UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
Commission File number 1-4982
PARKER-HANNIFIN CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 34-0451060
(State or other (IRS Employer
jurisdiction of Identification No.)
incorporation)
17325 Euclid Avenue, Cleveland, Ohio 44112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 531-3000
Indicate by check mark whether Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X . No .
Number of Common Shares outstanding at December 31, 1994 49,140,587
The Exhibit Index appears on sequential page 12.
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PARKER-HANNIFIN CORPORATION
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Income - Three
Months and Six Months Ended December 31,
1994 and 1993 3
Consolidated Balance Sheet -
December 31, 1994 and June 30, 1994 4
Consolidated Statement of Cash Flows -
Six Months Ended December 31, 1994
and 1993 5
Business Segment Information by Industry -
Three Months and Six Months Ended
December 31, 1994 and 1993 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8-10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
EXHIBIT 10(a)* - Non-Employee Directors' Stock Plan 13-14
EXHIBIT 10(b)* - Deferred Compensation Plan for Directors 15-21
EXHIBIT 10(c)* - Executive Deferral Plan 22-36
EXHIBIT 10(d)* - Savings Restoration Plan 37-52
EXHIBIT 10(e)* - Pension Restoration Plan 53-62
EXHIBIT 11* - Computation of Earnings per Common Share 63
EXHIBIT 27* - Financial Data Schedule 64
*Numbered in accordance with Item 601 of Regulation S-K.
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PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PARKER-HANNIFIN CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales $ 738,231 $ 592,226 $ 1,450,688 $ 1,199,637
Cost of sales 572,862 485,145 1,123,389 979,199
Gross profit 165,369 107,081 327,299 220,438
Selling, general and administrative expenses 91,168 70,070 172,703 142,840
Provision for business restructuring activities 5,044 6,705
Income from operations 74,201 31,967 154,596 70,893
Other income (deductions)
Interest expense (7,654) (10,206) (14,878) (21,817)
Interest and other income, net 148 1,222 336 3,171
(7,506) (8,984) (14,542) (18,646)
Income before income taxes
and extraordinary item 66,695 22,983 140,054 52,247
Income taxes 25,611 8,922 55,321 22,121
Income before extraordinary item 41,084 14,061 84,733 30,126
Extraordinary item - extinguishment of debt (4,207) (4,207)
Net income $ 41,084 $ 9,854 $ 84,733 $ 25,919
Earnings per share before extraordinary item $ .84 $ .29 $ 1.73 $ .62
Earnings per share $ .84 $ .20 $ 1.73 $ .53
Cash dividends per common share $ .25 $ .24 $ .50 $ .48
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
PARKER-HANNIFIN CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
December 31, June 30,
1994 1994
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 43,553 $ 81,590
Accounts receivable, net 408,879 388,515
Inventories:
Finished products 276,446 245,068
Work in process 184,191 171,114
Raw materials 91,955 76,748
552,592 492,930
Prepaid expenses 12,666 14,263
Deferred income taxes 41,506 41,056
Total current assets 1,059,196 1,018,354
Plant and equipment 1,701,323 1,621,828
Less accumulated depreciation 950,183 904,528
751,140 717,300
Other assets 234,230 177,136
Total assets $ 2,044,566 $ 1,912,790
LIABILITIES
Current liabilities:
Notes payable $ 95,776 $ 26,973
Accounts payable, trade 170,946 181,148
Accrued liabilities 234,368 238,682
Accrued domestic and foreign taxes 51,753 57,641
Total current liabilities 552,843 504,444
Long-term debt 252,769 257,259
Pensions and other postretirement benefits 179,078 169,081
Deferred income taxes 4,930 8,052
Other liabilities 7,045 7,603
Total liabilities 996,665 946,439
SHAREHOLDERS' EQUITY
Serial preferred stock, $.50 par value;
authorized 3,000,000 shares; none issued -- --
Common stock, $.50 par value; authorized
150,000,000 shares; issued 49,273,618 shares at
December 31 and 49,265,074 shares at June 30 24,637 24,633
Additional capital 169,152 165,942
Retained earnings 866,412 806,240
Deferred compensation related to guarantee
of ESOP debt (19,733) (25,697)
Currency translation adjustment 10,420 2,538
1,050,888 973,656
Less treasury shares, at cost: 133,031 shares at
December 31 and 325,371 shares at June 30 (2,987) (7,305)
Total shareholders' equity 1,047,901 966,351
Total liabilities and shareholders' equity $ 2,044,566 $ 1,912,790
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
PARKER-HANNIFIN CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Ended
December 31,
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 84,733 $ 25,919
Adjustments to reconcile net income to net cash
provided by operations:
Net effect of extraordinary loss 4,207
Depreciation 55,516 54,489
Amortization 3,982 2,624
Deferred income taxes (2,848) (16,381)
Foreign currency transaction loss 83 2,116
Loss (gain) on sale of plant and equipment 511 (62)
Provision for restructuring (4,115) (6,874)
Changes in assets and liabilities:
Accounts receivable 9,614 17,474
Inventories (31,724) 3,344
Prepaid expenses 2,806 (431)
Other assets (6,588) (3,712)
Accounts payable, trade (23,050) (11,841)
Accrued payrolls and other compensation (8,825) (18,049)
Accrued domestic and foreign taxes (7,651) (4,845)
Other accrued liabilities (2,393) 15,814
Pensions and other postretirement benefits 7,899 8,756
Other liabilities (1,553) (2,029)
Net cash provided by operating activities 76,397 70,519
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions (excluding cash of $5,146 in 1994
and $2,095 in 1993) (105,750) (29,798)
Capital expenditures (59,548) (41,554)
Proceeds from sale of plant and equipment 8,937 1,827
Proceeds from disposition of business 3,205
Other 3,574 1,884
Net cash used in investing activities (152,787) (64,436)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common shares 6,998 1,581
Proceeds from notes payable, net 63,275 2,113
Proceeds from long-term borrowings 18,887 1,637
Payments of long-term borrowings (26,721) (110,179)
Extraordinary loss on early retirement of debt (6,922)
Dividends (24,560) (23,349)
Net cash provided by (used in)
financing activities 37,879 (135,119)
Effect of exchange rate changes on cash 474 (1,193)
Net decrease in cash and cash equivalents (38,037) (130,229)
Cash and cash equivalents at beginning of year 81,590 159,985
Cash and cash equivalents at end of period $ 43,553 $ 29,756
See accompanying notes to consolidated financial statements.
</TABLE>
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PARKER-HANNIFIN CORPORATION
BUSINESS SEGMENT INFORMATION BY INDUSTRY
(Dollars in thousands)
(Unaudited)
Parker operates in two industry segments: Industrial and Aerospace. The
Industrial Segment is the largest and includes the International operations.
Industrial - This segment produces a broad range of motion-control and fluid
systems and components used in all kinds of manufacturing, packaging,
processing, transportation, mobile construction, and agricultural and military
machinery and equipment. Sales are direct to major original equipment
manufacturers (OEMs) and through a broad distribution network to smaller OEMs
and the aftermarket.
Aerospace - This segment designs and manufactures products and provides
aftermarket support for commercial, military and general-aviation aircraft,
missile and spacecraft markets. The Aerospace Segment provides a full range of
systems and components for hydraulic, pneumatic, cryogenic and fuel
applications.
<TABLE>
<CAPTION>
Results by Business Segment:
Three Months Ended Six Months Ended
December 31, December 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales, including intersegment sales
Industrial:
North America $ 414,206 $ 342,068 $ 825,227 $ 688,418
International 190,689 115,919 360,840 234,347
Aerospace 133,551 134,297 264,932 277,020
Intersegment sales (215) (58) (311) (148)
Total $ 738,231 $ 592,226 $ 1,450,688 $ 1,199,637
Income (loss) from operations before corporate
general and administrative expenses
Industrial:
North America $ 55,639 $ 41,491 $ 116,912 $ 83,165
International 15,209 (10,042) 28,129 (15,633)
Aerospace 13,753 9,499 29,685 22,143
Total 84,601 40,948 174,726 89,675
Corporate general and administrative
expenses 10,400 8,981 20,130 18,782
Income from operations $ 74,201 $ 31,967 $ 154,596 $ 70,893
See accompanying notes to consolidated financial statements.
</TABLE>
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PARKER-HANNIFIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollars in thousands, except per share amounts
_______________________
1. Management Representation
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position as of
December 31, 1994, the results of operations for the three and six months
ended December 31, 1994 and 1993 and cash flows for the six months then ended.
2. Extraordinary Item
In November 1993 the Company early-retired $100 million of 9.45 percent
debentures due November 1997 through 2016. The resulting pre-payment premium
and unamortized deferred debt costs were reported as an extraordinary charge.
3. Earnings per share
Primary earnings per share are computed using the weighted average number of
shares of common stock and common stock equivalents outstanding during the
period. Fully diluted earnings per share are not presented because such
dilution is not material.
4. Acquisitions
Effective December 31, 1994 the Company purchased the Polyflex Schwarz Group
of companies with operating plants in Huttenfeld and Viernheim, Germany and in
Wissembourg, France as well as the wholly-owned subsidiary, Rogan & Shanley,
in Houston, Texas for $18.1 million in cash. Polyflex manufactures reinforced
high- and ultra-high-pressure hoses, hose fittings and assemblies. Also
effective December 31, 1994 the Company purchased Hauser Elektronik GmbH, a
producer of automation components and systems based in Offenburg, Germany for
$11.6 million in cash. Effective December 21, 1994 the Company sold its 49
percent interest in its Mexican joint venture Conductores de Fluidos Parker,
purchased inventory and accounts receivable from such joint venture, and
formed a new wholly-owned subsidiary - Parker Fluid Connectors de Mexico. The
net purchase price was approximately $2.5 million in 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.
On September 30, 1994, the Company acquired Chomerics Inc., a leading producer
of electromagnetic interference-shielding materials and thermal interface
products for commercial-electronics and defense-electronics applications for
approximately $40 million in cash. Chomerics has manufacturing facilities in
the U.S. and the U.K. On August 1, 1994, the Company acquired the Automation
Division of Atlas Copco AB, a Swedish manufacturer of pneumatic components for
a variety of automation markets for $37 million in cash.
These acquisitions were accounted for by the purchase method, and the
accompanying statements include their results of operations since the
respective dates of acquisition. Sales by these operations for their most
recent fiscal year prior to acquisition exceeded $171 million.
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PARKER-HANNIFIN CORPORATION
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 1994
AND COMPARABLE PERIODS ENDED DECEMBER 31, 1993
CONSOLIDATED STATEMENT OF INCOME
Net sales increased 24.7 percent for the second quarter and 20.9 percent for
the six-month period. Without the effect of acquisitions and dispositions the
increases would have been 20.5 percent and 18.5 percent, respectively. This
growth is the result of market-share gains and the worldwide recovery of the
industrial markets. The aerospace market, which had been declining, also
began to show signs of recovery in order entry although sales were down
slightly from the prior year.
Income from operations of $74.2 million for the current second quarter and
$154.6 million for the current six months was more than double the $32.0
million for the quarter and $70.9 million for the six months of the prior
year. As a percent of sales, Income from operations increased to 10.1 percent
from 5.4 percent for the quarter and to 10.7 percent from 5.9 percent for the
six months. Cost of sales as a percent of sales decreased to 77.6 percent
from 81.9 percent for the quarter and to 77.4 percent from 81.6 percent for
the six-month period as a result of the benefits achieved from prior years'
restructuring activities and the positive effects of higher production levels
in relation to fixed costs. Selling, general and administrative expenses, as
a percent of sales, increased to 12.3 percent from 11.8 percent for the
quarter and remained at 11.9 percent for the six-month period. The majority
of this increase is due to acquisitions, increased sales-promotion expenses
and charges related to incentive compensation based on sales and earnings.
The fiscal 1994 second quarter and six month results included a Provision for
business restructuring activities amounting to $5,044 and $6,705,
respectively. These provisions were for employment reductions, plant closings
and relocations, and write-offs of related capital assets for the European
Industrial and Aerospace operations. The Company has not incurred
restructuring charges in fiscal 1995. Restructuring activities relating to
prior-year provisions are continuing as planned and the remaining accruals are
appropriate.
Interest expense decreased 25.0 percent for the quarter and 31.8 percent for
the six months, primarily due to lower borrowings, but also due to lower
interest rates on new borrowings.
The current-year effective income tax rate was reduced to 39.5 percent due to
the utilization of previously reported net operating losses in the U.K. and
Brazil. The Company experienced higher-than-expected profits in these
countries during the second quarter because of the International Industrial
recovery. For the first half of fiscal 1994 the rate had increased to 42.3
percent due to a $1.6 million charge for tax-law changes in Germany and the
United States.
Net income for the quarter was $41.1 million, more than four times the $9.9
million reported for the prior year after the extraordinary charge of $4.2
million for the early-retirement of $100 million of 9.45 percent debentures.
As a percent of sales, Net income increased to 5.6 percent from 1.7 percent
for the quarter. Six-month Net income increased to $84.7 million from $25.9
million after the extraordinary charge for the early-retirement of debentures.
As a percent of sales, Net income increased to 5.8 percent from 2.2 percent
for the six months.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Backlog increased to $950.2 million at December 31, 1994 as compared to $824.4
million the prior year and $852.5 million at June 30, 1994. The increase was
partially due to acquisitions, but was primarily due to increases within the
Industrial Segment in both North American and International operations.
BUSINESS SEGMENT INFORMATION BY INDUSTRY
The Industrial Segment operations achieved the following Net sales increases
in the current year when compared to the equivalent prior-year period:
Period ending December 31,
Three Months Six Months
Industrial North America 21.1 % 19.9 %
Industrial International 64.5 % 54.0 %
Total Industrial 32.1 % 28.5 %
Without the effect of currency-rate changes, International sales would have
increased 52.0 percent for the quarter and 43.9 percent for the six months.
Without the effect of acquisitions, the increases would have been:
Period ending December 31,
Three Months Six Months
Industrial North America 17.1 % 17.5 %
Industrial International 49.2 % 42.4 %
Total Industrial 25.2 % 23.8 %
The Industrial International markets continue to demonstrate sharp improvement
while the North American markets are maintaining their high demand. In
addition to the global recovery, the Company is achieving market-share gains
as a result of concentrated efforts towards reaching expanding markets and
premier customer service. The sales levels achieved to date in fiscal 1995 are
expected to continue throughout the year in addition to the benefit to be
realized from recent acquisitions.
Operating income for the Industrial Segment was up 125.3 percent for the
quarter and 114.8 percent for the six months. Industrial North America
Operating income increased 34.1 percent for the quarter and 40.6 percent for
the six months while Industrial International results moved from a loss to
income of $15.2 million for the quarter and $28.1 million for the six months.
Without the effect of acquisitions the total Industrial Segment Operating
income would have increased 113.6 percent for the quarter and 107.5 for the
six months. Benefits are being realized throughout the segment as a result of
increased volume and prior years' restructuring activities.
Fiscal 1994 results included a Provision for restructuring activities for the
Industrial Segment of $3.3 million for the quarter and $4.6 million for the
six months ended December 31, 1993. Prior-year restructuring actions are
progressing as planned and the remaining accruals are appropriate. No further
restructuring charges are anticipated and the improved margin levels resulting
from prior activities are expected to continue.
Total Industrial Segment backlog increased 47.4 percent compared to a year ago
and 25.5 percent since June 30, 1994. Without the effect of acquisitions the
increase would have been 40.5 percent and 19.5 percent, respectively. The
North American operations are being challenged to keep up with demand, but
productivity improvements and better utilization of existing capacity is
increasing throughput worldwide.
Aerospace Segment Net sales were down 0.6 percent for the quarter and 4.4
percent for the six months. A portion of the decrease in sales is the result
of divesting the Metal Bellows operations in the fourth quarter of fiscal
1994. The remaining decrease is the result of reduced original equipment
shipments compared to the prior year. While Aerospace markets remain at low
levels, long-term orders from original equipment customers and
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
near-term orders from maintenance, repair and overhaul customers are gradually
improving, with sales increases anticipated in fiscal year 1996 and beyond.
Despite the decreased sales, Operating income for the Aerospace Segment
increased 44.8 percent for the quarter and 34.1 percent for the six-month
period. The Aerospace Segment has carried out a substantial downsizing over
the past several years to adjust to the changing markets. These prior-year
actions have helped the Segment to achieve improved margin levels in the
current year, which are expected to continue. Fiscal 1994 results included a
charge of $1.7 million for the quarter and $2.1 million for the six-month
period for restructuring activities. The restructuring activities provided
for in prior periods are continuing as planned and the remaining accruals are
appropriate. No further restructuring charges are anticipated.
Management believes the Aerospace business is stabilizing and expects to
maintain favorable margins despite the lower volume. Backlog for the
Aerospace Segment decreased slightly from a year ago, but increased 3.1
percent since June 30, 1994.
CONSOLIDATED BALANCE SHEET
Working capital decreased to $506.4 million at December 31, 1994 from $513.9
million at June 30, 1994 with the ratio of current assets to current
liabilities decreasing slightly to 1.9 to 1. A $38.0 million decrease in Cash
and cash equivalents and a $68.8 million increase in Notes payable contributed
to the decrease in working capital, but were partially offset by increases in
Accounts receivable, net and Inventories. Acquisitions caused more than the
$20.4 million increase in Accounts receivable, net and slightly less than half
of the $59.7 million increase in Inventories. The remaining increase in
Inventories was due to the increased volume in the Industrial operations as
months supply increased only slightly.
The increases in Plant and equipment, net and Other assets are also the result
of acquisitions.
The debt to debt-equity ratio, excluding the effect of the ESOP loan guarantee
on both Long-term debt and Shareholders' equity, increased to 23.5 percent at
December 31, 1994 from 20.7 percent at June 30, 1994 as a result of the
increase in Notes payable. The additional Notes payable were used to fund
recent acquisitions.
CONSOLIDATED STATEMENT OF CASH FLOWS
Net cash provided by operating activities was $76.4 million for the six months
ended December 31, 1994, slightly higher than the $70.5 million for the same
six months in 1993 primarily as a result of higher Net income which was offset
by an increase in cash used for working capital items. Changes in the
principal working capital items - Accounts receivable, Inventories, and
Accounts payable, trade - resulted in the use of $45.2 million cash in fiscal
1995 as compared to providing cash of $9.0 million in fiscal 1994. This
change reflects the building of Inventories and Accounts Payable as a result
of higher volume.
Net cash used in investing activities increased to $152.8 million from $64.4
million for the six months ended December 31, 1994 and 1993 as a result of
several acquisitions and increased capital expenditures in fiscal 1995.
Financing activities provided cash of $37.9 million for the six months ended
December 31, 1994 and used cash of $135.1 million for the same period in 1993.
Additional borrowings in the current year were used to fund recent
acquisitions. During the prior-year period, the Company aggressively retired
debt.
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PARKER-HANNIFIN CORPORATION
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) The following documents are furnished as exhibits and
numbered pursuant to Item 601 of Regulation S-K:
Exhibit 10(a) - Non-Employee Directors' Stock Plan
Exhibit 10(b) - Deferred Compensation Plan for Directors
Exhibit 10(c) - Executive Deferral Plan
Exhibit 10(d) - Savings Restoration Plan
Exhibit 10(e) - Pension Restoration Plan
Exhibit 11 - Statement regarding computation of per share
earnings.
Exhibit 27 - Financial Data Schedule
(b) No reports on Form 8-K have been filed during the quarter for
which this Report is filed.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PARKER-HANNIFIN CORPORATION
(Registrant)
Michael J. Hiemstra
Michael J. Hiemstra
Vice President - Finance and Administration
Date: February 13, 1995
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EXHIBIT INDEX
Sequential
Exhibit No. Description of Exhibit Page
10(a) Non-Employee Directors' Stock Plan 13-14
10(b) Deferred Compensation Plan for Directors 15-21
10(c) Executive Deferral Plan* 22-36
10(d) Savings Restoration Plan* 37-52
10(e) Pension Restoration Plan* 53-62
11 Computation of Earnings
Per Common Share 63
27 Financial Data Schedule 64
*A management compensation plan.
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<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.
Participation in the Plan shall be limited to Directors who are not full-
time employees of the Company.
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 5,000 shares.
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
<PAGE>
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 treasury 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.
<PAGE>
DEFERRED COMPENSATION PLAN
FOR DIRECTORS OF PARKER-HANNIFIN CORPORATION
Parker-Hannifin Corporation has established the Deferred Compensation
Plan for Directors of Parker-Hannifin Corporation to provide Directors with
the opportunity to defer payment of their directors' fees in accordance with
the provisions of this Plan.
ARTICLE I
DEFINITIONS
For the purposes hereof, the following words and phrases shall have the
meaning indicated.
1. The "Plan" shall mean the deferred compensation plan as set forth
herein, together with all amendments hereto, which Plan shall be called the
Deferred Compensation Plan for Directors of Parker-Hannifin Corporation.
2. The "Corporation" shall mean 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.
3. "Director" shall mean any member of the board of Directors of the
Corporation who is not an officer or common-law employee of the Corporation.
4. "Fees" shall mean the retainer and cash meeting fees earned by the
Director for his services as such.
5. "Year" shall mean a calendar year.
6. A "Participant" shall mean any Director who has at any time elected
to defer the receipt of Fees in accordance with the Plan.
7. "Account" shall mean the bookkeeping account on which the amount of
the Fees which are deferred by a Participant shall be recorded and on which
interest shall be credited in accordance with the Plan.
8. "Beneficiary" shall mean the person designated by a Participant in
accordance with the Plan to receive payment of the remaining balance of the
Account in the event of the death of the Participant prior to receipt of the
entire amount credited to the Participant's Account.
<PAGE>
9. "Change in Control" shall mean any of the following events shall
have occurred:
(i) Any person (as that term is defined in Section 13(d)(3)
or Section 14(d)(2) of the Securities Exchange Act of 1934 (the
"Exchange Act")) has become the beneficial owner (as that term is
defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities representing
twenty-five percent (25%) of the combined voting power of the then
outstanding securities entitled to vote generally in the election
of the directors of the Company ("Voting Stock"), which ownership
of securities has not been specifically approved by the Company's
Board of Directors with specific reference to this Plan;
(ii) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act
disclosing in response to the applicable disclosure requirements of
Form 8-K or Schedule 14A (or any successor schedule, form or report
or item therein) that a change in control of the Company has
occurred or will occur in the future pursuant to any then existing
contract or transaction; provided, however that if the report or
proxy statement reports a prospective change in control, any
consequences of a Change in Control as set forth elsewhere in this
Plan will not occur until the reported change in control has
actually occurred;
(iii) If, during any period of twenty-four (24) consecutive
months, beginning before or after the effective date of this Plan,
individuals who at the beginning of any such period constitute the
directors of the Company cease for any reasons (other than death,
disability, or retirement pursuant to the Company's policy relating
to retirement of directors, if any, in effect on the date of this
Plan) to constitute at least a majority of the Board of Directors
of the Company; provided, however, that for purposes of this clause
(iii) if a person is first elected, or first nominated for election
by the Company's stockholders, by a vote of at least two-thirds of
the Board of Directors of the Company (or a committee thereof) then
still in office who were directors of the Company at the beginning
of any such period, then such person will be deemed to have been a
director of the Company at the beginning of such period.
Notwithstanding the foregoing provisions of Sections 1.4(i) or 1.4(ii),
unless otherwise determined in a specific case by a majority vote of the Board
of Directors, a Change in Control shall not be deemed to have occurred for
purposes of Sections 1.4(i) or 1.4(ii) solely because (1) the Company, (2) an
entity in which the Company directly or indirectly beneficially owns 50% or
more of the voting equity securities (a "Subsidiary"), or (3) any employee
stock ownership plan or any other employee benefit plan of the Company or any
Subsidiary (an "Employee Plan") either files or
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<PAGE>
becomes obligated to file a report or proxy statment under or in response to
the applicable disclosure requirements of Schedule 13D, Schedule 14D-1, Form
8-K or Schedule 14A (or any successor schedule, form or report or item
therein) under the Exchange Act disclosing beneficial ownership by it of
shares of Voting Stock, whether in excess of 25% or otherwise, or because the
Company, a Subsidiary or an Employee Plan reports that a change in control of
the Company has occurred or will occur in the future by reason of such
beneficial ownership.
ARTICLE II
ELECTION TO DEFER
1. Eligibility. Any Director may elect to defer receipt of all or a
specified part of his or her Fees for any Year in accordance with Section 2 of
this Article. A Director's entitlement to defer shall cease with respect to
the Year following the Year in which he or she ceases to be a Director.
2. Election to Defer. A Director who desires to defer the payment of
all or a portion of his or her Fees earned in any Year must complete and
deliver an Election Agreement substantially in the form attached hereto as
Exhibit A to the Secretary of the Corporation prior to January 1 of such Year;
provided, however, that any Director newly elected to the Board of Directors
of the Corporation may make an election to defer payment of Fees earned from
the date of such election through December 31 of that Year if the new Director
delivers an executed Election Agreement to the Secretary of the Corporation
within 30 days of his election to the Board of Directors. A Director who
timely delivers the Election Agreement to the Secretary of the Corporation
shall be a Participant. A Director shall be required to execute an Election
Agreement with respect to each Year for which he or she defers Fees, which
Election Agreement shall be delivered to the Secretary of the Corporation
prior to January 1 of such Year.
3. Amount Deferred; Period of Deferral. A Participant shall designate
on the Election Agreement the percentage of his or her Fees that are to be
deferred. That percentage of Fees shall be deferred until the date specified
by the Participant in his Election Agreement, at which time payment of the
amount deferred shall be made in accordance with Section 5 or 6 of this
Article; provided, however, that except as set forth in Section 8 of this
Article, no payment shall be made while a Participant is still serving as a
Director. Notwithstanding the foregoing, the Corporation reserves the right
to commence payment of the amount deferred in the calendar quarter following
the date the Participant ceases to be a Director, whether by death, retirement
or otherwise.
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<PAGE>
4. Account; Interest.
(a) The percentage of Fees which a Participant elects to
defer shall be credited to a bookkeeping Account under the Plan as
of the date the Fees otherwise would have been paid to the
Participant. A Participant's Account shall be credited with gains
or losses each calendar quarter based on the applicable Crediting
Rate as described below.
(b) The Crediting Rate shall mean any notional gains or
losses equal to those that would have been generated if part or all
of the Account balance had been invested in one or more of the
investment portfolios sponsored by The Prudential Series Fund, Inc.
and designated as available by the Corporation, and/or as if part
or all of the Account balance were credited with interest at the
prime rate, as elected by the Participant, less any separate
account fees and less any applicable administrative charges
determined annually by the Administrator.
(c) The allocation of the Account shall be determined by the
Participant among one or more of the available options pursuant to
rules determined by the Corporation. The gains or losses shall be
credited based upon the daily unit values from the Prudential
portfolio(s) selected by the Participant and/or the average prime
rate as in effect for the preceding month, as applicable. Gains
and losses will be compounded daily and will be credited to
Participants' Accounts as of the first day of the calendar quarter
following the quarter to which they relate. Notwithstanding the
method of calculating the Crediting Rate, the Company shall be
under no obligation to purchase any investments designated by a
Participant.
5. Payment of Account. The amount of a Participant's Account shall be
paid to the Participant in a lump sum or in a number of approximately equal
quarterly installments (not to exceed 20), as designated by the Participant on
the Election Agreement. The amount of the Account remaining unpaid shall
continue to bear interest, as provided in Section 4 of this Article. The lump
sum payment or the first quarterly installment, as the case may be, shall be
made on the first day of the calendar quarter following the end of the period
of deferral as specified in Section 3 of this Article. The election as to the
time for and method of payment of the amount of the Account relating to Fees
deferred for a particular Year shall be made on the Election Agreement(s) and
may not thereafter be altered.
6. Death of Participant. In the event of the death of a Participant,
the amount of the Participant's Account shall be paid to the Beneficiary or
Beneficiaries designated in a writing substantially in the form attached
hereto as Exhibit B, in accordance with the Participant's Election Agreement
and Section 5 of this Article. A Participant's Beneficiary
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<PAGE>
designation may be changed at any time prior to his death by execution and
delivery of a new Beneficiary designation form. The form on file with the
Corporation at the time of the Participant's death which bears the latest date
shall govern. In the absence of a Beneficiary designation or the failure of
any Beneficiary to survive the Participant, the amount of the Participant's
Account shall be paid to the Participant's estate in a lump sum within ninety
days after the appointment of an executor or administrator. In the event of
the death of a Beneficiary or all of the Beneficiaries after the death of a
Participant, but before all amount of the Participant's Account have been paid
to such Beneficiary or Beneficiaries according to the Participant's
designation, the remaining applicable amount of the Account shall be paid in a
lump sum to the estate of the deceased Beneficiary or estates of the deceased
Beneficiaries ninety days after the appointment of an executor or
administrator.
7. Small Payments. Notwithstanding the foregoing, if the quarterly
installment payments elected by a Participant would result in a quarterly
payment of less than $1,000, the entire amount of the Account shall be paid in
a lump sum in accordance with Section 5 of this Article.
8. Acceleration. Notwithstanding the foregoing, (i) the entire amount
of a Participant's Account will be paid in a lump sum to the Participant or
his Beneficiary in the event of a Change in Control; and (ii) the Board of
Directors of the Corporation may, in its sole discretion, accelerate payment
of the amount of the Account of a Participant in the event of financial
hardship of the Participant due to causes not within the control of the
Participant.
9. Noncompetition. During the time any Participant is a Director of
Parker-Hannifin, he shall not, directly or indirectly, as officer, director,
shareholder (other than an interest of less than 1% of the stock of any
publicly held company), partner, employee or in any other capacity, engage in
competition with the Corporation in the manufacture, sale or distribution of
products or parts thereof. In the event of a breach of this provision, a
Participant shall forfeit all right and interest in the moneys in his Account,
and shall not be entitled to any distribution of any deferred Fees.
ARTICLE III
ADMINISTRATION
The Corporation shall be responsible for the general administration of
the Plan and for carrying out the provisions hereof. The Corporation shall
have all such powers as may be necessary to carry out the provisions of the
Plan, including the power to determine all questions relating to eligibility
for and the amount in the Account and all questions pertaining to claims for
benefits and procedures for claim review; to resolve all other questions
arising under the Plan, including any questions of construction; and to take
such further action as the Corporation shall deem advisable in the
administration of the Plan. The actions taken and the decisions made by the
Corporation hereunder shall be final and
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<PAGE>
binding upon all interested parties. The Corporation shall provide a
procedure for handling claims of Participants or their Beneficiaries under
this Plan. Such procedure shall provide adequate written notice within a
reasonable period of time with respect to the denial of any such claim as well
as a reasonable opportunity upon a Participant's request for a full and fair
review by the Corporation of any such denial.
ARTICLE IV
AMENDMENT AND TERMINATION
The Corporation reserves the right to amend or terminate the Plan at any
time by action of its Board of Directors; provided, however, that no such
action shall adversely affect any Participant who has an Account or any
Beneficiary.
ARTICLE V
PRIOR PLANS OR AGREEMENTS
The Plan supersedes all prior deferred compensation plans for Directors
and all prior deferred compensation arrangements with any individual Director,
except as to the obligation to make payment of the amount of the accounts of
participants in the prior plans or under the prior arrangements in accordance
with their respective terms. Fees earned after termination of the prior plan
or arrangement will not be eligible for deferral under such plan or
arrangement and deferral elections under the prior plan or arrangement will be
of no force or effect with respect to Fees earned after termination.
ARTICLE VI
MISCELLANEOUS
1. Nonalienation of Deferred Compensation. No Participant or
Beneficiary shall encumber or dispose of the right to receive any payments
hereunder.
2. Interest of Directors. The obligation of the Corporation under the
Plan to make payment of amounts reflected on an Account merely constitutes the
unsecured promise of the Corporation to make payments from its general assets
as provided herein, and no Participant or Beneficiary shall have any interest
in, or a lien or prior claim upon, any property of the Corporation.
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<PAGE>
3. Claims of Other Persons. The provisions of the Plan shall in no
event be construed as giving any person, firm or corporation any legal or
equitable right as against the Corporation, or the officers, employees, or
directors of the Corporation, except any such rights as are specifically
provided for in the Plan or are hereafter created in accordance with the terms
and provisions of the Plan.
4. Severability. The invalidity and unenforceability of any
particular provision of the Plan shall not affect any other provision hereof,
and the Plan shall be construed in all respects as if such invalid or
unenforceable provision were omitted herefrom.
5. Governing Law. The provisions of the Plan shall be governed and
construed in accordance with the laws of the State of Ohio.
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<PAGE>
PARKER-HANNIFIN CORPORATION
EXECUTIVE DEFERRAL PLAN
<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/or long-term incentive bonuses before
reductions for deferrals under the Plan or the Savings Restoration Plan or the
Savings Plan.
1.5 Change in Control shall mean any of the following events
shall have occurred:
(i) Any person (as that term is defined in Section 13(d)(3)
or Section 14(d)(2) of the Securities Exchange Act of 1934 (the
"Exchange Act")) has become the beneficial owner (as that term is
defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities representing
twenty-five percent (25%) of the combined voting power of the then
outstanding securities entitled to vote generally in the election of
the directors of the Company ("Voting Stock"), which ownership of
securities has not been specifically approved by the Company's Board
of Directors with specific reference to this Plan;
(ii) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act
disclosing in response to the applicable disclosure requirements of
Form 8-K or Schedule 14A (or any successor schedule, form or report
or item therein) that a change in control of the Company
<PAGE>
has occurred or will occur in the future pursuant to any then
existing contract or transaction; provided, however, that if the
report or proxy statement reports a prospective change in control,
any consequences of a Change in Control as set forth elsewhere in
this Plan will not occur until the reported change in control has
actually occurred;
(iii) If, during any period of twenty-four (24) consecutive
months, beginning before or after the effective date of this Plan,
individuals who at the beginning of any such period constitute the
directors of the Company cease for any reasons (other than death,
disability, or retirement pursuant to the Company's policy relating
to retirement of directors, if any, in effect on the date of this
Plan) to constitute at least a majority of the Board of Directors of
the Company; provided, however, that for purposes of this clause
(iii) if a person is first elected, or first nominated for election
by the Company's stockholders, by a vote of at least two-thirds of
the Board of Directors of the Company (or a committee thereof) then
still in office who were directors of the Company at the beginning of
any such period, then such person will be deemed to have been a
director of the Company at the beginning of such period.
Notwithstanding the foregoing provisions of Sections 1.4(i) or
1.4(ii), unless otherwise determined in a specific case by a majority
vote of the Board of Directors, a Change in Control shall not be
deemed to have occurred for purposes of Sections 1.4(i) or 1.4(ii)
solely because (1) the Company, (2) an entity in which the Company
directly or indirectly beneficially owns 50% or more of the voting
equity securities (a "Subsidiary"), or (3) any employee stock
ownership plan or any other employee benefit plan of the Company or
any Subsidiary (an "Employee Plan") either files or becomes obligated
to file a report or proxy statment under or in response to the
applicable disclosure requirements of Schedule 13D, Schedule 14D-1,
Form 8-K or Schedule 14A (or any successor schedule, form or report
or item therein) under the Exchange Act disclosing beneficial
ownership by it of shares of Voting Stock, whether in excess of 25%
or otherwise, or because the Company, a Subsidiary or an Employee
Plan reports that a change in control of the Company has occurred or
will occur in the future by reason of such beneficial ownership.
1.6 Compensation shall mean the sum of the Participant's base
salary and anticipated bonuses (including profit-sharing, RONA, and incentive
bonuses paid in cash) 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.
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<PAGE>
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.
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.
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<PAGE>
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.
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.
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<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 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 percentage of
Salary and a specified 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.
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.
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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
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.
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
amortize such balance with interest credited at the Crediting Rate over the
period of time benefits are to be paid. For purposes of calculating
installments, an assumed rate of interest established by the Administrator
shall be applied to the balance and reconciled once annually with the actual
Crediting Rate for the period; any excess earnings shall be paid in an
additional payment once per year, and any overpayments shall be deducted pro
rata over the remaining installments.
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)
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<PAGE>
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.
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.
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<PAGE>
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, 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.
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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 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.
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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.
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.
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<PAGE>
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.
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.
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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.
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.
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<PAGE>
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
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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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PARKER-HANNIFIN CORPORATION
SAVINGS RESTORATION PLAN
<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 shall have
occurred:
(i) Any person (as that term is defined in Section 13(d)(3)
or Section 14(d)(2) of the Securities Exchange Act of 1934 (the
"Exchange Act")) has become the beneficial owner (as that term is
defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities representing twenty-
five percent (25%) of the combined voting power of the then
outstanding securities entitled to vote generally in the election of
the directors of the Company ("Voting Stock"), which ownership of
securities has not been specifically approved by the Company's Board
of Directors with specific reference to this Plan;
(ii) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act
disclosing in response to the applicable disclosure requirements of
Form 8-K or Schedule
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14A (or any successor schedule, form or report or item therein) that a
change in control of the Company has occurred or will occur in the
future pursuant to any then existing contract or transaction;
provided, however that if the report or proxy statement reports a
prospective change in control, any consequences of a Change in Control
as set forth elsewhere in this Plan will not occur until the reported
change in control has actually occurred;
(iii) If, during any period of twenty-four (24) consecutive
months, beginning before or after the effective date of this Plan,
individuals who at the beginning of any such period constitute the
directors of the Company cease for any reasons (other than death,
disability, or retirement pursuant to the Company's policy relating to
retirement of directors, if any, in effect on the date of this Plan)
to constitute at least a majority of the Board of Directors of the
Company; provided, however, that for purposes of this clause (iii) if
a person is first elected, or first nominated for election by the
Company's stockholders, by a vote of at least two-thirds of the Board
of Directors of the Company (or a committee thereof) then still in
office who were directors of the Company at the beginning of any such
period, then such person will be deemed to have been a director of the
Company at the beginning of such period.
Notwithstanding the foregoing provisions of Sections 1.4(i) or 1.4(ii),
unless otherwise determined in a specific case by a majority vote of the
Board of Directors, a Change in Control shall not be deemed to have
occurred for purposes of Sections 1.4(i) or 1.4(ii) solely because (1) the
Company, (2) an entity in which the Company directly or indirectly
beneficially owns 50% or more of the voting equity securities (a
"Subsidiary"), or (3) any employee stock ownership plan or any other
employee benefit plan of the Company or any Subsidiary (an "Employee
Plan") either files or becomes obligated to file a report or proxy
statment under or in response to the applicable disclosure requirements of
Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) under the Exchange Act
disclosing beneficial ownership by it of shares of Voting Stock, whether
in excess of 25% or otherwise, or because the Company, a Subsidiary or an
Employee Plan reports that a change in control of the Company has occurred
or will occur in the future by reason of such beneficial ownership.
1.5 Compensation shall mean the sum of the Participant's base salary and
anticipated bonuses (including profit-sharing, RONA, and incentive bonuses
paid in cash) 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 1.7.1
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 1.7.2 to the extent
the Restoration Account balance
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<PAGE>
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 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
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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.
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.
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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.
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.
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<PAGE>
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.
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.
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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. 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.
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 amortize
such balance with interest credited at the Crediting Rate over the period of
time benefits are to be paid. For
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<PAGE>
purposes of calculating installments, an assumed rate of interest established
by the Administrator shall be applied to the balance and reconciled once
annually with the actual Crediting Rate for the period; any excess earnings
shall be paid in an additional payment once per year, and any overpayments
shall be deducted pro rata over the remaining installments.
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 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.
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<PAGE>
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,
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<PAGE>
decrees, levies, garnishment or executions against any Participant to the
fullest extent allowed by law.
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.
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<PAGE>
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 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
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<PAGE>
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 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.
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<PAGE>
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. 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.
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<PAGE>
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 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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Parker-Hannifin Corporation
PENSION RESTORATION PLAN
<PAGE>
Parker-Hannifin Corporation
PENSION RESTORATION PLAN
Parker-Hannifin Corporation, an Ohio corporation (the "Company"), hereby
establishes this Pension Restoration Plan (the "Plan"), effective July 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 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 shall
have occurred:
(i) Any person (as that term is defined in Section 13(d)(3) or
Section 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange
Act")) has become the beneficial owner (as that term is defined under
Rule 13d-3 or any successor rule or regulation promulgated under the
Exchange Act) of securities representing twenty-five percent (25%) of
the combined voting power of the then outstanding securities entitled to
vote generally in the election of the directors of the Company ("Voting
Stock"), which ownership of securities has not been specifically
approved by the Company's Board of Directors with specific reference to
this Plan;
<PAGE>
(ii) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act
disclosing in response to the applicable disclosure requirements of Form
8-K or Schedule 14A (or any successor schedule, form or report or item
therein) that a change in control of the Company has occurred or will
occur in the future pursuant to any then existing contract or
transaction; provided, however, that if the report or proxy statement
reports a prospective change in control, any consequences of a Change in
Control as set forth elsewhere in this Plan will not occur until the
reported change in control has occurred;
(iii) If, during any period of twenty-four (24) consecutive
months, beginning before or after the effective date of this Plan,
individuals who at the beginning of any such period constitute the
directors of the Company cease for any reasons (other than death,
disability, or retirement pursuant to the Company's policy relating to
retirement of directors, if any, in effect on the date of this Plan) to
constitute at least a majority of the Board of Directors of the Company;
provided, however, that for purposes of this clause (iii) if a person is
first elected, or first nominated for election by the Company's
stockholders, by a vote of at least two-thirds of the Board of Directors
of the Company (or a committee thereof) then still in office who were
directors of the Company at the beginning of any such period, then such
person will be deemed to have been a director of the Company at the
beginning of such period.
Notwithstanding the foregoing provisions of paragraph 1.4(i) or 1.4(ii),
unless otherwise determined in a specific case by a majority vote of the
Board of Directors, a Change in Control shall not be deemed to have
occurred for purposes of paragraph 1.4(i) or 1.4(ii) solely because (1)
the Company, (2) an entity in which the Company directly or indirectly
beneficially owns 50% or more of the voting equity securities (a
"Subsidiary"), or (3) any employee stock ownership plan or any other
employee benefit plan of the Company or any Subsidiary (an "Employee
Plan") either files or becomes obligated to file a report or proxy
statment under or in response to the applicable disclosure requirements
of Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any
successor schedule, form or report or item therein) under the Exchange
Act disclosing beneficial ownership by it of shares of Voting Stock,
whether in excess of 25% or otherwise, or because the Company, a
Subsidiary or an Employee Plan reports that a change in control of the
Company has ooccurred or will occur in the future by reason of such
beneficial ownership.
1.5 Code shall mean the Internal Revenue Code of 1986, as amended,
inluding any successor provisions.
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<PAGE>
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.
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.
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<PAGE>
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%.
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
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<PAGE>
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.
5.4 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.
- 5 -
<PAGE>
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.
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
- 6 -
<PAGE>
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.
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.
- 7 -
<PAGE>
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.
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
- 8 -
<PAGE>
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.
- 9 -
EXHIBIT 11
<TABLE>
<CAPTION>
PARKER-HANNIFIN CORPORATION
FORM 10-Q
COMPUTATION OF EARNINGS PER COMMON SHARE
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net income (loss) applicable to common shares $ 41,084 $ 9,854 $ 84,733 $ 25,919
Weighted average common shares outstanding
for the period 49,128,037 48,671,373 49,048,437 48,643,784
Increase in weighted average from dilutive
effect of exercise of stock options 378,219 262,733 357,461 233,678
Weighted average common shares, assuming
issuance of the above securities 49,506,256 48,934,106 49,405,898 48,877,462
Earnings per common share:
Primary $ .84 $ .20 $ 1.73 $ .53
Fully diluted (A) $ .83 $ .20 $ 1.72 $ .53
<FN>
(A) This calculation is submitted in accordance with
Regulation S-K Item 601(b)(11) although not required for income statement
presentation because it results in dilution of less than 3 percent.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
PARKER-HANNIFIN CORPORATION'S REPORT ON FORM 10-Q FOR ITS QUARTERLY PERIOD
ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> DEC-31-1994
<CASH> 43,553
<SECURITIES> 0
<RECEIVABLES> 359,695
<ALLOWANCES> 5,725
<INVENTORY> 552,592
<CURRENT-ASSETS> 1,059,196
<PP&E> 1,701,323
<DEPRECIATION> 950,183
<TOTAL-ASSETS> 2,044,566
<CURRENT-LIABILITIES> 552,843
<BONDS> 274,848
<COMMON> 24,637
0
0
<OTHER-SE> 1,023,264
<TOTAL-LIABILITY-AND-EQUITY> 2,044,566
<SALES> 1,450,688
<TOTAL-REVENUES> 1,450,688
<CGS> 1,123,389
<TOTAL-COSTS> 1,123,389
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,403
<INTEREST-EXPENSE> 14,878
<INCOME-PRETAX> 140,054
<INCOME-TAX> 55,321
<INCOME-CONTINUING> 84,733
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 84,733
<EPS-PRIMARY> 1.73
<EPS-DILUTED> 1.72
</TABLE>
