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, 1995
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 .
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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 17, 1995, excluding, for
purposes of this computation, only stock holdings of the Registrant's
Directors and Officers. $2,866,988,304.
The number of Common Shares outstanding on August 17, 1995 was 74,004,315.
Portions of the following documents are incorporated by reference:
(1) Annual Report to Shareholders of the Company for the fiscal year
ended June 30, 1995. Incorporated by reference into Parts I, II
and IV hereof.
(2) Definitive Proxy Statement for the Company's 1995 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, 1995
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, an
actuator 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 6,000
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, 1995, net sales were $3,214,370,000; Industrial Segment products
accounted for 83% of net sales and Aerospace Segment products for 17%.
Markets
Motion control systems are used throughout industry in
applications which 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,
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construction equipment, fabricated metals, 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 Fluid Connectors Group manufactures connectors, including
tube fittings and hose fittings, check valves, hoses and couplers which
transmit and contain fluid. 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 Automotive and Refrigeration Group manufactures
components for use in industrial, residential and automotive air
conditioning and refrigeration systems and other automotive
applications, including pressure regulators, solenoid valves, expansion
valves, filter-dryers, gerotors and hose assemblies. The Seal Group
manufactures sealing devices, including o-rings and o-seals, gaskets and
packings which insure leak proof connections and electromagnetic
interference shielding and thermal management products. The Filtration
Group manufactures filters to remove contaminants from fuel, air, oil,
water and other fluids in industrial, process, mobile, marine and
environmental applications.
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 6,000 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 systems used for precise control of rudders,
elevators, ailerons, and other
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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 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 and its partnership status with key customers
to obtain original equipment business on new aircraft programs for its
fluid control 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.
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 $74,129,000 in fiscal 1995, $64,518,000 in fiscal
1994 and $60,054,000 in 1993. Customer reimbursements included in the
total cost for each of the respective years were $21,202,000,
$22,640,000, and $16,648,000.
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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, 1995 was approximately
$1,025,669,000 and at June 30, 1994 was approximately $852,482,000.
Approximately 79% of the Company's backlog at June 30, 1995 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 13 to the
Financial Statements contained on page 37 of the Company's Annual Report
to Shareholders for the fiscal year ended June 30, 1995 ("Annual
Report") as specifically excerpted on pages 13-31 and 13-32 of Exhibit
13 hereto is incorporated herein by reference.
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.
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Employees
The Company employed approximately 30,590 persons as of
June 30, 1995, of whom approximately 9,550 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 1983 59
Officer and Director
Dennis W. Sullivan Executive Vice President - 1978 56
Industrial and Automotive
and Director
Paul L. Carson Vice President - Information 1993 59
Services
Richard F. Ferrel Vice President and President, 1993 61
Applied Technologies Operations
of Motion and Control
Daniel T. Garey Vice President - Human Resources 1995 52
Stephen L. Hayes Vice President and President, 1993 54
Aerospace
Michael J. Hiemstra Vice President - Finance and 1987 48
Administration and Chief
Financial Officer
Lawrence J. Hopcraft Vice President and President, 1990 52
Automotive and Refrigeration
Nickolas W. Vande Steeg Vice President and President, 1995 52
Seal
Joseph D. Whiteman Vice President, General Counsel 1977 62
and Secretary
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William D. Wilkerson Vice President - Technical 1987 59
Director
Lawrence M. Zeno Vice President and President, 1993 53
Motion and Control
Donald A. Zito Vice President and President, 1988 55
Fluid Connectors
Harold C. Gueritey, Jr. Controller 1980 56
Timothy K. Pistell Treasurer 1993 48
(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, Hiemstra, Hopcraft, Whiteman,
Wilkerson, Zito and Gueritey, 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 Operations since July, 1993 and
was President of the Applied Technology Group from July, 1990 to
June, 1993.
Mr. Garey was elected Vice President effective in January, 1995.
He was Group Vice President Human Resources of the Motion and Control
Group (formerly the Fluidpower Group) from July, 1982 to December, 1994.
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.
Mr. Vande Steeg was elected as Vice President effective in
September, 1995. He has been President of the Seal Group since
May, 1986.
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.
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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. A "(1)" indicates that the property is occupied by the
Company's industrial segment and a "(2)" indicates properties occupied
by the aerospace segment.
UNITED STATES
State City
Alabama Boaz(1)
Decatur(1)
Huntsville(1)
Jacksonville(1)
Arizona Glendale(2)
Tolleson(2)
Tucson*(1)
Arkansas Siloam Springs(1)
Trumann(1)
California Culver City*(1)
Irvine(1)(2)
Modesto(1)
Newbury Park*(1)
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)
Rockford(1)
Indiana Albion(1)
Ashley(1)
Ft. Wayne(1)
Lebanon(1)
Tell City(1)
Iowa Red Oak(1)
Kansas Manhattan(1)
Kentucky Berea(1)
Lexington(1)
Louisiana Harvey*(1)
Maine Portland(1)
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State City
Massachusetts Waltham(2)
Woburn(1)
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)
Hudson(1)
New Jersey Fairfield*(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)
Wickliffe(1)
Oregon Eugene(1)
Pennsylvania Canton(1)
Harrison City(1)
Reading(1)
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State City
South Carolina Inman(1)
Spartanburg(1)
Tennessee Greenfield(1)
Greenville(1)
Memphis*(1)
Texas Cleburne(1)
Ft. Worth(1)(2)
Mansfield(2)
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 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)
Marlow*(1)
Morley(1)
Poole*(1)
Rotherham(1)
Watford(1)
Finland Helsinki*(1)
Hyrynsalmi(1)
Urjala(1)
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FOREIGN COUNTRIES
Country City
France Annemasse(1)
Contamine(1)
Evreux(1)
Pontarlier(1)
Wissembourg(1)
Germany Berlin*(1)
Bielefeld(1)
Bietigheim-Bissingen(1)
Cologne(1)
Erfurt(1)
Hamburg*(2)
Hochmossingen(1)
Huttenfeld(1)
Kaarst(1)
Mucke(1)
Offenburg*(1)
Pleidelsheim(1)
Queckborn(1)
Velbert(1)
Viernheim(1)
Hong Kong Hong Kong(1)
Hungary Budapest*(1)
India Bombay*(1)
Italy Adro(1)
Arsago Seprio(1)
Gessate(1)
Milan(1)
Japan Yokohama(1)
Mexico Matamoros(1)
Monterrey(1)
Tijuana(1)
Toluca(1)
Netherlands Hoogezand(1)
0ldenzaal(1)
New Zealand Mt. Wellington(1)
Norway Langhus(1)
Peoples Republic of China Shanghai*(1)
Poland Warsaw*(1)
Wroclaw*(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)
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FOREIGN COUNTRIES
Country City
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 in prior years
brought capacity levels closer to present and anticipated needs.
Although production volume has materially increased over the last fiscal
year, most of the Company's material manufacturing facilities remain
capable of handling additional volume increases.
ITEM 3. Legal Proceedings. None.
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, 1995, the approximate number of
shareholders of record of the Company was 3,706. 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 (adjusted to reflect the 3-shares-for-2 stock
split paid on June 2, 1995):
Fiscal Year 1st 2nd 3rd 4th Full Year
1995 High $ 30-1/8 $ 31-3/8 $ 32-7/8 $ 38-1/2 $ 38-1/2
Low 25 25-1/2 27-5/ 29-1/8 25
Dividends .167 .167 .16 .180 .667
1994 High $ 23-3/8 $ 25-3/8 $ 26-3/8 $ 29-7/8 $ 29-7/8
Low 20 22-5/8 23-1/8 22-5/8 20
Dividends .160 .160 .167 .167 .653
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ITEM 6. Selected Financial Data. The information set forth on
pages 38 and 39 of the Annual Report as specifically excerpted on page
13-35 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 13-9 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 13-10 to 13-34 of
Exhibit 13 hereto is incorporated herein by reference.
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. Not applicable.
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 25, 1995 (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 16 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 4 of the Proxy
Statement, under the caption "Executive Compensation" on pages 8 to 12
of the Proxy Statement and under the caption "Common Share Price
Performance Graph" on page 12 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 pages 11 and 12 of the
Proxy Statement and under the caption "Principal Shareholders of the
Corporation" on page 15 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 12 of the Proxy Statement is incorporated herein by reference.
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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. No reports on Form 8-K have been filed by the Company
during the last quarter of the fiscal year ended
June 30, 1995.
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
By: Michael J. Hiemstra
Michael J. Hiemstra
Vice President - Finance and
Administration
September 28, 1995
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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; and
DENNIS W. SULLIVAN, Director.
Date: September 28, 1995
By: Michael J. Hiemstra
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 --- 13-34
Consolidated Statement of Income for the
years ended June 30, 1995, 1994 and 1993 --- 13-10
Consolidated Balance Sheet at June 30, 1995
and 1994 --- 13-12 and 13-13
Reference
Excerpt from Annual
Form 10-K Report as set forth
Annual Report in Exhibit 13
(Page) (Page)
Consolidated Statement of Cash Flows for
the years ended June 30, 1995,
1994 and 1993 --- 13-14 and 13-15
Notes to Consolidated Financial Statements --- 13-18 to 13-32
Consent and Report of Independent
Accountants F-2 ---
Schedule:
II - Valuation and Qualifying Accounts F-3 ---
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 Coopers & Lybrand L.L.P.
& LYBRAND
a professional services firm
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 1995
Annual Report to Shareholders of Parker Hannifin Corporation, as
specifically excerpted on page 13-34 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 schedule listed in the index on
page F-1 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents 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 3, 1995 on our audit of the
consolidated financial statements and financial statement schedule of
Parker Hannifin Corporation as of June 30, 1995 and 1994, and for the years
ended June 30, 1995, 1994, and 1993, which report is included in Exhibit 13
of this Form 10-K.
Coopers & Lybrand L.L.P.
Cleveland, Ohio
September 28, 1995
F-2
<PAGE>
PARKER HANNIFIN CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 1993, 1994 and 1995
(Dollars in Thousands)
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Other Balance
Beginning Costs and (Deductions)/ At End
Description Of Period Expenses Additions (A) Of Period
Allowance for doubtful accounts:
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
Year ended June 30,1995 4,731 2,411 (529) 6,613
(A) Net balance of deductions due to uncollectible accounts charged off
and additions due to acquisitions or recoveries.
F-3
<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 13-23 and 13-24 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, as
amended and restated as of August 17, 1995.*
(10)(b) Form of Indemnification Agreement entered into by
the Registrant and its directors and certain
executive officers (B).
(10)(c) Executive Liability and Indemnification Insurance
Policy (C).
(10)(d) Parker-Hannifin Corporation Supplemental Executive
Retirement Benefits Program (July 16, 1992
Restatement), as amended as of August 17, 1995.*
(10)(e) Parker-Hannifin Corporation 1982 Employees Stock
Option Plan, as amended October 25, 1984 and
January 29, 1987 (D).*
(10)(f) Parker-Hannifin Corporation 1987 Employees Stock
Option Plan, as amended as of August 17, 1995 (E).*
(10)(g) Parker-Hannifin Corporation 1990 Employees Stock
Option Plan, as amended as of August 17, 1995 (F).*
(10)(h) Amendment to Parker-Hannifin Corporation 1990
Employees Stock Option Plan (G).*
<PAGE>
Exhibit No. Description of Exhibit
(10)(i) Parker-Hannifin Corporation 1993 Stock Incentive
Program, as amended as of August 17, 1995 (H).*
(10)(j) Retirement Plan for Outside Directors of Parker-
Hannifin Corporation (I).*
(10)(k) Parker-Hannifin Corporation 1995 Target Incentive
Bonus Plan Description (J).*
(10)(l) Parker-Hannifin Corporation 1996 Target Incentive
Bonus Plan Description.*
(10)(m) Parker-Hannifin Corporation 1993-94-95 Long Term
Incentive Plan Description (K).*
(10)(n) Parker-Hannifin Corporation 1994-95-96 Long Term
Incentive Plan Description, as amended as of August
17, 1995.*
(10)(o) Parker-Hannifin Corporation 1995-96-97 Long Term
Incentive Plan Description, as amended as of August
17, 1995.*
(10)(p) Parker-Hannifin Corporation 1996-97-98 Long Term
Incentive Plan Description.*
(10)(q) Parker-Hannifin Corporation Savings Restoration
Plan, as amended as of August 17, 1995.*
(10)(r) Parker-Hannifin Corporation Pension Restoration
Plan, as amended as of August 17, 1995.*
(10)(s) Parker-Hannifin Corporation Executive Deferral
Plan, as amended as of August 17, 1995.*
(10)(t) Parker-Hannifin Corporation 1995 Volume Incentive
Plan (L).*
(10)(u) Parker-Hannifin Corporation 1996 Volume Incentive
Plan.*
(10)(v) Parker-Hannifin Corporation Non-Employee Directors'
Stock Plan, as amended as of August 17, 1995.*
(10)(w) Parker-Hannifin Corporation Deferred Compensation
Plan for Directors (M).*
(11) Computation of Common Shares Outstanding and
Earnings Per Share.
(13) Excerpts from Annual Report to Shareholders for the
fiscal year ended June 30, 1995 which are
incorporated herein by reference thereto.
(21) List of subsidiaries of the Registrant.
<PAGE>
Exhibit No. Description of Exhibit
(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.
(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(f) to the
Registrant's Report on Form 10-K for the fiscal
year ended June 30, 1994.
(C) Incorporated by reference to Exhibit 10(g) to the
Registrant's Report on Form 10-K for the fiscal
year ended June 30, 1994.
(D) Incorporated by reference to Exhibit 10(i) to the
Registrant's Report on Form 10-K for the fiscal
year ended June 30, 1994.
(E) Incorporated by reference to Exhibit 10(j) to the
Registrant's Report on Form 10-K for the fiscal
year ended June 30, 1994.
(F) Incorporated by reference to Exhibit 10(k) to the
Registrant's Report on Form 10-K for the fiscal
year ended June 30, 1994.
(G) Incorporated by reference to Exhibit 10(i) to the
Registrant's Report on Form 10-K for the fiscal
year ended June 30, 1993.
(H) Incorporated by reference to Exhibit 10(j) to the
Registrant's Report on Form 10-K for the fiscal
year ended June 30, 1993.
(I) Incorporated by reference to Exhibit 10(n) to the
Registrant's Report on Form 10-K for the fiscal
year ended June 30, 1994.
(J) Incorporated by reference to Exhibit 10(p) to the
Registrant's Report on Form 10-K for the fiscal
year ended June 30, 1993.
(K) 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.
(L) Incorporated by reference to Exhibit 10 to the
Registrant's Report on Form 10-Q for the calendar
quarter ended September 30, 1994.
<PAGE>
(M) Incorporated by reference to Exhibit 10(b) to the
Registrant's Report on Form 10-Q for the calendar
quarter ended December 31, 1994.
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.
Exhibit (10)(a)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1995
by Parker-Hannifin Corporation
Form of Change in Control Agreement
entered into by the Registrant and
certain executive officers, as amended and
restated as of August 17, 1995
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
A M E N D E D and R E S T A T E D
A G R E E M E N T
between
PARKER-HANNIFIN CORPORATION
and
__________
effective August 17, 1995
<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, 5
Perquisites
5 Employee Benefit Plans 8
6 Effect of Death or Disability 10
7 Termination 11
8 Obligation to Mitigate Damages 20
9 Confidential Information 21
10 Severance Allowance 22
11 Withholding 23
12 Notices 23
13 General Provisions 24
14 Amendment or Modification, Waiver 26
15 Severability 27
16 Successors to the Company 27
17 Change in Control 27
18 Intention Relating to Recent
Legislation, Possible Future Amendments 30
Exhibits (A, B, C, D, E, and F)
<PAGE>
This AMENDED and RESTATED AGREEMENT between PARKER-HANNIFIN
CORPORATION, an Ohio Corporation (the Company), and
__________ (the Executive), effective the __________ day of
__________.
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 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
<PAGE>
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
(the Operative Date). This Agreement supersedes the prior Agreement
between the Company and the Executive dated __________.
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
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.
- 2 -
<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 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.
- 3 -
<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
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
- 4 -
<PAGE>
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
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
- 5 -
<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 recurring annual incentive compensation
plans (which currently include the Return on Net Assets
Bonus Plan and the Target Incentive Compensation
Program), or such equivalent successor plans as may be
adopted by the Company (the Annual Bonus Plans), 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 paid in 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) above, or
- 6 -
<PAGE>
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 eligible to participate in future award
opportunities in the Company's stock option plans, long-term
incentive plans and other long-term executive compensation
plans with at least the same award opportunities as shall have
been provided immediately prior to the Operative Date.
Nothing in this Agreement shall preclude improvement of award
opportunities in such plans
- 7 -
<PAGE>
or other plans in accordance with the practice of the Company
immediately prior to the Operative Date.
(b) The Company agrees to honor the terms of any
existing stock option plans and awards thereunder and long-term
incentive plans and awards thereunder in the event of a Change
in Control.
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.
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.
- 8 -
<PAGE>
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, the Parker-
Hannifin Employees' Savings Plus Stock Ownership Plan, the
Parker-Hannifin Corporation Pension Restoration Plan, the
Parker-Hannifin Corporation Savings Restoration Plan, any excess
benefits plan or any other program designed to restore benefits
unavailable under tax-qualified plans of the Company solely by
application of the requirements of the Code, the Supplemental
Executive Retirement Benefits Program, the Executive Deferral
Plan and any other applicable plan of deferred compensation),
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.
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
- 9 -
<PAGE>
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 (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
- 10 -
<PAGE>
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:
(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
- 11 -
<PAGE>
the month in which the death of the Executive shall have occurred
or after the sixth 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 pension
program (consisting of the Parker-Hannifin Corporation
Retirement Plan, the Parker-Hannifin Corporation Pension
Restoration Plan, any excess benefits plan or other program
designed to restore benefits unavailable under any tax-qualified
defined benefit plans of the Company solely by application of the
requirements of the Code, if any, and the 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.
- 12 -
<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 (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) 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.
- 13 -
<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), 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.
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<PAGE>
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 (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 or
distribution of products which constituted 15% or more of the
sales of the Company and its subsidiaries and divisions during
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<PAGE>
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 (30) days from his
receipt of written notice by the Secretary of the Company
pursuant to a 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)
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<PAGE>
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
(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
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<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
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 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.
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<PAGE>
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, including, without limitation, any
information 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.
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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
(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: __________
Parker-Hannifin Corporation
__________
__________
With additional copy to: __________
__________
__________
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<PAGE>
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 is
not intended to nor shall it infer or imply any obligation on
the part of the Executive to continue in the employment of the
Company, nor 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.
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<PAGE>
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, 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.
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<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, a "Change in
Control of the Company" shall be deemed to have occurred if:
(a) any "person" (as such term is defined in Section
3(a)(9) of the Securities Exchange Act of 1934 (the "Exchange
Act") and as used in Sections 13(d)(3) and 14(d)(2) of the
Exchange Act) is or becomes a "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding
securities eligible to vote
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<PAGE>
for the election of the Board of Directors of the Company
(the "Company Voting Securities"); provided, however, that
the event described in this paragraph shall not be deemed
to be a Change in Control by virtue of any of the following
situations: (i) an acquisition by the Company or, direct
or indirect majority-owned subsidiaries of the Company;
(ii) an acquisition by any employee benefit plan sponsored
or maintained by the Company or any corporation controlled
by the Company; (iii) an acquisition by any underwriter
temporarily holding securities pursuant to an offering of
such securities; (iv) a Non-Control Transaction (as defined
in paragraph (c)); (v) any acquisition by one or more of
the officers who have "change in control" contracts with
the Company; or (vi) the acquisition of Company Voting
Securities from the Company, if a majority of the Board of
Directors of the Company approves a resolution providing
expressly that the acquisition pursuant to this clause (vi)
does not constitute a Change in Control under this paragraph
(a);
(b) individuals who, at the beginning of any period of
twenty-four (24) consecutive months, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any
reason to constitute at least a majority thereof, provided
that (i) any person becoming a director subsequent to the
beginning of such twenty-four (24) month period, whose
election, or nomination for election, by the Company's
shareholders was approved by a vote of at least two-thirds of
the directors comprising the Incumbent Board (either by a
specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for
director, without objection to such nomination) shall be, for
purposes of this paragraph (b), considered as though such
person were a member of the Incumbent Board; provided,
however, that no individual initially elected or nominated as
a director of the Company as a result of an actual or
threatened election contest with respect to directors or any
other actual or threatened solicitation of proxies or consents
by or on behalf of any person other than the Board of
Directors shall be deemed to be a member of the Incumbent
Board;
(c) a merger or consolidation or similar form of
corporate reorganization, or sale or other disposition of all
or substantially all of the assets, of the Company (a
"Business Combination") is consummated, unless immediately
following such Business Combination: (i) more than 55% of the
total voting power of the corporation resulting from such
Business Combination (including, without limitation, for
purposes of making such 55% determination, any
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<PAGE>
shares owned through any entity which directly or indirectly
has beneficial ownership of the Company Voting Securities or
all or substantially all of the Company's assets) eligible to elect
directors of such corporation is represented by shares held by
shareholders of the Company immediately prior to such Business
Combination (either by remaining outstanding or being
converted), (ii) no person (other than any holding company
resulting from such Business Combination, any employee benefit
plan sponsored or maintained by the Company (or the
corporation resulting from such Business Combination), or any
person which beneficially owned, immediately prior to such
Business Combination, directly or indirectly, 20% or more of
the Company Voting Securities) becomes the beneficial owner,
directly or indirectly, of 20% or more of the total voting
power of the outstanding voting securities eligible to elect
directors of the corporation resulting from such Business
Combination, and (iii) at least a majority of the members of
the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or action
of the Board of Directors, providing for such Business
Combination (a "Non-Control Transaction"); or
(d) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because any person
acquires beneficial ownership of more than 20% of the Company
Voting Securities as a result of the acquisition of Company
Voting Securities by the Company which, by reducing the number
of Company Voting Securities outstanding, increases the
percentage of shares beneficially owned by such person;
provided, that if a Change in Control would occur as a result
of such an acquisition by the Company (if not for the
operation of this sentence), and after the Company's
acquisition such person becomes the beneficial owner of
additional Company Voting Securities that increases the
percentage of outstanding Company Voting Securities
beneficially owned by such person, then a Change in Control
shall occur.
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<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 Department
of Treasury 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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first above written.
ATTEST: PARKER-HANNIFIN CORPORATION,
an Ohio corporation
________________________________ By:__________________________
Secretary President & Chief
Executive Officer
THE EXECUTIVE
_________________________
- 31 -
Exhibit (10)(d)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1995
by Parker-Hannifin Corporation
Parker-Hannifin Corporation Supplemental Executive
Retirement Benefits Program (July 16, 1992 Restatement),
as amended as of August 17, 1995
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
Parker-Hannifin Corporation
Supplemental Executive
Retirement Benefits Program
<PAGE>
TABLE OF CONTENTS
Section Page
Premises. . . . . . . . . . . . . . . . . . . . . . . . .1
Definitions . . . . . . . . . . . . . . . . . . . . . . 1
Participation . . . . . . . . . . . . . . . . . . . . . 5
Participants . . . . . . . . . . . . . . . . . .5
Designation of Participants. . . . . . . . . . .5
Continuation of Participation. . . . . . . . . .5
Effect of Termination of Employment. . . . . . .6
Supplemental Retirement Benefits. . . . . . . . . . . . .6
Eligibility at or After Normal
Retirement . . . . . . . . . . . . . . . . .6
Eligibility Prior to Normal
Retirement Date. . . . . . . . . . . . . . .6
Amount of Supplemental
Retirement Benefits. . . . . . . . . . . . .7
Payments of Benefits. . . . . . . . . . . . . . . . . . 10
Commencement of Benefits . . . . . . . . . . . 10
Payments Under Certain Situations. . . . . . . 10
Optional Methods of Payment. . . . . . . 10
Payment Upon a Change in
Control . . . . . . . . . . . . . . . 10
Election to Receive a Lump
Sum Payment . . . . . . . . . . . . . 11
Certain Matters Following a
Lump Sum Payment. . . . . . . . . . . 11
Determination of the Lump Sum
Payment. . . . . . . . . . . . . . . . . . 12
Death Benefits. . . . . . . . . . . . . . . . . . . . . 12
Eligibility . . . . . . . . . . . . . . . . . 12
Benefit Amount. . . . . . . . . . . . . . . . 12
Benefit Payments. . . . . . . . . . . . . . . 13
Non-Competition . . . . . . . . . . . . . . . . . . . . 13
Condition of Payment. . . . . . . . . . . . . 13
Competition . . . . . . . . . . . . . . . . . 13
Cessation of Payments . . . . . . . . . . . . 14
<PAGE>
General Provisions. . . . . . . . . . . . . . . . . . . 14
Denial of Claims. . . . . . . . . . . . . . . 14
Claims Review Procedure . . . . . . . . . . . 14
Rights of Participants. . . . . . . . . . . . 15
Administration. . . . . . . . . . . . . . . . 16
Program Non-Contractual . . . . . . . . . . . 16
Non-Alienation of Retirement
Rights or Benefits . . . . . . . . . . . . 16
Payment of Benefits to Others . . . . . . . . 16
Notices . . . . . . . . . . . . . . . . . . . 17
Amendment, Modification, Termination. . . . . 17
<PAGE>
Parker-Hannifin Corporation
Supplemental Executive
Retirement Benefits Program
WHEREAS, by instrument effective as of January 1, 1980, a supplemental
executive retirement benefits program was established for the benefit of
certain employees of Parker-Hannifin Corporation and their beneficiaries; and
WHEREAS, said Program was amended from time to time; and
WHEREAS, it is desired to restate the terms, provisions, and
conditions of said Program;
NOW, THEREFORE, effective as of August 17, 1995, said Program is
hereby amended and restated in its entirety to provide as hereinafter set
forth.
1. Definitions
Except as otherwise required by the context, the terms used in this
Program shall have the meaning hereinafter set forth.
(a) Benefit Payment Period. The one of the following which
applies to the particular Participant or Recipient:
(i) For a Recipient who is receiving payments for the
remainder of a term certain period, Benefit Payment Period means the
remainder of such term certain period.
(ii) For a Participant who is to receive a Lump Sum Payment
pursuant to subparagraph (b) of Paragraph 4.02, or a Recipient who is
receiving payments for his or her remaining lifetime, the Benefit
Payment Period is the Life Expectancy of the Participant or
Recipient.
(iii) For a Recipient who is receiving payments for his or
her remaining lifetime plus payments for the lifetime of a Contingent
Annuitant, the Benefit Payment Period is the Life Expectancy of the
Recipient plus an additional period to reflect the Life Expectancy of
the Contingent Annuitant after the death of the Recipient.
(b) Change in Control: Any one or more of the following
occurrences:
(i) any "person" (as such term is defined in Section
3(a)(9) of the Securities Exchange Act of 1934 (the "Exchange Act")
and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is
or becomes a "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 20%
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or more of the combined voting power of the Company's then outstanding
securities eligible to vote for the election of the Board of Directors
of the Company (the "Company Voting Securities"); provided, however,
that the event described in this paragraph shall not be deemed to be a
Change in Control by virtue of any of the following situations: (A) an
acquisition by the Company or, direct or indirect, majority-owned
subsidiaries of the Company; (B) an acquisition by any employee benefit
plan sponsored or maintained by the Company or any corporation controlled
by the Company; (C) an acquisition by any underwriter temporarily holding
securities pursuant to an offering of such securities; (D) a Non-Control
Transaction (as defined in paragraph (iii)); (E) any acquisition by one
or more of the officers who have "change in control" contracts with the
Company; or (F) the acquisition of Company Voting Securities from the
Company, if a majority of the Board of Directors of the Company approves
a resolution providing expressly that the acquisition pursuant to this
clause (F) does not constitute a Change in Control under this
paragraph (i);
(ii) individuals who, at the beginning of any period of
twenty-four (24) consecutive months, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason
to constitute at least a majority thereof, provided that any person
becoming a director subsequent to the beginning of such twenty-four
(24) month period, whose election, or nomination for election, by the
Company's shareholders was approved by a vote of at least two-thirds
of the directors comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of the Company in which
such person is named as a nominee for director, without objection to
such nomination) shall be, for purposes of this paragraph (ii),
considered as though such person were a member of the Incumbent
Board; provided, however, that no individual initially elected or
nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors or any other
actual or threatened solicitation of proxies or consents by or on
behalf of any person other than the Board of Directors shall be
deemed to be a member of the Incumbent Board;
(iii) a merger or consolidation or similar form of corporate
reorganization, or sale or other disposition of all or substantially
all of the assets, of the Company (a "Business Combination") is
consummated, unless immediately following such Business Combination:
(A) more than 55% of the total voting power of the corporation
resulting from such Business Combination (including, without
limitation, for purposes of making such 55% determination, any shares
owned through any entity which directly or indirectly has beneficial
ownership of the Company Voting Securities or all or substantially
all of the Company's assets) eligible to elect directors of such
corporation is represented by shares held by shareholders of the
Company immediately prior to such Business Combination (either by
remaining outstanding or being converted); (B) no person (other than
any holding company resulting from such Business Combination, any
employee benefit plan sponsored or maintained by the Company (or the
corporation resulting from such Business Combination), or any person
which beneficially owned, immediately prior to such Business
Combination, directly or indirectly, 20% or more of the Company
Voting Securities)
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becomes the beneficial owner, directly or indirectly, of 20% or more
of the total voting power of the outstanding voting securities eligible
to elect directors of the corporation resulting from such Business
Combination; and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the execution of the
initial agreement, or action of the Board of Directors, providing for
such Business Combination (a "Non-Control Transaction"); or
(iv) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because any person acquires beneficial ownership of more than
20% of the Company Voting Securities as a result of the acquisition of
Company Voting Securities by the Company which, by reducing the number of
Company Voting Securities outstanding, increases the percentage of shares
beneficially owned by such person; provided, that if a Change in Control
would occur as a result of such an acquisition by the Company (if not for the
operation of this sentence), and after the Company's acquisition such person
becomes the beneficial owner of additional Company Voting Securities that
increases the percentage of outstanding Company Voting Securities
beneficially owned by such person, then a Change in Control shall occur.
(c) Committee: The Compensation and Management Development
Committee of the Board of Directors of the Company.
(d) Company: Parker-Hannifin Corporation, an Ohio corporation,
its corporate successors, and the surviving corporation resulting from any
merger of Parker-Hannifin Corporation with any other corporation or
corporations.
(e) Competition: Conduct defined in Paragraph 6.02 of the
Program.
(f) Contingent Annuitant: The person designated by a Participant
as provided in Section 9.1 of the Retirement Plan.
(g) Controlled Group: The group of related corporations of which
the Company is a member as determined under Section 1563(a) of the Internal
Revenue Code of 1986, as amended.
(h) Highest Average Three-Year Compensation: One-third of the
aggregate amount of the highest of compensation of a Participant from the
Controlled Group with respect to any three calendar years of the
Participant's employment which produces a higher average than any other three
calendar years including base salary, executive or incentive compensation or
bonus, Return on Net Assets (RONA)/Profit Sharing payments, and any amounts
which would otherwise be paid as compensation but which are deferred by a
Participant pursuant to any qualified or unqualified deferred compensation
program sponsored by the Controlled Group, but excluding (i) any deferred
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<PAGE>
compensation received during any such year but credited under the Program to
the Participant for a prior year, (ii) any income realized due to the
exercise of stock options or stock appreciation rights; (iii) any payments,
in cash or otherwise, paid to the Participant under the Company's Long-Term
Incentive Plan, any extraordinary one-time bonus arrangements, or as an
executive prequisite; and (iv) such items as fringe benefits includible in
income as compensation for federal tax purposes, moving and educational
reimbursement expenses, overseas allowances received by the Participant from
the Controlled Group, and any other irregular payments.
(i) Life Expectancy: The expected remaining lifetime (to the
nearest integer) based on the Mortality Table and the age nearest birthday
of the Participant or Recipient at the date the Lump Sum Payment is made.
If a joint and contingent survivor annuity has been elected, then Life
Expectancy shall reflect the joint Life Expectancy of the Participant or
Recipient and Contingent Annuitant.
(j) Lump Sum Payment: The Lump Sum Payment provided in Paragraph
4.02 of Section 4 of the Program with the amount determined as set forth in
Paragraph 4.03 thereof.
(k) Mortality Table: The UP-1984 Table (or such other pensioner
annuity mortality table as the Company with the written consent of the
Participant or Recipient shall determine) and the associated Uniform
Seniority Table for the determination of joint life expectancies.
(l) Net Specified Rate: The interest rate which will produce
income on a tax free basis, that equals the income produced by the Specified
Rate net of the combined highest rates of Federal, state and local income
taxes that are in effect in the jurisdiction of the Participant or Recipient
on the date of payment of the Lump Sum Payment.
(m) Normal Retirement Date: The date on which a Participant
attains 65 years of age unless and until another date is prescribed in the
Retirement Plan as the normal retirement date of participants in the
Retirement Plan in which event such other date shall become the Normal
Retirement Date hereunder.
(n) Participant: An employee of the Company designated to
participate in the Program pursuant to Section 2 of the Program, while so
employed.
(o) Profit Sharing Account Balance: The definition set forth in
Section 1.1(y) of the Parker-Hannifin Corporation Retirement Plan.
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<PAGE>
(p) Program: The Supplemental Executive Retirement Benefits
Program set forth in these pages.
(q) Recipient: A retiree, Contingent Annuitant, term certain
beneficiary, or Surviving Spouse, who is currently receiving benefits or is
entitled to receive benefits under the Program.
(r) Retirement Plan: The Parker-Hannifin Corporation Retirement
Plan and any excess benefit plan, including any amendments thereto that may
be adopted after the Effective Date of the Program.
(s) Service: Employment as an employee by any member of the
Controlled Group, as well as employment by a corporation, trade or business,
that is now part of the Controlled Group at a time prior to its becoming part
of the Controlled Group, but in each such case only if and to the extent that
the Committee shall so direct at any time prior to retirement.
(t) Specified Rate: The interest rate for immediate annuities
of the Pension Benefit Guarantee Corporation (PBGC) in effect on the date of
payment of the Lump Sum Payment as set forth in Appendix B to Part 2619 of
29 Code of Federal Regulations or such successor to such Appendix B as may
be in effect on such date.
(u) Surviving Spouse: The person who is the Participant's spouse
at the time of the Participant's death and who has been such spouse for at
least one year immediately prior to the date of the Participant's death.
(v) Unreduced Benefit: An amount equal to 1/12th of 55 percent
(i.e., 4.5833%) of Highest Average Three-Year Compensation.
2. Participation
2.01 Participants. The Participants in the Program shall be such
officers and other key executives of the Company as shall be designated as
Participants from time to time by the Committee.
2.02 Designation of Participants. An individual may be designated
a Participant by action of the Committee or in a written employment agreement
approved by the Committee. Participation of each individual designated as
a Participant shall be subject to the terms, conditions, and limitations set
forth in the Program and to such other terms, conditions and limitations as
the Committee may, in its discretion, impose upon the participation of any
such individual at the time the individual is designated a Participant in the
Program.
2.03 Continuation of Participation. Subject only to the
provisions of Paragraph 2.04 and Section 6 of the Program, an individual
designated as a Participant shall continue to be a
5
<PAGE>
Participant for the purpose of the supplemental retirement benefits provided
by the Program and his participation in the Program shall not be terminated.
2.04 Effect of Termination of Employment. To be eligible for
supplemental retirement benefits under the Program a Participant shall not
voluntarily terminate employment with the Company without the consent of the
Committee for a period, not exceeding 60 calendar months, set by the
Committee at the time he is designated a Participant. If he shall so
voluntarily terminate his employment within such period, his participation
in the Program shall terminate and he shall cease to be a Participant. For
purposes of this Paragraph 2.04, in no event shall the termination by a
Participant of his employment with the Company pursuant to his right to do
so under an agreement with the Company be deemed to be a voluntary
termination of employment with the Company without the consent of the
Committee.
3. Supplemental Retirement Benefits
3.01 Eligibility at or After Normal Retirement Date. Any
provision of Paragraph 2.04 above to the contrary notwithstanding, any
Participant with at least 120 calendar months of Service who terminates his
employment with the Controlled Group on or after his Normal Retirement Date
shall be eligible for a monthly supplemental retirement benefit computed as
follows:
(a) If such Participant has at least 180 calendar months of
Service, such benefit shall be an amount determined in accordance with the
provisions of subparagraph (a) of Paragraph 3.03; or
(b) If such Participant has less than 180 calendar months of
Service, such benefit shall be an amount determined in accordance with the
provisions of subparagraph (b) of Paragraph 3.03.
3.02 Eligibility Prior to Normal Retirement Date. Any provision
of Paragraph 2.04 to the contrary notwithstanding, any Participant with at
least 120 calendar months of Service (i) who terminates his employment with
the Controlled Group with the consent of the Committee after attainment of
age 55; or (ii) who terminates his employment with the Controlled Group prior
to attainment of age 60 and after a Change in Control of the Company; or
(iii) whose employment with the Controlled Group is terminated by the Company
for reasons other than for cause (as determined solely by the Board of
Directors of the Company) after attainment of age 55 but prior to the
expiration of the requisite period of employment established by the Committee
with respect to him pursuant to Paragraph 2.04; or (iv) who terminates his
employment with the Controlled Group due to disability after attainment of
age 55 but prior to his Normal Retirement Date; or (v) who terminates his
employment with the Controlled Group after attainment of age 60 but prior to
his Normal Retirement Date, shall be eligible for a monthly supplemental
retirement benefit as follows:
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<PAGE>
(a) If such Participant has at least 180 calendar months of
Service, such benefit shall be an amount determined in accordance with the
provisions of subparagraph (c) of Paragraph 3.03; or
(b) If such Participant has less than 180 calendar months of
Service, such benefit shall be an amount determined in accordance with the
provisions of subparagraph (d) of Paragraph 3.03.
3.03 Amount of Supplemental Retirement Benefits. The amount of
a monthly supplemental retirement benefit payable to an eligible Participant
shall be computed in the following manner:
(a) If a Participant is eligible for a supplemental retirement
benefit pursuant to the provisions of subparagraph (a) of Paragraph 3.01,
such benefit shall equal his Unreduced Benefit reduced by the sum of:
(i) the monthly straight-life normal retirement benefit
to which the Participant is eligible under the Retirement Plan,
including any amount attributable to such Participant's
Profit-Sharing Account Balance;
(ii) the monthly straight-life benefit to which the
Participant is eligible pursuant to any unfunded program of the
Company that is not attributable to compensation deferred by the
Participant under any deferred compensation program;
(iii) the monthly straight-life actuarial equivalent of any
benefit to which the Participant is eligible from any qualified
pension plan of the Company and which is attributable to
contributions of the Company unless benefit service for employment on
which such benefit is based is credited to the Participant under the
Retirement Plan;
(iv) commencing at the earliest date payable on or after
termination of employment, 50 percent of the monthly primary social
security benefit to which the Participant is entitled, or would be
entitled, at the time in the absence of any compensation that may at
the time be or have been earned by him after such date; and
(v) the monthly straight-life actuarial equivalent of any
benefit which the Participant is eligible to receive from any
previous employer, provided that a contract between the Participant
and the Company grants the Participant service credit for service
with the previous employer and the contract states the benefit to be
offset.
(b) If a Participant is eligible for a supplemental retirement
benefit pursuant to the provisions of subparagraph (b) of Paragraph 3.01,
such benefit shall equal his Unreduced Benefit reduced by the sum of:
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<PAGE>
(i) .3055 percent of the Unreduced Benefit for each
calendar month his Service is less than 180 calendar months;
(ii) the monthly straight-life normal retirement benefit
to which the Participant is eligible under the Retirement Plan,
including any amount attributable to such Participant's
Profit-Sharing Account Balance;
(iii) the monthly straight-life benefit to which the
Participant is eligible pursuant to any unfunded program of the
Company that is not attributable to compensation deferred by the
Participant under any deferred compensation program;
(iv) the monthly straight-life actuarial equivalent of any
benefit to which the Participant is eligible from any qualified
pension plan of the Company and which is attributable to
contributions of the Company unless benefit service for employment on
which such benefit is based is credited to the Participant under the
Retirement Plan;
(v) commencing at the earliest date payable on or after
termination of employment, 50 percent of the monthly primary social
security benefit to which the Participant is entitled, or would be
entitled, at the time in the absence of any compensation that may at
the time be or have been earned by him after such date; and
(vi) the monthly straight-life actuarial equivalent of any
benefit which the Participant is eligible to receive from any
previous employer, provided that a contract between the Participant
and the Company grants the Participant service credit for service
with the previous employer and the contract states the benefit to be
offset.
(c) If a Participant is eligible for a supplemental retirement
benefit pursuant to the provisions of subparagraph (a) of Paragraph 3.02,
such benefit shall equal his Unreduced Benefit reduced by the sum of:
(i) .1515 percent of the Unreduced Benefit multiplied by
the number of calendar months during which such benefit is to be paid
after attainment of age 60 but prior to his Normal Retirement Date;
(ii) .3030 percent of the Unreduced Benefit multiplied by
the number of calendar months during which such benefit is to be paid
after attainment of age 55 but prior to attainment of age 60;
(iii) the monthly straight-life early retirement benefit to
which the Participant is eligible under the Retirement Plan,
including any amount attributable to such Participant's
Profit-Sharing Account Balance;
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<PAGE>
(iv) the monthly straight-life benefit to which the
Participant is eligible pursuant to any unfunded program of the
Company that is not attributable to compensation deferred by the
Participant under any deferred compensation program;
(v) the monthly straight-life actuarial equivalent of any
benefit to which the Participant is eligible from any qualified
pension plan of the Company and which is attributable to
contributions of the Company unless benefit service for employment on
which such benefit is based is credited to the Participant under the
Retirement Plan;
(vi) commencing at the earliest date payable on or after
termination of employment, 50 percent of the monthly primary social
security benefit to which the Participant is entitled, or would be
entitled, at the time in the absence of any compensation that may at
the time be or have been earned by him after such date; and
(vii) the monthly straight-life actuarial equivalent of any
benefit which the Participant is eligible to receive from any
previous employer, provided that a contract between the Participant
and the Company grants the Participant service credit for service
with the previous employer and the contract states the benefit to be
offset.
(d) If a Participant is eligible for a supplemental retirement
benefit pursuant to the provisions of subparagraph (b) of Paragraph 3.02,
such benefit shall equal his Unreduced Benefit reduced by the sum of:
(i) .3055 percent of the Unreduced Benefit for each calendar
month his service is less than 180 calendar months;
(ii) .1515 percent of the Unreduced Benefit multiplied by
the number of calendar months during which such benefit is to be paid
after attainment of age 60 but prior to his Normal Retirement Date;
(iii) .3030 percent of the Unreduced Benefit multiplied by
the number of calendar months during which such benefit is to be paid
after attainment of age 55 but prior to attainment of age 60;
(iv) the monthly straight-life early retirement benefit to
which the Participant is eligible under the Retirement Plan,
including any amount attributable to such Participant's
Profit-Sharing Account Balance;
(v) the monthly straight-life benefit to which the
Participant is eligible pursuant to any unfunded program of the
Company that is not attributable to compensation deferred by the
Participant under any deferred compensation program;
(vi) the monthly straight-life actuarial equivalent of any
benefit to which the Participant is eligible from any qualified
pension plan of the Company and which is
9
<PAGE>
attributable to contributions of the Company unless benefit service for
employment on which such benefit is based is credited to the Participant
under the Retirement Plan;
(vii) commencing at the earliest date payable on or after
termination of employment, 50 percent of the monthly primary social
security benefit to which the Participant is entitled, or would be
entitled, at the time in the absence of any compensation that may at
the time be or have been earned by him after such date; and
(viii) the monthly straight-life actuarial equivalent of any
benefit which the Participant is eligible to receive from any
previous employer, provided that a contract between the Participant
and the Company grants the Participant service credit for service
with the previous employer and the contract states the benefit to be
offset.
(e) Attachment A to the Program sets forth illustrative examples
of certain retirement situations under this Paragraph 3.03.
4. Payment of Benefits
4.01 Commencement of Benefits. Subject to Paragraphs 4.02 (b) and
4.02 (c) below, supplemental retirement benefits shall be payable monthly to
an eligible Participant commencing with the later of the month next following
the month in which he becomes eligible for such benefit or the month
designated by him in writing to the Company and terminating with the month
in which the death of such Participant occurs.
4.02 Payments Under Certain Situations.
(a) Optional Methods of Payment. Subject to Paragraphs 4.02 (b)
and 4.02 (c) below, an optional method of payment selected by the Participant
for payment of his retirement benefit under the Retirement Plan, including
without limitation any deferment in the time of payment thereof, shall
automatically be applicable to the payment of the supplemental retirement
benefits provided by the Program, upon the same terms and conditions,
including factors (other than those specified in Section 3 for early
commencement of benefits) applicable under the Retirement Plan.
(b) Payment Upon a Change in Control. Upon the occurrence of a
Change in Control, each Participant and each Recipient shall receive on
account of future payments of any and all benefits (taking into account any
service period under any contract with the Participant) due under the
Program, a Lump Sum Payment so each such Participant and Recipient will
receive substantially the same amount of after tax income as before the
Change in Control. The Lump Sum Payment referred to herein shall be
determined as set forth in subparagraph (a) of Paragraph 4.03. Attachment
B to the Program sets forth illustrative examples.
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<PAGE>
(c) Election to Receive a Lump Sum Payment. A Participant, who
is anticipating retirement and is eligible to receive benefits under the
Program pursuant to Paragraph 3.01 or pursuant to clause (i), (iii), (iv) or
(v) of Paragraph 3.02, or a Recipient, may elect, subject to the terms and
conditions hereinafter set forth, to receive, in lieu of future payments of
any and all then unpaid accrued and vested benefits under the Program, a Lump
Sum Payment determined in accordance with subparagraph (b) of Paragraph 4.03.
The election of such Lump Sum Payment shall be made under either of the
following two clauses:
(i) Such Participant or a non-retiree Recipient may file
a request for a Lump Sum Payment with the Committee prior to the date
on which the first monthly benefit payment under the Program would
otherwise be made to such Participant or non-retiree Recipient. In
the case of the Participant, such election shall be made at least 180
days prior to his retirement date, unless such period shall be
reduced or waived by the Committee on a case by case basis or by rule
of general application. If the Committee in its sole discretion
consents to such request, which consent may be made subject to such
terms and conditions, if any, as the Committee may impose, and which
consent may be given on a case by case basis or by rule of general
application, 100% of such Lump Sum Payment shall be paid by the
Company on the date on which the first monthly benefit payment under
the Program would otherwise be made, or the Committee may direct that
the Trustee make such payment on such date from the Grantor Trust to
the extent funded, with the Company paying the balance, if any; or
(ii) Such Participant or a Recipient, who has not filed a
request pursuant to clause (i) above, may file an election at any
time with either the Company or the Trustee of the Grantor Trust
under this clause (ii), in which case he shall receive 90% of the
Lump Sum Payment, and the remaining 10% shall be forfeited. If such
election is filed with the Trustee, the Trustee, as promptly as
administratively feasible after the filing of such election, shall
make such payment to the Participant or Recipient. In the event the
election is filed with the Company, the Company may make the payment
or direct the Trustee to make the payment. To the extent that the
entire amount of Participant's or Recipient's 90% Lump Sum Payment is
not made from the Trust, the Trustee shall notify the Company of the
portion of such Lump Sum Payment not so made and such portion shall
be paid by the Company.
(d) Certain Matters Following a Lump Sum Payment. A Participant
who has received a Lump Sum Payment pursuant to subparagraph (b) of Paragraph
4.02 shall, thereafter (i) while in the employ of the Company, continue to
accrue benefits under the Program, and (ii) be eligible for further benefits
under Paragraph 4.01 or subparagraphs (a), (b) or (c) of Paragraph 4.02,
after appropriate reduction in respect of the Lump Sum Payment previously
received. The previous Lump Sum Payment shall be accumulated with interest
at the Specified Rate as in effect from time to time for the period of
time from initial payment date to the next computation date. It shall then
be converted to a straight-life annuity using the current annuity certain
factor. The current annuity certain factor will be determined on the Net
Specified Rate basis if this benefit payment is being made due to a later
Change in Control; otherwise, the Specified Rate shall be used.
Attachment C
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to the Program sets forth illustrative examples. Provided, however, that
in the case of any Participant or Recipient for whom the benefits provided
by this subparagraph (d) have been funded by contributions to the Trust
established under the Grantor Trust Agreement referred to in Paragraph 7.03
hereof, his right to receive any portion of such benefits that is payable
from the Trust shall be governed by Section 7(b)(i) of the Grantor Trust
Agreement.
4.03 Determination of the Lump Sum Payment.
(a) The Lump Sum Payment referred to in subparagraph (b) of
Paragraph 4.02 shall be determined by multiplying the annuity certain factor
(for monthly payments at the beginning of each month) based on the Benefit
Payment Period and the Net Specified Rate by the monthly benefit (adjusted
for assumed future benefit adjustments due to Social Security and Internal
Revenue Code Section 415 changes in the Retirement Plan) to be paid to the
Participant or Recipient under the Program.
(b) The Lump Sum Payment referred to in subparagraph (c) of
Paragraph 4.02 shall be determined by multiplying the annuity certain factor
(for monthly payments at the beginning of each month) based on the Benefit
Payment Period and the Specified Rate by the monthly benefit (adjusted for
assumed future benefit adjustments due to Social Security and Internal
Revenue Code Section 415 changes in the Retirement Plan) to be paid to the
Participant or Recipient under the Program.
5. Death Benefits
5.01 Eligibility. If a Participant dies after completing
120 calendar months of Service but prior to the earlier of his retirement or
his Normal Retirement Date, his Surviving Spouse (or, in the event there is
no surviving spouse, or there is a common death, his estate) shall be
eligible for a benefit under this Section 5.
5.02 Benefit Amount.
(a) The monthly amount of a benefit payable under this Section 5
to a deceased Participant's Surviving Spouse or estate, as the case may be,
who has applied therefor, shall be equal to the monthly payment the spouse
or estate would have received had the Participant retired on the day before
his death and after having effectively elected an optional benefit under
Option F (50% joint and contingent survivor annuity with a 10-year minimum
payment provision) defined in Section 9.1 of the Retirement Plan and
designated said spouse as his Contingent Annuitant under such option or, in
the case of his estate, said estate as his Term - Certain Beneficiary under
such option.
(b) The monthly benefit that would have been payable as an early
retirement benefit to the Participant on a life annuity basis will be reduced
by the factor for Option F as specified in the Retirement Plan, and that
reduced benefit amount is paid for 120 months. After the 120 month
12
<PAGE>
period has expired, the benefit amount will cease if paid to the deceased
Participant's estate, and will be 50% of that reduced monthly benefit if it
is paid to the Surviving Spouse.
(c) If the Participant dies before reaching age 55, then the
monthly benefit shall be determined under subparagraphs (c) or (d) of
Paragraph 3.03 (depending on the Participant's length of service) and the
applicable percent shall be adjusted by the .3030 percent (specified in those
subparagraphs for Participants between age 55 and age 60) multiplied by the
number of months that the participant was under age 60 at the time of his
death.
(d) Attachment D to this Restatement sets forth illustrative
example of certain death benefit situations under this Paragraph 5.02.
5.03 Benefit Payments. Subject to subparagraphs (b) and (c) of
Paragraph 4.02 above, the benefit under this Section 5 shall be paid to the
deceased Participant's Surviving Spouse commencing with the first day of the
month following the month in which the Participant's death occurs, and shall
be payable monthly thereafter during the life of the Surviving Spouse, the
last payment being for the month in which the death of the Surviving Spouse
shall occur. If the Surviving Spouse should commence to receive benefit
payments under this Section 5 but should die before 120 monthly payments have
been made, the monthly benefit payments required to be paid under this
Section 5, which have not been paid, will be paid to the deceased Surviving
Spouse's estate. In the event there is no Surviving Spouse or there is a
common death, the monthly payments required to be paid under this Section 5,
which have not been paid, will be paid to the deceased Participant's estate.
Anything in this Section 5 to the contrary notwithstanding, all monthly
payments required to be made to the deceased Participant's estate or the
deceased Surviving Spouse's estate shall be paid, in lieu thereof, in a
discounted lump sum payment within 30 days of the original commencement date
of such payments.
6. Non-Competition
6.01 Condition of Payment. Each monthly payment of supplemental
retirement benefits under the Program shall be subject to the condition that
the Participant and retiree-Recipient shall not have engaged in Competition
with the Company, as defined in Paragraph 6.02 below, at any time prior to
the date of such payment.
6.02 Competition. Competition for purposes of the Program shall
mean assuming an ownership position or a consulting, management, or director
position with a business engaged in the manufacture, processing, purchase or
distribution of products of the Controlled Group during the fiscal year prior
to the date of termination of the Participant's employment; provided,
however, that in no event shall ownership of less than two percent 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 in itself be deemed Competition; and provided further, that all
of the following shall have taken place:
13
<PAGE>
(i) the Secretary of the Company shall have given written
notice to the Participant or retiree-Recipient that, in the opinion
of the Committee, the Participant or retiree-Recipient is engaged in
Competition within the meaning of the foregoing provisions of this
Paragraph 6.02, specifying the details;
(ii) the Participant or retiree-Recipient shall have been
given a reasonable opportunity, upon receipt of such notice, to
appear before and to be heard by the Committee with respect to his
views regarding the Committee's opinion that the Participant or
retiree-Recipient engaged in Competition;
(iii) the Secretary of the Company shall have given written
notice to the Participant or retiree-Recipient that the Committee
determined that the Participant or retiree-Recipient is engaged in
Competition; and
(iv) the Participant or retiree-Recipient shall neither
have ceased to engage in such Competition within thirty days from his
receipt of notice of such determination nor diligently taken all
reasonable steps to that end during such thirty-day period and
thereafter.
6.03 Cessation of Payments. If the Participant or
retiree-Recipient shall have engaged in Competition with the Company contrary
to the provisions of Paragraph 6.01 above, the Company may cease making any
future payments of the supplemental retirement benefits otherwise payable to
the Participant or retiree-Recipient under the Program but shall not be
entitled to repayment of any amounts theretofore paid to the Participant or
retiree-Recipient under the Program.
7. General Provisions
7.01 Denial of Claims. Whenever the Company denies, in whole or
in part, a claim for benefits filed by any person (hereinafter referred to
as the "Claimant"), the Company shall transmit a written notice setting
forth, in a manner calculated to be understood by the Claimant, a statement
of the specific reasons for the denial of the claim, references to the
specific Program provisions on which the denial is based, a description of
any additional material or information necessary to perfect the claim and an
explanation of why such material or information is necessary, and an
explanation of the claims review procedure as set forth in Paragraph 7.02.
In addition, the written notice shall contain the date on which the written
notice was sent and a statement advising the Claimant that, within 60 days
of the date on which such notice was received, he may obtain review of the
decision of the Company.
7.02 Claims Review Procedure. Within 60 days of the date on which
the notice of denial of claim is received by the Claimant, the Claimant, or
his authorized representative, may request that the claim denial be reviewed
by filing with the Company a written request therefor, which request shall
contain the following information:
14
<PAGE>
(i) The date on which the notice of denial of claim was
received by the Claimant;
(ii) The date on which the Claimant's request was filed
with the Company; provided, however, that the date on which the
Claimant's request for review was in fact filed with the Company
shall control in the event that the date of the actual filing is
later than the date stated by the Claimant pursuant to this clause
(ii);
(iii) The specific portions of the denial of his claim which
the Claimant requests the Company to review;
(iv) A statement by the Claimant setting forth the basis
upon which he believes the Company should reverse its previous denial
of his claim for benefits and accept his claim as made; and
(v) Any written material (included as exhibits) which the
Claimant desires the Company to examine in its consideration of his
position as stated pursuant to clause (iv).
Within 60 days of the date determined pursuant to clause (ii) of this
Paragraph 7.02, the Company shall conduct a full and fair review of the
decision denying the Claimant's claim for benefits. Within ten days
following the date of such review, the Company will send to the Claimant its
written decision setting forth, in a manner calculated to be understood by
the Claimant, a statement of the specific reasons for its decision, including
references to the specific Program provision relied upon.
7.03 Rights of Participants. The Company has entered into a
Grantor Trust Agreement dated July 16, 1992, with Society National Bank as
Trustee (the "Grantor Trust Agreement"), pursuant to which it has established
a trust (the "Trust") for the purpose of holding assets as a reserve for the
discharge of the Company's obligations under the Program. Except as
expressly provided in the Grantor Trust Agreement, and except to such extent
as the Company may have made contributions to the Trust and the earnings
thereon:
(i) no Participant or Recipient shall have any right,
title, or interest whatsoever in or to any investments which the
Company may make to aid it in meeting its obligations under the
Program;
(ii) nothing contained in the Program shall create or be
construed to create a trust of any kind, or a fiduciary relationship
between the Company and any Participant, Recipient or any other
person;
(iii) to the extent that any person acquires a right to
receive payments from the Company under the Program, such right shall
be no greater than the right of an unsecured general creditor of the
Company; and
15
<PAGE>
(iv) all payments to be made under the Program shall be
paid from the general funds of the Company and no special or separate
fund shall be established and no segregation of assets shall be made
to assure payment of amounts payable under the Program.
Anything in the Program to the contrary notwithstanding, nothing in
the Program shall require any Participant or Recipient, or imply a
requirement, to refund the Company all or any part of any payment made to a
Participant or Recipient under the Program.
7.04 Administration. The Committee shall be responsible for the
general administration of the Program and for carrying out the provisions
thereof. Any act authorized, permitted or required to be taken by the
Company under the Program may be taken by action of the Committee. Subject
to the provisions of Paragraph 7.01 above relating to denial of claims and
claims review procedure, any action taken by the Committee which is
authorized, permitted or required under the Program shall be final and
binding upon the Company, all persons who have or who claim an interest under
the Program, and all third parties dealing with the Company.
7.05 Program Non-Contractual. Nothing herein contained shall be
construed as a commitment or agreement on the part of any person to continue
his employment with the Company, and nothing herein contained shall be
construed as a commitment on the part of the Company to continue the
employment or the rate of compensation of any such person for any period, and
all employees of the Company shall remain subject to discharge to the same
extent as if the Program had never been put into effect.
7.06 Non-Alienation of Retirement Rights or Benefits. No right
or benefit under the Program shall at any time be subject in any manner to
alienation or encumbrances. If any person shall attempt to, or shall,
alienate or in any way encumber his rights or benefits under the Program, or
any part thereof, or if by reason of his bankruptcy or other event happening
at any time any such benefits would otherwise be received by anyone else or
would not be enjoyed by him, his interest in all such benefits shall
automatically terminate and the same, at the discretion of the Company, shall
be held or applied to or for the benefit of such person, his spouse,
children, or other dependents as the Company may select.
7.07 Payment of Benefits to Others. If any person to whom a
retirement benefit is payable is unable to care for his affairs because of
illness or accident, any payment due (unless prior claim therefor shall have
been made by a duly qualified guardian or legal representative) may be paid
to the spouse, parent, brother, or sister, or any other individual deemed by
the Company to be maintaining or responsible for the maintenance of such
person. The monthly payment of a retirement benefit to a person for the
month in which he dies, if not paid to such person prior to his death, shall
be paid to his spouse, parent, brother, or sister, as the Company shall
determine. Any payment made in accordance with the provisions of this
Paragraph 7.07 shall be a complete discharge of any liability of the Program
with respect to the retirement benefit so paid.
16
<PAGE>
7.08 Notices. All notices provided for by the Program 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 below or to
such changed address as the addressee may have given by a similar notice:
To the Company: Attention:
Secretary
17325 Euclid Avenue
Cleveland, Ohio 44112
To the Participant: address of residence
Any such notice delivered in person shall be deemed to have been received on
the date of delivery.
7.09 Amendment, Modification, Termination. The Program may at any
time be terminated, or at any time or from time to time be amended or
otherwise modified, prospectively, by the Board of Directors of the Company;
provided, however, that no such termination, amendment or modification of the
Program shall operate to:
(a) reduce or terminate the benefit of a Participant
participating in the Program at the time of any such termination, amendment,
or modification;
(b) terminate the participation or the rights or benefits, of a
Participant participating in the Program at the time of any such termination,
amendment, or modification;
(c) increase the eligibility requirements applicable to a
Participant participating in the Program at the time of any such termination,
amendment or modification; or
(d) terminate the Program, or reduce or terminate any benefit,
or terminate the participation or any rights or benefits, after the
occurrence of a Change in Control, with respect to a Participant or Recipient
who was a Participant or Recipient, or became a Participant or Recipient, at
the time of the occurrence of the Change in Control.
EXECUTED in Cleveland, Ohio as of the 27th day of September, 1995.
PARKER-HANNIFIN CORPORATION
By: Daniel T. Garey
Daniel T. Garey
Corporate Vice President-Human Resources
17
<PAGE>
ATTACHMENT A
Page 1 of 2
Example A
PARKER SUPPLEMENTAL PLAN
Benefit for Retiring Employee
Age 60
Salary $200,000
Service at Retirement 30 years
Social Security Base $21.192
Expected Social Security at Age 62 $10,860
Parker Pension:
(.0075 x $200,000) $ 1,500
(.0065 x ($200,000 - $21,192)) 1,091
_________
$ 2,591
Pension: 30 x $2,591 = $ 77,730 at age 65
Reduces: 70% x $77,730 = $ 54,411 at age 60
Supplemental Pension:
50% x $200,000 $ 100,000
less:
Parker Pension 54,411
_________
45,589 at age 60
less:
Social Security (50%) 5,430
_________
$ 40,159 at age 62
<PAGE>
ATTACHMENT A
Page 2 of 2
Example B
PARKER SUPPLEMENTAL PLAN
Benefit for Retiring Employees
Employee with employment agreement granting 18 years of service from prior
employer but offsetting $33,500 pension at 60 from that employer.
Age 60
Salary $ 200,000
Service at Retirement 12 years
Service with prior employer 18 years
Benefit at age 60 from prior employer $ 33,500
Social Security Base $ 21,192
Expected Social Security at Age 62 $ 10,860
Parker Pension:
(.0075 x $200,0000) $ 1,500
(.0061 x ($200,000 - $21,192)) 1,091
_________
$ 2,591
Pension: 12 x $2,591 = $ 31,092 at age 65
Reduces: 70% x $31,092 = $ 21,764 at age 60
Supplemental Pension:
50% x $200,00 $ 100,000
less:
Parker Pension 21,764
less:
Pension from prior employer 33,500
________
$ 44,736 at age 60
less:
Social Security (50%) 5,430
________
$ 39,306 at age 62
<PAGE>
ATTACHMENT B
Page 1 of 3
Example C
PARKER SUPPLEMENTAL PLAN
Benefit for Retiring Employee
Employee covered under Supplemental Plan at change in control. Benefit is
determined based on continued service for 10 years assuming that Parker
Salaried Plan and employees' pay remain unchanged to the expiration (in 10
years) of the change in control officer agreement with the company.
Age 48
Salary $ 200,000
Change in control officer contract
expires at age 58.
Change in control effective
January 1, 1987.
Service to December 31, 1986: 20 years
Maximum aggregate tax rate: 35%
PBGC immediate interest rate: 6.5%
Final 5-year average salary: $ 200,000
Final 3-year average salary: 200,000
Pension - Parker Salaried: 52,000
Base Supplemental Pension 92,000
Supplement to age 62: 40,000
Estimated Social Security: 10,860
Supplement after age 62: 34,570
Life Expectancy at age 58: 20 years
Value of Pension at Specified Rate
Net of Taxes $ 678,038
Taxes due on lump sum (35%) 237,313
Lump Sum Amount after taxes 440,725
<PAGE>
ATTACHMENT B
Page 2 of 3
Example D
PARKER SUPPLEMENTAL PLAN
Benefit for Retiring Employee
Employee covered under Supplemental Plan at change in control. Benefit is
determined based on continued service for 2 years assuming that Parker
Salaried Plan and employees' plan remain unchanged to the expiration (at age
60) of the change in control officer agreement with the company.
Age 58
Salary $ 200,000
Change in control officer contract
expires at age 60.
Change in control effective
January 1, 1987.
Service to December 31, 1986: 28 years
Maximum aggregate tax rate: 35%
PBGC immediate interest rate: 6.5%
Final 5-year average salary: $ 200,000
Final 3-year average salary: 200,000
Pension - Parker Salaried: 52,000
Base Supplemental Pension 100,000
Supplement to age 62: 48,000
Estimated Social Security: 10,068
Supplement after age 62: 42,966
Life Expectancy at age 60: 19 years
Value of Pension at Specified Rate
Net of Taxes $ 673,200
Taxes due on lump sum (35%) 235,620
Lump Sum Amount after taxes 437,580
<PAGE>
ATTACHMENT B
Page 3 of 3
Example E
PARKER SUPPLEMENTAL PLAN
Benefit for Retiring Employee
Employee covered under Supplemental Plan at change in control. Benefit is
determined based on continued service for 2 years assuming that Parker
Salaried Plan and employees' pay remain unchanged to the expiration (at age
60) of the change in control officer agreement with the company.
Employee also has employment agreement granting 16 years of service from prior
employer but offsetting $34,000 pension at age 60 from that employer.
Age 58
Salary $ 200,000
Change in control officer contract
expires at age 60.
Change in control effective
January 1, 1987.
Service to December 31, 1986: 14 years
Maximum aggregate tax rate: 35%
PBGC immediate interest rate: 6.5%
Service with prior employer: 16 years
Benefit from prior employer to be paid
if payments begin at age 60 $ 34,000
Final 5-year average salary: $ 200,000
Final 3-year average salary: 200,000
Pension - Parker Salaried: 27,500
Base Supplemental Pension 100,000
Supplement to age 62: 38,500
Estimated Social Security: 10,068
Supplement after age 62: 33,466
Life Expectancy at age 60: 19 years
Value of Pension at Specified Rate
Net of Taxes $ 527,530
Taxes due on lump sum (35%) 184,630
Lump Sum Amount after taxes 342,900
<PAGE>
ATTACHMENT C
Page 1 of 1
Example F
PARKER SUPPLEMENTAL PLAN
Example of Benefit Determination for Participation who has
received a prior Lump Sum Payment
Change in control lump sum paid in 1987 to employee aged 48.
Supplemental benefit determined to begin at age 58 was $35,000.
Lump sum based on Specified rate (8%) $ 166,000
Actual lump sum (net specified rate (4%)) 328,200
Lump sum rolled up at the specified rate to age 65 $ 614,200
Supplemental benefit at age 65 $ 85,000
Lump sum value (at specified rate) 827,100
Excess of current lump sum over accumulated lump sum $ 212,900
Additional annual pension available at 65 21,880
Factor:
Original lump sum at specified rate (based on 8% interest, assumed
payments beginning in 10 years, no taxes to be paid, and life expectancy
of 20 years).
$35,000 x (20-year annuity) x discount from 58
= $35,000 x 10.2386 x .4631935 = $166,000
Actual lump sum:
$35,000 x 13,8830 x .675564 = $328,260
Accumulated initial lump sum (Note: The lump sum originally paid was
$166,000 so that is the base for additional calculation. The difference
between $328,200 and $166,000 is the 50% tax rate.)
$166,000 x interest for 17 years
= $166,000 x 3.700018 = $614,200
Final benefit calculation (based on 6.5% interest and 15-year life
expectancy at age 65.)
$85,000 x (15-year annuity)
= $85,000 x 9.7305 = $827,100
($827,100 - $614,200) / 9.7305 = $21,880
<PAGE>
ATTACHMENT D
Page 1 of 4
Example G
PARKER HANNIFIN CORPORATION
Supplemental Executive Retirement Plan
Example of Death Benefit for Participants
A participant dies at age 58 after working for 20 years. The Supplemental
benefit to his spouse (age 55) is based on the following information:
Salaried Plan benefit at 65 $ 100,000
Profit Sharing balance at 58 120,000
Immediate benefit from Profit Sharing ($120,000 / 11.0694) 10,840
Benefit from prior employer
at 65 (life only) 20,000
at 58 (50% J&S) 5,300
Salaried Plan benefit at 58 (life only) (.58 x $100,000) $ 58,000
Benefit on 50% J&S basis (.8897 x $58,000) 51,600
Benefit to spouse (.50 x $51,600) 25,800
Assumed Social Security benefit at 62 6,360
The Supplemental benefits are determined as follows:
Final three-year average salary $ 240,000
Base Supplemental benefit (.46 x $240,000) 110,400
Supplemental after J&S adjustment (.86 x $110,400) 94,940
Less:
Salaried plan benefit 25,800
Profit Sharing benefit 10,840
Prior employer benefit 5,300
Annual benefit to spouse under 62 $ 53,000
Less: 50% of Social Security 4,680
Annual benefit to spouse 62 and over $ 48,320
<PAGE>
ATTACHMENT D
Page 2 of 4
Total retirement income to the spouse will be as follows:
For 10 years After 10 years
_______________________ _______________________
While under While 62 While under While 62
Plan Age 62 and over Age 62 and over
_____ __________ _________ _________ ________
Salaried Plan $ 25,800 $ 25,800 $ 25,800 $ 25,800
Supplemental Plan 53,000 48,320 5,530 3,190
Profit Sharing 10,840 10,840 10,840 10,840
50% of Social Security - 4,680 - 4,680
Previous employer 5,300 5,300 5,300 5,300
Total 94,940 94,940 47,470 49,810
The following factors were used in determining the above results:
Joint and Survivor factors:
50% J&S (Salaried benefit) 88.97%
50% with 10 years (SERP) 86.00
Salaried early retirement factor 58.00
Immediate annuity for profit sharing 11.0694
Supplemental plan factors:
at 65 55%
at 60 50
at 58 46
<PAGE>
ATTACHMENT D
Page 3 of 4
Example H
PARKER HANNIFIN CORPORATION
Supplemental Executive Retirement Plan
Example of Death Benefits for Participants
A participant dies at age 53 after working for 20 years. The Supplemental
benefit to his spouse (age 50) is based on the following information:
Salaried Plan benefit at 65 $ 100,000
Profit Sharing balance at 58 90,000
Immediate benefit from Profit Sharing ($90,000 / 12.1667) 7,400
Salaried Plan benefit at 53 (life only) (.32 x $100,000) $ 32,000
Benefit on 50% J&S basis (.9085 x $32,000) 29,080
Benefit to spouse (.50 x $29,080) 14,450
Assumed Social Security benefit at 62 9,360
The Supplemental benefits are determined as follows:
Final three-year average salary $ 240,000
Base Supplemental benefit (.36 x $240,000) 86,400
Supplemental after J&S adjustment (.8882 x $86,400) 76,740
Less:
Salaried plan benefit 14,540
Profit Sharing benefit 7,400
Annual benefit to spouse under 62 $ 54,800
Less: 50% of Social Security 4,680
Annual benefit to spouse 62 and over $ 50,120
Total retirement income to the spouse will be as follows:
For 10 years After 10 years
________________________ ________________________
While under While 62 While under While 62
Plan Age 62 and over Age 62 and over
____ __________ ________ ___________ ________
Salaried Plan $ 14,540 $ 14,540 $ 14,540 $ 14,450
Supplemental Plan 54,800 50,120 16,430 14,090
Profit Sharing 7,400 7,400 7,400 7,400
50% of Social Security - 4,680 - 4,680
Total 76,740 76,740 38,370 40,710
<PAGE>
ATTACHMENT D
Page 4 of 4
The following factors were used in determining the above results:
Joint and Survivor factors:
50% J&S (Salaried benefit) 90.85%
50% with 10 years (SERP) 88.82
Salaried early retirement factor 32.00
Immediate annuity for profit sharing 12.1667
Supplemental plan factors:
at 65 55%
at 60 50
at 55 40
at 53 36
Exhibit (10)(l)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1995
by Parker-Hannifin Corporation
Parker-Hannifin Corporation 1996 Target Incentive
Bonus Plan Description
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
PARKER-HANNIFIN CORPORATION 1996 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 1996 operating plan.
B. The payout under the Plan ranges from 15% to 150% of each participant's
target award, with 100% payout set at achievement of fiscal year 1996
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 1996 Planned ROAA: 17.1%
ROAA Payout Schedule
FY96 Percentage of Target
ROAA Award Paid*
< 4.4% 0
4.4% 30%
6.4% 40%
8.3% 50%
10.2% 60%
12.0% 70%
12.4% 72%
13.7% 80%
15.4% 90%
17.1% 100%
17.9% 113%
18.9% 125%
19.7% 138%
20.6% 150%
* Fiscal year 1996 ROAA less than 12.4% will reduce the amount paid by 50%.
F. ROAA will not include the impact of:
1. Environmental costs in excess of planned amounts
2. Acquisitions\divestitures
3. Currency gains or losses
Exhibit (10)(n)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1995
by Parker-Hannifin Corporation
Parker-Hannifin Corporation 1994-95-96 Long Term
Incentive Plan Description, as amended as of August 17, 1995
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
PARKER-HANNIFIN CORPORATION
1994-95-96
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 94, 95 and 96.
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 16%.
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. 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 exceeded.
<PAGE>
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 35 50 70 100 150 200
Change in Control
In the event of a "Change in Control" of the Corporation (as defined in the
Change in Control Agreements between the Corporation and its executive
officers), the payout under the Plan will be accelerated to fifteen (15) days
after the Change in Control. The amount of the payout will be in cash and
will be the greater of the target award or the amount the payout would have
been had ROE during the Performance Period to the date of the Change in
Control continued throughout the Performance Period.
Exhibit (10)(o)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1995
by Parker-Hannifin Corporation
Parker-Hannifin Corporation 1995-96-97 Long Term
Incentive Plan Description, as amended as of August 17, 1995
*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
exceeded.
<PAGE>
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
Change in Control
In the event of a "Change in Control" of the Corporation (as defined in the
Change in Control Agreements between the Corporation and its executive
officers), the payout under the Plan will be accelerated to fifteen (15) days
after the Change in Control. The amount of the payout will be in cash and
will be the greater of the target award or the amount the payout would have
been had ROE during the Performance Period to the date of the Change in
Control continued throughout the Performance Period.
Exhibit (10)(p)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1995
by Parker-Hannifin Corporation
Parker-Hannifin Corporation 1996-97-98 Long Term
Incentive Plan Description
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
PARKER-HANNIFIN CORPORATION
1996-97-98
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 96, 97 and 98.
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 is retired at the time of payment or has
previously elected a cash payment to be deferred under the Corporation's
Executive Deferral Plan. The value of the cash payment in lieu of restricted
shares is determined based upon the share price of Parker-Hannifin's Common
Shares on June 30, 1998. 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 exceeded.
<PAGE>
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
Change in Control
In the event of a "Change in Control" of the Corporation (as defined in the
Change in Control Agreements between the Corporation and its executive
officers), the payout under the Plan will be accelerated to fifteen (15) days
after the Change in Control. The amount of the payout will be in cash and
will be the greater of the target award or the amount the payout would have
been had ROE during the Performance Period to the date of the Change in
Control continued throughout the Performance Period.
Exhibit (10)(q)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1995
by Parker-Hannifin Corporation
Parker-Hannifin Corporation Savings Restoration Plan,
as amended as of August 17, 1995
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
PARKER-HANNIFIN CORPORATION
SAVINGS RESTORATION PLAN
Parker-Hannifin Corporation, an Ohio corporation, (the "Company"),
hereby establishes this Savings Restoration Plan (the "Plan"), effective
October 1, 1994, for the purpose of attracting high quality executives and
promoting in its executives increased efficiency and an interest in the
successful operation of the Company by restoring some of the deferral
opportunities and employer-provided benefits that are lost under The
Parker-Hannifin Employees' Savings Plus Stock Ownership Plan due to
legislative limits. The benefits provided under the Plan shall be provided
in consideration for services to be performed after the effective date of
the Plan, but prior to the executive's retirement.
ARTICLE 1
Definitions
1.1 Administrator shall mean the Company or, if applicable, the
committee appointed by the Board of Directors of the Company to administer
the Plan pursuant to Article 13 of the Plan.
1.2 Annual Deferral shall mean the amount of Compensation which the
Participant elects to defer for a Plan Year pursuant to Articles 2 and 3
of the Plan.
1.3 Beneficiary shall mean the person or persons or entity designated
as such in accordance with Article 14 of the Plan.
1.4 Change in Control shall mean any of the following events have
occurred:
(i) any "person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 20%
or more of the combined voting power of the Company's then outstanding
securities eligible to vote for the election of the Board of Directors
of the Company (the "Company Voting Securities"); provided, however,
that the event described in this paragraph shall not be deemed to be a
Change in Control by virtue of any of the following situations: (A) an
acquisition by the Company or, direct or indirect, majority-owned
subsidiaries of the Company; (B) an acquisition by any employee benefit
plan sponsored or maintained by the Company or any corporation
controlled by the Company; (C) an acquisition by any underwriter
temporarily holding securities pursuant to an offering of such
securities; (D) a Non-Control Transaction (as defined in paragraph
(iii)); (E) any acquisition by one or more of the officers who have
"change in control"
- 1 -
<PAGE>
contracts with the Company; or (F) the acquisition of Company Voting
Securities from the Company, if a majority of the Board of Directors of
the Company approves a resolution providing expressly that the
acquisition pursuant to this clause (F) does not constitute a Change in
Control under this paragraph (i);
(ii) individuals who, at the beginning of any period of twenty-four
(24) consecutive months, constitute the Board of Directors of the
Company (the "Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a director
subsequent to the beginning of such twenty-four (24) month period,
whose election, or nomination for election, by the Company's
shareholders was approved by a vote of at least two-thirds of the
directors comprising the Incumbent Board (either by a specific vote or
by approval of the proxy statement of the Company in which such person
is named as a nominee for director, without objection to such
nomination) shall be, for purposes of this paragraph (ii), considered
as though such person were a member of the Incumbent Board; provided,
however, that no individual initially elected or nominated as a
director of the Company as a result of an actual or threatened election
contest with respect to directors or any other actual or threatened
solicitation of proxies or consents by or on behalf of any person other
than the Board of Directors shall be deemed to be a member of the
Incumbent Board;
(iii) a merger or consolidation or similar form of corporate
reorganization, or sale or other disposition of all or substantially
all of the assets, of the Company (a "Business Combination") is
consummated, unless immediately following such Business Combination:
(A) more than 55% of the total voting power of the corporation
resulting from such Business Combination (including, without
limitation, for purposes of making such 55% determination, any shares
owned through any entity which directly or indirectly has beneficial
ownership of the Company Voting Securities or all or substantially all
of the Company's assets) eligible to elect directors of such
corporation is represented by shares held by shareholders of the
Company immediately prior to such Business Combination (either by
remaining outstanding or being converted); (B) no person (other than
any holding company resulting from such Business Combination, any
employee benefit plan sponsored or maintained by the Company (or the
corporation resulting from such Business Combination), or any person
which beneficially owned, immediately prior to such Business
Combination, directly or indirectly, 20% or more of the Company Voting
Securities) becomes the beneficial owner, directly or indirectly, of
20% or more of the total voting power of the outstanding voting
securities eligible to elect directors of the corporation resulting
from such Business Combination; and (C) at least a majority of the
members of the board of directors of the corporation resulting from
such Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or action of the Board
of Directors, providing for such Business Combination (a "Non-Control
Transaction"); or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company.
- 2 -
<PAGE>
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because any person acquires beneficial ownership of more
than 20% of the Company Voting Securities as a result of the acquisition
of Company Voting Securities by the Company which, by reducing the number
of Company Voting Securities outstanding, increases the percentage of
shares beneficially owned by such person; provided, that if a Change in
Control would occur as a result of such an acquisition by the Company (if
not for the operation of this sentence), and after the Company's
acquisition such person becomes the beneficial owner of additional Company
Voting Securities that increases the percentage of outstanding Company
Voting Securities beneficially owned by such person, then a Change in
Control shall occur.
1.5 Compensation shall mean the sum of the Participant's base salary
and anticipated regular bonuses (including profit-sharing, RONA, and
executive compensation, but excluding payments under any long term
incentive plan, volume incentive plan, or other extraordinary bonus or
incentive plan) for a Plan Year before reductions for deferrals under the
Plan, or the Executive Deferral Plan, or the Savings Plan, or the Benefits
Plus Program.
1.6 Crediting Rate shall mean (i) the amount described in Section
1.6.1 to the extent the Restoration Account Balance represents either
Annual Deferrals under Article 3 or earnings previously credited on such
deferrals under Section 5.2 or (ii) the amount described in Section 1.6.2
to the extent the Restoration Account balance represents either Matching
Credits under Article 4 or interest previously credited on such Matching
Credits under Section 5.2:
1.6.1 Crediting Rate for Annual Deferrals shall mean any notional
gains or losses equal to those generated as if the Restoration Account
balance attributable to Annual Deferrals under Article 3 had been
invested in one or more of the investment portfolios sponsored by The
Prudential Series Fund, Inc. and designated as available by the
Administrator, less separate account fees and less applicable
administrative charges determined annually by the Administrator.
The allocation of the Restoration Account shall be determined
by the Participant among one or more of the available portfolios. The
gains or losses shall be credited based upon the daily unit values for
the portfolio(s) selected by the Participant. The rules and procedures
for allocating the Restoration Account balance among the portfolios
shall be determined by the Administrator. The Participant's allocation
is solely for the purpose of calculating the Crediting Rate.
Notwithstanding the method of calculating the Crediting Rate, the
Company shall be under no obligation to purchase any investments
designated by the Participant.
1.6.2 Crediting Rate for Matching Credits shall mean any notional
gains or losses equal to those generated as if the Restoration Account
balance attributable to Matching Credits under Article 4 had been
invested in the Common Stock of the Company, including reinvestment of
dividends. The rules and procedures for determining the value of the
Common Stock of the Company shall be determined by the Administrator.
The rules and procedures for re-allocating the Restoration Account
balance attributable to the
- 3 -
<PAGE>
Matching Credits among the other portfolios offered under the Plan shall
be determined by the Administrator.
1.7 Disability shall mean any long term disability as defined under
the Company's long term disability plan. The Administrator, in its
complete and sole discretion, shall determine a Participant's Disability.
The Administrator may require that the Participant submit to an
examination on an annual basis, at the expense of the Company, by a
competent physician or medical clinic selected by the Administrator to
confirm Disability. On the basis of such medical evidence, the
determination of the Administrator as to whether or not a condition of
Disability exists or continues shall be conclusive.
1.8 Early Retirement Date shall mean age 55 with ten or more years of
employment with Company.
1.9 Eligible Executive shall mean a key employee of the Company or any
of its subsidiaries who (i) participates in the Savings Plan and makes the
maximum permissible pre-tax contributions of compensation, (ii) is
designated by the Administrator as eligible to participate in the Plan
(subject to the restriction in Sections 10.2 and 12.2 of the Plan), and
(iii) qualifies as a member of the "select group of management or highly
compensated employees" under ERISA.
1.10 ERISA shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.11 Executive Deferral Plan shall mean the Parker-Hannifin
Corporation Executive Deferral Plan as it currently exists and as it may
subsequently be amended.
1.12 Financial Hardship shall mean an unexpected need for cash arising
from an illness, casualty loss, sudden financial reversal, or other such
unforeseeable occurrence as determined by the Administrator. Cash needs
arising from foreseeable events such as the purchase of a residence or
education expenses for children shall not, alone, be considered a
Financial Hardship.
1.13 Fixed Crediting Rate shall mean an effective annual yield equal
to ninety percent (90%) of the sixty (60) month rolling average of the
Ten-Year United States Treasury Note as determined by the Administrator on
September 30 of the preceding year. Notwithstanding the preceding
sentence, with respect to the first Plan Year, the Fixed Crediting Rate
shall be determined as of September 30, 1994. The Fixed Crediting Rate in
effect as of the Participant's Termination of Employment or death shall be
held constant for the remainder of the period for which benefits are paid.
1.14 Matching Credit shall mean the Company's credit to the
Participant's Restoration Account under Article 4.
- 4 -
<PAGE>
1.15 Normal Retirement Date shall mean the date on which a Participant
attains age 65.
1.16 Participant shall mean an Eligible Executive who has elected to
participate and has completed a Participation Agreement pursuant to
Article 2 of the Plan.
1.17 Participation Agreement shall mean the Participant's written
election to participate in the Plan.
1.18 Plan Year shall mean the calendar year, except that the first
Plan Year shall be the year commencing October 1, 1994 and ending
December 31, 1994.
1.19 Restoration Account shall mean the notional account established
for record keeping purposes for a Participant pursuant to Article 5 of
the Plan.
1.20 Retirement shall mean a termination of employment following
Normal or Early Retirement Date.
1.21 Savings Plan shall mean The Parker-Hannifin Employees' Savings
Plus Stock Ownership Plan as it currently exists and as it may
subsequently be amended.
1.22 Statutory Limit shall mean any statutory or regulatory limit on
salary reduction contributions to savings plans, or on compensation taken
into account in calculating employer or employee contributions to savings
plans with the exception of Internal Revenue Code Section 415(c), as
adjusted for inflation, which shall be deemed to apply to the combination
of both employer and employee contributions made in combination to the
Plan and the Savings Plan. The impact of such limits on the Participants
shall be determined by the Company prior to the beginning of each Plan
Year based upon its best estimates and according to procedures determined
by the Administrator. Once the Company has determined the impact of the
Statutory Limits, no adjustment shall be made to increase deferrals or
matching credits under this Plan notwithstanding any adjustments
ultimately required under the Savings Plan due to actual employee
contributions or other factors.
1.23 Termination of Employment shall mean the Participant's employment
with the Company ceases for any reason whatsoever, whether voluntary or
involuntary, other than Retirement or death.
1.24 Unscheduled Withdrawal shall mean a distribution of all or a
portion of the entire amount credited to the Participant's Restoration
Account requested by the Participant pursuant to the provisions of Article
11 of the Plan.
1.25 Valuation Date shall mean the end of the month in which
Retirement, Termination of Employment, or death occurs, except in the
event of an election to delay retirement benefits under Article 6, in
which case the Valuation Date shall mean the November 30 of the year
preceding commencement of benefit payments.
- 5 -
<PAGE>
ARTICLE 2
Participation
2.1 Participation Agreement / Annual Deferral. An Eligible Executive
shall become a Participant in the Plan on the first day of the Plan Year
coincident with or next following the later of the date the individual
becomes an Eligible Executive and the date the individual begins to
participate in the Savings Plan, provided such Eligible Executive has
submitted to the Administrator a Participation Agreement. To be
effective, the Eligible Executive must submit the Participation Agreement
to the Administrator during the enrollment period designated by the
Administrator. In the Participation Agreement, and subject to the
restrictions in Article 3, the Eligible Executive shall designate the
Annual Deferral for the covered Plan Year.
2.2 Continuation of Participation. An Eligible Executive who has
elected to participate in the Plan by making an Annual Deferral shall
continue as a Participant in the Plan for purposes of such Annual Deferral
even though such executive ceases to be an Eligible Executive. However,
a Participant shall not be eligible to elect a new Annual Deferral unless
the Participant is an Eligible Executive for the Plan Year for which the
election is made.
ARTICLE 3
Executive Deferrals
3.1 Deferral Election. A Participant who has elected to contribute
under the Savings Plan, but whose pre-tax contributions to the Savings
Plan are limited by the Statutory Limit, may elect an Annual Deferral
under this Plan to defer all or a portion of the Compensation that he or
she cannot defer under the Savings Plan due to the Statutory Limit. Such
election shall designate a specified percentage of Compensation to be
deferred. Such percentage shall include anticipated contributions to the
Savings Plan as well as to this Plan. Annual Deferrals under this Plan
shall be irrevocable.
3.2 Maximum Annual Deferral. The Annual Deferral for a Plan Year,
when combined with the amount the Participant has elected to contribute to
the Savings Plan on a pre-tax basis, may not exceed the stated percentage
of Compensation that could be deferred in the Savings Plan but for the
Statutory Limits. In addition, the Administrator shall, in its sole
discretion and prior to the first day of the Plan Year, decrease the
deferral as needed to allow the Participant to receive the optimal
Matching Credit within the Statutory Limits as defined for purpose of the
Plan.
3.3 Discontinuation of Deferral. In the event that a Participant
elects to make after-tax contributions of Compensation to the Savings
Plan, deferrals under this Plan shall cease for the remainder of the Plan
Year.
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<PAGE>
3.4 Vesting. The Participant's right to receive Compensation
deferred (and gains or losses thereon) under this Article 3 shall be 100%
vested at all times.
ARTICLE 4
Company Matching Credits
4.1 Amount. The Company's Matching Credit in each Plan Year shall
equal one hundred percent (100%) of the first three percent (3%) of
Compensation deferred and twenty-five percent (25%) of the next two (2%)
of Compensation deferred, reduced by the matching contributions credited
to the Participant's account under the Savings Plan.
4.2 Discontinuation of Matching Credits. Notwithstanding the
foregoing, if the Participant decreases or ceases pre-tax contributions
and/or makes after-tax contributions to the Savings Plan in any Plan Year,
additional Matching Credits shall not be credited to the Participant's
Restoration Account for the remainder of that Plan Year.
4.3 Vesting. Subject to Section 12.4, the Participant's right to
receive Matching Credits (and gains or losses thereon) credited to the
Participant's Restoration Account shall be one hundred percent (100%)
vested.
ARTICLE 5
Restoration Accounts
5.1 Restoration Accounts. Solely for record keeping purposes, the
Company shall maintain a Restoration Account for each Participant.
5.2 Timing of Credits -- Pre-Termination. The Company shall credit to
the Restoration Account the Annual Deferrals under Article 3 at the time
the deferrals would otherwise have been paid to the Participant but for
the deferral election. Matching Credits under Article 4 shall be credited
to the Restoration Account quarterly as of the first day of the following
quarter. The Company shall also credit gains or losses to the Restoration
Account each calendar quarter, or as of the Valuation Date, using the
Crediting Rate in effect.
5.3 Mid-Year Terminations. If a Participant's Termination of
Employment occurs other than at the end of a Plan Year, the Company shall
credit gains or losses to the Restoration Account from the first day of
such Plan Year to the Valuation Date.
5.4 Statement of Accounts. The Administrator shall provide
periodically to each Participant a statement setting forth the balance of
the Restoration Account maintained for such Participant.
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<PAGE>
ARTICLE 6
Retirement Benefits
6.1 Amount. Upon Retirement, the Company shall pay to the Participant
a retirement benefit in the form provided in Section 6.2 of the Plan,
based on the balance of the Restoration Account as of the Valuation Date.
If paid as a lump sum, the retirement benefit shall be equal to such
balance. If paid in installments, the installments shall be paid in
amounts that will annually amortize such balance with earnings and losses
credited at the Crediting Rate over the period of time benefits are to be
paid.
6.2 Form of Retirement Benefits. The retirement benefit shall be paid
monthly over a period of one hundred eighty (180) months or the number
of months required to result in a monthly benefit of one thousand dollars
($1,000.00), if less. Notwithstanding anything herein to the contrary,
the Participant may elect in the Participation Agreement to have the
retirement benefit paid in a lump sum or in installments paid monthly over
a period of sixty (60) or one hundred twenty (120) months. Payments shall
be made or shall begin as of the first day of the calendar quarter next
following the date sixty (60) days after the Participant's Retirement
unless the Participant elects in the Participation Agreement for payments
to begin on January l of a later year. However, in all events payments
shall commence on or before the earlier of the date the retired
Participant attains age seventy (70) or the January 1 five years after
Retirement. Except as provided under Section 10.2, Participants may elect
an alternative form of payout as available under this Section 6.2 by
written election filed with the Administrator; provided, however, that if
the Participant files the election less than thirteen (13) months prior to
the date benefit payments are to commence, the Participant's Restoration
Account shall be reduced by ten percent (10%).
6.3 Small Benefit Exception. Notwithstanding any of the foregoing, if
the sum of all benefits payable to the Participant is less than or equal
to five thousand dollars ($5,000.00), the Company may, in its sole
discretion, elect to pay such benefits in a single lump sum.
ARTICLE 7
Termination Benefits
7.1 Amount. As of the first day of the calendar quarter beginning at
least sixty (60) days after Termination of Employment, the Company shall
pay to the Participant a termination benefit equal to the balance of the
Restoration Account as of the Valuation Date.
7.2 Form of Termination Benefits. The Company shall pay the
termination benefits in a single lump sum; provided, however, that except
following a Change in Control the Company may, in its sole discretion,
elect to pay the termination benefits over a period of three (3) years in
monthly installments , in which event the Company shall credit interest on
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<PAGE>
the unpaid balance of the Restoration Account after the Valuation Date at
the Fixed Crediting Rate in effect at the time of Termination of
Employment.
ARTICLE 8
Survivor Benefits
8.1 Pre-Commencement Survivor Benefit. If the Participant dies
prior to the time installment payments have commenced, the Company shall
pay to the Participant's Beneficiary within ninety (90) days after the
Participant's death a benefit equal to the balance of the Participant's
Restoration Account as of the Valuation Date.
8.2 Post-Commencement Survivor Benefit. If the Participant dies
after the time installment payments have commenced, the Company shall pay
to the Participant's Beneficiary an amount equal to the remaining benefits
payable to the Participant under the Plan over the same period such
benefits would have been paid to the Participant, in which event the
Company shall credit interest on the unpaid balance of the Restoration
Account at the Fixed Crediting Rate in effect at the date of the
Participant's death.
8.3 Small Benefit Payment. Notwithstanding any of the foregoing,
in the event the sum of all benefits payable to the Beneficiary is less
than or equal to five thousand dollars ($5,000.00), the Company may, in
its sole discretion, elect to pay such benefits in a single lump sum.
ARTICLE 9
Disability
If a Participant suffers a Disability, the Company shall pay the
benefit described in Article 6 to the Participant as if the date of the
Participant's Termination of Employment for Disability were the
Participant's Normal Retirement Date.
ARTICLE 10
Change in Control
10.1 Election. At the time the Participant is completing his
initial Participation Agreement, the Participant may elect that, if a
Change in Control occurs, the Participant (or after the Participant's
death the Participant's Beneficiary) shall receive a lump sum payment of
the balance of the Restoration Account within thirty (30) days after the
Change of Control. Such balance shall be determined as of end of the
month sixty (60) days prior to the month in which the Change of Control
occurs.
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<PAGE>
10.2 Benefit Reduction on Withdrawal. If a Participant has not
made the election described in Section 10.1 above and, within thirty (30)
days after a Change of Control, the Participant (or Beneficiary) elects to
receive a distribution of the balance of the Restoration Account
(determined as described in Section 10.1 herein), the lump sum payment
shall be reduced by an amount equal to five percent (5%) of the total
balance of the Restoration Account (instead of the ten percent (10%)
reduction otherwise provided for in Section 11.2). If a Participant
elects such a withdrawal, any on-going Annual Deferral shall cease, and
the Participant may not again be designated as an Eligible Executive until
one entire Plan Year following the Plan Year in which such withdrawal was
made has elapsed.
ARTICLE 11
Unscheduled Withdrawals
11.1 Election. A Participant (or Beneficiary if the Participant is
deceased) may request an Unscheduled Withdrawal of all or a portion of the
entire amount credited to the Participant's Restoration Account, which
shall be paid in a single lump sum; provided, however, (i) that the
minimum withdrawal shall be twenty-five percent (25%) of the Restoration
Account balance, and (ii) that an election to withdraw seventy-five
percent (75%) or more of the balance shall be deemed to be an election to
withdraw the entire balance.
11.2 Withdrawal Penalty. There shall be a penalty deducted from
the Restoration Account prior to an Unscheduled Withdrawal equal to ten
percent (10%) of the Unscheduled Withdrawal. If a Participant elects such
a withdrawal, any on-going Annual Deferral shall cease, and the
Participant may not again be designated as an Eligible Executive until one
entire Plan Year following the Plan Year in which such withdrawal was made
has elapsed.
11.3 Small Benefit Exception. Notwithstanding any of the
foregoing, if the sum of all benefits payable to the Participant or
Beneficiary who has requested the Unscheduled Withdrawal is less than or
equal to five thousand dollars ($5,000.00), the Company may, in its sole
discretion, elect to pay out the entire Restoration Account balance
(reduced by the ten percent (10%) penalty) in a single lump sum.
ARTICLE 12
Conditions Related to Benefits
12.1 Nonassignability. The benefits provided under the Plan may
not be alienated, assigned, transferred, pledged or hypothecated by or to
any person or entity, at any time or any manner whatsoever. These
benefits shall be exempt from the claims of creditors of any Participant
or other claimants and from all orders, decrees, levies, garnishment or
executions against any Participant to the fullest extent allowed by law.
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<PAGE>
12.2 Financial Hardship Distribution. Upon a finding that the
Participant or the Beneficiary has suffered a Financial Hardship, the
Administrator may in its sole discretion, permit the Participant to cease
any on-going deferrals and accelerate distributions of benefits under the
Plan in the amount reasonably necessary to alleviate such Financial
Hardship. If a distribution is to be made to a Participant on account of
Financial Hardship, the Participant may not make deferrals under the Plan
until one entire Plan Year following the Plan Year in which a distribution
based on Financial Hardship was made has elapsed.
12.3 No Right to Company Assets. The benefits paid under the Plan
shall be paid from the general funds of the Company, and the Participant
and any Beneficiary shall be no more than unsecured general creditors of
the Company with no special or prior right to any assets of the Company
for payment of any obligations hereunder.
12.4 Protective Provisions. The Participant shall cooperate with
the Company by furnishing any and all information requested by the
Administrator, in order to facilitate the payment of benefits hereunder,
taking such physical examinations as the Administrator may deem necessary
and taking such other actions as may be requested by the Administrator.
If the Participant refuses to cooperate, the Company shall have no further
obligation to the Participant under the Plan. In the event of a
Participant's suicide during the first two (2) years of participation in
the Plan, or if the Participant makes any material misstatement of
information or nondisclosure of medical history, then no benefits shall be
payable to the Participant or the Participant's Beneficiary or estate
under the Plan beyond the sum of the Participant's Annual Deferrals.
12.5 Withholding. The Participant or the Beneficiary shall make
appropriate arrangements with the Company for satisfaction of any federal,
state or local income tax withholding requirements and Social Security or
other employee tax requirements applicable to the payment of benefits
under the Plan. If no other arrangements are made, the Company may
provide, at its discretion, for such withholding and tax payments as may
be required.
ARTICLE 13
Administration of Plan
The Company shall administer the Plan, provided, however, that the
Company may elect by action of its Board of Directors to appoint a
committee of three (3) or more individuals to administer the Plan. All
references to the Administrator herein shall refer to the Company or, if
such committee has been appointed, the committee.
The Administrator shall administer the Plan and interpret, construe
and apply its provisions in accordance with its terms. The Administrator
shall further establish, adopt or revise such rules and regulations as it
may deem necessary or advisable for the administration of the Plan. All
decisions of the Administrator shall be final and binding. The
individuals serving on the committee shall, except as prohibited by law,
be indemnified and held harmless
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<PAGE>
by the Company from any and all liabilities, costs, and expenses (including
legal fees), to the extent not covered by liability insurance arising out of
any action taken by any member of the committee with respect to the Plan,
unless such liability arises from the individual's own gross negligence or
willful misconduct.
ARTICLE 14
Beneficiary Designation
The Participant shall have the right, at any time, to designate any
person or persons as Beneficiary (both primary and contingent) to whom
payment under the Plan shall be made in the event of the Participant's
death. The Beneficiary designation shall be effective when it is
submitted in writing to the Administrator during the Participant's
lifetime on a form prescribed by the Administrator.
The submission of a new Beneficiary designation shall cancel all
prior Beneficiary designations. Any finalized divorce or marriage of a
Participant subsequent to the date of a Beneficiary designation shall
revoke such designation, unless in the case of divorce the previous spouse
was not designated as Beneficiary and unless in the case of marriage the
Participant's new spouse has previously been designated as Beneficiary.
The spouse of a married Participant shall consent to any designation of a
Beneficiary other than the spouse, and the spouse's consent shall be
witnessed by a notary public.
If a Participant fails to designate a Beneficiary as provided
above, or if the Beneficiary designation is revoked by marriage, divorce,
or otherwise without execution of a new designation, or if every person
designated as Beneficiary predeceases the Participant or dies prior to
complete distribution of the Participant's benefits, then the
Administrator shall direct the distribution of such benefits to the
Participant's estate.
ARTICLE 15
Amendment and Termination of Plan
15.1 Amendment of Plan. Except as provided in Section 15.3, the
Company may at any time amend the Plan in whole or in part, provided,
however, that such amendment (i) shall not decrease the balance of the
Participant's Restoration Account at the time of such amendment and (ii)
shall not retroactively decrease the applicable Crediting Rate of the Plan
prior to the time of such amendment. The Company may amend the Crediting
Rate or Fixed Crediting Rate of the Plan prospectively, in which case the
Company shall notify the Participant of such amendment in writing within
thirty (30) days after such amendment.
15.2 Termination of Plan. Except as provided in Section 15.3, the
Company may at any time terminate the Plan. If the Company terminates the
Plan, the date of such
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<PAGE>
termination shall be treated as the date of
Retirement or Termination of Employment for the purpose of calculating
Plan benefits, and the Company shall pay to the Participant the benefits
the Participant is entitled to receive under the Plan in monthly
installments over a thirty-six (36) month period. Interest at the Fixed
Crediting Rate will be credited to the Participant's Restoration Account
commencing as of the date of the Plan's termination and continuing until
distribution under this Section is completed.
15.3 Amendment or Termination After Change in Control.
Notwithstanding the foregoing, the Company shall not amend or terminate
the Plan without the prior written consent of affected Participants for a
period of two calendar years following a Change in Control and shall not
thereafter amend or terminate the Plan in any manner which affects any
Participant (or Beneficiary of a deceased Participant) who commences
receiving payment of benefits under the Plan prior to the end of such two
year period following a Change in Control.
15.4 Company Action. Except as provided in Section 15.3 or 15.5,
the Company's power to amend or terminate the Plan shall be exercisable by
the Company's Board of Directors or by the committee or individual
authorized by the Company's Board of Directors to exercise such powers.
15.5 Constructive Receipt Termination. In the event the
Administrator determines that amounts deferred under the Plan have been
constructively received by Participants and must be recognized as income
for federal income tax purposes, the Plan shall terminate and
distributions shall be made to Participants in accordance with the
Provisions of Section 15.2 or as may be determined by the Administrator.
The determination of the Administrator under this Section 15.4 shall be
binding and conclusive.
ARTICLE 16
Miscellaneous
16.1 Successors of the Company. The rights and obligations of the
Company under the Plan shall inure to the benefit of, and shall be binding
upon, the successors and assigns of the Company.
16.2 ERISA Plan. The Plan is intended to be an unfunded plan
maintained primarily to provide deferred compensation benefits for "a
select group of management or highly compensated employees" within the
meaning of Sections 201, 301 and 401 of ERISA and therefore to be exempt
from Parts 2, 3 and 4 of Title I of ERISA.
16.3 Trust. The Company shall be responsible for the payment of
all benefits under the Plan. At its discretion, the Company may establish
one or more grantor trusts for the purpose of providing for payment of
benefits under the Plan. Such trust or trusts may be irrevocable, but the
assets thereof shall be subject to the claims of the Company's creditors.
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<PAGE>
Benefits paid to the Participant from any such trust shall be considered
paid by the Company for purposes of meeting the obligations of the Company
under the Plan.
16.4 Employment Not Guaranteed. Nothing contained in the Plan nor
any action taken hereunder shall be construed as a contract of employment
or as giving any Participant any right to continued employment with the
Company.
16.5 Gender, Singular and Plural. All pronouns and variations
thereof shall be deemed to refer to the masculine, feminine, or neuter, as
the identity of the person or persons may require. As the context may
require, the singular may be read as the plural and the plural as the
singular.
16.6 Captions. The captions of the articles and sections of the
Plan are for convenience only and shall not control or affect the meaning
or construction of any of its provisions.
16.7 Validity. If any provision of the Plan is held invalid, void
or unenforceable, the same shall not affect, in any respect whatsoever,
the validity of any other provisions of the Plan.
16.8 Waiver of Breach. The waiver by the Company of any breach of
any provision of the Plan by the Participant shall not operate or be
construed as a waiver of any subsequent breach by the Participant.
16.9 Applicable Law. The Plan shall be governed and construed in
accordance with the laws of Ohio except where the laws of Ohio are
preempted by ERISA.
16.10 Notice. Any notice or filing required or permitted to be
given to the Company under the Plan shall be sufficient if in writing and
hand-delivered, or sent by first class mail to the principal office of the
Company, directed to the attention of the Administrator. Such notice
shall be deemed given as of the date of delivery, or, if delivery is made
by mail, as of the date shown on the postmark.
ARTICLE 17
Claims and Review Procedures
17.1 Claims Procedure. The Company shall notify a Participant in
writing, within ninety (90) days after his or her written application for
benefits, of his or her eligibility or noneligibility for benefits under
the Plan. If the Company determines that a Participant is not eligible
for benefits or full benefits, the notice shall set forth (1) the specific
reasons for such denial, (2) a specific reference to the provisions of the
Plan on which the denial is based, (3) a description of any additional
information or material necessary for the claimant to perfect his or her
claim, and a description of why it is needed, and (4) an explanation of
the Plan's
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<PAGE>
claims review procedure and other appropriate information as to
the steps to be taken if the Participant wishes to have the claim
reviewed. If the Company determines that there are special circumstances
requiring additional time to make a decision, the Company shall notify the
Participant of the special circumstances and the date by which a decision
is expected to be made, and may extend the time for up to an additional
ninety-day period.
17.2 Review Procedure. If a Participant is determined by the
Company not to be eligible for benefits, or if the Participant believes
that he or she is entitled to greater or different benefits, the
Participant shall have the opportunity to have such claim reviewed by the
Company by filing a petition for review with the Company within sixty (60)
days after receipt of the notice issued by the Company. Said petition
shall state the specific reasons which the Participant believes entitle
him or her to benefits or to greater or different benefits. Within sixty
(60) days after receipt by the Company of the petition, the Company shall
afford the Participant (and counsel, if any) an opportunity to present his
or her position to the Company orally or in writing, and the Participant
(or counsel) shall have the right to review the pertinent documents. The
Company shall notify the Participant of its decision in writing within the
sixty-day period, stating specifically the basis of its decision, written
in a manner calculated to be understood by the Participant and the
specific provisions of the Plan on which the decision is based. If,
because of the need for a hearing, the sixty-day period is not sufficient,
the decision may be deferred for up to another sixty-day period at the
election of the Company, but notice of this deferral shall be given to the
Participant. In the event of the death of the Participant, the same
procedures shall apply to the Participant's beneficiaries.
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Exhibit (10)(r)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1995
by Parker-Hannifin Corporation
Parker-Hannifin Corporation Pension Restoration Plan,
as amended as of August 17, 1995
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
Parker-Hannifin Corporation
PENSION RESTORATION PLAN
Parker-Hannifin Corporation, an Ohio corporation (the "Company"),
hereby establishes this Pension Restoration Plan (the "Plan"), effective
January 1, 1995, for the purpose of attracting high quality executives and
promoting in its executives increased efficiency and an interest in the
successful operation of the Company by restoring benefits that are lost due
to legislative limits on the Company's qualified retirement plan(s). The
benefits provided under the Plan shall be provided in consideration for
services to be performed after the effective date of the Plan, but prior to
the executive's retirement.
ARTICLE 1
Definitions
1.1 Actuarial Value shall mean the actuarial present value of the
benefits calculated by an actuary selected by the Administrator and using the
actuarial assumptions employed under the Qualified Plan (other than the
Pension Benefit Guaranty Corporation rates used to determine a lump sum
benefit).
1.2 Administrator shall mean the Company or, if applicable, the
committee appointed by the Board of Directors of the Company to administer
the Plan pursuant to Article 6 of the Plan.
1.3 Beneficiary shall mean the person or persons or entity designated
as such under the Qualified Plan.
1.4 Change in Control shall mean any of the following events have
occurred:
(i) any "person" (as such term is defined in Section 3(a)(9)
of the Securities Exchange Act of 1934 (the "Exchange Act") and as used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes
a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 20%
or more of the combined voting power of the Company's then outstanding
securities eligible to vote for the election of the Board of Directors
of the Company (the "Company Voting Securities"); provided, however,
that the event described in this paragraph shall not be deemed to be
a Change in Control by virtue of any of the following situations: (A)
an acquisition by the Company or, direct or indirect, majority-owned
subsidiaries of the Company; (B) an acquisition by any employee benefit
plan sponsored or maintained by the Company or any corporation
controlled by the Company; (C) an acquisition by any underwriter
temporarily holding securities pursuant to an offering of such
securities; (D) a Non-
<PAGE>
Control Transaction (as defined in paragraph
(iii)); (E) any acquisition by one or more of the officers who have
"change in control" contracts with the Company; or (F) the acquisition
of Company Voting Securities from the Company, if a majority of the
Board of Directors of the Company approves a resolution providing
expressly that the acquisition pursuant to this clause (F) does not
constitute a Change in Control under this paragraph (i);
(ii) individuals who, at the beginning of any period of twenty-four
24) consecutive months, constitute the Board of Directors of the
Company (the "Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a director
subsequent to the beginning of such twenty-four (24) month period,
whose election, or nomination for election, by the Company's
shareholders was approved by a vote of at least two-thirds of the
directors comprising the Incumbent Board (either by a specific vote or
by approval of the proxy statement of the Company in which such person
is named as a nominee for director, without objection to such
nomination) shall be, for purposes of this paragraph (ii), considered
as though such person were a member of the Incumbent Board; provided,
however, that no individual initially elected or nominated as a
director of the Company as a result of an actual or threatened election
contest with respect to directors or any other actual or threatened
solicitation of proxies or consents by or on behalf of any person other
than the Board of Directors shall be deemed to be a member of the
Incumbent Board;
(iii) a merger or consolidation or similar form of corporate
reorganization, or sale or other disposition of all or substantially
all of the assets, of the Company (a "Business Combination") is
consummated, unless immediately following such Business Combination:
(A) more than 55% of the total voting power of the corporation
resulting from such Business Combination (including, without
limitation, for purposes of making such 55% determination, any shares
owned through any entity which directly or indirectly has beneficial
ownership of the Company Voting Securities or all or substantially all
of the Company's assets) eligible to elect directors of such
corporation is represented by shares held by shareholders of the
Company immediately prior to such Business Combination (either by
remaining outstanding or being converted); (B) no person (other than
any holding company resulting from such Business Combination, any
employee benefit plan sponsored or maintained by the Company (or the
corporation resulting from such Business Combination), or any person
which beneficially owned, immediately prior to such Business
Combination, directly or indirectly, 20% or more of the Company Voting
Securities) becomes the beneficial owner, directly or indirectly, of
20% or more of the total voting power of the outstanding voting
securities eligible to elect directors of the corporation resulting
from such Business Combination; and (C) at least a majority of the
members of the board of directors of the corporation resulting from
such Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement,
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<PAGE>
or action of the Board of Directors, providing for such Business
Combination (a "Non-Control Transaction"); or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because any person acquires beneficial ownership of more than
20% of the Company Voting Securities as a result of the acquisition of
Company Voting Securities by the Company which, by reducing the number of
Company Voting Securities outstanding, increases the percentage of shares
beneficially owned by such person; provided, that if a Change in Control
would occur as a result of such an acquisition by the Company (if not for the
operation of this sentence), and after the Company's acquisition such person
becomes the beneficial owner of additional Company Voting Securities that
increases the percentage of outstanding Company Voting Securities
beneficially owned by such person, then a Change in Control shall occur.
1.5 Code shall mean the Internal Revenue Code of 1986, as amended,
including any successor provisions.
1.6 Early Retirement Date shall mean the "Early Retirement Date" as
defined in the Qualified Plan.
1.7 Eligible Executive shall mean an employee of the Company or any
of its subsidiaries who (i) participates in the Qualified Plan, (ii) is
designated by the Administrator as eligible to participate in the Plan, and
(iii) qualifies as a member of the "select group of management or highly
compensated employees" under ERISA.
1.8 ERISA shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.9 Normal Retirement Date shall mean the "Normal Retirement Date"
as defined in the Qualified Plan.
1.10 Participant shall mean an Eligible Executive who has become a
participant hereunder pursuant to Article 2.
1.11 Qualified Plan shall mean the Parker-Hannifin Corporation
Retirement Plan as it currently exists and as it may subsequently be amended,
or any other qualified defined benefit plan maintained by the Company and in
which an Eligible Executive participates.
1.12 Statutory Limit shall mean any limit on compensation taken into
account in calculating benefits under qualified retirement plans under
Section 401(a)(17) of the Code or that directly or indirectly affects the
amount of benefits payable from a Qualified Plan.
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<PAGE>
1.13 Termination of Employment shall mean the date of the cessation
of the Participant's employment with the Company for any reason whatsoever,
whether voluntary or involuntary, other than as a result of the Participant's
death.
ARTICLE 2
Participation
Eligible Executives shall become Participants in the Plan on the first
day of the month following their appointment as Eligible Executives.
ARTICLE 3
Restoration Benefits
3.1 Amount. Upon Termination of Employment on or after Normal or
Early Retirement Date, or after the Participant has a nonforfeitable right
to a deferred benefit under the Qualified Plan, the Participant shall be
entitled to a retirement benefit as provided in paragraph 3.2 of this Plan.
The retirement benefit shall equal the benefits that would be payable to the
Participant under the Qualified Plan calculated as if the Statutory Limit did
not apply to such benefits, less the benefits that are payable under the
Qualified Plan taking the Statutory Limit into account.
3.2 Form of Retirement Benefits. (a) Subject to (b) and (c) below,
the retirement benefit shall be paid in the same form and at the same time
as the Participant's benefits under the Qualified Plan.
(b) Notwithstanding (a) above, the Administrator may, in its sole
discretion, elect to pay the Actuarial Value of the benefit under this Plan
in a single lump sum if the monthly benefit otherwise due hereunder is less
than $50.00.
(c) Notwithstanding (a) above, a Participant who has retired at or
after Normal or Early Retirement Date, or who reaches Normal or Early
Retirement Date after a Termination of Employment may elect at any time
thereafter to receive the remaining Actuarial Value of his benefit in a
single lump sum, provided that his lump sum payment shall be reduced by 10%.
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<PAGE>
ARTICLE 4
Survivor Benefits
4.1 Survivor Benefit. If benefits are payable to the Participant's
Beneficiary under the Qualified Plan following the Participant's death
(whether the Participant's death occurs before or after Termination of
Employment), the Company shall pay to the Participant's Beneficiary a
survivor benefit equal to the benefits that would be payable to the
Beneficiary under the Qualified Plan calculated as if the Statutory Limit did
not apply to such benefits, less the survivor benefits that are payable under
the Qualified Plan taking the Statutory Limit into account.
4.2 Form of Survivor Benefit. The survivor benefit shall be paid in
the same form and at the same time as the survivor benefits under the
Qualified Plan; provided, however that the Administrator may, in its sole
discretion, elect to pay the Actuarial Value of the survivor benefit under
this Plan in a single lump sum, if the monthly benefit otherwise payable
hereunder is less than $50.00.
ARTICLE 5
Conditions Related to Benefits
5.1 Nonassignability. The benefits provided under the Plan may not
be alienated, assigned, transferred, pledged or hypothecated by or to any
person or entity, at any time or any manner whatsoever. These benefits shall
be exempt from the claims of creditors of any Participant or other claimants
and from all orders, decrees, levies, garnishment or executions against any
Participant to the fullest extent allowed by law.
5.2 No Right to Company Assets. The benefits paid under the Plan
shall be paid from the general funds of the Company, and the Participant and
any Beneficiary shall be no more than unsecured general creditors of the
Company with no special or prior right to any assets of the Company for
payment of any obligations hereunder.
5.3 Protective Provisions. The Participant shall cooperate with the
Company by furnishing any and all information requested by the Administrator,
in order to facilitate the payment of benefits hereunder, taking such
physical examinations as the Administrator may deem necessary and taking such
other actions as may be requested by the Administrator. If the Participant
refuses to cooperate, the Company shall have no further obligation to the
Participant under the Plan. In the event of a Participant's suicide during
the first two (2) years of participation in the Plan, or if the Participant
makes any material misstatement of information or nondisclosure of medical
history, then no benefits shall be payable to the Participant or the
Participant's Beneficiary or estate under the Plan.
- 5 -
<PAGE>
5.4 Withholding. The Participant or the Beneficiary shall make
appropriate arrangements with the Company for satisfaction of any federal,
state or local income tax withholding requirements and Social Security or
other employee tax requirements applicable to the payment of benefits under
the Plan. If no other arrangements are made, the Company may provide, at its
discretion, for such withholding and tax payments as may be required.
ARTICLE 6
Administration of Plan
The Company shall administer the Plan, provided, however, that the
Company may elect by action of its Board of Directors to appoint a committee
of three (3) or more individuals to administer the Plan. All references to
the Administrator herein shall refer to the Company or, if such committee has
been appointed, the committee.
The Administrator shall administer the Plan and interpret, construe and
apply its provisions in accordance with its terms. The Administrator shall
further establish, adopt or revise such rules and regulations as it may deem
necessary or advisable for the administration of the Plan. All decisions of
the Administrator shall be final and binding. The individuals serving on the
committee shall, except as prohibited by law, be indemnified and held
harmless by the Company from any and all liabilities, costs, and expenses
(including legal fees), to the extent not covered by liability insurance
arising out of any action taken by any member of the committee with respect
to the Plan, unless such liability arises from the individual's own gross
negligence or willful misconduct.
ARTICLE 7
Change in Control
In the event there is a Change in Control, each Participant shall
receive the Actuarial Value of his benefit earned hereunder to the date of
the Change in Control. Such benefit shall be paid in monthly installments
over thirty-six (36) months commencing within 3 months of the Change in
Control; provided, however, that the Administrator may elect, in its sole
discretion, to make payment in a single lump sum.
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<PAGE>
ARTICLE 8
Amendment and Termination of Plan
8.1 Amendment of Plan. The Company may at any time amend the Plan
in whole or in part, provided, however, that such amendment shall not
decrease the value of benefits accrued under the Plan prior to the time of
such amendment.
8.2 Termination of Plan. The Company may at any time terminate the
Plan. If the Company terminates the Plan, the date of such termination shall
be treated as the date of Termination of Employment for the purpose of
calculating Plan benefits. The Company shall pay to the Participant the
benefits the Participant is entitled to receive under the Plan in monthly
installments over a thirty-six (36) month period; provided, however, that the
Administrator may elect, in its sole discretion, to make payment in a single
lump sum.
8.3 Amendment or Termination After Change in Control.
Notwithstanding the foregoing, the Company shall not amend or terminate the
Plan without the prior written consent of affected Participants for a period
of two calendar years following a Change in Control and shall not thereafter
amend or terminate the Plan in any manner which affects any Participant (or
Beneficiary of a deceased Participant) who commences receiving payment of
benefits under the Plan prior to the end of such two year period following
a Change in Control.
8.4 Company Action. Except as provided in paragraph 8.5, the
Company's power to amend or terminate the Plan shall be exercisable by the
Company's Board of Directors or by the committee or individual authorized by
the Company's Board of Directors to exercise such powers.
8.5 Constructive Receipt Termination. In the event the Administrator
determines that benefits under the Plan have been constructively received by
Participants and must be recognized as income for federal income tax
purposes, the Plan shall terminate and distributions shall be made to
Participants in accordance with the provisions of paragraph 8.2 or as may be
determined by the Administrator. The determination of the Administrator
under this paragraph 8.5 shall be binding and conclusive.
ARTICLE 9
Miscellaneous
9.1 Successors of the Company. The rights and obligations of the
Company under the Plan shall inure to the benefit of, and shall be binding
upon, the successors and assigns of the Company.
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<PAGE>
9.2 ERISA Plan. The Plan is intended to be an unfunded plan
maintained primarily to provide deferred compensation benefits for "a select
group of management or highly compensated employees" within the meaning of
Sections 201, 301 and 401 of ERISA and therefore to be exempt from Parts 2,
3 and 4 of Title I of ERISA.
9.3 Trust. The Company shall be responsible for the payment of all
benefits under the Plan. At its discretion, the Company may establish one
or more grantor trusts for the purposes of providing for payment of benefits
under the Plan. Such trust or trusts may be irrevocable, but the assets
thereof shall be subject to the claims of the Company's creditors. Benefits
paid to the Participant from any such trust shall be considered paid by the
Company for purposes of meeting the obligations of the Company under the
Plan.
9.4 Employment Not Guaranteed. Nothing contained in the Plan nor any
action taken hereunder shall be construed as a contract of employment or as
giving any Participant any right to continued employment with the Company.
9.5 Gender, Singular and Plural. All pronouns and variations thereof
shall be deemed to refer to the masculine, feminine, or neuter, as the
identity of the person or persons may require. As the context may require,
the singular may be read as the plural and the plural as the singular.
9.6 Captions. The captions of the articles and paragraphs of the
Plan are for convenience only and shall not control or affect the meaning or
construction of any of its provisions.
9.7 Validity. If any provision of the Plan is held invalid, void or
unenforceable, the same shall not affect, in any respect whatsoever, the
validity of any other provisions of the Plan.
9.8 Waiver of Breach. The waiver by the Company of any breach of any
provision of the Plan by the Participant shall not operate or be construed
as a waiver of any subsequent breach by the Participant.
9.9 Applicable Law. The Plan shall be governed and construed in
accordance with the laws of the Ohio except where the laws of the Ohio are
preempted by ERISA.
9.10 Notice. Any notice or filing required or permitted to be given
to the Company under the Plan shall be sufficient if in writing and hand-
delivered, or sent by first class mail to the principal office of the
Company, directed to the attention of the Administrator. Such notice shall
be deemed given as of the date of delivery, or, if delivery is made by mail,
as of the date shown on the postmark.
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<PAGE>
ARTICLE 10
Claims and Review Procedures
10.1 Claims Procedure. The Company shall notify a Participant in
writing, within ninety (90) days after his or her written application for
benefits, of his or her eligibility or noneligibility for benefits under the
Plan. If the Company determines that a Participant is not eligible for
benefits or full benefits, the notice shall set forth (1) the specific
reasons for such denial, (2) a specific reference to the provisions of the
Plan on which the denial is based, (3) a description of any additional
information or material necessary for the claimant to perfect his or her
claim, and a description of why it is needed, and (4) an explanation of the
Plan's claims review procedure and other appropriate information as to the
steps to be taken if the Participant wishes to have the claim reviewed. If
the Company determines that there are special circumstances requiring
additional time to make a decision, the Company shall notify the Participant
of the special circumstances and the date by which a decision is expected to
be made, and may extend the time for up to an additional ninety-day period.
10.2 Review Procedure. If a Participant is determined by the Company
not to be eligible for benefits, or if the Participant believes that he or
she is entitled to greater or different benefits, the Participant shall have
the opportunity to have such claim reviewed by the Company by filing a
petition for review with the Company within sixty (60) days after receipt of
the notice issued by the Company. Said petition shall state the specific
reasons which the Participant believes entitle him or her to benefits or to
greater or different benefits. Within sixty (60) days after receipt by the
Company of the petition, the Company shall afford the Participant (and
counsel, if any) an opportunity to present his or her position to the Company
orally or in writing, and the Participant (or counsel) shall have the right
to review the pertinent documents. The Company shall notify the Participant
of its decision in writing within the sixty-day period, stating specifically
the basis of its decision, written in a manner calculated to be understood
by the Participant and the specific provisions of the Plan on which the
decision is based. If, because of the need for a hearing, the sixty-day
period is not sufficient, the decision may be deferred for up to another
sixty-day period at the election of the Company, but notice of this deferral
shall be given to the Participant. In the event of the death of the
Participant, the same procedures shall apply to the Participant's
beneficiaries.
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Exhibit (10)(s)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1995
by Parker-Hannifin Corporation
Parker-Hannifin Corporation Executive Deferral Plan,
as amended as of August 17, 1995
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
PARKER-HANNIFIN CORPORATION
EXECUTIVE DEFERRAL PLAN
Parker-Hannifin Corporation, an Ohio corporation, (the "Company"),
hereby establishes this Executive Deferral Plan (the "Plan"), effective
October 1, 1994, for the purpose of attracting high quality executives and
promoting in its executives increased efficiency and an interest in the
successful operation of the Company by offering a deferral opportunity to
accumulate capital on favorable economic terms. The benefits provided under
the Plan shall be provided in consideration for services to be performed
after the effective date of the Plan, but prior to the executive's
retirement.
ARTICLE 1
Definitions
1.1 Administrator shall mean the Company or, if applicable, the
committee appointed by the Board of Directors of the Company to administer
the Plan pursuant to Article 12 of the Plan.
1.2 Annual Deferral shall mean the amount of Compensation which the
Participant elects to defer for a Plan Year pursuant to Articles 2 and 3 of
the Plan.
1.3 Beneficiary shall mean the person or persons or entity designated
as such in accordance with Article 13 of the Plan.
1.4 Bonuses shall mean amounts paid in cash to the Participant by the
Company in the form of annual and other regular periodic bonuses before
reductions for deferrals under the Plan or the Savings Restoration Plan or
the Savings Plan. "Annual and other regular periodic bonuses" shall include
executive compensation, profit sharing and RONA, and any payments an Eligible
Executive elects to have paid in cash under any long-term incentive plan of
the Company, but shall exclude any non-cash payments under any such long-term
incentive program, any volume incentive or similar bonus program, and any
other extraordinary bonus or incentive program.
1.5 Change in Control shall mean any of the following events have
occurred:
(i) any "person" (as such term is defined in Section 3(a)(9)
of the Securities Exchange Act of 1934 (the "Exchange Act") and as used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes
a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 20%
or more of the combined voting power of the Company's then outstanding
securities eligible to vote for the election of the Board of Directors
of the Company (the "Company Voting Securities"); provided, however,
that the event described in this paragraph shall not be deemed to be
a Change in Control by virtue of any of the following situations: (A)
an acquisition by the Company or, direct or indirect, majority-owned
subsidiaries of the Company; (B) an acquisition by any employee benefit
plan sponsored or maintained by the Company or any corporation
controlled by the Company; (C) an acquisition by any underwriter
temporarily holding securities pursuant to an offering of such
securities; (D) a Non-Control Transaction
<PAGE>
(as defined in paragraph (iii)); (E) any acquisition by one or more of
the officers who have "change in control" contracts with the Company;
or (F) the acquisition of Company Voting Securities from the Company,
if a majority of the Board of Directors of the Company approves a
resolution providing expressly that the acquisition pursuant to this
clause (F) does not constitute a Change in Control under this paragraph (i);
(ii) individuals who, at the beginning of any period of twenty-four
(24) consecutive months, constitute the Board of Directors of the
Company (the "Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a director
subsequent to the beginning of such twenty-four (24) month period,
whose election, or nomination for election, by the Company's
shareholders was approved by a vote of at least two-thirds of the
directors comprising the Incumbent Board (either by a specific vote or
by approval of the proxy statement of the Company in which such person
is named as a nominee for director, without objection to such
nomination) shall be, for purposes of this paragraph (ii), considered
as though such person were a member of the Incumbent Board; provided,
however, that no individual initially elected or nominated as a
director of the Company as a result of an actual or threatened election
contest with respect to directors or any other actual or threatened
solicitation of proxies or consents by or on behalf of any person other
than the Board of Directors shall be deemed to be a member of the
Incumbent Board;
(iii) a merger or consolidation or similar form of corporate
reorganization, or sale or other disposition of all or substantially
all of the assets, of the Company (a "Business Combination") is
consummated, unless immediately following such Business Combination:
(A) more than 55% of the total voting power of the corporation
resulting from such Business Combination (including, without
limitation, for purposes of making such 55% determination, any shares
owned through any entity which directly or indirectly has beneficial
ownership of the Company Voting Securities or all or substantially all
of the Company's assets) eligible to elect directors of such
corporation is represented by shares held by shareholders of the
Company immediately prior to such Business Combination (either by
remaining outstanding or being converted); (B) no person (other than
any holding company resulting from such Business Combination, any
employee benefit plan sponsored or maintained by the Company (or the
corporation resulting from such Business Combination), or any person
which beneficially owned, immediately prior to such Business
Combination, directly or indirectly, 20% or more of the Company Voting
Securities) becomes the beneficial owner, directly or indirectly, of
20% or more of the total voting power of the outstanding voting
securities eligible to elect directors of the corporation resulting
from such Business Combination; and (C) at least a majority of the
members of the board of directors of the corporation resulting from
such Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or action of the Board
of Directors, providing for such Business Combination (a "Non-Control
Transaction"); or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company.
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<PAGE>
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because any person acquires beneficial ownership of more than
20% of the Company Voting Securities as a result of the acquisition of
Company Voting Securities by the Company which, by reducing the number of
Company Voting Securities outstanding, increases the percentage of shares
beneficially owned by such person; provided, that if a Change in Control
would occur as a result of such an acquisition by the Company (if not for the
operation of this sentence), and after the Company's acquisition such person
becomes the beneficial owner of additional Company Voting Securities that
increases the percentage of outstanding Company Voting Securities
beneficially owned by such person, then a Change in Control shall occur.
1.6 Compensation shall mean the sum of the Participant's base salary
and anticipated Bonuses for a Plan Year before reductions for deferrals
under the Plan, or the Savings Restoration Plan, or the Savings Plan, or the
Benefits Plus Program.
1.7 Crediting Rate shall mean any notional gains or losses equal to
those generated as if the Deferral Account balance attributable to Annual
Deferrals under Article 3 had been invested in one or more of the investment
portfolios sponsored by The Prudential Series Fund, Inc. and designated as
available by the Administrator, less separate account fees and less
applicable administrative charges determined annually by the Administrator.
The allocation of the Deferral Account shall be determined by the
Participant among one or more of the available portfolios. The gains or
losses shall be credited based upon the daily unit values for the
portfolio(s) selected by the Participant. The rules and procedures for
allocating the Deferral Account balance among the portfolios shall be
determined by the Administrator. Notwithstanding the method of calculating
the Crediting Rate, the Company shall be under no obligation to purchase any
investments designated by the Participant.
1.8 Deferral Account shall mean the notional account established for
record keeping purposes for a Participant pursuant to Article 4 of the Plan.
1.9 Disability shall mean any long term disability as defined under
the Company's long term disability plan. The Administrator, in its complete
and sole discretion, shall determine a Participant's Disability. The
Administrator may require that the Participant submit to an examination on
an annual basis, at the expense of the Company, by a competent physician or
medical clinic selected by the Administrator to confirm Disability. On the
basis of such medical evidence, the determination of the Administrator as to
whether or not a condition of Disability exists or continues shall be
conclusive.
1.10 Early Retirement Date shall mean age 55 with ten or more years
of employment with the Company.
1.11 Eligible Executive shall mean a key employee of the Company or
any of its subsidiaries who (i) is designated by the Administrator as
eligible to participate in the Plan (subject to the restriction in Sections
9.2, 10.3 and 11.2 of the Plan), and (ii) qualifies as a member of the
"select group of management or highly compensated employees" under ERISA.
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<PAGE>
1.12 ERISA shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.13 Financial Hardship shall mean an unexpected need for cash arising
from an illness, casualty loss, sudden financial reversal, or other such
unforeseeable occurrence as determined by the Administrator. Cash needs
arising from foreseeable events such as the purchase of a residence or
education expenses for children shall not, alone, be considered a Financial
Hardship.
1.14 Fixed Crediting Rate shall mean an effective annual yield equal
to ninety percent (90%) of the sixty (60) month rolling average of the
Ten-Year United States Treasury Note as determined by the Administrator on
September 30 of the preceding year. Notwithstanding the preceding sentence,
with respect to the first Plan Year, the Fixed Crediting Rate shall be
determined as of September 30, 1994.
1.15 Savings Plan shall mean The Parker-Hannifin Employees' Savings
Plus Stock Ownership Plan as it currently exists and as it may subsequently
be amended.
1.16 Savings Restoration Plan shall mean the Parker-Hannifin
Corporation Savings Restoration Plan as it currently exists and as it may
subsequently be amended.
1.17 In-Service Distribution shall mean a distribution elected by the
Participant pursuant to Article 10 of the Plan.
1.18 Normal Retirement Date shall mean the date on which a Participant
attains age 65.
1.19 Participant shall mean an Eligible Executive who has elected to
participate and has completed a Participation Agreement pursuant to Article
2 of the Plan.
1.20 Participation Agreement shall mean the Participant's written
election to participate in the Plan.
1.21 Plan Year shall mean the calendar year, except that the first
Plan Year shall be the year commencing October 1, 1994 and ending December
31, 1994.
1.22 Retirement shall mean a termination of employment following
Normal or Early Retirement Date.
1.23 Salary shall mean the Participant's annual basic rate of pay from
the Company (excluding Bonuses, commissions and other non-regular forms of
compensation) before reductions for deferrals under the Plan or under the
Savings Restoration Plan or under the 401(k)/ESOP Plan.
1.24 Scheduled Withdrawal shall mean a distribution of all or a
portion of the entire amount credited to the Participant's Deferral Account
requested by the Participant pursuant to the provisions of Article 10 of the
Plan.
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<PAGE>
1.25 Termination of Employment shall mean the Participant's employment
with the Company ceases for any reason whatsoever, whether voluntary or
involuntary, other than Retirement or death.
1.26 Unscheduled Withdrawal shall mean a distribution of all or a
portion of the entire amount credited to the Participant's Deferral Account
requested by the Participant pursuant to the provisions of Article 10 of the
Plan.
1.27 Valuation Date shall mean the end of the month in which the
Retirement, Termination of Employment, or death occurs, except in the event
of an election to delay retirement benefits under Article 5, in which case
the Valuation Date shall mean the November 30 of the year preceding
commencement of benefit payments.
ARTICLE 2
Participation
2.1 Participation Agreement/Annual Deferral. An Eligible Executive
shall become a Participant in the Plan on the first day of the Plan Year
following appointment as an Eligible Executive and submission to the
Administrator of a Participation Agreement. To be effective, the Eligible
Executive must submit the Participation Agreement to the Administrator during
the enrollment period designated by the Administrator. In the Participation
Agreement, and subject to the restrictions in Article 3, the Eligible
Executive shall designate the Annual Deferral for the covered Plan Year.
2.2 Continuation of Participation. An Eligible Executive who has
elected to participate in the Plan by making an Annual Deferral shall
continue as a Participant in the Plan for purposes of such Annual Deferral
even though such executive ceases to be an Eligible Executive. However, a
Participant shall not be eligible to elect a new Annual Deferral unless the
Participant is an Eligible Executive for the Plan Year for which the election
is made.
ARTICLE 3
Executive Deferrals
3.1 Deferral Commitment. A Participant may elect in the Participation
Agreement to defer an amount equal to a specified dollar amount of Salary and
a specified dollar amount or percentage of Bonuses to be earned by such
Participant during the next Plan Year. The Participant may also elect to
defer a percentage of Bonuses to be earned during the next Plan Year up to
a specified maximum dollar amount. Annual Deferrals under this Plan shall be
irrevocable.
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<PAGE>
3.2 Minimum Annual Deferral. The Annual Deferral for a Plan Year must
equal at least five thousand dollars ($5,000), from either Salary or Bonuses
or a combination of Salary and Bonuses.
Where a Participant elects to defer a specified percentage of Salary
and/or Bonuses, the determination of whether the Annual Deferral is at least
five thousand dollars ($5,000) shall be made by multiplying the applicable
elected percentages of Salary and Bonuses to be deferred by the Participant's
Salary and Bonuses in the Plan Year immediately preceding the Deferral
Contribution Period. The Administrator may, in its sole discretion, permit
Participants to elect to defer amounts in the form of a percentage based on
anticipated future Salary and Bonuses.
3.3 Maximum Deferral Commitment. The Annual Deferral for any Plan
Year may not exceed 20% of Salary plus 100% of Bonuses. Notwithstanding the
foregoing, the Annual Deferral may not reduce the Participant's income to an
amount below the old age, survivor, and disability insurance wage base under
Social Security.
3.4 Vesting. Subject to Section 11.4, the Participant's right to
receive Compensation deferred (and gains or losses thereon) under this
Article 3 shall be 100% vested at all times.
ARTICLE 4
Deferral Accounts
4.1 Deferral Accounts. Solely for recordkeeping purposes, the
Company shall maintain a Deferral Account for each Participant.
4.2 Timing of Credits -- Pre-Termination. The Company shall credit
to the Deferral Account the Annual Deferrals under Article 3 at the time the
deferrals would otherwise have been paid to the Participant but for the
deferral election. The Company shall also credit gains or losses to the
Deferral Account each calendar quarter, or as of the Valuation Date, using
the Crediting Rate in effect.
4.3 Mid-Year Terminations. If a Participant's Termination of
Employment occurs other than at the end of a Plan Year, the Company shall
credit gains or losses to the Deferral Account from the first day of such
Plan Year to the Valuation Date.
4.4 Statement of Accounts. The Administrator shall provide
periodically to each Participant a statement setting forth the balance of the
Deferral Account maintained for such Participant.
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<PAGE>
ARTICLE 5
Retirement Benefits
5.1 Amount. Upon Retirement, the Company shall pay to the
Participant a retirement benefit in the form provided in Section 5.2 of the
Plan, based on the balance of the Deferral Account as of the Valuation Date.
If paid as a lump sum, the retirement benefit shall be equal to such balance.
If paid in installments, the installments shall be paid in amounts that will
annually amortize such balance with earnings and losses credited at the
Crediting Rate over the period of time benefits are to be paid.
5.2 Form of Retirement Benefits. The retirement benefit shall be
paid monthly over a period of one hundred eighty (180) months or the number
of months required to result in a monthly benefit of one thousand dollars
$1,000.00, if less. Notwithstanding anything herein to the contrary, the
Participant may elect in the Participation Agreement to have the retirement
benefit paid in a lump sum or in installments paid monthly over a period of
sixty (60) or one hundred twenty (120) months. Payment shall be made or
shall begin as of the first day of the calendar quarter next following the
date sixty (60) days after the Participant's Retirement unless the
Participant elects in the Participation Agreement for payments to begin on
January l of a later year. However, in all events payments shall commence
on or before the earlier of the date the retired Participant attains age
seventy (70) or the January 1 five years after Retirement. Except as
provided under Section 9.2, Participants may elect an alternative form of
payout as available under this Section 5.2 by written election filed with the
Administrator; provided, however, that if the Participant files the election
less than thirteen (13) months prior to the date benefit payments are to
commence, the Deferral Account shall be reduced by ten percent (10%).
5.3 Small Benefit Exception. Notwithstanding any of the foregoing,
if the sum of all benefits payable to the Participant is less than or equal
to five thousand dollars ($5,000), the Company may, in its sole discretion,
elect to pay such benefits in a single lump sum.
ARTICLE 6
Termination Benefits
6.1 Amount. As of the first day of the calendar quarter beginning
at least sixty (60) days after Termination of Employment, the Company shall
pay to the Participant a termination benefit equal to the balance of the
Deferral Account as of the Valuation Date.
6.2 Form of Termination Benefits. The Company shall pay the
termination benefits in a single lump sum; provided, however, that except
following a Change in Control the Company may, in its sole discretion, elect
to pay the termination benefits over a period of three (3) years in monthly
installments, in which event the Company shall credit interest on the unpaid
balance of the Deferral Account after the Valuation Date at the Fixed
Crediting Rate in effect at the time of Termination of Employment.
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<PAGE>
ARTICLE 7
Survivor Benefits
7.1 Pre-Commencement Survivor Benefit. If the Participant dies prior
to the time installment payments have commenced, the Company shall pay to
the Participant's Beneficiary within ninety (90) days after the Participant's
death a benefit equal to the balance of the Participant's Deferral Account
as of the Valuation Date.
7.2 Post-Commencement Survivor Benefit. If the Participant dies
after the time installment payments have commenced, the Company shall pay to
the Participant's Beneficiary an amount equal to the remaining benefits
payable to the Participant under the Plan over the same period such benefits
would have been paid to the Participant, in which event the Company shall
credit interest on the unpaid balance of the Deferral Account at the Fixed
Crediting Rate in effect at the date of the Participant's death.
7.3 Small Benefit Payment. Notwithstanding any of the foregoing, in
the event the sum of all benefits payable to the Beneficiary is less than or
equal to five thousand dollars ($5,000), the Company may, in its sole
discretion, elect to pay such benefits in a single lump sum.
ARTICLE 8
Disability
If a Participant suffers a Disability, the Company shall pay the
benefit described in Article 5 to the Participant as if the date of the
Participant's Termination of Employment for Disability were the Participant's
Normal Retirement Date.
ARTICLE 9
Change in Control
9.1 Election. At the time the Participant is completing his initial
Participation Agreement, the Participant may elect that, if a Change in
Control occurs, the Participant (or after the Participant's death the
Participant's Beneficiary) shall receive a lump sum payment of the balance
of the Deferral Account within thirty (30) days after the Change of Control.
Such balance shall be determined as of end of the month sixty (60) days prior
to the month in which the Change of Control occurs.
9.2 Benefit Reduction on Withdrawal. If a Participant has not made
the election described in Section 9.1 above and, within thirty (30) days
after a Change of Control, the Participant (or Beneficiary) elects to receive
a distribution of the balance of the Deferral Account (determined as
described in Section 10.2 herein), the lump sum payment shall be reduced by
an amount equal to five percent (5%) of the total vested balance of the
Deferral Account (instead of the ten percent (10%) reduction otherwise
provided for in Section 10.3). If a Participant elects such a withdrawal,
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<PAGE>
any on-going Annual Deferral shall cease, and the Participant may not again
be designated as an Eligible Executive until one entire Plan Year following
the Plan Year in which such withdrawal was made has elapsed.
ARTICLE 10
Scheduled and Unscheduled Withdrawals
10.1 Payment of Scheduled Withdrawal. No later than the last day of
February of the Plan Year designated in the initial Participation Agreement
for a Scheduled Withdrawal, the Company shall pay to the Participant, in a
lump sum or four approximately equal annual installments, all or a portion
of the vested balance in the Participant' s Deferral Account.
10.2 Election. A Participant (or Beneficiary if the Participant is
deceased) may request an Unscheduled Withdrawal of all or any portion of the
entire amount credited to the Participant's Deferral Account, which shall be
paid in a single lump sum; provided, however, (i) that the minimum withdrawal
shall be twenty-five percent (25%) of the Deferral Account balance, and (ii)
that an election to withdraw seventy-five percent (75%) or more of the
Deferral Account balance shall be deemed to be an election to withdraw the
entire Deferral Account balance.
10.3 Withdrawal Penalty. There shall be a penalty deducted from the
Deferral Account prior to an Unscheduled Withdrawal equal to ten percent
(10%) of the Unscheduled Withdrawal. If a Participant elects such a
withdrawal, any on-going Annual Deferral shall cease, and the Participant may
not again be designated as an Eligible Executive until one entire Plan Year
following the Plan Year in which such withdrawal was made has elapsed.
10.4 Small Benefit Exception. Notwithstanding any of the foregoing,
if the sum of all benefits payable to the Participant or Beneficiary who has
requested the Unscheduled Withdrawal is less than or equal to five thousand
dollars ($5,000), the Company may, in its sole discretion, elect to pay out
the entire Deferral Account balance (reduced by the ten percent (10%)
penalty) in a single lump sum.
ARTICLE 11
Conditions Related to Benefits
11.1 Nonassignability. The benefits provided under the Plan may not
be alienated, assigned, transferred, pledged or hypothecated by or to any
person or entity, at any time or any manner whatsoever. These benefits shall
be exempt from the claims of creditors of any Participant or other claimants
and from all orders, decrees, levies, garnishment or executions against any
Participant to the fullest extent allowed by law.
11.2 Financial Hardship Distribution. Upon a finding that the
Participant or the Beneficiary has suffered a Financial Hardship, the
Administrator may in its sole discretion, permit the
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<PAGE>
Participant to cease any on-going deferrals and accelerate distributions of
benefits under the Plan in the amount reasonably necessary to alleviate such
Financial Hardship. If a distribution is to be made to a Participant on
account of Financial Hardship, the Participant may not make deferrals under
the Plan until one entire Plan Year following the Plan Year in which a
distribution based on Financial Hardship has elapsed.
11.3 No Right to Company Assets. The benefits paid under the Plan
shall be paid from the general funds of the Company, and the Participant and
any Beneficiary shall be no more than unsecured general creditors of the
Company with no special or prior right to any assets of the Company for
payment of any obligations hereunder.
11.4 Protective Provisions. The Participant shall cooperate with the
Company by furnishing any and all information requested by the Administrator,
in order to facilitate the payment of benefits hereunder, taking such
physical examinations as the Administrator may deem necessary and taking such
other actions as may be requested by the Administrator. If the Participant
refuses to cooperate, the Company shall have no further obligation to the
Participant under the Plan. In the event of a Participant's suicide during
the first two (2) years of participation in the Plan, or if the Participant
makes any material misstatement of information or nondisclosure of medical
history, then no benefits shall be payable to the Participant or the
Participant's Beneficiary or estate under the Plan beyond the sum of the
Participant's Annual Deferrals.
11.5 Withholding. The Participant or the Beneficiary shall make
appropriate arrangements with the Company for satisfaction of any federal,
state or local income tax withholding requirements and Social Security or
other employee tax requirements applicable to the payment of benefits under
the Plan. If no other arrangements are made, the Company may provide, at its
discretion, for such withholding and tax payments as may be required.
ARTICLE 12
Administration of Plan
The Company shall administer the Plan, provided, however, that the
Company may elect by action of its Board of Directors to appoint a committee
of three (3) or more individuals to administer the Plan. All references to
the Administrator herein shall refer to the Company or, if such committee has
been appointed, the committee.
The Administrator shall administer the Plan and interpret, construe and
apply its provisions in accordance with its terms. The Administrator shall
further establish, adopt or revise such rules and regulations as it may deem
necessary or advisable for the administration of the Plan. All decisions of
the Administrator shall be final and binding. The individuals serving on the
committee shall, except as prohibited by law, be indemnified and held
harmless by the Company from any and all liabilities, costs, and expenses
(including legal fees), to the extent not covered by liability insurance
arising out of any action taken by any member of the committee with respect
to the Plan, unless such liability arises from the individual's own gross
negligence or willful misconduct.
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<PAGE>
ARTICLE 13
Beneficiary Designation
The Participant shall have the right, at any time, to designate any
person or persons as Beneficiary (both primary and contingent) to whom
payment under the Plan shall be made in the event of the Participant's death.
The Beneficiary designation shall be effective when it is submitted in
writing to the Administrator during the Participant's lifetime on a form
prescribed by the Administrator.
The submission of a new Beneficiary designation shall cancel all prior
Beneficiary designations. Any finalized divorce or marriage of a Participant
subsequent to the date of a Beneficiary designation shall revoke such
designation, unless in the case of divorce the previous spouse was not
designated as Beneficiary and unless in the case of marriage the
Participant's new spouse has previously been designated as Beneficiary. The
spouse of a married Participant shall consent to any designation of a
Beneficiary other than the spouse, and the spouse's consent shall be
witnessed by a notary public.
If a Participant fails to designate a Beneficiary as provided above,
or if the Beneficiary designation is revoked by marriage, divorce, or
otherwise without execution of a new designation, or if every person
designated as Beneficiary predeceases the Participant or dies prior to
complete distribution of the Participant's benefits, then the Administrator
shall direct the distribution of such benefits to the Participant's estate.
ARTICLE 14
Amendment and Termination of Plan
14.1 Amendment of Plan. Except as provided in Section 14.3, the
Company may at any time amend the Plan in whole or in part, provided,
however, that such amendment (i) shall not decrease the balance of the
Participant's Deferral Account at the time of such amendment and (ii) shall
not retroactively decrease the applicable Crediting Rate of the Plan prior
to the time of such amendment. The Company may amend the Crediting Rate or
Fixed Crediting Rate of the Plan prospectively, in which case, the Company
shall notify the Participant of such amendment in writing within thirty (30)
days after such amendment.
14.2 Termination of Plan. Except as provided in Section 14.3, the
Company may at any time terminate the Plan. If the Company terminates the
Plan, the date of such termination shall be treated as the date of Retirement
or Termination of Employment for the purpose of calculating Plan benefits,
and the Company shall pay to the Participant the benefits the Participant is
entitled to receive under the Plan in monthly installments over a thirty-six
(36) month period. Interest at the Fixed Crediting Rate will be credited to
the Participant's Deferral Account prospectively commencing as of the date
of the Plan's termination and continuing until distribution under this
Section is completed.
- 11 -
<PAGE>
14.3 Amendment or Termination After Change in Control.
Notwithstanding the foregoing, the Company shall not amend or terminate the
Plan without the prior written consent of affected Participants for a period
of two calendar years following a Change in Control and shall not thereafter
amend or terminate the Plan in any manner which affects any Participant (or
Beneficiary of a deceased Participant) who commences receiving payment of
benefits under the Plan prior to the end of such two year period following
a Change in Control.
14.4 Company Action. Except as provided in Section 14.3 or 14.5, the
Company's power to amend or terminate the Plan shall be exercisable by the
Company's Board of Directors or by the committee or individual authorized by
the Company's Board of Directors to exercise such powers.
14.5 Constructive Receipt Termination. In the event the Administrator
determines that amounts deferred under the Plan have been constructively
received by Participants and must be recognized as income for federal income
tax purposes, the Plan shall terminate and distributions shall be made to
Participants in accordance with the Provisions of Section 14.2 or as may be
determined by the Administrator. The determination of the Administrator
under this Section shall be binding and conclusive.
ARTICLE 15
Miscellaneous
15.1 Successors of the Company. The rights and obligations of the
Company under the Plan shall inure to the benefit of, and shall be binding
upon, the successors and assigns of the Company.
15.2 ERISA Plan. The Plan is intended to be an unfunded plan
maintained primarily to provide deferred compensation benefits for "a select
group of management or highly compensated employees" within the meaning of
Sections 201, 301 and 401 of ERISA and therefore to be exempt from Parts 2,
3 and 4 of Title I of ERISA.
15.3 Trust. The Company shall be responsible for the payment of all
benefits under the Plan. At its discretion, the Company may establish one
or more grantor trusts for the purpose of providing for payment of benefits
under the Plan. Such trust or trusts may be irrevocable, but the assets
thereof shall be subject to the claims of the Company's creditors. Benefits
paid to the Participant from any such trust shall be considered paid by the
Company for purposes of meeting the obligations of the Company under the
Plan.
15.4 Employment Not Guaranteed. Nothing contained in the Plan nor any
action taken hereunder shall be construed as a contract of employment or as
giving any Participant any right to continued employment with the Company.
15.5 Gender, Singular and Plural. All pronouns and variations thereof
shall be deemed to refer to the masculine, feminine, or neuter, as the
identity of the person or persons may require. As the context may require,
the singular may be read as the plural and the plural as the singular.
- 12 -
<PAGE>
15.6 Captions. The captions of the articles and sections of the Plan
are for convenience only and shall not control or affect the meaning or
construction of any of its provisions.
15.7 Validity. If any provision of the Plan is held invalid, void or
unenforceable, the same shall not affect, in any respect whatsoever, the
validity of any other provisions of the Plan.
15.8 Waiver of Breach. The waiver by the Company of any breach of any
provision of the Plan by the Participant shall not operate or be construed
as a waiver of any subsequent breach by the Participant.
15.9 Applicable Law. The Plan shall be governed and construed in
accordance with the laws of Ohio except where the laws of Ohio are preempted
by ERISA.
15.10 Notice. Any notice or filing required or permitted to be given
to the Company under the Plan shall be sufficient if in writing and
hand-delivered, or sent by first class mail to the principal office of the
Company, directed to the attention of the Administrator. Such notice shall
be deemed given as of the date of delivery, or, if delivery is made by mail,
as of the date shown on the postmark.
ARTICLE 16
Claims and Review Procedures
16.1 Claims Procedure. The Company shall notify a Participant in
writing, within ninety (90) days after his or her written application for
benefits, of his or her eligibility or noneligibility for benefits under the
Plan. If the Company determines that a Participant is not eligible for
benefits or full benefits, the notice shall set forth (1) the specific
reasons for such denial, (2) a specific reference to the provisions of the
Plan on which the denial is based, (3) a description of any additional
information or material necessary for the claimant to perfect his or her
claim, and a description of why it is needed, and (4) an explanation of the
Plan's claims review procedure and other appropriate information as to the
steps to be taken if the Participant wishes to have the claim reviewed. If
the Company determines that there are special circumstances requiring
additional time to make a decision, the Company shall notify the Participant
of the special circumstances and the date by which a decision is expected to
be made, and may extend the time for up to an additional ninety-day period.
16.2 Review Procedure. If a Participant is determined by the Company
not to be eligible for benefits, or if the Participant believes that he or
she is entitled to greater or different benefits, the Participant shall have
the opportunity to have such claim reviewed by the Company by filing a
petition for review with the Company within sixty (60) days after receipt of
the notice issued by the Company. Said petition shall state the specific
reasons which the Participant believes entitle him or her to benefits or to
greater or different benefits. Within sixty (60) days after receipt by the
Company of the petition, the Company shall afford the Participant (and
counsel, if any) an opportunity to present his or her position to the Company
orally or in writing, and the Participant (or counsel) shall have the right
to review the pertinent documents. The Company shall notify the Participant
of its decision in writing within the sixty-day period, stating specifically
the basis of its decision, written in a manner calculated to be understood
by the Participant and the specific provisions of the Plan on which the
- 13 -
<PAGE>
decision is based. If, because of the need for a hearing, the sixty-day
period is not sufficient, the decision may be deferred for up to another
sixty-day period at the election of the Company, but notice of this deferral
shall be given to the Participant. In the event of the death of the
Participant, the same procedures shall apply to the Participant's
beneficiaries.
- 14 -
Exhibit (10)(u)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1995
by Parker-Hannifin Corporation
Parker-Hannifin Corporation 1996 Volume Incentive Plan
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
PARKER-HANNIFIN CORPORATION
VOLUME INCENTIVE PLAN
FOR FISCAL YEAR 1996
Participants: All Group Presidents, Trading Subsidiary Presidents and
Group Operating Vice Presidents
Terms: Participants will receive a bonus of 1 percent of base pay for each
1 percent increase in excess of a 7.5 percent increase, up to a
12.5 percent increase, in fiscal year 1996 customer sales over fiscal
year 1995 customer sales for their respective operations.
Participants will receive a bonus of 2 percent of base pay for each
1 percent increase in customer sales above 12.5 percent.
Participants are limited to an overall maximum bonus under the Plan
of 15 percent of base pay. Acquisitions may only account for up to
5 percent of the increase in customer sales. Also, sales growth
above 12.5 percent will result in additional payments under the Plan
only if the operating group is exceeding corporate goals with respect
to its return on sales and its assets/sales ratio.
Exhibit (10)(v)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1995
by Parker-Hannifin Corporation
Parker-Hannifin Corporation Non-Employee Directors' Stock
Plan, as amended as of August 17, 1995
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
PARKER-HANNIFIN CORPORATION NON-EMPLOYEE DIRECTORS'
STOCK PLAN
ARTICLE A -- Purpose.
The purpose of the Parker Hannifin Non-Employee Directors' Stock Plan
(hereinafter referred to as the "Plan") is to strengthen the alignment of
interests between non-employee directors (hereinafter referred to as
"Participants") and the shareholders of Parker Hannifin Corporation
(hereinafter referred to as the "Company") through the increased ownership of
shares of the Company's Common Stock. This will be accomplished by allowing
Participants to elect voluntarily to convert a portion of their fees for
services as a director into Common Stock.
ARTICLE B -- Administration.
1. The Plan shall be administered by the Compensation and Management
Development Committee (hereinafter referred to as the "Committee") of the
Board of Directors of the Company (hereinafter referred to as the "Board"),
or such other committee as may be designated by the Board. The Committee
shall consist of not less than four (4) members of the Board who are not
full-time employees of the Company, appointed by the Board from time to time
and to serve at the discretion of the Board.
2. It shall be the duty of the Committee to administer this Plan in
accordance with its provisions and to make such recommendations of amendments
or otherwise as it deem necessary or appropriate. A decision by a majority
of the Committee shall govern all actions of the Committee.
3. Subject to the express provisions of this Plan, the Committee
shall have authority to allow Participants the right to elect to receive fees
for services as a director partly in cash and partly in whole shares of the
Common Stock of the Company, subject to such conditions or restrictions, if
any, as the Committee may determine. The Committee also has the authority to
make all other determinations it deems necessary or advisable for
administering this Plan.
4. The Committee may establish from time to time such regulations,
provisions, and procedures within the terms of this Plan as, in its opinion,
may be advisable in the administration of this Plan.
5. The Committee may designate the Secretary of the Company or other
employees of the Company to assist the Committee in the administration of
this Plan and may grant authority to such persons to execute documents on
behalf of the Committee.
ARTICLE C -- Participation and Participant Elections.
1. Participation in the Plan shall be limited to Directors who are
not full-time employees of the Company.
2. Elections by Directors under the Plan to receive shares of Common
Stock in lieu of fees shall be irrevocably made in writing at least six (6)
months prior to the effective date of the election.
ARTICLE D -- Limitation on Number of Shares for the Plan.
1. The total number of shares of Common Stock of the Company that
may be awarded each year shall not exceed 7,500 shares. The total number of
shares of Common Stock of the Company that may be awarded under the plan is
50,000.
<PAGE>
2. Shares transferred or reserved for purposes of the Plan will be
subject to appropriate adjustment in the event of future stock splits, stock
dividends or other changes in capitalization; following any such change, the
term "Common Stock" or "shares of Common Stock" of the Company, as used in
the Plan, shall be deemed to refer to such class of shares or other
securities as may be applicable.
ARTICLE E -- Shares Subject to Use Under the Plan.
Shares of Common Stock to be awarded under the terms of this Plan shall
be either treasury shares or authorized but unissued shares.
ARTICLE F -- Transfer of Shares.
1. The Committee may transfer Common Stock of the Company under the
Plan subject to such conditions or restrictions, if any, as the Committee may
determine. The conditions and restrictions may vary from time to time and
may be set forth in agreements between the Company and the Participant or in
the awards of stock to them, all as the Committee determines.
2. The shares awarded shall be valued at the average of the high and
low quotations for Common Stock of the Company on the New York Stock Exchange
on the day of the transfer to a Participant. All shares awarded shall be
full shares, rounded up to the nearest whole share.
ARTICLE G -- Additional Provisions.
1. The Board may, at any time, repeal this Plan or may amend it from
time to time except that no such amendment may amend this paragraph, increase
the annual aggregate number of shares subject to this Plan, or alter the
persons eligible to participate in this Plan. The Participants and the
Company shall be bound by any such amendments as of their effective dates,
but if any outstanding awards are affected, notice thereof shall be given to
the holders of such awards and such amendments shall not be applicable to
such holder without his or her written consent. If this Plan is repealed in
its entirety, all theretofore awarded shares subject to conditions or
restrictions transferred pursuant to this Plan shall continue to be subject
to such conditions or restrictions.
2. Every recipient of shares pursuant to this Plan shall be bound by
the terms and provisions of this Plan and the transfer of shares agreement
referable thereto, and the acceptance of any transfer of shares pursuant to
this Plan shall constitute a binding agreement between the recipient and the
Company.
ARTICLE H --Duration of Plan.
This Plan shall become effective as of October 26, 1994 subject to
ratification before December 31, 1995 by the affirmative vote of the holders
of a majority of the Common Stock of the Company present, or represented, and
entitled to vote at a meeting duly held. Any shares awarded prior to
approval of the Plan by the shareholders must be restricted until such
approval is obtained and shall be subject to immediate forfeiture in the
event such approval is not obtained in which case the Participants would
receive the fees they would have received for their services as Directors
since October 26, 1994. This Plan will terminate on December 31, 2004 unless
a different termination date is fixed by the shareholders or by action of the
Board but no such termination shall affect the prior rights under this Plan
of the Company or of anyone to whom shares have been transferred prior to
such termination.
EXHIBIT (11)* TO REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED JUNE 30, 1995
PARKER HANNIFIN CORPORATION
COMPUTATION OF COMMON SHARES OUTSTANDING
AND EARNINGS PER SHARE**
(Amounts in thousands, except per share amounts)
1995 1994 1993
Net income applicable to common shares $ 218,238 $ 47,652 $ 65,056
========= ======== ========
Weighted average common shares outstanding
for the year 73,717 73,107 72,710
Increase in weighted average from:
Dilutive effect of stock options 382 407 210
________ ________ _______
Weighted average common shares, assuming
issuance of the above securities 74,099 73,514 72,920
======== ======== =======
Earnings per common share:
On the weighted average common shares
outstanding for the year $ 2.96 $ .65 $ .89
Assuming issuance of shares for
convertible debentures and
dilutive stock options*** $ 2.95 $ .65 $ .89
* Numbered in accordance with Item 601 of Regulation S-K.
** Amounts for years prior to 1995 have been adjusted to reflect the
3-shares-for-2 common stock split paid June 2, 1995.
***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 less than three percent.
Exhibit (13)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1995
by Parker-Hannifin Corporation
Excerpts from Annual Report to Shareholders for the fiscal year ended
June 30, 1995.
*Numbered in accordance with Item 601 of Regulation S-K.
<PAGE>
DISCUSSION OF STATEMENT OF INCOME
The Consolidated Statement of Income summarizes Parker's operating performance
over the last three years. The Company achieved all-time sales and earnings
records in 1995. During the first two years of this period the Company
reorganized extensively to respond to market changes. The North American
Industrial markets experienced a strong recovery in the latter half of fiscal
1993 which continued through all of fiscal 1994 and 1995. 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 1993 and 1994 which led to
significant reorganization and downsizing. In late fiscal 1994 and throughout
1995 these markets also began to recover, which resulted in double-digit
volume increases for 1995. The commercial airline and military aerospace
markets experienced significant declines in 1993 and 1994 which flattened in
1995, causing significant reorganization and downsizing, as well as the
impairment of certain long-term assets. The lower levels of volume in these
markets continue to be a concern, but the Aerospace Segment has reorganized
and in 1995 significantly improved the margins on relatively flat sales.
In analyzing the results, note 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. Also note that 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. That resulted in
an additional month (June 1992) being included in the fiscal 1993 operating
results. The June 1992 results for these subsidiaries were Net sales of
$50,801, Income from operations of $2,263, Interest expense of $470 and Net
income of $1,057 or $.01 per share.
Net Sales of $3.21 billion for fiscal 1995 were 24.8 percent higher than
$2.58 billion in 1994. Acquisitions contributed nearly one-fourth of this
increase. North American Industrial operations experienced continuing strong
demand in the heavy-duty truck, industrial machinery, construction and farm
equipment, semiconductor, mobile, and telecommunications markets. In addition,
these operations captured additional market share from competitors that have
not been able to meet customer demands. International Industrial operations
experienced significant growth, as much of Europe and Latin America recovered
from recessions. Aerospace markets remained flat compared to the prior year as
lower spending for military aircraft and a slumping commercial airline
industry continued. Fiscal 1994 sales increased 3.5 percent from $2.49 billion
in 1993 due to North American Industrial increases which were offset by
declines in International and Aerospace markets. The increased volume levels
in North American Industrial operations are anticipated to continue and the
International operations are expected to continue their recovery. The
Page 13-1
<PAGE>
Aerospace markets are expected to remain flat through much of 1996. With a
presence on virtually every significant current commercial and military
aircraft program, any improvements in aerospace markets should benefit Parker.
Net income of $218.2 million for 1995 was 358.0 percent higher than income
of $47.7 million in 1994. 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. Net income for 1994 was 26.8 percent
lower than 1993.
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 as a percentage of sales was 6.8 percent
in 1995, up from 2.0 percent in 1994 and 2.6 percent in 1993. A summary of the
changes follows:
% to Sales Change
Increase (Decrease) in Income 1995-94 1994-93
_______________________________________________ _______ _______
Gross profit 3.5 .9
Selling, general & admin. expenses (.3) .8
Provision for business restructuring activities .7 .2
Impairment of long-term operating assets 1.4 (1.4)
Interest expense .5 .4
Loss on disposal of assets .7 (.7)
Other (.2)
Income taxes (1.7) (.6)
Income before extraordinary item 4.8 (.6)
Gross profit margin increased to 23.8 percent in 1995 from 20.3 percent in
1994 and 19.4 percent in 1993. Increased production levels in North American
and International Industrial operations provided increased margins and better
absorption of fixed costs. Despite level sales volume, the Aerospace
operations were able to improve margins by taking advantage of efficiencies as
a result of previous reorganizations. The benefits of restructuring activities
performed in prior years are being realized in the margin returns of all
operations and are expected to benefit future years as well.
Selling, general and administrative expenses as a percent of sales
increased to 12.0 percent, from 11.7 percent in 1994, but decreased from the
12.5 percent in 1993. Acquisitions contributed to the increase in 1995 with an
average selling, general and administrative expense rate of 17.1 percent of
sales. In addition, the Company incurred larger sales-promotion expenses and
larger incentive compensation based on increased sales and earnings. Increased
sales volume and efficiencies as a result of reorganizations contributed to
the improvement made in 1994.
Provision for business restructuring activities in 1994 and 1993 was the
result of continued actions aimed at reducing costs and included downsizing,
plant closings and relocations, and write-offs of related capital assets. The
actions taken have resulted in reduced overhead charges, benefiting 1995 and
1994, and should continue to benefit future periods. The remaining accruals
from these actions are expected to be utilized by the end of 1996.
Page 13-2
<PAGE>
The Industrial Segment incurred restructuring charges of $12.3 million in
1994 and $13.6 million in 1993. 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 reduction of 107 employees in 1995. Due to a
management decision to sell a facility rather than relocate it, 44 of the
employees were not terminated and a portion of the previous provision was
reversed to income. Another 56 of the 107 employees have yet to be terminated
in 1996 for a facility closing and relocation which is to occur within the
year. Net cash outflow for the remaining actions is estimated to be $3.0
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.
Remaining net cash outflow is estimated to be $1.1 million in 1996 for
employee terminations and costs to close facilities.
The Aerospace operations incurred restructuring costs of $6.5 million in
1994, compared to $9.3 million in 1993. Management took action 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 resulted in lower
costs and enhanced capacity utilization. Of the 301 to be terminated in 1995,
159 were terminated and 24 remain to be terminated in 1996. Due to a change in
the outlook for several product lines, the remaining employees to be
terminated were maintained. The effect on income for this adjustment was
immaterial. Net cash outflow for the remaining restructuring activities is
estimated to be $2.1 million in 1996.
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 had no cash
impact, it reduced amortization and depreciation expenses $1.6 million per
year. The remaining impairment charges related 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 had no cash impact but reduced
depreciation expense $.7 million per year.
Interest expense decreased by $6.9 million in 1995 and by $9.2 million in
1994 principally due to reductions in debt.
Loss on disposal of assets was $4.5 million in 1995 as compared to $19.6
million in 1994. In 1994 $14.7 million was related to the impairment of idle
properties. These properties became idle due to downsizing activities and the
assets were written-down to their estimated recoverable value based on current
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
Page 13-3
<PAGE>
operations. The 1993 loss on disposal was $1.1 million. Losses on the disposal
of assets from plant consolidations are included in the Provision for business
restructuring activities in 1994 and 1993.
Income taxes decreased to an effective rate of 37.4 percent in 1995 as
compared to 53.6 percent in 1994 and 39.8 percent in 1993. The 1995 decrease
was primarily due to the unusually high effective rate in 1994 from receiving
no federal or state tax benefit for the charge taken to write down goodwill,
and due to the use of net operating loss carryforwards in the U.K. and Brazil.
Profits were higher-than-expected in these countries because of the
International industrial recovery. The increase in 1994 as compared to 1993
was primarily due to the write-down of goodwill, and for tax rate changes
enacted in the United States and Germany in 1994.
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, 1995 dropped slightly from the ratio at June
30, 1994.
Working Capital (millions) 1995 1994
__________________________ _______ _______
Current Assets $ 1,246 $ 1,031
Current Liabilities 653 504
Working Capital 593 527
Current Ratio 1.9 2.0
Accounts receivable are primarily due from customers for sales of product
($426.3 million at June 30, 1995, compared to $347.4 million at June 30,
1994). The current year increase in accounts receivable is due to increased
sales volume, acquisitions, and the effects of currency rate changes. All of
the increase was within the Industrial Segment as the Aerospace Segment
slightly decreased accounts receivable on relatively level year-to-year sales.
Days sales outstanding for the Company did not change from 1994.
Inventories were $625.9 million at June 30, 1995, compared to $492.9 million
a year ago. This increase is due to increased volume, acquisitions and the
effects of currency rate changes. In addition, there were increased purchases
of certain raw materials made late in the year for materials that had been in
short supply. The increase is within the Industrial Segment, as the Aerospace
Segment inventories decreased. Months supply of inventory on hand at June 30,
1995 remained level with the prior year.
Excess cost of investments over net assets acquired increased $57.8 million
in 1995 from acquisitions.
Accounts payable, trade increased $46.3 million in 1995 due to higher
volume and current year acquisitions. The majority of the increase was within
the Industrial Segment.
Accrued payrolls and other compensation increased $30.7 million in 1995
primarily as a result of incentive plans based on sales and earnings.
Page 13-4
<PAGE>
Accrued domestic and foreign taxes decreased $10.8 million in 1995
primarily as a result of payments made to the IRS to settle audit issues,
partially offset by an increase in foreign taxes payable.
Other accrued liabilities increased $11.5 million in 1995 primarily due to
acquisitions. Accruals related to restructuring decreased during the year, but
were offset by increases in pension and workers' compensation accruals.
Notes payable and Long-term debt increased a total of $50.3 million
primarily due to cash needed for acquisitions, debt acquired as part of the
acquisitions, and cash needed for foreign working capital, offset by a
reduction of $12.2 million of the ESOP debt guarantee.
Pensions and other postretirement benefits increased $19.2 million to $188.3
million in 1995. These costs are explained further in Note 10 to the
Consolidated Financial Statements.
Deferred income taxes included in current assets increased by $2.7 million
due largely to increases in state income taxes that are not currently
deductible. Non-current deferred income tax assets decreased by $.4 million
due to the reduction of the net operating loss carryovers of $4.6 million for
our German operations. That reduction, however, was almost entirely offset by
the foreign currency translation adjustments resulting from the strengthening
Mark. Non-current deferred income tax liabilities increased $2.5 million
primarily due to increases in tax over book depreciation deductions and the
deferred income taxes arising from current year acquisitions.
At June 30, 1995, non-current deferred income tax assets include a $22.4
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 continues to
believe 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; 26 percent of the losses were due to non-
recurring restructuring charges and the remainder primarily the result of the
recession in Europe; and the Company expects its German operations will
continue their return to pre-1991 profitability levels.
The Consolidated Balance Sheet for 1994 has been restated to correct the
classification of $13.0 million of certain Deferred income taxes within
current assets and long-term liabilities.
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, 1995 and 1994 includes the Company's
loan guarantee to the trust established by the Company for the Employee Stock
Ownership Plan (ESOP) as described more fully in Note 7.
Debt to Debt-Equity Ratio (millions) 1995 1994
____________________________________ _______ ________
Debt $ 335 $ 284
Debt & Equity 1,526 1,251
Ratio 21.9 % 22.7 %
Page 13-5
<PAGE>
Excluding the effect of the ESOP loan guarantee on both Long-term debt and
Shareholders' equity, the debt to debt-equity ratio at June 30, 1995 and 1994
was 21.0 percent and 20.7 percent, respectively.
In fiscal 1996, 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.
Cash and cash equivalents decreased $17.8 million in 1995 and $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 most
significant contribution to operating cash in 1995 was Net income. Changes in
the principal working capital items--Accounts receivable, Inventories and
Accounts payable, trade--required $109.2 million cash in 1995, and contributed
$24.4 million cash in 1994 and $19.4 million cash in 1993. Accounts receivable
and Inventories increased significantly in 1995 as a result of increased
volume (without the effect of acquisitions), using cash of $138.8 million.
The charge for the impairment of long-term assets in 1994 ($52.4 million) did
not require the use of cash and therefore is a reconciling item added to Net
income.
Cash paid for income taxes was $123,590 in 1995, $71,375 in 1994 and
$39,148 in 1993.
Cash Flows From Investing Activities -- Capital expenditures are a
principal use of long-term funds and have averaged $114.5 million per year for
the 1993-1995 period. Capital expenditures increased to $152.0 million in 1995
and are expected to increase again in 1996. Cash used for Acquisitions was
$126.7 million in 1995; $39.4 million in 1994 and $35.6 million in 1993.
Financing for future capital expenditures and acquisitions are expected to
come primarily from internally generated cash flows. Proceeds from
dispositions of business provided $13.7 million cash in 1994.
Acquisition amounts shown represent the net assets of the acquired
companies at their respective acquisition dates and consist of the following:
(In thousands) 1995 1994 1993
______________________ __________ ________ _________
Assets acquired:
Accounts receivable $ 31,160 $ 2,906 $ 4,349
Inventories 30,528 6,278 4,907
Prepaid expenses 774 2,146
Deferred income taxes 149 256 635
Plant & equipment 57,613 10,299 23,491
Other assets 53,679 22,539 8,428
__________ ________ ________
173,903 44,424 41,810
(Table continued on page 13-7)
Page 13-6
<PAGE>
Liabilities assumed:
Notes payable 4,180
Accounts payable 11,680 1,260 1,374
Accrued payrolls 3,823 1,977 988
Accrued taxes 5,641 204 884
Other accrued liabilities 8,053 1,222 2,694
Long-term debt 10,772 375
Other liabilities 3,041 (60) 229
_________ ________ ________
47,190 4,978 6,169
_________ ________ ________
Net assets acquired $ 126,713 $ 39,446 $ 35,641
========= ======== ========
Cash Flows From Financing Activities -- In 1995 the Company increased its
outstanding borrowings by a net total of $43.3 million compared to reducing
its outstanding borrowings by a net total of $172.3 million in 1994. In 1995
Notes payable were utilized to provide cash for acquisitions. In 1994 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 remained fairly steady, resulting in net proceeds of
$3.2 million.
Proceeds from common share activity is primarily from the exercise of stock
options and common shares issued for a 1995 acquisition. Dividends have been
paid for 180 consecutive quarters, including a yearly increase in dividends
for the last 39 fiscal years. The current annual dividend rate is $.72 per
share.
Cash paid for interest, net of capitalized interest, was $28,944 in 1995,
$34,221 in 1994 and $42,905 in 1993. Noncash financing activities included the
reduction in principal of the ESOP debt guarantee, which amounted to $12,229
in 1995, $11,067 in 1994 and $10,003 in 1993.
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.
INDUSTRIAL SEGMENT
______________________________________________________________________________
1995 1994 1993
______________________________________ ____ ____ ____
Operating income as a percent of sales 13.7 % 9.2 % 7.2 %
Return on average assets 22.6 % 14.0 % 10.6 %
Page 13-7
<PAGE>
Sales for the total segment increased 31.2 percent in 1995 and 8.7 percent
in 1994. Sales for the North American operations increased to a record $1.8
billion; 20.6 percent over 1994, following 1994's increase of 15.5 percent
over 1993. One-fifth of the 1995 increase was due to acquisitions. Record-
level volume was achieved as increasing demand continued within the heavy-duty
truck, industrial machinery, construction and farm equipment, mobile, and
telecommunications markets. In addition to increased demand, the North
American operations achieved increased market share and were able to implement
minor price increases in 1995. Although many indicators predict a leveling in
many of the North American markets, the Company expects to again increase
sales in 1996 through the benefit of acquisitions and continuing success in
gaining market share.
International Industrial sales increased to a record $853.5 million; 61.1
percent over 1994, following a 1994 sales decrease of 6.9 percent from 1993.
One-fourth of the 1995 increase was attributable to acquisitions and one-fifth
was attributable to currency rate changes. Without the effects of acquisitions
and currency rate changes, sales for 1995 would have increased more than 30
percent over the prior year. Without the effect of the 13th-month for
International operations in 1993, sales for International would have increased
2.3 percent in 1994. Most of 1994 was still affected by the recessions in
Europe and Latin America, but in late 1994 and all of 1995 the Company
experienced a strong recovery in these markets as well as significant growth
in Asia Pacific markets. Increased market share and minor price increases were
also achieved in 1995. With a continued strong recovery in Europe and Latin
America, acquisition growth, and further growth in the Asia Pacific markets,
the Company anticipates significant improvement in the International
Industrial operations in 1996.
Backlog for the Industrial Segment was $419.0 million at June 30, 1995,
compared to $318.8 million at the end of the prior period. This increase
occurred evenly between North American and International operations as a
result of acquisitions and increased volume. Backlog was $245.5 million at
June 30, 1993.
Operating income for the total segment increased 94.1 percent in 1995.
North American operations improved 35.8 percent. International operations
improved from a loss in 1994 to $85.5 million of operating income in 1995. In
1994 operating income included restructuring charges of $5.4 million for North
America and $6.9 million for the International operations. Also, in 1994 the
International operations recognized the impairment of long-term assets - $6.6
million pretax. This restructuring and downsizing allowed the operations to
take full advantage of the benefits gained from increased volume. Better
absorption of fixed costs through increased capacity utilization helped offset
the effects of raw material price increases experienced in 1995.
Operating income for 1994 increased 38.8 percent over 1993 for the total
segment, with North America increasing 33.4 percent. The International
operations reduced their losses by 16.0 percent during the same period,
without the effect of the extra month of operations in 1993. Restructuring
charges were $3.4 million in 1993 for North America and $10.2 million for the
International operations. In North America, volume gains and productivity
improvements as a result of prior years' restructurings were the primary
contributors to the increase. The International operations, still in a
recession, experienced continued under-absorption of fixed costs as a result
of the reduced volume.
Page 13-8
<PAGE>
Assets for the Industrial segment increased 32.4 percent in 1995 and 8.0
percent in 1994. Accounts receivable and inventories increased as a result of
increased volume and acquisitions. Net plant and equipment increased due to
acquisitions and capital expenditures exceeding depreciation, but these
increases were offset by write-downs of impaired assets in 1994. Acquisitions
also caused an increase in goodwill. Deferred taxes increased in 1994 for the
tax benefits of partially funding the pension obligation and an inventory tax
accounting change in Germany.
AEROSPACE SEGMENT
______________________________________________________________________________
1995 1994 1993
______________________________________ ____ ____ ____
Operating income as a percent of sales 11.5 % 3.3 % 8.5 %
Return on average assets 18.9 % 4.4 % 10.7 %
Sales increased 1.1 percent in 1995 despite the divestiture of the Metal
Bellows business in April 1994, and a relatively flat aerospace market.
Improvements in the commercial maintenance, repair, and overhaul market were
offset by reduced defense orders. The Aerospace segment continued increasing
its penetration of commercial markets resulting in an approximate revenue
split of 60 percent commercial and 40 percent military. In 1994 sales
decreased 12.1 percent from the previous year, reflecting cutbacks in defense
and commercial aircraft deliveries. Backlog at June 30, 1995 was $606.7
million compared to $533.7 million in 1994, reflecting improvement in long-
term orders from original equipment customers. Backlog was $611.1 million at
the end of 1993.
Operating income more than tripled to $63.9 million in 1995 due to
productivity gains resulting from prior years' restructuring activities.
Higher margins were achieved on the same volume, using fewer facilities and
employees. The 1994 operating income decreased 66.1 percent from 1993.
Restructuring charges were $6.5 million in 1994 and $9.3 million in 1993. The
1994 results also included recognition of pretax impairment losses of $28.9
million.
Assets decreased 8.2 percent in 1995 and 23.5 percent in 1994, primarily
due to reductions in customer receivables, inventories and net plant and
equipment, and in 1994, also due to the write down of goodwill related to
impaired assets and the divestiture of the Metal Bellows operations. Net plant
and equipment decreased as a result of downsizing and consolidation of
facilities in 1994.
Page 13-9
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
For the years ended June 30, 1995 1994 1993
<S> <C> <C> <C>
NET SALES $ 3,214,370 $ 2,576,337 $ 2,489,323
Cost of sales 2,448,264 2,053,376 2,004,955
___________ ___________ ___________
Gross profit 766,106 522,961 484,368
Selling, general and administrative expenses 384,581 302,668 310,765
Provision for business restructuring activities 18,773 22,879
Impairment of long-term operating assets 35,483
___________ ___________ ___________
INCOME FROM OPERATIONS 381,525 166,037 150,724
Other income (deductions):
Interest expense (30,922) (37,832) (47,056)
Interest and other income, net 2,335 3,879 5,457
Loss on disposal of assets (4,531) (19,635) (1,059)
___________ ___________ ___________
(33,118) (53,588) (42,658)
___________ ___________ ___________
Income before income taxes 348,407 112,449 108,066
Income taxes (Note 3) 130,169 60,274 43,010
___________ ___________ ___________
Income before extraordinary item 218,238 52,175 65,056
Extraordinary item - extinguishment of debt (Note 7) (4,523)
___________ ___________ ___________
NET INCOME $ 218,238 $ 47,652 $ 65,056
=========== =========== ===========
EARNINGS PER SHARE: (Note 4)
Earnings per share before extraordinary item $ 2.96 $ .71 $ .89
Extraordinary item - extinguishment of debt (.06)
___________ ___________ ___________
Earnings per share $ 2.96 $ .65 $ .89
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
Page 13-10
<PAGE>
<TABLE>
<CAPTION>
QUARTERLY INFORMATION
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
1995 (a) 1st 2nd 3rd 4th Total
Net sales $ 712,457 $ 738,231 $ 879,673 $ 884,009 $ 3,214,370
Gross profit 161,930 165,369 212,705 226,102 766,106
Net income 43,649 41,084 65,855 67,650 218,238
Earnings per share .59 .56 .89 .92 2.96
1994 (a) (b) 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 .22 .19 (.26) .56 .71
Earnings per share .22 .13 (.26) .56 .65
<FN>
(a) Quarterly Information is unaudited.
(b) Net income for the third quarter of fiscal 1994 includes charges
totaling $52,707 or $.72 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.
</FN>
</TABLE>
Page 13-11
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
June 30, 1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 63,830 $ 81,590
Accounts receivable, less allowance
for doubtful accounts
(1995 - $6,613; 1994 - $4,731) 484,962 388,515
Inventories (Notes 1 and 5):
Finished products 314,180 245,068
Work in process 201,386 171,114
Raw materials 110,340 76,748
___________ ___________
625,906 492,930
Prepaid expenses 14,994 14,263
Deferred income taxes (Notes 1 and 3) 56,690 54,010
___________ ___________
TOTAL CURRENT ASSETS 1,246,382 1,031,308
Plant and equipment (Note 1):
Land and land improvements 87,521 81,900
Buildings and building equipment 426,150 387,764
Machinery and equipment 1,234,962 1,114,708
Construction in progress 64,034 37,456
___________ ___________
1,812,667 1,621,828
Less accumulated depreciation 996,896 904,528
___________ ___________
815,771 717,300
Investments and other assets (Note 1) 102,669 97,137
Excess cost of investments over
net assets acquired (Note 1) 109,308 51,516
Deferred income taxes (Notes 1 and 3) 28,079 28,483
___________ ___________
TOTAL ASSETS $ 2,302,209 $ 1,925,744
=========== ===========
(Table continued on page 13-13)
Page 13-12
<PAGE>
June 30, 1995 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable, including long-term debt
payable within one year (Notes 6 and 7) $ 97,372 $ 26,973
Accounts payable, trade 227,482 181,148
Accrued payrolls and other compensation 110,186 79,497
Accrued domestic and foreign taxes 46,876 57,641
Other accrued liabilities 170,705 159,185
___________ ___________
TOTAL CURRENT LIABILITIES 652,621 504,444
Long-term debt (Note 7) 237,157 257,259
Pensions and other postretirement
benefits (Notes 1 and 10) 188,292 169,081
Deferred income taxes (Notes 1 and 3) 23,512 21,006
Other liabilities 9,113 7,603
___________ ___________
TOTAL LIABILITIES 1,110,695 959,393
SHAREHOLDERS' EQUITY (Note 9)
Serial preferred stock, $.50 par value,
authorized 3,000,000 shares, none issued
Common stock, $.50 par value,
authorized 150,000,000 shares; issued
74,002,402 shares in 1995 and
49,265,074 shares in 1994 at par value 37,001 24,633
Additional capital 158,454 165,942
Retained earnings 974,486 806,240
Deferred compensation related to
guarantee of ESOP debt (Note 7) (13,468) (25,697)
Foreign currency translation adjustments 35,041 2,538
___________ ___________
1,191,514 973,656
Common stock in treasury at cost;
325,371 shares in 1994 (7,305)
___________ ___________
TOTAL SHAREHOLDERS' EQUITY 1,191,514 966,351
___________ ___________
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,302,209 $ 1,925,744
=========== ===========
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, 1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 218,238 $ 47,652 $ 65,056
Adjustments to reconcile net income to net cash
provided by operating activities:
Net effect of extraordinary loss 4,523
Depreciation 110,527 106,546 109,673
Amortization 9,403 6,523 4,483
Deferred income taxes (4,299) (34,000) (14,525)
Foreign currency transaction loss 1,903 3,563 983
Loss on sale of plant and equipment 3,728 2,849 1,003
Provision for restructuring (net of cash payments
of $7,481 in 1995, $20,214 in 1994 and $7,300 in 1993) (5,676) (1,441) 15,579
Impairment losses on long-term assets 52,422
Changes in assets and liabilities, net of effects
from acquisitions and dispositions:
Accounts receivable (53,052) (45,387) (17,873)
Inventories (85,795) 11,247 39,716
Prepaid expenses 617 1,887 (260)
Other assets (13,716) (6,719) (4,095)
Accounts payable, trade 29,668 58,497 (2,464)
Accrued payrolls and other compensation 24,726 9,568 6,388
Accrued domestic and foreign taxes (9,159) 22,630 23,409
Other accrued liabilities (311) 11,364 3,953
Pensions and other postretirement benefits 12,396 8,971 1,609
Other liabilities 937 (1,491) (3,253)
_________ _________ _________
Net cash provided by operating activities 240,135 259,204 229,382
(Table continued on page 13-15)
Page 13-14
<PAGE>
For the years ended June 30, 1995 1994 1993
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions (excluding cash of $5,961 in 1995 and
$2,661 in 1994) (126,713) (39,446) (35,641)
Capital expenditures (151,963) (99,914) (91,484)
Proceeds from sale of plant and equipment 13,045 5,774 3,440
Proceeds from disposition of business 13,689
Other 1,409 (362) (4,324)
_________ _________ _________
Net cash (used in) investing activities (264,222) (120,259) (128,009)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from common share activity 11,528 9,105 4,645
Proceeds from (payments of) notes payable, net 62,021 (18,888) 14,673
Proceeds from long-term borrowings 20,764 3,619 8,528
Payments of long-term borrowings (39,438) (157,026) (19,960)
Extraordinary loss on early retirement of debt (7,238)
Dividends paid, net of tax benefit of ESOP shares (49,961) (47,445) (46,121)
_________ _________ _________
Net cash provided by (used in) financing activities 4,914 (217,873) (38,235)
Effect of exchange rate changes on cash 1,413 533 (3,206)
_________ _________ _________
Net (decrease) increase in cash and cash equivalents (17,760) (78,395) 59,932
Cash and cash equivalents at beginning of year 81,590 159,985 100,053
_________ _________ _________
Cash and cash equivalents at end of year $ 63,830 $ 81,590 $ 159,985
========= ========= =========
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)
1995 1994 1993
<S> <C> <C> <C>
NET SALES, including intersegment sales:
Industrial:
North America $ 1,806,883 $ 1,498,612 $ 1,297,474
International 853,537 529,891 568,984
Aerospace 554,378 548,091 623,239
Intersegment sales (428) (257) (374)
___________ ___________ ___________
$ 3,214,370 $ 2,576,337 $ 2,489,323
=========== =========== ===========
INCOME FROM OPERATIONS before corporate
general and administrative expenses:
Industrial:
North America $ 278,018 $ 204,778 $ 153,525
International 85,470 (17,502) (18,579)
Aerospace 63,882 18,001 53,093
___________ ___________ ___________
427,370 205,277 188,039
Corporate general and administrative expenses 45,845 39,240 37,315
___________ ___________ ___________
Income from operations 381,525 166,037 150,724
Other deductions 33,118 53,588 42,658
___________ ___________ ___________
Income before income taxes $ 348,407 $ 112,449 $ 108,066
=========== =========== ===========
IDENTIFIABLE ASSETS:
Industrial $ 1,835,789 $ 1,386,660 $ 1,283,728
Aerospace 324,600 353,635 462,538
___________ ___________ ___________
2,160,389 1,740,295 1,746,266
Corporate assets (a) 141,820 185,449 217,324
___________ ___________ ___________
$ 2,302,209 $ 1,925,744 $ 1,963,590
=========== =========== ===========
PROPERTY ADDITIONS: (b)
Industrial $ 196,691 $ 99,710 $ 104,669
Aerospace 9,052 9,675 7,981
Corporate 3,834 828 2,325
___________ ___________ ___________
$ 209,577 $ 110,213 $ 114,975
=========== =========== ===========
DEPRECIATION:
Industrial $ 90,712 $ 82,796 $ 83,333
Aerospace 17,183 20,475 23,117
Corporate 2,632 3,275 3,223
___________ ___________ ___________
$ 110,527 $ 106,546 $ 109,673
=========== =========== ===========
Page 13-16
<PAGE>
<FN>
(a) 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.
(b) Includes value of net plant and equipment at the date of
acquisition of acquired companies accounted for by the purchase
method (1995 - $57,613; 1994 - $10,299; 1993 - $23,491).
</FN>
</TABLE>
<TABLE>
<CAPTION>
BUSINESS SEGMENT INFORMATION - BY GEOGRAPHIC AREA
(Dollars in thousands)
1995 1994 1993
<S> <C> <C> <C>
NET SALES, including interarea sales:
North America $ 2,423,283 $ 2,091,974 $ 1,957,014
Europe 728,642 433,844 473,547
All Other 156,455 109,113 110,703
Interarea (94,010) (58,594) (51,941)
___________ ___________ ___________
$ 3,214,370 $ 2,576,337 $ 2,489,323
=========== =========== ===========
INCOME FROM OPERATIONS before corporate
general and administrative expenses:
North America $ 341,204 $ 222,779 $ 206,618
Europe 66,368 (16,708) (22,404)
All Other 19,798 (794) 3,825
___________ ___________ ___________
427,370 205,277 188,039
Corporate general and administrative expenses 45,845 39,240 37,315
___________ ___________ ___________
Income from operations $ 381,525 $ 166,037 $ 150,724
=========== =========== ===========
IDENTIFIABLE ASSETS:
North America $ 1,346,601 $ 1,193,568 $ 1,272,589
Europe 704,061 460,961 386,461
All Other 109,727 85,766 87,216
___________ ___________ ___________
2,160,389 1,740,295 1,746,266
Corporate assets (a) 141,820 185,449 217,324
___________ ___________ ___________
$ 2,302,209 $ 1,925,744 $ 1,963,590
=========== =========== ===========
<FN>
(a) 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.
</FN>
</TABLE>
Page 13-17
<PAGE>
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. Its components also perform a vital role in naval vessels, land-based
weapons systems, satellites and 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.
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.
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.
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 aerospace 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 estimated
useful lives of the assets. Improvements which extend the useful life of
Page 13-18
<PAGE>
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.
Excess cost of investments - The excess cost of investments over net assets
acquired is being amortized, on a straight-line basis, primarily over 15 years
and 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.
Foreign currency translation - 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 (Brazil and Venezuela), are included in income.
Derivative financial instruments - Derivative financial instruments are
utilized by the company to manage risks generally associated with foreign
exchange rate and interest rate market volatility. The Company does not hold
or issue derivative financial instruments for trading purposes.
Through the use of foreign currency forward exchange contracts (forward
contracts), the Company reduces its exposure to fluctuations in related
foreign currencies. These contracts are with major financial institutions and
the risk of loss is considered remote. Gains or losses on forward contracts
which hedge dividends from consolidated subsidiaries are accrued in
Shareholders' equity. Gains or losses on forward contracts which hedge
specific transactions are recognized in Net income, offsetting the underlying
foreign currency gains or losses.
Page 13-19
<PAGE>
The Company has an interest rate agreement to convert fixed rate debt to
variable rate debt. The interest rate swap involves the exchange of fixed and
floating rate interest payment obligations over the life of the agreement
without the exchange of the notional payment obligation. The differential to
be paid or received is accrued monthly as interest rates change and is
recognized over the life of the agreement as an adjustment to Interest
expense.
2. ACQUISITIONS AND DIVESTITURES
Acquisitions - Effective March 30, 1995 the Company acquired the assets of
Figgie International's Power Systems Division, headquartered in Rockford,
Illinois, a manufacturer of hydraulic bladder accumulators and pneumatic
cylinders, for $7.0 million cash. On March 3, 1995 the Company purchased the
stock of Byron Valve and Machine Company, Inc. of Siloam Springs, Arkansas, a
producer of distributors and flow raters, for $3.1 million cash. As of
December 31, 1994 the Company purchased the Polyflex Schwarz Group of
companies located in Germany, France and Texas, a manufacturer of reinforced
high-pressure hoses, fittings and assemblies, for $18.1 million cash. The
Company also purchased Hauser Elektronik GmbH, a producer of automation
components and systems, based in Offenburg, Germany, for $11.6 million cash on
December 31, 1994. Effective December 21, 1994 the Company sold its 49
percent interest in its Mexican joint venture, Conductores de Fluidos Parker
and purchased its inventory and accounts receivable to form a new wholly-owned
subsidiary - Parker Fluid Connectors de Mexico - for a net purchase price of
$2.5 million cash. On October 31, 1994 the Company acquired Symetrics, Inc.,
a Newbury Park, California manufacturer of aerospace quick-disconnect valved
couplings, for 108,680 shares of Parker-Hannifin Common Stock, valued at $5.1
million. On September 30, 1994 the Company acquired Chomerics, Inc., a
leading producer of electromagnetic interference-shielding materials, with
plants in Massachusetts, New Hampshire and the United Kingdom, for $40.0
million cash. On August 1, 1994 the Company acquired the Automation Division
of Atlas Copco AB, a Swedish manufacturer of pneumatic components, for $37.0
million cash. Annual sales for these operations, for their most recent fiscal
year prior to acquisition, were approximately $200 million. These acquisitions
were accounted for by the purchase method, and results are included as of the
respective dates of acquisition.
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 Finland and a sales subsidiary in Sweden. In
December 1993 the Company acquired the remaining 60 percent of LDI Pneutronics
Corp., which specializes in advanced-technology pneumatic valves and
components 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 $26.7
million cash. Annual 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. Annual 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 13-20
<PAGE>
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.
Annual sales for this product line were approximately $30 million in fiscal
1993.
In December 1992, the Company purchased the assets of Gromelle S.A., in
Annemasse, France. In August 1993, a French Court of Appeals rescinded the
purchase and ordered the return of the purchase price to the Company. The
effects of this transaction were 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 items include the following:
1995 1994 1993
Federal $ 90,956 $ 70,332 $ 45,523
Foreign 23,350 10,004 5,470
State and local 14,631 14,376 6,940
Deferred 1,232 (34,438) (14,923)
_________ ________ ________
$ 130,169 $ 60,274 $ 43,010
========= ======== ========
A reconciliation of the Company's effective income tax rate to the statutory
Federal rate follows:
1995 1994 1993
Statutory Federal income tax rate 35.0 % 35.0 % 34.0 %
State and local income taxes 2.6 6.1 4.0
FSC income not taxed (1.3) (3.0) (2.7)
Foreign tax rate difference 1.0 .8 1.6
Foreign losses with no tax benefit 1.5 3.0
Foreign tax credits 1.1 .2
Recognized loss carryforwards (1.8) (3.4)
Impairment losses with no tax benefit 9.0
Other 1.9 3.1 3.1
____ ____ ____
Effective income tax rate 37.4 % 53.6 % 39.8 %
==== ==== ====
Page 13-21
<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:
1995 1994
Postretirement benefits $ 45,965 $ 45,051
Other liabilities and reserves 44,741 39,358
Long-term contracts 9,365 8,944
Operating loss carryforwards 35,669 38,403
Foreign tax credit carryforwards 3,093
Valuation allowance (8,867) (11,035)
Depreciation (59,892) (57,848)
Acquisitions (9,183) (7,584)
Inventory 5,746 4,048
________ ________
Net deferred tax asset (liability) $ 63,544 $ 62,430
======== ========
Change in net deferred tax asset (liability):
Provision for deferred tax $ (1,232) $ 34,438
Translation adjustment 4,323 1,978
Acquisitions (1,977) (490)
________ ________
Total change in net deferred tax $ 1,114 $ 35,926
======== ========
At June 30, 1995, foreign subsidiaries had benefits for operating loss
carryforwards of $35,669 for tax and $37,262 for financial reporting, most of
which can be carried forward indefinitely. Currency adjustments offset the
loss carryforward reductions in the valuation allowance.
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 1995 and 1994 of total inventories. The current cost of these inventories
exceeds their valuation determined on the LIFO basis by $138,974 in 1995 and
$130,710 in 1994. Progress payments of $11,665 in 1995 and $11,429 in 1994
are netted against inventories.
Page 13-22
<PAGE>
6. LINES OF CREDIT
At June 30, 1995, the Company had available $100,000 through a multi-currency
unsecured revolving credit agreement with a group of banks, of which $47,447
was outstanding at June 30, 1995. The interest on this credit agreement,
which expires October 1997, is based upon the type of debt advanced. The
agreement also requires a facility fee equal to 1/10 percent of the commitment
per annum. Covenants in the agreement include a limitation on the Company's
debt to debt-equity ratio.
The Company has other lines of credit, primarily short-term, aggregating
$68,210, from various foreign banks, of which $37,397 is outstanding at June
30, 1995. Most of these agreements are reviewed annually.
The Company is also authorized to sell up to $200,000 of short-term
commercial paper notes, rated A-1 by Standard & Poor's and P-2 by Moody's.
There were no commercial paper notes outstanding at June 30, 1995 or 1994.
7. DEBT
June 30, 1995 1994
Domestic:
Debentures and notes
9.86%, due 1996-1997 $ 2,000 $ 4,000
9.6%, due 1996-1999 7,428 10,286
10.375%, due 1999-2018 100,000 100,000
9.75%, due 2002-2021 100,000 100,000
Variable rate debentures 4.15%, due 2010-2025 15,535
Industrial revenue bonds
2.05% to 4.71%, due 2002-2015 4,660 25,121
ESOP loan guarantee 8.49%, due 1996 13,468 25,697
Foreign:
Bank loans, including revolving credit
2.25% to 11.75%, due 1996-2006 15,541 10,842
Other long-term debt, including capitalized leases 1,042 1,864
_________ _________
Total long-term debt 259,674 277,810
Less long-term debt payable within one year 22,517 20,551
_________ _________
Long-term debt, net $ 237,157 $ 257,259
========= =========
Principal amounts of long-term debt payable in the five years ending
June 30, 1996 through 2000 are $22,517, $7,927, $5,408, $6,836, and $6,166,
respectively.
In November 1993, the Company used cash from operating activities to early-
retire $100,000 of 9.45% 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 applicable income taxes of $3,515. In
addition, the Company early-retired $3,509 of 15.08% Australian debt due in
1995, resulting in early redemption premium of $316.
Notes payable - Notes payable primarily represent short-term borrowings
from foreign banks. The balance and weighted average interest rate at
June 30, 1995 and 1994 were $74,855 and 6.6% and $6,422 and 7.6%, respectively.
Page 13-23
<PAGE>
ESOP loan guarantee - During 1989, Parker established a leveraged Employee
Stock Ownership Plan. A trust established under the plan borrowed $70,000,
which is unconditionally guaranteed by the Company, to purchase 2.5 million
shares of Parker-Hannifin common stock on the open market. The unpaid balance
of the loan, due June 30, 1996, is recorded as Long-term debt and an
equivalent amount, representing deferred compensation, is a deduction of
Shareholders' equity.
Lease Commitments - Future minimum rental commitments as of June 30, 1995,
under noncancelable operating leases, which expire at various dates, are as
follows: 1996-$22,598; 1997-$17,087; 1998-$11,703; 1999-$7,466; 2000-$4,758;
and after 2000-$16,061.
Rental expense in 1995, 1994 and 1993 was $26,374, $21,470 and $30,897,
respectively.
8. FINANCIAL INSTRUMENTS
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. The carrying values for Cash and cash equivalents,
Investments and other assets and Notes payable approximate fair value. The
estimated 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, $259,359 and $277,215 at June 30, 1995 and 1994,
respectively, was estimated to have a fair value of $288,935 and $284,499, at
June 30, 1995 and 1994, respectively.
The Company has also entered into forward contracts with terms of one year
or less which require the Company to exchange foreign currencies for 61,429
U.S. dollars and U.S. dollars for 1,137 British Pounds Sterling. These
agreements would have resulted in a gain of $85 had they been settled by the
Company at June 30, 1995. There were no forward contracts outstanding at
June 30, 1994.
The Company has an interest-rate swap agreement with a triple-A-rated
counterparty covering a notional amount of $50,000, which expires in December,
1996. This agreement effectively changes the Company's interest rate exposure
to the difference between a 5.079% fixed rate receivable and the six-month
LIBOR rate payable at each December 1 and June 1 through maturity of the
agreement. This agreement could have been settled for a payment of $623 and
$2,278 at June 30, 1995 and 1994, respectively.
The estimated amounts the Company would receive or pay to terminate the
forward contracts and the interest rate swap agreement represent the fair
value as determined by dealer quotes.
Page 13-24
<PAGE>
9. SHAREHOLDERS' EQUITY AND OTHER STOCK-RELATED INFORMATION
1995 1994 1993
COMMON SHARES
Balance July 1 $ 24,633 $ 24,633 $ 24,632
Shares issued under stock option
plans (1995 - 282,880;
1994 - 129,801; 1993 - 22,496)
less shares of stock for stock
exchange (1995 - 190,556;
1994 - 129,801; 1993 - 22,496) 46
Shares issued (24,642,547) in
connection with 3-for-2 stock
split 12,321
Shares issued for prior year
pooled acquisition /
conversion of debentures 1 1
_________ _________ _________
Balance June 30 $ 37,001 $ 24,633 $ 24,633
========= ========= =========
ADDITIONAL CAPITAL
Balance July 1 $ 165,942 $ 164,430 $ 164,041
Shares issued under stock option
plans, less shares of stock
for stock exchange 1,890 1,512 367
Shares issued in connection with
3-for-2 stock split (12,321)
Shares issued for purchase
acquisition 2,641
Shares issued as restricted
stock 287
Shares issued for prior year
pooled acquisition /
conversion of debentures 15 22
--------- --------- ---------
Balance June 30 $ 158,454 $ 165,942 $ 164,430
========= ========= =========
RETAINED EARNINGS
Balance July 1 $ 806,240 $ 806,033 $ 787,098
Net income 218,238 47,652 65,056
Cash dividends paid on common
shares, net of tax benefit of
ESOP shares (1995 - $.68 per
share; 1994 - $.65 per share;
1993 - $.64 per share) (49,961) (47,445) (46,121)
Cash payments for fractional
shares in connection with
3-for-2 stock split (31)
_________ _________ _________
Balance June 30 $ 974,486 $ 806,240 $ 806,033
========= ========= =========
(Table continued on Page 13-26)
Page 13-25
<PAGE>
1995 1994 1993
DEFERRED COMPENSATION RELATED TO ESOP DEBT
Balance July 1 $ (25,697) $ (36,764) $ (46,767)
Reduction of ESOP debt (Note 7) 12,229 11,067 10,003
_________ _________ _________
Balance June 30 $ (13,468) $ (25,697) $ (36,764)
========= ========= =========
TRANSLATION ADJUSTMENTS
Balance July 1 $ 2,538 $ (10,533) $ 24,201
Translation adjustments (Note 11) 32,503 13,071 (34,734)
_________ _________ _________
Balance June 30 $ 35,041 $ 2,538 $ (10,533)
========= ========= =========
COMMON STOCK IN TREASURY
Balance July 1 $ (7,305) $ (14,899) $ (19,186)
Shares purchased at cost (1,364)
Shares issued under stock option
plans (1995 - 230,234;
1994 - 338,330;1993 - 190,961) 5,890 7,594 4,287
Shares issued for purchase
acquisition 2,440
Shares issued as restricted stock 339
_________ _________ _________
Balance June 30 $ 0 $ (7,305) $ (14,899)
========= ========= =========
On April 13, 1995, the Board of Directors authorized a 3-for-2 split of the
Company's common shares, paid June 2, 1995. All per share amounts in the
financial statements and notes thereto have been restated to give effect to
the 3-for-2 split. Historical share amounts have not been adjusted for the
stock split with the exception of Options exercisable and Shares available for
grant information in this footnote, data in Note 10 on shares held by the
ESOP, and shares outstanding data on the eleven-year financial summary.
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.
Under the Company's 1993 Stock Incentive Plan, 19,444 shares of restricted
stock were issued to certain key employees as interim payments under the
Company's 1993-94-95 Long Term Incentive Plan (LTIP). Value of the payments
was set as the market value of the Company's common stock on the date of
issuance and totaled $534 or $27.50 per share. Shares were earned and awarded
based upon attainment of criteria specified in the LTIP over the first two
years of the 3-year Plan. Plan participants are entitled to cash dividends and
to vote their respective shares, but the shares are restricted as to
transferability for three years following issuance. The LTIP's final payout
of 41,526 shares, accrued in 1995, will be issued in 1996.
Page 13-26
<PAGE>
In addition, non-employee members of the Board of Directors have been given
the opportunity to receive all or a portion of their fees in the form of
restricted stock. These shares vest ratably, on an annual basis, over the
term of office of the director. In 1995, 2,991 shares were issued in lieu of
directors' fees.
At June 30, 1995, the Company had 4,674,353 common shares reserved for
issuance in connection with all 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, 1993 2,134,126 $ 28.04
Granted 49,800 40.25
Exercised (468,031) 26.29
Cancelled (34,132) --
_________ _______
Outstanding June 30, 1994 1,681,763 $ 28.85
Granted (pre-split) 454,200 44.79
Exercised (pre-split) (370,514) 29.22
Additional shares for split 876,131 --
Exercised (post-split) (142,600) 19.75
Cancelled (14,287) --
_________ _______
Outstanding June 30, 1995 2,484,693 $ 22.05
========= =======
Options exercisable and shares available for future grant were:
June 30, 1995 1994
Options exercisable 1,808,643 2,447,945
Shares available for grant 2,189,660 2,174,840
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.
10. RETIREMENT BENEFITS
Pensions -- The Company has noncontributory defined benefit pension plans
covering eligible employees, including certain employees in foreign countries.
Plans for most salaried employees provide pay-related benefits based on years
of service. Plans for hourly employees generally provide benefits based on
flat-dollar amounts and years of 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.
Page 13-27
<PAGE>
Pension costs for all plans were $17,246, $10,850 and $14,649 for 1995,
1994 and 1993, 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 accounted for using SFAS No. 87, Employers'
Accounting for Pensions, are as follows:
1995 1994 1993
Service cost-benefits earned
during the period $ 18,801 $ 16,889 $ 16,776
Interest cost on projected benefit
obligation 37,929 34,330 31,564
Actual return on assets (77,321) (3,088) (46,181)
Net amortization and deferral 35,665 (38,364) 11,524
________ ________ ________
Net periodic pension costs $ 15,074 $ 9,767 $ 13,683
======== ======== ========
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, 1995 and 1994. The expected long-term rate of
return on assets was 9% at June 30, 1995 and 1994. For the principal foreign
plans located in the United Kingdom and Germany, the weighted average discount
rates used were 8% and 7%, respectively, at June 30, 1995 and 7.5% and 7%,
respectively, at June 30, 1994 and the rates of increase in future
compensation used were 6% and 4.5%, respectively, at June 30, 1995 and 5.5%
and 4.5%, respectively, at June 30, 1994. The rates of return on assets used
in the United Kingdom and Germany were 8.5% and 7%, respectively, at
June 30, 1995 and 1994.
The following tables set forth the funded status of all the plans accounted
for under SFAS No. 87 and the amounts recognized in the Company's consolidated
balance sheet:
Assets Exceed Accumulated Benefits
1995 1994
Actuarial present value of benefit obligations:
Vested benefit obligation $ (371,240) $ (319,733)
========== ==========
Accumulated benefit obligation $ (380,902) $ (330,657)
========== ==========
Projected benefit obligation $ (437,653) $ (388,478)
Plan assets at fair value 507,015 434,951
__________ __________
Projected benefit obligation less than plan assets 69,362 46,473
Unrecognized net (gain) or loss (6,415) 9,258
Unrecognized prior service cost 12,033 11,409
Unrecognized net (asset) obligation (23,700) (26,977)
__________ __________
Prepaid pension cost (pension liability)
recognized $ 51,280 $ 40,163
========== ==========
Page 13-28
<PAGE>
Accumulated Benefits Exceed Assets
1995 1994
Actuarial present value of benefit obligations:
Vested benefit obligation $ (73,642) $ (60,322)
========== ==========
Accumulated benefit obligation $ (83,387) $ (67,402)
========== ==========
Projected benefit obligation $ (99,537) $ (77,353)
Plan assets at fair value 17,440 15,682
__________ __________
Projected benefit obligation in excess of
plan assets (82,097) (61,671)
Unrecognized net (gain) or loss 3,937 1,809
Unrecognized prior service cost 4,883 1,299
Unrecognized net (asset) obligation 2,900 3,056
__________ __________
Prepaid pension cost (pension liability)
recognized $ (70,377) $ (55,507)
========== ==========
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, 1995 and 1994, the
plans' assets included Company stock with market values of $12,844 and
$10,068, respectively.
Employee Savings Plan -- During 1989, the Company established a leveraged
Employee Stock Ownership Plan (ESOP) as part of its existing savings and
investment 401(k) plan, which is available to eligible domestic employees.
Parker-Hannifin common shares, within the ESOP, are used to match
contributions made by employees to the savings plan up to a maximum of 5% of
an employee's annual compensation.
1995 1994 1993
Allocated shares 4,156,716 3,671,907 3,280,128
Committed to be released 44,365 12,267 7,395
Unreleased shares 562,178 1,117,098 1,659,522
_________ _________ _________
Total shares held by the ESOP 4,763,259 4,801,272 4,947,045
========= ========= =========
Company contributions to the ESOP, recorded as compensation and interest
expense, were $17,106 in 1995, $15,764 in 1994 and $15,217 in 1993. The
interest expense portion (interest on ESOP debt) was $1,910 in 1995, $2,848 in
1994 and $3,764 in 1993. Dividends earned by the unallocated shares and
interest income within the ESOP are used to service the ESOP debt. These were
$793 in 1995, $1,059 in 1994 and $1,368 in 1993.
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
Page 13-29
<PAGE>
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. Postretirement benefit costs included the following
components:
1995 1994 1993
Service cost-benefits attributed to
service during the period $ 3,598 $ 3,414 $ 3,767
Interest cost on accumulated
postretirement benefit obligations 9,638 9,656 9,009
Net amortization and deferral 72 364 (125)
________ ________ ________
Net periodic postretirement
benefit costs $ 13,308 $ 13,434 $ 12,651
======== ======== ========
The following table reconciles the plans' combined funded status to amounts
recognized in the Company's consolidated balance sheet:
1995 1994
Accumulated postretirement benefit obligation:
Retirees $ (68,452) $ (61,488)
Fully eligible active plan participants (26,602) (27,532)
Other active plan participants (34,373) (39,026)
Unrecognized (gain) loss 316 6,976
Unrecognized prior service cost 606 754
__________ __________
Accrued postretirement benefit costs $ (128,505) $ (120,316)
========== ==========
For measurement purposes, an 11% annual rate of increase in the per capita
cost of covered benefits (i.e., health care cost trend rate) was assumed for
1996. 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, 1995
by $5,910, and the aggregate of the service and interest cost components of
net periodic postretirement benefit cost for the year then ended by $421. The
weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8% at June 30, 1995 and 1994.
Other -- In 1995 the Company established nonqualified deferred compensation
programs which permit officers, directors and certain management employees to
annually elect (via individual contracts) to defer a portion of their
compensation, on a pre-tax basis, until their retirement. The retirement
benefit to be provided is based on the amount of compensation deferred,
Company match, and earnings on the deferrals. Deferred compensation expense
was $2,530 in 1995.
The Company has invested in corporate-owned life insurance policies to
assist in funding these programs. The cash surrender value of these policies
are in an irrevocable rabbi trust and are recorded as assets of the Company.
Page 13-30
<PAGE>
11. 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. Net transaction and translation
adjustments reduced Net income in 1995, 1994 and 1993 by $195, $382 and
$2,218, 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.
Net sales, Income before income taxes (and before extraordinary item in
1994) and Net income include the following amounts from foreign operations:
1995 1994 1993
Net sales $ 932,886 $ 588,098 $ 616,717
========= ========= =========
Income before income taxes 92,256 (17,070) (25,804)
========= ========= =========
Net income 63,514 (14,594) (17,468)
========= ========= =========
Net assets of foreign operations at June 30, 1995 and 1994 amounted to
$601,142 and $416,756, respectively.
Accumulated undistributed earnings of foreign operations reinvested in
their operations amounted to $100,550, $38,938, and $58,101, at June 30, 1995,
1994 and 1993, respectively.
12. RESEARCH AND DEVELOPMENT
Research and development costs amounted to $74,129 in 1995, $64,518 in 1994,
and $60,054 in 1993. Customer reimbursements included in the total cost for
each of the respective years were $21,202, $22,640 and $16,648. Costs include
those costs related to independent research and development as well as
customer reimbursed and unreimbursed development programs.
13. CONTINGENCIES
The Company is involved in various litigations arising in the normal course of
business, including proceedings based on product liability claims, workers'
compensation claims and alleged violations of various environmental laws. 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.
Management regularly reviews the probable outcome of these proceedings, the
expenses expected to be incurred, the availability and limits of the insurance
coverage, and the established accruals for uninsured liabilities. While the
outcome of pending proceedings cannot be predicted with certainty, management
believes that any liabilities that may result from these proceedings are not
reasonably likely to have a material effect on the Company's liquidity,
financial condition or results of operations.
Page 13-31
<PAGE>
Environmental - 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 12 off-site waste disposal facilities.
As of June 30, 1995, the Company has a reserve of $11,364 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 $802 for discounting at
an 8% annual rate a portion of the costs at 7 locations for established
treatment procedures required over periods ranging from 7 to 20 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 $10,698 to a maximum of $27,051. 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.
Page 13-32
<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 L.L.P., 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 13-33
<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, 1995 and 1994, and the related
consolidated statements of income and cash flows for each of the three years
in the period ended June 30, 1995. 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, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 1995 in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
Cleveland, Ohio
August 3, 1995
Page 13-34
<PAGE>
<TABLE>
<CAPTION>
FIVE-YEAR FINANCIAL SUMMARY
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
1995 1994 (a) 1993 1992 (b) 1991
Net sales $ 3,214,370 $ 2,576,337 $ 2,489,323 $ 2,375,808 $ 2,440,815
Cost of sales 2,448,264 2,053,376 2,004,955 1,925,800 1,977,381
Selling, general and administrative expenses 384,581 302,668 310,765 282,861 289,535
Provision for business restructuring activities 18,773 22,879 14,798 14,350
Impairment of long-term assets 35,483
Interest expense 30,922 37,832 47,056 52,190 59,369
Interest and other income, net (2,335) (3,879) (5,457) (6,380) (5,973)
Loss (gain) on disposal of assets 4,531 19,635 1,059 1,148 2,685
Income taxes 130,169 60,274 43,010 41,912 44,300
Income - continuing operations 218,238 52,175 65,056 63,479 59,168
Income before extraordinary item and cumulative
effect of changes in accounting principles 218,238 52,175 65,056 63,479 59,168
Net income 218,238 47,652 65,056 11,218 59,168
Earnings per share - continuing operations 2.96 .71 .89 .88 .82
Earnings per share before extraordinary item
and cumulative effect of changes in
accounting principles 2.96 .71 .89 .88 .82
Earnings per share $ 2.96 $ .65 $ .89 $ .15 $ .82
Average number of shares outstanding (thousands) 73,717 73,107 72,710 72,429 72,422
Cash dividends per share $ .68 $ .65 $ .64 $ .62 $ .61
Cash dividends paid $ 49,961 $ 47,445 $ 46,121 $ 44,382 $ 43,415
Net income as a percent of net sales 6.8% 1.8% 2.6% 0.5% 2.4%
Return on average assets 10.3% 2.5% 3.3% 0.6% 3.0%
Return on average equity 20.2% 5.0% 7.0% 1.2% 6.3%
Book value per share $ 16.10 $ 13.16 $ 12.80 $ 12.86 $ 13.05
Current assets 1,246,382 1,031,308 1,056,443 1,055,776 1,019,019
Current liabilities 652,621 504,444 468,254 383,603 369,545
Working capital $ 593,761 $ 526,864 $ 588,189 $ 672,173 $ 649,474
Ratio of current assets to current liabilities 1.9 2.0 2.3 2.8 2.8
Plant and equipment, net continuing $ 815,771 $ 717,300 $ 736,056 $ 752,490 $ 757,937
Plant and equipment, net discontinued
Total assets 2,302,209 1,925,744 1,963,590 1,958,120 1,920,697
Long-term debt 237,157 257,259 378,476 446,974 476,586
Shareholders' equity $ 1,191,514 $ 966,351 $ 932,900 $ 934,019 $ 943,475
Debt to debt-equity percent 21.9% 22.7% 33.3% 34.0% 35.4%
Depreciation continuing $ 110,527 $ 106,546 $ 109,673 $ 102,628 $ 98,919
Capital expenditures continuing $ 151,963 $ 99,914 $ 91,484 $ 84,955 $ 112,047
Number of employees 30,590 26,730 25,646 26,669 27,793
Number of shareholders 35,629 29,625 30,414 30,836 32,812
Number of shares outstanding at year-end (thousands) 74,002 73,410 72,902 72,614 72,308
<FN>
(a) Includes an extraordinary item for the early retirement 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.
</FN>
</TABLE>
Page 13-35
Exhibit (21)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1995
by Parker-Hannifin Corporation
The Company has the following subsidiaries:
Domestic Subsidiaries
Percentage
Name Incorporated
Owned(1)
iPower Distribution Group Inc. Delaware 100
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)
Hauser Elektronik GmbH Germany 100(5)
Hauser Elektronik GmbH Switzerland 100(6)
N. V. Parker-Hannifin S.A. Belgium 100(7)
P-H do Brasil Comercial Ltda. Brazil 100(3)
PH Finance Limited United Kingdom 100(8)
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(9)
Parker Enzed Equipment (Australia) Pty. Ltd. Australia 100(9)
Parker Enzed Technologies Pty. Ltd. Australia 100(9)
Parker Ermeto GmbH Austria 100(5)
Parker Fluid Connectors de Mexico S.A. de C.V. Mexico 100
Parker Pneumatique S.A. France 100(10)
Parker Pradifa GmbH Germany 100(11)
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(12)
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(13)
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(7)
Parker Hannifin Foreign Sales Corp. Guam 100(3)
Parker Hannifin GmbH Germany 100(3)
Parker Hannifin GmbH & Co. KG Germany 100(14)
Parker Hannifin Hong Kong Limited Hong Kong 100(15)
<PAGE>
Parker Hannifin Industria e Comercio Ltda. Brazil 100(16)
Parker Hannifin Japan Ltd. Japan 100
Parker Hannifin Naarden B.V. Netherlands 100(7)
Parker Hannifin NMF AG Switzerland 100(5)
Parker Hannifin (N.Z.) Ltd. New Zealand 100
Parker Hannifin Oy Finland 100
Parker Hannifin plc United Kingdom 100(13)
Parker Hannifin RAK, S.A. France 100
Parker Hannifin S.p.A. Italy 100
Parker Hannifin Sp. z.o.o. Poland 100
Parker Hannifin S.r.o. Czech Republic 100(3)
Parker-Hannifin Singapore Pte. Ltd. Singapore 100
Parker Hannifin Sweden AB Sweden 100
Parker Hannifin Taiwan Ltd. Taiwan 100
Parker Hannifin Verwaltungs GmbH Germany 100(5)
Polar Seals ApS Denmark 100(17)
Polyflex France S.A. France 100(10)
Swedab Finn-Filter Svenska AB Sweden 100(18)
Atlas Automation AB Sweden 100
Atlas Automation Svenska AB Sweden 100(19)
Atlas Svenska Forsaljnings AB Sweden 100(19)
Atlas Automation A/S Denmark 100(19)
Hydro-Pneumatik AB Sweden 100(19)
(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 GmbH
(6) Owned 100% by Parker Hannifin NMF AG
(7) Owned 100% by Parker Hannifin B.V.
(8) Owned 100% by Parker Hannifin plc
(9) Owned 100% by Parker-Hannifin (Australia) Pty. Ltd.
(10) Owned 100% by Parker Hannifin RAK S.A.
(11) Owned 13.8% by Parker Hannifin GmbH and 86.2% by Parker-
Hannifin International Corp.
(12) Owned 100% by Parker-Hannifin S.p.A.
(13) Owned 100% by Alenco (Holdings) Limited
(14) Owned 99% by Parker Hannifin GmbH and 1% by Parker
Hannifin Verwaltungs GmbH
(15) Owned 99.99% by Parker-Hannifin Corporation and .01% by
Parker-Hannifin International Corporation
(16) Owned 37.5% by P-H do Brasil Comercial Ltda. and 62.5% by
Parker-Hannifin International Corp.
(17) Owned 100% by Parker Hannifin Danmark A/S
(18) Owned 100% by Parker Hannifin Sweden AB
(19) Owned 100% by Atlas Automation AB
All of the foregoing subsidiaries are included in the
Company's consolidated financial statements. In addition to the
foregoing, the Company owns three inactive or name holding companies.
*Numbered in accordance with Item 601 of Regulation S-K.
Exhibit (25)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1995
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 8/16/95 F. A. LePage 8/17/95
_____________________________ ____ ______________________________ ____
P. S. Parker, Chairman of F. A. LePage, Director
the Board of Directors
D. E. Collins 8/17/95 Peter W. Likins 8/17/95
_____________________________ ____ ______________________________ ____
D. E. Collins, Principal P. W. Likins, Director
Executive Officer and Director
M. J. Hiemstra 8-17-95 Allan L. Rayfield 8/17/95
_____________________________ ____ ______________________________ ____
M. J. Hiemstra, Principal A. L. Rayfield, Director
Financial Officer
H. C. Gueritey, Jr 8-16-95 P. G. Schloemer 8/17/95
_____________________________ ____ ______________________________ ____
H. C. Gueritey, Jr., P. G. Schloemer, Director
Principal Accounting Officer
J. G. Breen 8-16-95 Wolfgang R. Schmitt 8-17-95
_____________________________ ____ ______________________________ ____
J. G. Breen, Director W. R. Schmitt, Director
Paul C. Ely, Jr. 8-16-95
_____________________________ ____ ______________________________ ____
P. C. Ely, Jr., Director W. Seipp, Director
Allen H. Ford 8/17/95 D. W. Sullivan 8/17/95
_____________________________ ____ ______________________________ ____
A. H. Ford, Director D. W. Sullivan, Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
PARKER-HANNIFIN CORPORATION'S REPORT ON FORM 10-K FOR ITS FISCAL YEAR
ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 63,830
<SECURITIES> 0
<RECEIVABLES> 426,337
<ALLOWANCES> 6,613
<INVENTORY> 625,906
<CURRENT-ASSETS> 1,246,382
<PP&E> 1,812,667
<DEPRECIATION> 996,896
<TOTAL-ASSETS> 2,302,209
<CURRENT-LIABILITIES> 652,621
<BONDS> 259,674
<COMMON> 37,001
0
0
<OTHER-SE> 1,154,513
<TOTAL-LIABILITY-AND-EQUITY> 2,302,209
<SALES> 3,214,370
<TOTAL-REVENUES> 3,214,370
<CGS> 2,448,264
<TOTAL-COSTS> 2,448,264
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,411
<INTEREST-EXPENSE> 30,922
<INCOME-PRETAX> 348,407
<INCOME-TAX> 130,169
<INCOME-CONTINUING> 218,238
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 218,238
<EPS-PRIMARY> 2.96
<EPS-DILUTED> 2.95
</TABLE>
