SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to ______________________
Commission File No. 1-4982
PARKER-HANNIFIN CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 34-0451060
(State of Incorporation) (I.R.S. Employer
Identification No.)
17325 Euclid Avenue, Cleveland, Ohio 44112
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (216) 531-3000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class which Registered
Common Shares, $.50 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days.
Yes X . No .
The sequential page in this Report where the Exhibit Index appears
is page 23.
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Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K [ ].
The aggregate market value of the voting stock held by non-affiliates
of the Registrant as of August 18, 1994, excluding, for purposes of this
computation, only stock holdings of the Registrant's Directors and Officers.
$1,958,010,570.
The number of Common Shares outstanding on August 18, 1994 was 48,966,848.
Portions of the following documents are incorporated by reference:
(1) Annual Report to Shareholders of the Company for the fiscal year ended
June 30, 1994. Incorporated by reference into Parts I, II and IV
hereof.
(2) Definitive Proxy Statement for the Company's 1994 Annual Meeting of
Shareholders. Incorporated by reference into Part III hereof.
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PARKER-HANNIFIN CORPORATION
FORM 10-K
Fiscal Year Ended June 30, 1994
PART I
ITEM 1. Business. Parker-Hannifin Corporation is a leading
worldwide full-line manufacturer of motion control products, including fluid
power systems, electromechanical controls and related components. Fluid power
involves the transfer and control of power through the medium of liquid, gas
or air, in both hydraulic and pneumatic applications. Fluid power systems
move and position materials, control machines, vehicles and equipment and
improve industrial efficiency and productivity. Components of a simple fluid
power system include a pump which generates pressure, valves which control the
fluid's flow, a cylinder which translates the pressure in the fluid into
mechanical energy, a filter to remove contaminants and numerous hoses,
couplings, fittings and seals. Electromechanical control involves the use of
electronic components and systems to control motion and precisely locate or
vary speed in automation applications.
The Company was incorporated in Ohio in 1938. Its principal
executive offices are located at 17325 Euclid Avenue, Cleveland, Ohio 44112,
telephone (216) 531-3000. As used in this Report, unless the context
otherwise requires, the term "Company" or "Parker" refers to Parker-Hannifin
Corporation and its subsidiaries.
The Company's manufacturing, service, distribution and
administrative facilities are located in 33 states, Puerto Rico and worldwide
in 30 foreign countries. Its motion control technology is used in the
products of its two business Segments: Industrial and Aerospace. The
products are sold as original and replacement equipment through product and
distribution centers worldwide. The Company markets its products through its
direct-sales employees and more than 5,000 independent distributors. Parker
products are supplied to over a quarter million customer outlets in virtually
every major manufacturing, transportation and processing industry. For the
fiscal year ended June 30, 1994, net sales were $2,576,337,000; Industrial
Segment products accounted for 79% of net sales and Aerospace Segment products
for 21%.
During the fiscal year the Company made three acquisitions. In
November, 1993, the Company acquired the Electro-pneumatic Division of
Telemecanique in Evreux, France, a leading European manufacturer of pneumatic
products. In December, 1993, the Company increased its ownership from 40% to
100% in LDI Pneutronics Corp., located in Hollis, New Hampshire, which
specializes in advanced-technology pneumatic valves and components. In
April, 1994, the Company purchased the assets of Finn-Filter Oy, a leading
Scandinavian filter manufacturer with manufacturing locations in Urjala and
Hyrynsalmi, Finland and a sales subsidiary in Sweden.
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Markets
Motion control systems are used throughout industry in
applications which require substantial amounts of energy. Such applications
include moving of materials, controlling machines, vehicles and equipment and
positioning materials during the manufacturing process. Motion control
systems contribute to the efficient use of energy and improve industrial
productivity.
The more than a quarter million customer outlets which carry the
Company's parts are found throughout virtually every significant
manufacturing, transportation and processing industry. No customer accounted
for more than 3% of the Company's total net sales for the fiscal year.
The major markets for products of the Fluid Connector, Motion &
Control, Filtration and Seal Groups of the Industrial Segment are agricultural
machinery, construction equipment, food production, industrial machinery,
instrumentation, lumber and paper, machine tools, marine, mining, mobile
equipment, chemicals, petrochemicals, robotics, textiles, transportation and
every other major production and processing industry. Products manufactured
by the Industrial Segment's Automotive and Refrigeration Group are utilized
principally in automotive and mobile air conditioning systems, industrial
refrigeration systems and home and commercial air conditioning equipment.
Sales of Industrial Segment products are made to original equipment
manufacturers and their replacement markets.
Aerospace Segment sales are made primarily to the commercial,
military and general aviation markets and are made to original equipment
manufacturers and to end users for maintenance, repair and overhaul.
Principal Products, Methods of Distribution and Competitive Conditions
Industrial Segment. The product lines of the Company's Industrial
Segment cover most of the components of motion control systems. The Motion
& Control Group manufactures components and systems used to provide motion,
control and conditioning through the medium of pressurized fluids and
electricity. Products include hydraulic and precision metering pumps, power
units, control valves, accumulators, cylinders, servo actuators, rotary
actuators and motors, pneumatic control valves, pressure regulators,
lubricators, hydrostatic steering components, electronic controls and systems
and automation devices. The Filtration Group manufactures filters to remove
contaminants from fuel, air, oil, water and other fluids in industrial,
process, mobile and environmental applications. The Fluid Connectors Group
manufactures connectors, including tube fittings and hose fittings, hoses and
couplers which transmit and contain fluid. The Seal Group manufactures
sealing devices, including o-rings and o-seals, gaskets and packings which
insure leak proof connections. The Automotive and Refrigeration Group
manufactures components for use in industrial and automotive air conditioning
and refrigeration systems and other automotive applications, including
pressure regulators, solenoid valves, expansion valves, filter-dryers,
gerotors and hose assemblies.
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Industrial Segment products include both standard items which are
produced in large quantities and custom units which are engineered and
produced to original equipment manufacturers' specifications for application
to a particular end product. Both standard and custom products are also used
in the replacement of original motion control system components. Industrial
Segment products are marketed primarily through field sales employees and more
than 5,000 independent distributors.
Aerospace Segment. The principal products of the Company's
Aerospace Segment are hydraulic, pneumatic, and fuel systems and components
which are utilized on virtually every domestic commercial, military and
general aviation aircraft.
Hydraulic systems and components include precision hydraulic and
electro-hydraulic servo systems used for precise control of rudders,
elevators, ailerons, and other aerodynamic control surfaces of aircraft,
utility hydraulic components such as reservoirs, accumulators, selector
valves, nose wheel steering systems, engine controls, electromechanical
actuators, and electronic controllers.
Pneumatic systems and components include bleed air control
systems, pressure regulators, low pressure pneumatic controls, heat transfer
systems, engine start systems, engine bleed control and anti-ice systems, and
electronic control and monitoring computers.
Fuel systems and components include fuel transfer and
pressurization control, in-flight refueling systems, fuel pumps, quantity
gaging systems and center of gravity control, fuel injection nozzles and
augmentor controls, fuel tank inerting systems, fuel tank ducting and hose
assemblies, and electronic monitoring computers.
The Aerospace Segment also designs and manufactures lightweight
aircraft wheels and brakes for the general aviation market and supplies to the
space market propellant control systems, tankage, and environmental control
components used extensively on the Space Shuttle and on unmanned satellites
and launch vehicles.
The Aerospace Segment products are marketed by Parker's field
sales force and are sold directly to the manufacturer and to the end user.
Competition. All aspects of the Company's business are highly
competitive. No single manufacturer competes with respect to all products
manufactured and sold by the Company and the degree of competition varies with
different products. In the Industrial Segment, the Company competes on the
basis of product quality and innovation, customer service, its manufacturing
and distribution capability, and price. The Company believes that, in most
of its major product markets, it is one of the principal suppliers of motion
control systems and components. In the Aerospace Segment, the Company
utilizes its advanced technological capability to obtain original equipment
business on new aircraft programs for its fluid handling systems and
components and, thereby, to obtain the follow-on repair and replacement
business for these programs. The Company believes that it is one of the
primary suppliers in this area.
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Research and Product Development
The Company continually researches the feasibility of new products
through its development laboratories and testing facilities in many of its
worldwide manufacturing locations. Its research and product development staff
includes chemists, mechanical, electronic and electrical engineers and
physicists.
Research and development costs relating to the development of new
products or services and the improvement of existing products or services
amounted to $64,518,000 in fiscal 1994, $60,054,000 in 1993, and $50,019,000
in 1992. Customer reimbursements included in the total cost for each of the
respective years were $22,640,000, $16,648,000, and $20,089,000.
Patents, Trademarks, Licenses
The Company owns a number of patents, trademarks and licenses
related to its products and has exclusive and non-exclusive rights under
patents owned by others. In addition, patent applications on certain products
are now pending, although there can be no assurance that patents will be
issued. The Company is not dependent to any material extent on any single
patent or group of patents.
Backlog and Seasonal Nature of Business
The Company's backlog at June 30, 1994 was approximately
$852,482,000 and at June 30, 1993 was approximately $856,517,000.
Approximately 75% of the Company's backlog at June 30, 1994 is scheduled for
delivery in the succeeding twelve months. The Company's business generally
is not seasonal in nature.
Environmental Regulation
The Company is subject to federal, state and local laws and
regulations designed to protect the environment and to regulate the discharge
of materials into the environment. Among other environmental laws, the
Company is subject to the federal "Superfund" law, under which the Company has
been designated as a "potentially responsible party" and may be liable for
clean up costs associated with various waste sites, some of which are on the
U.S. Environmental Protection Agency Superfund priority list. The Company
believes that its policies, practices and procedures are properly designed to
prevent unreasonable risk of environmental damage and the consequent financial
liability to the Company. Compliance with environmental laws and regulations
requires continuing management effort and expenditures by the Company.
Compliance with environmental laws and regulations has not had in the past,
and, the Company believes, will not have in the future, material effects on
the capital expenditures, earnings, or competitive position of the Company.
The information set forth in Footnote 12 to the Financial Statements contained
on page 37 of the Company's Annual Report to Shareholders for the fiscal year
ended June 30, 1994 ("Annual Report") as specifically excerpted on pages 13-31
and 13-32 of Exhibit 13 hereto is incorporated herein by reference.
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Energy Matters and Sources and Availability of Raw Materials
The Company's primary energy source for each of its business
segments is electric power. While the Company cannot predict future costs
of such electric power, the primary source for production of the required
electric power will be coal from substantial, proven reserves. The Company
is subject to governmental regulations in regard to energy supplies both in
the United States and elsewhere. To date the Company has not experienced any
significant disruptions of its operations due to energy curtailments.
Steel, brass, aluminum and elastomeric materials are the principal
raw materials used by the Company. These materials are available from
numerous sources in quantities sufficient to meet the requirements of the
Company.
Employees
The Company employed approximately 26,730 persons as of June 30,
1994, of whom approximately 7,993 were employed by foreign subsidiaries.
Business Segment Information
The net sales, income from operations before corporate general and
administrative expenses and identifiable assets by business segment and by
geographic area for the past three fiscal years, as set forth on page 31 of
the Annual Report and specifically excerpted on pages 13-16 through 13-18 of
Exhibit 13 hereto is incorporated herein by reference.
Item 1A. Executive Officers of the Company
The Company's Executive Officers are as follows:
Officer
Name Position Since(1) Age
Duane E. Collins President, Chief Executive Officer 1983 58
and Director
Dennis W. Sullivan Executive Vice President - Industrial 1978 55
and Automotive and Director
Paul L. Carson Vice President, Information 1993 58
Services
Richard F. Ferrel Vice President and President, 1993 60
Applied Technologies Operations
of the Motion and Control Group
John L. Hanson Vice President - Human Resources 1981 61
Stephen L. Hayes Vice President and President, 1993 53
Aerospace
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Michael J. Hiemstra Vice President - Finance and 1987 47
Administration and Chief
Financial Officer
Lawrence J. Hopcraft Vice President and President, 1990 51
Automotive and Refrigeration
Joseph D. Whiteman Vice President, General Counsel 1977 61
and Secretary
William D. Wilkerson Vice President - Technical Director 1987 58
Lawrence M. Zeno Vice President and President, 1993 52
Motion and Control
Donald A. Zito Vice President and President, 1988 54
Fluid Connectors
Harold C. Gueritey, Jr. Controller 1980 55
Timothy K. Pistell Treasurer 1993 47
(1) Officers of Parker-Hannifin serve for a term of office from
the date of election to the next organizational meeting of the
Board of Directors and until their respective successors are
elected, except in the case of death, resignation or removal.
Messrs. Sullivan, Hanson, Hiemstra, Gueritey, Whiteman,
Wilkerson and Zito have served in the executive capacities
indicated above during the past five years.
Mr. Collins was elected as President and Chief Executive Officer of the
Company effective July, 1993. He was elected as Vice Chairman of the Board
in July, 1992 and Executive Vice President in July, 1988. He was President
of the International Sector from January, 1987 until June, 1992.
Mr. Carson was elected a Vice President in October, 1993. He was Vice
President of Management Information Systems from July 1, 1983 to October,
1993.
Mr. Ferrel was elected a Vice President in October, 1993. He has been
President of Applied Technologies Operation since July, 1993 and was President
of the Applied Technology Group from July, 1990 to June, 1993; President of
the Nichols\Electromechanical Group from January, 1990 to June, 1990; and
President of the Nichols Group from March, 1985 to December, 1989.
Mr. Hayes was elected as Vice President and named President of the
Aerospace Group in April, 1993. He was a Group Vice President of the
Aerospace Group from February, 1985 to April, 1993.
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Mr. Hopcraft was elected a Vice President in October, 1990. He has
been President of the Automotive and Refrigeration Group since 1989 and was
President of the Refrigeration Group from 1980 to 1989.
Mr. Zeno was elected a Vice President in October, 1993. He has been
President of the Motion and Control Group since January, 1994 and was Vice
President-Operations of the Motion and Control Group (formerly the Fluidpower
Group) from July, 1988 to December, 1993.
Mr. Pistell was elected as Treasurer of the Company in July, 1993. He
was Director of Business Planning from January, 1993 to July, 1993; and Vice
President-Finance\Controller of the International Sector from October, 1988
to December, 1992.
ITEM 2. Properties. The following table sets forth the principal
plants and other materially important properties of the Company and its
subsidiaries. The leased properties are indicated with an asterisk.
UNITED STATES
State City
__________________ _________________
Alabama Boaz(1)
Decatur(1)
Huntsville(1)
Jacksonville(1)
Arizona Glendale(2)
Tolleson(2)
Tucson*(1)
Arkansas Trumann(1)
California City of Industry(2)
Culver City*(1)
Irvine(1)(2)
Modesto(1)
Moorpark*(2)
Rohnert Park(1)
Colorado Sheridan*(1)
Connecticut Enfield(1)
Florida Longwood(1)
Miami*(1)
Georgia Fulton*(1)
Illinois Broadview(1)
Des Plaines(1)
Elgin(1)
Niles*(1)
Indiana Albion(1)
Ashley(1)
Ft. Wayne(1)
Lebanon(1)
Tell City(1)
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State City
__________________ _________________
Iowa Red Oak(1)
Kansas Manhattan(1)
Kentucky Berea(1)
Lexington(1)
Louisiana Harvey*(1)
Maine Portland(1)
Massachusetts Sharon(2)
Waltham(2)
Michigan Lakeview(1)
Otsego(1)
Oxford(1)
Richland(1)
Troy*(1)
Minnesota Golden Valley(1)
Mississippi Batesville(1)
Booneville(1)
Madison(1)
Missouri Kennett(1)
Nebraska Lincoln(1)
New Hampshire Portsmouth*(1)
Hollis*(1)
New Jersey North Brunswick(1)
New York Clyde(2)
Lyons(1)
Smithtown(2)
North Carolina Forest City(1)
Hillsborough(1)
Mooresville(1)
Sanford(1)
Wake Forest*(1)
Ohio Akron(1)
Andover(2)
Avon(2)
Brookville(1)
Cleveland(1)(2)
Columbus(1)
Cuyahoga Falls*(1)
Eastlake(1)
Eaton(1)
Elyria(1)(2)
Forest(2)
Green Camp(1)
Kent(1)
Lewisburg(1)
Metamora(1)
Ravenna(1)
St. Marys(1)
Wadsworth(1)
Waverly(1)
Wickliffe(1)
Oregon Eugene(1)
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State City
__________________ _________________
Pennsylvania Canton(1)
Harrison City(1)
Reading(1)
South Carolina Spartanburg(1)
Tennessee Greenfield(1)
Greenville(1)
Texas Cleburne(1)
Ft. Worth(1)(2)
Mansfield(2)
McAllen(1)
Utah Ogden(2)
Salt Lake City(1)
Wisconsin Grantsburg(1)
Mauston(1)
Territory City
Puerto Rico Ponce*(2)
FOREIGN COUNTRIES
Country City
__________________ _________________
Argentina Buenos Aires(1)
Australia Castle Hill(1)
Wodonga*(1)
Austria Wiener Neustadt(1)
Belgium Brussels*(1)
Brazil Jacarei(1)
Sao Paulo(1)
Canada Burlington(1)
Grimsby(1)
Owen Sound(1)
Czech Republic Prague*(1)
Denmark Copenhagen*(1)
Helsingor(1)
England Barnstaple(1)
Cannock(1)
Derby(1)
Hemel Hempstead(1)
Littlehampton(1)
Morley(1)
Poole*(1)
Rotherham(1)
Watford(1)
Finland Helsinki*(1)
Hyrynsalmi(1)
Urjala(1)
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Country City
__________________ _________________
France Annemasse(1)
Contamine(1)
Evreux(1)
Pontarlier(1)
Germany Bielefeld(1)
Bietigheim-Bissingen(1)
Cologne(1)
Hamburg*(2)
Hildburghausen(1)
Hochmossingen(1)
Kaarst(1)
Mucke(1)
Pleidelsheim(1)
Quekborn(1)
Velbert(1)
Hong Kong Hong Kong(1)
Hungary Budapest*(1)
India Bombay*(1)
Italy Arsago Seprio(1)
Capriolo*(1)
Gessate(1)
Milan(1)
Japan Yokohama(1)
Mexico Matamoros(1)
Monterrey(1)
Tijuana(1)
Netherlands Hoogezand(1)
Naarden(1)
0ldenzaal(1)
New Zealand Mt. Wellington(1)
Norway Langhus(1)
Peoples Republic of China Shanghai*(1)
Poland Warsaw*(1)
Singapore Singapore*(1)(2)
South Africa Johannesburg*(1)
South Korea Seoul*(1)
Spain Madrid*(1)
Sweden Falkoping(1)
Stockholm(1)
Ulricehamn(1)
Taiwan Taipei*(1)
Venezuela Caracas*(1)
Puerto Ordaz*(1)
The Company believes that its properties have been adequately
maintained, are in good condition generally and are suitable and adequate for
its business as presently conducted. The extent of utilization of the
Company's properties varies among its plants and from time to time. The
Company's restructuring efforts over the past several years have brought
capacity levels closer to present and anticipated needs. Although capacity
has been reduced and production volume has increased over the last fiscal
year, most of the Company's material manufacturing facilities remain capable
of handling additional volume increases.
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(1) Indicates properties occupied by the Company's industrial
segment.
(2) Indicates properties occupied by the Company's aerospace
segment.
ITEM 3. Legal Proceedings. Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders. Not
applicable.
PART II
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters. As of August 30, 1994, the approximate number of
shareholders of record of the Company was 4,071. The Company's common shares
are traded on the New York Stock Exchange ("NYSE"). Set forth below is a
quarterly summary of the high and low sales prices on the NYSE for the
Company's common shares and dividends declared for the two most recent fiscal
years:
Fiscal Year 1st 2nd 3rd 4th Full Year
1994 High $ 35 $ 38-1/8 $ 39-1/2 $ 44-7/8 $ 44-7/8
Low 30 33-7/8 34-3/4 34 30
Dividends .24 .24 .25 .25 .98
1993 High $ 32 $ 30-1/2 $ 34-1/4 $ 34-1/8 $ 34-1/4
Low 27-5/8 26-1/8 29-1/2 28 26-1/8
Dividends .24 .24 .24 .24 .96
ITEM 6. Selected Financial Data. The information set forth on pages
38 and 39 of the Annual Report as specifically excerpted on page 13-36 of
Exhibit 13 hereto is incorporated herein by reference.
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations. The information set forth on pages 23, 24, 26, 28
and 30 of the Annual Report as specifically excerpted on pages 13-1 through
13-10 of Exhibit 13 hereto is incorporated herein by reference.
ITEM 8. Financial Statements and Supplementary Data. The information
set forth on pages 22, 25, 27, 29 and 31 through 37 of the Annual Report as
specifically excerpted on pages 13-11 to 13-35 of Exhibit 13 hereto is
incorporated herein by reference.
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure. Not applicable.
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PART III
ITEM 10. Directors and Executive Officers of the Registrant.
Information required as to the Directors of the Company is contained on pages
1 to 3 of the Company's definitive Proxy Statement dated September 26, 1994
(the "Proxy Statement") under the caption "Election of Directors."
Information required with respect to compliance with Section 16(a) of the
Securities Exchange Act of 1934 is contained in the first paragraph on page
13 of the Proxy Statement. The foregoing information is incorporated herein
by reference. Information as to the executive officers of the Company is
included in Part I hereof.
ITEM 11. Executive Compensation. The information set forth under the
caption "Compensation of Directors" on page 3 of the Proxy Statement, under
the caption "Executive Compensation" on pages 5 to 9 of the Proxy Statement
and under the caption "Common Share Price Performance Graph" on page 11 of the
Proxy Statement is incorporated herein by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management. The information set forth under the caption "Officer Agreements
Effective Upon "Change in Control"" on page 10 of the Proxy Statement and
under the caption "Principal Shareholders of the Corporation" on page 12 of
the Proxy Statement is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions. The
information set forth under the caption "Transactions With Management" on page
11 of the Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K.
a. The following are filed as part of this report:
1. Financial Statements and Schedules
The financial statements and schedules listed in the
accompanying Index to Consolidated Financial
Statements and Schedules are filed or incorporated by
reference as part of this Report.
2. The exhibits listed in the accompanying
Exhibit Index and required by Item 601 of
Regulation S-K (numbered in accordance with
Item 601 of Regulation S-K) are filed or
incorporated by reference as part of this
Report.
b. The Registrant filed a report on Form 8-K on April 15,
1994 with respect to its April 14, 1994 announcement
of its intention to record a charge of $52.7 million
or $1.08 per share in the third
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quarter, ended March 31, 1994, to reduce the value
of certain long-term assets and to recognize
downsizing and relocation activities.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PARKER-HANNIFIN CORPORATION
Michael J. Hiemstra
By: Michael J. Hiemstra
Vice President - Finance and
Administration
September 28, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report on Form 10-K has been signed below by the following persons in the
capacities and on the date indicated.
Signature and Title
PATRICK S. PARKER, Chairman of the Board of Directors;
DUANE E. COLLINS, President, Chief Executive Officer and
Director; HAROLD C. GUERITEY, JR., Controller and Principal
Accounting Officer; JOHN G. BREEN, Director; PAUL C.
ELY, JR., Director; ALLEN H. FORD, Director; FRANK A.
LePAGE, Director; PETER W. LIKINS, Director; ALLAN L.
RAYFIELD, Director; PAUL G. SCHLOEMER, Director;
WOLFGANG R. SCHMITT, Director; WALTER SEIPP, Director;
and DENNIS W. SULLIVAN, Director.
Date: September 28, 1994
Michael J. Hiemstra
By: Michael J. Hiemstra,
Vice President - Finance and Administration,
Principal Financial Officer
and Attorney-in-Fact
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PARKER-HANNIFIN CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
Reference
Excerpt from Annual
Form 10-K Report as set forth
Annual Report in Exhibit 13
(Page) (Page)
Data incorporated by reference from the
Annual Report as specifically excerpted
in Exhibit 13 hereto:
Report of Independent Accountants --- 13-35
Consolidated Statement of Income for the
years ended June 30, 1994, 1993 and 1992 --- 13-11
Consolidated Balance Sheet at June 30, 1994
and 1993 --- 13-12 and 13-13
Consolidated Statement of Cash Flows for
the years ended June 30, 1994, 1993 and 1992 --- 13-14 and 13-15
Notes to Consolidated Financial Statements --- 13-19 to 13-33
Consent and Report of Independent Accountants F-2 ---
Schedules:
V - Property, Plant and Equipment F-3 ---
VI - Accumulated Depreciation, Depletion
and Amortization of Property, Plant
and Equipment F-4 ---
VIII - Valuation and Qualifying Accounts F-5 ---
IX - Short-Term Borrowings F-6 ---
X - Supplementary Income Statement
Information F-7 ---
Individual financial statements and related applicable schedules for the
Registrant (separately) have been omitted because the Registrant is primarily
an operating company and its subsidiaries are considered to be totally-held.
Schedules other than those listed above have been omitted from this
Annual Report because they are not required, are not applicable, or the
required information is included in the consolidated financial statements or
the notes thereto.
F-1
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Coopers certified public accountants
& Lybrand
CONSENT AND REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Parker Hannifin Corporation
Our report on the consolidated financial statements of Parker Hannifin
Corporation has been incorporated by reference from page 22 of the 1994
Annual Report to Shareholders of Parker Hannifin Corporation, as
specifically excerpted on page 13-35 of Exhibit 13 to this Form 10-K. In
connection with our audit of such financial statements, we have also
audited the related financial statement schedules listed in the index on
page F-1 of this Form 10-K.
In our opinion, the financial statements schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
We consent to the incorporation by reference in the registration statement
of Parker Hannifin Corporation on Forms S-8 (File Nos. 33-53193, 33-43938
and 2-66732) of our report dated August 4, 1994 on our audit of the
consolidated financial statements and financial statement schedules of
Parker Hannifin Corporation as of June 30, 1994 and 1993, and for the years
ended June 30, 1994, 1993, and 1992, which report is included in Exhibit 13
of this Form 10-K.
Coopers & Lybrand LLP
Coopers & Lybrand L.L.P.
Cleveland, Ohio
September 28, 1994
F-2
<PAGE>
<TABLE>
<CAPTION>
PARKER-HANNIFIN CORPORATION
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED JUNE 30, 1992, 1993 and 1994
(Dollars in Thousands)
Column A Column B Column C Column D Column E (A) Column F
Balance at Other Balance
Beginning Additions Changes - At End
Classification Of Period At Cost Retirements Add (Deduct) Of Period
______________ ____________ __________ ____________ _____________ ____________
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1992:
Land and land improvements $ 73,381 $ 6,133 $ 996 $ 1,509 $ 80,027
Buildings and building equipment 346,989 10,186 3,263 15,811 369,723
Machinery and equipment 954,259 81,852 31,701 29,548 1,033,958
Construction in progress 57,316 (13,216) 81 (8,640) 35,379
____________ __________ __________ __________ ____________
$ 1,431,945 $ 84,955 $ 36,041 $ 38,228 (A) $ 1,519,087
============ ========== ========== ========== ============
Year Ended June 30, 1993:
Land and land improvements $ 80,027 $ 1,971 $ 232 $ (311) $ 81,455
Buildings and building equipment 369,723 10,485 2,120 (1,512) 376,576
Machinery and equipment 1,033,958 74,225 27,366 (1,921) 1,078,896
Construction in progress 35,379 4,803 17 (7,743) 32,422
____________ __________ __________ __________ ____________
$ 1,519,087 $ 91,484 $ 29,735 $ (11,487) (A) $ 1,569,349
============ ========== ========== ========== ============
Year Ended June 30, 1994:
Land and land improvements $ 81,455 $ 854 $ 2,482 $ 2,073 $ 81,900
Buildings and building equipment 376,576 15,419 13,711 9,480 387,764
Machinery and equipment 1,078,896 68,194 58,329 25,947 1,114,708
Construction in progress 32,422 15,447 637 (9,776) 37,456
____________ __________ __________ __________ ____________
$ 1,569,349 $ 99,914 $ 75,159 $ 27,724 (A) $ 1,621,828
============ ========== ========== ========== ============
<FN>
NOTES:
(A) Includes assets of companies acquired during the year, foreign currency
translation adjustments, and FAS 109 adjustments as follows:
1992 1993 1994
____________ __________ __________
<S> <C> <C> <C>
Assets $ 6,127 $ 23,491 $ 10,299
Translation adjustments 20,627 (34,978) $ 17,425
FAS 109 adjustments * 11,474
____________ __________ __________
Total $ 38,228 $(11,487) $ 27,724
============ ========== ==========
* FAS 109 adjustments reflect the write-up of assets obtained through purchase
acquisitions due to adoption of Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes.
(B) The estimated useful lives of depreciable assets are as follows:
Classification of Properties Life
____________________________ ___________
<S> <C>
Roadways and grounds 6-40 years
Buildings 10-40 years
Building equipment 5-40 years
Machinery & equipment 3-15 years
Furniture and fixtures 3-15 years
Transportation equipment 5 years
Leasehold improvements 2-25 years
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
PARKER-HANNIFIN CORPORATION
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED JUNE 30, 1992, 1993 and 1994
(Dollars in Thousands)
Column A Column B Column C Column D Column E Column F
Additions
Balance at Charged to Other Balance
Beginning Costs and Changes - At End
Description Of Period Expenses Retirements Add (Deduct) Of Period
___________ ___________ ___________ ____________ ____________ __________
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1992:
Land and land improvements $ 8,653 $ 1,320 $ 330 $ 281 $ 9,924
Buildings and building equipment 110,505 15,102 1,731 2,437 126,313
Machinery and equipment 554,850 86,206 23,955 13,259 630,360
__________ __________ __________ __________ __________
$ 674,008 $ 102,628 $ 26,016 $ 15,977 (A) $ 766,597
========== ========== ========== ========== ==========
Year Ended June 30, 1993:
Land and land improvements $ 9,924 $ 1,406 $ 30 $ (151) $ 11,149
Buildings and building equipment 126,313 15,730 1,300 (2,170) 138,573
Machinery and equipment 630,360 92,537 23,962 (15,364) 683,571
__________ __________ __________ __________ __________
$ 766,597 $ 109,673 $ 25,292 $ (17,685) (A) $ 833,293
========== ========== ========== ========== ==========
Year Ended June 30, 1994:
Land and land improvements $ 11,149 $ 1,389 $ 345 $ 66 $ 12,259
Buildings and building equipment 138,573 15,588 2,065 1,690 153,786
Machinery and equipment 683,571 89,569 43,067 8,410 738,483
__________ __________ __________ __________ __________
$ 833,293 $ 106,546 $ 45,477 $ 10,166 (A) $ 904,528
========== ========== ========== ========== ==========
<FN>
NOTES:
(A) Includes foreign currency translation adjustments,
and FAS 109 adjustments as follows:
1992 1993 1994
__________ __________ __________
<S> <C> <C> <C>
Translation adjustments $ 10,708 $ (17,685) $ 10,166
FAS 109 adjustments 5,269
__________ __________ __________
Total $ 15,977 $ (17,685) $ 10,166
========== ========== ==========
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
PARKER-HANNIFIN CORPORATION
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 1992, 1993 and 1994
(Dollars in Thousands)
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Balance
Beginning Costs and At End
Description Of Period Expenses Deductions (A) Of Period
___________ _________ __________ __________ _________
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year Ended June 30, 1992 $ 3,848 $ 2,882 $ 2,867 $ 3,863
Year Ended June 30, 1993 3,863 1,940 1,657 4,146
Year Ended June 30, 1994 4,146 2,597 2,012 4,731
<FN>
NOTES:
(A) Uncollectible accounts charged off, less recoveries.
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
PARKER-HANNIFIN CORPORATION
SCHEDULE IX - SHORT-TERM BORROWINGS
FOR THE YEARS ENDED JUNE 30, 1992, 1993 and 1994
(Dollars in Thousands)
Column A Column B Column C Column D Column E Column F
Maximum Average Weighted
Category of Weighted Amount Amount Average
Aggregate Balance at Average Outstanding Outstanding Interest Rate
Short-Term End of Interest During the During the During the
Borrowings (A) Period Rate Period Period (B) Period (C)
___________ __________ ________ ___________ ___________ _____________
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1992:
Notes payable to banks $ 11,281 11.5% $ 29,313 $ 21,395 14.3%
Year Ended June 30, 1993:
Notes payable to banks $ 23,733 9.8% $ 26,121 $ 19,908 10.5%
Year Ended June 30, 1994:
Notes payable to banks $ 6,422 7.6% $ 35,188 $ 22,343 7.3%
<FN>
NOTES:
(A) Notes payable to banks primarily represent short-term borrowings from
foreign banks.
(B) Average of month-end balances.
(C) The Weighted Average Interest Rate During the Period was computed by
dividing actual interest expense by the average short-term debt
outstanding during the period.
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
PARKER-HANNIFIN CORPORATION
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED JUNE 30, 1992, 1993 and 1994
(Dollars in Thousands)
Column A Column B
Charged to
Items Costs and Expenses
_____ ______________________________
1992 1993 1994
________ ________ ________
<S> <C> <C> <C>
Maintenance and repairs $ 72,447 $ 76,833 $80,767
<FN>
Note:
(A) Items other than those presented above have been omitted because the
amounts individually are less than one percent of sales and revenues.
</TABLE>
F-7
<PAGE>
Exhibit Index
Exhibit No. Description of Exhibit
(3) Articles of Incorporation and By-Laws
(3)(a) Amended Articles of Incorporation (A).
(3)(b) Code of Regulations, as amended (A).
(4) Instruments Defining Rights of Security Holders:
(4)(a) Rights Agreement, dated February 10, 1987, between the
Registrant and Society National Bank (as successor to
Ameritrust Company National Association) (A).
The Registrant is a party to other instruments, copies
of which will be furnished to the Commission upon
request, defining the rights of holders of its long-
term debt identified in Note 7 of the Notes to
Consolidated Financial Statements appearing on page 34
in the Annual Report as specifically excerpted on
pages 13-24 and 13-25 of Exhibit 13 hereto, which Note
is incorporated herein by reference.
(10) Material Contracts:
(10)(a) Form of Change in Control Agreement entered into by
the Registrant and certain executive officers (1981).*
(10)(b) Form of Change in Control Agreement entered into by
the Registrant and certain executive officers (1984).*
(10)(c) Form of Change in Control Agreement entered into by
the Registrant and certain executive officers (1988).*
(10)(d) Form of Change in Control Agreement entered into by
the Registrant and certain executive officers (1991).*
(10)(e) Form of Change in Control Agreement entered into by
the Registrant and certain executive officers (1994).*
(10)(f) Form of Indemnification Agreement entered into by the
Registrant and its directors and certain executive
officers.
(10)(g) Executive Liability and Indemnification Insurance
Policy.
(10)(h) Parker-Hannifin Corporation Supplemental Executive
Retirement Benefits Program. (July 16, 1992
Restatement)(B).*
(10)(i) Parker-Hannifin Corporation 1982 Employees Stock
Option Plan, as amended October 25, 1984 and
January 29, 1987.*
<PAGE>
Exhibit No. Description of Exhibit
(10)(j) Parker-Hannifin Corporation 1987 Employees Stock
Option Plan.*
(10)(k) Parker-Hannifin Corporation 1990 Employees Stock
Option Plan.*
(10)(l) Amendment to Parker-Hannifin Corporation 1990
Employees Stock Option Plan (C).*
(10)(m) Parker-Hannifin Corporation 1993 Stock Incentive
Plan (D).*
(10)(n) Retirement Plan for Outside Directors of Parker-
Hannifin Corporation.*
(10)(o) Parker-Hannifin Corporation 1994 Target Incentive
Bonus Plan Description(E).*
(10)(p) Parker-Hannifin Corporation 1995 Target Incentive
Bonus Plan Description.*
(10)(q) Parker-Hannifin Corporation 1993-94-95 Long Term
Incentive Plan Description(F).*
(10)(r) Parker-Hannifin Corporation 1994-95-96 Long Term
Incentive Plan Description(G).*
(10)(s) Parker-Hannifin Corporation 1995-96-97 Long Term
Incentive Plan Description.*
(11) Computation of Common Shares Outstanding and Earnings
Per Share.
(13) Excerpts from Annual Report to Shareholders for the
fiscal year ended June 30, 1994 which are incorporated
herein by reference thereto.
(21) List of subsidiaries of the Registrant.
(24) Consents of Experts (contained in Consent and Report
of Independent Accountants appearing on Page F-2 of
this Form 10-K).
(25) Power of Attorney
(27) Financial Data Schedules
*Management contracts or compensatory plans or arrangements.
<PAGE>
(A) Incorporated by reference to Exhibits to the
Registrant's Registration Statement on Form S-8 (No.
333193) filed with the Commission on April 20, 1994.
(B) Incorporated by reference to Exhibit 10(e) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1992.
(C) Incorporated by reference to Exhibit 10(i) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1993.
(D) Incorporated by reference to Exhibit 10(j) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1993.
(E) Incorporated by reference to the pertinent information
contained in the Compensation and Management
Development Committee Report on Executive Compensation
contained on pages 4 and 5 of the Company's Proxy
Statement for the 1994 Annual Meeting of Shareholders
(the "1994 Proxy Statement").
(F) Incorporated by reference to the table captioned "Long
Term Incentive Plan-Awards in Fiscal 1993" contained
on page 7 of the Company's Proxy Statement for the
1993 Annual Meeting of Shareholders.
(G) Incorporated by reference to the table captioned "Long
Term Incentive Plan-Awards in Fiscal 1994" on page 9
of the 1994 Proxy Statement.
Shareholders may request a copy of any of the exhibits to this Annual Report
on Form 10-K by writing to the Secretary, Parker-Hannifin Corporation, 17325
Euclid Avenue, Cleveland, Ohio 44112.
<PAGE>
Exhibit (10)(a)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1994
by Parker-Hannifin Corporation
Form of Change in Control Agreement
entered into by the Registrant and
certain executive officers (1981)
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
A G R E E M E N T
between
PARKER-HANNIFIN CORPORATION
and
__________________
dated ___________, 1981
<PAGE>
TABLE OF CONTENTS
Section Page
Recitals 1
1 Operation of Agreement 1
2 Employment; Period of Employment 2
3 Position, Duties, Responsibilities 2
4 Compensation, Compensation Plans, Perquisites 4
5 Employee Benefit Plans 6
6 Effect of Death or Disability 7
7 Termination 8
8 Obligation to Mitigate Damages 16
9 Confidential Information 17
10 Severance Allowance 18
11 Withholding 19
12 Notices 19
13 General Provisions 19
14 Amendment or Modification, Waiver 21
15 Severability 22
16 Successors to the Company 22
17 Change in Control 22
Exhibits (5)
<PAGE>
AGREEMENT between PARKER-HANNIFIN
CORPORATION, an Ohio Corporation (the "Company"), and _____________________
(the "Executive"), dated the ______ day of ___________, 1981.
W I T N E S S E T H :
WHEREAS,
A. The Executive is a principal officer of the Company and an
integral part of its management.
B. The Company wishes to assure both itself and the Executive
of continuity of management in the event of any actual or threatened change
in control of the Company.
C. This agreement is not intended to alter materially the
compensation and benefits that the Executive could reasonably expect in the
absence of a change in control of the Company and, accordingly, this
Agreement, though taking effect upon execution thereof, will be operative
only upon a change in control of the Company, as that term is hereafter
defined.
NOW, THEREFORE, it is hereby agreed by and between the parties as
follows:
1. OPERATION OF AGREEMENT
This Agreement shall be effective immediately upon its execution
by the parties hereto, but, anything in this Agreement to the contrary
notwithstanding, neither the Agreement nor any provision thereof shall be
operative unless and until there has been a
<PAGE>
Change in Control of the Company, as defined in Section 17 below while the
Executive is in the employ of the Company. Upon such a Change in Control
of the Company, this Agreement and all provisions thereof shall become
operative immediately.
2. EMPLOYMENT; PERIOD OF EMPLOYMENT
2.01 The Company hereby agrees to continue the Executive in its employ,
and the Executive hereby agrees to remain in the employ of the Company, for the
period set forth in paragraph 2.02 below (the Period of Employment), in the
position and with the duties and responsibilities set forth in Section 3
below, and upon the other terms and conditions hereinafter stated.
2.02 The Period of Employment shall be deemed to have commenced on the
date of this Agreement and, subject only to the provisions of Section 6
below, relating to death or Disability, shall continue until the close of
business on the date stated in Exhibit A attached to and made part of this
Agreement. In the event that the Executive shall continue in the full-time
employment of the Company after the latter date, such continued employment
shall be subject to the terms and conditions of this Agreement and the Period
of Employment shall include the period during which the Executive in fact so
continues in such employment.
3. POSITION, DUTIES, RESPONSIBILITIES
3.01 (a) It is contemplated that during the Period of Employment the
Executive shall continue to serve as a principal officer of the Company with
the office(s) and title(s),
- 2 -
<PAGE>
set forth in Exhibit B attached to and made part
of this Agreement, reporting as set in such Exhibit B and with duties and
responsibilities including those specifically set forth in such Exhibit B.
(b) At all times during the Period of Employment, the Executive
shall hold a position of responsibility and importance and a position of
scope, with the functions, duties and responsibilities attached thereto, at
least equal in responsibility and importance and in scope to and
commensurate with his position on the date of this Agreement described in
general terms in subparagraph 3.01(a) above.
3.02 During the Period of Employment, the Executive shall also
serve and continue to serve, if and when elected and reelected, as an
officer or director, or both, of any subsidiary, division or affiliate of
the Company.
3.03 Throughout the Period of Employment the Executive shall devote
his full time and undivided attention during normal business hours to the
business and affairs of the Company, except for reasonable vacations and
except for illness or incapacity, but nothing in this Agreement shall
preclude the Executive from devoting reasonable periods required for serving
as a director or member of a committee of any organization involving no conflict
of interest with the interests of the Company, from engaging in charitable
and community activities, and from managing his personal investments,
provided that such activities do not materially interfere with the regular
performance of his duties and responsibilities under this Agreement.
- 3 -
<PAGE>
3.04 The office of the Executive shall be located at the principal
offices of the Company within the area described in Exhibit C attached to
and made part of this Agreement, and the Executive shall not be required to
locate his office elsewhere without his prior written consent, nor shall he
be required to be absent therefrom on travel status or otherwise more than
the total number of working days in any calendar year stated in such Exhibit C.
4. COMPENSATION, COMPENSATION PLANS, PERQUISITES
4.01 (a) For all services rendered by the Executive in any capacity
during the Period of Employment, including, without limitation, services as
an executive, officer, director or member of any committee of the Company
or of any subsidiary, division or affiliate thereof, the Executive shall be
paid as compensation:
(i) A base salary, payable not less often than monthly, at a rate
of no less than $_____________ per month, with such increases in such rate as
shall be awarded from time to time in accordance with the Company's regular
administrative practices of salary increases applicable to executives of the
Company in effect and on the date of this Agreement, and
(ii) An executive performance award or bonus under the Company's
Executive Compensation Plan, or such equivalent successor plan as may be
adopted by the Company, upon a basis that will render total compensation
for any calendar month, consisting of the minimum base salary provided in
clause (i) of this subparagraph 4.01(a) plus bonus for such month determined
by dividing the award made for the fiscal year of the Company in which such
month occurred by the number of months in such fiscal year, equal to no less
than the amount set forth from
- 4 -
<PAGE>
time to time in Exhibit D to this Agreement,
which amount shall be equal to $_____________ plus such salary increases as
may have been granted pursuant to clause (i) of this subparagraph 4.01(a).
(b) Subject to the provisions of clause (ii) of subparagraph
4.01(a) above, nothing in this Agreement shall preclude a change in the mix
between the base salary and bonus of the Executive by increasing the base
salary of the Executive.
(c) Any increase in salary pursuant to clause (i) of
subparagraph 4.01(a) or in bonus or other compensation shall in no way
diminish any other obligation of the Company under this Agreement.
4.02 During the Period of Employment the Executive shall be and
continue to be a full participant in the Company's Deferred Compensation
Plan, its 1977 Employees Stock Option Plan and 1977 Stock Appreciation Rights
Plan, or equivalent successor plans that may be adopted by the Company,
with at least the same reward opportunities as that have been heretofore
provided. Nothing in this Agreement shall preclude improvement of reward
opportunities in such plans or other plans in accordance with the present
practice of the Company.
4.03 During the Period of Employment, the Executive shall be entitled to
perquisites, including, without limitation, an office, secretarial and clerical
staff, and to fringe benefits, including, without limitation, the business and
personal use of an automobile and payment or reimbursement of club dues, in
each case at least equal to those attached to his office on the date of this
Agreement, as well as to reimbursement, upon proper accounting,
- 5 -
<PAGE>
of reasonable expenses and disbursements incurred by him in the course of his
duties.
5. EMPLOYEE BENEFIT PLANS
5.01 The compensation provided for in Section 4 above, together with
other matters therein set forth, is in addition to the benefits provided for
in this Section 5.
5.02 In the event that the Executive shall not heretofore have been
designated a Participant in the Supplemental Executive Retirement Benefits
Program of the Company, the Executive shall be and hereby is designated a
Participant in that Program on and as of the date this Agreement becomes
operative in accordance with the provisions of Section 1 of this Agreement.
5.03 The Executive, his dependents and beneficiaries shall be entitled
to all payments and benefits and service credit for benefits during the
Period of Employment to which officers of the Company, their dependents and
beneficiaries are entitled as the result of the employment of such officers
during the Period of Employment under the terms of employee plans and
practices of the Company, including, without limitation, the Company's
retirement program (consisting of its Retirement Plan for Salaried Employees,
its Excess Benefits Plan, if any, and its Supplemental Executive Retirement
Benefits Program) the Company's stock purchase and savings, thrift and
investment plans, if any, the Company's Group Life Insurance Plan, its
accidental death and dismemberment insurance, disability, medical, dental and
health and welfare plans) and other present or equivalent successor plans and
practices of the Company, its subsidiaries and divisions, for which officers,
their
- 6 -
<PAGE>
dependents and beneficiaries are eligible, and to all payments or other
benefits under any such plan or practice after the Period of Employment as a
result of participation in such plan or practice during the Period of
Employment.
5.04 Nothing in this Agreement shall preclude the Company from amending
or terminating any employee benefit plan or practice, but, it being the
intent of the parties that the Executive shall continue to be entitled during
the Period of Employment to perquisites as set forth in paragraph 4.03 above,
and to benefits and service credit for benefits under paragraph 5.03 above at
least equal to those attached to his position on the date of this Agreement,
nothing in this Agreement shall operate as, or be construed or reduce or
authorize, a reduction without the Executive's written consent in the level
of such perquisites, benefits or service credit for benefits; in the event of
any such reduction, by amendment or termination of any plan or practice or
otherwise, the Executive, his dependents and beneficiaries shall continue to be
entitled to perquisites, benefits and service credit for benefits at least
equal to the perquisites and to benefits and service credit for benefits
under such plans or practices that he or his dependents and beneficiaries
would have received if such reduction had not taken place.
6. EFFECT OF DEATH OR DISABILITY
6.01 In the event of the death of the Executive during the Period of
Employment, the legal representative of the Executive shall be entitled to
the compensation provided for in paragraph 4.01 above for the month in
which death shall have taken place at the rate being paid at the time of
death, and the Period of Employment shall be deemed to have
- 7 -
<PAGE>
ended as of the close of business on the last day of the month in which
death shall have occurred, but without prejudice to any payments due in
respect of the Executive's death.
6.02 (a) The term "Disability", as used in this Agreement, shall
mean an illness or accident which prevents the Executive from performing
his duties under this Agreement for a period of six consecutive months.
The Period of Employment shall be deemed to have ended as of the close of
business on the last day of such six months period but without prejudice
to any payments due the Executive in respect of disability.
(b) In the event of the Disability of the Executive during
the Period of Employment, the Executive shall be paid an amount equal to
the Minimum Total Monthly Compensation for the month in which such
Disability commenced. Such amount shall be paid at the end of each month
during the period of such Disability but not in excess of six months.
(c) The amount of any payments due under this paragraph 6.02
shall be reduced by any payments to which the Executive may be entitled
for the same period because of disability under any disability or pension
plan of the Company or of any subsidiary or affiliate thereof.
7. TERMINATION
7.01 In the event of a Termination, as defined in paragraph 7.03 below,
during the Period of Employment, the provisions of this Section 7 shall apply.
7.02 In the event of a Termination and subject to the provisions of
Section 8 of this
- 8 -
<PAGE>
Agreement relating to mitigation of damages and to
compliance by the Executive with the provisions of paragraph 7.04 below,
relating to Competition, and of Section 9 below, relating to confidential
information, the Company shall, as liquidated damages or severance pay, or
both, pay to the Executive and provide him, his dependents, beneficiaries and
estate, with the following:
(a) The Company shall pay the Executive (i) the compensation provided in
paragraph 4.01 above for the month in which Termination shall have occurred at
the rate being paid at the time of Termination and (ii) during the remainder
of the Period of Employment an amount equal to the total compensation provided
in clause (ii) of subparagraph 4.01(a). Such amount shall be paid in monthly
installments at the end of each month commencing with the month next following
the month in which Termination occurred and continuing during the remainder
of the Period of Employment or through the month in which the death of the
Executive shall have occurred if earlier.
(b) During the period that the payments provided for in subparagraph
(a) of this paragraph 7.02 are required to be made, the Executive, his
dependents, beneficiaries and estate, shall continue to be entitled to all
benefits and service credit for benefits under employee benefit plans of
the Company as if still employed during such period under this Agreement
and, if and to the extent that such benefits or service credit for benefits
shall not be payable or provided under any such plans to the Executive, his
dependents, beneficiaries and estate, by reason of his no longer being an
employee of the Company as the result of Termination, the Company shall
itself pay or provide for payment of such benefits and service credit
for benefits to the Executive, his dependents, beneficiaries and estate.
(c) The remainder of the period of Employment shall be considered
service with
- 9 -
<PAGE>
the Company for the purpose (i) of continued credits under
the Company's retirement program, (consisting of its Retirement Plan for
Salaried Employees, its Excess Benefits Plan, if any, and its Supplemental
Executive Retirement Benefits Program) as each such plan or program was in
effect immediately prior to Termination and (ii) of all other benefit plans
of the Company as in effect immediately prior to Termination.
(d) In the event that the Executive shall at the time of Termination
hold an outstanding and unexercised (whether or not exercisable at the time)
option or options theretofore granted by the Company, the Company shall, in
addition to the amounts provided for in subparagraphs 7.02(a) and 7.02(b),
pay to the Executive in a lump sum an amount equal to the excess above the
option price under each such option of the Fair Market Value at the time of
Termination of the shares subject to each such option. Solely for the
purpose of this subparagraph (d), Fair Market Value at the time of Termination
shall be deemed to mean the higher of (i) the average of the reported closing
prices of the Common Shares of the Company, as reported on the New York Stock
Exchange-Composite Transactions, on the last trading day prior to the
Termination and on the last trading day of each of the two preceding thirty-
day periods, and (ii) in the event that a Change in Control, as defined in
Section 17 below, prior to Termination shall have taken place as the result
of a tender offer and such Change in Control was consummated within twelve
months of Termination, the highest consideration paid for Common Shares of
the Company in the course of such tender or exchange offer. Upon receiving
the payment from the Company called for by clause (i) of subparagraph (a) of
this paragraph 7.02, the Executive shall execute and deliver to the Company
a general release in favor of the Company, its successors and assigns, in
respect of any and all matters, including, without limitation, any
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<PAGE>
and all rights under any outstanding and unexercisable options at the time of
Termination, except for the payments and obligations required to be made or
assumed by the Company under this Agreement which at the time had not yet
been made or assumed by the Company and except for such other valid
obligations of the Company as shall be set forth in such release.
7.03 The word "Termination", for the purpose of this Section 7 and
any other provision of this Agreement, shall mean:
(a) Termination by the Company of the employment of the Executive by
the Company and its subsidiaries for any reason other than for Cause as
defined in paragraph 7.05 below or for Disability as defined in
subparagraph 6.02(a) above; or
(b) Termination by the Executive of his employment by the Company
and its subsidiaries upon the occurrence of any of the following events:
(i) Failure to elect or reelect the Executive to, or removal of
the Executive from, any of the offices described in paragraph 3.01 above.
(ii) A significant change in the nature or scope of the
authorities, powers, functions or duties attached to the position summarized
in paragraph 3.01 above, or a reduction in compensation, which is not
remedied within 30 days after receipt by the Company of written notice
from the Executive.
(iii) A determination by the Executive made in good faith that as a
result of a Change in Control of the Company, as defined in Section 17 below,
and a change in circumstances thereafter and since the date of this Agreement
significantly affecting his position, he is unable to carry out the
authorities, powers, functions or
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duties attached to his position and contemplated by Section 3 of this
Agreement and the situation is not remedied within 30 days after receipt by
the Company of written notice from the Executive of such determination.
(iv) A breach by the Company of any provision of this Agreement not
embraced within the foregoing clauses (i), (ii) and (iii) of this
subparagraph 7.03(b) which is not remedied within 30 days after receipt by
the Company of written notice from the Executive.
(v) The liquidation, dissolution, consolidation or merger of the
Company or transfer of all or a significant portion of its assets unless a
successor or successors (by merger, consolidation or otherwise) to which
all or a significant portion of its assets have been transferred shall have
assumed all duties and obligations of the Company under this Agreement,
provided that in any event set forth in this subparagraph 7.03(b) above, the
Executive shall have elected to terminate his employment under this Agreement
upon not less than forty and not more than ninety days' advance written
notice to the Board of Directors of the Company, Attention of the Secretary,
given, except in the case of a continuing breach, within three calendar
months after (A) failure to be so elected or reelected, or removal, (B)
expiration of the thirty-day cure period with respect to such event, or (C)
the closing date of such liquidation, dissolution, consolidation, merger or
transfer of assets, as the case may be.
An election by the Executive to terminate his employment given
under the provisions of this paragraph 7.03 shall not be deemed a voluntary
termination of employment by the Executive for the purpose of this Agreement
or any plan or practice of
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<PAGE>
the Company.
7.04 (a) There shall be no obligation on the part of the Company to
make any further payments provided for in paragraph 7.02 above or to provide
any further benefits specified in such paragraph 7.02 if the Executive shall,
during the period that such payments are being made or benefits provided,
engage in Competition with the Company as hereinafter defined, provided all
of the following shall have taken place:
(i) the Secretary of the Company, pursuant to resolution of the
Board of Directors of the Company, shall have given written notice to the
Executive that, in the opinion of the Board of Directors, the Executive is
engaged in such Competition, specifying the details;
(ii) the Executive shall have been give a reasonable opportunity
to appear before the Board of Directors prior to the determination of the
Board evidenced by such resolution; and
(iii) the Executive shall neither have ceased to engage in such
Competition within thirty days from his receipt of such notice nor
diligently taken all reasonable steps to that end during such thirty-day
period and thereafter.
(b) The word "Competition" for purposes of this paragraph 7.04 and
any other provision of this Agreement shall mean taking a management
position with or control of a business engaged in the manufacture,
processing, purchase of distribution of products which constituted 15% or
more of the sales of the Company and its subsidiaries and divisions during
the last fiscal year of the Company preceding the termination of the
Executive's employment (or during any fiscal year of the Company during the
Period of Employment);
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<PAGE>
provided, however, that in no event shall ownership of
less than 5% of the outstanding capital stock entitled to vote for the
election of directors of a corporation with a class of equity securities held
of record by more than 500 persons, standing alone, be deemed Competition
with the Company within the meaning of this paragraph 7.04.
7.05 For the purpose of any provision of this Agreement, the
termination of the Executive's employment shall be deemed to have been for
Cause only
(a) if termination of his employment shall have been the result of an
act or acts of dishonesty on the part of the Executive constituting a felony
and resulting or intended to result directly or indirectly in gain or
personal enrichment at the expense of the Company, or
(b) if there has been a breach by the Executive during the Period of
Employment of the provisions of paragraph 3.03 above, relating to the time
to be devoted to the affairs of the Company, or of Section 9, relating to
confidential information, and such breach results in demonstrably material
injury to the Company, and with respect to any alleged breach of paragraph
3.03 hereof, the Executive shall have both failed to remedy such alleged
breach within thirty days from his receipt of written notice by the Secretary
of the Company pursuant to resolution duly adopted by the Board of Directors
of the Company after notice to the Executive and an opportunity to be heard
demanding that he remedy such alleged breach, and failed to take all
reasonable steps to that end during such thirty-day period and thereafter;
provided that there shall have been delivered to the Executive a certified
copy of a resolution of the Board of Directors of the Company adopted by the
affirmative vote of not less than three-fourths of the entire membership of
the Board of Directors called and
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<PAGE>
held for that purpose and at which the Executive was given an opportunity to
be heard, finding that the Executive was guilty of conduct set forth in
subparagraphs (a) or (b) above, specifying the particulars thereof in detail.
Anything in this paragraph 7.05 or elsewhere in this Agreement to the
contrary notwithstanding, the employment of the Executive shall in no event
be considered to have been terminated by the Company for Cause if termination
of his employment took place (i) as the result of bad judgment or negligence
on the part of the Executive, or (ii) as the result of an act or omission
without intent of gaining therefrom directly or indirectly a profit to which
the Executive was not legally entitled, or (iii) because of an act or
omission believed by the Executive in good faith to have been in or not
opposed to the interests of the Company, or (iv) for any act or omission in
respect of which a determination could properly be made that the Executive
met the applicable standard of conduct prescribed for indemnification or
reimbursement or payment of expenses under the Code of Regulations of the
Company or the laws of the State of Ohio or the directors' and officers'
liability insurance of the Company, in each case as in effect at the time
of such act or omission, or (v) as the result of an act or omission which
occurred more than twelve calendar months prior to the Executive's having
been given notice of the termination of his employment for such act or
omission unless the commission of such act or such omission could not at the
time of such commission or omission have been known to a member of the
Board of Directors of the Company (other than the Executive, if he is then a
member of the Board of Directors), in which case more than twelve calendar
months from the date that the commission of such act or such omission was or
could reasonably have been so known, or (vi) as the result of a continuing
course of action which commenced and was or could
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reasonably have been known to a member of the Board of Directors of the
Company (other than the Executive) more than twelve calendar months prior
to notice having been given to the Executive of the termination of his
employment.
7.06 In the event that the Executive's employment shall be terminated
by the Company during the Period of Employment and such termination is
alleged to be for Cause, or the Executive's right to terminate his employment
under paragraph 7.03(b) above shall be questioned by the Company, or the
Company shall withhold payments or provision of benefits because the
Executive is alleged to be engaged in Competition in breach of the provisions
of paragraph 7.04 above or for any other reason, the Executive shall have the
right, in addition to all other rights and remedies provided by law, at his
election either to seek arbitration within the area described in Exhibit C
attached hereto and made part of this Agreement under the rules of the
American Arbitration Association by serving a notice to arbitrate upon the
Company or to institute a judicial proceeding, in either case within ninety
days after having received notice of termination of his employment or
notice in any form that the termination of his employment under paragraph
7.03(b) is subject to question or that the Company is withholding or proposed
to withhold payments or provision of benefits or within such longer period as
may reasonably be necessary for the Executive to take action in the event
that his illness or incapacity should preclude his taking such action within
such ninety-day period.
8. OBLIGATION TO MITIGATE DAMAGES
8.01 In the event of a Termination, as defined in paragraph 7.03 above,
the
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Executive shall make reasonable efforts to mitigate damages by seeking
other employment; provided, however, that he shall not be required to accept
a position of less dignity and importance or of substantially different
character than the highest position theretofore held by him with the Company
or a position that would call upon him to engage in competition within the
meaning of paragraph 7.04(b) above, nor shall he be required to accept a
position other than in a location reasonably convenient to his principal
residence immediately prior to such Termination.
8.02 To the extent that the Executive shall receive compensation,
benefits and service credit for benefits from other employment secured
pursuant to the provisions of paragraph 8.01 above, the payments to be
made and the benefits and service credit for benefits to be provided by
the Company under the provisions of paragraph 7.02 above shall be
correspondingly reduced. Such reduction shall, in the event of any
question, be determined jointly by the firm of certified public
accountants selected by the Executive, in each case upon the advice of
actuaries to the extent the certified public accountants consider
necessary, and, in the event such accountants are unable to agree on a
resolution of the question, such reduction shall be determined by an
independent firm of certified public accountants selected jointly by
both firms of accountants.
9. CONFIDENTIAL INFORMATION
9.01 The Executive agrees not to disclose, either while in the
Company's employ or at any time thereafter, to any person not employed by
the Company, or not engaged to render services to the Company, any
confidential information obtained by him while in the
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<PAGE>
employ of the Company, including, without limitation, any of the Company's
inventions, processes, methods of distribution or customers or trade secrets;
provided, however, that this provision shall not preclude the Executive from
use or disclosure of information known generally to the public or of
information not considered confidential by persons engaged in the business
conducted by the Company or from disclosure required by law or Court order.
9.02 The Executive also agrees that upon leaving the Company's employ,
he will not take with him, without the prior written consent of an officer
authorized to act in the matter by the Board of Directors of the Company, any
drawing, blueprint, specification or other document of the Company, its
subsidiaries, affiliates and divisions, which is of a confidential nature
relating to the Company, its subsidiaries, affiliates and divisions, or
without limitation, relating to its or their methods of distribution, or any
description of any formulae or secret processes.
10. SEVERANCE ALLOWANCE
In the event that, following the specific date set forth in paragraph
2.02 of this Agreement, the employment of the Executive shall be terminated
by the Company prior to his normal retirement date and such termination shall
be for any reason other than for Cause, as defined in paragraph 7.05 above,
the Company shall pay the Executive as a severance allowance a lump sum equal
to 50% of his annual compensation for one year, consisting of base salary at
the rate paid for the month prior to such termination of employment plus his
most recent executive performance award of bonus under the Company's annual
incentive plan.
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<PAGE>
11. WITHHOLDING
Anything to the contrary notwithstanding, all payments required to be
made by the Company hereunder to the Executive or his estate or beneficiaries
shall be subject to the withholding of such amounts, if any, relating to tax
and other payroll deductions as the Company may reasonably determine it
should withhold pursuant to any applicable law or regulation. In lieu of
withholding such amounts, the Company may accept other provisions to the end
that it has sufficient funds to pay all taxes required by law to be withheld
in respect of any or all of such payments.
12. NOTICES
All notices, requests, demands and other communications provided for
by this Agreement shall be in writing and shall be sufficiently given if and
when mailed in the continental United States by registered or certified mail
or personally delivered to the party entitled thereto at the address stated
from time to time in Exhibit E to this Agreement which address shall be such
address as the addressee may have given most recently by a similar notice.
Any such notice, request, demand or other communication delivered in person
shall be deemed to have been received on the date of delivery.
13. GENERAL PROVISIONS
13.01 There shall be no right of set-off or counter-claim, in respect
of any claim, debt or obligation, against any payments to the Executive, his
dependents, beneficiaries or estate provided for in this Agreement.
13.02 The Company and the Executive recognize that each party will
have no
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<PAGE>
adequate remedy at law for breach by the other of any of the
agreements contained herein and, in the event of any such breach, the Company
and the Executive hereby agree and consent that the other shall be entitled
to a decree of specific performance, mandamus or other appropriate remedy to
enforce performance of such agreements.
13.03 No right or interest to or in any payments shall be assignable by
the Executive; provided, however, that this provision shall not preclude him
from designating one or more beneficiaries to receive any amount that may be
payable after his death and shall not preclude the legal representative of
his estate from assigning any right hereunder to the person or persons
entitled thereto under his will or, in the case of intestacy, to the person
or persons entitled thereto under the laws of intestacy applicable to his
estate. The term "beneficiaries" as used in this Agreement shall mean a
beneficiary or beneficiaries so designated to receive any such amount or,
if no beneficiary has been so designated, the legal representative of the
Executive's estate.
13.04 No right, benefit or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt or obligation, or
to execution, attachment, levy or similar process, or assignment by
operation of law. Any attempt, voluntary or involuntary, to effect any
action specified in the immediately preceding sentence shall, to the full
extent permitted by law, be null, void and of no effect.
13.05 In the event of the Executive's death or a judicial determination
of his
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<PAGE>
incompetence, reference in this Agreement to the Executive shall be
deemed, where appropriate, to refer to his legal representative or, where
appropriate, to his beneficiary or beneficiaries.
13.06 The titles to sections in this Agreement are intended solely for
convenience and no provision of this Agreement is to be construed by reference
to the title of any section.
13.07 This Agreement shall be binding upon and shall inure to the
benefit of the Executive, his heirs and legal representatives, and the
Company and its successors as provided in Section 16 hereof.
14. AMENDMENT OR MODIFICATION; WAIVER
No provision of this Agreement may be amended, modified or waived unless
such amendment, modification or waiver shall be authorized by the Board of
Directors of the Company or any authorized committee of the Board of Directors
and shall be agreed to in writing, signed by the Executive and by an officer
of the Company thereunto duly authorized. Except as otherwise specifically
provided in this Agreement, no waiver by either party hereto of any breach
by the other party hereto of any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of a subsequent
breach of such condition or provision or a waiver of a similar or dissimilar
provision or condition at the same or at any prior or subsequent time.
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<PAGE>
15. SEVERABILITY
In the event that any provision of this Agreement, or portion thereof,
shall be determined to be invalid or unenforceable for any reason, in whole
or in part, the remaining provisions of this Agreement and parts of such
provision not so invalid or unenforceable shall be unaffected thereby and
shall remain in full force and effect to the fullest extent permitted by law.
16. SUCCESSORS TO THE COMPANY
Except as otherwise provided herein, this Agreement shall be binding upon
and inure to the benefit of the Company and any successor of the Company,
including, without limitation, any corporation or corporations acquiring
directly or indirectly all or substantially all of the assets of the Company
whether by merger, consolidation, sale or otherwise (and such successor shall
thereafter be deemed "the Company" for the purposes of this Agreement), but
shall not otherwise be assignable by the Company.
17. CHANGE IN CONTROL
For the purpose of this Agreement, the term "Change in Control of the
Company" shall mean a change in control of a nature that would be required to
be reported in response to Item 5(f) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934 as in effect on the
date of this Agreement; provided that, without limitation, such a change in
control shall be deemed to have occurred if and when (a) any "person" (as
such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934) is or becomes a beneficial owner, directly or indirectly, of
securities of the Company representing 25% or more of the combined voting
power of the Company's
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<PAGE>
then outstanding securities or (b) during any period
of 24 consecutive months, commencing before or after the date of this
Agreement, individuals who at the beginning of such twenty-four month
period were directors of the Company for whom the Executive shall have voted
cease for any reason to constitute at least a majority of the Board of
Directors of the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as the day and year first above written.
[seal]
ATTEST: PARKER-HANNIFIN CORPORATION,
an Ohio corporation
_______________________________ By:_________________________
THE EXECUTIVE
_____________________________
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<PAGE>
Exhibit (10)(b)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1994
by Parker-Hannifin Corporation
Form of Change in Control Agreement
entered into by the Registrant and
certain executive officers (1984)
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
A G R E E M E N T
between
PARKER-HANNIFIN CORPORATION
and
__________________
dated ___________, 1984
<PAGE>
TABLE OF CONTENTS
Section Page
Recitals 1
1 Operation of Agreement 1
2 Employment; Period of Employment 2
3 Position, Duties, Responsibilities 2
4 Compensation, Compensation Plans, Perquisites 4
5 Employee Benefit Plans 6
6 Effect of Death or Disability 7
7 Termination 8
8 Obligation to Mitigate Damages 16
9 Confidential Information 17
10 Severance Allowance 18
11 Withholding 19
12 Notices 19
13 General Provisions 19
14 Amendment or Modification, Waiver 21
15 Severability 22
16 Successors to the Company 22
17 Change in Control 22
Exhibits (5)
<PAGE>
AGREEMENT between PARKER-HANNIFIN CORPORATION, an Ohio
Corporation (the "Company"), and _____________________ (the "Executive"),
dated the______ day of ___________, 1984.
W I T N E S S E T H :
WHEREAS,
A. The Executive is a principal officer of the Company and an
integral part of its management.
B. The Company wishes to assure both itself and the Executive
of continuity of management in the event of any actual or threatened change in
control of the Company.
C. This agreement is not intended to alter materially the
compensation and benefits that the Executive could reasonably expect in the
absence of a change in control of the Company and, accordingly, this
Agreement, though taking effect upon execution thereof, will be operative only
upon a change in control of the Company, as that term is hereafter defined.
NOW, THEREFORE, it is hereby agreed by and between the parties as
follows:
1. OPERATION OF AGREEMENT
This Agreement shall be effective immediately upon its execution
by the parties hereto, but, anything in this Agreement to the contrary
notwithstanding, neither the Agreement nor any provision thereof shall be
operative unless and until there has been a
<PAGE>
Change in Control of the Company, as defined in Section 17 below while the
Executive is in the employ of the Company. Upon such a Change in Control of
the Company, this Agreement and all provisions thereof shall become operative
immediately.
2. EMPLOYMENT; PERIOD OF EMPLOYMENT
2.01 The Company hereby agrees to continue the Executive in its employ,
and the Executive hereby agrees to remain in the employ of the Company, for
the period set forth in paragraph 2.02 below (the Period of Employment), in
the position and with the duties and responsibilities set forth in Section 3
below, and upon the other terms and conditions hereinafter stated.
2.02 The Period of Employment shall be deemed to have commenced on the
date of this Agreement and, subject only to the provisions of Section 6 below,
relating to death or Disability, shall continue until the close of business on
the date stated in Exhibit A attached to and made part of this Agreement. In
the event that the Executive shall continue in the full-time employment of the
Company after the latter date, such continued employment shall be subject to
the terms and conditions of this Agreement and the Period of Employment shall
include the period during which the Executive in fact so continues in such
employment.
3. POSITION, DUTIES, RESPONSIBILITIES
3.01 (a) It is contemplated that during the Period of Employment the
Executive shall continue to serve as a principal officer of the Company with
the office(s) and title(s),
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set forth in Exhibit B attached to and made part
of this Agreement, reporting as set in such Exhibit B and with duties and
responsibilities including those specifically set forth in such Exhibit B.
(b) At all times during the Period of Employment, the Executive shall
hold a position of responsibility and importance and a position of scope, with
the functions, duties and responsibilities attached thereto, at least equal in
responsibility and importance and in scope to and commensurate with his
position on the date of this Agreement described in general terms in
subparagraph 3.01(a) above.
3.02 During the Period of Employment, the Executive shall also serve
and continue to serve, if and when elected and reelected, as an officer or
director, or both, of any subsidiary, division or affiliate of the Company.
3.03 Throughout the Period of Employment the Executive shall devote his
full time and undivided attention during normal business hours to the business
and affairs of the Company, except for reasonable vacations and except for
illness or incapacity, but nothing in this Agreement shall preclude the
Executive from devoting reasonable periods required for serving as a director
or member of a committee of any organization involving no conflict of interest
with the interests of the Company, from engaging in charitable and community
activities, and from managing his personal investments, provided that such
activities do not materially interfere with the regular performance of his
duties and responsibilities under this Agreement.
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<PAGE>
3.04 The office of the Executive shall be located at the principal offices of
the Company within the area described in Exhibit C attached to and made part
of this Agreement, and the Executive shall not be required to locate his
office elsewhere without his prior written consent, nor shall he be required
to be absent therefrom on travel status or otherwise more than the total
number of working days in any calendar year stated in such Exhibit C.
4. COMPENSATION, COMPENSATION PLANS, PERQUISITES
4.01 (a) For all services rendered by the Executive in any capacity during
the Period of Employment, including, without limitation, services as an
executive, officer, director or member of any committee of the Company or of
any subsidiary, division or affiliate thereof, the Executive shall be paid as
compensation:
(i) A base salary, payable not less often than monthly, at a
rate of no less than $_____________ per month, with such increases in such
rate as shall be awarded from time to time in accordance with the Company's
regular administrative practices of salary increases applicable to executives
of the Company in effect and on the date of this Agreement, and
(ii) An executive performance award or bonus under the Company's
Executive Compensation Plan, or such equivalent successor plan as may be
adopted by the Company, upon a basis that will render total compensation for
any calendar month, consisting of the minimum base salary provided in clause
(i) of this subparagraph 4.01(a) plus bonus for such month determined by
dividing the award made for the fiscal year of the Company in which such month
occurred by the number of months in such fiscal year, equal to no less than
the amount set forth from
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time to time in Exhibit D to this Agreement, which amount shall be equal to
$_____________ plus such salary increases as may have been granted pursuant
to clause (i) of this subparagraph 4.01(a).
(b) Subject to the provisions of clause (ii) of subparagraph 4.01(a)
above, nothing in this Agreement shall preclude a change in the mix between
the base salary and bonus of the Executive by increasing the base salary of
the Executive.
(c) Any increase in salary pursuant to clause (i) of subparagraph
4.01(a) or in bonus or other compensation shall in no way diminish any other
obligation of the Company under this Agreement.
4.02 During the Period of Employment the Executive shall be and continue to
be a full participant in the Company's Deferred Compensation Plan, its 1977
and 1982 Employees Stock Option Plan, or equivalent successor plans that may
be adopted by the Company, with at least the same reward opportunities as that
have been heretofore provided. Nothing in this Agreement shall preclude
improvement of reward opportunities in such plans or other plans in accordance
with the present practice of the Company.
4.03 During the Period of Employment, the Executive shall be entitled
to perquisites, including, without limitation, an office, secretarial and
clerical staff, and to fringe benefits, including, without limitation, the
business and personal use of an automobile and payment or reimbursement of
club dues, in each case at least equal to those attached to his office on the
date of this Agreement, as well as to reimbursement, upon proper accounting,
of reasonable expenses and disbursements incurred by him in the course of his
duties.
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<PAGE>
5. EMPLOYEE BENEFIT PLANS
5.01 The compensation provided for in Section 4 above, together with
other matters therein set forth, is in addition to the benefits provided for
in this Section 5.
5.02 In the event that the Executive shall not heretofore have been
designated a Participant in the Supplemental Executive Retirement Benefits
Program of the Company, the Executive shall be and hereby is designated a
Participant in that Program on and as of the date this Agreement becomes
operative in accordance with the provisions of Section 1 of this Agreement.
5.03 The Executive, his dependents and beneficiaries shall be entitled
to all payments and benefits and service credit for benefits during the Period
of Employment to which officers of the Company, their dependents and
beneficiaries are entitled as the result of the employment of such officers
during the Period of Employment under the terms of employee plans and
practices of the Company, including, without limitation, the Company's
retirement program (consisting of its Retirement Plan for Salaried Employees,
its Excess Benefits Plan, if any, and its Supplemental Executive Retirement
Benefits Program) the Company's stock purchase and savings, thrift and
investment plans, if any, the Company's Group Life Insurance Plan, its
accidental death and dismemberment insurance, disability, medical, dental and
health and welfare plans) and other present or equivalent successor plans and
practices of the Company, its subsidiaries and divisions, for which officers,
their dependents and beneficiaries are eligible, and to all payments or other
benefits under any such plan or practice after the Period of Employment as a
result of participation in such
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<PAGE>
plan or practice during the Period of Employment.
5.04 Nothing in this Agreement shall preclude the Company from amending
or terminating any employee benefit plan or practice, but, it being the intent
of the parties that the Executive shall continue to be entitled during the
Period of Employment to perquisites as set forth in paragraph 4.03 above, and
to benefits and service credit for benefits under paragraph 5.03 above at
least equal to those attached to his position on the date of this Agreement,
nothing in this Agreement shall operate as, or be construed or reduce or
authorize, a reduction without the Executive's written consent in the level of
such perquisites, benefits or service credit for benefits; in the event of any
such reduction, by amendment or termination of any plan or practice or
otherwise, the Executive, his dependents and beneficiaries shall continue to
be entitled to perquisites, benefits and service credit for benefits at least
equal to the perquisites and to benefits and service credit for benefits under
such plans or practices that he or his dependents and beneficiaries would
have received if such reduction had not taken place.
6. EFFECT OF DEATH OR DISABILITY
6.01 In the event of the death of the Executive during the Period of
Employment, the legal representative of the Executive shall be entitled to the
compensation provided for in paragraph 4.01 above for the month in which death
shall have taken place at the rate being paid at the time of death, and the
Period of Employment shall be deemed to have ended as of the close of business
on the last day of the month in which death shall have occurred, but without
prejudice to any payments due in respect of the Executive's death.
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<PAGE>
6.02 (a) The term "Disability", as used in this Agreement, shall mean an
illness or accident which prevents the Executive from performing his duties
under this Agreement for a period of six consecutive months. The Period of
Employment shall be deemed to have ended as of the close of business on the
last day of such six months period but without prejudice to any payments due
the Executive in respect of disability.
(b) In the event of the Disability of the Executive during the Period
of Employment, the Executive shall be paid an amount equal to the Minimum
Total Monthly Compensation for the month in which such Disability commenced.
Such amount shall be paid at the end of each month during the period of such
Disability but not in excess of six months.
(c) The amount of any payments due under this paragraph 6.02 shall be
reduced by any payments to which the Executive may be entitled for the same
period because of disability under any disability or pension plan of the
Company or of any subsidiary or affiliate thereof.
7. TERMINATION
7.01 In the event of a Termination, as defined in paragraph 7.03 below,
during the Period of Employment, the provisions of this Section 7 shall apply.
7.02 In the event of a Termination and subject to the provisions of
Section 8 of this Agreement relating to mitigation of damages and to
compliance by the Executive with the provisions of paragraph 7.04 below,
relating to Competition, and of Section 9 below, relating to confidential
information, the Company shall, as liquidated damages or severance pay, or
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<PAGE>
both, pay to the Executive and provide him, his dependents, beneficiaries and
estate, with the following:
(a) The Company shall pay the Executive (i) the compensation provided
in paragraph 4.01 above for the month in which Termination shall have occurred
at the rate being paid at the time of Termination and (ii) during the
remainder of the Period of Employment an amount equal to the total
compensation provided in clause (ii) of subparagraph 4.01(a). Such amount
shall be paid in monthly installments at the end of each month commencing with
the month next following the month in which Termination occurred and
continuing during the remainder of the Period of Employment or through the
month in which the death of the Executive shall have occurred if earlier.
(b) During the period that the payments provided for in subparagraph
(a) of this paragraph 7.02 are required to be made, the Executive, his
dependents, beneficiaries and estate, shall continue to be entitled to all
benefits and service credit for benefits under employee benefit plans of the
Company as if still employed during such period under this Agreement and, if
and to the extent that such benefits or service credit for benefits shall not
be payable or provided under any such plans to the Executive, his dependents,
beneficiaries and estate, by reason of his no longer being an employee of the
Company as the result of Termination, the Company shall itself pay or provide
for payment of such benefits and service credit for benefits to the Executive,
his dependents, beneficiaries and estate.
(c) The remainder of the period of Employment shall be considered
service with the Company for the purpose (i) of continued credits under the
Company's retirement program, (consisting of its Retirement Plan for Salaried
Employees, its Excess Benefits Plan, if any, and its Supplemental Executive
Retirement Benefits Program) as each such plan or
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<PAGE>
program was in effect immediately prior to Termination and (ii) of all other
benefit plans of the Company as in effect immediately prior to Termination.
(d) In the event that the Executive shall at the time of Termination
hold an outstanding and unexercised (whether or not exercisable at the time)
option or options theretofore granted by the Company, the Company shall, in
addition to the amounts provided for in subparagraphs 7.02(a) and 7.02(b), pay
to the Executive in a lump sum an amount equal to the excess above the option
price under each such option of the Fair Market Value at the time of
Termination of the shares subject to each such option. Solely for the purpose
of this subparagraph (d), Fair Market Value at the time of Termination shall
be deemed to mean the higher of (i) the average of the reported closing prices
of the Common Shares of the Company, as reported on the New York Stock
Exchange-Composite Transactions, on the last trading day prior to the
Termination and on the last trading day of each of the two preceding thirty-
day periods, and (ii) in the event that a Change in Control, as defined in
Section 17 below, prior to Termination shall have taken place as the result of
a tender offer and such Change in Control was consummated within twelve months
of Termination, the highest consideration paid for Common Shares of the
Company in the course of such tender or exchange offer. Upon receiving the
payment from the Company called for by clause (i) of subparagraph (a) of this
paragraph 7.02, the Executive shall execute and deliver to the Company a
general release in favor of the Company, its successors and assigns, in
respect of any and all matters, including, without limitation, any and all
rights under any outstanding and unexercisable options at the time of
Termination, except for the payments and obligations required to be made or
assumed by the Company under this Agreement which at the time had not yet been
made or assumed by the Company
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<PAGE>
and except for such other valid obligations of the Company as shall be set
forth in such release.
7.03 The word "Termination", for the purpose of this Section 7 and any
other provision of this Agreement, shall mean:
(a) Termination by the Company of the employment of the Executive by
the Company and its subsidiaries for any reason other than for Cause as
defined in paragraph 7.05 below or for Disability as defined in subparagraph
6.02(a) above; or
(b) Termination by the Executive of his employment by the Company and
its subsidiaries upon the occurrence of any of the following events:
(i) Failure to elect or reelect the Executive to, or removal of
the Executive from, any of the offices described in paragraph 3.01 above.
(ii) A significant change in the nature or scope of the
authorities, powers, functions or duties attached to the position summarized
in paragraph 3.01 above, or a reduction in compensation, which is not remedied
within 30 days after receipt by the Company of written notice from the
Executive.
(iii) A determination by the Executive made in good faith that as a
result of a Change in Control of the Company, as defined in Section 17 below,
and a change in circumstances thereafter and since the date of this Agreement
significantly affecting his position, he is unable to carry out the
authorities, powers, functions or duties attached to his position and
contemplated by Section 3 of this Agreement and the situation is not remedied
within 30 days after receipt by the Company of written notice from the
Executive of such determination.
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<PAGE>
(iv) A breach by the Company of any provision of this Agreement
not embraced within the foregoing clauses (i), (ii) and (iii) of this
subparagraph 7.03(b) which is not remedied within 30 days after receipt by the
company of written notice from the Executive.
(v) The liquidation, dissolution, consolidation or merger of the
Company or transfer of all or a significant portion of its assets unless a
successor or successors (by merger, consolidation or otherwise) to which all
or a significant portion of its assets have been transferred shall have
assumed all duties and obligations of the Company under this Agreement,
provided, however, that in any event set forth in this subparagraph 7.03(b)
above, the Executive shall have elected to terminate his employment under this
Agreement upon not less than forty and not more than ninety days' advance
written notice to the Board of Directors of the Company, Attention of the
Secretary, given, except in the case of a continuing breach, within three
calendar months after (A) failure to be so elected or reelected, or removal,
(B) expiration of the thirty-day cure period with respect to such event, or
(C) the closing date of such liquidation, dissolution, consolidation, merger
or transfer of assets, as the case may be.
An election by the Executive to terminate his employment given
under the provisions of this paragraph 7.03 shall not be deemed a voluntary
termination of employment by the Executive for the purpose of this Agreement
or any plan or practice of the Company.
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<PAGE>
7.04 (a) There shall be no obligation on the part of the Company to make
any further payments provided for in paragraph 7.02 above or to provide any
further benefits specified in such paragraph 7.02 if the Executive shall,
during the period that such payments are being made or benefits provided,
engage in Competition with the Company as hereinafter defined, provided all of
the following shall have taken place:
(i) the Secretary of the Company, pursuant to resolution of the
Board of Directors of the Company, shall have given written notice to the
Executive that, in the opinion of the Board of Directors, the Executive is
engaged in such Competition, specifying the details;
(ii) the Executive shall have been give a reasonable opportunity
to appear before the Board of Directors prior to the determination of the
Board evidenced by such resolution; and
(iii) the Executive shall neither have ceased to engage in such
Competition within thirty days from his receipt of such notice nor diligently
taken all reasonable steps to that end during such thirty-day period and
thereafter.
(b) The word "Competition" for purposes of this paragraph 7.04 and any
other provision of this Agreement shall mean taking a management position with
or control of a business engaged in the manufacture, processing, purchase of
distribution of products which constituted 15% or more of the sales of the
Company and its subsidiaries and divisions during the last fiscal year of the
Company preceding the termination of the Executive's employment (or during any
fiscal year of the Company during the Period of Employment); provided,
however in no event shall ownership of less than 5% of the outstanding capital
stock entitled to vote for the election of directors of a corporation with a
class of
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<PAGE>
equity securities held of record by more than 500 persons, standing alone, be
deemed Competition with the Company within the meaning of this paragraph 7.04.
7.05 For the purpose of any provision of this Agreement, the
termination of the Executive's employment shall be deemed to have been for
Cause only
(a) if termination of his employment shall have been the result of an
act or acts of dishonesty on the part of the Executive constituting a felony
and resulting or intended to result directly or indirectly in gain or personal
enrichment at the expense of the Company, or
(b) if there has been a breach by the Executive during the Period of
Employment of the provisions of paragraph 3.03 above, relating to the time to
be devoted to the affairs of the Company, or of Section 9, relating to
confidential information, and such breach results in demonstrably material
injury to the Company, and with respect to any alleged breach of paragraph
3.03 hereof, the Executive shall have both failed to remedy such alleged
breach within thirty days from his receipt of written notice by the Secretary
of the Company pursuant to resolution duly adopted by the Board of Directors
of the Company after notice to the Executive and an opportunity to be heard
demanding that he remedy such alleged breach, and failed to take all
reasonable steps to that end during such thirty-day period and thereafter;
provided that there shall have been delivered to the Executive a certified
copy of a resolution of the Board of Directors of the Company adopted by the
affirmative vote of not less than three-fourths of the entire membership of
the Board of Directors called and held for that purpose and at which the
Executive was given an opportunity to be heard, finding that the Executive was
guilty of conduct set forth in subparagraphs (a) or (b) above,
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<PAGE>
specifying the particulars thereof in detail.
Anything in this paragraph 7.05 or elsewhere in this Agreement to
the contrary notwithstanding, the employment of the Executive shall in no
event be considered to have been terminated by the Company for Cause if
termination of his employment took place (i) as the result of bad judgment or
negligence on the part of the Executive, or (ii) as the result of an act or
omission without intent of gaining therefrom directly or indirectly a profit
to which the Executive was not legally entitled, or (iii) because of an act or
omission believed by the Executive in good faith to have been in or not
opposed to the interests of the Company, or (iv) for any act or omission in
respect of which a determination could properly be made that the Executive met
the applicable standard of conduct prescribed for indemnification or
reimbursement or payment of expenses under the Code of Regulations of the
Company or the laws of the State of Ohio or the directors' and officers'
liability insurance of the Company, in each case as in effect at the time of
such act or omission, or (v) as the result of an act or omission which
occurred more than twelve calendar months prior to the Executive's having been
given notice of the termination of his employment for such act or omission
unless the commission of such act or such omission could not at the time of
such commission or omission have been known to a member of the Board of
Directors of the Company (other than the Executive, if he is then a member of
the Board of Directors), in which case more than twelve calendar months from
the date that the commission of such act or such omission was or could
reasonably have been so known, or (vi) as the result of a continuing course of
action which commenced and was or could reasonably have been known to a member
of the Board of Directors of the Company (other than the Executive) more than
twelve calendar months prior to notice having been given to
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<PAGE>
the Executive of the termination of his employment.
7.06 In the event that the Executive's employment shall be terminated
by the Company during the Period of Employment and such termination is alleged
to be for Cause, or the Executive's right to terminate his employment under
paragraph 7.03(b) above shall be questioned by the Company, or the Company
shall withhold payments or provision of benefits because the Executive is
alleged to be engaged in Competition in breach of the provisions of paragraph
7.04 above or for any other reason, the Executive shall have the right, in
addition to all other rights and remedies provided by law, at his election
either to seek arbitration within the area described in Exhibit C attached
hereto and made part of this Agreement under the rules of the American
Arbitration Association by serving a notice to arbitrate upon the Company or
to institute a judicial proceeding, in either case within ninety days after
having received notice of termination of his employment or notice in any form
that the termination of his employment under paragraph 7.03(b) is subject to
question or that the Company is withholding or proposed to withhold payments
or provision of benefits or within such longer period as may reasonably be
necessary for the Executive to take action in the event that his illness or
incapacity should preclude his taking such action within such ninety-day
period.
8. OBLIGATION TO MITIGATE DAMAGES
8.01 In the event of a Termination, as defined in paragraph 7.03 above,
the Executive shall make reasonable efforts to mitigate damages by seeking
other employment; provided, however, that he shall not be required to accept a
position of less dignity and
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<PAGE>
importance or of substantially different character than the highest position
theretofore held by him with the Company or a position that would call upon
him to engage in competition within the meaning of paragraph 7.04(b) above,
nor shall he be required to accept a position other than in a location
reasonably convenient to his principal residence immediately prior to such
Termination.
8.02 To the extent that the Executive shall receive compensation,
benefits and service credit for benefits from other employment secured
pursuant to the provisions of paragraph 8.01 above, the payments to be made
and the benefits and service credit for benefits to be provided by the Company
under the provisions of paragraph 7.02 above shall be correspondingly reduced.
Such reduction shall, in the event of any question, be determined jointly by
the firm of certified public accountants selected by the Executive, in each
case upon the advice of actuaries to the extent the certified public
accountants consider necessary, and, in the event such accountants are unable
to agree on a resolution of the question, such reduction shall be determined
by an independent firm of certified public accountants selected jointly by
both firms of accountants.
9. CONFIDENTIAL INFORMATION
9.01 The Executive agrees not to disclose, either while in the
Company's employ or at any time thereafter, to any person not employed by the
Company, or not engaged to render services to the Company, any confidential
information obtained by him while in the employ of the Company, including,
without limitation, any of the Company's inventions, processes, methods of
distribution or customers or trade secrets; provided, however, that this
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<PAGE>
provision shall not preclude the Executive from use or disclosure of
information known generally to the public or of information not considered
confidential by persons engaged in the business conducted by the Company or
from disclosure required by law or Court order.
9.02 The Executive also agrees that upon leaving the Company's employ,
he will not take with him, without the prior written consent of an officer
authorized to act in the matter by the Board of Directors of the Company, any
drawing, blueprint, specification or other document of the Company, its
subsidiaries, affiliates and divisions, which is of a confidential nature
relating to the Company, its subsidiaries, affiliates and divisions, or
without limitation, relating to its or their methods of distribution, or any
description of any formulae or secret processes.
10. SEVERANCE ALLOWANCE
In the event that, following the specific date set forth in
paragraph 2.02 of this Agreement, the employment of the Executive shall be
terminated by the Company prior to his normal retirement date and such
termination shall be for any reason other than for Cause, as defined in
paragraph 7.05 above, the Company shall pay the Executive as a severance
allowance a lump sum equal to 50% of his annual compensation for one year,
consisting of base salary at the rate paid for the month prior to such
termination of employment plus his most recent executive performance award of
bonus under the Company's annual incentive plan.
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<PAGE>
11. WITHHOLDING
Anything to the contrary notwithstanding, all payments required to
be made by the Company hereunder to the Executive or his estate or
beneficiaries shall be subject to the withholding of such amounts, if any,
relating to tax and other payroll deductions as the Company may reasonably
determine it should withhold pursuant to any applicable law or regulation. In
lieu of withholding such amounts, the Company may accept other provisions to
the end that it has sufficient funds to pay all taxes required by law to be
withheld in respect of any or all of such payments.
12. NOTICES
All notices, requests, demands and other communications provided for by
this Agreement shall be in writing and shall be sufficiently given if and when
mailed in the continental United States by registered or certified mail or
personally delivered to the party entitled thereto at the address stated from
time to time in Exhibit E to this Agreement which address shall be such
address as the addressee may have given most recently by a similar notice.
Any such notice, request, demand or other communication delivered in person
shall be deemed to have been received on the date of delivery.
13. GENERAL PROVISIONS
13.01 There shall be no right of set-off or counter-claim, in respect of
any claim, debt or obligation, against any payments to the Executive, his
dependents, beneficiaries or estate provided for in this Agreement.
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<PAGE>
13.02 The Company and the Executive recognize that each party will have
no adequate remedy at law for breach by the other of any of the agreements
contained herein and, in the event of any such breach, the Company and the
Executive hereby agree and consent that the other shall be entitled to a
decree of specific performance, mandamus or other appropriate remedy to
enforce performance of such agreements.
13.03 No right or interest to or in any payments shall be assignable by
the Executive; provided, however, that this provision shall not preclude him
from designating one or more beneficiaries to receive any amount that may be
payable after his death and shall not preclude the legal representative of his
estate from assigning any right hereunder to the person or persons entitled
thereto under his will or, in the case of intestacy, to the person or persons
entitled thereto under the laws of intestacy applicable to his estate. The
term "beneficiaries" as used in this Agreement shall mean a beneficiary or
beneficiaries so designated to receive any such amount or, if no beneficiary
has been so designated, the legal representative of the Executive's estate.
13.04 No right, benefit or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt or obligation, or to
execution, attachment, levy or similar process, or assignment by operation of
law. Any attempt, voluntary or involuntary, to effect any action specified in
the immediately preceding sentence shall, to the full extent permitted by law,
be null, void and of no effect.
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<PAGE>
13.05 In the event of the Executive's death or a judicial determination
of his incompetence, reference in this Agreement to the Executive shall be
deemed, where appropriate, to refer to his legal representative or, where
appropriate, to his beneficiary or beneficiaries.
13.06 The titles to sections in this Agreement are intended solely for
convenience and no provision of this Agreement is to be construed by reference
to the title of any section.
13.07 This Agreement shall be binding upon and shall inure to the
benefit of the Executive, his heirs and legal representatives, and the Company
and its successors as provided in Section 16 hereof.
14. AMENDMENT OR MODIFICATION; WAIVER
No provision of this Agreement may be amended, modified or waived
unless such amendment, modification or waiver shall be authorized by the Board
of Directors of the Company or any authorized committee of the Board of
Directors and shall be agreed to in writing, signed by the Executive and by an
officer of the Company thereunto duly authorized. Except as otherwise
specifically provided in this Agreement, no waiver by either party hereto of
any breach by the other party hereto of any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of a
subsequent breach of such condition or provision or a waiver of a similar or
dissimilar provision or condition at the same or at any prior or subsequent
time.
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<PAGE>
15. SEVERABILITY
In the event that any provision of this Agreement, or portion thereof,
shall be determined to be invalid or unenforceable for any reason, in whole or
in part, the remaining provisions of this Agreement and parts of such
provision not so invalid or unenforceable shall be unaffected thereby and
shall remain in full force and effect to the fullest extent permitted by law.
16. SUCCESSORS TO THE COMPANY
Except as otherwise provided herein, this Agreement shall be
binding upon and inure to the benefit of the Company and any successor of the
Company, including, without limitation, any corporation or corporations
acquiring directly or indirectly all or substantially all of the assets of the
Company whether by merger, consolidation, sale or otherwise (and such
successor shall thereafter be deemed "the Company" for the purposes of this
Agreement), but shall not otherwise be assignable by the Company.
17. CHANGE IN CONTROL
For the purpose of this Agreement, the term "Change in Control of
the Company" shall mean a change in control of a nature that would be required
to be reported in response to Item 5(f) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934 as in effect on the date
of this Agreement; provided that, without limitation, such a change in control
shall be deemed to have occurred if and when (a) any "person" (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) is
or becomes a beneficial owner, directly or indirectly, of securities of the
Company representing 25% or more of the combined voting power of the Company's
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<PAGE>
then outstanding securities or (b) during any period of 24 consecutive months,
commencing before or after the date of this Agreement, individuals who at the
beginning of such twenty-four month period were directors of the Company for
whom the Executive shall have voted cease for any reason to constitute at
least a majority of the Board of Directors of the Company.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as the day and year first above written.
[seal]
ATTEST: PARKER-HANNIFIN CORPORATION,
an Ohio corporation
______________________________________ By:_____________________________
THE EXECUTIVE
________________________________
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<PAGE>
Exhibit (10)(c)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1994
by Parker-Hannifin Corporation
Form of Change in Control Agreement
entered into by the Registrant and
certain executive officers (1988)
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
A G R E E M E N T
between
PARKER-HANNIFIN CORPORATION
and
_______________________
dated _____________, 1988
<PAGE>
TABLE OF CONTENTS
Section Page
Recitals 1
1 Operation of Agreement 1
2 Employment; Period of Employment 2
3 Position, Duties, Responsibilities 3
4 Compensation, Compensation Plans, Perquisites 5
5 Employee Benefit Plans 9
6 Effect of Death or Disability 10
7 Termination 11
8 Obligation to Mitigate Damages 21
9 Confidential Information 22
10 Severance Allowance 23
11 Withholding 24
12 Notices 24
13 General Provisions 25
14 Amendment or Modification; Waiver 27
15 Severability 28
16 Successors to the Company 28
17 Change in Control 28
18 Intention Relating to Recent Legislation; 29
Possible Future Amendments
Exhibits (6)
<PAGE>
AGREEMENT between PARKER HANNIFIN CORPORATION, an Ohio
Corporation (the Company), and ___________________ (the Executive), dated the
_____ day of _______________, 1988.
W I T N E S S E T H :
WHEREAS:
A. The Executive is a principal officer of the Company and an
integral part of its management.
B. The Company wishes to assure both itself and the Executive
of continuity of management in the event of any actual or threatened change
in control of the Company.
C. This agreement is not intended to alter materially the
compensation and benefits that the Executive could reasonably expect in the
absence of a change in control of the Company and, accordingly, this
Agreement, though taking effect upon execution thereof, will be operative
only upon a change in control of the Company, as that term is hereafter
defined.
NOW, THEREFORE, it is hereby agreed by and between the parties as
follows:
1. OPERATION OF AGREEMENT
This Agreement shall be effective immediately upon its execution
by the parties hereto, but, anything in this Agreement to the contrary
notwithstanding, neither this Agreement nor any provision thereof, except for
this Section 1, Sections 14 through 18
<PAGE>
inclusive, paragraph 13.01, paragraphs 13.07 through 13.10 inclusive, and
provisions of subparagraphs 3.01 (a)(ii), 3.04(b) and 4.01(b) and of Section
12 providing for automatic updating of Exhibits B, D, E and F from time to
time prior to the date this Agreement becomes operative, shall be operative
unless and until there has been a Change in Control of the Company as defined
in Section 17 below while the Executive is in the employ of the Company.
Upon such a Change in Control of the Company, this Agreement and all
provisions thereof shall become operative immediately.
2. EMPLOYMENT; PERIOD OF EMPLOYMENT
2.01 The Company hereby agrees to continue the Executive in its
employ, and the Executive hereby agrees to remain in the employ of the
Company, for the period set forth in paragraph 2.02 below (the Period of
Employment), in the position and with the duties and responsibilities set
forth in Section 3 below, and upon the other terms and conditions hereinafter
stated.
2.02 The Period of Employment shall commence on the date this
Agreement becomes operative pursuant to the provisions of Section 1 above
(the Operative Date) and, subject only to the provisions of Section 6 below,
relating to death or Disability, shall continue until the close of business
on the date stated in Exhibit A attached to and made part of this Agreement.
In the event that the Executive shall continue in the full-time employment of
the Company after the latter date, such continued employment shall be subject
to the terms and conditions of this Agreement and the Period of Employment
shall
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<PAGE>
include the period during which the Executive in fact so continues in such
employment.
3. POSITION, DUTIES, RESPONSIBILITIES
3.01 (a) (i) It is contemplated that during the Period of Employment the
Executive shall continue to serve as a principal officer of the Company and
as a member of its Board of Directors if serving as a member of its Board of
Directors immediately prior to the Operative Date, with the office(s) and
title(s), reporting responsibility, and duties and responsibilities of the
Executive immediately prior to the Operative Date.
(ii) The office(s), title(s), reporting responsibility, duties
and responsibilities of the Executive on the date of this Agreement, as the
same may be changed from time to time prior to the Operative Date, shall be
summarized in Exhibit B to this Agreement to the end that, if this Agreement
becomes operative pursuant to the provisions of Section 1 above, Exhibit B
will reflect accurately the office(s), title(s), reporting responsibility,
duties and responsibilities of the Executive immediately prior to the
Operative Date, it being understood and agreed that if, as and when the
office(s), title(s), reporting responsibility, duties or responsibilities of
the Executive shall be changed prior to the Operative Date, Exhibit B shall
be deemed to be and shall be updated by the parties to reflect such change;
provided, however, that Exhibit B is intended only as a memorandum for the
convenience of the parties and shall be disregarded if and to the extent
that, on the Operative Date, Exhibit B shall fail to reflect accurately the
office(s), title(s), reporting responsibility, duties or responsibilities of
the Executive immediately prior to the Operative Date because the parties
shall have failed to update Exhibit B as contemplated hereby.
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<PAGE>
(b) At all times during the Period of Employment, the Executive shall
hold a position of responsibility and importance and a position of scope,
with the functions, duties and responsibilities attached thereto, at least
equal in responsibility and importance and in scope to and commensurate with
his position described in general terms in subparagraph 3.01(a) above and
intended to be summarized in Exhibit B to this Agreement.
3.02 During the Period of Employment the Executive shall also serve
and continue to serve, if and when elected and reelected, as an officer or
director, or both, of any subsidiary, division or affiliate of the Company.
3.03 Throughout the Period of Employment the Executive shall devote
his full time and undivided attention during normal business hours to the
business and affairs of the Company, except for reasonable vacations and
except for illness or incapacity, but nothing in this Agreement shall
preclude the Executive from devoting reasonable periods required for serving
as a director or member of a committee of any organization involving no
conflict of interest with the interests of the Company, from engaging in
charitable and community activities, and from managing his personal
investments, provided that such activities do not materially interfere with
the regular performance of his duties and responsibilities under this
Agreement.
3.04 (a) The office of the Executive shall be located at the principal
offices of the Company within the area within which the office of the
Executive is located immediately
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<PAGE>
prior to the Operative Date, and the Executive shall not be required to
locate his office elsewhere without his prior written consent, nor shall he
be required to be absent therefrom on travel status or otherwise more than
the total number of working days in any calendar year stated in Exhibit C
attached to and made part of this Agreement nor more than the number of
consecutive days at any one time stated in such Exhibit C.
(b) The area within which the office of the Executive is located on
the date of this Agreement, as the same may be changed from time to time
prior to the Operative Date, shall be described in Exhibit D to this
Agreement to the end that, if this Agreement becomes operative pursuant to
the provisions of Section 1 above, Exhibit D will reflect accurately the area
within which the office of the Executive was located immediately prior to the
Operative Date, it being understood and agreed that if, as and when the area
within which the office of the Executive is located shall be changed prior to
the Operative Date, Exhibit D shall be deemed to be and shall be updated by
the parties to reflect such change; provided, however, that Exhibit D is
intended only as a memorandum for the convenience of the parties and shall be
disregarded if and to the extent that, on the Operative Date, Exhibit D shall
fail to reflect accurately the area within which the office of the Executive
was located immediately prior to the Operative Date because the parties shall
have failed to update Exhibit D as contemplated hereby.
4. COMPENSATION, COMPENSATION PLANS, PERQUISITES
4.01 (a) For all services rendered by the Executive in any capacity during
the Period of Employment, including, without limitation, services as an
executive, officer, director or
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<PAGE>
member of any committee of the Company or of any subsidiary, division or
affiliate thereof, the Executive shall be paid as compensation:
(i) A base salary, payable not less often than monthly, at a
monthly rate (before reduction for any deduction including, without
limitation, any deduction for withholding of income taxes or F.I.C.A. taxes
and any deduction pursuant to Section 401(k) of the Internal Revenue Code of
1954 as amended) at least equal to the monthly rate (before reduction for any
such deduction) of salary which was payable to the Executive immediately
prior to the Operative Date, with increases in such rate after the Operative
Date in accordance with the Company's regular administrative practices,
relating to salary increases applicable to executives of the Company, in
effect immediately prior to the Operative Date (the Minimum Base Salary), and
(ii) An executive performance award or bonus under the Company's
Executive Compensation Plan, or such equivalent successor plan as may be
adopted by the Company, upon a basis that will render an executive
performance award or bonus for each calendar month which is within the
calendar year to which such executive performance award or bonus relates, and
within the Period of Employment or within the calendar year in which the
Period of Employment commences, equal to no less than the highest executive
performance award or bonus awarded by the Company to the Executive (whether
on a current or deferred payment basis) prior to the Operative Date, divided
by twelve (the Minimum Monthly Bonus), so that total compensation for any
such calendar month (the Minimum Total Monthly Compensation) shall consist of
the Minimum Base Salary for such month provided for in clause (i) if this
subparagraph 4.01(a), plus the Minimum Monthly
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Bonus for such month provided for in clause (ii) of this subparagraph
4.01(a).
(b) The Minimum Total Monthly Compensation that is applicable from
time to time after the date of this Agreement pursuant to the provisions of
subparagraph 4.01(a) above, or that would be applicable if this Agreement
were operative at such time, shall be set forth in Exhibit E to this
Agreement, the intent of this subparagraph 4.01(b) being that such Exhibit E
shall be deemed to be and shall be updated from time to time after the date
of this Agreement, whether or not this Agreement shall then be operative, to
reflect the Minimum Total Monthly Compensation that applies at the time, or
that would apply at the time if this Agreement were then operative, provided,
however, that such Exhibit E is intended only as a memorandum for the
convenience of the parties hereto and, in the event that there is at any time
any conflict, disparity or discrepancy between the Minimum Total Monthly
Compensation provided by subparagraph 4.01(a) above and the amount then set
forth in Exhibit E hereto, the provisions of subparagraph 4.01(a) shall in
all events control.
(c) Subject to the provisions of subparagraph 4.01(a) above relating
to the Minimum Total Monthly Compensation, nothing in this Agreement shall
preclude a change in the mix between the Minimum Base Salary and Minimum
Monthly Bonus of the Executive by increasing the Minimum Base Salary of the
Executive.
(d) Any increase in salary pursuant to clause (i) of subparagraph
4.01(a) or in bonus or other compensation shall in no way diminish any other
obligation of the Company under this Agreement.
4.02 (a) During the Period of Employment the Executive shall be and
continue to be
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a full participant in the Company's Executive Compensation Plan, Deferred
Compensation Plan, any Employees Stock Option Plan, including its 1977
Employees Stock Option Plan and 1977 Stock Appreciation Rights Plan and its
1982 Employees Stock Option Plan, or equivalent successor plans that may be
adopted by the Company, with at least the same reward opportunities as shall
have been provided immediately prior to the Operative Date. Nothing in this
Agreement shall preclude improvement of reward opportunities in such plans or
other plans in accordance with the practice of the Company immediately prior
to the Operative Date.
(b) Any provision of the Company's Executive Compensation Plan (or
any successor plan) to the contrary notwithstanding, any executive
performance award or bonus awarded to the Executive during the Period of
Employment (whether for services rendered during or prior to the Period of
Employment) shall, unless the Executive shall have approved otherwise in
writing, be paid wholly in cash as soon as practicable after the awards are
made.
4.03 During the Period of Employment, the Executive shall be entitled
to perquisites, including, without limitation, an office, secretarial and
clerical staff, and to fringe benefits, including, without limitation, the
business and personal use of an automobile and payment or reimbursement of
club dues, in each case at least equal to those attached to his office
immediately prior to the Operative Date, as well as to reimbursement, upon
proper accounting, of reasonable expenses and disbursements incurred by him
in the course of his duties.
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5. EMPLOYEE BENEFIT PLANS
5.01 The compensation provided for in Section 4 above, together with
other matters therein set forth, is in addition to the benefits provided for
in this Section 5.
5.02 In the event that the Executive shall not have been designated a
Participant in the Supplemental Executive Retirement Benefits Program of the
Company prior to the Operative Date, the Executive shall be and hereby is
designated, on and as of the Operative Date, a Participant in that Program as
in effect immediately prior to the Operative Date.
5.03 The Executive, his dependents and beneficiaries shall be entitled
to all payments and benefits and service credit for benefits during the
Period of Employment to which officers of the Company, their dependents and
beneficiaries are entitled as the result of the employment of such officers
during the Period of Employment under the terms of employee plans and
practices of the Company, including, without limitation, the Company's
retirement program (consisting of its Retirement Plan for Salaried Employees,
its Excess Benefits Plan, if any, and its Supplemental Executive Retirement
Benefits Program), the Company's stock purchase and savings, thrift and
investment plans, if any, its Group Life Insurance Plan, its accidental death
and dismemberment insurance, disability, medical, dental and health and
welfare plans and other preset or equivalent successor plans and practices of
the Company, its subsidiaries and divisions, for which officers, their
dependents and beneficiaries are eligible, and to all payments or other
benefits under any such plan or practice after the Period of Employment as a
result of participation in such plan or practice
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during the Period of Employment.
5.04 Nothing in this Agreement shall preclude the Company from
amending or terminating any employee benefit plan or practice, but, it being
the intent of the parties that the Executive shall continue to be entitled
during the Period of Employment to perquisites as set forth in paragraph 4.03
above and to benefits and service credit for benefits under paragraph 5.03
above at least equal to those attached to his position immediately prior to
the Operative Date, nothing in this Agreement shall operate as, or be
construed to reduce or authorize, a reduction without the Executive's written
consent in the level of such perquisites, benefits or service credit for
benefits; in the event of any such reduction, by amendment or termination of
any plan or practice or otherwise, the Executive, his dependents and
beneficiaries shall continue to be entitled to perquisites, benefits and
service credit for benefits at least equal to the perquisites and to benefits
and service credit for benefits under such plans or practices that he or his
dependents and beneficiaries would have received if such reduction had not
taken place.
6. EFFECT OF DEATH OR DISABILITY
6.01 In the event of the death of the Executive during the Period of
Employment, the legal representative of the Executive shall be entitled to the
Minimum Total Monthly Compensation for the month in which death shall have
occurred, and the Period of Employment shall be deemed to have ended as of
the close of business on the last day of such month but without prejudice to
any payments due in respect of the Executive's death.
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6.02 (a) The term "Disability", as used in this Agreement, shall mean an
illness or accident which prevents the Executive from performing his duties
under this Agreement for a period of six consecutive months. The Period of
Employment shall be deemed to have ended as of the close of business on the
last day of such six-month period but without prejudice to any payments due
the Executive in respect of disability.
(b) In the event of the Disability of the Executive during the Period
of Employment, the Executive shall be paid an amount, equal to the Minimum
Total Monthly Compensation for the month in which such Disability commenced,
at the end of each month during the period of such Disability but not in
excess of six months.
(c) The amount of any payments due under this paragraph 6.02 shall be
reduced by any payments to which the Executive may be entitled for the same
period because of disability under any disability or pension plan of the
Company or of any subsidiary or affiliate thereof.
7. TERMINATION
7.01 In the event of a Termination, as defined in paragraph 7.03
below, during the Period of Employment, the provisions of this Section 7
shall apply.
7.02 In the event of a Termination and subject to the provisions of
Section 8 of this Agreement, relating to mitigation of damages, and to
compliance by the Executive with the provisions of paragraph 7.04 below,
relating to Competition, and of Section 9 below, relating to confidential
information, the Company shall, as liquidated damages or severance pay, or
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both, pay to the Executive and provide him, his dependents, beneficiaries and
estate, with the following:
(a) The Company shall pay the Executive an amount equal to the
Minimum Total Monthly Compensation that would have been paid to the Executive
for the month in which Termination occurred had such Termination not
occurred,
(i) at the end of the month in which Termination occurred, and
(ii) at the end of each month thereafter during the remainder of
the Period of Employment,
provided, however, that in no event shall the Company be required to pay such
an amount after the month in which the death of the Executive shall have
occurred or after the twelfth month following the occurrence of an illness or
accident which would constitute a "Disability" under subparagraph 6.02(b)
above in the absence of such Termination.
(b) During the period that the payments provided for in subparagraph
(a) of this paragraph 7.02 are required to be made, the Executive, his
dependents, beneficiaries and estate, shall continue to be entitled to all
benefits and service credit for benefits under employee benefit plans of the
Company as if still employed during such period under this Agreement and, if
and to the extent that such benefits or service credit for benefits shall not
be payable or provided under any such plans to the Executive, his dependents,
beneficiaries and estate, by reason of his no longer being an employee of the
Company as the result of Termination, the Company shall itself pay or provide
for payment of such benefits and service credit for benefits to the
Executive, his dependents, beneficiaries and estate.
(c) The period in which the payments provided for in subparagraph
(a) of this
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paragraph 7.02 are required to be made shall be considered service with the
Company for the purpose (i) of continued credits under the Company's
retirement program (consisting of its Retirement Plan for Salaried Employees,
its Excess Benefits Plan, if any, and its Supplemental Executive Retirement
Benefits Program) as each such plan or program was in effect immediately
prior to Termination (but without giving effect to any reduction of benefits
thereunder as the result of amendment or termination of any such Plan or
Program during the Period of Employment) and (ii) of all other benefit plans
of the Company as in effect immediately prior to Termination.
(d) In the event that the Executive shall at the time of Termination
hold an outstanding and unexercised (whether or not exercisable at the time)
non-statutory stock option or options theretofore granted by the Company, the
Company shall, in addition to the amounts provided for in subparagraphs
7.02(a) and 7.02(b), pay to the Executive in a lump sum an amount equal to
the excess above the option price under each such non-statutory stock option
of the Fair Market Value at the time of Termination of the shares subject to
each such non-statutory stock option. Solely for the purpose of this
subparagraph (d), Fair Market Value at the time of Termination shall be
deemed to mean the higher of (i) the average of the reported closing prices
of the Common Shares of the Company, as reported on the New York Stock
Exchange-Composite Transactions, on the last trading day prior to the
Termination and on the last trading day of each of the two preceding thirty-
day periods, and (ii) in the event that a Change in Control, as defined in
Section 17 below, prior to Termination shall have taken place as the result
of a tender or exchange offer and such Change in Control was consummated
within twelve months of Termination, the highest
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consideration paid for Common Shares of the Company in the course of such
tender or exchange offer. Upon receiving the payment from the Company called
for by clause (i) of subparagraph (a) of this paragraph 7.02, the Executive
shall execute and deliver to the Company a general release in favor of the
Company, its successors and assigns, in respect of any and all matters,
including, without limitation, any and all rights under any outstanding and
unexercisable non-statutory stock options at the time of Termination, except
for the payments and obligations required to be made or assumed by the
Company under this Agreement which at the time had not yet been made or
assumed by the Company and except for such other valid obligations of the
Company as shall be set forth in such release.
(e) If as a result of a termination of employment pursuant to the
provisions of paragraph 7.03(b), the Executive (or anyone claiming under or
through him) loses any part or all of the benefits he would have received as
a Participant in the Supplemental Executive Retirement Benefits Program of
the Company as in effect immediately prior to the Operative Date, the Company
will provide him with a substantially equivalent benefit.
7.03 The work "Termination", for the purpose of this Section 7 and any
other provision of this Agreement, shall mean:
(a) Termination by the Company of the employment of the Executive by
the Company and its subsidiaries for any reason other than for Cause as
defined in paragraph 7.05 below or for Disability as defined in subparagraph
6.02(a) above; or
(b) Termination by the Executive of his employment by the Company and
its subsidiaries upon the occurrence of any of the following events:
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(i) Failure to elect or reelect the Executive to the Board of
Directors of the Company, if the Executive shall have been a member of the
Board of Directors immediately prior to the Operative Date, or failure to
elect or reelect the Executive to, or removal of the Executive from, any of
the office(s) described in paragraph 3.01(a)(i) above and intended to be
summarized in Exhibit B to this Agreement.
(ii) A significant change in the nature or scope of the
authorities, powers, functions or duties attached to the position described
in paragraph 3.01(a)(i) above and intended to be summarized in Exhibit B to
this Agreement, or a reduction in compensation, which is not remedied within
30 days after receipt by the Company of written notice from the Executive.
(iii) A determination by the Executive made in good faith that as
a result of a Change in Control of the Company, as defined in Section 17
below, and a change in circumstances on or after the Operative Date
significantly affecting his position, he is unable to carry out the
authorities, powers, functions or duties attached to his position and
contemplated by Section 3 of this Agreement and the situation is not remedied
within 30 days after receipt by the Company of written notice from the
Executive of such determination.
(iv) A breach by the Company of any provision of this Agreement
not embraced within the foregoing clauses (i), (ii) and (iii) of this
subparagraph 7.03(b) which is not remedied within 30 days after receipt by
the Company of written notice from the Executive.
(v) The liquidation, dissolution, consolidation or merger of
the Company
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or transfer of all or a significant portion of its assets unless a successor
or successors (by merger, consolidation or otherwise) to which all or a
significant portion of its assets have been transferred shall have assumed
all duties and obligations of the Company under this Agreement; provided that
in any event set forth in this subparagraph 7.03(b) above, the Executive
shall have elected to terminate his employment under this Agreement upon not
less than forty and not more than ninety days' advance written notice to the
Board of Directors of the Company, Attention of the Secretary, given, except
in the case of a continuing breach, within three calendar months after (A)
failure to be so elected or reelected, or removal, (B) expiration of the
thirty-day cure period with respect to such event, or (C) the closing date of
such liquidation, dissolution, consolidation, merger or transfer of assets,
as the case may be.
An election by the Executive to terminate his employment given
under the provisions of this paragraph 7.03 shall not be deemed a voluntary
termination of employment by the Executive for the purpose of this Agreement
or any plan or practice of the Company.
7.04 (a) There shall be no obligation on the part of the Company to make
any further payments provided for in paragraph 7.02 above or to provide any
further benefits specified in such paragraph 7.02 if the Executive shall,
during the period that such payments are being made or benefits provided,
engage in Competition with the Company as hereinafter defined, provided all
of the following shall have taken place:
(i) the Secretary of the Company, pursuant to resolution of
the Board of
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Directors of the Company, shall have given written notice to the
Executive that, in the opinion of the Board of Directors, the Executive is
engaged in such Competition, specifying the details;
(ii) the Executive shall have been given a reasonable
opportunity to appear before the Board of Directors prior to the
determination of the Board evidenced by such resolution;
(iii) the Executive shall neither have ceased to engage in such
Competition within thirty days from his receipt of such notice nor diligently
taken all reasonable steps to that end during such thirty-day period and
thereafter.
(b) The word "Competition" for purposes of this paragraph 7.04 and
any other provision of this Agreement shall mean taking a management position
with, or control of, a business engaged in the manufacture, processing,
purchase of distribution of products which constituted 15% or more of the
sales of the Company and its subsidiaries and divisions during the last
fiscal year of the Company preceding the termination of the Executive's
employment (or during any fiscal year of the Company during the Period of
Employment); provided, however, that in no event shall ownership of less than
5% of the outstanding capital stock entitled to vote for the election of
directors of a corporation with a class of equity securities held of record
by more than 500 persons, standing alone, be deemed Competition with the
Company within the meaning of this paragraph 7.04.
7.05 For the purpose of any provision of this Agreement, the
termination of the Executive's employment shall be deemed to have been for Cause
only
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(a) if termination of his employment shall have been the result of an
act or acts of dishonesty on the part of the Executive constituting a felony
and resulting or intended to result directly or indirectly in gain or
personal enrichment at the expense of the Company, or
(b) if there has been a breach by the Executive during the Period of
Employment of the provisions of paragraph 3.03 above, relating to the time to
be devoted to the affairs of the Company, or of Section 9, relating to
confidential information, and such breach results in demonstrably material
injury to the Company, and with respect to any alleged breach of paragraph
3.03 hereof, the Executive shall have both failed to remedy such alleged
breach within thirty days from his receipt of written notice by the Secretary
of the Company pursuant to resolution duly adopted by the Board of Directors
of the Company after notice to the Executive and an opportunity to be heard
demanding that he remedy such alleged breach, and failed to take all
reasonable steps to that end during such thirty-day period and thereafter;
provided that there shall have been delivered to the Executive a certified
copy of a resolution of the Board of Directors of the Company adopted by the
affirmative vote of not less than three-fourths of the entire membership of
the Board of Directors called and held for that purpose and at which the
Executive was given an opportunity to be heard, finding that the Executive
was guilty of conduct set forth in subparagraphs (a) or (b) above, specifying
the particulars thereof in detail.
Anything in this paragraph 7.05 or elsewhere in this Agreement to
the contrary notwithstanding, the employment of the Executive shall in no
event be considered to have been terminated by the Company for Cause if
termination of his employment took place (i)
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as the result of bad judgment or negligence on the part of the Executive, or
(ii) as the result of an act or omission without intent of gaining therefrom
directly or indirectly a profit to which the Executive was not legally
entitled, or (iii) because of an act or omission believed by the Executive in
good faith to have been in or not opposed to the interests of the Company, or
(iv) for any act or omission in respect of which a determination could
properly be made that the Executive met the applicable standard of conduct
prescribed for indemnification or reimbursement or payment of expenses under
the Code of Regulations of the Company or the laws of the State of Ohio or
the directors' and officers' liability insurance of the Company, in each case
as in effect at the time of such act or omission, or (v) as the result of an
act or omission which occurred more than twelve calendar months prior to the
Executive's having been given notice of the termination of his employment for
such act or omission unless the commission of such act or such omission could
not at the time of such commission or omission have been known to a member of
the Board of Directors of the Company (other than the Executive, if he is
then a member of the Board of Directors), in which case more than twelve
calendar months from the date that the commission of such act or such
omission was or could reasonably have been so known, or (vi) as the result of
a continuing course of action which commenced and was or could reasonably
have been known to a member of the Board of Directors of the Company (other
than the Executive) more than twelve calendar months prior to notice having
been given to the Executive of the termination of his employment.
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7.06 In the event that the Executive's employment shall be terminated
by the Company during the Period of Employment and such termination is
alleged to be for Cause, or the Executive's right to terminate his employment
under paragraph 7.03(b) above shall be questioned by the Company, or the
Company shall withhold payments or provision of benefits because the
Executive is alleged to be engaged in Competition in breach of the provisions
of paragraph 7.04 above or for any other reason, the Executive shall have the
right, in addition to all other rights and remedies provided by law, at his
election either to seek arbitration within the area within which the office
of the Executive was located immediately prior to the Operative Date and
intended to be described in Exhibit D to this Agreement under the rules of
the American Arbitration Association by serving a notice to arbitrate upon
the Company or to institute a judicial proceeding, in either case within
ninety days after having received notice of termination of his employment or
notice in any form that the termination of his employment under paragraph
7.03(b) is subject to question or that the Company is withholding or proposed
to withhold payments or provision of benefits or within such longer period as
may reasonably be necessary for the Executive to take action in the event
that his illness or incapacity should preclude his taking such action within
such ninety-day period.
7.07 Any provision above in this Section 7 to the contrary
notwithstanding, if the Company should default on any obligation set forth in
this Section 7 and shall have failed to remedy such default within thirty
(30) days after having received written notice of such default from the
Executive or his beneficiaries, then, in that event:
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(a) any and all undischarged, future obligations of the Company under
this Section 7 shall, at the sole option of the Executive or his
beneficiaries, exercised in writing signed by the Executive or his
beneficiaries, as the case may be, and delivered to the Company within ninety
days after the expiration of such thirty-day period, become immediately due
and payable in a lump sum discounted to present value using the "Federal
short-term rate", "Federal mid-term rate" or "Federal long-term rate" that
would apply at the time under section 1274(d) of the Internal Revenue Code of
1986 as amended (the "Code") to a debt instrument having a term equal to the
period extending from the date such option is exercised in writing to the
date or dates such future obligations of the Company would otherwise have
become due and payable; and
(b) in addition to, and not in substitution for, interest for any
other period properly payable to the Executive as a result of such default,
the Company agrees to pay pre-judgment interest on any such obligation in
default, calculated at the "Federal short-term rate", "Federal mid-term rate"
or "Federal long-term rate" that would apply at the time under section
1274(d) of the Code to a debt instrument having a term equal to the period
extending from the date that the Company's obligation became due and payable
hereunder to the date the Executive or his beneficiaries obtain a money
judgment therefor (whether in litigation or arbitration).
8. OBLIGATION TO MITIGATE DAMAGES
8.01 In the event of a Termination, as defined in paragraph 7.03
above, the Executive shall make reasonable efforts to mitigate damages by
seeking other employment;
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provided, however, that he shall not be required to accept a position of less
dignity and importance or of substantially different character than the
highest position theretofore held by him with the Company or a position that
would call upon him to engage in competition within the meaning of paragraph
7.04(b) above, nor shall he be required to accept a position other than in a
location reasonably convenient to his principal residence immediately prior
to such Termination.
8.02 To the extent that the Executive shall receive compensation,
benefits and service credit for benefits from other employment secured
pursuant to the provisions of paragraph 8.01 above, the payments to be made
and the benefits and service credit for benefits to be provided by the
Company under the provisions of paragraph 7.02 above shall be correspondingly
reduced. Such reduction shall, in the event of any question, be determined
jointly by the firm of certified public accountants of the Company and the
firm of certified public accountants selected by the Executive, in each case
upon the advice of actuaries to the extent the certified public accountants
consider necessary, and, in the event such accountants are unable to agree on
a resolution of the question, such reduction shall be determined by an
independent firm of certified public accountants selected jointly by both
firms of accountants.
9. CONFIDENTIAL INFORMATION
9.01 The Executive agrees not to disclose, either while in the
Company's employ or at any time thereafter, to any person not employed by the
Company, or not engaged to
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render services to the Company, any confidential information obtained by him
while in the employ of the Company, including, without limitation, any of the
Company's inventions, processes, methods of distribution, customers or trade
secrets; provided, however, that this provision shall not preclude the
Executive from use or disclosure of information known generally to the public
or of information not considered confidential by persons engaged in the
business conducted by the Company or from disclosure required by law or Court
order.
9.02 The Executive also agrees that upon leaving the Company's employ,
he will not take with him, without the prior written consent of an officer
authorized to act in the matter by the Board of Directors of the Company, any
drawing, blueprint, specification or other document of the Company, its
subsidiaries, affiliates and divisions, which is of a confidential nature
relating to the Company, its subsidiaries, affiliates and divisions, or
without limitation, relating to its or their methods of distribution, or any
description of any formulae or secret processes.
10. SEVERANCE ALLOWANCE
In the event that, following the date stated in Exhibit A
attached to and made part of this Agreement, the employment of the Executive
shall be terminated by the Company prior to his normal retirement date and
such termination shall be for any reason other than for Cause, as defined in
paragraph 7.05 above, the Company shall pay the Executive as a severance
allowance a lump sum equal to the Minimum Total Monthly Compensation for the
month prior to such termination of employment, multiplied by six.
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11. WITHHOLDING
Anything to the contrary notwithstanding, all payments required
to be made by the Company hereunder to the Executive or his estate or
beneficiaries shall be subject to the withholding of such amounts, if any,
relating to tax and other payroll deductions as the Company may reasonably
determine it should withhold pursuant to any applicable law or regulation.
In lieu of withholding such amounts, the Company may accept other provisions
to the end that it has sufficient funds to pay all taxes required by law to
be withheld in respect of any or all of such payments.
12. NOTICES
(a) All notices, requests, demands and other communications provided
for by this Agreement shall be in writing and shall be sufficiently given if
and when mailed in the continental United States by registered or certified
mail to, or personally delivered to the party entitled thereto at, (i) the
address set forth below, unless the addressee shall have given notice of a
different address by a similar notice, in which case (ii) the latest address
given by the addressee by a similar notice (the Official Address):
To the Company: Attention: Secretary
17325 Euclid Avenue
Cleveland, Ohio 44112
To the Executive: Mr. ____________________
Parker-Hannifin Corporation
17325 Euclid Avenue
Cleveland, Ohio 44112
With additional copy to: Mr. ____________________
________________________
________________________
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Any such notice, request, demand or other communication delivered in person
shall be deemed to have been received on the date of delivery.
(b) The Official Address of each party to this Agreement, as the same
may be changed from time to time after the date of this Agreement pursuant to
the provisions of subparagraph 12(a) above, shall be set forth in Exhibit F
to this Agreement to the end that Exhibit F will reflect accurately the
Official Address of each party hereto from time to time after the date of
this Agreement, it being understood and agreed that if, as and when any party
hereto shall change his Official Address after the date of this Agreement by
giving the notice required by subparagraph 12(a) above, Exhibit F shall be
deemed to be and shall be updated by the parties to reflect such change;
provided, however, that Exhibit F is intended only as a memorandum for the
convenience of the parties and shall be disregarded if and to the extent
that, subsequent to the date of this Agreement, Exhibit F shall fail to
reflect accurately the Official Address in accordance with the provisions of
subparagraph 12(a) above because the parties shall have failed to update
Exhibit F as contemplated hereby.
13. GENERAL PROVISIONS
13.01 This Agreement is not intended to and shall not infer or imply
any right on the part of the Executive to continue in the employ of the
Company, or any subsidiary or affiliate of the Company, prior to a Change in
Control of the Company, and is not intended in any way to limit the right of
the Company to terminate the employment of the Executive, with or without
assigning a reason therefor, at any time prior to a Change in Control of the
Company. Nor is this Agreement intended to nor shall it infer or imply any
obligation on the part of the Executive to continue in the employment of the
Company, or any subsidiary or affiliate of the Company, prior to a Change in
Control of the Company. Neither the Company nor the Executive shall incur any
liability under this Agreement if the employment of the Executive shall be
terminated by the Company or by the Executive prior to a Change in Control of
the Company.
13.02 There shall be no right of set-off or counter-claim, in respect
of any claim, debt or obligation, against any payments to the Executive, his
dependents, beneficiaries or
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estate provided for in this Agreement.
13.03 The Company and the Executive recognize that each party will have
no adequate remedy at law for breach by the other of any of the agreements
contained herein and, in the event of any such breach, the Company and the
Executive hereby agree and consent that the other shall be entitled to a
decree of specific performance, mandamus or other appropriate remedy to
enforce performance of such agreements.
13.04 No right or interest to or in any payments shall be assignable by
the Executive; provided, however, that this provision shall not preclude him
from designating one or more beneficiaries to receive any amount that may be
payable after his death and shall not preclude the legal representative of
his estate from assigning any right hereunder to the person or persons
entitled thereto under his will or, in the case of intestacy, to the person
or persons entitled thereto under the laws of intestacy applicable to his
estate. The term "beneficiaries" as used in this Agreement shall mean a
beneficiary or beneficiaries so designated to receive any such amount or, if
no beneficiary has been so designated, the legal representative of the
Executive's estate.
13.05 No right, benefit or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt or obligation, or to
execution, attachment, levy or similar process, or assignment by operation of
law. Any attempt, voluntary or involuntary, to effect any action specified
in the immediately preceding sentence shall, to the full extent permitted by
law, be null, void and of no effect.
13.06 In the event of the Executive's death or a judicial determination
of his incompetence, reference in this Agreement to the Executive shall be
deemed, where appropriate, to refer to his legal representative, or, where
appropriate, to his beneficiary or beneficiaries.
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<PAGE>
13.07 If any event provided for in this Agreement is scheduled to take
place on a legal holiday, such event shall take place on the next succeeding
day that is not a legal holiday.
13.08 The titles to sections in this Agreement are intended solely for
convenience and no provision of this Agreement is to be construed by
reference to the title of any section.
13.09 This Agreement shall be binding upon and shall inure to the
benefit of the Executive, his heirs and legal representatives, and the Company
and its successors as provided in Section 16 hereof.
13.10 This instrument contains the entire agreement of the parties
relating to the subject matter of this Agreement and supersedes and replaces
all prior agreements and understandings with respect to such subject matter,
and the parties hereto have made no agreements, representations or warranties
relating to the subject matter of this Agreement which are not set forth
herein.
14. AMENDMENT OR MODIFICATION; WAIVER
No provision of this Agreement may be amended, modified or waived
unless such amendment, modification or waiver shall be authorized by the
Board of Directors of the Company or any authorized committee of the Board of
Directors and shall be agreed to in writing, signed by the Executive and by
an officer of the Company thereunto duly authorized. Except as otherwise
specifically provided in this Agreement, no waiver by either party hereto of
any breach by the other party hereto of any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of a
subsequent breach of such condition or provision or a waiver of a similar or
dissimilar provision or condition at the same or at any prior or subsequent
time.
- 27 -
<PAGE>
15. SEVERABILITY
Anything in this Agreement to the contrary notwithstanding:
(a) In the event that any provision of this Agreement, or portion
thereof, shall be determined to be invalid or unenforceable for any reason,
in whole or in part, the remaining provisions of this Agreement and parts of
such provision not so invalid or unenforceable shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law.
(b) Any provision of this Agreement, or portion thereof, which may be
invalid or unenforceable in any jurisdiction shall be limited by construction
thereof, to the end that such provision, or portion thereof, shall be valid
and enforceable in such jurisdiction; and
(c) Any provision of this Agreement, or portion thereof, which may
for any reason be invalid or unenforceable in any jurisdiction shall remain
in effect and be enforceable in any jurisdiction in which such provision, or
portion thereof, shall be valid and enforceable.
16. SUCCESSORS TO THE COMPANY
Except as otherwise provided herein, this Agreement shall be
binding upon and inure to the benefit of the Company and any successor of the
Company, including, without limitation, any corporation or corporations
acquiring directly or indirectly all or substantially all of the assets of
the Company whether by merger, consolidation, sale or otherwise (and such
successor shall thereafter be deemed "the Company" for the purposes of this
Agreement), but shall not otherwise be assignable by the Company.
17. CHANGE IN CONTROL
For the purpose of this Agreement, the term "Change in Control of
the Company" shall mean a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934 as in
effect on the date of this Agreement; provided that, without limitation, such
a change in control shall be deemed to have occurred if and when (a) any
"person" (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) is or becomes a beneficial owner, directly
or indirectly, of securities
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<PAGE>
of the Company representing 25% or more of the combined voting power of the
Company's then outstanding securities or (b) during any period of 24
consecutive months, commencing before or after the date of this Agreement,
individuals who at the beginning of such twenty-four (24) month period were
directors of the Company for whom the Executive shall have voted cease for
any reason (other than death, disability or retirement pursuant to the
Company's policy relating to retirement of directors, if any, in effect on
the date of this Agreement) to constitute at least a majority of the Board of
Directors of the Company.
18. INTENTION RELATING TO RECENT LEGISLATION;
POSSIBLE FUTURE AMENDMENTS
18.01 The Company and the Executive intend that this Agreement shall be
performed according to its terms hereinbefore set forth, and that such
performance shall not give rise to or result in any payment or benefit being
subject to the Excise tax imposed by Section 4999 of the Code or the related
loss of deduction mandated by Section 280G(a) of the Code. Each and every
provision of this Agreement shall be administered, interpreted and construed
to carry out such intention.
18.02 The Company and the Executive recognize that the legislation
which introduced Sections 280G(a) and 4999 of the Code was enacted very
recently and that there are as yet no regulations or rulings under, or
official interpretations of, any of these Code Sections. Accordingly, the
Company and the Executive agree that, when Treasury Regulations are issued in
proposed or final form under Section 280G or 4999 of the Code or relevant
rulings or official interpretations are promulgated, they will at that time,
or from time to time, review this Agreement and take such action, including
executing amendments hereto, as the Company and the Executive may agree to be
necessary or appropriate to carry out the aforesaid intention.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as the day and year first above written.
[seal]
ATTEST: PARKER-HANNIFIN CORPORATION
___________________________________ By__________________________
Secretary President
__________________________
The Executive
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<PAGE>
Exhibit (10)(d)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1994
by Parker-Hannifin Corporation
Form of Change in Control Agreement
entered into by the Registrant and
certain executive officers (1991)
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
A G R E E M E N T
between
PARKER-HANNIFIN CORPORATION
and
__________________
dated ___________, 1991
<PAGE>
TABLE OF CONTENTS
Section Page
Recitals 1
1 Operation of Agreement 1
2 Employment; Period of Employment 2
3 Position, Duties, Responsibilities 3
4 Compensation, Compensation Plans, Perquisites 5
5 Employee Benefit Plans 8
6 Effect of Death or Disability 10
7 Termination 11
[Intentionally Left Blank] 21
9 Confidential Information 21
10 Severance Allowance 22
11 Withholding 22
12 Notices 22
13 General Provisions 23
14 Amendment or Modification; Waiver 25
15 Severability 26
16 Successors to the Company 26
17 Change in Control 27
Exhibits (6)
<PAGE>
AGREEMENT between PARKER-HANNIFIN CORPORATION, an Ohio
Corporation (the Company), and _____________________ (the Executive),
dated the ______ day of ___________, 1991.
W I T N E S S E T H :
WHEREAS:
A. The Executive is a principal officer of the Company
and an integral part of its management.
B. The Company wishes to assure both itself and the
Executive of continuity of management in the event of any actual or
threatened change in control of the Company
C. This agreement is not intended to alter materially
the compensation and benefits that the Executive could reasonably expect
in the absence of a change in control of the Company and, accordingly,
this Agreement, though taking effect upon execution thereof, will be
operative only upon a change in control of the Company, as that term is
hereafter defined.
NOW, THEREFORE, it is hereby agreed by and between the
parties as follows:
1. OPERATION OF AGREEMENT
This Agreement shall be effective immediately upon its execution by
the parties hereto, but, anything in this Agreement to the contrary
notwithstanding, neither this Agreement nor any provision thereof,
except for this Section 1, Sections 14 through 17 inclusive, paragraph
13.01, paragraphs 13.07 through 13.10 inclusive, and provisions of
<PAGE>
subparagraphs 3.01 (a)(ii), 3.04(b) and 4.01(b) and of Section 12
providing for automatic updating of Exhibits B, D, E and F from time to
time prior to the date this Agreement becomes operative, shall be
operative unless and until there has been a Change in Control of the
Company as defined in Section 17 below while the Executive is in the
employ of the Company. Upon such a Change in Control of the Company,
this Agreement and all provisions thereof shall become operative
immediately.
2. EMPLOYMENT; PERIOD OF EMPLOYMENT
2.01 The Company hereby agrees to continue the Executive in its
employ, and the Executive hereby agrees to remain in the employ of the
Company, for the period set forth in paragraph 2.02 below (the Period of
Employment), in the position and with the duties and responsibilities
set forth in Section 3 below, and upon the other terms and conditions
hereinafter stated.
2.02 The Period of Employment shall commence on the date this
Agreement becomes operative pursuant to the provisions of Section 1
above (the Operative Date) and, subject only to the provisions of
Section 6 below, relating to death or Disability, shall continue until
the close of business on the date stated in Exhibit A attached to and
made part of this Agreement. In the event that the Executive shall
continue in the full-time employment of the Company after the latter
date, such continued employment shall be subject to the terms and
conditions of this Agreement and the Period of Employment shall include
the period during which the Executive in fact so continues in such
employment.
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<PAGE>
3. POSITION, DUTIES, RESPONSIBILITIES
3.01 (a) (i) It is contemplated that during the Period of
Employment the Executive shall continue to serve as a principal officer
of the Company and as a member of its Board of Directors if serving as a
member of its Board of Directors immediately prior to the Operative
Date, with the office(s) and title(s), reporting responsibility, and
duties and responsibilities of the Executive immediately prior to the
Operative Date.
(ii) The office(s), title(s), reporting
responsibility, duties and responsibilities of the Executive on the date
of this Agreement, as the same may be changed from time to time prior to
the Operative Date, shall be summarized in Exhibit B to this Agreement
to the end that, if this Agreement becomes operative pursuant to the
provisions of Section 1 above, Exhibit B will reflect accurately the
office(s), title(s), reporting responsibility, duties and
responsibilities of the Executive immediately prior to the Operative
Date, it being understood and agreed that if, as and when the office(s),
title(s), reporting responsibility, duties or responsibilities of the
Executive shall be changed prior to the Operative Date, Exhibit B shall
be deemed to be and shall be updated by the parties to reflect such
change; provided, however, that Exhibit B is intended only as a
memorandum for the convenience of the parties and shall be disregarded
if and to the extent that, on the Operative Date, Exhibit B shall fail
to reflect accurately the office(s), title(s), reporting responsibility,
duties or responsibilities of the Executive immediately prior to the
Operative Date because the parties shall have failed to update Exhibit B
as contemplated hereby.
(b) At all times during the Period of Employment, the
Executive shall hold a position of responsibility and importance and a
position of scope, with the functions, duties
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<PAGE>
and responsibilities attached thereto, at least equal in responsibility
and importance and in scope to and commensurate with his position
described in general terms in subparagraph 3.01(a) above and intended to
be summarized in Exhibit B to this Agreement.
3.02 During the Period of Employment the Executive shall also
serve and continue to serve, if and when elected and reelected, as an
officer or director, or both, of any subsidiary, division or affiliate
of the Company.
3.03 Throughout the Period of Employment the Executive shall
devote his full time and undivided attention during normal business
hours to the business and affairs of the Company, except for reasonable
vacations and except for illness or incapacity, but nothing in this
Agreement shall preclude the Executive from devoting reasonable periods
required for serving as a director or member of a committee of any
organization involving no conflict of interest with the interests of the
Company, from engaging in charitable and community activities, and from
managing his personal investments, provided that such activities do not
materially interfere with the regular performance of his duties and
responsibilities under this Agreement.
3.04 (a) The office of the Executive shall be located at the
principal offices of the Company within the area within which the office
of the Executive is located immediately prior to the Operative Date, and
the Executive shall not be required to locate his office elsewhere
without his prior written consent, nor shall he be required to be absent
therefrom on travel status or otherwise more than the total number of
working days in any calendar
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<PAGE>
year
stated in Exhibit C attached to and made part of this Agreement nor more
than the number of consecutive days at any one time stated in such
Exhibit C.
(b) The area within which the office of the Executive is
located on the date of this Agreement, as the same may be changed from
time to time prior to the Operative Date, shall be described in Exhibit
D to this Agreement to the end that, if this Agreement becomes operative
pursuant to the provisions of Section 1 above, Exhibit D will reflect
accurately the area within which the office of the Executive was located
immediately prior to the Operative Date, it being understood and agreed
that if, as and when the area within which the office of the Executive
is located shall be changed prior to the Operative Date, Exhibit D shall
be deemed to be and shall be updated by the parties to reflect such
change; provided, however, that Exhibit D is intended only as a
memorandum for the convenience of the parties and shall be disregarded
if and to the extent that, on the Operative Date, Exhibit D shall fail
to reflect accurately the area within which the office of the Executive
was located immediately prior to the Operative Date because the parties
shall have failed to update Exhibit D as contemplated hereby.
4. COMPENSATION, COMPENSATION PLANS, PERQUISITES
4.01 (a) For all services rendered by the Executive in any
capacity during the Period of Employment, including, without limitation,
services as an executive, officer, director or member of any committee
of the Company or of any subsidiary, division or affiliate thereof, the
Executive shall be paid as compensation:
(i) A base salary, payable not less often than
monthly, at a monthly rate (before reduction for any deduction
including, without limitation, any deduction for
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<PAGE>
withholding of income taxes or F.I.C.A. taxes and any deduction pursuant
to Section 401(k) of the Internal Revenue Code of 1986 as amended (the
"Code") at least equal to the monthly rate (before reduction for any
such deduction) of salary which was payable to the Executive immediately
prior to the Operative Date, with increases in such rate after the
Operative Date in accordance with the Company's regular administrative
practices, relating to salary increases applicable to executives of the
Company, in effect immediately prior to the Operative Date (the Minimum
Base Salary), and
(ii) An executive performance award or bonus under the
Company's Executive Compensation Plan, or such equivalent successor plan
as may be adopted by the Company, upon a basis that will render an
executive performance award or bonus for each calendar month which is
within the calendar year to which such executive performance award or
bonus relates, and within the Period of Employment or within the
calendar year in which the Period of Employment commences, equal to no
less than the highest executive performance award or bonus awarded by
the Company to the Executive (whether on a current or deferred payment
basis) prior to the Operative Date, divided by twelve (the Minimum
Monthly Bonus), so that total compensation for any such calendar month
(the Minimum Total Monthly Compensation) shall consist of the Minimum
Base Salary for such month provided for in clause (i) if this
subparagraph 4.01(a), plus the Minimum Monthly Bonus for such month
provided for in clause (ii) of this subparagraph 4.01(a).
(b) The Minimum Total Monthly Compensation that is
applicable from time to time after the date of this Agreement pursuant
to the provisions of subparagraph 4.01(a)
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<PAGE>
above, or that would be applicable if this Agreement were operative at
such time, shall be set forth in Exhibit E to this Agreement, the intent
of this subparagraph 4.01(b) being that such Exhibit E shall be deemed
to be and shall be updated from time to time after the date of this
Agreement, whether or not this Agreement shall then be operative, to
reflect the Minimum Total Monthly Compensation that applies at the time,
or that would apply at the time if this Agreement were then operative,
provided, however, that such Exhibit E is intended only as a memorandum
for the convenience of the parties hereto and, in the event that there
is at any time any conflict, disparity or discrepancy between the
Minimum Total Monthly Compensation provided by subparagraph 4.01(a)
above and the amount then set forth in Exhibit E hereto, the provisions
of subparagraph 4.01(a) shall in all events control.
(c) Subject to the provisions of subparagraph 4.01(a) above
relating to the Minimum Total Monthly Compensation, nothing in this
Agreement shall preclude a change in the mix between the Minimum Base
Salary and Minimum Monthly Bonus of the Executive by increasing the
Minimum Base Salary of the Executive.
(d) Any increase in salary pursuant to clause (i) of
subparagraph 4.01(a) or in bonus or other compensation shall in no way
diminish any other obligation of the Company under this Agreement.
4.02 (a) During the Period of Employment the Executive shall be
and continue to be a full participant in the Company's Executive
Compensation Plan, Deferred Compensation Plan, any Employees Stock
Option Plan, including its 1977 Stock Option Plan and 1977 Stock
Appreciation Rights Plan and 1982 Employees Stock Option Plan, or
equivalent successor plans that may be adopted by the Company, with at
least the same reward
-7-
<PAGE>
opportunities as shall have been provided immediately prior to the
Operative Date. Nothing in this Agreement shall preclude improvement of
reward opportunities in such plans or other plans in accordance with the
practice of the Company immediately prior to the Operative Date.
(b) Any provision of the Company's Executive Compensation
Plan (or any successor plan) to the contrary notwithstanding, any
executive performance award or bonus awarded to the Executive during the
Period of Employment (whether for services rendered during or prior to
the Period of Employment) shall, unless the Executive shall have
approved otherwise in writing, be paid wholly in cash as soon as
practicable after the awards are made.
4.03 During the Period of Employment, the Executive shall be
entitled to perquisites, including, without limitation, an office,
secretarial and clerical staff, and to fringe benefits, including,
without limitation, the business and personal use of an automobile and
payment or reimbursement of club dues, in each case at least equal to
those attached to his office immediately prior to the Operative Date, as
well as to reimbursement, upon proper accounting, of reasonable expenses
and disbursements incurred by him in the course of his duties.
5. EMPLOYEE BENEFIT PLANS
5.01 The compensation provided for in Section 4 above, together
with other matters therein set forth, is in addition to the benefits
provided for in this Section 5.
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<PAGE>
5.02 In the event that the Executive shall not have been
designated a Participant in the Supplemental Executive Retirement
Benefits Program of the Company prior to the Operative Date, the
Executive shall be and hereby is designated, on and as of the Operative
Date, a Participant in that Program as in effect immediately prior to
the Operative Date.
5.03 The Executive, his dependents and beneficiaries shall be
entitled to all payments and benefits and service credit for benefits
during the Period of Employment to which officers of the Company, their
dependents and beneficiaries are entitled as the result of the
employment of such officers during the Period of Employment under the
terms of employee plans and practices of the Company, including, without
limitation, the Company's retirement program (consisting of its
Retirement Plan for Salaried Employees, its Excess Benefits Plan, if
any, and its Supplemental Executive Retirement Benefits Program) the
Company's stock purchase and savings, thrift and investment plans, if
any, its Group Life Insurance Plan, its accidental death and
dismemberment insurance, disability, medical, dental and health and
welfare plans and other present or equivalent successor plans and
practices of the Company, its subsidiaries and divisions, for which
officers, their dependents and beneficiaries are eligible, and to all
payments or other benefits under any such plan or practice after the
Period of Employment as a result of participation in such plan or
practice during the Period of Employment.
5.04 Nothing in this Agreement shall preclude the Company from
amending or terminating any employee benefit plan or practice, but, it
being the intent of the parties that the Executive shall continue to be
entitled during the Period of Employment to perquisites
-9-
<PAGE>
as set forth in paragraph 4.03 above and to benefits and service credit
for benefits under paragraph 5.03 above at least equal to those attached
to his position immediately prior to the Operative Date, nothing in this
Agreement shall operate as, or be construed to reduce or authorize, a
reduction without the Executive's written consent in the level of such
perquisites, benefits or service credit for benefits; in the event of
any such reduction, by amendment or termination of any plan or practice
or otherwise, the Executive, his dependents and beneficiaries shall
continue to be entitled to perquisites, benefits and service credit for
benefits at least equal to the perquisites and to benefits and service
credit for benefits under such plans or practices that he or his
dependents and beneficiaries would have received if such reduction had
not taken place.
6. EFFECT OF DEATH OR DISABILITY
6.01 In the event of the death of the Executive during the Period
of Employment, the legal representative of the Executive shall be
entitled to the Minimum Total Monthly Compensation for the month in
which death shall have occurred, and the Period of Employment shall be
deemed to have ended as of the close of business on the last day of such
month but without prejudice to any payments due in respect of the
Executive's death.
6.02 (a) The term "Disability", as used in this Agreement, shall
mean an illness or accident which prevents the Executive from performing
his duties under this Agreement for a period of six consecutive months.
The Period of Employment shall be deemed to have ended as of the close
of business on the last day of such six month period but without
prejudice to any payments due the Executive in respect of disability.
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<PAGE>
(b) In the event of the Disability of the Executive during
the Period of Employment, the Executive shall be paid an amount, equal
to the Minimum Total Monthly Compensation for the month in which such
Disability commenced, at the end of each month during the period of such
Disability but not in excess of six months.
(c) The amount of any payments due under this paragraph
6.02 shall be reduced by any payments to which the Executive may be
entitled for the same period because of disability under any disability
or pension plan of the Company or of any subsidiary or affiliate
thereof.
7. TERMINATION
7.01 In the event of a Termination, as defined in paragraph 7.03
below, during the Period of Employment, the provisions of this Section 7
shall apply.
7.02 In the event of a Termination and subject to compliance by
the Executive with the provisions of paragraph 7.04 below, relating to
Competition, and of Section 9 below, relating to confidential
information, the Company shall, as liquidated damages, pay to the
Executive and provide him, his dependents, beneficiaries and estate with
the following:
(a) The Company shall pay the Executive an amount equal to
the Minimum Total Monthly Compensation that would have been paid to the
Executive for the month in which Termination occurred had such
Termination not occurred,
(i) at the end of the month in which Termination
occurred, and
(ii) at the end of each month thereafter during the
remainder of the Period of Employment, provided, however, that in no
event shall the Company be required
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<PAGE>
to pay such an amount after the month in which the death of the
Executive shall have occurred or after the twelfth month following the
occurrence of an illness or accident which would constitute a
"Disability" under subparagraph 6.02(b) above in the absence of such
Termination.
(b) During the period that the payments provided for in
subparagraph (a) of this paragraph 7.02 are required to be made, the
Executive, his dependents, beneficiaries and estate, shall continue to
be entitled to all benefits and service credit for benefits under
employee benefit plans of the Company as if still employed during such
period under this Agreement and, if and to the extent that such benefits
or service credit for benefits shall not be payable or provided under
any such plans to the Executive, his dependents, beneficiaries and
estate, by reason of his no longer being an employee of the Company as
the result of Termination, the Company shall itself pay or provide for
payment of such benefits and service credit for benefits to the
Executive, his dependents, beneficiaries and estate.
(c) The period in which the payments provided for in
subparagraph (a) of this paragraph 7.02 are required to be made shall be
considered service with the Company for the purpose (i) of continued
credits under the Company's retirement program (consisting of its
Retirement Plan for Salaried Employees, its Excess Benefits Plan, if
any, and its Supplemental Executive Retirement Benefits Program) as each
such plan or program was in effect immediately prior to Termination (but
without giving effect to any reduction of benefits thereunder as the
result of amendment or termination of any such Plan or Program during
the Period of Employment) and (ii) of all other benefit plans of the
Company as in effect immediately prior to Termination.
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<PAGE>
(d) In the event that the Executive shall at the time of
Termination hold an outstanding and unexercised (whether or not
exercisable at the time) non-statutory stock option or options
theretofore granted by the Company, the Company shall, in addition to
the amounts provided for in subparagraphs 7.02(a) and 7.02(b), pay to
the Executive in a lump sum an amount equal to the excess above the
option price under each such non-statutory stock option of the Fair
Market Value at the time of Termination of the shares subject to each
such non-statutory stock option. Solely for the purpose of this
subparagraph (d), Fair Market Value at the time of Termination shall be
deemed to mean the higher of (i) the average of the reported closing
prices of the Common Shares of the Company, as reported on the New York
Stock Exchange-Composite Transactions, on the last trading day prior to
the Termination and on the last trading day of each of the two preceding
thirty day periods, and (ii) in the event that a Change in Control, as
defined in Section 17 below, prior to Termination shall have taken place
as the result of a tender or exchange offer and such Change in Control
was consummated within twelve months of Termination, the highest
consideration paid for Common Shares of the Company in the course of
such tender or exchange offer. Upon receiving the payment from the
Company called for by clause (i) of subparagraph (a) of this paragraph
7.02, the Executive shall execute and deliver to the Company a general
release in favor of the Company, its successors and assigns, in respect
of any and all matters, including, without limitation, any and all
rights under any outstanding and unexercisable non-statutory stock
options at the time of Termination, except for the payments and
obligations required to be made or assumed by the Company under this
Agreement which at the time had not yet been made or assumed by the
Company and except for such other valid obligations of the Company as
shall be set forth in such release.
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<PAGE>
(e) If as a result of a termination of employment pursuant
to the provisions of paragraph 7.03(b) the Executive (or anyone claiming
under or through him) loses any part or all of the benefits he would
have received as a Participant in the Supplemental Executive Retirement
Benefits Program of the Company as in effect immediately prior to the
Operative Date, the Company will provide him with a substantially
equivalent benefit.
7.03 The word "Termination", for the purpose of this Section 7 and
any other provision of this Agreement, shall mean:
(a) Termination by the Company of the employment of the
Executive by the Company and its subsidiaries for any reason other than
for Cause as defined in paragraph 7.05 below or for Disability as defined
in subparagraph 6.02(a) above; or
(b) Termination by the Executive of his employment by the
Company and its subsidiaries upon the occurrence of any of the following
events:
(i) Failure to elect or reelect the Executive to the
Board of Directors of the Company, if the Executive shall have been a
member of the Board of Directors immediately prior to the Operative
Date, or failure to elect or reelect the Executive to, or removal of the
Executive from, any of the office(s) described in paragraph 3.01(a)(i)
above and intended to be summarized in Exhibit B to this Agreement.
(ii) A significant change in the nature or scope of
the authorities, powers, functions or duties attached to the position
described in paragraph 3.01(a)(i) above and intended to be summarized in
Exhibit B to this Agreement, or a reduction in compensation, which is
not remedied within 30 days after receipt by the Company of written
notice from the Executive.
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<PAGE>
(iii) A determination by the Executive made in good
faith that as a result of a Change in Control of the Company, as defined
in Section 17 below, and a change in circumstances on or after the
Operative Date significantly affecting his position, he is unable to
carry out the authorities, powers, functions or duties attached to his
position and contemplated by Section 3 of this Agreement and the
situation is not remedied within 30 days after receipt by the Company of
written notice from the Executive of such determination.
(iv) A breach by the Company of any provision of this
Agreement not embraced within the foregoing clauses (i), (ii) and (iii)
of this subparagraph 7.03(b) which is not remedied within 30 days after
receipt by the Company of written notice from the Executive.
(v) The liquidation, dissolution, consolidation or
merger of the Company or transfer of all or a significant portion of its
assets unless a successor or successors (by merger, consolidation or
otherwise) to which all or a significant portion of its assets have been
transferred shall have assumed all duties and obligations of the Company
under this Agreement; provided that in any event set forth in this
subparagraph 7.03(b) above, the Executive shall have elected to
terminate his employment under this Agreement upon not less than forty
and not more than ninety days' advance written notice to the Board of
Directors of the Company, Attention of the Secretary, given, except in
the case of a continuing breach, within three calendar months after (A)
failure to be so elected or reelected, or removal, (B) expiration of the
thirty-day cure period with respect to such event, or (C) the closing
date of such
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<PAGE>
liquidation, dissolution, consolidation, merger or transfer of assets,
as the case may be. An election by the Executive to terminate his
employment given under the provisions of this paragraph 7.03 shall not
be deemed a voluntary termination of employment by the Executive for the
purpose of this Agreement or any plan or practice of the Company.
7.04 (a) There shall be no obligation on the part of the Company
to make any further payments provided for in paragraph 7.02 above or to
provide any further benefits specified in such paragraph 7.02 if the
Executive shall, during the period that such payments are being made or
benefits provided, engage in Competition with the Company as hereinafter
defined, provided all of the following shall have taken place:
(i) the Secretary of the Company, pursuant to
resolution of the Board of Directors of the Company, shall have given
written notice to the Executive that, in the opinion of the Board of
Directors, the Executive is engaged in such Competition, specifying the
details;
(ii) the Executive shall have been given a reasonable
opportunity to appear before the Board of Directors prior to the
determination of the Board evidenced by such resolution; and
(iii) the Executive shall neither have ceased to engage
in such Competition within thirty days from his receipt of such notice
nor diligently taken all reasonable steps to that end during such
thirty-day period and thereafter.
(b) The word "Competition" for purposes of this paragraph
7.04 and any other
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<PAGE>
provision of this Agreement shall mean taking a management position
with, or control of, a business engaged in the manufacture, processing,
purchase of distribution of products which constituted 15% or more of
the sales of the Company and its subsidiaries and divisions during the
last fiscal year of the Company preceding the termination of the
Executive's employment (or during any fiscal year of the Company during
the Period of Employment); provided, however, that in no event shall
ownership of less than 5% of the outstanding capital stock entitled to
vote for the election of directors of a corporation with a class of
equity securities held of record by more than 500 persons, standing
alone, be deemed Competition with the Company within the meaning of this
paragraph 7.04.
7.05 For the purpose of any provision of this Agreement, the
termination of the Executive's employment shall be deemed to have been
for Cause only:
(a) if termination of his employment shall have been the
result of an act or acts of dishonesty on the part of the Executive
constituting a felony and resulting or intended to result directly or
indirectly in gain or personal enrichment at the expense of the Company,
or
(b) if there has been a breach by the Executive during the
Period of Employment of the provisions of paragraph 3.03 above, relating
to the time to be devoted to the affairs of the Company, or of Section
9, relating to confidential information, and such breach results in
demonstrably material injury to the Company, and with respect to any
alleged breach of paragraph 3.03 hereof, the Executive shall have both
failed to remedy such alleged breach within thirty days from his receipt
of written notice by the Secretary of the Company pursuant to resolution
duly adopted by the Board of Directors of the Company after notice
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<PAGE>
to the Executive and an opportunity to be heard demanding that he remedy
such alleged breach, and failed to take all reasonable steps to that end
during such thirty-day period and thereafter; provided that there shall
have been delivered to the Executive a certified copy of a resolution of
the Board of Directors of the Company adopted by the affirmative vote of
not less than three-fourths of the entire membership of the Board of
Directors called and held for that purpose and at which the Executive
was given an opportunity to be heard, finding that the Executive was
guilty of conduct set forth in subparagraphs (a) or (b) above,
specifying the particulars thereof in detail.
Anything in this paragraph 7.05 or elsewhere in this Agreement to
the contrary notwithstanding, the employment of the Executive shall in
no event be considered to have been terminated by the Company for Cause
if termination of his employment took place (i) as the result of bad
judgment or negligence on the part of the Executive, or (ii) as the
result of an act or omission without intent of gaining therefrom
directly or indirectly a profit to which the Executive was not legally
entitled, or (iii) because of an act or omission believed by the
Executive in good faith to have been in or not opposed to the interests
of the Company, or (iv) for any act or omission in respect of which a
determination could properly be made that the Executive met the
applicable standard of conduct prescribed for indemnification or
reimbursement or payment of expenses under the Code of Regulations of
the Company or the laws of the State of Ohio or the directors' and
officers' liability insurance of the Company, in each case as in effect
at the time of such act or omission, or (v) as the result of an act or
omission which occurred more than twelve calendar months prior to the
Executive's having been given notice of the termination of his
employment for such act or omission unless the commission of such act or
such omission could not at the
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<PAGE>
time of such commission or omission have been known to a member of the
Board of Directors of the Company (other than the Executive, if he is
then a member of the Board of Directors), in which case more than twelve
calendar months from the date that the commission of such act or such
omission was or could reasonably have been so known, or (vi) as the
result of a continuing course of action which commenced and was or could
reasonably have been known to a member of the Board of Directors of the
Company (other than the Executive) more than twelve calendar months
prior to notice having been given to the Executive of the termination of
his employment.
7.06 In the event that the Executive's employment shall be
terminated by the Company during the Period of Employment and such
termination is alleged to be for Cause, or the Executive's right to
terminate his employment under paragraph 7.03(b) above shall be
questioned by the Company, or the Company shall withhold payments or
provision of benefits because the Executive is alleged to be engaged in
Competition in breach of the provisions of paragraph 7.04 above or for
any other reason, the Executive shall have the right, in addition to all
other rights and remedies provided by law, at his election either to
seek arbitration within the area within which the office of the
Executive was located immediately prior to the Operative Date and
intended to be described in Exhibit D to this Agreement under the rules
of the American Arbitration Association by serving a notice to arbitrate
upon the Company or to institute a judicial proceeding, in either case
within ninety days after having received notice of termination of his
employment or notice in any form that the termination of his employment
under paragraph 7.03(b) is subject to question or that the Company is
withholding or proposed to withhold payments or provision of benefits
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<PAGE>
or within such longer period as may reasonably be necessary for the
Executive to take action in the event that his illness or incapacity
should preclude his taking such action within such ninety-day period.
7.07 Any provision above in this Section 7 to the contrary
notwithstanding, if the Company should default on any obligation set
forth in this Section 7 and shall have failed to remedy such default
within thirty (30) days after having received written notice of such
default from the Executive or his beneficiaries, then, in that event:
(a) any and all undischarged, future obligations of the
Company under this Section 7 shall, at the sole option of the Executive
or his beneficiaries, exercised in writing signed by the Executive or
his beneficiaries, as the case may be, and delivered to the Company
within ninety (90) days after the expiration of such thirty-day period,
become immediately due and payable in a lump sum discounted to present
value using the "Federal short-term rate," "Federal mid-term rate" or
"Federal long-term rate" that would apply at the time under section
1274(d) of the Code to a debt instrument having a term equal to the
period extending from the date such option is exercised in writing to
the date or dates such future obligations of the Company would otherwise
have become due and payable; and
(b) in addition to, and not in substitution for, interest
for any other period properly payable to the Executive as a result of
such default, the Company agrees to pay pre-judgment interest on any
such obligation in default, calculated at the "Federal short-term rate,"
"Federal mid-term rate" or "Federal long-term rate" that would apply at
the time under section 1274(d) of the Code to a debt instrument having a
term equal to the period extending from the date that the Company's
obligation became due and payable hereunder
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<PAGE>
to the date the Executive or his beneficiaries obtain a money judgment
therefor (whether in litigation or arbitration).
8. [INTENTIONALLY LEFT BLANK]
9. CONFIDENTIAL INFORMATION
9.01 The Executive agrees not to disclose, either while in the
Company's employ or at any time thereafter, to any person not employed
by the Company, or not engaged to render services to the Company, any
confidential information obtained by him while in the employ of the
Company, including, without limitation, any of the Company's inventions,
processes, methods of distribution, customers or trade secrets;
provided, however, that this provision shall not preclude the Executive
from use or disclosure of information known generally to the public or
of information not considered confidential by persons engaged in the
business conducted by the Company or from disclosure required by law or
Court order.
9.02 The Executive also agrees that upon leaving the Company's
employ, he will not take with him, without the prior written consent of
an officer authorized to act in the matter by the Board of Directors of
the Company, any drawing, blueprint, specification or other document of
the Company, its subsidiaries, affiliates and divisions, which is of a
confidential nature relating to the Company, its subsidiaries,
affiliates and divisions, or without limitation, relating to its or
their methods of distribution, or any description of any formulae or
secret processes.
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<PAGE>
10. SEVERANCE ALLOWANCE
In the event that, following the date stated in Exhibit A attached
to and made part of this Agreement, the employment of the Executive
shall be terminated by the Company prior to his normal retirement date
and such termination shall be for any reason other than for Cause, as
defined in paragraph 7.05 above, the Company shall pay the Executive as
a severance allowance a lump sum equal to the Minimum Total Monthly
Compensation for the month prior to such termination of employment,
multiplied by six.
11. WITHHOLDING
Anything to the contrary notwithstanding, all payments required to
be made by the Company hereunder to the Executive or his estate or
beneficiaries shall be subject to the withholding of such amounts, if
any, relating to tax and other payroll deductions as the Company may
reasonably determine it should withhold pursuant to any applicable law
or regulation. In lieu of withholding such amounts, the Company may
accept other provisions to the end that it has sufficient funds to pay
all taxes required by law to be withheld in respect of any or all of
such payments.
12. NOTICES
(a) All notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall be
sufficiently given if and when mailed in the continental United States
by registered or certified mail to, or personally delivered to the party
entitled thereto at, (i) the address set forth below, unless the
addressee shall have given notice of a different address by a similar
notice, in which case (ii) the latest address given by the addressee by
a similar notice (the Official Address):
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To the Company: Attention: Secretary
_____________________
17325 Euclid Avenue
Cleveland, Ohio 44112
To the Executive: Mr. _______________________
Parker-Hannifin Corporation
17325 Euclid Avenue
Cleveland, Ohio 44112
With additional copy to: Mr. _______________________
___________________________
___________________________
Any such notice, request, demand or other communication delivered in
person shall be deemed to have been received on the date of delivery.
(b) The Official Address of each party to this Agreement,
as the same may be changed from time to time after the date of this
Agreement pursuant to the provisions of subparagraph 12(a) above, shall
be set forth in Exhibit F to this Agreement to the end that Exhibit F
will reflect accurately the Official Address of each party hereto from
time to time after the date of this Agreement, it being understood and
agreed that if, as and when any party hereto shall change his Official
Address after the date of this Agreement by giving the notice required
by subparagraph 12(a) above, Exhibit F shall be deemed to be and shall
be updated by the parties to reflect such change; provided, however,
that Exhibit F is intended only as a memorandum for the convenience of
the parties and shall be disregarded if and to the extent that,
subsequent to the date of this Agreement, Exhibit F shall fail to
reflect accurately the Official Address in accordance with the
provisions of subparagraph 12(a) above because the parties shall have
failed to update Exhibit F as contemplated hereby.
13. GENERAL PROVISIONS
13.01 This Agreement is not intended to and shall not infer or
imply any right on the part of the Executive to continue in the employ
of the Company, or any subsidiary or affiliate of the Company, prior to
a Change in Control of the Company, and is not intended in any way to
limit the right of the Company to terminate the employment of the Executive,
with or without assigning a reason therefor, at any time prior to a Change
in Control of the
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<PAGE>
Company. Nor is this Agreement intended to nor shall it infer or
imply any obligation on the part of the Executive to continue in the
employment of the Company, or any subsidiary or affiliate of the
Company, prior to a Change in Control of the Company. Neither the
Company nor the Executive shall incur any liability under this Agreement
if the employment of the Executive shall be terminated by the Company or
by the Executive prior to a Change in Control of the Company.
13.02 There shall be no right of set-off or counter-claim, in
respect of any claim, debt or obligation, against any payments to the
Executive, his dependents, beneficiaries or estate provided for in this
Agreement.
13.03 The Company and the Executive recognize that each party will
have no adequate remedy at law for breach by the other of any of the
agreements contained herein and, in the event of any such breach, the
Company and the Executive hereby agree and consent that the other shall
be entitled to a decree of specific performance, mandamus or other
appropriate remedy to enforce performance of such agreements.
13.04 No right or interest to or in any payments shall be
assignable by the Executive; provided, however, that this provision
shall not preclude him from designating one or more beneficiaries to
receive any amount that may be payable after his death and shall not
preclude the legal representative of his estate from assigning any right
hereunder to the person or persons entitled thereto under his will or,
in the case of intestacy, to the person or persons entitled thereto
under the laws of intestacy applicable to his estate. The term
"beneficiaries" as used in this Agreement shall mean a beneficiary or
beneficiaries so designated to receive any such amount or, if no
beneficiary has been so designated, the legal representative of the
Executive's estate.
13.05 No right, benefit or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt or obligation,
or to execution, attachment, levy or similar process,
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<PAGE>
or assignment by operation of law. Any attempt, voluntary or
involuntary, to effect any action specified in the immediately preceding
sentence shall, to the full extent permitted by law, be null, void and
of no effect.
13.06 In the event of the Executive's death or a judicial
determination of his incompetence, reference in this Agreement to the
Executive shall be deemed, where appropriate, to refer to his legal
representative or, where appropriate, to his beneficiary or
beneficiaries.
13.07 If any event provided for in this Agreement is scheduled to
take place on a legal holiday, such event shall take place on the next
succeeding day that is not a legal holiday.
13.08 The titles to sections in this Agreement are intended solely
for convenience and no provision of this Agreement is to be construed by
reference to the title of any section.
13.09 This Agreement shall be binding upon and shall inure to the
benefit of the Executive, his heirs and legal representatives, and the
Company and its successors as provided in Section 16 hereof.
13.10 This instrument contains the entire agreement of the parties
relating to the subject matter of this Agreement and supersedes and
replaces all prior agreements and understandings with respect to such
subject matter, and the parties hereto have made no agreements,
representations or warranties relating to the subject matter of this
Agreement which are not set forth herein.
14. AMENDMENT OR MODIFICATION; WAIVER
No provision of this Agreement may be amended, modified or waived
unless such amendment, modification or waiver shall be authorized by the
Board of Directors of the Company or any authorized committee of the
Board of Directors and shall be agreed
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<PAGE>
to in writing, signed by the Executive and by an officer of the Company
thereunto duly authorized. Except as otherwise specifically provided in
this Agreement, no waiver by either party hereto of any breach by the
other party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of a subsequent
breach of such condition or provision or a waiver of a similar or
dissimilar provision or condition at the same or at any prior or
subsequent time.
15. SEVERABILITY
Anything in this Agreement to the contrary notwithstanding:
(a) In the event that any provision of this Agreement, or
portion thereof, shall be determined to be invalid or unenforceable for
any reason, in whole or in part, the remaining provisions of this
Agreement and parts of such provision not so invalid or unenforceable
shall be unaffected thereby and shall remain in full force and effect to
the fullest extent permitted by law.
(b) Any provision of this Agreement, or portion thereof,
which may be invalid or unenforceable in any jurisdiction shall be
limited by construction thereof, to the end that such provision, or
portion thereof, shall be valid and enforceable in such jurisdiction;
and
(c) Any provision of this Agreement, or portion thereof,
which may for any reason be invalid or unenforceable in any jurisdiction
shall remain in effect and be enforceable in any jurisdiction in which
such provision, or portion thereof, shall be valid and enforceable.
16. SUCCESSORS TO THE COMPANY
Except as otherwise provided herein, this Agreement shall be
binding upon and inure to the benefit of the Company and any successor
of the Company, including, without limitation, any corporation or
corporations acquiring directly or indirectly all or substantially all
of the assets of the Company whether by merger, consolidation, sale or
otherwise (and such successor shall thereafter be deemed "the Company"
for the purposes of this Agreement), but shall not otherwise be
assignable by the Company.
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<PAGE>
17. CHANGE IN CONTROL
For the purpose of this Agreement, the term "Change in Control of
the Company" shall mean a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934 as
in effect on the date of this Agreement; provided that, without
limitation, such a change in control shall be deemed to have occurred if
and when (a) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) is or becomes a
beneficial owner, directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's
then outstanding securities or (b) during any period of 24 consecutive
months, commencing before or after the date of this Agreement,
individuals who at the beginning of such twenty-four month period were
directors of the Company for whom the Executive shall have voted cease
for any reason (other than death, disability or retirement pursuant to
the Company's policy relating to retirement of directors, if any, in
effect on the date of this Agreement) to constitute at least a majority
of the Board of Directors of the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as the day and year first above written.
[seal]
ATTEST: PARKER-HANNIFIN CORPORATION,
an Ohio corporation
________________________________ By:___________________
THE EXECUTIVE
______________________
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<PAGE>
Exhibit (10)(e)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1994
by Parker-Hannifin Corporation
Form of Change in Control Agreement
entered into by the Registrant and
certain executive officers (1994)
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
A G R E E M E N T
between
PARKER-HANNIFIN CORPORATION
and
__________________
dated ____________, 1994
<PAGE>
TABLE OF CONTENTS
Section Page
Recitals 1
1 Operation of Agreement 1
2 Employment; Period of Employment 2
3 Position, Duties, Responsibilities 3
4 Compensation, Compensation Plans, Perquisites 5
5 Employee Benefit Plans 8
6 Effect of Death or Disability 10
7 Termination 11
8 Obligation to Mitigate Damages 21
9 Confidential Information 22
10 Severance Allowance 23
11 Withholding 23
12 Notices 24
13 General Provisions 25
14 Amendment or Modification, Waiver 27
15 Severability 27
16 Successors to the Company 28
17 Change in Control 28
18 Intention Relating to Recent Legislation, 29
Possible Future Amendments
Exhibits (A, B, C, D, E, and F)
<PAGE>
AGREEMENT between PARKER-HANNIFIN CORPORATION, an Ohio
Corporation (the Company), and ___________________ (the Executive),
dated the ____ day of _____________, 1994.
W I T N E S S E T H :
WHEREAS:
A. The Executive is a principal officer of the Company
and an integral part of its management.
B. The Company wishes to assure both itself and the
Executive of continuity of management in the event of any actual or
threatened change in control of the Company.
C. This agreement is not intended to alter materially the
compensation and benefits that the Executive could reasonably expect in
the absence of a change in control of the Company and, accordingly, this
Agreement, though taking effect upon execution thereof, will be
operative only upon a change in control of the Company, as that term is
hereafter defined.
NOW, THEREFORE, it is hereby agreed by and between the
parties as follows:
1. OPERATION OF AGREEMENT
This Agreement shall be effective immediately upon its execution by
the parties hereto, but, anything in this Agreement to the contrary
notwithstanding, neither this Agreement nor any provision thereof,
except for this Section 1, Sections 14 through 18
<PAGE>
inclusive, paragraph 13.01, paragraphs 13.07 through 13.10 inclusive,
and provisions of subparagraphs 3.01 (a)(ii), 3.04(b) and 4.01(b) and of
Section 12 providing for automatic updating of Exhibits B, D, E and F
from time to time prior to the date this Agreement becomes operative,
shall be operative unless and until there has been a Change in Control
of the Company as defined in Section 17 below while the Executive is in
the employ of the Company. Upon such a Change in Control of the
Company, this Agreement and all provisions thereof shall become
operative immediately.
2. EMPLOYMENT, PERIOD OF EMPLOYMENT
2.01 The Company hereby agrees to continue the Executive in its
employ, and the Executive hereby agrees to remain in the employ of the
Company, for the period set forth in paragraph 2.02 below (the Period of
Employment), in the position and with the duties and responsibilities
set forth in Section 3 below, and upon the other terms and conditions
hereinafter stated.
2.02 The Period of Employment shall commence on the date this
Agreement becomes operative pursuant to the provisions of Section 1
above (the Operative Date) and, subject only to the provisions of
Section 6 below, relating to death or Disability, shall continue until
the close of business on the date stated in Exhibit A attached to and
made part of this Agreement. In the event that the Executive shall
continue in the full-time employment of the Company after the latter
date, such continued employment shall be subject to the terms and
conditions of this Agreement and the Period of Employment shall
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<PAGE>
include the period during which the Executive in fact so continues in
such employment.
3. POSITION, DUTIES, RESPONSIBILITIES
3.01 (a) (i) It is contemplated that during the Period of
Employment the Executive shall continue to serve as a principal officer
of the Company and as a member of its Board of Directors if serving as a
member of its Board of Directors immediately prior to the Operative
Date, with the office(s) and title(s), reporting responsibility, and
duties and responsibilities of the Executive immediately prior to the
Operative Date.
(ii) The office(s), title(s), reporting
responsibility, duties and responsibilities of the Executive on the date
of this Agreement, as the same may be changed from time to time prior to
the Operative Date, shall be summarized in Exhibit B to this Agreement
to the end that, if this Agreement becomes operative pursuant to the
provisions of Section 1 above, Exhibit B will reflect accurately the
office(s), title(s), reporting responsibility, duties and
responsibilities of the Executive shall be changed prior to the
Operative Date, Exhibit B shall be deemed to be and shall be updated by
the parties to reflect such change; provided, however, that Exhibit B is
intended only as a memorandum for the convenience of the parties and
shall be disregarded if and to the extent that, on the Operative Date,
Exhibit B shall fail to reflect accurately the office(s), title(s),
reporting responsibility, duties or responsibilities of the Executive
immediately prior to the Operative Date because the parties shall have
failed to update Exhibit B as contemplated hereby.
(b) At all times during the Period of Employment, the
Executive shall hold a position of responsibility and importance and a
position of scope, with the functions, duties
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<PAGE>
and responsibilities attached thereto, at least equal in responsibility
and importance and in scope to and commensurate with his position
described in general terms in subparagraph 3.01(a) above and intended to
be summarized in Exhibit B to this Agreement.
3.02 During the Period of Employment the Executive shall also
serve and continue to serve, if and when elected and reelected, as an
officer or director, or both, of any subsidiary, division or affiliate
of the Company.
3.03 Throughout the Period of Employment the Executive shall
devote his full time and undivided attention during normal business
hours to the business and affairs of the Company, except for reasonable
vacations and except for illness or incapacity, but nothing in this
Agreement shall preclude the Executive from devoting reasonable periods
required for serving as a director or member of a committee of any
organization involving no conflict of interest with the interests of the
Company, from engaging in charitable and community activities, and from
managing his personal investments, provided that such activities do not
materially interfere with the regular performance of his duties and
responsibilities under this Agreement.
3.04 (a) The office of the Executive shall be located at the
principal offices of the Company within the area within which the office
of the Executive is located immediately prior to the Operative Date, and
the Executive shall not be required to locate his office elsewhere
without his prior written consent, nor shall he be required to be absent
therefrom on travel status or otherwise more than the total number of
working days in any calendar
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year stated in Exhibit C attached to and made part of this
Agreement nor more than the number of consecutive days at any one time
stated in such Exhibit C.
(b) The area within which the office of the Executive is
located on the date of this Agreement, as the same may be changed from
time to time prior to the Operative Date, shall be described in Exhibit
D to this Agreement to the end that, if this Agreement becomes operative
pursuant to the provisions of Section 1 above, Exhibit D will reflect
accurately the area within which the office of the Executive was located
immediately prior to the Operative Date, it being understood and agreed
that if, as and when the area within which the office of the Executive
is located shall be changed prior to the Operative Date, Exhibit D shall
be deemed to be and shall be updated by the parties to reflect such
change; provided, however, that Exhibit D is intended only as a
memorandum for the convenience of the parties and shall be disregarded
if and to the extent that, on the Operative Date, Exhibit D shall fail
to reflect accurately the area within which the office of the Executive
was located immediately prior to the Operative Date because the parties
shall have failed to update Exhibit D as contemplated hereby.
4. COMPENSATION, COMPENSATION PLANS, PERQUISITES
4.01 (a) For all services rendered by the Executive in any
capacity during the Period of Employment, including, without limitation,
services as an executive, officer, director or member of any committee
of the Company or of any subsidiary, division or affiliate thereof, the
Executive shall be paid as compensation:
(i) A base salary, payable not less often than
monthly, at a monthly rate (before reduction for any deduction
including, without limitation, any deduction for
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<PAGE>
withholding of income taxes or F.I.C.A. taxes and any deduction pursuant
to Section 401(k) of the Internal Revenue Code of 1986, as amended (the
"Code")) at least equal to the monthly rate (before reduction for any
such deduction) of salary which was payable to the Executive immediately
prior to the Operative Date, with increases in such rate after the
Operative Date in accordance with the Company's regular administrative
practices, relating to salary increases applicable to executives of the
Company, in effect immediately prior to the Operative Date (the Minimum
Base Salary), and
(ii) An executive performance award or bonus under the
Company's Executive Compensation Plan, or such equivalent successor plan
as may be adopted by the Company, upon a basis that will render an
executive performance award or bonus for each calendar month which is
within the calendar year to which such executive performance award or
bonus relates, and within the Period of Employment or within the
calendar year in which the Period of Employment commences, equal to no
less than the highest executive performance award or bonus awarded by
the Company to the Executive (whether on a current or deferred payment
basis) prior to the Operative Date, divided by twelve (the Minimum
Monthly Bonus), so that total compensation for any such calendar month
(the Minimum Total Monthly Compensation) shall consist of the Minimum
Base Salary for such month provided for in clause (i) if this
subparagraph 4.01(a), plus the Minimum Monthly Bonus for such month
provided for in clause (ii) of this subparagraph 4.01(a)
(b) The Minimum Total Monthly Compensation that is
applicable from time to time after the date of this Agreement pursuant
to the provisions of subparagraph 4.01(a)
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<PAGE>
above, or that would be applicable if this Agreement were operative at
such time, shall be set forth in Exhibit E to this Agreement, the intent
of this subparagraph 4.01(b) being that such Exhibit E shall be deemed to
be and shall be updated from time to time after the date of this Agreement,
whether or not this Agreement shall then be operative, to reflect the
Minimum Total Monthly Compensation that applies at the time, or that would
apply at the time if this Agreement were then operative, provided, however,
that such Exhibit E is intended only as a memorandum for the convenience of
the parties hereto and, in the event that there is at any time any
conflict, disparity or discrepancy between the Minimum Total Monthly
Compensation provided by subparagraph 4.01(a) above and the amount then set
forth in Exhibit E hereto, the provisions of subparagraph 4.01(a) shall in
all events control.
(c) Subject to the provisions of subparagraph 4.01(a) above
relating to the Minimum Total Monthly Compensation, nothing in this
Agreement shall preclude a change in the mix between the Minimum Base
Salary and Minimum Monthly Bonus of the Executive by increasing the
Minimum Base Salary of the Executive.
(d) Any increase in salary pursuant to clause (i) of
subparagraph 4.01(a) or in bonus or other compensation shall in no way
diminish any other obligation of the Company under this Agreement.
4.02 (a) During the Period of Employment the Executive shall be
and continue to be a full participant in the Company's annual executive
compensation plan, return on net assets bonus plan, any other annual
cash incentive bonus plan, deferred compensation plan, Long-Term
Incentive Plan, any Employees Stock Option Plan, including its 1982
Employees Stock Option Plan, 1987 Employees Stock Option Plan, 1990
Employees Stock Option Plan and
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1993 Stock Incentive Program, or equivalent successor plans that may be
adopted by the Company, with at least the same reward opportunities as
shall have been provided immediately prior to the Operative Date.
Nothing in this Agreement shall preclude improvement of reward
opportunities in such plans or other plans in accordance with the
practice of the Company immediately prior to the Operative Date.
(b) Any provision of the Company's Executive Compensation
Plan (or any successor plan) to the contrary notwithstanding, any
executive performance award or bonus awarded to the Executive during the
Period of Employment (whether for services rendered during or prior to
the Period of Employment) shall, unless the Executive shall have
approved otherwise in writing, be paid wholly in cash as soon as
practicable after the awards are made.
4.03 During the Period of Employment, the Executive shall be
entitled to perquisites, including, without limitation, an office,
secretarial and clerical staff, and to fringe benefits, including,
without limitation, the business and personal use of an automobile and
payment or reimbursement of club dues, in each case at least equal to
those attached to his office immediately prior to the Operative Date, as
well as to reimbursement, upon proper accounting, of reasonable expenses
and disbursements incurred by him in the course of his duties.
5. EMPLOYEE BENEFIT PLANS
5.01 The compensation provided for in Section 4 above, together
with other matters therein set forth, is in addition to the benefits
provided for in this Section 5.
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5.02 In the event that the Executive shall not have been
designated a Participant in the Supplemental Executive Retirement
Benefits Program of the Company prior to the Operative Date, the
Executive shall be and hereby is designated, on and as of the Operative
Date, a Participant in that Program as in effect immediately prior to
the Operative Date.
5.03 The Executive, his dependents and beneficiaries shall be
entitled to all payments and benefits and service credit for benefits
during the Period of Employment to which officers of the Company, their
dependents and beneficiaries are entitled as the result of the
employment of such officers during the Period of Employment under the
terms of employee plans and practices of the Company, including, without
limitation, the Company's retirement program (consisting of the Parker-
Hannifin Corporation Retirement Plan, any excess benefits plan, or other
program designed to restore benefits unavailable under tax-qualified
plans of the Company solely by application of the requirements of the
Code, if any, and its Supplemental Executive Retirement Benefits Program
if applicable, and any other applicable plan of deferred compensation),
the Parker-Hannifin Employees' Savings Plus Stock Ownership Plan, other
Company stock purchase and savings, thrift and investment plans or
programs, if any, the Benefits Plus Plan (including the group life
insurance, accidental death and dismemberment insurance, disability,
medical, dental and health and welfare plans) and other present or
equivalent successor plans and practices of the Company, its
subsidiaries and divisions, for which officers, their dependents and
beneficiaries are eligible, and to all payments or other benefits under
any such plan or practice after the Period of Employment as a result of
participation in such plan or practice during the Period of Employment.
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5.04 Nothing in this Agreement shall preclude the Company from
amending or terminating any employee benefit plan or practice, but, it
being the intent of the parties that the Executive shall continue to be
entitled during the Period of Employment to perquisites as set forth in
paragraph 4.03 above and to benefits and service credit for benefits
under paragraph 5.03 above at least equal to those attached to his
position immediately prior to the Operative Date, nothing in this
Agreement shall operate as, or be construed to reduce or authorize, a
reduction without the Executive's written consent in the level of such
perquisites, benefits or service credit for benefits; in the event of
any such reduction, by amendment or termination of any plan or practice
or otherwise, the Executive, his dependents and beneficiaries shall
continue to be entitled to perquisites, benefits and service credit for
benefits at least equal to the perquisites and to benefits and service
credit for benefits under such plans or practices that he or his
dependents and beneficiaries would have received if such reduction had
not taken place.
6. EFFECT OF DEATH OR DISABILITY
6.01 In the event of the death of the Executive during the Period
of Employment, the legal representative of the Executive shall be
entitled to the Minimum Total Monthly Compensation for the month in
which death shall have occurred, and the Period of Employment shall be
deemed to have ended as of the close of business on the last day of such
month but without prejudice to any payments due in respect of the
Executive's death.
6.02 (a) The term "Disability", as used in this Agreement, shall
mean an illness or accident which prevents the Executive from performing
his duties under this Agreement for
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a period of six (6) consecutive months. The Period of Employment shall
be deemed to have ended as of the close of business on the last day of
such six (6) month period but without prejudice to any payments due the
Executive in respect of disability.
(b) In the event of the Disability of the Executive during
the Period of Employment, the Executive shall be paid an amount equal to
the Minimum Total Monthly Compensation for the month in which such
Disability commenced. Such amount shall be paid at the end of each
month during the period of such Disability but not in excess of six (6)
months.
(c) The amount of any payments due under this paragraph
6.02 shall be reduced by any payments to which the Executive may be
entitled for the same period because of disability under any disability
or pension plan of the Company or of any subsidiary or affiliate
thereof.
7. TERMINATION
7.01 In the event of a Termination, as defined in paragraph 7.03
below, during the Period of Employment, the provisions of this Section 7
shall apply.
7.02 In the event of a Termination and subject to the provisions
of Section 8 of this Agreement relating to mitigation of damages and to
compliance by the Executive with the provisions of paragraph 7.04 below
relating to Competition and of Section 9 below relating to confidential
information, the Company shall, as liquidated damages or severance pay
or both, pay to the Executive and provide him, his dependents,
beneficiaries and estate with the following:
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(a) The Company shall pay the Executive an amount equal to
the Minimum Total Monthly Compensation that would have been paid to the
Executive for the month in which Termination occurred had such
Termination not occurred,
(i) at the end of the month in which Termination
occurred, and
(ii) at the end of each month thereafter during the
remainder of the Period of Employment, provided, however, that in no
event shall the Company be required to pay such an amount after the
month in which the death of the Executive shall have occurred or after
the twelfth month following the occurrence of an illness or accident
which would constitute a "Disability" under subparagraph 6.02(a) above
in the absence of such Termination.
(b) During the period that the payments provided for in
subparagraph (a) of this paragraph 7.02 are required to be made, the
Executive, his dependents, beneficiaries and estate, shall continue to
be entitled to all benefits and service credit for benefits under
employee benefit plans of the Company as if still employed during such
period under this Agreement and, if and to the extent that such benefits
or service credit for benefits shall not be payable or provided under
any such plans to the Executive, his dependents, beneficiaries and
estate by reason of his no longer being an employee of the Company as
the result of Termination, the Company shall itself pay or provide for
payment of such benefits and service credit for benefits to the
Executive, his dependents, beneficiaries and estate.
(c) The period in which the payments provided for in
subparagraph (a) of this paragraph 7.02 are required to be made shall be
considered service with the Company for the purpose (i) of continued
credits under the Company's retirement program (consisting of the
Parker-Hannifin Corporation Retirement Plan, any excess benefits plan or
other
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program designed to restore benefits unavailable under the tax-qualified
plans of the Company solely by application of the requirements of the
Code, if any, and its Supplemental Executive Retirement Benefits
Program) as each such plan or program was in effect immediately prior to
Termination (but without giving effect to any reduction of benefits
thereunder as the result of amendment or termination of any such Plan or
Program during the Period of Employment) and (ii) of all other benefit
plans of the Company as in effect immediately prior to Termination.
(d) In the event that the Executive shall at the time of
Termination hold an outstanding and unexercised (whether or not
exercisable at the time) non-statutory stock option or options
theretofore granted by the Company, the Company shall, in addition to
the amounts provided for in subparagraphs 7.02(a) and 7.02(b), pay to
the Executive in a lump sum an amount equal to the excess above the
option price under each such non-statutory stock option of the Fair
Market Value at the time of Termination of the shares subject to each
such non-statutory stock option. Solely for the purpose of this
subparagraph (d), Fair Market Value at the time of Termination shall be
deemed to mean the higher of (i) the average of the reported closing
prices of the Common Shares of the Company, as reported on the New York
Stock Exchange-Composite Transactions, on the last trading day prior to
the Termination and on the last trading day of each of the two preceding
thirty (30) day periods, and (ii) in the event that a Change in Control,
as defined in Section 17 below, prior to Termination shall have taken
place as the result of a tender or exchange offer and such Change in
Control was consummated within twelve (12) months of Termination, the
highest consideration paid for Common Shares of the Company in the
course of such tender or exchange offer. Upon receiving the payment
from the Company called for by clause (i)
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of subparagraph (a) of this paragraph 7.02, the Executive shall execute
and deliver to the Company a general release in favor of the Company,
its successors and assigns, in respect of any and all matters,
including, without limitation, any and all rights under any outstanding
and unexercisable non-statutory stock options at the time of
Termination, except for the payments and obligations required to be made
or assumed by the Company under this Agreement which at the time had not
yet been made or assumed by the Company and except for such other valid
obligations of the Company as shall be set forth in such release.
(e) If as a result of a termination of employment pursuant
to the provisions of paragraph 7.03(b) the Executive (or anyone claiming
under or through him) loses any part or all of the benefits he would
have received as a Participant in the Supplemental Executive Retirement
Benefits Program of the Company as in effect immediately prior to the
Operative Date, the Company will provide him with a substantially
equivalent benefit.
7.03 The word "Termination", for the purpose of this Section 7 and
any other provision of this Agreement, shall mean:
(a) Termination by the Company of the employment of the
Executive by the Company and its subsidiaries for any reason other than
for Cause as defined in paragraph 7.05 below or for Disability as
defined in subparagraph 6.02(a) above; or
(b) Termination by the Executive of his employment by the
Company and its subsidiaries upon the occurrence of any of the following
events:
(i) Failure to elect or reelect the Executive to the
Board of Directors of the Company, if the Executive shall have been a
member of the Board of Directors immediately prior to the Operative
Date, or failure to elect or reelect the Executive
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to, or removal of the Executive from, any of the office(s) described in
paragraph 3.01(a)(i) above and intended to be summarized in Exhibit B to
this Agreement.
(ii) A significant change in the nature or scope of
the authorities, powers, functions or duties attached to the position
described in paragraph 3.01(a)(i) above and intended to be summarized in
Exhibit B to this Agreement, or a reduction in compensation, which is
not remedied within 30 days after receipt by the Company of written
notice from the Executive.
(iii) A determination by the Executive made in good
faith that as a result of a Change in Control of the Company, as defined
in Section 17 below, and a change in circumstances on or after the
Operative Date significantly affecting his position, he is unable to
carry out the authorities, powers, functions or duties attached to his
position and contemplated by Section 3 of this Agreement and the
situation is not remedied within 30 days after receipt by the Company of
written notice from the Executive of such determination.
(iv) A breach by the Company of any provision of this
Agreement not embraced within the foregoing clauses (i), (ii) and (iii)
of this subparagraph 7.03(b) which is not remedied within 30 days after
receipt by the Company of written notice from the Executive.
(v) The liquidation, dissolution, consolidation or
merger of the Company or transfer of all or a significant portion of its
assets unless a successor or successors (by merger, consolidation or
otherwise) to which all or a significant portion of its assets have been
transferred shall have assumed all duties and obligations of the Company
under this Agreement; provided that in any event set forth in this
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subparagraph 7.03(b) above, the Executive shall have elected to
terminate his employment under this Agreement upon not less than forty
and not more than ninety days' advance written notice to the Board of
Directors of the Company, Attention of the Secretary, given, except in
the case of a continuing breach, within three calendar months after (A)
failure to be so elected or reelected, or removal, (B) expiration of the
thirty (30) day cure period with respect to such event, or (C) the
closing date of such liquidation, dissolution, consolidation, merger or
transfer of assets, as the case may be. An election by the Executive to
terminate his employment given under the provisions of this paragraph
7.03 shall not be deemed a voluntary termination of employment by the
Executive for the purpose of this Agreement or any plan or practice of
the Company.
7.04 (a) There shall be no obligation on the part of the Company
to make any further payments provided for in paragraph 7.02 above or to
provide any further benefits specified in such paragraph 7.02 if the
Executive shall, during the period that such payments are being made or
benefits provided, engage in Competition with the Company as hereinafter
defined, provided all of the following shall have taken place:
(i) the Secretary of the Company, pursuant to
resolution of the Board of Directors of the Company, shall have given
written notice to the Executive that, in the opinion of the Board of
Directors, the Executive is engaged in such Competition, specifying the
details;
(ii) the Executive shall have been give a reasonable
opportunity to appear
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before the Board of Directors prior to the determination of the Board
evidenced by such resolution; and
(iii) the Executive shall neither have ceased to engage
in such Competition within thirty (30) days from his receipt of such
notice nor diligently taken all reasonable steps to that end during such
thirty (30) day period and thereafter.
(b) The word "Competition" for purposes of this paragraph
7.04 and any other provision of this Agreement shall mean taking a
management position with, or control of, a business engaged in the
manufacture, processing, purchase of distribution of products which
constituted 15% or more of the sales of the Company and its subsidiaries
and divisions during the last fiscal year of the Company preceding the
termination of the Executive's employment (or during any fiscal year of
the Company during the Period of Employment); provided, however, that in
no event shall ownership of less than 5% of the outstanding capital
stock entitled to vote for the election of directors of a corporation
with a class of equity securities held of record by more than 500
persons, standing alone, be deemed Competition with the Company within
the meaning of this paragraph 7.04.
7.05 For the purpose of any provision of this Agreement, the
termination of the Executive's employment shall be deemed to have been
for Cause only:
(a) if termination of his employment shall have been the
result of an act or acts of dishonesty on the part of the Executive
constituting a felony and resulting or intended to result directly or
indirectly in gain or personal enrichment at the expense of the Company,
or
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(b) if there has been a breach by the Executive during the
Period of Employment of the provisions of paragraph 3.03 above, relating
to the time to be devoted to the affairs of the Company, or of Section
9, relating to confidential information, and such breach results in
demonstrably material injury to the Company, and with respect to any
alleged breach of paragraph 3.03 hereof, the Executive shall have both
failed to remedy such alleged breach within thirty (30) days from his
receipt of written notice by the Secretary of the Company pursuant to
resolution duly adopted by the Board of Directors of the Company after
notice to the Executive and an opportunity to be heard demanding that he
remedy such alleged breach, and failed to take all reasonable steps to
that end during such thirty (30) day period and thereafter; provided
that there shall have been delivered to the Executive a certified copy
of a resolution of the Board of Directors of the Company adopted by the
affirmative vote of not less than three-fourths (3/4) of the entire
membership of the Board of Directors called and held for that purpose
and at which the Executive was given an opportunity to be heard, finding
that the Executive was guilty of conduct set forth in subparagraphs (a)
or (b) above, specifying the particulars thereof in detail.
Anything in this paragraph 7.05 or elsewhere in this Agreement to
the contrary notwithstanding, the employment of the Executive shall in
no event be considered to have been terminated by the Company for Cause
if termination of his employment took place (i) as the result of bad
judgment or negligence on the part of the Executive, or (ii) as the
result of an act or omission without intent of gaining therefrom
directly or indirectly a profit to which the Executive was not legally
entitled, or (iii) because of an act or omission believed by the
Executive in good faith to have been in or not opposed to the interests
of the Company, or (iv) for any act or omission in respect of which a
determination could properly
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be made that the Executive met the applicable standard of conduct
prescribed for indemnification or reimbursement or payment of expenses
under the Code of Regulations of the Company or the laws of the State of
Ohio or the directors' and officers' liability insurance of the Company,
in each case as in effect at the time of such act or omission, or (v) as
the result of an act or omission which occurred more than twelve (12)
calendar months prior to the Executive's having been given notice of the
termination of his employment for such act or omission unless the
commission of such act or such omission could not at the time of such
commission or omission have been known to a member of the Board of
Directors of the Company (other than the Executive, if he is then a
member of the Board of Directors), in which case more than twelve (12)
calendar months from the date that the commission of such act or such
omission was or could reasonably have been so known, or (vi) as the
result of a continuing course of action which commenced and was or could
reasonably have been known to a member of the Board of Directors of the
Company (other than the Executive) more than twelve (12) calendar months
prior to notice having been given to the Executive of the termination of
his employment.
7.06 In the event that the Executive's employment shall be
terminated by the Company during the Period of Employment and such
termination is alleged to be for Cause, or the Executive's right to
terminate his employment under paragraph 7.03(b) above shall be
questioned by the Company, or the Company shall withhold payments or
provision of benefits because the Executive is alleged to be engaged in
Competition in breach of the provisions of paragraph 7.04 above or for
any other reason, the Executive shall have the right, in addition to all
other rights and remedies provided by law, at his election either to
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seek arbitration within the area within which the office of the
Executive was located immediately prior to the Operative Date and
intended to be described in Exhibit D to this Agreement under the rules
of the American Arbitration Association by serving a notice to arbitrate
upon the Company or to institute a judicial proceeding, in either case
within ninety (90) days after having received notice of termination of
his employment or notice in any form that the termination of his
employment under paragraph 7.03(b) is subject to question or that the
Company is withholding or proposed to withhold payments or provision of
benefits or within such longer period as may reasonably be necessary for
the Executive to take action in the event that his illness or incapacity
should preclude his taking such action within such ninety (90) day
period.
7.07 Any provision above in this Section 7 to the contrary
notwithstanding, if the Company should default on any obligation set
forth in this Section 7 and shall have failed to remedy such default
within thirty (30) days after having received written notice of such
default from the Executive or his beneficiaries, then, in that event:
(a) any and all undischarged, future obligations of the
Company under this Section 7 shall, at the sole option of the Executive
or his beneficiaries, exercised in writing signed by the Executive or
his beneficiaries, as the case may be, and delivered to the Company
within ninety (90) days after the expiration of such thirty (30) day
period, become immediately due and payable in a lump sum discounted to
present value using the "Federal short-term rate," "Federal mid-term
rate" or "Federal long-term rate" that would apply at the time under
section 1274(d) of the Code to a debt instrument having a term equal to
the period extending from the date such option is exercised in writing
to the date or dates such
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future obligations of the Company would otherwise have become due and
payable; and
(b) in addition to, and not in substitution for, interest
for any other period properly payable to the Executive as a result of
such default, the Company agrees to pay pre-judgment interest on any
such obligation in default, calculated at the "Federal short-term rate,"
"Federal mid-term rate" or "Federal long-term rate" that would apply at
the time under section 1274(d) of the Code to a debt instrument having a
term equal to the period extending from the date that the Company's
obligation became due and payable hereunder to the date the Executive or
his beneficiaries obtain a money judgment therefor (whether in
litigation or arbitration).
8. OBLIGATION TO MITIGATE DAMAGES
8.01 In the event of a Termination, as defined in paragraph 7.03
above, the Executive shall make reasonable efforts to mitigate damages
by seeking other employment; provided, however, that he shall not be
required to accept a position of less dignity and importance or of
substantially different character than the highest position theretofore
held by him with the Company or a position that would call upon him to
engage in competition within the meaning of paragraph 7.04(b) above, nor
shall he be required to accept a position other than in a location
reasonably convenient to his principal residence immediately prior to
such Termination.
8.02 To the extent that the Executive shall receive compensation,
benefits and service credit for benefits from other employment secured
pursuant to the provisions of paragraph 8.01 above, the payments to be
made and the benefits and service credit for
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benefits to be provided by the Company under the provisions of paragraph
7.02 above shall be correspondingly reduced. Such reduction shall, in
the event of any question, be determined jointly by the firm of
certified public accountants of the Company and the firm of certified
public accountants selected by the Executive, in each case upon the
advice of actuaries to the extent the certified public accountants
consider necessary, and, in the event such accountants are unable to
agree on a resolution of the question, such reduction shall be
determined by an independent firm of certified public accountants
selected jointly by both firms of accountants.
9. CONFIDENTIAL INFORMATION
9.01 The Executive agrees not to disclose, either while in the
Company's employ or at any time thereafter, to any person not employed
by the Company, or not engaged to render services to the Company, any
confidential information obtained by him while in the employ of the
Company, including, without limitation, any of the Company's inventions,
processes, methods of distribution, customers or trade secrets;
provided, however, that this provision shall not preclude the Executive
from use or disclosure of information known generally to the public or
of information not considered confidential by persons engaged in the
business conducted by the Company or from disclosure required by law or
Court order.
9.02 The Executive also agrees that upon leaving the Company's
employ, he will not take with him, without the prior written consent of
an officer authorized to act in the matter by the Board of Directors of
the Company, any drawing, blueprint, specification or other document of
the Company, its subsidiaries, affiliates and divisions, which is of a
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confidential nature relating to the Company, its subsidiaries,
affiliates and divisions, or without limitation, relating to its or
their methods of distribution, or any description of any formulae or
secret processes.
9.03 The Executive further agrees that upon leaving the Company's
employ (or prior to leaving, if in connection with an intention of the
Executive to leave), he will not solicit any other employee of the
Company or otherwise cause any other employee to consider terminating
employment with the Company without the prior written consent of an
officer authorized to act in the matter by the Board of Directors of the
Company.
10. SEVERANCE ALLOWANCE
In the event that, following the date stated in Exhibit A attached
to and made part of this Agreement, the employment of the Executive
shall be terminated by the Company prior to his normal retirement date
and such termination shall be for any reason other than for Cause, as
defined in paragraph 7.05 above, the Company shall pay the Executive as
a severance allowance a lump sum equal to the Minimum Total Monthly
Compensation for the month prior to such termination of employment,
multiplied by six.
11. WITHHOLDING
Anything to the contrary notwithstanding, all payments required to
be made by the Company hereunder to the Executive or his estate or
beneficiaries shall be subject to the withholding of such amounts, if
any, relating to tax and other payroll deductions as the Company may
reasonably determine it should withhold pursuant to any applicable law
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or regulation. In lieu of withholding such amounts, the Company may
accept other provisions to the end that it has sufficient funds to pay
all taxes required by law to be withheld in respect of any or all of
such payments.
12. NOTICES
(a) All notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall be
sufficiently given if and when mailed in the continental United States
by registered or certified mail to, or personally delivered to the party
entitled thereto at, (i) the address set forth below, unless the
addressee shall have given notice of a different address by a similar
notice, in which case (ii) the latest address given by the addressee by
a similar notice (the Official Address):
To the Company: Attention: Secretary
Parker-Hannifin Corporation
17325 Euclid Avenue
Cleveland, Ohio 44112
To the Executive: Mr. _______________________
Parker-Hannifin Corporation
17325 Euclid Avenue
Cleveland, Ohio 44112
With additional copy to: Mr. _______________________
___________________________
___________________________
Any such notice, request, demand or other communication delivered in
person shall be deemed to have been received on the date of delivery.
(b) The Official Address of each party to this Agreement,
as the same may be changed from time to time after the date of this
Agreement pursuant to the provisions of subparagraph 12(a) above, shall
be set forth in Exhibit F to this Agreement to the end that Exhibit F
will reflect accurately the Official Address of each party hereto from
time to time after the date of this Agreement, it being understood and
agreed that if, as and when any
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party hereto shall change his Official Address after the date of this
Agreement by giving the notice required by subparagraph 12(a) above,
Exhibit F shall be deemed to be and shall be updated by the parties to
reflect such change; provided, however, that Exhibit F is intended only
as a memorandum for the convenience of the parties and shall be
disregarded if and to the extent that, subsequent to the date of this
Agreement, Exhibit F shall fail to reflect accurately the Official
Address in accordance with the provisions of subparagraph 12(a) above
because the parties shall have failed to update Exhibit F as
contemplated hereby.
13. GENERAL PROVISIONS
13.01 This Agreement is not intended to and shall not infer or
imply any right on the part of the Executive to continue in the employ
of the Company, or any subsidiary or affiliate of the Company, prior to
a Change in Control of the Company, and is not intended in any way to
limit the right of the Company to terminate the employment of the
Executive, with or without assigning a reason therefor, at any time
prior to a Change in Control of the Company. Nor is this Agreement
intended to nor shall it infer or imply any obligation on the part of
the Executive to continue in the employment of the Company, or any
subsidiary or affiliate of the Company, prior to a Change in Control of
the Company. Neither the Company nor the Executive shall incur any
liability under this Agreement if the employment of the Executive shall
be terminated by the Company or by the Executive prior to a Change in
Control of the Company.
13.02 There shall be no right of set-off or counter-claim, in
respect of any claim, debt or obligation, against any payments to the
Executive, his dependents, beneficiaries or estate provided for in this
Agreement.
13.03 The Company and the Executive recognize that each party will
have no adequate remedy at law for breach by the other of any of the
agreements contained herein and, in the event of any such breach, the
Company and the Executive hereby agree and consent that the other shall
be entitled to a decree of specific performance, mandamus or other
appropriate remedy to enforce performance of such agreements.
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13.04 No right or interest to or in any payments shall be
assignable by the Executive; provided, however, that this provision
shall not preclude him from designating one or more beneficiaries to
receive any amount that may be payable after his death and shall not
preclude the legal representative of his estate from assigning any right
hereunder to the person or persons entitled thereto under his will or,
in the case of intestacy, to the person or persons entitled thereto
under the laws of intestacy applicable to his estate. The term
"beneficiaries" as used in this Agreement shall mean a beneficiary or
beneficiaries so designated to receive any such amount or, if no
beneficiary has been so designated, the legal representative of the
Executive's estate.
13.05 No right, benefit or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt or obligation,
or to execution, attachment, levy or similar process, or assignment by
operation of law. Any attempt, voluntary or involuntary, to effect any
action specified in the immediately preceding sentence shall, to the
full extent permitted by law, be null, void and of no effect.
13.06 In the event of the Executive's death or a judicial
determination of his incompetence, reference in this Agreement to the
Executive shall be deemed, where appropriate, to refer to his legal
representative, or, where appropriate, to his beneficiary or
beneficiaries.
13.07 If any event provided for in this Agreement is scheduled to
take place on a legal holiday, such event shall take place on the next
succeeding day that is not a legal holiday.
13.08 The titles to sections in this Agreement are intended solely
for convenience and no provision of this Agreement is to be construed by
reference to the title of any section.
-26-
<PAGE>
13.09 This Agreement shall be binding upon and shall inure to the
benefit of the Executive, his heirs and legal representatives, and the
Company and its successors as provided in Section 16 hereof.
13.10 This instrument contains the entire agreement of the parties
relating to the subject matter of this Agreement and supersedes and
replaces all prior agreements and understandings with respect to such
subject matter, and the parties hereto have made no agreements,
representations or warranties relating to the subject matter of this
Agreement which are not set forth herein.
14. AMENDMENT OR MODIFICATION, WAIVER
No provision of this Agreement may be amended, modified or waived
unless such amendment, modification or waiver shall be authorized by the
Board of Directors of the Company or any authorized committee of the
Board of Directors and shall be agreed to in writing, signed by the
Executive and by an officer of the Company thereunto duly authorized.
Except as otherwise specifically provided in this Agreement, no waiver
by either party hereto of any breach by the other party hereto of any
condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of a subsequent breach of such condition
or provision or a waiver of a similar or dissimilar provision or
condition at the same or at any prior or subsequent time.
15. SEVERABILITY
Anything in this Agreement to the contrary notwithstanding:
(a) In the event that any provision of this Agreement, or
portion thereof, shall be determined to be invalid or unenforceable for
any reason, in whole or in part, the remaining provisions of this
Agreement and parts of such provision not so invalid or unenforceable
shall be unaffected thereby and shall remain in full force and effect to
the fullest extent permitted by law.
(b) Any provision of this Agreement, or portion thereof,
which may be invalid or unenforceable in any jurisdiction shall be
limited by construction thereof, to the end that such provision, or
portion thereof, shall be valid and enforceable in such jurisdiction;
and
-27-
<PAGE>
(c) Any provision of this Agreement, or portion thereof,
which may for any reason be invalid or unenforceable in any jurisdiction
shall remain in effect and be enforceable in any jurisdiction in which
such provision, or portion thereof, shall be valid and enforceable.
16. SUCCESSORS TO THE COMPANY
Except as otherwise provided herein, this Agreement shall be
binding upon and inure to the benefit of the Company and any successor
of the Company, including, without limitation, any corporation or
corporations acquiring directly or indirectly all or substantially all
of the assets of the Company whether by merger, consolidation, sale or
otherwise (and such successor shall thereafter be deemed "the Company"
for the purposes of this Agreement), but shall not otherwise be
assignable by the Company.
17. CHANGE IN CONTROL
For the purpose of this Agreement, the term "Change in Control of
the Company" shall mean a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934 as
in effect on the date of this Agreement; provided that, without
limitation, such a change in control shall be deemed to have occurred if
and when (a) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) is or becomes a
beneficial owner, directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's
then outstanding securities or (b) during any period of 24 consecutive
months, commencing before or after the date of this Agreement,
individuals who at the beginning of such twenty-four (24) month period
were directors of the Company for whom the Executive shall have voted
cease for any reasons (other than death, disability or retirement
pursuant to the Company's policy relating to retirement of directors, if
any, in effect on the date of this Agreement) to constitute at least a
majority of the Board of Directors of the Company.
-28-
<PAGE>
18. INTENTION RELATING TO RECENT LEGISLATION,
POSSIBLE FUTURE AMENDMENTS
18.01 The Company and the Executive intend that this Agreement
shall be performed according to its terms hereinbefore set forth, and
that such performance shall not give rise to or result in any payment or
benefit being subject to the Excise tax imposed by Section 4999 of the
Code or the related loss of deduction mandated by Section 280G(a) of the
Code. Each and every provision of this Agreement shall be administered,
interpreted and construed to carry out such intention.
18.02 As a result of the issuance of proposed regulations on May 5,
1989, and with respect to paragraph 18.01 of this Agreement, the amount
to be paid to the Executive under this Agreement upon a Change in
Control of the Company shall be limited to an amount not to exceed two
hundred ninety-nine percent (299%) of the "disqualified individual's
base amount" as those terms are defined in Regulation 1.280G-1. The
Company and the Executive recognize that there are as yet no final
regulations or rulings under, or official interpretations of Sections
280G(a) and 4999. Accordingly, the Company and the Executive agree
that, when Treasury Regulations are issued in proposed or final form
under Section 280G or 4999 of the Code or relevant rulings or official
interpretations are promulgated, they will at that time, or from time to
time, review this Agreement and take such action, including executing
amendments hereto, as the Company and the Executive may agree to be
necessary or appropriate to carry out the aforesaid intention.
-29-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as the day and year first above written.
[seal]
ATTEST: PARKER-HANNIFIN CORPORATION,
an Ohio corporation
_______________________________ By:_________________________
THE EXECUTIVE
_____________________________
-30-
<PAGE>
Exhibit (10)(f)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1994
by Parker-Hannifin Corporation
Form of Indemnification Agreement entered
into by the Registrant and its directors
and certain executive officers
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as
of the ____ day of ______, 19__, by and between Parker-Hannifin
Corporation, an Ohio corporation (the "Company"), and __________
_____ (the "Indemnitee"), a Director of the Company.
RECITALS
A. The Indemnitee is presently serving as a Director of
the Company and the Company desires the Indemnitee to continue in
that capacity. The Indemnitee is willing, subject to certain
conditions including without limitation the execution and perfor-
mance of this Agreement by the Company, to continue in that
capacity.
B. In addition to the indemnification to which the
Indemnitee is entitled under the Regulations of the Company (the
"Regulations"), the Company has obtained, as its sole expense,
insurance protecting the Company and its officers and directors
including the Indemnitee against certain losses arising out of
actual or threatened actions, suits, or proceedings to which such
persons may be made or threatened to be made parties. However, as
a result of circumstances having no relation to, and beyond the
control of, the Company and the Indemnitee, the scope of that
insurance has been reduced and there can be no assurance of the
continuation or renewal of that insurance.
Accordingly, and in order to induce the Indemnitee to
continue to serve in his present capacity, the Company and the
Indemnitee agree as follows:
1. Continued Service. The Indemnitee shall continue to
serve at the will of the Company as a Director of the Company so
long as he is duly elected and qualified in accordance with the
Regulations or until he resigns in writing in accordance with
applicable law.
2. Initial Indemnity. (a) The Company shall indemnify
the Indemnitee, if or when he is a party or is threatened to be
made a party to any threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, administrative, or
investigative (other than an action by or in the right of the
Company), by reason of the fact that he is or was a Director of the
Company or by reason of any action alleged to have been taken or
omitted in
<PAGE>
2
any such capacity, against any and all costs, charges,
expenses (including without limitation fees and expenses of
attorneys and/or others; all such costs, charges and expenses being
herein jointly referred to as "Expenses"), judgments, fines, and
amounts paid in settlement, actually and reasonably incurred by the
Indemnitee in connection therewith including any appeal of or from
any judgment or decision, unless it is proved by clear and
convincing evidence in a court of competent jurisdiction that the
Indemnitee's action or failure to act involved an act or omission
undertaken with deliberate intent to cause injury to the Company or
undertaken with reckless disregard for the best interests of the
Company. In addition, with respect to any criminal action or
proceeding, indemnification hereunder shall be made only if the
Indemnitee had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, or conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the Indemnitee did not satisfy the foregoing
standard of conduct to the extent applicable thereto.
(b) The Company shall indemnify the Indemnitee, if or
when he is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding by or
in the right of the Company to procure a judgment in its favor, by
reason of the fact that the Indemnitee is or was a Director of the
Company against any and all Expenses actually and reasonably
incurred by the Indemnitee in connection with the defense or
settlement thereof or any appeal of or from any judgment or
decision, unless it is proved by clear and convincing evidence in
a court of competent jurisdiction that the Indemnitee's action or
failure to act involved an act or omission undertaken with
deliberate intent to cause injury to the Company or undertaken with
reckless disregard for the best interests of the Company, except
that no indemnification shall be made in respect of any action or
suit in which the only liability asserted against Indemnitee is
pursuant to Section 1701.95 of the Ohio Revised Code.
(c) Any indemnification under Section 2(a) or 2(b)
(unless ordered by a court) shall be made by the Company only as
authorized in the specific case upon a determination that indemni-
fication of the Indemnitee is proper in the circumstances because
he has met the applicable standard of conduct set forth in Section
2(a) or 2(b). Such authorization shall be made (i) by the
Directors of the Company (the "Board") by a majority vote of a
quorum consisting of Directors who were not and are not parties to
or threatened with such action, suit, or proceeding, or (ii) if
such a quorum of disinterested Directors is not available or if a
<PAGE>
3
majority of such quorum so directs, in a written opinion by
independent legal counsel (designated for such purpose by the
Board) which shall not be an attorney, or a firm having associated
with it an attorney, who has been retained by or who has performed
services for the Company, or any person to be indemnified, within
the five years preceding such determination, or (iii) by the
shareholders of the Company (the "Shareholders"), or (iv) by the
court in which such action, suit, or proceeding was brought.
(d) To the extent that the Indemnitee has been successful
on the merits or otherwise, including without limitation the
dismissal of an action without prejudice, in defense of any action,
suit, or proceeding referred to in Section 2(a) or 2(b), or in
defense of any claim, issue, or matter therein, he shall be
indemnified against Expenses actually and reasonably incurred by
him in connection therewith. Expenses actually and reasonably
incurred by the Indemnitee in defending any such action, suit, or
proceeding shall be paid by the Company as they are incurred in
advance of the final disposition of such action, suit, or proceeding
under the procedure set forth in Section 4(b) hereof.
(e) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on the Indemnitee
with respect to any employee benefit plan; references to "serving
at the request of the Company" shall include any service as a
director, officer, employee, or agent of the Company which imposes
duties on, or involves services by, the Indemnitee with respect to
an employee benefit plan, its participants or beneficiaries;
references to the masculine shall include the feminine; and
references to the singular shall include the plural and vice versa.
3. Additional Indemnification. Pursuant to Section
1701.13(E)(6) of the Ohio Revised Code (the "ORC"), without
limiting any right which the Indemnitee may have pursuant to
Section 2 hereof or any other provision of this Agreement or the
Articles, the Regulations, the ORC, any policy of insurance, or
otherwise, but subject to any limitation on the maximum permissible
indemnity which may exist under applicable law at the time of any
request for indemnity hereunder and subject to the following
provisions of this Section 3, the Company shall indemnify the
Indemnitee against any amount which he is or becomes obligated to
pay relating to or arising out of any claim made against him
because of any act, failure to act, or neglect or breach of duty,
including any actual or alleged error, misstatement, or misleading
statement, which he commits, suffers, permits, or acquiesces in
while acting in his capacity as a Director of the Company. The
<PAGE>
4
payments which the Company is obligated to make pursuant to this
Section 3 shall include without limitation, judgments, fines, and
amounts paid in settlement and any and all Expenses actually and
reasonably incurred by the Indemnitee in connection therewith
including any appeal of or from any judgment or decision; provided,
however, that the Company shall not be obligated under this Section
3 to make any payment in connection with any claim against the
Indemnitee:
(a) to the extent of any fine or similar governmental
imposition which the Company is prohibited by applicable law
from paying which results from a final, nonappealable order;
or
(b) to the extent based upon or attributable to the
Indemnitee having actually realized a personal gain or profit
to which he was not legally entitled, including without
limitation profit from the purchase and sale by the Indemnitee
of equity securities of the Company which are recoverable by
the Company pursuant to Section 16(b) of the Securities
Exchange Act of 1934, or profit arising from transactions in
publicly traded securities of the Company which were effected
by the Indemnitee in violation of Section 10(b) of the
Securities Exchange Act of 1934, or Rule 10b-5 promulgated
thereunder.
A determination as to whether the Indemnitee shall be entitled to
indemnification under this Section 3 shall be made in accordance
with Section 4(a) hereof. Expenses incurred by the Indemnitee in
defending any claim to which this Section 3 applies shall be paid
by the Company as they are actually and reasonably incurred in
advance of the final disposition of such claim under the procedure
set forth in Section 4(b) hereof.
4. Certain Procedures Relating to Indemnification.
(a) For purposes of pursuing his rights to indemnification under
Section 3 hereof, the Indemnitee shall (i) submit to the Board a
sworn statement of request for indemnification substantially in the
form of Exhibit 1 attached hereto and made a part hereof (the
"Indemnification Statement") averring that he is entitled to
indemnification hereunder and (ii) present to the Company
reasonable evidence of all amounts for which indemnification is
requested. Submission of an Indemnification Statement to the Board
shall create a presumption that the Indemnitee is entitled to
indemnification hereunder, and the Company shall, within 60
calendar days after submission of the Indemnification Statement,
make the payments requested in the Indemnification Statement to or
<PAGE>
5
for the benefit of the Indemnitee, unless (i) within such 60-
calendar-day period the Board shall resolve by vote of a majority
of the Directors at a meeting at which a quorum is present that the
Indemnitee is not entitled to indemnification under Section 3
hereof, (ii) such vote shall be based upon clear and convincing
evidence (sufficient to rebut the foregoing presumption), and (iii)
the Indemnitee shall have received within such period notice in
writing of such vote, which notice shall disclose with particular-
ity the evidence upon which the vote is based. The foregoing
notice shall be sworn to by all persons who participated in the
vote and voted to deny indemnification. The provisions of this
Section 4(a) are intended to be procedural only and shall not
affect the right of Indemnitee to indemnification under Section 3
of this Agreement so long as Indemnitee follows the prescribed
procedure and any determination by the Board that Indemnitee is not
entitled to indemnification and any failure to make the payments
requested in the Indemnification Statement shall be subject to
judicial review by any court of competent jurisdiction.
(b) For purposes of obtaining payments of Expenses in
advance of final disposition pursuant to the second sentence of
Section 2(d) or the last sentence of Section 3 hereof, the
Indemnitee shall submit to the Company a sworn request for
advancement of Expenses substantially in the form of Exhibit 2
attached hereto and made a part hereof (the "Undertaking"),
averring that he has reasonably incurred actual Expenses in
defending an action, suit or proceeding referred to in Section 2(a)
or 2(b) or any claim referred to in Section 3, or pursuant to
Section 8 hereof. Unless at the time of the Indemnitee's act or
omission at issue, the Articles of Incorporation or Regulations of
the Company prohibit such advances by specific reference to ORC
Section 1701.13(E)(5)(a) and unless the only liability asserted
against the Indemnitee in the subject action, suit or proceeding is
pursuant to ORC Section 1701.95, the Indemnitee shall be eligible
to execute Part A of the Undertaking by which he undertakes to (a)
repay such amount if it is proved by clear and convincing evidence
in a court of competent jurisdiction that the Indemnitee's action
or failure to act involved an act or omission undertaken with
deliberate intent to cause injury to the Company or undertaken with
reckless disregard for the best interests of the Company and (b)
reasonably cooperate with the Company concerning the action, suit,
proceeding or claim. In all cases, the Indemnitee shall be
eligible to execute Part B of the Undertaking by which he under-
takes to repay such amount if it ultimately is determined that he
is not entitled to be indemnified by the Company under this
Agreement or otherwise. In the event that the Indemnitee is
eligible to and does execute both Part A and Part B of the
<PAGE>
6
Undertaking, the Expenses which are paid by the Company pursuant
thereto shall be required to be repaid by the Indemnitee only if he
is required to do so under the terms of both Part A and Part B of
the Undertaking. Upon receipt of the Undertaking, the Company
shall thereafter promptly pay such Expenses of the Indemnitee as
are noticed to the Company in writing and in reasonable detail
arising out of the matter described in the Undertaking. No
security shall be required in connection with any Undertaking.
5. Limitation on Indemnity. Notwithstanding anything
contained herein to the contrary, the Company shall not be required
hereby to indemnify the Indemnitee with respect to any action,
suit, or proceeding that was initiated by the Indemnitee unless (i)
such action, suit, or proceeding was initiated by the Indemnitee to
enforce any rights to indemnification arising hereunder and such
person shall have been formally adjudged to be entitled to
indemnity by reason hereof, (ii) authorized by another agreement to
which the Company is a party whether heretofore or hereafter
entered, or (iii) otherwise ordered by the court in which the suit
was brought.
6. Subrogation; Duplication of Payments. (a) In the
event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and
shall do everything that may be necessary to secure such rights,
including the execution of such documents necessary to enable the
Company effectively to bring suit to enforce such rights.
(b) The Company shall not be liable under this Agreement
to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has actually received payment
(under any insurance policy, the Company's Regulations or other-
wise) of the amounts otherwise payable hereunder.
7. Ratification. The Company may, at its option,
propose at any future meeting of Shareholders that this Agreement
be ratified by the Shareholders; if the Shareholders vote not to
ratify this Agreement, the Company shall have the right to amend
this Agreement without the consent of the Indemnitee; provided,
however, that no such amendment or termination shall deny or
diminish the Indemnitee's rights to indemnity pursuant hereto (or
the procedures set forth herein to obtain indemnification) as
applied to any act or failure to act occurring in whole or in part
prior to the date of such amendment or termination (whether or not
a claim hereunder is made before or after such date).
<PAGE>
7
8. Fees and Expenses of Enforcement. It is the intent
of the Company that the Indemnitee not be required to incur the
expenses associated with the enforcement of his rights under this
Agreement by litigation or other legal action because the cost and
expense thereof would substantially detract from the benefits
intended to be extended to the Indemnitee hereunder. Accordingly,
if it should appear to the Indemnitee that the Company has failed
to comply with any of its obligations under this Agreement or in
the event that the Company or any other person takes any action to
declare this Agreement void or unenforceable, or institutes any
action, suit or proceeding to deny, or to recover from, the
Indemnitee the benefits intended to be provided to the Indemnitee
hereunder, the Company irrevocably authorizes the Indemnitee from
time to time to retain counsel of his choice, at the expense of the
Company as hereafter provided, to represent the Indemnitee in
connection with the initiation or defense of any litigation or
other legal action, whether by or against the Company or any
director, officer, shareholder, or other person affiliated with the
Company, in any jurisdiction. Regardless of the outcome thereof,
the Company shall pay and be solely responsible for any and all
costs, charges, and expenses including, without limitation fees
and expenses of attorneys and others, reasonably incurred by the
Indemnitee pursuant to this Section 8.
9. Merger of Consolidation. In the event that the
Company shall be a constituent corporation in a consolidation,
merger, or other reorganization, the Company, if it shall not be
the surviving, resulting, or acquiring corporation therein, shall
require as a condition thereto that the surviving, resulting, or
acquiring corporation agree to assume all of the obligations of the
Company hereunder and to indemnify the Indemnitee to the full
extent provided herein. Whether or not the Company is the
resulting, surviving, or acquiring corporation in any such
transaction, the Indemnitee shall also stand in the same position
under the Agreement with respect to the resulting, surviving, or
acquiring corporation as he would have with respect to the Company
if its separate existence had continued.
10. Nonexclusivity and Severability. (a) The rights to
indemnification provided by this Agreement shall not be exclusive
of any other rights of indemnification to which the Indemnitee may
be entitled under the Articles, the Regulations, the ORC or any
other statute, any insurance policy, agreement, or vote of
shareholders or directors or otherwise, as to any actions or
failures to act by the Indemnitee, and shall continue after he has
ceased to be a Director, officer, employee, or agent of the Company
or other entity for which his service gives rise to a right
<PAGE>
8
hereunder, and shall inure to the benefit of his heirs, executors,
and administrators. In the event of any payment under this
Agreement, the Company shall be subrogated to the extent thereof to
all rights of recovery previously vested in the Indemnitee, who
shall execute all instruments and take all other actions as shall
be reasonably necessary for the Company to enforce such right.
(b) If any provision of this Agreement or the applica-
tion of any provision hereof to any person or circumstances is held
invalid, unenforceable, or otherwise illegal, the remainder of this
Agreement and the application of such provision to other persons or
circumstances shall not be affected, and the provision so held to
be invalid, unenforceable, or otherwise illegal shall be reformed
to the extent (and only to the extent) necessary to make it
enforceable, valid, and legal.
11. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Ohio,
without giving effect to the principles of conflict of laws
thereof.
12. Modification. This Agreement and the rights and
duties of the Indemnitee and the Company hereunder may be modified
only by an instrument in writing signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first above written.
PARKER-HANNIFIN CORPORATION
By____________________________
[Title]
______________________________
[Signature of Indemnitee]
<PAGE>
Exhibit 1
INDEMNIFICATION STATEMENT
STATE OF _______________)
) SS
COUNTY OF ______________)
I, _______________, being first duly sworn, do depose and
say as follows:
1. This Indemnification Statement is submitted pursuant
to the Indemnification Agreement, dated __________, 19__, between
Parker-Hannifin Corporation (the "Company"), an Ohio corporation,
and the undersigned.
2. I am requesting indemnification against costs,
charges, expenses (which may include fees and expenses of attorneys
and/or others), judgments, fines, and amounts paid in settlement
(collectively, "Liabilities"), which have been actually and
reasonably incurred by me in connection with a claim referred to in
Section 3 of the aforesaid Indemnification Agreement.
3. With respect to all matters related to any such
claim, I am entitled to be indemnified as herein contemplated
pursuant to the aforesaid Indemnification Agreement.
4. Without limiting any other rights which I have or
may have, I am requesting indemnification against Liabilities which
have or may arise out of ________________________________________
_________________________________________________________________
________________________________.
______________________________
[Signature of Indemnitee]
Subscribed and sworn to before me, a Notary Public in and
for said County and State, this _____ day of __________, 19__.
______________________________
[Seal]
My commission expires the _____ day of __________, 19__.
<PAGE>
Exhibit 2
UNDERTAKING
STATE OF ________________)
) SS
COUNTY OF _______________)
I, ___________________, being first duly sworn do depose
and say as follows:
1. This Undertaking is submitted pursuant to the
Indemnification Agreement, dated _______________, 19__, between
Parker-Hannifin Corporation (the "Company"), an Ohio corporation
and the undersigned.
2. I am requesting payment of costs, charges, and
expenses which I have reasonably incurred or will reasonably incur
in defending an action, suit or proceeding, referred to in Section
2(a) or 2(b) or any claim referred to in Section 3, or pursuant to
Section 8, of the aforesaid Indemnification Agreement.
3. The costs, charges, and expenses for which payment
is requested are, in general, all expenses related to ___________
_________________________________________________________________
_________________.
4. Part A
I hereby undertake to (a) repay all amounts paid pursuant
hereto if it is proved by clear and convincing evidence in a court
of competent jurisdiction that my action or failure to act which is
the subject of the matter described herein involved an act or
omission undertaken with deliberate intent to cause injury to the
Company or undertaken with reckless disregard for the best
interests of the Company, and (b) reasonably cooperate with the
Company concerning the action, suit, proceeding or claim.
______________________________
[Signature of Indemnitee]
<PAGE>
2
4. Part B
I hereby undertake to repay all amounts paid pursuant
hereto if it ultimately is determined that I am not entitled to be
indemnified by the Company under the aforesaid Indemnification
Agreement or otherwise.
______________________________
[Signature of Indemnitee]
Subscribed and sworn to before me, a Notary Public in and
for said County and State, this _____ day of __________, 19__.
______________________________
[Seal]
My commission expires the _____ day of _______________, 19__.
<PAGE>
Exhibit (10)(g)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1994
by Parker-Hannifin Corporation
Executive Liability and Indemnification
Insurance Policy
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
Executive Protection Policy for:
PARKER HANNIFIN CORPORATION
Form 14-02-0941 (Ed. 1-92) Page 1 of 5
<PAGE>
Executive Protection Policy
DECLARATIONS
EXECUTIVE PROTECTION POLICY
Policy Number 8125-69-4lC
Federal Insurance Company, a stock insurance
company, incorporated under the laws of
Indiana, herein called the Company.
Item 1. Parent Organization:
PARKER HANNIFIN CORPORATION
17325 EUCLID AVENUE
CLEVELAND, OHIO
44112
Item 2. Policy Period: From 12:01 A.M. on JANUARY 31, 1994
To 12:01 A.M. JANUARY 31, 1995
Local time at the address shown in Item 1.
Item 3. Coverage Summary
Description
GENERAL TERMS AND CONDITIONS
EXECUTIVE LIABILITY AND INDEMNIFICATION
FIDUCIARY LIABILITY
CRIME INSURANCE
KIDNAP/RANSOM AND EXTORTION
OUTSIDE DIRECTORSHIP LIABILITY
Item 4. Termination of
Prior Policies: 81256941-B
THE EXECUTIVE LIABILITY AND INDEMNIFICATION, FIDUCIARY LIABILITY,
OUTSIDE DIRECTORSHIP LIABILITY AND EMPLOYMENT PRACTICES LIABILITY
COVERAGE SECTIONS (WHICHEVER ARE APPLICABLE) ARE ALL WRITTEN ON A
CLAIMS MADE BASIS. EXCEPT AS OTHERWISE PROVIDED, THESE COVERAGE SECTIONS
COVER ONLY CLAIMS FIRST MADE AGAINST THE INSURED DURING THE POLICY
PERIOD. PLEASE READ CAREFULLY.
In witness whereof, the Company issuing this policy has caused this
policy to be signed by its authorized officers, but it shall not be
valid unless also signed by a duly authorized representative of the
Company.
FEDERAL INSURANCE COMPANY
________________________ ____________________________
Secretary President
________________________ ____________________________
Date Authorized Representative
Form 14-02-0941 (Ed. 1-92) Page 2 of 5
<PAGE>
General Terms
and Conditions
Territory 1. Coverage shall extend anywhere in the world.
Terms and Conditions 2. Except for the General Terms and Conditions
or unless stated to the contrary in any
coverage section, the terms and conditions
of each coverage section of this policy
apply only to that section and shall not be
construed to apply to any other coverage
section of this policy.
Limits of Liability 3. Unless stated to the contrary in any
and Deductible Amounts coverage section, the limits of liability
and deductible amounts shown for each
coverage section of this policy are separate
limits of liability and separate deductible
amounts pertaining to the coverage section
for which they are shown; the application of
a deductible amount to a loss under one
coverage section of this policy shall not
reduce the deductible amount under any other
coverage section of this policy.
Notice 4. Notice to the Company under this policy
shall be given in writing addressed to:
Notice of Claim:
National Claims Department
Chubb Group of Insurance Companies
15 Mountain View Road
Warren, New Jersey 07059
All Other Notices:
Executive Protection Department
Chubb Group of Insurance Companies
15 Mountain View Road
Warren, New Jersey 07059
Such notice shall be effective on the date
of receipt by the Company at such address.
Investigation 5. The Company may make any investigation it
and Settlement deems necessary and may, with the written
consent of the Insured, make any settlement
of a claim it deems expedient. If the
Insured withholds consent to such settlement,
the Company's liability for all loss on account
of such claim shall not exceed the amount for
which the Company could have settled such claim
plus costs, charges and expenses accrued as of
the date such settlement was proposed in
writing by the Company to the Insured.
Form 14-02-0941 (Ed 1-92) Page 3 of 5
<PAGE>
General Terms
and Conditions
Valuation and 6. All premiums, limits, retentions, loss
Foreign Currency and other amounts under this policy are
expressed and payable in the currency of
the United States of America. Except
as otherwise provided in any coverage
section, if judgment is rendered,
settlement is denominated or another
element of loss under this policy is
stated in a currency other than United
States of America dollars, payment under
this policy shall be made in United
States dollars at the rate of exchange
published in the Wall Street Journal on
the date the final judgment is reached,
the amount of the settlement is agreed
upon or the other element of loss is
due, respectively.
Subrogation 7. In the event of any payment under this
policy, the Company shall be subrogated
to the extent of such payment to all the
Insured's rights of recovery, and the
Insured shall execute all papers required
and shall do everything necessary to
secure and preserve such rights, including
the execution of such documents necessary
to enable the Company effectively to bring
suit in the name of the Insured.
Action Against 8. No action shall lie against the Company
the Company unless, as a condition precedent thereto,
there shall have been full compliance with
all the terms of this policy. No person
or organization shall have any right
under this policy to join the Company as
a party to any action against the Insured
to determine the Insured's liability nor
shall the Company be impleaded by the
Insured or his legal representatives.
Bankruptcy or insolvency of an Insured
or of the estate of an Insured shall not
relieve the Company of its obligations
nor deprive the Company of its rights
under this policy.
Authorization Clause 9. By acceptance of this policy, the Parent
Organization agrees to act on behalf
of all Insureds with respect to the
giving and receiving of notice of claim
or termination, the payment of premiums
and the receiving of any return premiums
that may become due under this policy,
the negotiation, agreement to and
acceptance of endorsements, and the
giving or receiving of any notice
provided for in this policy (except the
giving of notice to apply for the
Extended Reporting Period), and the
Insureds agree that the Parent
Organization shall act on their behalf.
Alteration 10. No change in, modification of, or
and Assignment assignment of interest under this policy
shall be effective except when made by a
written endorsement to this policy which
is signed by an authorized employee of
Chubb & Son Inc.
Termination of 11. This policy or any coverage section shall
Policy or terminate at the earliest of the following
Coverage Section times:
(A) sixty days after the receipt by the Parent
Organization of a written notice
of termination from the Company,
(B) upon the receipt by the Company of
written notice of termination from the
Parent Organization,
Form 14-02-0941 (Ed. 1-92) Page 4 of 5
<PAGE>
General Terms
and Conditions
Termination of (C) upon expiration of the Policy Period as
Policy or set forth in Item 2 of the
Coverage Section Declarations of this policy, or
(continued)
(D) at such other time as may be agreed upon
by the Company and the Parent
Organization.
The Company shall refund the unearned premium
computed at customary short rates if the
policy or any coverage section is terminated
by the Parent Organization. Under any other
circumstances the refund shall be computed
pro rata.
Termination of 12. Any bonds or policies issued by the Company
Prior Bonds or its affiliates and specified in
or Policies Item 4 of the Declarations of this policy
shall terminate, if not already terminated,
as of the inception date of this policy.
Such prior bonds or policies shall not
cover any loss under the Crime or
Kidnap/Ransom & Extortion coverage sections
not discovered and notified to the Company
prior to the inception date of this policy.
Definitions 13. When used in this policy:
Parent Organization means the organization
designated in Item 1 of the Declarations of
this policy.
Policy Period means the period of time
specified in Item 2 of the Declarations
of this policy, subject to prior termination
in accordance with Subsection 11 above. If
this period is less than or greater than
one year, then the Limits of Liability
specified in the Declarations for each
coverage section shall be the Company's
maximum limit of liability under such
coverage section for the entire period.
Form 14-02-0941 (Ed. 1-92) Page 5 of 5
<PAGE>
Effective date of
this endorsement: JANUARY 31, 1994
To be attached to and form part of Company: FEDERAL INSURANCE COMPANY
Policy No. 8125-69-4lC
Issued to: PARKER HANNIFIN CORPORATION
The following is a schedule of endorsements issued with the policy at
inception:
GENERAL TERMS AND CONDITIONS
ENDORSEMENT NUMBER FORM NUMBER
1 14-02-0961
EXECUTIVE LIABILITY AND INDEMNIFICATION
ENDORSEMENT NUMBER FORM NUMBER
1 14-02-0961
2 14-02-0961
3 14-02-0961
4 14-02-1049
5 14-02-1106
6 14-02-1166
FIDUCIARY LIABILITY
ENDORSEMENT NUMBER FORM NUMBER
1 14-02-0961
2 14-02-0961
CRIME INSURANCE
ENDORSEMENT NUMBER FORM NUMBER
1 14-02-0976
2 14-02-0998
KIDNAP/RANSOM AND EXTORTION
ENDORSEMENT NUMBER FORM NUMBER
1 14-02-0961
2 14-02-0961
3 14-02-1024
Page 1 Continued
Form 14-02-1252 (Ed. 12/92)
<PAGE>
OUTSIDE DIRECTORSHIP LIABILITY
ENDORSEMENT NUMBER FORM NUMBER
1 14-02-0961
2 14-02-0961
3 14-02-0961
Page 2 Last page
Form 14-02-1252 (Ed. 12/92)
<PAGE>
ENDORSEMENT
Coverage Section: GENERAL TERMS Company: FEDERAL INSURANCE COMPANY
Effective date of Endorsement No: 1
this endorsement: JANUARY 31, 1994
To be attached to and form part of
Policy No. 8125-69-41C
Issued to: PARKER HANNIFIN CORPORATION
It is agreed that subsection 5, Investigation and
Settlement, is deleted in its entirety and
replaced with the following:
5. The Company may make any investigation it
deems necessary and may, with the written
consent of the Insured, make any
settlement of a claim it deems expedient.
With respect to any coverage section other
than the Executive Liability and
Indemnification and Outside Directorship
Liability coverage sections, if the Insured
withholds consent to such settlement, the
Company's liability for all loss on account
of such claim shall not exceed the amount
for which the Company could have settled
such claim plus costs, charges and
expenses accrued as of the date such
settlement was proposed in writing by the
Company to the Insured.
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
___________________________
Authorized Representative
___________________________
Date
Page 1 Last page
Form 14-02-0961 (Rev. 1-92)
<PAGE>
DECLARATIONS
EXECUTIVE LIABILITY AND
INDEMNIFICATION COVERAGE SECTION
Item 1. Parent Organization:
PARKER HANNIFIN CORPORATION
Item 2. Limits of Liability:
(A) Each Loss $ 25,000,000.00
(B) Each Policy Period $ 25,000,000.00
Note that the limits of liability and any deductible or
retention are reduced or exhausted by Defense Costs.
Item 3. Coinsurance Percent: NONE
Item 4. Deductible Amount:
Insuring Clause 2 $ 750,000.00
Item 5. Insured Organization:
PARKER HANNIFIN CORPORATION
and its Subsidiaries and its
Operating Groups;
PARKER HANNIFIN FOUNDATION
Item 6. Insured Persons:
Any person who has been, now is, or shall become
a duly elected director or a duly elected or
appointed officer of the Insured Organization.
Item 7. Extended Reporting Period:
(A) Additional Premium: 80% of the Annual Premium
(B) Additional Period: One Year
Item 8. Pending or Prior Date: May 22, 1970
Item 9. Continuity Date: May 22, 1970
Form 14-02 0943 (Ed. 1/92) Page 1 of 10
<PAGE>
Executive Liability In consideration of payment of the premium and
and Indemnification subject to the Declarations, General
Coverage Section Terms and Conditions, and the limitations,
conditions, provisions and other terms of
this coverage section, the Company agrees as follows:
Insuring Clauses
Executive 1. The Company shall pay on behalf of each of the
Liability Coverage Insured Persons all Loss for which the Insured
Insuring Clause 1 Person is not indemnified by the Insured
Organization and which the Insured Person
becomes legally obligated to pay on account of
any claim first made against him, individually
or otherwise, during the Policy Period or, if
exercised, during the Extended Reporting
Period, for a Wrongful Act committed, attempted,
or allegedly committed or attempted by such
Insured Person before or during the Policy
Period.
Executive 2. The Company shall pay on behalf of the Insured
Indemnification Organization all Loss for which the Insured
Coverage Organization grants indemnification to each
Insuring Clause 2 Insured Person, as permitted or required by
law, which the Insured Person has become legally
obligated to pay on account of any Claim first
made against him, individually or otherwise,
during the Policy Period or, if exercised,
during the Extended Reporting Period, for a
Wrongful Act committed, attempted, or allegedly
committed or attempted by such Insured Person
before or during the Policy Period.
Estates and Legal 3. Subject otherwise to the General Terms and
Representatives Conditions and the limitations, conditions,
provisions and other terms of this coverage
section, coverage shall extend to Claims for the
Wrongful Acts of Insured Persons made against the
estates, heirs, legal representatives or assigns
of Insured Persons who are deceased or against
the legal representatives or assigns of Insured
Persons who are incompetent, insolvent or
bankrupt.
Extended 4. If the Company terminates or refuses to renew
Reporting Period this coverage section other than for nonpayment
of premium, the Parent Organization and the
Insured Persons shall have the right, upon
payment of the additional premium set forth
in Item 7(A) of the Declarations for this
coverage section, to an extension of the
coverage granted by this coverage section for
the period set forth in Item 7(B) of the
Declarations for this coverage section (Extended
Reporting Period) following the effective date
of termination or nonrenewal, but only for any
Wrongful Act committed, attempted, or allegedly
committed or attempted, prior to the effective
date of termination or nonrenewal. This right of
extension shall lapse unless written notice of
such election, together with payment of the
additional premium due, is received by the
Company within 30 days following the effective
date of termination or nonrenewal. Any Claim
made during the Extended Reporting Period shall
be deemed to have been made during the
immediately preceding Policy Period.
If the Parent Organization terminates or
declines to accept renewal, the Company may, if
requested, at its sole option, grant an Extended
Reporting Period. The offer of renewal terms and
conditions or premiums different from those in
effect prior to renewal shall not constitute
refusal to renew.
Form 14-02-0943 (Ed. 1/92) Page 2 of 10
<PAGE>
Exclusions
Exclusions Applicable 5. The Company shall not be liable for Loss on
to Insuring account of any Claim made against any Insured
Clauses 1 and 2 Person:
(a) based upon, arising from, or in consequence
of any circumstance if written notice of such
circumstance has been given under any policy
or coverage section of which this coverage
section is a renewal or replacement and is
such prior policy or coverage section affords
coverage (or would afford such coverage
except for the exhaustion of its limits of
liability) for such Loss, in whole or in
part, as a result of such notice;
(b) based upon, arising from, or in consequence
of any demand, suit or other proceeding
pending, or order, decree or judgement
entered against any Insured on or prior to
the Pending or Prior Date set forth in
Item 8 of the Declarations for this coverage
section, or the same or any substantially
similar fact, circumstance or situation
underlying or alleged therein;
(c) brought or maintained by or on behalf of any
Insured except:
(i) a Claim that is a derivative action
brought or maintained on behalf of
an Insured Organization by one or more
persons who are not Insured Persons and
who bring and maintain the Claim without
the solicitation, assistance or
participation of any Insured,
(ii) a Claim brought or maintained by an
Insured Person for the actual or alleged
wrongful termination of the Insured
Person, or
(iii) a Claim brought or maintained by an
Insured Person for contribution or
indemnity, if the Claim directly results
from another Claim covered under this
coverage section;
(d) for an actual or alleged violation of the
responsibilities, obligations or duties
imposed by the Employee Retirement Income
Security Act of 1974 and amendments thereto
or similar provisions of any federal, state
or local statutory law or common law upon
fiduciaries of any pension, profit sharing,
health and welfare or other employee benefit
plan or trust established or maintained for
the purpose of providing benefits to
employees of an Insured Organization;
(e) for bodily injury, mental or emotional
distress, sickness, disease or death
of any person or damage to or destruction of
any tangible property including loss of use
thereof; or
(f) based upon, arising from, or in consequence
of (i) the actual, alleged or threatened
discharge, release, escape or disposal of
Pollutants into or on real or personal
property, water or the atmosphere; or (ii)
any direction or request that the Insured
test for, monitor, clean up, remove, contain,
treat, detoxify or neutralize Pollutants, or
any voluntary decision to do so; including
but not limited to any Claim for financial
loss to the Insured Organization, its
security holders or its creditors based upon,
arising from, or in consequence of the matter
described in (i) or (ii) of this exclusion.
Form 14-02-0943 (Ed. 1/92) Page 3 of 10
<PAGE>
Exclusions
(continued)
Exclusions Applicable 6. The Company shall not be liable under Insuring
to Insuring Clause 1 for Loss on account of any Claim made
Clause 1 Only against any Insured Person:
(a) for an accounting of profits made from the
purchase or sale by such Insured Person of
securities of the Insured Organization
within the meaning of Section 16 (b) of the
Securities Exchange Act of 1934 and
amendments thereto or similar provisions of
any federal, state or local statutory law or
common law;
(b) based upon, arising from, or in consequence
of any deliberately fraudulent act or
omission or any willful violation of any
statute or regulation by such Insured Person,
if a judgement or other final adjudication
adverse to the Insured Person establishes
such a deliberately fraudulent act or
omission or willful violation; or
(c) based upon, arising from, or in consequence
of such Insured Person having gained in fact
any personal profit, remuneration or
advantage to which such Insured Person was
not legally entitled.
Severability 7. With respect to the Exclusions in Subsections 5
of Exclusions and 6 of this coverage section, no fact
pertaining to or knowledge possessed by any
Insured Person shall be imputed to any other
Insured Person to determine if coverage is
available.
Limit of Liability, 8. For the purposes of this coverage section, all
Deductible and Loss arising out of the same Wrongful Act and
Coinsurance all Interrelated Wrongful Acts of any Insured
Person shall be deemed one Loss, and such Loss
shall be deemed to have originated in the
earliest Policy Period in which a Claim is first
made against any Insured Person alleging any such
Wrongful Act or Interrelated Wrongful Acts.
The Company's maximum liability for each Loss,
whether covered under Insuring Clause 1 or
Insuring Clause 2 or both, shall be the Limit of
Liability for each Loss set forth in Item 2(A) of
the Declarations for this coverage section.
The Company's maximum aggregate liability for all
Loss on account of all Claims first made during
the same Policy Period, whether covered under
Insuring Clause 1 or Insuring Clause 2 or both,
shall be the Limit of Liability for each Policy
Period set forth in Item 2(B) of the Declarations
for this coverage section.
The Company's liability under Insuring Clause 2
shall apply only to that part of each Loss which
is excess of the Deductible Amount set forth in
Item 4 of the Declarations for this coverage
section and such Deductible Amount shall be borne
by the Insureds uninsured and at their own risk.
If a single Loss is covered in part under
Insuring Clause 1 and in part under Insuring
Clause 2, the Deductible Amount applicable to the
Loss shall be the Insuring Clause 2 deductible
set forth in Item 4 of the Declarations for this
coverage section.
Form 14-02-0943 (Ed. 1/92) Page 4 of 10
<PAGE>
Limit of Liability, With respect to all Loss (excess of the
Deductible and applicable Deductible Amount) originating
Coinsurance in any one Policy Period, the Insureds shall bear
(continued) uninsured and at their own risk that percent of
all such Loss specified as the Coinsurance
Percent in Item 3 of the Declarations for this
coverage section, and the Company's liability
hereunder shall apply only to the remaining
percent of all such Loss.
Any Loss covered in whole or in part by this
coverage section and the Employment Practices
Liability coverage section of this policy (if
purchased) shall be subject to the limits of
liability, deductible and coinsurance percent
applicable to such other coverage section;
provided, however, if any limit of liability
applicable to such other coverage section is
exhausted with respect to such Loss, any
remaining portion of such Loss otherwise covered
by this coverage section shall be subject to the
Limits of Liability and Coinsurance Percent
applicable to this coverage section, as reduced
by the amount of such Loss otherwise covered by
this coverage section which is paid by the
Company pursuant to such other coverage section.
For purposes of this Subsection 8 only, the
Extended Reporting Period, if exercised, shall be
part of and not in addition to the immediately
preceding Policy Period.
Presumptive 9. If the Insured Organization:
Indemnification (a) fails or refuses, other than for reason of
Financial Impairment, to indemnify the
Insured Person for Loss; and
(b) is permitted or required to indemnify the
Insured Person for such Loss pursuant to:
(i) the by-laws or certificate of
incorporation of the Insured Organization
in effect at the inception of this
coverage section, or
(ii) any subsequently amended or superseding
by-laws or certificate of incorporation
of the Insured Organization provided,
however, that such amended or superseding
by-laws or certificate of incorporation
expand or broaden, and do not restrict or
in any way limit, the Insured
Organization's ability to indemnify the
Insured Person;
then, notwithstanding any other conditions,
provisions or terms of this coverage section to
the contrary, any payment by the Company of such
Loss shall be subject to (i) the Insuring Clause
2 Deductible Amount set forth in Item 4 of the
Declarations for this coverage section, and (ii)
all of the Exclusions set forth in Subsections 5
and 6 of this coverage section.
For purposes of this Subsection 9, the
shareholder and board of director resolutions of
the Insured Organization shall be deemed to
provide indemnification for such Loss to the
fullest extent permitted by such by-laws or
certificate of incorporation.
Form 14-02-0943 (Ed. 1/92) Page 5 of 10
<PAGE>
Reporting 10. The Insureds shall, as a condition precedent to
and Notice exercising their rights under this coverage
section, give to the Company written notice as
soon as practicable of any Claim made against any
of them for a Wrongful Act.
If during the Policy Period or Extended Reporting
Period (if exercised) an Insured becomes aware of
circumstances which could give rise to a Claim
and gives written notice of such circumstance(s)
to the Company, then any Claims subsequently
arising from such circumstances shall be
considered to have been made during the Policy
Period or the Extended Reporting Period in which
the circumstances were first reported to the
Company.
The Insureds shall, as a condition precedent to
exercising their rights under this coverage
section, give to the Company such information and
cooperation as it may reasonably require,
including but not limited to a description of the
Claim or circumstances, the nature of the alleged
Wrongful Act, the nature of the alleged or
potential damage, the names of actual or
potential claimants, and the manner in which the
Insured first became aware of the Claim or
circumstances.
Defense and 11. Subject to this Subsection, it shall be the duty
Settlement of the Insured Persons and not the duty of the
Company to defend Claims made against the Insured
Persons.
The Insureds agree not to settle any Claim, incur
any Defense Costs or otherwise assume any
contractual obligation or admit any liability
with respect to any Claim without the Company's
written consent, which shall not be unreasonably
withheld. The Company shall not be liable for any
settlement, Defense Costs, assumed obligation or
admission to which it has not consented.
The Company shall have the right and shall be
given the opportunity to effectively associate
with the Insureds in the investigation, defense
and settlement, including but not limited to the
negotiation of a settlement, of any Claim that
appears reasonably likely to be covered in whole
or in part by this coverage section.
The Insureds agree to provide the Company with
all information, assistance and cooperation which
the Company reasonably requests and agree that in
the event of a Claim the Insureds will do nothing
that may prejudice the Company's position or its
potential or actual rights of recovery.
Defense Costs are part of and not in addition to
the Limits of Liability set forth in Item 2 of
the Declarations for this coverage section, and
the payment by the Company of Defense Costs
reduces such Limits of Liability.
Allocation 12. If both Loss covered by this coverage section and
loss not covered by this coverage section are
incurred, either because a claim against the
Insured Persons includes both covered and
uncovered matters or because a Claim is made
against both an Insured Person and others,
including the Insured Organization, the Insureds
and the Company shall use their best efforts to
agree upon a fair and proper allocation of such
amount between covered Loss and uncovered loss.
Form 14-02-0943 (Ed. 1/92) Page 6 of 10
<PAGE>
Allocation If the Insureds and the Company agree on an
(continued) allocation of Defense Costs, the Company shall
advance on a current basis Defense Costs
allocated to the covered Loss. If the Insureds
and the Company cannot agree on an allocation:
(a) no presumption as to allocation shall exist
in any arbitration, suit or other proceeding;
(b) the Company shall advance on a current basis
Defense Costs which the Company believes to
be covered under this coverage section until
a different allocation is negotiated,
arbitrated or judicially determined; and
(c) the Company, if requested by the Insureds,
shall submit the dispute to binding
arbitration. The rules of the American
Arbitration Association shall apply except
with respect to the selection of the
arbitration panel, which shall consist of one
arbitrator selected by the Insureds, one
arbitrator selected by the Company, and a
third independent arbitrator selected by
the first two arbitrators.
Any negotiated, arbitrated or judicially
determined allocation of Defense Costs
on account of a Claim shall be applied
retroactively to all Defense Costs on
account of such Claim, notwithstanding any prior
advancement to the contrary. Any allocation or
advancement of Defense Costs on account of a
Claim shall not apply to or create any
presumption with respect to the allocation of
other Loss on account of such Claim.
Other 13. If any Loss arising from any Claim made against
Insurance any Insured Persons is insured under any other
valid policy(ies), prior or current, then this
coverage section shall cover such Loss, subject
to its limitations, conditions, provisions and
other terms, only to the extent that the amount
of such Loss is in excess of the amount of
payment from such other insurance whether such
other insurance is stated to be primary,
contributory, excess, contingent or otherwise,
unless such other insurance is written only as
specific excess insurance over the Limits of
Liability provided in this coverage section.
Changes in
Exposure
Acquisition or 14. If the Insured Organization (i) acquires
Creation of securities or voting rights in another
Another Organization organization or creates another organization,
which as a result of such acquisition or creation
becomes a Subsidiary, or (ii) acquires any
organization by merger into or consolidation with
an Insured Organization, such organization and
its Insured Persons shall be Insureds under this
coverage section but only with respect to
Wrongful Acts committed, attempted, or allegedly
committed or attempted, after such acquisition or
creation unless the Company agrees, after
presentation of a complete application and all
appropriate information, to provide coverage by
endorsement for Wrongful Acts committed,
attempted, or allegedly committed or attempted,
by such Insured Persons prior to such acquisition
or creation.
Form 14-02-0943 (Ed. 1/92) Page 7 of 10
<PAGE>
Changes in
Exposure
Acquisition or If the fair value of all cash, securities,
Creation of assumed indebtedness and other consideration paid
Another Organization by the Insured Organization for any such
(continued) acquisition or creation exceeds 10% of the total
assets of the Parent Organization as reflected in
the Parent Organization's most recent audited
consolidated financial statements, the Parent
Organization shall give written notice of such
acquisition or creation to the Company as soon as
practicable together with such information as the
Company may require and shall pay any reasonable
additional premium required by the Company.
Acquisition of Parent 15. If (i) the Parent Organization merges into or
Organization by consolidates with another organization, or (ii)
Another Organization another organization or person or group of
organizations and/or persons acting in concert
acquires securities or voting rights which result
in ownership or voting control by the other
organization(s) or person(s) of more than 50% of
the outstanding securities representing the
present right to vote for the election of
directors of the Parent Organization, coverage
under this coverage section shall continue until
termination of this coverage section, but only
with respect to Claims for Wrongful Acts
committed, attempted, or allegedly committed or
attempted, by Insured Persons prior to such
merger, consolidation or acquisition. The Parent
Organization shall give written notice of such
merger, consolidation or acquisition to the
Company as soon as practicable together with such
information as the Company may require.
Cessation of 16. In the event an organization ceases to be a
Subsidiaries Subsidiary before or after the Inception Date of
this coverage section, coverage with respect to
such Subsidiary and its Insured Persons shall
continue until termination of this coverage
section but only with respect to Claims for
Wrongful Acts committed, attempted or allegedly
committed or attempted prior to the date such
organization ceased to be a Subsidiary.
Representations 17. In granting coverage to any one of the Insureds,
and Severability the Company has relied upon the declarations and
statements in the written application for this
coverage section and upon any declarations and
statements in the original written application
submitted to another insurer in respect of the
prior coverage incepting as of the Continuity
Date set forth in Item 9 of the Declarations for
this coverage section. All such declarations and
statements are the basis of such coverage and
shall be considered as incorporated in and
constituting part of this coverage section.
Such written application(s) for coverage shall be
construed as a separate application for coverage
by each of the Insured Persons. With respect to
the declarations and statements contained in such
written application(s) for coverage, no statement
in the application or knowledge possessed by any
Insured Person shall be imputed to any other
Insured Person for the purpose of determining if
coverage is available.
Form 14-02-0943 (Ed. 1/92) Page 8 of 10
<PAGE>
Definitions 18. When used in this coverage section:
Claim means:
(i) a written demand for monetary damages,
(ii) a civil proceeding commenced by the service
of a complaint or similar pleading,
(iii) a criminal proceeding commenced by a return
of an indictment, or
(iv) a formal administrative or regulatory
proceeding commenced by the filing of a
notice of charges, formal investigative order
of similar document,
against any Insured Person for a Wrongful Act,
including any appeal therefrom.
Defense Costs means that part of Loss consisting
of reasonable costs, charges, fees (including but
not limited to attorneys' fees and experts' fees)
and expenses (other than regular or overtime
wages, salaries or fees of the directors,
officers or employees of the Insured
Organization) incurred in defending or
investigating claims and the premium for appeal,
attachment or similar bonds.
Financial Impairment means the status of the
Insured Organization resulting from (i) the
appointment by any state or federal official,
agency or court of any receiver, conservator,
liquidator, trustee, rehabilitator or similar
official to take control of, supervise, manage or
liquidate the Insured Organization, or (ii) the
Insured Organization becoming a debtor in
possession.
Insured, either in the singular or plural, means
the Insured Organization and any Insured Person.
Insured Capacity means the position or capacity
designated in Item 6 of the Declarations for this
coverage section held by any Insured Person but
shall not include any position or capacity in any
organization other than the Insured Organization,
even if the Insured Organization directed or
requested the Insured Person to serve in such
other position or capacity.
Insured Organization means, collectively, those
organizations designated in Item 5 of the
Declarations for this coverage section.
Insured Person, either in the singular or plural,
means any one or more of those persons designated
in Item 6 of the Declarations for this coverage
section.
Interrelated Wrongful Acts means all causally
connected Wrongful Acts.
Loss means the total amount which any Insured
Person becomes legally obligated to pay on
account of each Claim and for all Claims in each
Policy Period and the Extended Reporting Period,
if exercised, made against them for Wrongful Acts
for which coverage applies, including, but not
limited to, damages, judgements, settlements,
costs and Defense Costs. Loss does not include
(i) any amount not indemnified by the Insured
Organization for which the Insured Person is
absolved from payment by reason of any covenant,
agreement or court order, (ii) any amount
incurred by the Insured Organization (including
its board of directors or any committee of the
board of directors) in connection with the
investigation or evaluation of any Claim or
potential Claim by or on behalf of the Insured
Organization, (iii) fines or penalties imposed by
law or the multiple portion of any multiplied
damage award, or (iv) matters uninsurable under
the law pursuant to which this coverage section
is construed.
Form 14-024-0943 (Ed. 1/92) Page 9 of 10
<PAGE>
Definitions Pollutants means any substance located anywhere
(continued) in the world exhibiting any hazardous
characteristics as defined by, or identified on a
list of hazardous substances issued by, the
United States Environmental Protection Agency or
a state, county, municipality or locality
counterpart thereof. Such substances shall
include. without limitation, solids, liquids,
gaseous or thermal irritants, contaminants or
smoke, vapor, soot, fumes, acids, alkalis,
chemicals or waste materials. Pollutants shall
also mean any other air emission, odor, waste
water, oil or oil products, infectious or medical
waste. asbestos or asbestos products and any
noise.
Subsidiary, either in the singular or plural,
means any organization in which more than 50% of
the outstanding securities or voting rights
representing the present right to vote for
election of directors is owned or controlled,
directly or indirectly, in any combination, by
one or more Insured Organizations.
Wrongful Act means any error, misstatement,
misleading statement, act, omission, neglect, or
breach of duty committed, attempted, or allegedly
committed or attempted, by an Insured Person,
individually or otherwise, in his Insured
Capacity, or any matter claimed against him
solely by reason of his serving in such Insured
Capacity.
Form 14-02-0943 (Ed. 1/92) Page 10 of 10
<PAGE>
ENDORSEMENT
Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY
Effective date of Endorsement No: 1
this endorsement: JANUARY 31, 1994
To be attached to and form part of
Policy No. 8125-69-41C
Issued to: PARKER HANNIFIN CORPORATION
It is understood and agreed that:
1. The premium for the insurance coverage under
Insuring Clause 1 of this policy for Insured
Persons of any Insured Organization
incorporated under the laws of Australia
shall be $1,000.00 (Australian Dollars);
2. Some or all of the Insured Persons of such
Insured Organization(s) have paid personally
such premium in its entirety.
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
___________________________
Authorized Representative
___________________________
Date
Page 1 Last page
Form 14-02-0961 (Rev. 1-92)
<PAGE>
ENDORSEMENT
Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY
Effective date of Endorsement No: 2
this endorsement: JANUARY 31, 1994
to be attached to and form part of
Policy No. 8125-69-41C
Issued to: PARKER HANNIFIN CORPORATION
It is hereby agreed and understood that Item 5 of the
Declarations, Insured Organization, is amended to
include:
Assoc. Hydraulics & Pneumatics Pty. Ltd.,
Parker Enzed Equipment (Australia)
Pty. Limited, Parker Enzed Technology
Pty. Limited, Parker Enzed (Australia)
Pty. Limited, Parker Hannifin (Australia)
Pty. Ltd., Schrader Bellows (Australia)
Pty. Ltd., Schrader Pongrass (W.A.) Pty. Ltd.
and Schrader Scovill Holdings Pty. Ltd.
It is further agreed that as respects the additional
Insured Organizations listed above only, Item 6 of
the Declarations, Insured Persons, is amended to
read as follows:
All Directors and Officers (as defined in the
Corporations Act of 1989)
It is further agreed that there shall be no coverage
under this policy for Trustees or Administrators of
any Superannuation Funds, Pension Plans, Employee
Benefit Plans, Employee Welfare Plans or any
similar Funds, Trust or Plan.
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
___________________________
Authorized Representative
___________________________
Date
Page 1 Last page
Form 14-02-0961 (Rev. 1-92)
<PAGE>
ENDORSEMENT
Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY
Effective date of Endorsement No: 3
this endorsement: JANUARY 31, 1994
To be attached to and form part of
Policy No. 8125-69-4lC
Issued to: PARKER HANNIFIN CORPORATION
It is agreed that subsection 5, "Exclusions: Exclusions
Applicable to Insuring Clauses 1 and 2", is amended
by adding the following:
(g) based upon, arising from, or in consequence of
Wrongful Acts or Interrelated Wrongful Acts
where all or any part of such acts were
committed, attempted or allegedly committed
or attempted prior to February 19, 1988, but
only as respects: Gull, Inc. and its Subsidiaries
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
___________________________
Authorized Representative
___________________________
Date
Page 1 Last page
Form 14-02-0961 (Rev. 1-92)
<PAGE>
ENDORSEMENT
Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY
Effective date of Endorsement No: 4
this endorsement: JANUARY 31, 1994
To be attached to and form part of
Policy No. 8125-69-41C
Issued to: PARKER HANNIFIN CORPORATION
It is agreed that subsection 5, "Exclusions: Exclusions Applicable to
Insuring Clauses 1 and 2", is amended by deleting paragraph (e) in its
entirety and replacing it with the following:
(e) based upon, arising from, or in consequence of bodily injury, mental
or emotional distress, sickness, disease, death, disability, shock,
mental injury, false arrest, false imprisonment, wrongful eviction,
wrongful entry, wrongful detention, malicious prosecution, libel,
slander, defamation, humiliation, invasion of privacy, or damage to
or destruction of any tangible property including loss of use
thereof. However, this exclusion shall not apply to Loss on account
of any Claim brought by any shareholder in his capacity as such,
whether in his own right or on behalf of the Insured Organization,
provided that such Claim is brought and maintained without the
solicitation, assistance or participation of any Insured; or
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
___________________________
Authorized Representative
___________________________
Date
Form 14-02-1049 (Ed. 4/92)
<PAGE>
ENDORSEMENT
Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY
Effective date of Endorsement No: 5
this endorsement: JANUARY 31, 1994
To be attached to and form part of
Policy No. 8125-69-41C
Issued to: PARKER HANNIFIN CORPORATION
It is agreed that subsection 5, "Exclusions: Exclusions Applicable to
Insuring Clauses 1 and 2", is amended by deleting paragraph (f) in its
entirety and replacing it with the following:
(f) based upon, arising from, or in consequence of:
(1) the actual, alleged or threatened discharge, release, escape or
disposal of Pollutants into or on real or personal property,
water or the atmosphere; or
(2) any direction or request that the Insured test for, monitor,
clean up, remove, contain, treat, detoxify or neutralize
Pollutants, or any voluntary decision to do so;
including but not limited to any Claim for financial loss to the Insured
Organization, its security holders or its creditors based upon, arising from
or in consequence of the matters described in (1) and (2) above. However,
this exclusion shall not apply to Loss (i) which is on account of any Claim
brought by any shareholder of the Insured Organization in his capacity as
such, whether in his own right or on behalf of the Insured Organization,
provided that such Claim is brought and maintained without the assistance,
participation or solicitation of any Insured, and (ii) for which the Insured
Organization either is not permitted or required, or fails or refuses by
reason of Financial Impairment, to indemnify the Insured Person(s). For
purposes of this endorsement, the certificate of incorporation, by-laws and
shareholder and board of director resolutions of the Insured Organization
shall be deemed to provide indemnification to the Insured Person(s) to the
fullest extent permitted by law.
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
___________________________
Authorized Representative
___________________________
Date
Form 14-02-1106 (Ed. 4/92)
<PAGE>
ENDORSEMENT
Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY
Effective date of Endorsement No: 6
this endorsement: JANUARY 31, 1994
To be attached to and form part of
Policy No. 8125-69-41C
Issued to: PARKER HANNIFIN CORPORATION
It is agreed that if a Claim against an Insured Person includes a claim
against the Insured Person's lawful spouse solely by reason of (i) such
spouse's status as a spouse of the Insured Person, or (ii) such spouse's
ownership interest in property which the claimant seeks as recovery for
alleged Wrongful Acts of the Insured Person, all loss which such spouse
becomes legally obligated to pay on account of such Claim shall be treated for
purposes of this coverage section as Loss which the Insured Person becomes
legally obligated to pay on account of the Claim made against the Insured
Person. All limitations, conditions, provisions and other terms of coverage
(including the deductible) applicable to the Insured Person's Loss shall also
be applicable to such spousal loss.
The coverage extension afforded by this Endorsement does not apply to any
Claim alleging any wrongful act or omission by the Insured Person's spouse.
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
___________________________
Authorized Representative
___________________________
Date
Form 14-02-1166 (Ed. 6/92)
<PAGE>
DECLARATIONS
OUTSIDE DIRECTORSHIP LIABILITY
COVERAGE SECTION
Item 1. Parent Organization:
PARKER HANNIFIN CORPORATION
Item 2. Limits of Liability:
(A) Each Loss $ 25,000,000.00
(B) Each Policy Period $ 25,000,000.00
Note that the limits of liability and any deductible or retention
are reduced or exhausted by Defense Costs.
Item 3. Coinsurance Percent: NONE
Item 4. Deductible Amount:
Insuring Clause 2 $ 750,000.00
Item 5. Insured Organization:
PARKER HANNIFIN CORPORATION
and its Subsidiaries and its
Operating Groups;
PARKER HANNIFIN FOUNDATION
Item 6. Insured Persons:
With regard to a Non-Profit Outside Entity, any person who
has been, now is or shall become a duly elected director, a
duly elected or appointed officer, or an employee of the
Insured Organization. With regard to any Scheduled Outside
Entity, any individual listed on a Scheduled Outside Entity
Endorsement.
Item 7. Extended Reporting Period:
(A) Additional Premium: 80% of the Annual Premium
(B) Additional Period: One Year
Item 8. Pending or Prior Date: January 31, 1992
Item 9. Continuity Date: January 31, 1992
Form 14-02-0951 (Ed. 1-92) Page 1 of 10
<PAGE>
Outside Directorship In consideration of payment of the premium and
Liability Coverage subject to the Declarations, General
Section Terms and Conditions, and the limitations,
conditions, provisions and other terms of
this coverage section, the Company agrees as
follows:
Insuring Clauses
Outside Directorship 1. The Company shall pay on behalf of each of the
Liability Coverage Insured Persons who serve in an Outside
Insuring Clause 1 Directorship all Loss for which the Insured
Person is not indemnified by the Insured
Organization or the Outside Entity and which
the Insured Person becomes legally obligated
to pay on account of any Claim first made
against him, individually or otherwise, during
the Policy Period or, if exercised, during the
Extended Reporting Period, for a Wrongful Act
committed, attempted, or allegedly committed
or attempted by such Insured Person before
or during the Policy Period.
Outside Directorship 2. The Company shall pay on behalf of the Insured
Indemnification Coverage Organization all Loss (i) for which the
Insuring Clause 2 Insured Organization grants indemnification,
as permitted or required by law, to each
Insured Person who serves in an Outside
Directorship (ii) for which the Insured Person
is not indemnified by the Outside Entity, and
(iii) which the Insured Person has become
legally obligated to pay on account of any
Claim first made against him, individually or
otherwise, during the Policy Period or, if
exercised, during the Extended Reporting
Period for a Wrongful Act committed,
attempted, or allegedly committed or attempted
by such Insured Person before or during the
Policy Period.
Estates and Legal 3. Subject otherwise to the General Terms and
Representatives Conditions and the limitations, conditions,
provisions and other terms of this coverage
section, coverage shall extend to Claims for
the Wrongful Acts of Insured Persons made
against the estates, heirs, legal
representatives or assigns of Injured Persons
who are deceased or against the legal
representatives or assigns of Insured Persons
who are incompetent, insolvent or bankrupt.
Extended 4. If the Company terminates or refuses to renew
Reporting Period this coverage section other than for
nonpayment of premium, the Parent Organization
and the Insured Persons shall have the right,
upon payment of the additional premium set
forth in item 7(A) of the Declarations for
this coverage section, to an extension of the
coverage granted by this coverage section for
the period set forth in Item 7(B) of the
Declarations for this coverage section
(Extended Reporting Period) following the
effective date of termination or nonrenewal,
but only for any Wrongful Act committed,
attempted, or allegedly committed or
attempted, prior to the effective date of
termination or nonrenewal. This right of
extension shall lapse unless written notice of
such election, together with payment of the
additional premium due, is received by the
Company within 30 days following the
effective date of termination or nonrenewal.
Any Claim made during the Extended Reporting
Period shall be deemed to have been made
during the immediately preceding Policy
Period.
If the Parent Organization terminates or
declines to accept renewal, the Company may,
if requested, at its sole option, grant an
Extended Reporting Period. The offer of
renewal terms and conditions or premiums
different from those in effect prior to
renewal shall not constitute refusal to renew.
Form 14-02-0951 (Ed. 1-92) Page 2 of 10
<PAGE>
Exclusions
Exclusions 5. The Company shall not be liable for Loss on
Applicable to account of any Claim made against any Insured
Insuring Clauses 1 and 2 Person:
(a) based upon, arising from, or in
consequence of any circumstance if written
notice of such circumstance has been given
under any policy or coverage section of which
this coverage section is a renewal or
replacement and if such prior policy or
coverage section affords coverage (or would
afford such coverage except for the exhaustion
of its limits of liability) for such
Loss, in whole or in part, as a result of such
notice.
(b) based upon, arising from, or in
consequence of any demand, suit or other
proceeding pending, or order, decree or
judgment entered against any Insured
Person on or prior to:
(i) the Pending or Prior Date set forth in
Item 8 of the Declarations for this
coverage section with respect to
Outside Directorships in a Non-Profit
Outside Entity;
(ii) the Pending or Prior Date set forth
in the Scheduled Outside Entity
Endorsement hereto with respect to
Outside Directorships in a Scheduled
Outside Entity,
or the same or any substantially similar
fact, circumstance or situation underlying
or alleged therein;
(c) brought or maintained by or on behalf of
any Insured, the Outside Entity, or one or
more of the Outside Entity's directors,
officers, trustees, governors or
equivalent executives, except:
(i) a Claim that is a derivative action
brought and maintained on behalf
of an Insured Organization by one or
more persons who are not
Insured Persons and who bring and
maintain the Claim without the
solicitation, assistance or
participation of any Insured; or
(ii) a Claim that is a derivative action
brought and maintained on behalf
of the Outside Entity by one or more
persons who are not directors,
officers, trustees, governors or
equivalent executives of the Outside
Entity and who bring and maintain the
Claim without the solicitation,
assistance or participation of the
Outside Entity or any director,
officer, trustee, governor or
equivalent executive thereof;
(d) for an actual or alleged violation of the
responsibilities, obligations or duties
imposed by the Employee Retirement Income
Security Act of 1974 and amendments
thereto or similar provisions of any
federal, state or local statutory law or
common law upon fiduciaries of any
pension, profit sharing, health and
welfare or other employee benefit plan or
trust established or maintained for the
purpose of providing benefits to employees
of any Outside Entity;
(e) for bodily injury, mental or emotional
distress, sickness, disease or death
of any person or damage to or destruction
of any tangible property including loss of
use thereof;
Form 14-02-0951 (Ed. 1-92) Page 3 of 10
<PAGE>
Exclusions
Exclusions (f) based upon, arising from, or in
Applicable to consequence of (i) the actual, alleged or
Insuring Clauses 1 and 2 threatened discharge, release, escape or
(continued) disposal of Pollutants into or on real or
personal property, water or the
atmosphere; or (ii) any direction or
request that the Insured or Outside Entity
test for, monitor, clean up, remove,
contain, treat, detoxify or neutralize
Pollutants, or any voluntary decision to
do so; including but not limited to any
Claim for financial loss to the Insured
Organization, the Outside Entity, or any
security holders or creditors thereof
based upon, arising from, or in
consequence of the matters described in
(i) or (ii) of this Exclusion; or
(g) for Wrongful Acts committed, attempted or
allegedly committed or attempted after the
date such Insured Person ceases to serve
in the Outside Directorship.
Exclusions 6. The Company shall not be liable under Insuring
Applicable to Clause 1 for Loss on account of any Claim made
Insuring Clause 1 Only against any Insured Person:
(a) for an accounting of profits made from the
purchase or sale by such Insured Person of
securities of the Insured Organization or
the Outside Entity within the meaning of
Section 16(b) of the Securities Exchange
Act of 1934 and amendments thereto or
similar provisions of any federal, state
or local statutory law or common law;
(b) based upon, arising from, or in
consequence of any deliberately fraudulent
act or omission or any willful violation
of any stature or regulation by such
Insured Person, if a judgment or other
final adjudication adverse to the Insured
Person establishes such a deliberately
fraudulent act or omission or willful
violation; or
(c) based upon, arising from, or in
consequence of such Insured Person having
gained in fact any personal profit,
remuneration or advantage to which such
Insured Person was not legally entitled.
Severability 7. With respect to the Exclusions in Subsections
of Exclusions 5 and 6 of this coverage section, no fact
pertaining to or knowledge possessed by any
Insured Person shall be imputed to any other
Insured Person to determine if coverage is
available.
Limit of Liability, 8. For the purposes of this coverage section, all
Deductible and Loss arising out of the same Wrongful Act and
Coinsurance all Interrelated Wrongful Acts of any Insured
Person shall be deemed one Loss, and such Loss
shall be deemed to have originated in the
earliest Policy Period in which a Claim is
first made against any Insured Person alleging
any such Wrongful Acts or Interrelated
Wrongful Acts.
The Company's maximum liability for each Loss,
whether covered under Insuring Clause 1 or
Insuring Clause 2 or both, shall be the Limit
of Liability for Each Loss set forth in Item
2(A) of the Declarations for this coverage
section. The Company's maximum aggregate
liability for all Loss on account of all
Claims first made during the same Policy
Period, whether covered under Insuring Clause
1 or Insuring Clause 2 or both, shall be the
Limit of Liability for each Policy Period set
forth in Item 2(B) of the Declarations for
this coverage section.
Form 14-02-0951 (Ed. 1-92) Page 4 of 10
<PAGE>
Limit of Liability, The Company's liability under Insuring Clause
Deductible and 2 shall apply only to that part of each Loss
Coinsurance which is excess of the Deductible Amount set
(continued) forth in Item 4 of the Declarations for this
coverage section and such Deductible Amount
shall be borne by the Insureds uninsured and
at their own risk.
If a single Loss is covered in part under
Insuring Clause 1 and in part under Insuring
Clause 2, the Deductible Amount applicable to
such Loss shall be the Insuring Clause 2
deductible set forth in Item 4 of the
Declarations for this coverage section.
With respect to all Loss (excess of the
applicable Deductible Amount) originating
in any one Policy Period, the Insureds shall
bear uninsured and at their own risk that
percent of all such Loss specified as the
Coinsurance Percent in Item 3 of the
Declarations for this coverage section and the
Company's liability hereunder shall apply only
to the remaining percent of all such Loss.
For purposes of this Subsection 8 only, the
Extended Reporting Period, if exercised, shall
be part of and not in addition to the
immediately preceding Policy Period.
If the Company or any of its subsidiaries or
affiliated companies makes payment under
another policy or another coverage section of
this policy on account of any Claim also
covered under this coverage section, the Limit
of Liability for this coverage section with
respect to such Claim shall be reduced by the
amount of such payment.
Presumptive 9. If the Insured Organization:
Indemnification
(a) fails or refuses, other than for reason of
Financial Impairment, to indemnify the
Insured Person for Loss; and
(b) is permitted or required to indemnify the
Insured Person for such Loss to the
fullest extent permitted or required by law,
then, notwithstanding any other conditions,
provisions or terms of this coverage
section to the contrary, any payment by the
Company of such Loss shall be subject to (i)
the Insuring Clause 2 Deductible Amount set
forth in Item 4 of the Declarations for this
coverage section and (ii) all of the
Exclusions set forth in Subsections 5 and 6 of
this coverage section.
For purposes of this Subsection 9, the
shareholder and board of director
resolutions of the Insured Organization shall
be deemed to provide indemnification for such
Loss to the fullest extent permitted or
required by law.
Reporting 10. The Insureds shall, as a condition precedent
and Notice to exercising their rights under this coverage
section, give to the Company written notice as
soon as practicable of any Claim made against
any of them for a Wrongful Act.
If during the Policy Period or Extended
Reporting Period (if exercised) an Insured
becomes aware of circumstances which could
give rise to a Claim and gives written notice
of such circumstance(s) to the Company, then
any Claims subsequently arising from such
circumstances shall be considered to have been
reported during the Policy Period or the
Extended Reporting Period in which the
circumstances were first reported to the Company.
Form 14-02-0951 (Ed 1-92) Page 5 of 10
<PAGE>
Reporting The Insureds shall, as a condition precedent
and Notice to exercising their rights under this coverage
(continued) section, give to the Company such information
and cooperation as it may reasonably require,
including but not limited to a description of
the Claim or circumstances, the nature of the
alleged potential damage, the names of actual
or potential claimants, and the manner in
which the Insured first became aware of the
Claims or circumstances.
Defense and 11. Subject to this Subsection, it shall be the
Settlement duty of the Insured Persons and not
the duty of the Company to defend Claims made
against the Insured Person.
The Insureds agree not to settle any Claim,
incur any Defense Costs or otherwise assume
any contractual obligation or admit any
liability with respect to any Claim without
the Company's consent, which shall not be
unreasonably withheld. The Company shall not
be liable for any settlement, Defense Costs,
assumed obligation or admission to which it
has not consented.
The Company shall have the right and shall be
given the opportunity to effectively associate
with the Insureds in the investigation,
defense and settlement, including but not
limited to the negotiation of a settlement, of
any Claim that appears reasonably likely to be
covered in whole or in part by this coverage
section.
The Insureds agree to provide the Company with
all information, assistance and cooperation
which the Company reasonably requests and
agree that in the event of a Claim the
Insureds will do nothing that may prejudice
the Company's position or its potential or
actual rights of recovery.
Defense Costs shall be part of and not in
addition to the Limits of Liability set
forth in Item 2 of the Declarations for this
coverage section, and the payment by the
Company of Defense Costs reduces such Limits
of Liability.
Allocation 12. If both Loss covered by this coverage section
and loss not covered by this coverage section
are incurred, either because a Claim against
the Insured Persons includes both covered and
uncovered matters or because a claim is made
against both an Insured Person and others,
including the Insured Organization, and/or the
Outside Entity, the Insureds and the Company
shall use their best efforts to agree upon a
fair and proper allocation of such amount
between covered Loss and uncovered loss.
If the Insureds and the Company agree on an
allocation of Defense Costs, the Company shall
advance on a current basis Defense Costs
allocated to covered Loss. If the Insureds and
the Company cannot agree on an allocation:
(a) no presumption as to allocation shall
exist in any arbitration, suit or other
proceeding;
(b) the Company shall advance on a current
basis Defense Costs which the Company
believes to be covered under this coverage
section until a different allocation is
negotiated arbitrated or judicially
determined; and
(c) the Company, if requested by the Insureds,
shall submit the dispute to binding
arbitration. The rules of the American
Arbitration Association shall apply except
with respect to the selection of the
arbitration panel, which shall consist of
one arbitrator selected by the Insureds,
one arbitrator selected by the Company,
and a third independent arbitrator
selected by the first two arbitrators.
Form 14-02-0951 (Ed. 1-92) Page 6 of 10
<PAGE>
Allocation Any negotiated, arbitrated or judicially
(continued) determined allocation of Defense Costs
on account of a Claim shall be applied
retroactively to all Defense Costs on
account of such Claim, notwithstanding any
prior advancement to the contrary.
Any allocation or advancement of Defense Costs
on account of a Claim shall not apply to or
create any presumption with respect to the
allocation of other Loss on account of such
Claim.
Other Insurance 13. If the Outside Entity maintains one or more
and Indemnity insurance policies during the period
a Claim otherwise covered by this coverage
section is first made against an Injured
Person, then with respect to such Claim this
coverage section shall be specifically excess
of the amount of payment from such other
insurance.
If any Loss arising from any Claim made
against any Insured Persons is insured under
any other valid policy(ies), prior or current,
or is indemnified by the Outside Entity or any
other organization other than the Insured
Organization, then this coverage section shall
cover such Loss, subject to its limitations,
conditions, provisions and other terms, only
to the extent that the amount of such Loss is
in excess of the amount of payment from such
indemnity or other insurance whether such
other insurance is stated to be primary,
contributory, excess, contingent or otherwise,
unless such other insurance is written only as
specific excess insurance over the limits
provided in this coverage section.
The Insureds agree that they will use their
best efforts to promptly enforce any rights of
the Insured Persons to indemnification by the
Outside Entity or any other organization.
Changes in
Exposure
Acquisition or 14. If the Insured Organization (i) acquires
Creation of securities or voting rights in another
Another Organization organization or creates another organization,
which as a result of such acquisition or
creation becomes a Subsidiary, or (ii)
acquires any organization by merger into or
consolidation with an Insured Organization,
such organization and its Insured Persons
shall be Insureds under this coverage
section but only with respect to Wrongful
Acts committed, attempted, or allegedly
committed or attempted, after such acquisition
or creation unless the Company agrees, after
presentation of a complete application and all
appropriate information, to provide coverage
by endorsement for Wrongful Acts committed
or attempted, or allegedly committed or
attempted, by such Insured Persons
prior to such acquisition or creation.
If the fair value of all cash, securities,
assumed indebtedness and other consideration
paid by the Insured Organization for any such
acquisition or creation exceeds 10% of the
total assets of the Parent Organization as
reflected in the Parent Organization's most
recent audited consolidated financial
statements, the Parent Organization shall give
written notice of such acquisition to the
Company as soon as practicable together with
such information as the Company may require
and shall pay any reasonable additional
premium required by the Company.
Form 14-02-0951 (Ed. 1-92) Page 7 of 10
<PAGE>
Changes in
Exposure
(continued)
Acquisition of 15. If (i) the Parent Organization merges into or
Parent Organization consolidates with another organization, or
by Another (ii) another organization or person or group
Organization of organizations and/or persons acting in
concert acquires securities or voting rights
which result in ownership or voting control by
the other organization(s) or person(s) of more
than 50% of the outstanding securities
representing the present right to vote for
election of directors of the Parent
Organization, coverage under this coverage
section shall continue until termination of
this coverage section, but only with
respect to Claims for Wrongful Act committed,
attempted, or allegedly committed or attempted
by Insured Persons prior to such merger,
consolidation or acquisition. The Parent
Organization shall give written notice of such
merger, consolidation or acquisition as soon
as practicable, together with such
information as the Company may require.
Cessation of 16. In the event an organization ceases to be a
Subsidiaries Subsidiary before or after the Inception Date
of this coverage section, coverage with
respect to such Subsidiary and its Insured
Persons shall continue until termination of
this coverage section, but only with respect
to Claims for Wrongful Acts committed,
attempted or allegedly committed or attempted
prior to the date such organization ceased to
be a Subsidiary.
Scope of 17. The coverage under this coverage section shall
Coverage not be construed under any circumstance to
extend to any Outside Entity or to any
director, officer, trustee, governor or other
executive or employee of any Outside Entity,
other than the Insured Person in his Outside
Directorship.
Representations 18. In granting coverage to any one of the
and Severability Insureds, the Company has relied upon the
declarations and statements in the written
application for this coverage section and upon
any declarations and statements in the
original written application submitted to
another insurer in respect of the prior
coverage incepting as of the Continuity Date
set forth in Item 9 of the Declarations for
this coverage section. All such declarations
and statements are the basis of such coverage
and shall be considered as incorporated in and
constituting part of this coverage section.
Such written application(s) for coverage shall
be construed as a separate application for
coverage by each of the Insured Persons. With
respect to the declarations and statements
contained in such written application(s) for
coverage, no statement in the application or
knowledge possessed by any Insured Person
shall be imputed to any other Insured Person
for the purpose of determining if coverage is
available.
Form 14-02-0951 (Ed. 1-92) Page 8 of 10
<PAGE>
Definitions 19. When used in this coverage section:
Claim means:
(i) a written demand for monetary damages,
(ii) a civil proceeding commenced by the
service of a complaint or similar pleading,
(iii) a criminal proceeding commenced by a
return of an indictment, or
(iv) a formal administrative or regulatory
proceeding commenced by the filing
of a notice of charges, formal
investigative order or similar document,
against any Insured Person for a Wrongful Act,
including any appeal therefrom.
Defense Costs means that part of Loss
consisting of reasonable costs, charges, fees
(including but not limited to attorneys' fees
and experts' fees) and expenses (other than
regular or overtime wages, salaries or fees of
the directors, officers or employees of the
Insured Organization) incurred in defending or
investigating Claims, and the premium for
appeal, attachment or similar bonds.
Financial Impairment means the status of the
Insured Organization resulting from (i) the
appointment by any state or federal official,
agency or court of any receiver, conservator,
liquidator, trustee, rehabilitator or similar
official to take control of, supervise, manage
or liquidate the Insured Organization, or (ii)
the Insured Organization becoming a debtor in
possession.
Insureds, either in the singular or plural,
means the Insured Organization and any Insured
Persons.
Insured Organization means, collectively,
those organizations designated in Item 5 of
the Declarations for this coverage section.
Insured Persons, either in the singular or
plural, means any one or more of those persons
designated in Item 6 of the Declarations for
this coverage section.
Interrelated Wrongful Acts means all causally
connected Wrongful Acts.
Loss means the total amount which any Insured
Person becomes legally obligated to pay on
account of each Claim and for all Claims in
each Policy Period and the Extended Reporting
Period, if exercised, made against them for
Wrongful Acts for which coverage applies,
including, but not limited to, damages,
judgments, settlements, costs and Defense
Costs.
Loss does not include (i) any amount not
indemnified by the Insured Organization for
which the Insured Person is absolved from
payment by reason of any covenant, agreement
or court order, (ii) fines or penalties
imposed by law or the multiple portion of any
multiplied damage award, or (iii) matters
uninsurable under the law pursuant to which
this coverage section is construed.
Non-Profit Outside Entity means any non-profit
corporation, community chest, fund or
foundation that is not included in the
definition of Insured Organization and that is
exempt from federal income tax as an
organization described in Section 501 (c) (3)
of the Internal Revenue Code of 1986, as
amended.
Form 14-02-0951 (Ed. 1-92) Page 9 of 10
<PAGE>
Definitions Outside Directorship means the position of
(continued) director, officer, trustee, governor or
equivalent executive position held by any
Insured Person in an Outside Entity if service
in such position was with the knowledge and
consent or at the request of the Insured
Organization.
Outside Entity means a Non-Profit Outside
Entity or a Scheduled Outside Entity.
Pollutants means any substance located
anywhere in the world exhibiting any hazardous
characteristics as defined by, or identified
on a list of hazardous substances issued by,
the United States Environmental Protection
Agency or a state, county, municipality or
locality counterpart thereof. Such substances
shall include, without limitation, solids,
liquids, gaseous or thermal irritants,
contaminants or smoke, vapor, soot, fumes,
acids, alkalis, chemicals or waste materials.
Pollutants shall also mean any other air
emission, odor, waste water, oil or oil
products, infectious or medical waste,
asbestos or asbestos products and any noise.
Scheduled Outside Entity means any
organization listed in a Scheduled
Outside Entity Endorsement to this policy.
Subsidiary, either in the singular or plural,
means any organization in which more than 50%
of the outstanding securities or voting rights
representing the present right to vote for
election of directors is owned or controlled,
directly or indirectly, in any combination, by
one or more Insured Organizations.
Wrongful Act means any error, misstatement,
misleading statement, act, omission, neglect,
or breach of duty committed, attempted, or
allegedly committed or attempted, by an
Insured Person, individually or otherwise, in
an Outside Directorship, or any matter claimed
against him solely by reason of his serving in
an Outside Directorship.
Form 14-O2-0951 (Ed. 1-92) Page 10 of 10
<PAGE>
ENDORSEMENT
Coverage Section: OUTSIDE DIRECTORSHIP Company: FEDERAL INSURANCE COMPANY
Effective date of Endorsement No: 1
this endorsement: JANUARY 31, 1994
To be attached to and form part of
Policy No. 8125-69-41C
Issued to: PARKER HANNIFIN CORPORATION
It is agreed that Item 4 of the Declarations for this
coverage section is amended as set forth below:
INSURING CLAUSE 2
OUTSIDE ENTITY DEDUCTIBLE
Non-Profit Outside Entities....... $50,000.00
If two or more deductibles of different amounts apply
to a single Loss, the highest of such deductible amounts
shall apply to such Loss.
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
___________________________
Authorized Representative
___________________________
Date
Page 1 Last page
Form 14-02-0961 (Rev. 1-92)
<PAGE>
ENDORSEMENT
Coverage Section: OUTSIDE DIRECTORSHIP Company: FEDERAL INSURANCE COMPANY
Effective date of Endorsement No: 2
this endorsement: JANUARY 31, 1994
To be attached to and form part of
Policy No. 8125-69-4lC
Issued to: PARKER HANNIFIN CORPORATION
It is agreed that the following Insured Persons serving
in the position of director, officer, trustee, governor
or equivalent executive position in the following
respective organizations shall be serving a
Scheduled Outside Entity:
INSURED OUTSIDE PENDING OR CONTINUITY
PERSON ENTITY PRIOR DATE DATE
J.A. Baker National Investors 1/31/92 1/31/92
Hall of Fame
Foundation
National Invention
Center, Inc.
D.E. Collins Cleveland YMCA 1/31/92 1/31/92
H.C. Gueritey Financial 1/31/92 1/31/92
Executives
Institute
Financial
Executives
Research Foundation
Junior Achievement
of Greater
Cleveland, Inc.
J.L. Hanson N.E.O. Branch Office 1/31/92 1/31/92
Arthritis Foundation
N.E.O. Chapter
Office
Arthritis Foundation
M.J. Hiemstra Ursuline College 1/31/92 1/31/92
Boy Scouts of
America
Cleveland Council
Page 1 Continued
Form 14-02-0961 (Rev. 1-92)
<PAGE>
W.E. McHale Willoughby Fine Arts 1/31/92 1/31/92
Association
P.S. Parker Musical Arts 1/31/92 1/31/92
Association
Playhouse Square
Foundation
The Western Reserve
Historical Society
University School
Woodruff Foundation
R.H. Rau General Aviation 1/31/92 1/31/92
Manufacturers
Association
P.G.Schloemer Aerospace Industries
Association of
America
Cleveland Tomorrow
Inc.
The Conference Board
The 50 Club of
Cleveland
Greater Cleveland
Growth Association
John Carroll University
Manufactures Alliance
for Productivity
Improvement
National Association
of Manufacturers
St. Vincent Charity
Hospital & Health
Center
J.D. Whiteman Great Lakes Theatre 1/31/92 1/31/92
Festival
Judson Retirement
Community
St. Luke's Hospital
W.C. Young McGregor Home 1/31/92 1/31/92
D.A. Zito Meridia Euclid 1/31/92 1/31/92
Hospital Board
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
___________________________
Authorized Representative
___________________________
Date
Page 2 Last page
Form 14-02-0961 (Rev. 1-92)
<PAGE>
ENDORSEMENT
Coverage Section: OUTSIDE DIRECTORSHIP Company: FEDERAL INSURANCE COMPANY
Effective date of Endorsement No: 3
this endorsement: JANUARY 31, 1994
To be attached to and form part of
Policy No. 8125-69-41C
Issued to: PARKER HANNIFIN CORPORATION
It is agreed that any duly elected director or duly
appointed officer of the Insured Organization who
serves as a director, officer or partner of any
entity in which an Insured Organization owns 50%
or less of the voting stock shall be considered
to be an Insured Person serving a Scheduled
Outside Entity.
OUTSIDE PENDING OR CONTINUITY
ENTITY PRIOR DATE DATE
LDI Pneutronics Corp. 1/31/89 1/31/89
Arosellos, S.A. de C.V. 1/31/89 1/31/89
Conductores de Fluidos Parker, 1/31/89 1/31/89
S.A. de C.V.
HS Parker Co., Ltd 1/31/89 1/31/89
HS Parker Air Conditioning 1/31/92 1/31/92
Components Company, Ltd.
Innovative Solutions and 1/31/92 1/31/92
Support, Inc.
Parker Hubei Seal Corporation 1/31/89 1/31/89
Parker Seal de Mexico, S.A. 1/31/89 1/31/89
de C.V. 1/31/89 1/31/89
Parker Sistemas de 1/31/89 1/31/89
Automatizacion, S.A. de C.V.
Schrader Bellows Parker, 1/31/89 1/31/89
S.A. de C.V.
Uniflex-Parker Co., Limited 1/31/92 1/31/92
Parker-AMC (Japan) Co., Ltd. 10/06/93 10/06/93
SACS-Parker UHP Component Corp. 10/06/93 10/06/93
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
___________________________
Authorized Representative
___________________________
Date
Page 1 Last page
Form 14-02-0961 (Rev. 1-92)
<PAGE>
Exhibit (10)(i)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1994
by Parker-Hannifin Corporation
Parker-Hannifin Corporation 1982 Employees Stock
Option Plan, as amended October 25, 1984 and
January 29, 1987
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
PARKER-HANNIFIN CORPORATION
1982 EMPLOYEES STOCK OPTION PLAN
Effective: July 8, 1982
Amended: October 25, 1984
Amended: January 29, 1987
1. Purpose. This 1982 Employees Stock Option Plan (the "Plan") is
designed to enable the Corporation, by the grant of options, to attract
and retain key employees for the Corporation and its subsidiaries and to
provide additional incentive to these employees through increased stock
ownership. Options granted under the Plan may be (a) incentive stock
options within the meaning of Section 422A of the Internal Revenue Code
of 1954, as amended, and the Internal Revenue Code of 1954, as amended,
and the Internal Revenue Code of 1986, as amended (collectively, the
"Code"), or (b) nonqualified stock options.
2. Administration. The Plan shall be administered by a committee
consisting of not less than three directors of the Corporation (the
"Committee"), to be appointed by, and to serve during the pleasure of,
the Board of Directors of the Corporation. No director who has within
one year been eligible to participate in the Plan may be appointed or
serve as a member of the Committee. Subject to the terms of the Plan,
the Committee shall have full power and authority to interpret the
provisions and to supervise the administration of the Plan and to define
the terms of and grant options under the Plan. All decisions by the
committee pursuant to the provisions of the Plan
<PAGE>
shall be made by a majority of its members and shall be final.
3. Employees Who May Participate in the Plan. Employees to whom
options are granted shall be designated from time to time by the
Committee. An option may be granted to any salaried employee of the
Corporation or of a subsidiary with executive, managerial, technical or
professional responsibility, including any officer who is a member of the
Board of Directors. An employee may hold more than one option; provided,
however, that:
(a) for incentive stock options granted prior to January 1,
1987, no employee may be granted incentive stock options in any calendar
year (under all plans of the Corporation and its subsidiaries) for shares
which exceed an aggregate fair market value, determined as of the date of
grant, of $100,000 plus any unused limit carryover to that year. The
carryover amount from any calendar shall be one-half of the amount by
which $100,000 exceeds the value at the date of grant of the Common
Shares for which options were granted to any eligible employee in such
year. Unused amounts may be carried forward three years. Options
granted in any year shall first use up the $100,000 current year
limitation and next the unused carryovers in the chronological order of
the calendar years in which the carryovers arose; and
(b) for incentive stock options granted after December 31,
1986, the aggregate fair market value
- 2 -
<PAGE>
(determined at the time the option is granted) of the shares with respect
to such incentive stock options which are exercisable for the first time
during any calendar year (under all plans of the Corporation and its
subsidiaries) shall not exceed $100,000.
4. Shares Subject to the Plan. The shares subject to the Plan
shall be the Corporation's Common Shares, $.50 par value, and may be
authorized but unissued shares or treasury shares. The total number of
shares that may be delivered upon the exercise of all options granted
under the Plan may not exceed 1,125,000, subject, however, to adjustment
as provided in Section 12. Stock appreciation rights may be granted with
respect to all or part of the shares subject to an option granted under
the Plan. When all or part of an option is surrendered upon exercise of
the related stock appreciation rights, the shares subject to the
surrendered part of the option shall be considered exercised in full and
shall not be available for the grant of future options under the Plan,
and the number of shares that may be delivered under the Plan shall be
reduced accordingly. When, however, an option is surrendered or expires
for any reason other than the exercise of the related stock appreciation
rights, the shares subject to the option shall again become available for
offering under the Plan.
- 3 -
<PAGE>
5. Option Price. The option price shall be determined by the
Committee or by the Board of Directors. In the case of incentive stock
options, the option price may not be less than 100% of the fair market
value of the shares subject to the option on the date the option is
granted, except that, if the optionee owns, at the time the option is
granted, shares possessing more than 10% of the total combined voting
power of all classes of stock of the Corporation or a subsidiary, the
option price may be not less than 110% of the fair market value of the
shares on the date the option is granted. In no event may previously
unissued shares be issued at a price less than that permitted by the Ohio
General Corporation Law. For purposes of this Plan, the "fair market
value" of shares on any date shall be the reported closing price of the
shares as reported for New York Stock Exchange-Composite Transactions on
that date or, if no shares are traded on that date, the next preceding
date on which trading occurred. In the event that the shares cease to be
traded on the New York Stock Exchange, the "fair market value" of the
shares shall be determined in the manner prescribed by the Committee.
6. Exercise of Options. Except as otherwise provided in Section
7, or as may be permitted pursuant to options granted under Section 13,
an option may be exercised only while the optionee is in the employ of
the Corporation or of a subsidiary. Unless an option is accelerated as
- 4 -
<PAGE>
provided in this Section 6, an optionee to whom an option has been
granted must remain in the continuous employ of the Corporation or of a
subsidiary for one year from the date on which the option is granted
before he or she may exercise any part of the option. Thereafter, and
during the life of the option, the option may be exercised at any time
as to all of the Common Shares subject to the option, or from time to
time, as to any portion of such Common Shares. No fraction of a Common
Share may, however, be purchased upon the exercise of an option.
Incentive stock options granted after December 31, 1986 may be exercised
in any order and may be exercised before the exercise of incentive stock
options granted before January 1, 1987. No incentive stock option
granted before January 1, 1987 shall be exercisable while there is
outstanding any incentive stock option previously granted to the employee
by the Corporation or by a parent, subsidiary, or predecessor
corporation. An option shall be treated as outstanding for this purpose
until the option is exercised in full, is surrendered upon the exercise
of related stock appreciation rights, or expires by reason of the lapse
of time.
The Board of Directors may, in its discretion and upon such
terms as it deems appropriate, accelerate the date on which any
outstanding option becomes exercisable in the event of a proposed merger
or consolidation of the Corporation into or with another corporation,
- 5 -
<PAGE>
a proposed sale of all or a substantial part of the Corporation's assets,
a tender or exchange offer for the Corporation's Common Shares, or
another transaction or series of transactions that the Board determines
is likely to result in a change in control of the Corporation. In
addition to the foregoing, the Committee may purchase stock options
previously granted to any person who is at the time of any such
transaction a director or officer of the Corporation for a price equal to
the difference between the consideration per share payable pursuant to
the terms of the transaction and the option price.
7. Exercise of Options After Termination of Employment. No option
may be exercised after termination of the optionee's employment, except
in the following situations:
(a) If the termination of employment is due to permanent
disability or to retirement under the applicable retirement plan or
policy of the Corporation or a subsidiary, the optionee shall have the
right to exercise the option in whole or in part within the period of two
years after the date of the termination of his employment.
(b) If the termination of employment is due to the death of
the optionee, the optionee's estate, personal representative, or
beneficiary shall have the right to exercise the option in whole or in
part within the period of two years after the date of the optionee's
death.
- 6 -
<PAGE>
(c) If the termination of employment is due to any other
reason except the optionee's permanent disability or retirement as
specified in (a) above or the optionee's death as specified in (b)
above, the optionee shall have the right to exercise the option in whole
or in part within the period of three months after the date of such
termination of employment.
8. Termination of Options. An option granted under this Plan
shall terminate, and the right of the employee to purchase shares upon
exercise of the option shall expire, on the date determined by the
Committee at the time the option is granted. No option, however, may
have a life of more than ten years after the date it is granted, and, in
the case of an employee who owns, at the time the option is granted,
stock possessing more than 10% of the total combined voting power of all
classes of stock of the Corporation or a subsidiary, no incentive stock
option may have a life of more than five years after the date it is
granted. If an option is accelerated pursuant to Section 6, the Board
may prescribe an earlier termination date.
9. Notice of Grant. When an employee is granted an option under
the Plan, the Committee shall promptly cause the employee to be notified
in writing of the nature of the grant and the terms of the option. The
- 7 -
<PAGE>
date on which the Committee approves the grant shall be considered to be
the date on which the option is granted.
l0. Notice of Exercise; Payment for Shares. An option shall be
considered to be exercised when the employee notifies the Corporation in
writing of his intention to do so and tenders payment in full of the
option price. Payment of the option price may be made in cash, by
delivery of Common Shares of the Corporation (taken at their fair market
value on the date of exercise, as defined in Section 5), or partly in
cash and partly in shares, unless otherwise determined by the Committee.
The employee shall have none of the rights of a shareholder with respect
to shares purchased upon exercise of an option until he has paid the
option price in full.
ll. Nontransferrability of Options. An option granted under the
Plan may not be transferred other than by will or by the laws of descent
and distribution. Each employee to whom an option is granted, by
accepting the option, agrees with the Corporation that, in the event
that the Corporation merges into or consolidates with another
corporation, the Corporation sells all or a substantial part of its
assets, or the Corporation's Common Shares are subject to a tender or
exchange offer, he will consent to the transfer or assumption of the
option, or accept a new option in substitution therefor, if the Committee
or the Board of Directors requests him to do so.
- 8 -
<PAGE>
12. Adjustments Upon Changes in Shares. In the event of any change
in the shares subject to the Plan or to any option right granted under
the Plan by reason of a merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, exchange of shares, or
other change in the corporate structure of the Corporation, the aggregate
number of Common Shares as to which options may thereafter by granted
under the Plan, the number of Common Shares subject to each outstanding
option, and the option price for share subject to each outstanding option
shall be appropriately adjusted by the Committee.
13. Substitute Options. The Board of Directors may grant options
in substitution for, or upon the assumption of, options granted by
another corporation that is merged into, consolidated with, or all or a
substantial part of the assets or stock of which is acquired by the
Corporation or a subsidiary. Subject to the limit in Section 4 on the
number of shares that may be delivered upon the exercise of options
granted under this Plan, the terms and provisions of any options granted
under this Section 13 may vary from the terms and provisions otherwise
specified in this Plan and may, instead, correspond to the terms and
provisions of the options granted by the other corporation.
14. Purchase for Investment. Each employee receiving shares upon
exercise of an option may be required
- 9 -
<PAGE>
by the Corporation to furnish a representation that he is acquiring the
shares as an investment and not with a view to distribution if the
Corporation, in its sole discretion, determines that the representation
is required to ensure that the resale or other disposition of the shares
would not violate the Securities Act of 1933, as amended, or any
applicable state securities laws. The Corporation reserves the right to
place any legend or other symbol on certificates for shares delivered
pursuant to the Plan, and to issue any stop transfer or similar
instructions to the transfer agent, that the Corporation deems necessary
and proper to assure compliance with any such representation.
15. Compliance with Securities Laws. No certificate for shares
shall be delivered upon exercise of an option until the Corporation has
taken any action that is required to comply with the provisions of the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934,
as amended, and any applicable state securities laws and with the
requirements of any exchange on which the Corporation's Common Shares
may, at the time, be listed.
16. Duration and Termination of the Plan. The Plan shall remain in
effect until July 7, 1992, and shall then terminate, unless terminated at
an earlier date by action of the Board of Directors. Except as provided
in Section 18, termination of the Plan shall not affect options
previously granted.
- 10 -
<PAGE>
17. Amendment of the Plan. The Board of Directors may alter or
amend the Plan from time to time prior to its termination, except that,
without shareholder approval, no amendment may increase the aggregate
number of shares with respect to which options may be granted (except in
accordance with the provisions of Section 12), reduce the option price
at which options may be exercised (except in accordance with the
provisions of Section 12), extend the time within which options may be
granted or the time within which an option may be exercised, or change
the requirements relating to eligibility or to administration of the
Plan. Except in accordance with the provisions of Section 12, the Board
of Directors may not, without the consent of the holder of the option,
alter or impair any outstanding option previously granted under this
Plan. The Committee may, with the agreement of the affected optionee,
cancel any stock option granted pursuant to the Plan. In the event of
such cancellation, the Committee may authorize the grant of a new option
for the same number of Common Shares specified in the cancelled stock
option or for a different number of Common Shares, at such option price
and upon terms and conditions which would have been applicable under the
Plan had the original cancelled stock option not been granted.
18. Effective Date. This Plan was adopted by the Board of
Directors and became effective on July 8,
- 11 -
<PAGE>
1982, subject to approval by the Corporation's shareholders on or before
July 7, 1983. Options may be granted prior to approval of the Plan by
shareholders, but no such option may be exercised until after the Plan
has been approved by shareholders. If the shareholders do not approve
the Plan on or before July 7, 1983, all options previously granted under
the Plan shall terminate.
Approved by the Shareholders on October 21, 1982
Amendment approved by the Shareholders on October 25, 1984
<PAGE>
Exhibit (10)(j)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1994
by Parker-Hannifin Corporation
Parker-Hannifin Corporation 1987 Employees Stock Option Plan
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
PARKER-HANNIFIN CORPORATION
1987 EMPLOYEES STOCK OPTION PLAN
Effective: January 29, 1987
1. Purpose. This 1987 Employees Stock Option Plan (the "Plan") is
designed to enable the Corporation, by the grant of options, to attract
and retain key employees for the Corporation and its subsidiaries and to
provide additional incentive to these employees through increased stock
ownership. Options granted under the Plan may be (a) incentive stock
options within the meaning of Section 422A of the Internal Revenue Code of
1986, as amended (the "Code"), or (b) nonqualified stock options.
2. Administration. The Plan shall be administered by a committee
consisting of not less than three directors of the Corporation (the
"Committee"), to be appointed by, and to serve during the pleasure of, the
Board of Directors of the Corporation. No director who has within one
year been eligible to participate in the Plan may be appointed or serve as
a member of the Committee. Subject to the terms of the Plan, the
Committee shall have full power and authority to interpret the provisions
and to supervise the administration of the Plan and to define the terms of
and grant options under the Plan. All decisions by the Committee pursuant
to the provisions of the Plan shall be made by a majority of its members
and shall be final.
<PAGE>
3. Employees Who May Participate in the Plan. Employees to whom
options are granted shall be designated from time by the Committee. An
option may be granted to any salaried employee of the Corporation or of a
subsidiary with executive, managerial, technical or professional
responsibility, including any officer who is a member of the Board of
Directors. An employee may hold more than one option; however, for
incentive stock options, the aggregate fair market value (determined at
the time the option is granted) of the shares with respect to such
incentive stock options which are exercisable for the first time during
any calendar year (under all plans of the Corporation and its
subsidiaries) shall not exceed $100,000.
4. Shares Subject to the Plan. The shares subject to the Plan shall
be the Corporation's Common Shares, without par value, and may be
authorized but unissued shares or treasury shares. The total number of
shares that may be delivered upon the exercise of all options granted
under the Plan may not exceed l,000,000, subject, however. to adjustment
as provided in Section 12. Stock appreciation rights may be granted with
respect to all or part of the shares subject to an option granted under
the Plan. When all or part of an option is surrendered upon exercise of
the related stock appreciation rights, the shares subject to the
surrendered part of the
- 2 -
<PAGE>
option shall be considered exercised in full and shall not be available
for the grant of future options under the Plan, and the number of shares
that may be delivered under the Plan shall be reduced accordingly. When,
however, an option is surrendered or expires for any reason other than the
exercise of the related stock appreciation rights, the shares subject to
the option shall again become available for offering under the Plan.
5. Option Price. The option price shall be determined by the
Committee or by the Board of Directors. In the case of incentive stock
options, the option price may not be less than 100% of the fair market
value of the shares subject to the option on the date the option is
granted, except that, if the optionee owns, at the time the option is
granted, shares possessing more than 10% of the total combined voting
power of all classes of stock of the Corporation or a subsidiary, the
option price may be not less than 110% of the fair market value of the
shares on the date the option is granted. In no event may previously
unissued shares be issued at a price less than that permitted by the Ohio
General Corporation Law. For purposes of this Plan, the "fair market
value" of shares on any date shall be the reported closing price of the
shares as reported for New York Stock Exchange-Composite Transactions on
that date or, if no shares are traced on that date, the
- 3 -
<PAGE>
next preceding date on which trading occurred. In the event that the
shares cease to be traded on the New York Stock Exchange, the "fair market
value" of the shares shall be determined in the manner prescribed by the
Committee.
6. Exercise of Options. Except as otherwise provided in Section 7,
or as may be permitted pursuant to options granted under Section 13, an
option may be exercised only while the optionee is in the employ of the
Corporation or of a subsidiary. Unless an option is accelerated as
provided in this Section 6, an optionee to whom an option has been granted
must remain in the continuous employ of the Corporation or of a subsidiary
for one year from the date on which the option is granted before he or she
may exercise any part of the option. Thereafter, and during the life of
the option, the option may be exercised at any time as to all of the
Common Shares subject to the option, or from time to time, as to any
portion of such Common Shares or in such installments as the Committee may
determine at the time the option is granted. No fraction of a Common
Share may, however, be purchased upon the exercise of an option. An
option shall be treated as outstanding for this purpose until the option
is exercised in full, is surrendered upon the exercise of related stock
appreciation rights, or expires by reason of the lapse of time.
The Board of Directors may, in its discretion and upon such terms as
it deems appropriate, accelerate the
- 4 -
<PAGE>
date on which any outstanding option becomes exercisable in the event of a
proposed merger or consolidation of the Corporation into or with another
corporation, a proposed sale of all or a substantial part of the
Corporation's assets, a tender or exchange offer for the Corporation's
Common Shares, or another transaction or series of transactions that the
Board determines is likely to result in a change in control of the
Corporation. In addition to the foregoing, the Committee may purchase
stock options previously granted to any person who is at the time of any
such transaction a director or officer of the Corporation for a price
equal to the difference between the consideration per share payable
pursuant to the terms of the transaction and the option price.
7. Exercise of Options After Termination of Employment. No option
may be exercised after termination of the optionee's employment except in
the following situations:
(a) If the termination of employment is due to permanent
disability or to retirement under the applicable retirement plan or policy
of the Corporation or a subsidiary, the optionee shall have the right to
exercise the option in whole or in part within the period of two years
after the date of the termination of his employment.
(b) If the termination of employment is due to the death of the
optionee, the optionee's estate,
- 5 -
<PAGE>
personal representative, or beneficiary shall have the right to exercise
the option in whole or in part within the period of two years after the
date of the optionee's death.
(c) If the termination of employment is due to any other reason
except the optionee's permanent disability or retirement as specified in
(a) above or the optionee's death as specified in (b) above, the optionee
shall have the right to exercise the option in whole or in part within the
period of three months after the date of such termination of employment.
8. Termination of Options. An option granted under this Plan shall
terminate, and the right of the employee to purchase shares upon exercise
of the option shall expire, on the date determined by the Committee at the
time the option is granted. No option, however, may have a life of more
than ten years after the date it is granted, and, in the case of an
employee who owns, at the time the option is granted, stock possessing
more than 10% of the total combined voting power of all classes of stock
of the Corporation or a subsidiary, no incentive stock option may have a
life of more than five years after the date it is granted. If an option
is accelerated pursuant to Section 6, the Board may prescribe an earlier
termination date.
9. Notice of Grant. When an employee is granted an option under the
Plan, the Committee shall
- 6 -
<PAGE>
promptly cause the employee to be notified in writing of the nature of the
grant and the terms of the option. The date on which the Committee
approves the grant shall be considered to be the date on which the option
is granted.
10. Notice of Exercise; Payment for Shares. An option shall be
considered to be exercised when the employee notifies the Corporation in
writing of his intention to do so and tenders payment in full of the
option price. Payment of the option price may be made in cash, by
delivery of Common Shares of the Corporation (taken at their fair market
value on the date of exercise, as defined in Section 5), or partly in cash
and partly in shares, unless otherwise determined by the Committee. The
employee shall have none of the rights of a shareholder with respect to
shares purchased upon exercise of an option until he has paid the option
price in full.
11. Nontransferrability of Options. An option granted under the Plan
may not be transferred other than by will or by the laws of descent and
distribution. Each employee to whom an option is granted, by accepting the
option, agrees with the Corporation that, in the event that the
Corporation merges into or consolidates with another corporation, the
Corporation sells all or a substantial part of its assets, or the
Corporation's Common Shares are subject to a tender or exchange offer, he
will consent to the transfer or assumption of the option, or
- 7 -
<PAGE>
accept a new option in substitution therefor, if the Committee or the
Board of Directors requests him to do so.
12. Adjustments Upon Changes in Shares. In the event of any change
in the shares subject to the Plan or to any option right granted under the
Plan by reason of a merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, exchange of shares, or
other change in the corporate structure of the Corporation, the aggregate
number of Common Shares as to which options may thereafter be granted
under the Plan, the number of Common Shares subject to each outstanding
option, and the option price for shares subject to each outstanding option
shall be appropriately adjusted by the Committee.
13. Substitute Options. The Board of Directors may grant options in
substitution for, or upon the assumption of, options granted by another
corporation that is merged into, consolidated with, or all or a
substantial part of the assets or stock of which is acquired by the
Corporation or a subsidiary. Subject to the limit in Section 4 on the
number of shares that may be delivered upon the exercise of options
granted under this Plan, the terms and provisions of any options granted
under this Section 13 may vary from the terms and provisions otherwise
specified in this Plan and may, instead, correspond to the terms and
provisions of the options granted by the other corporation.
- 8 -
<PAGE>
14. Purchase for Investment. Each employee receiving shares upon
exercise of an option may be required by the Corporation to furnish a
representation that he is acquiring the shares as an investment and not
with a view to distribution if the Corporation, in its sole discretion,
determines that the representation is required to ensure that the resale
or other disposition of the shares would not violate the Securities Act of
1933, as amended, or any applicable state securities laws. The Corporation
reserves the right to place any legend or other symbol on certificates for
shares delivered pursuant to the Plan, and to issue any stop transfer or
similar instructions to the transfer agent, that the Corporation deems
necessary and proper to assure compliance with any such representation.
15. Compliance with Securities Laws. No certificate for shares
shall be delivered upon exercise of an option until the Corporation has
taken any action that is required to comply with the provisions of the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934,
as amended. and any applicable state securities laws and with the
requirements of any exchange on which the Corporation's Common Shares may,
at the time, be listed.
16. Duration and Termination of the Plan. The Plan shall remain in
effect until January 28, 1997, and shall then terminate, unless terminated
at an earlier date
- 9 -
<PAGE>
by action of the Board of Directors. Except as provided in Section 18,
termination of the Plan shall not affect options previously granted.
17. Amendment of the Plan. The Board of Directors may alter or
amend the Plan from time to time prior to its termination, except that,
without shareholder approval, no amendment may increase the aggregate
number of shares with respect to which options may be granted (except in
accordance with the provisions of Section 12), reduce the option price at
which options may be exercised (except in accordance with the provisions
of Section 12), extend the time within which options may be granted or the
time within which an option may be exercised, or change the requirements
relating to eligibility or to administration of the Plan. Except in
accordance with the provisions of Section 12, the Board of Directors may
not, without the consent of the holder of the option, alter or impair any
outstanding option previously granted under this Plan. The Committee may,
with the agreement of the affected optionee, cancel any stock option
granted pursuant to the Plan. In the event of such cancellation. the
Committee may authorize the grant of a new option for the same number of
Common Shares specified in the canceled stock option or for a different
number of Common Shares, at such option price and upon terms and
conditions which would have been applicable
- 10 -
<PAGE>
under the Plan had the original cancelled stock option not been granted.
18. Effective Date. This Plan was adopted by the Board of Directors
and became effective on January 29, 1987, subject to approval by the
Corporation's shareholders on or before October __, 1987. Options may be
granted prior to approval of the Plan by shareholders, but no such option
may be exercised until after the Plan has been approved by shareholders.
If the shareholders do not approve the Plan on or before October __, 1987,
all options previously granted under the Plan shall terminate.
Approved by the Shareholders on October __,1987.
<PAGE>
Exhibit (10)(k)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1994
by Parker-Hannifin Corporation
Parker-Hannifin Corporation 1990 Employees Stock Option Plan
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
PARKER - HANNIFIN CORPORATION
1990 EMPLOYEES STOCK OPTION PLAN
Effective: September 1, 1990
1. Purpose. This 1990 Employees Stock Option Plan (the
"Plan") is designed to enable the Corporation, by the grant of options, to
attract and retain key employees for the Corporation and its subsidiaries
and to provide additional incentive to these employees through increased
stock ownership. Options granted under the Plan may be (a) incentive stock
options within the meaning of Section 422A of the Internal Revenue Code of
1986, as amended (the "Code"), or (b) nonqualified stock options.
2. Administration. The Plan shall be administered by a
committee consisting of not less than three directors of the Corporation (the
"Committee"), to be appointed by, and to serve during the pleasure of, the
Board of Directors of the Corporation. No director who has within one year
been eligible to participate in the Plan may be appointed or serve as a
member of the Committee. Subject to the terms of the Plan, the Committee
shall have full power and authority to interpret the provisions and to
supervise the administration of the Plan and to define the terms of and
grant options under the Plan. All decisions by the Committee pursuant to
the provisions of the Plan shall be made by a majority of its members and
shall be final.
3. Employees Who May Participate in the Plan. Employees to whom
options are granted shall be designated from time to time by the
Committee. An option may be granted to any salaried employee of the
Corporation or of a subsidiary with executive, managerial, technical or
professional responsibility, including any officer who is a member of the
Board of Directors. An employee may hold more than one option; however,
for incentive stock options, the aggregate fair market value (determined at
the time the option
<PAGE>
is granted) of the shares with respect to such incentive stock options which
are exercisable for the first time during any calendar year (under all plans
of the Corporation and its subsidiaries) shall not exceed $100,000.
4. Shares Subject to the Plan. The shares subject to the Plan
shall be the Corporation's Common Shares, without par value, and may be
authorized but unissued shares or treasury shares. The total number of
shares that may be delivered upon the exercise of all options granted under
the Plan may not exceed 1,000,000, subject, however, to adjustment as
provided in Section 12. Stock appreciation rights may be granted with
respect to all or part of the shares subject to an option granted under the
Plan. When all or part of an option is surrendered upon exercise of the
related stock appreciation rights, the shares subject to the surrendered
part of the option shall be considered exercised in full and shall not be
available for the grant of future options under the Plan, and the number of
shares that may be delivered under the Plan shall be reduced accordingly.
When, however, an option is surrendered or expires for any reason other than
the exercise of the related stock appreciation rights, the shares subject to
the option shall again become available for offering under the Plan.
5. Option Price. The option price shall be determined by the
Committee or by the Board of Directors. In the case of incentive stock
options, the option price may not be less than 100% of the fair market value
of the shares subject to the option on the date the option is granted, except
that, if the optionee owns, at the time the option is granted, shares
possessing more than 10% of the total combined voting power of all classes
of stock of the Corporation or a subsidiary, the option price may be not
less than 110% of the fair market value of the shares on the date the option
is granted. In no event may previously
- 2 -
<PAGE>
unissued shares be issued at a price less than that permitted by the Ohio
General Corporation Law. For purposes of this Plan, the "fair market value"
of shares on any date shall be the reported closing price of the shares as
reported for New York Stock Exchange-Composite Transactions on that date, or
if no shares are traded on that date, the next preceding date on which
trading occurred. In the event that the shares cease to be traded on the
New York Stock Exchange, the "fair market value" of the shares shall be
determined in the manner prescribed by the Committee.
6. Exercise of Options. Except as otherwise provided in Section
7, or as may be permitted pursuant to options granted under Section 13, an
option may be exercised only while the optionee is in the employ of the
Corporation or of a subsidiary. Unless an option is accelerated as provided
in this Section 6, an optionee to whom an option has been granted must
remain in the continuous employ of the Corporation or of a subsidiary for
one year from the date on which the option is granted before he or she may
exercise any part of the option. Thereafter, and during the life of the
option, the option may be exercised at any time as to all of the Common
Shares subject to the option, or from time to time, as to any portion of
such Common Shares or in such installments as the Committee may determine at
the time the option is granted. No fraction of a Common Share may, however,
be purchased upon the exercise of an option. An option shall be treated as
outstanding for this purpose until the option is exercised in full, is
surrendered upon the exercise of related stock appreciation rights, or
expires by reason of the lapse of time.
The Board of Directors may, in its discretion and upon such
terms as it deems appropriate, accelerate the date on which any outstanding
option becomes exercisable in the event of a proposed merger or consolidation
of the Corporation
- 3 -
<PAGE>
into or with another corporation, a proposed sale of all or a substantial part
of the Corporation's assets, a tender or exchange offer for the Corporation's
Common Shares, or another transaction or series of transactions that the
Board determines is likely to result in a change in control of the Corporation.
In addition to the foregoing, the Committee may purchase stock options
previously granted to any person who is at the time of any such transaction a
director or officer of the Corporation for a price equal to the difference
between the consideration per share payable pursuant to the terms of the
transaction and the option price.
7. Exercise of Options After Termination of Employment. No option
may be exercised after termination of the optionee's employment, except in the
following situations:
(a) If the termination of employment is due to permanent
disability or to retirement under the applicable retirement plan or policy of
the Corporation or a subsidiary, the optionee shall have the right to
exercise the option in whole or in part within the period of two years after
the date of the termination of his employment.
(b) If the termination of employment is due to the death of the
optionee, the optionee's estate, personal representative, or beneficiary shall
have the right to exercise the option in whole or in part within the period of
two years after the date of the optionee's death.
(c) If the termination of employment is due to any other reason
except the optionee's permanent disability or retirement as specified in (a)
above or the optionee's death as specified in (b) above, the optionee shall
have the right to exercise the option in whole or in part within the period
of three months after the date of such termination of employment.
- 4 -
<PAGE>
8. Termination of Options. An option granted under this Plan shall
terminate, and the right of the employee to purchase shares upon exercise of
the option shall expire, on the date determined by the Committee at the time
the option is granted. No option, however, may have a life of more than ten
years after the date it is granted, and, in the case of an employee who owns,
at the time the option is granted, stock possessing more than 10% of the
total combined voting power of all classes of stock of the Corporation or a
subsidiary, no incentive stock option may have a life of more than five years
after the date it is granted. If an option is accelerated pursuant to Section
6, the Board may prescribe an earlier termination date.
9. Notice of Grant. When an employee is granted an option under the
Plan, the Committee shall promptly cause the employee to be notified in writing
of the nature of the grant and the terms of the option. The date on which the
Committee approves the grant shall be considered to be the date on which the
option is granted.
10. Notice of Exercise: Payment for Shares. An option shall be
considered to be exercised when the employee notifies the Corporation in
writing of his intention to do so and tenders payment in full of the option
price. Payment of the option price may be made in cash, by delivery of Common
Shares of the Corporation (taken at their fair market value on the date of
exercise, as defined in Section 5), or partly in cash and partly in shares,
unless otherwise determined by the Committee. The employee shall have none of
the rights of a shareholder with respect to shares purchased upon exercise of
an option until he has paid the option price in full.
11. Nontransferability of Options. An option granted under the Plan
may not be transferred other than by will or by the laws of descent and
distribution.
- 5 -
<PAGE>
Each employee to whom an option is granted, by accepting the option, agrees
with the Corporation that, in the event that the Corporation merges into or
consolidates with another corporation, the Corporation sells all or a
substantial part of its assets, or the Corporation's Common Shares are subject
to a tender or exchange offer, he will consent to the transfer or assumption of
the option, or accept a new option in substitution therefor, if the Committee
or the Board of Directors requests him to do so.
12. Adjustments Upon Changes in Shares. In the event of any change
in the shares subject to the Plan or to any option right granted under the
Plan by reason of a merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, exchange of shares, or other change in the
corporate structure of the Corporation, the aggregate number of Common Shares
as to which options may thereafter be granted under the Plan, the number of
Common Shares subject to each outstanding option, and the option price for
shares subject to each outstanding option shall be appropriately adjusted by
the Committee.
13. Substitute Options. The Board of Directors may grant options
in substitution for, or upon the assumption of, options granted by another
corporation that is merged into, consolidated with, or all or a substantial
part of the assets or stock of which is acquired by the Corporation
or a subsidiary. Subject to the limit in Section 4 on the number of shares
that may be delivered upon the exercise of options granted under this Plan,
the terms and provisions of any options granted under this Section 13 may
vary from the terms and provisions otherwise specified in this Plan and may,
instead, correspond to the terms and provisions of the options granted by
the other corporation.
- 6 -
<PAGE>
14. Purchase for Investment. Each employee receiving shares upon
exercise of an option may be required by the Corporation to furnish a
representation that he is acquiring the shares as an investment and not with
a view to distribution if the Corporation, in its sole discretion, determines
that the representation is required to ensure that the resale or other
disposition of the shares would not violate the Securities Act of 1933, as
amended, or any applicable state securities laws. The Corporation reserves
the right to place any legend or other symbol on certificates for shares
delivered pursuant to the Plan, and to issue any stop transfer or similar
instructions to the transfer agent, that the Corporation deems necessary
and proper to assure compliance with any such representation.
15. Compliance with Securities Law. No certificate for shares
shall be delivered upon exercise of an option until the Corporation has
taken any action that is required to comply with the provisions of the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934,
as amended, and any applicable state securities laws and with the requirements
of any exchange on which the Corporation's Common Shares may, at the time,
be listed.
16. Duration and Termination of the Plan. The Plan shall remain in
effect until August 31, 2000, and shall then terminate, unless terminated at
an earlier date by action of the Board of Directors. Except as provided in
Section 18, termination of the Plan shall not affect options previously
granted.
17. Amendment of the Plan. The Board of Directors may alter or
amend the Plan from time to time prior to its termination, except that,
without shareholder approval, no amendment may increase the aggregate number
of shares with respect to which options may be granted (except in accordance
with the provisions of Section 12), reduce the option price at which options
may be
- 7 -
<PAGE>
exercised (except in accordance with the provisions of Section 12), extend the
time within which options may be granted or the time within which an option may
be exercised, or change the requirements relating to eligibility or to
administration of the Plan. Except in accordance with the provisions of
Section 12, the Board of Directors may not, without the consent of the holder
of the option, alter or impair any outstanding options previously granted
under this Plan. The Committee, may, with the agreement of the affected
optionee, cancel any stock option granted pursuant to the Plan. In the event
of such cancellation, the Committee may authorize the grant of a new option
for the same number of Common Shares specified in the cancelled stock option
or for a different number of Common Shares, at such option price and upon
terms and conditions which would have been applicable under the Plan had the
original cancelled stock option not been granted.
18. Effective Date. This Plan was adopted by the Board of Directors
and became effective on September 1, 1990, subject to approval by the
Corporation's shareholders on or before October 24, 1990. Options may be
granted prior to approval of the Plan by shareholders, but no such option may
be exercised until after the Plan has been approved by shareholders. If the
shareholders do not approve the Plan on or before October 24, 1990, all
options previously granted under the Plan shall terminate.
Approved by the Shareholders on October 24, 1990.
- 8 -
<PAGE>
Exhibit (10)(n)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1994
by Parker-Hannifin Corporation
Retirement Plan for Outside Directors
Minimum age: 65
Minimum service: 3 years (one full term)
Amount and duration: 50% of annual retainer in effect on date Director
retires, until the number of monthly payments made
equals the Director's months of service, or 120 monthly
payments have been made, or until death, whichever
occurs first.
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
Exhibit (10)(p)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1994
by Parker-Hannifin Corporation
Parker-Hannifin Corporation 1995 Target Incentive Bonus Plan
Description
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
PARKER-HANNIFIN CORPORATION 1995 TARGET INCENTIVE BONUS PLAN
A. Payments earned under the Bonus Plan depend upon the Company's
performance against a pre-tax return on average assets (ROAA) schedule
which is based upon the Fiscal Year 1995 operating plan.
B. The payout under the Plan ranges from 52% to 150% of each participant's
target award, with 100% payout set at achievement of fiscal year 1995
planned ROAA.
C. Any payout pursuant to the Plan that will result in the exceedance of
the $1 million cap on the tax deductibility of executive compensation
will be deferred until such time in the earliest subsequent fiscal year
that such cap will not be exceeded.
D. Participants: All of the executive officers of the Company, plus Group
Presidents who are not executive officers.
E. Fiscal year 1995 Planned ROAA: 12.0%
ROAA Payout Schedule
FY95 Percentage of Target
ROAA Award Paid
< 7.3% 0
7.3% 52%
8.1% 60%
9.1% 70%
10.1% 80%
11.1% 90%
12.0% 100%
12.7% 113%
13.4% 125%
14.1% 138%
14.7% 150%
F. ROAA will not include the impact of
1. Environmental costs in excess of planned amounts
2. Acquisitions\divestitures
3. Currency gains or losses
4. FASB-dictated accounting changes
<PAGE>
Exhibit (10)(s)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1994
by Parker-Hannifin Corporation
Parker-Hannifin Corporation 1995-96-97 Long Term Incentive
Plan Description
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
PARKER-HANNIFIN CORPORATION
1995-96-97
LONG TERM INCENTIVE PLAN
The purpose of the Plan is to provide a long-term incentive portion of bonus
compensation. The plan's focus is on return on equity. It balances a
competitive base salary pay structure, an annual cash bonus compensation based
on a return on average assets, and a stock option plan with ten-year exercise
rights. The return on equity objective is a key financial goal and
comprehends return on sales at the net income level and asset utilization.
The participants in this plan in the near term will be limited to Corporate
Officers and Group Presidents. They clearly can affect broadly the overall
financial performance of the company. At a later date, it could be expanded
to include Operating Vice Presidents and equivalent Corporate Staff positions.
The key elements of Parker-Hannifin's plan are as follows:
Participation
Those key executives having a critical impact on the long term performance of
the Company selected by the Chief Executive Officer and approved by the
Compensation and Management Development Committee of the Board.
Performance Period
Three-year average Return on Equity with the grant to cover FY 95, 96 and 97.
Size of Awards
Commensurate with bonus compensation and stock option level of participants as
determined by the CEO with approval of the Compensation and Management
Development Committee.
Performance Objective
The Return on Equity objective is 14%.
Value Range
Actual value of the payments under the Plan will be within a range of 25% to
200% of target value based on performance against the objective.
Performance Range
For performance below a threshold of 8% ROE objective, no payment will be
made. For performance between 8% and 20% ROE, payments will be earned between
25% and 200% of the target value on a proportional basis above and below the
target value. The plan is capped at 200%.
Payment
Payments earned under the plan will be paid at the end of the three-year
performance period. Payment will be made in restricted stock of the
Corporation unless the participant elects a cash payment to be deferred under
the Corporation's voluntary income deferral plan. The restricted shares would
be subject to a vesting schedule and such other terms and conditions
determined by the Compensation Committee at the time of issuance. Any payout
pursuant to this plan that will result in the exceedance of the $1 million cap
on the tax deductibility of executive compensation will be deferred until such
time in the earliest subsequent fiscal year that such cap will not be
<PAGE>
exceeded.
Termination of Employment
If a participant dies, retires (with consent of the Compensation and
Management Development Committee if earlier than age 60) or is disabled during
the performance period, he will receive a pro rata portion of the award
payable upon completion of the performance period. A participant who resigns
or is otherwise terminated during the performance period forfeits the award.
Performance Schedule
The Plan performance schedule, based on the three year simple average of
annual report Return on Equity, is as follows:
Return on Equity
_________________________________________________________________________
<8.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0%
_____ ____ _____ _____ _____ _____ _____ _____
Payout % 0 25 50 75 100 133 167 200
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT (11)* TO REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED JUNE 30, 1994
PARKER-HANNIFIN CORPORATION
COMPUTATION OF COMMON SHARES OUTSTANDING
AND EARNINGS PER SHARE
(Amounts in thousands, except per share amounts)
1994 1993 1992
<S> <C> <C> <C>
Net income applicable to common shares $ 47,652 $ 65,056 $ 11,218
Adjustments for convertible securities:
Interest on 4% convertible debentures 3
Tax effect on interest deduction (1)
_________ _________ _________
Net income applicable to common shares,
assuming conversion of the above securities $ 47,652 $ 65,056 $ 11,220
========= ========= =========
Weighted average common shares outstanding
for the year 48,738 48,473 48,286
Increase in weighted average from:
Conversion of 4% convertible debentures 4
Dilutive effect of stock options 271 140 152
_________ _________ _________
Weighted average common shares, assuming
issuance of the above securities 49,009 48,613 48,442
========= ========= =========
Earnings per common share:
On the weighted average common shares
outstanding for the year $ .98 $ 1.34 $ 0.23
Assuming issuance of shares for
convertible debentures and
dilutive stock options** $ .97 $ 1.34 $ 0.23
* Numbered in accordance with Item 601 of Regulation S-K.
** This calculation is submitted in accordance with Regulation S-K
Item 601(b)(11) although not required for income statement presentation
because it results in dilution of less than three percent.
</TABLE>
<PAGE>
Exhibit (13)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1994
by Parker-Hannifin Corporation
Excerpts from Annual Report to Shareholders for the fiscal year ended
June 30, 1994.
*Numbered in accordance with Item 601 of Regulation S-K.
DISCUSSION OF STATEMENT OF INCOME
The Consolidated Statement of Income summarizes Parker's operating
performance over the last three years. During this period the Company
reorganized extensively to respond to market changes. The North American
Industrial markets experienced a strong recovery during the latter half of
fiscal 1993 and all of fiscal 1994. The reorganization of prior years
helped these operations prepare for this growth and for margin
improvement. Recessions in Europe and Latin America caused volume
declines in the International Industrial markets during these years which
led to significant reorganization and downsizing. In late fiscal 1994
these markets also began to show signs of recovery which the Company
believes could be as strong as in North America. The commercial airline
and military aerospace markets have also experienced significant declines
in all three years, causing significant reorganization and downsizing, as
well as the impairment of certain long-term assets. The declines in these
markets continue to be a concern, but the Aerospace Segment has
reorganized itself to maintain very good margins in spite of market
conditions.
In analyzing the results, it should be noted that 1994 included the effect
of an extraordinary charge for the early-retirement of debt which is
explained in Note 7 to the Consolidated Financial Statements. The 1993
results include the effect of a 13th month for the International
operations, to bring the year-end of those operations to June 30,
explained in Note 1. Also, the 1992 results include the effects of two
accounting changes, explained in Note 1.
Net Sales of $2.58 billion for fiscal 1994 were 3.5 percent higher than
$2.49 billion in 1993. Without the additional month in 1993 for
International, the 1994 increase would have been 5.7 percent. Fiscal 1993
sales increased 4.8 percent from $2.38 billion in 1992. North American
Industrial operations experienced continued strong demand in the heavy-
duty truck, construction and farm equipment, and machine-tool industries.
In addition, these operations captured additional market share from
competitors that have not been able to meet customer demands. However,
the continuing recession in the International markets and the continuing
slump in the commercial airline industry, as well as lower spending for
military aircraft, partially offset these record-setting results.
Increased volume of the North American Industrial operations is
Page 13-1
<PAGE>
anticipated to continue and current order trends indicate that
International operations are showing signs of recovery. On the other
hand, Aerospace markets are expected to continue to decline into 1995,
with recovery anticipated in 1996. With a presence on virtually every
significant current commercial and military aircraft program, any
improvements in aerospace markets should benefit Parker.
Net income for 1994 was 26.8 percent lower than 1993. Without the
additional month of operating results in 1993, the decline would have been
25.5 percent. Income for 1994 was reduced by $56.5 million, primarily for
the reduction in book value of certain long-term assets, downsizing and
relocation activities, compared to $14.7 million and $10.3 million for
downsizing and relocations in 1993 and 1992, respectively. Without these
charges the Industrial operations achieved a significant increase in
earnings, as a result of higher volume and reduced losses by International
operations.
Net income for 1993 increased more than five times over 1992 primarily
due to the one-time adjustments in 1992 for the cumulative effects of
changes in two accounting principles described in Note 1 to the
Consolidated Financial Statements. Income before the effect of these
changes increased 2.5 percent in 1993, primarily as a result of the North
American Industrial operations achieving improved earnings in spite of
competitive pressures.
Extraordinary item - extinguishment of debt of $4.5 million in 1994 is
due to the redemption premiums and deferred issuance costs related to the
early-retirement of $100.0 million of 9.45 percent debentures and $3.5
million of Australian long-term bearer bonds. See Note 7 for further
description.
Income before extraordinary item and cumulative effect of changes in
accounting principles as a percentage of sales was 2.0 percent in 1994,
down from 2.6 percent in 1993 and 2.7 percent in 1992. A summary of the
changes follows:
% to Sales Change
(Decrease) Increase in Income 1994-93 1993-92
____________________________________________ ________ ________
Gross profit .9 .5
Selling, general & admin. expenses .8 (.6)
Provision for business restructuring activities .2 (.3)
Impairment of long-term operating assets (1.4)
Interest expense .4 .3
Loss on disposal of assets (.7)
Other (.2)
Income taxes (.6)
____________________________________________ ________ ________
Income before extraordinary item and cumulative
effect of changes in accounting principles (.6) (.1)
____________________________________________ ________ ________
Page 13-2
<PAGE>
Gross profit margin increased to 20.3 percent in 1994 from 19.4 percent
in 1993 and 18.9 percent in 1992. Increased production levels in North
American Industrial operations provided increased margins and better
absorption of fixed costs. Also, the benefits of restructuring activities
are being realized in the margin returns and are expected to benefit
future years as well.
Selling, general and administrative expenses as a percent of sales
decreased to 11.7 percent, from 12.5 percent in 1993 and 11.9 percent in
1992. Increased sales volume and efficiencies as a result of
reorganizations have contributed to the improvements in 1994. The
increase in 1993 was primarily a result of increased selling and
promotional efforts to penetrate new markets and to maintain market share
in growing domestic markets, as well as to keep market share in some
extremely competitive shrinking markets.
Provision for business restructuring activities is the result of
continued actions aimed at reducing costs and has included downsizing,
plant closings and relocations, and write-offs of related capital assets.
Severance costs have been $38.9 million for the three years. All of the
actions taken are expected to result in reduced overhead charges in the
future.
The Industrial Segment, over the past three years, has incurred
restructuring charges of $12.3 million, $13.6 million and $11.0 million,
respectively. The North American Industrial operations incurred
restructuring charges of $5.4 million in 1994, which primarily involved
the relocation or consolidation of higher-cost and under-utilized
facilities. Severance charges of $1.2 million were recorded for the
reduction of 51 employees in 1994 and the planned reduction of 107
employees in 1995. Savings as a result of these actions are estimated to
be $.8 million in 1995 and an additional $1.4 in 1996. Net cash outflow
from these actions is estimated to be $2.6 million in 1995 and $.9 million
in 1996. International's restructuring charges of $6.9 million in 1994
were primarily for severance costs for 159 employees (106 employees in
1994 and the remainder in 1995) and the consolidation of under-utilized
facilities. Savings from these actions are anticipated to be $1.8 million
in 1995 and an additional $1.2 million in 1996. Net cash outflow is
estimated to be $2.0 million in fiscal 1995 and $.2 in 1996.
The Aerospace operations incurred restructuring costs of $6.5 million in
1994, compared to $9.3 million in 1993 and $3.8 million in 1992.
Management continues to adjust to the changing market by reducing factory
and office floor space and organizing into customer-focused teams to more
effectively serve the customer. These charges included a workforce
reduction of 597 employees (296 in 1994 and 301 in 1995) and relocation
costs for three facilities which will result in lower costs and enhanced
capacity utilization in 1995. The savings from these actions are
estimated to be $3.8 million in 1995 and an additional $4.4 million in
1996. Net cash outflow is estimated to be $2.4 million in 1995 and $1.2
million in 1996.
Page 13-3
<PAGE>
Impairment of long-term operating assets of $35.5 million in 1994
includes $28.9 million related to the write-down of goodwill and certain
permanently impaired assets of the continuing operations of the Aerospace
heat-transfer components product line. This product line was purchased
during a period of heavy defense spending in 1987 and the related goodwill
was being amortized over 40 years. However, with the completion of major
contracts and the decline of aerospace markets, future cash flows are now
estimated to be less than the carrying value of the related assets.
Accordingly, the assets were written down to their recoverable value.
While the effect of this charge will have no cash impact, it will reduce
amortization and depreciation expenses $1.6 million per year. The
remaining impairment charges relate primarily to certain machinery and
equipment used in operations in unprofitable product lines in Brazil and
Germany. Since the future cash flows of these product lines were
anticipated to be less than the carrying value of the related assets, the
machinery and equipment for these product lines were written down to their
estimated recoverable value. The effect of these charges will have no
cash impact but will reduce depreciation expense $.7 million per year in
1995 and 1996.
Interest expense decreased by $9.2 million in 1994 and by $5.1 million
in 1993 principally due to reductions in debt.
Loss on disposal of assets was $19.6 million in 1994, $14.7 million of
which was due to impairment of idle properties. These properties became
idle due to downsizing activities. Management has decided to sell or
lease these properties in the near term. Accordingly, the assets were
written-down to their estimated recoverable value based on today's
markets. The 1994 loss on disposal of assets was also affected by a
charge of $1.3 million for the estimated net loss on the sale of the Metal
Bellows operations. The 1993 loss on disposal was comparable to 1992.
All years reported include losses from fixed asset disposals not part of a
plant closing. Losses on the disposal of assets from a plant closing are
included in the Provision for business restructuring activities.
Income taxes increased to an effective rate of 53.6 percent in 1994 from
a rate of 39.8 percent in 1993 and 1992. This increase was primarily due
to receiving no federal or state tax benefit for the charge taken to write
down goodwill, and for tax rate changes enacted in the United States and
Germany.
DISCUSSION OF BALANCE SHEET
The Consolidated Balance Sheet shows the Company's financial position at
year end, compared with the previous year end. This statement provides
information to assist in assessing factors such as the Company's liquidity
and financial resources.
The current ratio at June 30, 1994 was lower than the ratio at June 30,
1993, principally due to the decrease of cash and cash equivalents.
Page 13-4
<PAGE>
Working Capital (millions) 1994 1993
__________________________ _______ ________
Current Assets $ 1,018 $ 1,056
Current Liabilities 504 468
Working Capital 514 588
Current Ratio 2.0 2.3
Accounts receivable are primarily due from customers for sales of
product ($347.4 million at June 30, 1994, compared to $316.3 million at
June 30, 1993). The current year increase is primarily due to increased
sales volume, but also increased slightly due to acquisitions. These
increases were offset by the effects of currency rate changes in
hyperinflationary countries. Lower sales volume in the Aerospace business
offset the increased sales volume in the North American Industrial
operations. Days sales outstanding for the Company improved from 1993.
Inventories were $492.9 million at June 30, 1994, compared to $499.7
million a year ago. Reduced Aerospace inventories were nearly offset by
increases in the Industrial Segment inventories, reflecting volume changes
in these segments. Months supply of inventory on hand at June 30, 1994
decreased from 1993.
Accounts payable, trade increased $56.0 million in 1994 primarily within
the Industrial operations. The majority of the increase is due to higher
volume within the North American Industrial operations and current year
acquisitions. The Aerospace accounts payable, trade remained constant
with the prior year.
Accrued domestic and foreign taxes increased $16.7 million in 1994 as a
result of the increase in domestic taxable income during the current year
and the increase in the Federal income tax rate.
Other accrued liabilities increased $17.3 million in 1994 as a result of
an increase in accrued pension liabilities and an increase in accruals
related to restructuring activities.
Notes payable and Long-term debt decreased a total of $180.9 million
primarily due to the retirement of $100 million of 9.45 percent debentures
due 1997 through 2016, the retirement of $35.1 million of foreign bearer
bonds due in 1994 and a reduction of the ESOP debt guarantee by $11.1
million.
Pensions and other postretirement benefits increased $11.6 million to
$169.1 million in 1994. These costs are explained further in Note 9 to
the Consolidated Financial Statements.
Deferred income taxes included in current assets increased by $12.6
million due largely to the downsizing and relocation charges taken in the
current year that are not deductible for income tax purposes until paid.
Page 13-5
<PAGE>
Non-current deferred income tax assets increased $13.8 million in Germany
for the funding of a portion of their pension obligation, and for a change
in the tax accounting for inventory. Non-current deferred income tax
liabilities decreased $9.3 million, primarily because of reductions in the
book/tax basis difference of depreciable assets and the tax benefit on the
increase in the liabilities for other postretirement benefits.
At June 30, 1994, non-current deferred income tax assets include a $22.8
million tax benefit for the net operating loss carryforwards of the
Company's German operations. The Company has not provided a valuation
allowance that would be required under Statement of Financial Accounting
Standards (SFAS) No. 109 if it is more likely that these benefits would
not be realized. Although future events cannot be predicted with
certainty, management believes these benefits will be realized because:
the tax loss carryforward period is unlimited; there are several tax
planning strategies that can be used to reduce the carryforward; and the
Company expects its German operations to return to their pre-1991
profitability levels within the near future, because 26 percent of the
recent losses were due to non-recurring restructuring charges and the
remainder was primarily the result of the recession in Europe.
It is the Company's goal to maintain no less than an "A" rating on
senior debt to ensure availability and reasonable cost of external funds.
To meet this objective, the Company has established the financial goal of
maintaining a ratio of debt to debt-equity of 30 to 33 percent. The
calculation of the debt to debt-equity ratio at June 30, 1994 and 1993
includes the Company's loan guarantee to the trust established by the
Company for the Employee Stock Ownership Plan as described more fully in
Note 7. Excluding the effect of the loan guarantee on both Long-term debt
and Shareholders' equity, the debt to debt-equity ratio at June 30, 1994
and 1993 was 20.7 percent and 30.6 percent, respectively.
Debt to Debt-Equity Ratio (millions) 1994 1993
____________________________________ _______ _______
Debt $ 284 $ 465
Debt & Equity 1,251 1,398
Ratio 22.7 % 33.3 %
The Company has negotiated a principal revolving credit agreement with
several banks under which it may borrow up to $50 million. Upon agreement
with the banks, this may be increased to $200 million and is intended to
support financing for worldwide operating needs as well as any commercial
paper borrowings. At June 30, 1994, $.7 million was outstanding on this
credit line. There are also other lines of credit with various foreign
banks (with credit limits totaling $55 million) which provide short-term
financing for the Company's operations overseas. At June 30, 1994, $11
million was outstanding from these credit lines. The Company is also
currently authorized by the Board of Directors to sell up to $200 million
of commercial paper notes. At June 30, 1994, there were no commercial
paper notes outstanding.
Page 13-6
<PAGE>
In fiscal 1995, no additional borrowings are anticipated to be used for
the stock repurchase program, capital investments, or working capital
purposes, but may be utilized for acquisitions.
DISCUSSION OF CASH FLOWS
The Consolidated Statement of Cash Flows reflects cash inflows and
outflows from the Company's operating, investing and financing activities.
Related noncash investing and financing transactions that affect the
Company's financial position, but do not directly affect cash flows during
the period, are disclosed separately in Note 1 to the Consolidated
Financial Statements.
Cash and cash equivalents decreased $78.4 million in 1994; but increased
$59.9 million in 1993. The major components of these changes in cash
flows are as follows:
Cash Flows From Operating Activities -- The Company's largest source of
cash continues to be net cash provided by operating activities. The
charge for the impairment of long-term assets ($52.4 million) does not
require the use of cash and therefore is a reconciling item added to Net
income. Changes in the principal working capital items--Accounts
receivable, Inventories and Accounts payable, trade--contributed $24.4
million in 1994, $19.4 million in 1993 and $50.8 million in 1992.
Increased Accounts receivable in 1994 were more than offset by increased
Accounts payable, trade. Inventory reductions have provided cash for the
last three years, but not as significantly in the current year as in the
past.
Cash Flows From Investing Activities -- Capital expenditures are a
principal use of long-term funds and have averaged $92.1 million per year
for the 1992-1994 period. Capital expenditures increased slightly to
$99.9 million in 1994 and are expected to increase again in 1995.
Financing is expected to come from internally generated cash flows.
Proceeds from dispositions of business provided $13.7 million cash in 1994.
Cash used for Acquisitions was $39.4 million in 1994 and $35.6 million in
1993. Acquisition amounts shown represent the net assets of the acquired
companies at their respective acquisition dates and consist of the
following:
(In thousands) 1994 1993 1992
________________________________ ________ ________ ________
Assets acquired:
Accounts receivable $ 2,906 $ 4,349 $ 174
Inventories 6,278 4,907 3,175
Prepaid expenses 2,146 113
Deferred income taxes 256 635
Plant & equipment 10,299 23,491 6,127
Other assets 22,539 8,428
________ ________ ________
44,424 41,810 9,589
Page 13-7
<PAGE>
Liabilities assumed:
Notes payable 298
Accounts payable 1,260 1,374 15
Accrued payrolls 1,977 988 97
Accrued taxes 204 884
Other accrued liabilities 1,222 2,694 83
Long-term debt 375
Other liabilities (60) 229
________ ________ ________
4,978 6,169 493
________________________________ ________ ________ ________
Net assets acquired $ 39,446 $ 35,641 $ 9,096
======== ======== ========
Cash Flows From Financing Activities -- In 1994 the Company reduced
its outstanding borrowings by a net total of $172.3 million. Payments of
long-term borrowings were primarily the early-retirement of $100.0 million
of debentures, the retirement of $35.1 million in foreign bearer bonds and
the elimination of certain foreign bank loans. In 1993 the Company's
notes payable and long-term borrowings activity remained fairly steady,
resulting in net proceeds of $3.2 million.
Dividends have been paid for 176 consecutive quarters, including a
yearly increase in dividends for the last 38 fiscal years. The current
annual dividend rate is $1.00 per share.
In summary, based upon the Company's past performance and current
expectations, management believes that the cash flows generated from
future operating activities, combined with the Company's worldwide
financial capabilities, will provide adequate funds to support planned
growth and continued improvements in Parker's manufacturing facilities and
equipment.
DISCUSSION OF BUSINESS SEGMENT INFORMATION
The Business Segment Information presents sales, operating income and
assets by the principal industries and geographic areas in which Parker's
various businesses operate. The Industrial Segment results for 1993
include the effect of a 13th month for the International operations. See
Note 1 to the Consolidated Financial Statements.
Industrial Segment operating income as a percent of sales increased to
9.2 percent in 1994 from 7.2 percent in 1993 and 7.0 percent in 1992.
Return on average assets was 14.0 percent in 1994, 10.6 percent in 1993
and 9.5 percent in 1992.
.........% Change........
Increase (Decrease) 1994-93 1993-92 1992-91
___________________________ _______ _______ _______
Sales 8.7 8.9 (2.0)
Operating income 38.8 12.8 (7.9)
Assets 8.0 1.2 1.8
Page 13-8
<PAGE>
Sales for the North American operations increased 15.5 percent over
1993, while sales for the International operations declined 6.9 percent.
Without the effect of the extra month for International operations in
1993, sales for International would have increased 2.3 percent in 1994.
North American Industrial sales achieved record levels through increased
shipments to heavy-duty truck, construction and farm equipment, and
machine-tool customers. International Industrial sales continued to be
affected by the recession in Europe and Latin America and were reduced by
the effects of currency rate changes. Sales for 1993, without the effect
of the extra month for International operations, increased 6.5 percent over
1992. North American sales increased 10.3 percent while International sales
decreased 1.6 percent. The North American markets began experiencing
increased volume during 1992 which continued throughout 1993. As in 1994
the recession lowered volume for the International operations. Backlog
was $318.8 million at June 30, 1994, compared to $245.5 million at the end
of the prior period, primarily due to increases in North America.
Operating income for the total segment increased 38.8 percent in 1994.
North American operations improved 33.4 percent, while operating losses
for the International operations, without the effect of the extra month of
operations in 1993, were reduced by 16.0 percent. Total segment Operating
income for 1993, without the effect of an extra month for International
operations, increased 13.8 percent, with North America experiencing a 29.5
percent increase, offset by a significant decline in the International
operations. The significant improvements in both years, for the North
American operations, were due to volume gains which increased capacity
utilization and therefore improved the absorption of fixed costs. These
gains were offset by a continuing recession in the International
operations which caused under-absorption of fixed costs as a result of
reduced volume. In addition, the International operations recognized the
impairment of long-term assets ($6.6 million pretax), primarily relating
to certain machinery and equipment used in operations for unprofitable
product lines in Brazil and Germany. Despite these charges, the
International results improved in 1994 and the total segment experienced
margin improvements as a result of prior years' restructuring activities.
Assets for the Industrial segment increased 8.0 percent in 1994 and
increased only slightly in 1993. The 1994 increase is primarily due to
increased customer accounts receivable and inventories as a result of
increased volume in the North American Industrial markets and acquisitions
in both North America and International. Net plant and equipment
increased due to capital expenditures exceeding depreciation as well as
acquisitions, but these increases were offset by write-downs of impaired
assets. Acquisitions also caused an increase in goodwill. Deferred taxes
increased for the tax benefits of partially funding the pension obligation
and an inventory tax accounting change in Germany. The slight increase in
assets in 1993 was due to increases in short-term investments, customer
receivables, and deferred taxes, partially offset by a decrease in the
inventory balance as a result of currency rate changes. The increase in
customer receivables was due to increased volume in North America and the
Page 13-9
<PAGE>
increase in deferred tax assets was caused by the tax benefits of
increased operating loss carryforwards in Germany. The increase in short-
term investments was principally due to the International operations'
investment of cash generated by their operating activities.
Aerospace Segment operating income as a percent of sales decreased to
3.3 percent from 8.5 percent in 1993 and 10.2 percent in 1992. Return on
average assets was 4.4 percent in 1994, 10.7 percent in 1993 and 12.1
percent in 1992.
.........% Change........
Increase (Decrease) 1994-93 1993-92 1992-91
_____________________________ _______ _______ _______
Sales (12.1) (5.9) (4.4)
Operating income (66.1) (21.3) 2.3
Assets (23.5) (13.4) (8.7)
Sales decreased 12.1 percent in 1994, and 5.9 percent in 1993,
reflecting cutbacks in defense and commercial aircraft deliveries. The
divestiture of the Metal Bellows operations also contributed to the 1994
decline. The Aerospace segment has continued to increase its penetration
of commercial markets, with results approaching a split of nearly 60/40
between commercial and military revenues. Backlog at June 30, 1994 was
$533.7 million as compared to $611.1 million at the end of the prior
period, reflecting decreased military spending, fewer new aircraft
deliveries and lower aftermarket volume.
Operating income decreased 66.1 percent in 1994 and 21.3 percent in
1993. The significant decrease in 1994 is due to the recognition of
impairment losses of $28.9 million pretax in the third quarter related to
the write-down of goodwill and permanently impaired assets of the
continuing operations of the heat-transfer components product line. The
decline experienced in 1994 was also due to under-absorption of fixed
costs as a result of reduced volume, offset by gains that are being
realized as a result of prior years' restructurings. The 1993 decline was
due to higher restructuring costs than the prior year.
Assets decreased 23.5 percent in 1994 and 13.4 percent in 1993,
primarily due to reductions in customer receivables, inventories and net
plant and equipment, and in 1994 the write-down of goodwill related to
impaired assets and the divestiture of the Metal Bellows operations. The
decrease in customer receivables and inventories are both the result of
the lower volume experienced during the respective years. Inventories in
1993 were also affected by write-offs of excess and obsolete materials.
Net plant and equipment decreased as a result of downsizing and
consolidation of facilities as well as from write-downs of impaired assets
in 1994.
Page 13-10
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
For the years ended June 30, 1994 1993 1992
<S> <C> <C> <C>
NET SALES $ 2,576,337 $ 2,489,323 $ 2,375,808
Cost of sales 2,053,376 2,004,955 1,925,800
___________ ___________ ___________
Gross profit 522,961 484,368 450,008
Selling, general and administrative expenses 302,668 310,765 282,861
Provision for business restructuring activities 18,773 22,879 14,798
Impairment of long-term operating assets 35,483
___________ ___________ ___________
INCOME FROM OPERATIONS 166,037 150,724 152,349
Other income (deductions):
Interest expense (37,832) (47,056) (52,190)
Interest and other income, net 3,879 5,457 6,380
Loss on disposal of assets (19,635) (1,059) (1,148)
___________ ___________ ___________
(53,588) (42,658) (46,958)
Income before income taxes 112,449 108,066 105,391
Income taxes (Note 3) 60,274 43,010 41,912
___________ ___________ ___________
Income before extraordinary item and cumulative
effect of changes accounting principles 52,175 65,056 63,479
Extraordinary item - extinguishment of debt (Note 7) (4,523)
Cumulative effect - change in accounting for
postretirement benefits (Notes 1 and 9) (60,619)
Cumulative effect - change in accounting for income
taxes (Notes 1 and 3) 8,358
___________ ___________ ___________
NET INCOME $ 47,652 $ 65,056 $ 11,218
=========== =========== ===========
EARNINGS PER SHARE: (Note 4)
Earnings per share before extraordinary item
and cumulative effect of changes in
accounting principles $ 1.07 $ 1.34 $ 1.32
Extraordinary item - extinguishment of debt (.09)
Cumulative effect - change in accounting for
postretirement benefits (1.26)
Cumulative effect - change in accounting for
income taxes .17
___________ ___________ ___________
Earnings per share $ .98 $ 1.34 $ .23
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
Page 13-11
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
June 30, 1994 1993
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 81,590 $ 159,985
Accounts receivable, less allowance for doubtful
accounts (1994 - $4,731; 1993 - $4,146) 388,515 354,338
Inventories (Notes 1 and 5):
Finished products 245,068 236,160
Work in process 171,114 191,957
Raw materials 76,748 71,591
___________ ___________
492,930 499,708
Prepaid expenses 14,263 13,934
Deferred income taxes (Notes 1 and 3) 41,056 28,478
___________ ___________
TOTAL CURRENT ASSETS 1,018,354 1,056,443
Plant and equipment (Note 1):
Land and land improvements 81,900 81,455
Buildings and building equipment 387,764 376,576
Machinery and equipment 1,114,708 1,078,896
Construction in progress 37,456 32,422
___________ ___________
1,621,828 1,569,349
Less accumulated depreciation 904,528 833,293
___________ ___________
717,300 736,056
Investments and other assets (Note 1) 97,137 93,532
Excess cost of investments over net assets acquired (Note 1) 51,516 62,896
Deferred income taxes (Notes 1 and 3) 28,483 14,663
___________ ___________
TOTAL ASSETS $ 1,912,790 $ 1,963,590
=========== ===========
Page 13-12
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable, including long-term debt
payable within one year (Notes 6 and 7) $ 26,973 $ 86,641
Accounts payable, trade 181,148 125,127
Accrued payrolls and other compensation 79,497 73,715
Accrued domestic and foreign taxes 57,641 40,917
Other accrued liabilities 159,185 141,854
___________ ___________
TOTAL CURRENT LIABILITIES 504,444 468,254
Long-term debt (Note 7) 257,259 378,476
Pensions and other postretirement benefits (Notes 1 and 9) 169,081 157,513
Deferred income taxes (Notes 1 and 3) 8,052 17,349
Other liabilities 7,603 9,098
___________ ___________
TOTAL LIABILITIES 946,439 1,030,690
SHAREHOLDERS' EQUITY (Note 8)
Serial preferred stock, $.50 par value, authorized
3,000,000 shares, none issued
Common stock, $.50 par value, authorized 150,000,000 shares;
issued 49,265,074 shares in 1994 and 1993 at par value 24,633 24,633
Additional capital 165,942 164,430
Retained earnings 806,240 806,033
Deferred compensation related to guarantee of ESOP
debt (Note 7) (25,697) (36,764)
Foreign currency translation adjustments 2,538 (10,533)
973,656 947,799
Common stock in treasury at cost; 325,371 shares in 1994
and 663,701 shares in 1993 (7,305) (14,899)
___________ ___________
TOTAL SHAREHOLDERS' EQUITY 966,351 932,900
___________ ___________
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,912,790 $ 1,963,590
=========== ===========
The accompanying notes are an integral part of the financial statements
</TABLE>
Page 13-13
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
For the years ended June 30, 1994 1993 1992
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 47,652 $ 65,056 $ 11,218
Adjustments to reconcile net income to net cash
provided by operating activities:
Net effect of extraordinary loss 4,523
Cumulative effect of changes in accounting principles 52,261
Depreciation 106,546 109,673 102,628
Amortization 6,523 4,483 4,385
Deferred income taxes (34,000) (14,525) (16,622)
Foreign currency transaction loss 3,563 983 4,243
Loss on sale of plant and equipment 2,849 1,003 3,477
Provision for restructuring (excluding cash payments
of $20,214 in 1994, $7,300 in 1993 and $15,538 in 1992) (1,441) 15,579 (740)
Impairment of long-term assets 52,422
Changes in assets and liabilities, net of effects from
acquisitions and dispositions:
Accounts receivable (45,387) (17,873) (20,626)
Inventories 11,247 39,716 69,403
Prepaid expenses 1,887 (260) (1,500)
Other assets (6,719) (4,095) (7,763)
Accounts payable, trade 58,497 (2,464) 1,990
Accrued payrolls and other compensation 9,568 6,388 12,166
Accrued domestic and foreign taxes 22,630 23,409 10,618
Other accrued liabilities 11,364 3,953 (3,131)
Pensions and other postretirement benefits 8,971 1,609 16,594
Other liabilities (1,491) (3,253) (3,415)
_________ _________ _________
Net cash provided by operating activities 259,204 229,382 235,186
Page 13-14
<PAGE>
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions (excluding cash of $2,661 in 1994 and
$503 in 1992) (39,446) (35,641) (9,096)
Capital expenditures (99,914) (91,484) (84,955)
Proceeds from sale of plant and equipment 5,774 3,440 6,548
Proceeds from disposition of business 13,689
Other (362) (4,324) (1,740)
_________ _________ _________
Net cash (used in) investing activities (120,259) (128,009) (89,243)
CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of stock options 9,105 4,645 5,350
(Payments of) proceeds from notes payable, net (18,888) 14,673 (21,469)
Proceeds from long-term borrowings 3,619 8,528 2,465
Payments of long-term borrowings (157,026) (19,960) (27,759)
Extraordinary loss on early retirement of debt (7,238)
Dividends paid, net of tax benefit of ESOP shares (47,445) (46,121) (44,382)
_________ _________ _________
Net cash (used in) financing activities (217,873) (38,235) (85,795)
Effect of exchange rate changes on cash 533 (3,206) 1,062
_________ _________ _________
Net (decrease)increase in cash and cash equivalents (78,395) 59,932 61,210
Cash and cash equivalents at beginning of year 159,985 100,053 38,843
_________ _________ _________
Cash and cash equivalents at end of year $ 81,590 $ 159,985 $ 100,053
========= ========= =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
Page 13-15
<PAGE>
<TABLE>
<CAPTION>
BUSINESS SEGMENT INFORMATION - BY INDUSTRY
(Dollars in thousands)
1994 1993 1992
<S> <C> <C> <C>
NET SALES, including intersegment sales:
Industrial:
North America $ 1,498,612 $ 1,297,474 $ 1,176,690
International 529,891 568,984 537,457
Aerospace 548,091 623,239 662,276
Intersegment sales (257) (374) (615)
___________ ___________ ___________
$ 2,576,337 $ 2,489,323 $ 2,375,808
=========== =========== ===========
INCOME FROM OPERATIONS before corporate
general and administrative expenses:
Industrial:
North America $ 204,778 $ 153,525 $ 118,568
International (17,502) (18,579) 1,066
Aerospace 18,001 53,093 67,439
___________ ___________ ___________
205,277 188,039 187,073
Corporate general and administrative expenses 39,240 37,315 34,724
___________ ___________ ___________
Income from operations 166,037 150,724 152,349
Other deductions 53,588 42,658 46,958
___________ ___________ ___________
Income before income taxes $ 112,449 $ 108,066 $ 105,391
=========== =========== ===========
IDENTIFIABLE ASSETS: (a)
Industrial $ 1,386,660 $ 1,283,728 $ 1,268,952
Aerospace 353,635 462,538 534,050
___________ ___________ ___________
1,740,295 1,746,266 1,803,002
Corporate assets (b) 172,495 217,324 155,118
___________ ___________ ___________
$ 1,912,790 $ 1,963,590 $ 1,958,120
=========== =========== ===========
PROPERTY ADDITIONS: (c)
Industrial $ 99,710 $ 104,669 $ 79,137
Aerospace 9,675 7,981 8,096
Corporate 828 2,325 3,849
___________ ___________ ___________
$ 110,213 $ 114,975 $ 91,082
=========== =========== ===========
Page 13-16
<PAGE>
DEPRECIATION:
Industrial $ 82,796 $ 83,333 $ 72,794
Aerospace 20,475 23,117 26,927
Corporate 3,275 3,223 2,907
___________ ___________ ___________
$ 106,546 $ 109,673 $ 102,628
=========== =========== ===========
(a) Identifiable assets for 1992 were restated to reclassify
certain prepaid pension costs to be consistent with 1994
and 1993 reporting.
(b) Corporate assets are principally cash and cash equivalents,
domestic deferred income taxes, investments, headquarters
facilities, idle facilities held for sale and the major portion
of the Company's domestic data processing equipment.
(c) Includes value of net plant and equipment at the date of
acquisition of acquired companies accounted for by the
purchase method (1994 - $10,299; 1993 - $23,491; 1992 - $6,127).
</TABLE>
<TABLE>
<CAPTION>
BUSINESS SEGMENT INFORMATION - BY GEOGRAPHIC AREA
(Dollars in thousands)
1994 1993 1992
<S> <C> <C> <C>
NET SALES, including interarea sales
North America $ 2,091,974 $ 1,957,014 $ 1,879,241
Europe 433,844 473,547 450,898
All Other 109,113 110,703 98,816
Interarea (58,594) (51,941) (53,147)
____________ ____________ ____________
$ 2,576,337 $ 2,489,323 $ 2,375,808
============ ============ ============
INCOME FROM OPERATIONS before corporate
general and administrative expenses:
North America $ 222,779 $ 206,618 $ 186,007
Europe (16,708) (22,404) (995)
All Other (794) 3,825 2,061
___________ ___________ ___________
205,277 188,039 187,073
Corporate general and administrative expenses 39,240 37,315 34,724
___________ ___________ ___________
Income from operations $ 166,037 $ 150,724 $ 152,349
=========== =========== ===========
Page 13-17
<PAGE>
IDENTIFIABLE ASSETS: (a)
North America $ 1,193,568 $ 1,272,589 $ 1,295,133
Europe 460,961 386,461 418,638
All Other 85,766 87,216 89,231
___________ ___________ ___________
1,740,295 1,746,266 1,803,002
Corporate assets (b) 172,495 217,324 155,118
___________ ___________ ___________
$ 1,912,790 $ 1,963,590 $ 1,958,120
=========== =========== ===========
</TABLE>
The Industrial Segment produces motion-control and fluid system
components for builders and users of various types of manufacturing,
packaging, processing, transportation, agricultural, and military
machinery, vehicles and equipment. The North American Industrial
business represents the largest portion of the Company's manufacturing
plants and distribution networks. The International Industrial operations
bring Parker products and services to countries outside of North America.
Through both overseas manufacturing and export, these International
operations supply a rapidly growing customer base in Europe, Asia Pacific
and Latin America.
The Aerospace Segment provides Parker components and systems for most of
the western-world's commercial, military and general-aviation aircraft and
turbine engines. Also, it performs a vital role in naval vessels,
land-based weapons systems, missiles, satellites and manned space vehicles.
This Segment serves original equipment and maintenance, repair and overhaul
customers worldwide.
Intersegment and interarea sales are recorded at fair market value.
There was no customer to whom sales were 3 percent or more of consolidated
sales.
Page 13-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts.)
1. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed in the preparation of the
accompanying consolidated financial statements are summarized below.
Basis of Consolidation - The consolidated financial statements
include the accounts of all domestic and foreign subsidiaries. All
material intercompany transactions and profits have been eliminated in
the consolidated financial statements.
Financial Instruments - The Company has provided fair value estimates
and information about valuation methodologies of financial instruments
in this note and Note 7 to the financial statements. The Company's
financial instruments consist primarily of investments in cash, cash
equivalents and long-term investments as well as obligations under notes
payable and long-term debt.
Cash - Cash equivalents consist of short-term highly liquid
investments, with a three month or less maturity, carried at cost plus
accrued interest, which are readily convertible into cash. The carrying
value for cash and cash equivalents approximates fair value.
1994 1993 1992
Cash paid for:
Interest, net of capitalized interest $ 34,221 $ 42,905 $ 46,974
Income taxes 71,375 39,148 49,190
Noncash financing activities:
Principal reduction of
ESOP debt guarantee 11,067 10,003 9,016
Inventories - Inventories are stated at the lower of cost or market.
The majority of domestic inventories are valued by the last-in, first-
out method and the balance of the Company's inventories are valued by
the first-in, first-out method.
Long-Term Contracts - The Company enters into long-term contracts for
the production of products. For financial statement purposes, sales are
recorded as deliveries are made (units of delivery method of percentage-
of-completion). Unbilled costs on these contracts are included in
inventory. Progress payments are netted against the inventory balances.
Provisions for estimated losses on uncompleted contracts are made in the
period in which such losses are determined.
Plant, Equipment and Depreciation - Plant and equipment are recorded
at cost and are depreciated principally using the straight-line method
for financial reporting purposes. Depreciation rates are based on
Page 13-19
<PAGE>
estimated useful lives of the assets. Improvements which extend the
useful life of property are capitalized, and maintenance and repairs are
expensed. When property is retired or otherwise disposed of, the cost
and accumulated depreciation are removed from the appropriate accounts
and any gain or loss is included in current income.
Investments and Other Assets - Investments in joint-venture companies
in which ownership is 50% or less are stated at cost plus the Company's
equity in undistributed earnings. These investments and the related
earnings are not material to the consolidated financial statements. The
carrying value of Investments and other assets approximates fair value.
Excess Cost of Investments - The excess cost of investments over net
assets acquired is being amortized, on a straight-line basis, over
various periods not exceeding 40 years. Unamortized cost in excess of
associated expected operating cash flows is considered to be impaired
and is written down to fair value.
Income Taxes - Income taxes are provided based upon income for
financial reporting purposes. Deferred income taxes arise from
temporary differences in the recognition of income and expense for tax
purposes. Tax credits and similar tax incentives are applied to reduce
the provision for income taxes in the year in which the credits arise.
Undistributed earnings of foreign subsidiaries are reinvested in their
operations. Accordingly, no provision is made for additional income
taxes that might be payable on the distribution of such earnings.
ACCOUNTING CHANGES
Concurrent Close - In fiscal 1993 the Company changed the end of the
twelve-month reporting period for subsidiaries outside of North America
from May 31 to June 30 to provide uniform reporting on a global basis.
Accordingly, an additional month of operating results (June 1993) for
these subsidiaries is included in the fiscal 1993 financial statements.
The results of this month for the affected subsidiaries were Net sales
of $40,089, Income (loss) from operations of $(1,191), Interest expense
of $1,122 and a Net income (loss) of $(1,484) or $(.03) per share. For
fiscal years 1992 and prior, the consolidated financial statements for
subsidiaries outside of North America were consolidated on the basis of
twelve-month periods ending May 31 and have not been restated.
When comparing fiscal 1994 to fiscal 1993 the additional month of
operating results for these subsidiaries would be June 1992. The
results of this month were Net sales of $50,801, Income from operations
of $2,263, Interest expense of $470 and Net income of $1,057 or $.02 per
share.
Page 13-20
<PAGE>
Accounting for Postretirement Benefits and Accounting for Income
Taxes - Effective July 1, 1991, the Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions and SFAS
No. 109, Accounting for Income Taxes. For postretirement benefits, the
Company changed its method from expensing the cost of medical and life
insurance claims when they are paid to accruing these costs during the
employees' active working career. For income taxes, the Company changed
its method from the deferred method to the asset and liability method.
Under this method, deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax basis of
the Company's assets and liabilities. These deferred taxes are measured
by the provisions of currently enacted tax laws.
Effects of SFAS No. 106 and 109 Accounting Changes - The cumulative
effects for these changes in accounting, for the periods prior to July
1, 1991, are shown separately in fiscal 1992. For postretirement
benefits, the cumulative effect was expense of $60,619 (after an income
tax benefit of $35,602). For income taxes, the cumulative effect was
income of $8,358, consisting of a $1,847 income tax benefit and $6,511
that was accounted for as an increase in Plant and equipment for prior
business combinations.
2. ACQUISITIONS AND DIVESTITURES
Acquisitions - In August 1994, the Company acquired the Automation
Division of Atlas Copco AB, a manufacturer of pneumatic components in
Sweden. Sales for the most recent fiscal year prior to acquisition
exceeded $35 million for this operation.
In April 1994 the Company purchased the assets of a leading
Scandinavian filter manufacturer, Finn-Filter Oy, for $9.6 million cash,
which included manufacturing locations in Urjala and Hyrynsalmi, Finland
and a sales subsidiary in Sweden. In December 1993 the Company
increased its ownership in LDI Pneutronics Corp., which specializes in
advanced-technology pneumatic valves and components for medical,
semiconductor, and analytical instrumentation markets, from 40 percent
to 100 percent, for an additional investment of $5.7 million. In
November 1993 the Company acquired the Electro-pneumatic Division of
Telemecanique in Evreux, France, a leading European manufacturer of
pneumatic products for industrial applications for $26.7 million cash.
Sales for these operations for their most recent fiscal year prior to
acquisition exceeded $63.2 million. These acquisitions were accounted
for by the purchase method.
During the year ended June 30, 1993, the Company acquired the Ross
hydraulic motor and hydrostatic steering controls business of TRW Inc.
located in Greeneville, Tennessee and Dusseldorf, Germany for
approximately $31.3 million cash. Sales for these operations for the
most recent fiscal year prior to acquisition exceeded $39 million. This
acquisition was accounted for by the purchase method.
Page 13-21
<PAGE>
During fiscal 1992, the Company acquired the assets of the hydraulic
hose business of Trelleborg AB located in Hoogezand, the Netherlands and
Sundsvall, Sweden for $8.0 million cash and the assets of FACOA, C.A. of
Puerto Ordaz, Venezuela, a manufacturer of hydraulic hose fittings, for
$1.1 million cash. Sales for these operations for the most recent
fiscal year prior to acquisition were approximately $14.5 million.
These acquisitions were accounted for by the purchase method.
Divestitures - Effective April 1, 1994, the Company divested nearly
all of the assets related to its Metal Bellows operations, which
manufactured welded and formed bellows, accumulators and other
fabricated assemblies, principally for the aerospace market. The sale
resulted in proceeds of $14.2 million. Sales for this product line, for
the most recent fiscal year, were approximately $30 million.
In December 1992, the Company purchased the assets of Gromelle S.A.,
a manufacturer of hydraulic and pneumatic quick couplings in Annemasse,
France. In August 1993, a French Court of Appeals rescinded the
purchase and on September 1 control of the operations was returned to an
administrator. On November 9, 1993 the Court of Appeals accepted a
purchase proposal submitted by another party and ordered the return of
the purchase price to the Company. The effects of this transaction are
not material to the Company's consolidated financial statements and were
reported as a disposition of business in fiscal 1994.
3. INCOME TAXES
Income taxes before extraordinary item and cumulative effect of changes
in accounting principles include the following:
1994 1993 1992
Federal $ 70,332 $ 45,523 $ 40,258
Foreign 10,004 5,470 10,749
State and local 14,376 6,940 6,908
Deferred (34,438) (14,923) (16,003)
$ 60,274 $ 43,010 $ 41,912
A reconciliation of the Company's effective income tax rate to the
statutory Federal rate follows:
1994 1993 1992
Statutory Federal income tax rate 35.0 % 34.0 % 34.0 %
State and local income taxes 6.1 4.0 4.0
FSC income not taxed (3.0) (2.7) (2.0)
Foreign tax rate difference .5 1.6 3.1
Foreign losses with no tax benefit 1.5 3.0 2.6
Foreign tax credits 1.1 .2 (3.0)
Recognized loss carryforwards .3 (3.4) (1.5)
Impairment losses with no tax benefit 9.0
Other 3.1 3.1 2.6
Effective income tax rate 53.6 % 39.8 % 39.8 %
Page 13-22
<PAGE>
Deferred income taxes are provided for the temporary differences
between the financial reporting basis and the tax basis of assets and
liabilities. The differences comprising the net deferred taxes shown on
the Consolidated Balance Sheet at June 30 were as follows:
1994 1993
Postretirement benefits $ 45,051 $ 33,425
Other liabilities and reserves 39,358 28,656
Long-term contracts 8,944 9,648
Operating loss carryforwards 38,403 39,036
Foreign tax credit carryforwards 3,093 1,263
Valuation allowance (11,035) (9,078)
Depreciation (57,848) (63,986)
Acquisitions (7,584) (11,420)
Inventory 4,048 (1,040)
Net deferred tax asset (liability) $ 62,430 $ 26,504
Change in net deferred tax asset (liability):
Provision for deferred tax $ 34,438 $ 14,923
Translation adjustment 1,978 (299)
Acquisitions (490)
Total change in net deferred tax $ 35,926 $ 14,624
At June 30, 1994, foreign subsidiaries had benefits for tax and
financial reporting operating loss carryforwards of $38,403 and $38,900,
respectively, most of which can be carried forward indefinitely. All of
the foreign tax credit carryforwards of $3,093 are available through 1995.
Provision has not been made for additional U.S. or foreign taxes on
undistributed earnings of certain international operations as those
earnings will continue to be reinvested. It is not practicable to
estimate the additional taxes, including applicable foreign withholding
taxes, that might be payable on the eventual remittance of such
earnings.
4. EARNINGS PER SHARE
Earnings per share are computed using the weighted average number of
shares of common stock outstanding during the year, adjusted for shares
issued in acquisitions accounted for as poolings of interests and stock
splits distributed to shareholders. Fully diluted earnings per share
are not presented because such dilution is not material.
5. INVENTORIES
Inventories valued on the last-in, first-out cost method are
approximately 40% in 1994 and 36% in 1993 of total inventories. The
current cost of these inventories exceeds their valuation determined on
the LIFO basis by $130,710 in 1994 and $130,610 in 1993. Progress
payments of $11,429 in 1994 and $12,964 in 1993 are netted against
inventories.
Page 13-23
<PAGE>
6. LINES OF CREDIT
At June 30, 1994, the Company had available $50,000 through a multi-
currency unsecured revolving credit agreement with a group of banks.
The interest on this credit agreement, which expires October 1996, is
based upon the type of debt advanced. The agreement also requires a
facility fee equal to 1/8 percent of the commitment per annum. Covenants
in the agreement include a limitation on the Company's debt to debt-
equity ratio. The Company had $660 outstanding under this credit line
at June 30, 1994.
The Company has other lines of credit, primarily short-term,
aggregating $55 million, from various foreign banks. Most of these
agreements are reviewed annually. At June 30, 1994, the Company had $11
million outstanding under these lines of credit.
The Company is also currently authorized to sell up to $200 million
of short-term commercial paper notes. These notes are rated A-1 by
Standard & Poor's and P-2 by Moody's. There were no commercial paper
notes outstanding at June 30, 1994 or 1993.
7. LONG-TERM DEBT
Long-term debt at June 30 consists of the following:
1994 1993
Domestic:
Debentures and notes
9.86%, due 1995-1999 $ 4,000 $ 6,000
9.6%, due 1995-1998 10,286 14,286
9.45%, due 1998-2017 100,000
10.375%, due 1999-2018 100,000 100,000
9.75%, due 2002-2021 100,000 100,000
Industrial revenue bonds
2.05% to 8.25%, due 1995-2015 25,121 30,671
ESOP loan guarantee
8.41%, due 1995-1996 25,697 36,764
Foreign:
Bearer bonds
5.75%, due 1995 35,142
Bank loans, including revolving credit
2.25% to 12.0%, due 1995-2006 10,842 17,314
Other long-term debt, including capitalized leases 1,864 1,207
Total long-term debt 277,810 441,384
Less long-term debt payable within one year 20,551 62,908
Long-term debt, net $ 257,259 $ 378,476
Principal amounts of long-term debt payable in the five years ending
June 30, 1995 through 1999 are $20,551, $20,865, $7,853, $5,395, and
$10,516, respectively.
Page 13-24
<PAGE>
The carrying amount of the Company's notes payable approximates fair
value. The fair value of the Company's long-term debt (excluding
leases) was estimated using discounted cash flow analyses based on the
Company's current incremental borrowing rate for similar types of
borrowing arrangements. The carrying value of this debt, $277,215, was
estimated to have a fair value of $284,499.
In November 1993, the Company used cash from operating activities to
early-retire $100,000 of 9.45 percent debentures due November 1997
through 2016, resulting in an early redemption premium and write-off of
deferred issuance costs totaling $4,207, which is net of income taxes of
$3,515. In addition, the Company early-retired $3,509 of 15.08 percent
Australian debt due in 1995, resulting in an early redemption premium of
$316. These have been accounted for as extraordinary items in the
Consolidated Statement of Income.
ESOP loan guarantee - In February 1989, Parker established a
leveraged Employee Stock Ownership Plan (ESOP), which covers
substantially all domestic employees. Under the ESOP, the Company
established a trust which borrowed $70 million. The loan is
unconditionally guaranteed by the Company and therefore the unpaid
balance of the borrowing is reflected in the Consolidated Balance Sheet
as Long-term debt. An equivalent amount representing Deferred
compensation is recorded as a deduction from Shareholders' equity.
Proceeds of this borrowing were used by the ESOP to purchase 2.5 million
shares of the Company's common stock on the open market at an average
cost of $28 per share. Commencing July 1, 1989, and continuing over the
period of the loan, the shares purchased by the ESOP with the loan
proceeds are being allocated to employees who make contributions to the
Company's existing 401(k) Savings Plan. Company contributions plus
interest income and dividends earned on the unallocated shares are used
to service the loan. Company contributions in excess of loan service
requirements are used to obtain additional shares, which are all
allocated to employees. Compensation and interest components of ESOP
expense, equal to the amount of Company contributions to the ESOP, are
included in Net income.
1994 1993 1992
Company contributions to the ESOP $ 15,764 $ 15,217 $ 14,523
Interest income and dividends earned
by the ESOP 1,059 1,368 1,696
Interest expense on ESOP debt (2,848) (3,764) (4,550)
Lease Commitments - Future minimum rental commitments as of June 30,
1994, under noncancelable operating leases, which expire at various
dates, are as follows: 1995-$16,965; 1996-$14,178; 1997-$10,246; 1998-
$6,909; 1999-$5,613; and after 1999-$24,211.
Rental expense in 1994, 1993 and 1992 was $21,470, $30,897 and
$31,428, respectively.
Page 13-25
<PAGE>
8. SHAREHOLDERS' EQUITY AND OTHER STOCK-RELATED INFORMATION
Common Shares 1994 1993 1992
Balance July 1 $ 24,633 $ 24,632 $ 24,615
Shares issued under stock option plans
(1994 - 129,801; 1993 - 22,496; 1992 - 56,644)
less shares of stock for stock exchange
(1994 - 129,801; 1993 - 22,496; 1992 - 23,194) 17
Shares issued for conversion of debentures 1
Balance June 30 $ 24,633 $ 24,633 $ 24,632
Additional Capital
Balance July 1 $ 164,430 $ 164,041 $ 162,496
Shares issued under stock option plans,
less shares of stock for stock exchange 1,512 367 1,534
Shares issued for conversion of debentures 22 11
Balance June 30 $ 165,942 $ 164,430 $ 164,041
Retained Earnings
Balance July 1 $ 806,033 $ 787,098 $ 820,262
Net income 47,652 65,056 11,218
Cash dividends paid on common shares,
net of tax benefit of ESOP shares
(1994 - $.98 per share; 1993 - $.96 per
share; 1992 - $.93 per share; (47,445) (46,121) (44,382)
Balance June 30 $ 806,240 $ 806,033 $ 787,098
Deferred Compensation Related to ESOP Debt
Balance July 1 $ (36,764) $ (46,767) $ (55,783)
Reduction of ESOP debt (Note 7) 11,067 10,003 9,016
Balance June 30 $ (25,697) $ (36,764) $ (46,767)
Translation Adjustments
Balance July 1 $ (10,533) $ 24,201 $ 14,870
Translation adjustments (Note 10) 13,071 (34,734) 9,331
Balance June 30 $ 2,538 $ (10,533) $ 24,201
Common Stock in Treasury
Balance July 1 $ (14,899) $ (19,186) $ (22,985)
Shares issued under stock option plan
(1994 - 338,330; 1993 - 190,961;
1992 - 169,238) 7,594 4,287 3,799
Balance June 30 $ (7,305) $ (14,899) $ (19,186)
On August 16, 1990 the Board of Directors authorized the repurchase,
from time to time, of up to 3 million shares of the Company's common
stock on the open market, at prevailing prices. The repurchases were
funded from operating cash flows and the shares are being held as
treasury stock.
Page 13-26
<PAGE>
The Company's stock option and stock incentive plans provide for the
granting of incentive stock options and/or nonqualified options to
officers and key employees to purchase shares of common stock at a price
not less than 100% of the fair market value of the stock on the dates
options are granted. All outstanding options are exercisable one year
after the date of grant and expire no more than ten years after grant.
At June 30, 1994, the Company had 3,131,656 common shares reserved for
issuance in connection with these plans. Additional information as to
shares subject to options is as follows:
Shares Subject Average Option
To Options Price Per Share
Outstanding June 30, 1992 1,752,148 $ 27.37
Granted 694,700 28.99
Exercised (213,457) 23.42
Cancelled (99,265) 32.77
Outstanding June 30, 1993 2,134,126 $ 28.04
Granted 49,800 40.25
Exercised (468,031) 26.29
Cancelled (34,132) 29.51
Outstanding June 30, 1994 1,681,763 $ 28.85
Options exercisable and shares available for future grant at June 30
were:
1994 1993
Options exercisable 1,631,963 1,466,826
Shares available for grant 1,449,893 1,380,354
The Company derives a tax deduction measured by the excess of the
market value over the option price at the date nonqualified options are
exercised. The related tax benefit is credited to additional capital.
The Company makes no charges against capital with respect to options
granted.
9. RETIREMENT BENEFITS
Pensions -- The Company has noncontributory defined benefit pension
plans covering eligible employees, including certain employees in
foreign countries. Benefits for salaried plans are generally based on
the employees' compensation during the three to five years prior to
retirement. Under the hourly plans, benefits are generally based on
various monthly amounts for each year of credited service. The Company
also has contractual arrangements with certain key employees which
provide for supplemental retirement benefits. In general, the Company's
policy is to fund these plans based on legal requirements, tax
considerations, local practices and investment opportunities. The
Company also sponsors defined contribution plans and participates in
government-sponsored programs in certain foreign countries.
Contributions and costs are determined as a percentage of each covered
employee's salary.
Page 13-27
<PAGE>
Pension costs for all plans were $10,850, $14,649 and $10,369 for
1994, 1993 and 1992, respectively. Pension costs were reduced in 1994
by curtailment gains of $1,899 for the Metal Bellows divestiture.
Pension costs for all defined benefit plans are as follows:
1994 1993 1992
Service cost-benefits earned during
the period $ 16,889 $ 16,776 $ 15,731
Interest cost on projected benefit
obligation 34,330 31,564 28,515
Actual return on assets (3,088) (46,181) (46,827)
Net amortization and deferral (38,364) 11,524 12,039
Net periodic pension costs $ 9,767 $ 13,683 $ 9,458
For domestic plans, the weighted average discount rates and the rates
of increase in future compensation levels used in determining the
actuarial present value of the projected benefit obligations were 8% and
5%, respectively, at June 30, 1994 and 1993. The expected long-term
rate of return on assets was 9% at June 30, 1994 and 1993. For the
principal foreign plans located in the United Kingdom and Germany, the
weighted average discount rates used were 7.5% and 7%, respectively, at
June 30, 1994 and 9% and 6.5%, respectively, at June 30, 1993 and rates
of increase in future compensation used were 5.5% and 4.5%,
respectively, at June 30, 1994 and 7% and 4%, respectively, at June 30,
1993. The rates of return on assets used in the United Kingdom were
8.5% at June 30, 1994 and 10% in 1993 and was 7% at June 30, 1994 for
Germany.
The following tables set forth the funded status of all the plans
accounted for using SFAS No. 87, Employers' Accounting for Pensions, and
the amounts recognized in the Company's consolidated balance sheet:
Assets Exceed Accumulated Benefits
1994 1993
Actuarial present value of benefit obligations:
Vested benefit obligation $(319,733) $(280,917)
Accumulated benefit obligation $(330,657) $(293,299)
Projected benefit obligation $(388,478) $(356,329)
Plan assets at fair value 434,951 440,038
Projected benefit obligation less than plan assets 46,473 83,709
Unrecognized net (gain) or loss 9,258 (29,398)
Unrecognized prior service cost 11,409 10,484
Unrecognized net (asset) obligation (26,977) (30,558)
Prepaid pension cost (pension liability)
recognized $ 40,163 $ 34,237
Page 13-28
<PAGE>
Accumulated Benefits Exceed Assets
1994 1993
Actuarial present value of benefit obligations:
Vested benefit obligation $ (60,322) $ (53,067)
Accumulated benefit obligation $ (67,402) $ (57,809)
Projected benefit obligation $ (77,353) $ (68,053)
Plan assets at fair value 15,682 8,090
Projected benefit obligation in excess of
plan assets (61,671) (59,963)
Unrecognized net (gain) or loss 1,809 5,535
Unrecognized prior service cost 1,299 1,267
Unrecognized net (asset) obligation 3,056 1,994
Prepaid pension cost (pension liability)
recognized $ (55,507) $ (51,167)
The majority of the underfunded plans relate to foreign and
supplemental executive plans.
The plans' assets consist primarily of listed common stocks,
corporate and government bonds, and real estate investments. At June
30, 1994 and 1993, the plans' assets included Company stock with market
values of $10,068 and $7,824, respectively.
Other Postretirement Benefits--The Company provides postretirement
medical and life insurance benefits to certain retirees and eligible
dependents. Most plans are contributory, with retiree contributions
adjusted annually. The plans are unfunded and pay stated percentages of
covered medically necessary expenses incurred by retirees, after
subtracting payments by Medicare or other providers and after stated
deductibles have been met. For most plans, the Company has established
cost maximums to more effectively control future medical costs. The
Company has reserved the right to change or eliminate these benefit
plans.
As discussed in Note 1, the Company adopted SFAS No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions, with respect
to its domestic postretirement benefit plans effective July 1, 1991.
Certain of the Company's non-U.S. subsidiaries have similar plans for
retirees. However, most retirees outside the United States are covered
by government-sponsored and administered programs, and the cost of the
postretirement programs are not significant. Postretirement benefit
costs included the following components:
1994 1993 1992
Service cost-benefits attributed to
service during the period $ 3,414 $ 3,767 $ 3,622
Interest cost on accumulated
postretirement benefit obligations 9,656 9,009 7,826
Net amortization and deferral 364 (125)
Net periodic postretirement
benefit costs $ 13,434 $ 12,651 $ 11,448
Page 13-29
<PAGE>
The following table reconciles the plans' combined funded status to
amounts recognized in the Company's consolidated balance sheet:
1994 1993
Accumulated postretirement benefit obligation:
Retirees $ (61,488) $ (49,800)
Fully eligible active plan participants (27,532) (27,060)
Other active plan participants (39,026) (42,989)
Unrecognized (gain) loss 6,976 6,768
Unrecognized prior service cost 754 816
Accrued postretirement benefit costs $(120,316) $(112,265)
For measurement purposes, an 11.25% annual rate of increase in the
per capita cost of covered benefits (i.e., health care cost trend rate)
was assumed for 1995. The rate was assumed to decrease gradually to 6%
by 2007 and remain at that level thereafter. The health care cost trend
rate assumption has a significant effect on the amounts reported. To
illustrate, increasing the assumed health care cost trend rates by 1
percentage point in each year would increase the accumulated
postretirement benefit obligation as of June 30, 1994 by $5,535, and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year then ended by $429. The
weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8% at June 30, 1994 and 1993.
10. FOREIGN CURRENCY TRANSLATION AND FOREIGN OPERATIONS
The Company's major foreign operations are located in Germany, the
United Kingdom, Brazil, France, and Italy. Their business activities
are conducted principally in their local currency.
Assets and liabilities of most foreign subsidiaries are translated at
current exchange rates, and income and expenses are translated using
weighted average exchange rates. The effects of these translation
adjustments, as well as gains and losses from certain intercompany
transactions, are reported in a separate component of Shareholders'
equity. Such adjustments will affect Net income only upon sale or
liquidation of the underlying foreign investments, which is not
contemplated at this time.
Exchange gains and losses from transactions in a currency other than
the local currency of the entity involved, and translation adjustments
in countries with highly inflationary economies (Argentina, Brazil and
Venezuela), are included in income. Net transaction and translation
adjustments reduced Net income in 1994, 1993 and 1992 by $382, $2,218
and $1,168, respectively. Such amounts are net of the tax benefits from
monetary corrections for inflation and exclude the effect on Cost of
sales resulting from valuing inventories at acquisition cost since sales
price increases in each year more than offset this effect.
Page 13-30
<PAGE>
Net sales, Income before income taxes (and before extraordinary item
in 1994 and cumulative effect of changes in accounting principles in
1992) and Net income include the following amounts from foreign
operations:
1994 1993 1992
Net sales $ 588,098 $ 616,717 $ 583,044
Income before income taxes (17,070) (25,804) (7,595)
Net income (14,594) (17,468) (6,588)
Net assets of foreign operations at June 30, 1994 and 1993 amounted
to $416,756 and $349,407, respectively.
Accumulated undistributed earnings of foreign operations reinvested
in their operations amounted to $38,938, $58,101, and $79,142 at June
30, 1994, 1993 and 1992, respectively.
11. RESEARCH AND DEVELOPMENT
Research and development costs amounted to $64,518 in 1994, $60,054 in
1993, and $50,019 in 1992. Customer reimbursements included in the
total cost for each of the respective years were $22,640, $16,648 and
$20,089. The costs and customer reimbursements amounts for 1993 and
1992 have been restated to be consistent with 1994. All years now
include costs related to independent research and development as well as
customer reimbursed and unreimbursed development programs.
12. CONTINGENCIES
The Company is self-insured in the U.S. for health care, workers
compensation, general liability and product liability up to
predetermined amounts, above which third party insurance applies. The
Company purchases third party product liability insurance for products
manufactured by its international operations and for products that are
used in aerospace applications.
Product Liability - The Company's costs are limited by third party
insurance coverage to $2,000 per occurrence and $6,000 per year. As of
June 30, 1994 the Company has a reserve of $11,848 for product liability
costs accrued, of which $3,298 is for claims incurred but not reported.
This reserve is estimated using the history of claims paid over the last
ten years, and is net of $2,148 to discount at a 7.5% annual rate those
claims expected to be paid over the next eight years. As an offset to
this liability, the Company has an account receivable of $710 for
anticipated insurance recoveries for litigation matters regarding
asbestos-related product liability.
Page 13-31
<PAGE>
Environmental - The Company is subject to environmental laws and
regulations which require the Company to remove or mitigate the effect
on the environment of the disposal or release of certain chemical
substances. The Company is currently involved in environmental
remediation at 22 manufacturing facilities presently or formerly
operated by the Company and has been named as a "potentially responsible
party", along with other companies, at 7 off-site waste disposal
facilities.
As of June 30, 1994, the Company has a reserve of $10,718 for
environmental matters which are probable and reasonably estimable. This
reserve is recorded based upon the best estimate of net costs to be
incurred in light of the progress made in determining the magnitude of
remediation costs, the timing and extent of remedial actions required by
governmental authorities, the amount of the Company's liability in
proportion to other responsible parties and any recoveries receivable.
This reserve is net of $638 for discounting at an 8% annual rate a
portion of the costs at 7 locations for established treatment procedures
required over periods ranging from 5 to 21 years. The Company also has
an account receivable of $533 for anticipated insurance recoveries.
The Company's estimated total liability for the above mentioned sites
ranges from a minimum of $10,678 to a maximum of $30,651. The actual
costs to be incurred by the Company will be dependent on final
delineation of contamination, final determination of remedial action
required, negotiations with federal and state agencies with respect to
cleanup levels, changes in regulatory requirements, innovations in
investigatory and remedial technology, effectiveness of remedial
technologies employed, the ultimate ability to pay of the other
responsible parties and any insurance recoveries.
13. QUARTERLY INFORMATION (UNAUDITED)
NET SALES, GROSS PROFIT, NET INCOME AND EARNINGS PER SHARE
1994 (a) 1st 2nd 3rd 4th Total
Net sales $ 607,411 $ 592,226 $ 677,353 $ 699,347 $ 2,576,337
Gross profit 113,357 107,081 139,389 163,134 522,961
Income before
extraordinary
item 16,065 14,061 (19,083) 41,132 52,175
Net income 16,065 9,854 (19,083) 40,816 47,652
Earnings per share
before extraordinary
item .33 .29 (.39) .84 1.07
Earnings per share .33 .20 (.39) .84 .98
1993 (b) 1st 2nd 3rd 4th Total
Net sales $ 608,174 $ 588,676 $ 607,225 $ 685,248 $ 2,489,323
Gross profit 115,332 112,816 114,605 141,615 484,368
Net income 16,028 14,676 14,934 19,418 65,056
Earnings per share .33 .30 .31 .40 1.34
Page 13-32
<PAGE>
(a) Net income for the third quarter of fiscal 1994 includes charges
totaling $52,707 or $1.08 per share, to reduce the book value of certain
long-term assets to their current values, and to recognize the cost of
downsizing and relocation activities. The effect on Gross profit was
$49,738.
(b) At June 30, 1993 the Company changed the reporting period for
subsidiaries outside of North America to provide uniform reporting on a
global basis. The following table shows the fiscal 1993 quarterly
results if restated for the change to uniform reporting periods.
1993 1st 2nd 3rd 4th Total
Net sales $ 609,287 $ 567,016 $ 621,843 $ 640,376 $ 2,438,522
Gross profit 115,892 105,065 120,286 124,570 465,813
Net Income 16,085 10,137 18,505 19,272 63,999
Earnings per share .33 .21 .38 .40 1.32
Page 13-33
<PAGE>
Report of Management
The Company's management is responsible for the integrity and accuracy
of the financial information contained in this annual report.
Management believes that the financial statements have been prepared in
conformity with generally accepted accounting principles appropriate in
the circumstances and that the other information in this annual report
is consistent with those statements. In preparing the financial
statements, management makes informed judgments and estimates where
necessary to reflect the expected effects of events and transactions
that have not been completed.
Management is also responsible for maintaining an internal control
system designed to provide reasonable assurance at reasonable cost that
assets are safeguarded against loss or unauthorized use and that
financial records are adequate and can be relied upon to produce
financial statements in accordance with generally accepted accounting
principles. The system is supported by written policies and guidelines,
by careful selection and training of financial management personnel and
by an internal audit staff which coordinates its activities with the
Company's independent accountants. To foster a strong ethical climate,
the Parker Hannifin Code of Ethics is publicized throughout the Company.
This addresses, among other things, compliance with all laws and
accuracy and integrity of books and records. The Company maintains a
systematic program to assess compliance.
Coopers & Lybrand, independent accountants, are retained to conduct an
audit of Parker Hannifin's financial statements in accordance with
generally accepted auditing standards and to provide an independent
assessment that helps ensure fair presentation of the Company's
financial position, results of operations and cash flows.
The Audit Committee of the Board of Directors is composed entirely of
outside directors. The committee meets periodically with management,
internal auditors and the independent accountants to discuss internal
accounting controls and the quality of financial reporting. Financial
management, as well as the internal auditors and the independent
accountants, have full and free access to the Audit Committee.
Duane E. Collins Michael J. Hiemstra
Duane E. Collins Michael J. Hiemstra
President and Vice President -
Chief Executive Officer Finance and Administration
Page 13-34
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Directors
Parker Hannifin Corporation
We have audited the accompanying consolidated balance sheet of Parker
Hannifin Corporation and its subsidiaries at June 30, 1994 and 1993, and
the related consolidated statements of income and cash flows for each of
the three years in the period ended June 30, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Parker
Hannifin Corporation and its subsidiaries at June 30, 1994 and 1993, and
the consolidated results of their operations and their cash flows for each
of the three years in the period ended June 30, 1994 in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the financial statements, the Company changed
its methods of accounting for postretirement benefits other than pensions
and accounting for income taxes in 1992.
Coopers & Lybrand LLP
Coopers & Lybrand LLP
Cleveland, Ohio
August 4, 1994
Page 13-35
<PAGE>
<TABLE>
<CAPTION>
FIVE-YEAR FINANCIAL SUMMARY
(Dollars in thousands, except per share amounts) 1994 (a) 1993 1992 (b) 1991 1990 (a)
<S> <C> <C> <C> <C> <C>
Net sales $ 2,576,337 $ 2,489,323 $ 2,375,808 $ 2,440,815 $ 2,452,568
Cost of sales 2,053,376 2,004,955 1,925,800 1,977,381 1,927,119
Selling, general and administrative expenses 302,668 310,765 282,861 289,535 282,811
Provision for business restructuring activities 18,773 22,879 14,798 14,350
Impairment of long-term assets 35,483
Interest expense 37,832 47,056 52,190 59,369 62,139
Interest and other income, net (3,879) (5,457) (6,380) (5,973) (4,804)
Loss (gain) on disposal of assets 19,635 1,059 1,148 2,685 2,029
Income taxes 60,274 43,010 41,912 44,300 72,827
Income - continuing operations 52,175 65,056 63,479 59,168 110,447
Discontinued operations 4,792
Income before extraordinary item and cumulative
effect of changes in accounting principles 52,175 65,056 63,479 59,168 115,239
Net income 47,652 65,056 11,218 59,168 111,479
Earnings per share - continuing operations 1.07 1.34 1.32 1.23 2.26
Discontinued operations earnings per share .10
Earnings per share before extraordinary item and
cumulative effect of changes in accounting principles 1.07 1.34 1.32 1.23 2.36
Earnings per share $ 0.98 $ 1.34 $ 0.23 $ 1.23 $ 2.28
Average number of shares outstanding (thousands) 48,738 48,473 48,286 48,281 48,877
Cash dividends per share (c) $ .98 $ .96 $ .93 $ .92 $ .88
Cash dividends paid (c) $ 47,445 $ 46,121 $ 44,382 $ 43,415 $ 41,995
Net income as a percent of net sales 1.8% 2.6% 0.5% 2.4% 4.5%
Return on average assets 2.5% 3.3% 0.6% 3.0% 5.7%
Return on average equity 5.0% 7.0% 1.2% 6.3% 12.5%
Book value per share $ 19.75 $ 19.20 $ 19.29 $ 19.57 $ 19.18
Current assets 1,018,354 1,056,443 1,055,776 1,019,019 1,129,190
Current liabilities 504,444 468,254 383,603 369,545 453,372
Working capital $ 513,910 $ 588,189 $ 672,173 $ 649,474 $ 675,818
Ratio of current assets to current liabilities 2.0 2.3 2.8 2.8 2.5
Plant and equipment, net continuing $ 717,300 $ 736,056 $ 752,490 $ 757,937 $ 752,668
Total assets 1,912,790 1,963,590 1,958,120 1,920,697 2,020,157
Long-term debt 257,259 378,476 446,974 476,586 511,681
Shareholders' equity $ 966,351 $ 932,900 $ 934,019 $ 943,475 $ 938,404
Debt to debt-equity percent 22.7% 33.3% 34.0% 35.4% 39.2%
Depreciation continuing $ 106,546 $ 109,673 $ 102,628 $ 98,919 $ 92,286
Capital expenditures continuing $ 99,914 $ 91,484 $ 84,955 $ 112,047 $ 125,680
Number of employees 26,730 25,646 26,669 27,793 30,408
Number of shareholders (c) 29,625 30,414 30,836 32,812 34,976
Number of shares outstanding at year-end (thousands) 48,940 48,601 48,409 48,205 48,918
<FN>
(a) Includes an extraordinary item for the early extinguishment of debt.
(b) Includes the cumulative effect of changes in accounting principles for
SFAS No. 106, Employer's Accounting for Postretirement Benefits Other than
Pensions and SFAS No. 109, Accounting for Income Taxes.
(c) Not restated for 1990 divestitures.
</TABLE>
Page 13-36
<PAGE>
Exhibit (21)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1994
by Parker-Hannifin Corporation
The Company has the following subsidiaries:
Domestic Subsidiaries
Percentage
Name Incorporated Owned(1)
Parker de Puerto Rico, Inc. Delaware 100
Parker Finance Corp. Delaware 100(2)
Parker-Hannifin Asia Pacific Co., Ltd. Delaware 100(3)
Parker-Hannifin International Corp. Delaware 100
Parker Intangibles Inc. Delaware 100
Parker Properties Inc. Delaware 100
Parker Services Inc. Delaware 100
Travel 17325 Inc. Delaware 100
Foreign Subsidiaries
Acadia International Insurance Limited Ireland 100
Alenco (Holdings) Limited United Kingdom 100(3)
Brownsville Rubber Co., S.A. de C.V. Mexico 100
Ermeto Productie Maatschappij B.V. Netherlands 100(4)
Great Lakes Indemnity Co. Ltd. Bermuda 100
N. V. Parker-Hannifin S.A. Belgium 100(5)
P-H do Brasil Comercial Ltda. Brazil 100(3)
PH Finance Limited United Kingdom 100(6)
Parker Automotive de Mexico S.A. de C.V. Mexico 100
Parker Enzed (N.Z.) Limited New Zealand 100(3)
Parker Enzed (Australia) Pty. Ltd. Australia 100(7)
Parker Enzed Equipment (Australia) Pty. Ltd. Australia 100(7)
Parker Enzed Technologies Pty. Ltd. Australia 100(7)
Parker Ermeto GmbH Austria 100(8)
Parker Pneumatique S.A. France 100(9)
Parker Pradifa GmbH Germany 100(10)
Parker Reynosa S.A. de C.V. Mexico 100
Parker Seal de Baja S.A. de C.V. Mexico 100
Parker Seals S.p.A. Italy 100(11)
Parker Zenith S.A. de C.V. Mexico 100
Parker Hannifin (Africa) Pty. Ltd. South Africa 100
Parker Hannifin Argentina SAIC Argentina 100
Parker Hannifin A/S Norway 100(12)
Parker Hannifin (Australia) Pty. Ltd. Australia 100(3)
Parker Hannifin B.V. Netherlands 100(3)
Parker Hannifin (Canada) Inc. Canada 100(3)
Parker Hannifin Danmark A/S Denmark 100
Parker Hannifin de Venezuela, C.A. Venezuela 100(3)
Parker Hannifin (Espana) SA Spain 100(3)
Parker Hannifin Finance B.V. Netherlands 100(5)
Parker Hannifin Foreign Sales Corp. Guam 100(3)
Parker Hannifin GmbH Germany 100(3)
Parker Hannifin Hong Kong Limited Hong Kong 100(13)
Parker Hannifin Industria e Comercio Ltda. Brazil 100(14)
Parker Hannifin Japan Ltd. Japan 100
Parker Hannifin Naarden B.V. Netherlands 100(5)
Parker Hannifin NMF AG Switzerland 100(8)
<PAGE>
Parker Hannifin (N.Z.) Ltd. New Zealand 100
Parker Hannifin Oy Finland 100(15)
Parker Hannifin plc United Kingdom 100(12)
Parker Hannifin RAK, S.A. France 100
Parker Hannifin S.p.A. Italy 100
Parker-Hannifin Singapore Pte. Ltd. Singapore 100
Parker Hannifin Sweden AB Sweden 100(16)
Parker Hannifin Taiwan Ltd. Taiwan 100
Polar Seals ApS Denmark 100(17)
Swedab Finn-Filter Svenska AB Sweden 100(18)
Atlas Copco Automation AB Sweden 100
Atlas Copco Automation S.A. France 100(19)
Atlas Copco Automation Svenska AB Sweden 100(20)
Atlas Copco Svenska Forsaljnings AB Sweden 100(20)
Atlas Copco Automazione S.p.A. Italy 100(11)
Atlas Copco Automation A/S Denmark 100(20)
Hydro-Pneumatik AB Sweden 100(20)
(1) Excludes directors' qualifying shares
(2) Owned 100% by Parker de Puerto Rico, Inc.
(3) Owned 100% by Parker-Hannifin International Corp.
(4) Owned 100% by Parker-Hannifin Naarden B.V.
(5) Owned 100% by Parker Hannifin B.V.
(6) Owned 100% by Parker Hannifin plc
(7) Owned 100% by Parker-Hannifin (Australia) Pty. Ltd.
(8) Owned 100% by Parker Hannifin GmbH
(9) Owned 100% by Parker Hannifin RAK S.A.
(10) Owned 13.8% by Parker Hannifin GmbH and 86.2% by
Parker-Hannifin International Corp.
(11) Owned 100% by Parker-Hannifin S.p.A.
(12) Owned 100% by Alenco (Holdings) Limited
(13) Owned 99.99% by Parker-Hannifin Corporation and .01%
by Parker-Hannifin International Corporation
(14) Owned 37.5% by P-H do Brasil Comercial Ltda. and 62.5%
by Parker-Hannifin International Corp.
(15) Owned 90% by Parker-Hannifin Corporation and 10% by
Parker Hannifin Sweden AB
(16) Owned 96% by Parker-Hannifin Corporation and 4% by
Parker-Hannifin B.V.
(17) Owned 100% by Parker Hannifin Danmark A/S
(18) Owned 100% by Parker Hannifin Sweden AB
(19) Owned 100% by Parker Pneumatique S.A.
(20) Owned 100% by Atlas Copco Automation AB
All of the foregoing subsidiaries are included in the
Company's consolidated financial statements. In addition to the foregoing,
the Company owns four inactive or name holding companies.
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
Exhibit (25)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1994
by Parker-Hannifin Corporation
Power of Attorney
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
Re: Parker-Hannifin Corporation
Commission File No. 1-4982
Annual Report on Form 10-K
Authorized Representatives
Gentlemen:
Parker-Hannifin Corporation (the "Company") is the issuer of Securities
registered under Section 12(b) of the Securities Exchange Act of 1934 (the
"Act"). Each of the persons signing his name below confirms, as of the date
appearing opposite his signature, that each of the following "Authorized
Representatives" is authorized on his behalf to sign and to submit to the
Securities and Exchange Commission Annual Reports on Form 10-K and amendments
thereto as required by the Act:
Authorized Representatives
Duane E. Collins
Michael J. Hiemstra
Patrick S. Parker
Joseph D. Whiteman
Each person so signing also confirms the authority of each of the Authorized
Representatives named above to do and perform, on his behalf, any and all acts
and things requisite or necessary to assure compliance by the signing person
with the Form 10-K filing requirements. The authority confirmed herein shall
remain in effect as to each person signing his name below until such time as
the Commission shall receive from such person a written communication
terminating or modifying the authority.
Date Date
P. S. Parker 8/18/94 F. A. LePage 8/18/94
_____________________________ ____ ______________________________ ____
P. S. Parker, Chairman of F. A. LePage, Director
the Board of Directors
D. E. Collins 8/18/94 P. W. Likins 8/18/94
_____________________________ ____ ______________________________ ____
D. E. Collins, Principal P. W. Likins, Director
Executive Officer and Director
M. J. Hiemstra 8-18-94 A. L. Rayfield 8/18/94
_____________________________ ____ ______________________________ ____
M. J. Hiemstra, Principal A. L. Rayfield, Director
Financial Officer
H. C. Gueritey, Jr 8-18-94 P. G. Schloemer 8/18/94
_____________________________ ____ ______________________________ ____
H. C. Gueritey, Jr., P. G. Schloemer, Director
Principal Accounting Officer
J. G. Breen 8/18/94 W. R. Schmitt 8-18-94
_____________________________ ____ ______________________________ ____
J. G. Breen, Director W. R. Schmitt, Director
Paul C. Ely, Jr. 8/18/94 W. Seipp 8/18/94
_____________________________ ____ ______________________________ ____
P. C. Ely, Jr., Director W. Seipp, Director
Allen H. Ford 8/18/94 D. W. Sullivan 8/18/94
_____________________________ ____ ______________________________ ____
A. H. Ford, Director D. W. Sullivan, Director
<PAGE>
Exhibit (27)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1994
by Parker-Hannifin Corporation
FINANCIAL DATA SCHEDULES
*Numbered in accordance with Item 601 of Regulation S-K.
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[ARTICLE] 5
[LEGEND]
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
PARKER-HANNIFIN'S REPORT ON FORM 10-K FOR ITS FISCAL YEAR ENDED
JUNE 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] JUN-30-1994
[PERIOD-END] JUN-30-1994
[CASH] 81,590
[SECURITIES] 0
[RECEIVABLES] 347,365
[ALLOWANCES] 4,731
[INVENTORY] 492,930
[CURRENT-ASSETS] 1,018,354
[PP&E] 1,621,828
[DEPRECIATION] 904,528
[TOTAL-ASSETS] 1,912,790
[CURRENT-LIABILITIES] 504,444
[BONDS] 277,810
[COMMON] 24,633
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 941,718<F1>
[TOTAL-LIABILITY-AND-EQUITY] 1,912,790
[SALES] 2,576,337
[TOTAL-REVENUES] 2,576,337
[CGS] 2,053,376
[TOTAL-COSTS] 2,053,376
[OTHER-EXPENSES] 54,256<F2>
[LOSS-PROVISION] 2,597
[INTEREST-EXPENSE] 37,832
[INCOME-PRETAX] 112,449
[INCOME-TAX] 60,274
[INCOME-CONTINUING] 52,175
[DISCONTINUED] 0
[EXTRAORDINARY] (4,523)
[CHANGES] 0
[NET-INCOME] 47,652
[EPS-PRIMARY] .98
[EPS-DILUTED] .98
<FN>
<F1>Other Stockholders' Equity includes:
Additional capital of 165,942
Retained earnings of 806,240
Deferred compensation related to
guarantee of ESOP debt of (25,697)
Foreign currency translation adjustments of 2,538
Common stock in treasury at cost of (7,305)
<F2>Other Operating Costs and Expenses includes:
Provision for business restructuring activities of 18,773
Impairment of long-term operating assets of 35,483
</FN>
</TABLE>
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