SCHEDULE 14A INFORMATION STATEMENT
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
PARKER-HANNIFIN CORPORATION
_______________________________________________________________________
(Name of Registrant as Specified in its Charter)
Joseph D. Whiteman, Secretary
______________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
<PAGE>
PARKER-HANNIFIN CORPORATION
6035 PARKLAND BOULEVARD - MAYFIELD HEIGHTS, OHIO 44124-4141
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 22, 1997
The annual meeting of shareholders of Parker-Hannifin Corporation will
be held at the Corporation's headquarters at 6035 Parkland Boulevard,
Mayfield Heights, Ohio 44124, on Wednesday, October 22, 1997, at 9:00 a.m.,
Eastern Daylight Time, for the following purposes:
1. Fixing at five the number of Directors in the class whose three-
year term of office will expire in 2000 and electing five Directors in
such class;
2. Adopting an Amendment to the Corporation's Amended Articles of
Incorporation to increase the authorized Common Shares of the Corporation
from 300,000,000 to 600,000,000;
3. Adopting an Amendment to the Corporation's Amended Articles of
Incorporation to change the principal place of business of the Corporation
in Ohio from the City of Cleveland to the City of Mayfield Heights;
4. Adopting an Amendment to the Corporation's 1993 Stock Incentive
Program to limit the number of stock options granted to any individual in
a three-year period;
5. Appointing Coopers & Lybrand L.L.P. as independent public
accountants for the fiscal year ending June 30, 1998; and
6. Transacting such other business as may properly come before the
meeting.
Shareholders of record at the close of business on August 29, 1997,
are entitled to vote at the meeting. Please sign and return the enclosed
Proxy promptly. A return envelope is enclosed for your convenience.
By Order of the Board of Directors
JOSEPH D. WHITEMAN
JOSEPH D. WHITEMAN
Secretary
September 22, 1997
<PAGE>
PARKER-HANNIFIN CORPORATION
6035 Parkland Boulevard - Mayfield Heights, Ohio 44124-4141
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of the Corporation of proxies to be voted at the
annual meeting of shareholders scheduled to be held on October 22, 1997,
and at all adjournments thereof. Only shareholders of record at the close
of business on August 29, 1997 will be entitled to vote. On that date,
__________ Common Shares were outstanding and entitled to vote at the
meeting, each share being entitled to one vote. This Proxy Statement and
the form of Proxy are being mailed to shareholders on September 22, 1997.
Shareholders of the Corporation have cumulative voting rights in the
election of Directors, provided any shareholder gives notice in writing to
the President or a Vice President or the Secretary of the Corporation not
less than 48 hours before the time fixed for holding the meeting that he
desires that the voting at such election be cumulative and an announcement
of the giving of such notice is made upon the convening of the meeting by
the Chairman or the Secretary or by or on behalf of the shareholder giving
such notice. In such event, each shareholder has the right to cumulate
his votes and give one nominee the number of votes equal to the number of
Directors of each class to which Directors are nominated multiplied by the
number of votes to which his shares are entitled, or he may distribute his
votes on the same principle among two or more nominees to each such class,
as he sees fit. In the event that voting at the election is cumulative,
the persons named in the Proxy will vote shares represented by valid Board
of Directors' Proxies on a cumulative basis for the election of the
nominees named below, allocating the votes of such shares in accordance
with their judgment.
ELECTION OF DIRECTORS
The Directors of the class elected at each annual election hold office
for terms of three years. The Board of Directors of the Corporation
presently consists of 15 members divided into three classes. The class
whose term expires in 1997 consists of five members, the class whose term
expires in 1998 consists of four members and the class whose term expires
in 1999 consists of six members. Since the last annual meeting of
shareholders, Hector R. Ortino was elected to the Board of Directors in
January 1997 to a term expiring in 1999 and Debra L. Starnes was elected
to the Board of Directors in July 1997 to a term expiring in 1999. In
addition, in October 1996, Walter Seipp retired from the Board of
Directors.
Shareholder approval is sought to fix at five the number of directors
in the class whose term will expire in 2000 and to elect Duane E. Collins,
Allen H. Ford, Allan L. Rayfield, Paul G. Schloemer and Michael A.
Treschow, Directors whose terms of office expire in 1997, to such class.
A plurality of the Common Shares voted in person or by proxy is required
to elect a director.
Should any nominee become unable to accept nomination or election, the
proxies will be voted for the election of such other person as a Director
as the Board of Directors may recommend. However, the Board of Directors
has no reason to believe that this contingency will occur.
NOMINEES FOR ELECTION AS DIRECTORS FOR TERM EXPIRING IN 2000
DUANE E. COLLINS, 61, has served as a Director of the Corporation since
1992. Mr. Collins became President and Chief Executive Officer of the
Corporation in July 1993. Prior to that date, Mr. Collins served as the
Corporation's Vice Chairman of the Board from June 1992 to June 1993 and
Executive Vice President and President, International, from 1987 to 1992.
Mr. Collins also serves as a Director of The Sherwin Williams Company.
ALLEN H. FORD, 69, has served as a Director of the Corporation since 1975.
He is Chairman of the Audit Committee and a member of the Nominating and
Pension Committees. Now a Consultant, Mr. Ford was formerly the Senior
Vice President -Finance and Control of The Standard Oil Company
(diversified natural resources). Mr. Ford is also a Director of First
Union Real Estate Investments and Gliatech, Inc.
ALLAN L. RAYFIELD, 62, has served as a Director of the Corporation since
1984. He is a member of the Audit, Compensation and Management
Development and Nominating Committees. Now retired, Mr. Rayfield
previously served as President, Chief Executive Officer and Director of
M/A-COM, Inc. (microwave manufacturing) from November, 1993 to December,
1994; and President and Chief Operating Officer of M/A-COM, Inc. from
March 1991 to November 1993. Mr. Rayfield is also a Director of Acme
Metals Inc.
PAUL G. SCHLOEMER, 69, has served as a Director of the Corporation since
1982. He is a member of the Nominating Committee. Mr. Schloemer was
President and Chief Executive Officer of the Corporation from 1984 to
1993. Mr. Schloemer is also a Director of Rubbermaid Incorporated, AMP
Incorporated and Esterline Technologies Corporation.
MICHAEL A. TRESCHOW, 54, was elected to the Board of Directors in July,
1996. He is a member of the Audit and Nominating Committees. Mr.
Treschow has been the President and Chief Executive of AB Electrolux
(electrical appliances) in Sweden since ______________. He was previously
the President and Chief Executive Officer of Atlas Copco AB from
____________ to _____________. Mr. Treschow is also a Director of SKF AB
and Saab Automobile AB.
PRESENT DIRECTORS WHOSE TERMS EXPIRE IN 1998
JOHN G. BREEN, 63, has served as a Director of the Corporation since 1980.
He is Chairman of the Compensation and Management Development Committee
and a member of the Nominating and Pension Committees. Mr. Breen is the
Chairman of the Board and Chief Executive Officer of The Sherwin Williams
Company (paints and coatings). Mr. Breen is also a Director of National
City Corporation, Mead Corporation and Goodyear Tire and Rubber Company.
HECTOR R. ORTINO, 55, was elected to the Board of Directors in January,
1997. He is a member of the Audit and Nominating Committees. Mr. Ortino
has been the President and Chief Operating Officer of Ferro Corporation
(specialty materials) since _______________. He was previously
________________.
PATRICK S. PARKER, 67, has served as a Director of the Corporation since
1960. Mr. Parker is the Chairman of the Board of Directors of the
Corporation.
DENNIS W. SULLIVAN, 58, has served as a Director of the Corporation since
1983. Mr. Sullivan is Executive Vice President and, since July 1, 1997,
a member of the Office of the President of the Corporation. Mr. Sullivan
is also a Director of Ferro Corporation and KeyCorp.
PRESENT DIRECTORS WHOSE TERMS EXPIRE IN 1999
PAUL C. ELY, JR., 65, has served as a Director of the Corporation since
1984. He is Chairman of the Pension Committee and a member of the
Nominating Committee. Mr. Ely is presently General Partner of Alpha
Partners (venture capital seed financing). Mr. Ely is also a Director
of Tektronix, Inc.
FRANK A. LEPAGE, 70, has served as a Director of the Corporation since
1977. He is a member of the Audit and Nominating Committees. Now
retired, Mr. LePage previously served as Director and Executive Vice
President of The Firestone Tire & Rubber Company (manufacturer of tires
and related products). Mr. LePage is also a Director of Acme Metals Inc.
PETER W. LIKINS, 61, has served as a Director of the Corporation since
1989. He is Chairman of the Nominating Committee and a member of the
Audit and Compensation and Management Development Committees. Dr. Likins
is the President of Lehigh University. Dr. Likins also serves as Director
of Consolidated Edison Company of New York, Inc., Communications Satellite
Corp. and Safeguard Scientifics, Inc.
WOLFGANG R. SCHMITT, 53, has served as a Director of the Corporation since
1992. He is a member of the Compensation and Management Development and
Nominating Committees. Mr. Schmitt is the Chairman of the Board and Chief
Executive Officer of Rubbermaid Incorporated (manufacturer of rubber and
plastic products). He was previously President and Chief Operating
Officer of Rubbermaid from 1991 to 1992. Mr. Schmitt also serves as a
Director of Kimberly-Clark Inc.
DEBRA L. STARNES, 44, was elected to the Board of Directors in July, 1997.
She is a member of the Nominating and Pension Committees. Ms. Starnes
has been the Senior Vice President, Petrochemicals of Lyondell
Petrochemical Company (petrochemical production) since _________________.
She was previously ______________________.
STEPHANIE A. STREETER, 40, was elected to the Board of Directors in April
1996. She is a member of the Audit and Nominating Committees. Ms.
Streeter is the Group Vice President of Worldwide Office Products of Avery
Dennison Corporation (adhesives and office products). She was previously
Vice President and General Manager of Avery Dennison Brands from November
1993 to May 1996 and Vice President and General Manager of Office Labels
and Avery Dennison from June 1991 to November 1993.
No Director of the Corporation is related to any other Director.
During the fiscal year ended June 30, 1997, there were five meetings of
the Corporation's Board of Directors. Each Director attended at least 75%
of the meetings held by the Board of Directors and the Committees of the
Board on which he or she served except for Mr. Schmitt.
The Audit Committee, which met twice during the fiscal year ended June
30, 1997, is responsible for reviewing with the Corporation's financial
management and its independent auditors, the proposed auditing program
(including both the independent and the internal audits) for each fiscal
year, the results of the audits and the adequacy of the Corporation's
internal control structure. This Committee recommends to the Board of
Directors the appointment of the independent auditors for the fiscal year.
The Pension Committee, which met once during the fiscal year ended
June 30, 1997, is responsible for reviewing with the Corporation's
management the funding and investment policies for defined benefit plans
and defined contribution plans sponsored by the Corporation.
The Compensation and Management Development Committee, which met three
times during the fiscal year ended June 30, 1997, is responsible for
annually reviewing and fixing the salaries and other compensation of the
officers of the Corporation, deciding upon the grant of stock options to
the officers and other employees of the Corporation and reviewing
corporate policies and programs for the development of management
personnel.
The Nominating Committee, which met three times during the fiscal year
ended June 30, 1997, is responsible for evaluating and recommending to the
Board qualified nominees for election as Directors of the Corporation and
considering other matters pertaining to the size and composition of the
Board. The Nominating Committee will give appropriate consideration to
qualified persons recommended by shareholders for nomination as Directors
of the Corporation, provided that such recommendations are accompanied by
information sufficient to enable the Committee to evaluate the
qualifications of the nominee. Nominations should be sent to the
attention of the Secretary of the Corporation.
Compensation of Directors. The Corporation compensates Directors,
other than officers who are Directors, for their services. Except as
otherwise indicated below, the annual retainer for such Directors is
$24,000. The fee for attending each Board and Committee meeting is $1,000
for all such Directors other than Committee Chairmen, whose fee is $1,500
for chairing committee meetings. Patrick S. Parker, Chairman of the Board
of Directors, receives an annual retainer of $132,000, plus meeting fees,
club memberships and the use of a leased automobile. Directors may elect
to defer all or a portion of their fees under the Corporation's Deferred
Compensation Plan for Directors (the "Directors Deferral Plan") or to
elect to receive all or a portion of their fees in common shares of the
Corporation pursuant to the Corporation's Non-Employee Directors' Stock
Plan.
In August 1996, the Board of Directors terminated the Retirement Plan
for Directors, except with respect to Directors who had already retired
and who continue to receive payments under the Plan. Upon termination,
each Director received credit under the Directors Deferral Plan in a
phantom Parker-Hannifin Common Stock account in an amount equal to the
present value of their vested benefits under the Directors Retirement
Plan. Said account balance is non-transferable and must remain in the
Directors Deferral Plan until the retirement of the Director.
The Board of Directors adopted the Non-Employee Directors Stock Option
Plan in August 1996. Each Director who is not a current or retired
employee of the Corporation was granted 1,000 stock options under such
Plan in August 1996 at an option price equal to the then current fair
market value of the Corporation's Common Stock. Such options have a ten-
year term and vest following one year of continued service as a Director.
Mr. Ortino was granted 500 stock options upon identical terms upon his
election to the Board in January 1997.
Compensation Committee Interlocks and Insider Participation. The
following Directors serve as members of the Corporation's Compensation and
Management Development Committee: Messrs. Breen, Likins, Rayfield, and
Schmitt. Mr. Collins, the President and Chief Executive Officer of the
Corporation, serves on the Compensation Committee of The Sherwin Williams
Company. Mr. Breen is the Chairman and Chief Executive Officer of The
Sherwin Williams Company.
COMPENSATION AND MANAGEMENT DEVELOPMENT
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Management Development Committee of the Board of
Directors (the "Committee") has furnished the following report on
executive compensation.
The Committee, which consists entirely of four outside non-employee
Directors, has overall responsibility to:
* review the performance and long-term management potential of the
executive officers of the Corporation; and
* review and fix the salaries and other compensation of the
executive officers of the Corporation.
Following review and approval by the Committee, all issues pertaining
to executive compensation are submitted to the full Board of Directors in
conjunction with its approval and review of the Corporation's strategies
and operating plans, thereby assuring that the Corporation's system of
executive compensation is reasonable and appropriate, meets its stated
purpose and effectively serves the interests of the shareholders and the
Corporation.
The Corporation's executive compensation programs are designed to
attract and retain key executives critical to the long-term success of the
Corporation by remaining competitive with other multinational-diversified
manufacturing companies of similar size. Comparative compensation
information is used by the Committee to establish competitive salary grade
ranges at the market median for base pay, annual bonus and long-term
compensation. The group of companies used for compensation comparison
purposes is not the same as the S&P Manufacturing (Diversified
Industrials) Index, which is the peer group of companies included in the
performance graph on page _____. Comparative compensation information is
obtained by the Committee from independent surveys of numerous diversified
manufacturers, which the Committee believes is important in order to
establish competitive compensation ranges at the appropriate levels. On
the other hand, the S&P Manufacturing (Diversified Industrials) Index
utilized in the performance graph contains data only with respect to a
limited number of companies who are in businesses similar to the
Corporation, which data is theoretically reflective of the stock
performance of all diversified manufacturers as a whole.
The Corporation's executive compensation programs also are intended to
reward executives commensurate with performance and attainment of pre-
determined financial objectives. Accordingly, compensation of executive
officers is directly and materially linked to both operating and stock
price performance, aligning closely the financial interests of the
Corporation's executives with those of its shareholders.
Compensation for the Corporation's executives consists of three
primary elements:
1. A base salary within a competitively established range. The
specific base salary within the range is determined by length of service
and individual contributions and performance as measured against pre-
established goals and objectives. Goals and objectives for each executive
vary in accordance with each executive's responsibilities and are
established by each executive's supervisor.
2. An annual cash incentive bonus that is comprised of two
components:
a. An amount that is determined by the Corporation's pre-tax
return on average assets as compared to the Corporation's annual
goal established at the beginning of the fiscal year (the "Target
Incentive Bonus"); and
b. An amount that is determined based on the return on division
net assets for the divisions in each executive's individual
operating unit (or the average return for all divisions for
corporate staff executive officers) (the "RONA Bonus").
The target amounts of the annual cash incentive bonuses are
established in such a manner so that base salary plus the target bonuses
will be within the competitively determined total annual compensation
range mentioned above. Target annual cash incentive bonuses represent
approximately 35-45% of total targeted annual compensation for the
executive officers with operational profit and loss responsibility
(including the Chief Executive Officer) and 25-35% of total targeted
annual compensation for the other executive officers.
The Chief Executive Officer, with the approval of the Committee, also
has the authority to establish additional annual incentive programs for
operating executives. In fiscal year 1997, under a Volume Incentive Plan,
operating group presidents had the opportunity to earn an additional bonus
of 1% of base salary for each 1% of sales by which their group exceeded
their previous year's sales by between 7.5% and 12.5%, and an additional
bonus of 2% of base salary for each 1% of sales by which their group
exceeded their previous year's sales by more than 12.5%; subject, however,
to an overall maximum of 15% of the participant's base salary. An
identical Volume Incentive Plan has been adopted for fiscal year 1998.
3. Long-term incentive compensation that is comprised of two
components:
a. A long-term incentive plan ("LTIP") award that is based upon
the Corporation's actual average return on equity for a three
fiscal year period, payable in restricted stock (unless the
participant elects to receive cash pursuant to an election under
the Corporation's Executive Deferral Plan). The amount of the
LTIP award in shares is calculated by dividing a target LTIP
dollar value (adjusted for risk of forfeiture) by the market price
of the Corporation's Common Stock at the beginning of the three-
year performance period. The target LTIP value is established by
the Committee at the market median of comparative LTIP
compensation information.
b. A stock option grant determined by utilizing the Black-
Scholes valuation model to derive a target stock option dollar
value (adjusted for risk of non-vesting). The target stock
option value is established by the Committee at the market median
of comparative stock option compensation information. Stock
options are granted with an exercise price equal to the fair
market value of the Corporation's Common Stock on the day of
grant and grants are generally exercisable between one and ten
years from the date granted.
Incentive compensation for the Corporation's executives is
significantly "at risk", based upon the financial performance of the
Corporation. Indeed, more than one half of each executive's targeted
total compensation (including base salary, annual bonus, LTIP payouts and
stock options) may fluctuate significantly from year to year because it is
directly tied to business and individual performance.
Long-term incentive programs are designed to link the interests of the
executives with those of the stockholders. LTIP awards, whether paid in
cash or restricted stock, focus on long-term return on equity, which is
directly related to enhancing shareholder value. Restricted stock awards
build stock ownership and encourage a long-term focus on shareholder
value, since the stock is restricted from being sold, transferred or
assigned for a specified period. Stock option grants provide an incentive
that aligns the executive's interests with those of the shareholders,
since stock options will provide value to the executive only when the
price of the Corporation's stock increases above the option grant price.
In August 1996, the Board of Directors, at the recommendation of the
Committee, adopted stock ownership guidelines that are designed to
encourage the accumulation and retention of the Corporation's Common Stock
by its Directors, executive officers and other key executives. These
guidelines, stated as a multiple of executives' base salaries and of
Directors' annual retainer, are as follows: Chief Executive Officer:
three times; Vice Presidents: two times; other executive officers and
group presidents: one time; and non-officer Directors: four times. The
recommended time period for reaching the above guidelines is five years.
The Chief Executive Officer reviews compliance with this policy with the
Committee on an annual basis.
The Corporation's executive compensation philosophy is specifically
evident in the compensation paid during the most recent fiscal year to the
Corporation's President and Chief Executive Officer, Duane E. Collins.
Mr. Collins' increase in base salary from fiscal 1996 to fiscal 1997 of
6.25% is reflective of his "outstanding" performance rating for fiscal
1996. In addition, based on the Corporation's fiscal 1997 operating plan,
Mr. Collins was entitled to receive 100% of his Target Incentive Bonus of
$300,000 if the Corporation's actual pre-tax return on average assets,
adjusted primarily for acquisitions and currency transactions, was 14.6%.
A minimum payout of 15% of the Target Incentive Bonus was established at
a 3.4% pre-tax return on average assets and a maximum payout of 150% of
the Target Incentive Bonus was established at a 17.8% pre-tax return on
average assets. During the fiscal year ended June 30, 1997, the
Corporation's adjusted pre-tax return on average assets was 14.96% and
each executive officer, including Mr. Collins, received an amount equal to
105.9% of his Target Incentive Bonus, which is included in the "Bonus"
column of the Summary Compensation Table on page ____.
Mr. Collins' RONA Bonus was targeted at $377,550 based upon an
approximate 31.8% average return on division net assets. The average
return on division net assets was 33.8%, resulting in a RONA Bonus payment
to Mr. Collins of $400,484, which is included in the "Bonus" column of the
Summary Compensation Table on page ____. The other executive officers
also received RONA Bonuses based upon the return on division net assets by
their respective operating units (or the average return for all divisions
for corporate staff executive officers).
Based on the Corporation's average return on equity of 19.18% for the
three fiscal years ended June 30, 1997, Mr. Collins and the other
executive officers received a payment under the 1995-96-97 Long Term
Incentive Plan in the form of either restricted shares or contributions to
their Executive Deferral Plan accounts in an amount equal to the value of
the restricted shares earned, as reported in the "LTIP Payouts" column of
the Summary Compensation Table on page ____. Such payment represents
186.47% of the target payment that would have been achieved had the
Corporation achieved its return on equity goal of 14% during such period.
During fiscal year 1997, Mr. Collins and the other executive officers
also received a long-term incentive award as described in the LTIP table
on page ___ and a stock option grant as reported in Option Grants Table on
page ____.
During the past fiscal year, the Corporation once again recorded all-
time sales and earnings records, exceeding the prior years' record
performance and forecasted performance. Accordingly, incentive
compensation payable to each executive, including Mr. Collins, exceeded
the target levels of annual compensation established by the Committee at
the beginning of the fiscal year and greatly exceeded the 1995-96-97 LTIP
target compensation.
During 1993, the Omnibus Budget Reconciliation Act of 1993 (the "Act")
was enacted by Congress. The Act includes potential limitations on the
deductibility of compensation in excess of $1 million paid to the
Corporation's Chief Executive Officer and four other highest paid
executive officers beginning in fiscal year 1995. The Committee has taken
or is taking, including seeking amendment to the 1993 Stock Incentive
Program, the necessary actions to ensure the deductibility of compensation
paid by the Corporation to such individuals.
JOHN G. BREEN ALLAN L. RAYFIELD
JOHN G. BREEN ALLAN L. RAYFIELD
DR. PETER W. LIKINS WOLFGANG R. SCHMITT
DR. PETER W. LIKINS WOLFGANG R. SCHMITT
EXECUTIVE COMPENSATION
The following table summarizes compensation paid by the Corporation for each
of the last three fiscal years to its Chief Executive Officer and each of the
other four most highly compensated executive officers:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
___________________________________ ______________________
Awards Payouts
__________ _______
Securities
Other Annual Underlying LTIP All Other
Fiscal Compensation Options Payouts Compensation
Name and Principal Position Year Salary ($) Bonus ($) ($)(a) (#)(b) ($)(c) ($)(d)
___________________________________ _______ __________ _________ ____________ __________ __________ ___________
<S> <C> <C> <C> <C> <C> <C> <C>
Duane E. Collins, 1997 830,880 718,184 14,222 88,500 2,898,556 11,531
President and Chief Executive 1996 783,473 611,981 18,068 99,000 988,348 14,570
Officer 1995 680,004 659,082 8,066 45,000 225,798 20,078
Dennis W. Sullivan, 1997 551,256 358,129 7,137 39,000 1,270,554 12,814
Executive Vice President 1996 525,000 323,325 8,144 56,250 436,055 12,934
1995 500,004 417,252 8,202 23,850 173,121 20,432
Michael J. Hiemstra, 1997 376,392 215,491 2,939 18,000 678,972 12,637
Vice President - 1996 361,920 199,074 6,574 22,500 232,553 14,672
Finance and Administration 1995 351,348 242,837 2,648 14,400 120,483 19,519
Donald A. Zito, 1997 331,500 239,672 8,467 18,000 678,972 13,338
Vice President, and President, 1996 318,744 236,557 7,015 22,500 232,553 13,502
Fluid Connectors Group 1995 300,000 583,380 705 14,400 97,868 19,879
Stephen L. Hayes, 1997 314,196 235,623 9,727 18,000 678,972 11,448
Vice President, and President, 1996 299,244 215,668 9,734 22,500 232,553 13,507
Parker Bertea Aerospace Group 1995 285,000 166,797 3,823 14,400 107,427 15,163
<FN>
(a) No executive officers named in the Summary Compensation Table received
personal benefits or perquisites in excess of the lesser of $50,000 or
10% of his total compensation reported in the Salary and Bonus columns.
Reported in this column is annual compensation consisting of amounts
reimbursed by the Corporation for the payment of income taxes on certain
executive perquisites.
(b) All option grants have been adjusted for the 3-shares-for-2 common stock
split paid on September 5, 1997.
(c) For 1997 the amounts represent contributions to the executives' Executive
Deferral Plan ("EDP") accounts made under the 1995-96-97 Long Term
Incentive Plan. For 1996 and 1995 the amounts represent the dollar value
of restricted shares issued as payments under the 1994-95-96 and
1993-94-95 Long Term Incentive Plans, respectively, based on the
Corporation's stock price on the date of issuance of the shares. The
restricted shares and EDP contributions are subject to a three-year
vesting period, with accelerated vesting in the event of the death,
disability or normal retirement of the Plan participant. Dividends are
paid by the Corporation on the restricted shares. The number and value of
the aggregate restricted stock holdings for each of the above-named
executive officers as of June 30, 1997 was as follows: Mr. Collins,
51,266 shares with a value of $2,074,116; Mr. Sullivan, 26,730 shares with
a value of $1,081,451; Mr. Hiemstra, 15,828 shares with a value of
$640,375; Mr. Zito, 14,564 shares with a value of $589,215; and Mr. Hayes,
13,196 shares with a value of $533,868. The number of restricted shares
has been adjusted for the 3-shares-for-2 common stock split paid
September 5, 1997.
(d) Represents matching contributions by the Corporation to the Parker
Hannifin Retirement Savings Plan and the Parker Hannifin Savings
Restoration Plan.
</FN>
</TABLE>
The following table summarizes stock option grants by the Corporation during
the fiscal year ended June 30, 1997 to each of the executive officers
identified in the Summary Compensation Table on page __:
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL 1997
Individual Grants
_____________________________________________________
Number of % of Total Potential realizable value at
Securities Options Exercise assumed annual rates of stock
Underlying Granted to Or Base price appreciation for option term (b)
Options Employees Price Expiration _______________________________________
Name Granted (#)(a) in Fiscal 1997 ($/Sh) Date 5% ($) 10% ($) 10.68% ($)(c)
___________________ _______________ ______________ ________ __________ ___________ ___________ _____________
<S> <C> <C> <C> <C> <C> <C> <C>
Duane E. Collins 88,500 6.5% $24.667 8/14/06 1,372,812 3,479,112 3,839,042
Dennis W. Sullivan 39,000 2.9% $24.667 8/14/06 604,968 1,533,168 1,691,781
Michael J. Hiemstra 18,000 1.3% $24.667 8/14/06 279,216 707,616 780,822
Donald A. Zito 18,000 1.3% $24.667 8/14/06 279,216 707,616 780,822
Stephen L. Hayes 18,000 1.3% $24.667 8/14/06 279,216 707,616 780,822
<FN>
(a) Options are exercisable on the date following completion of one year of
continuous employment after the date of grant (i.e., August 15, 1997).
Restorative or "reload" option rights are attached to each option and
up to two reload options will be granted upon exercise, subject to
certain provisions, if the exercise price is paid using shares of
the Corporation's common stock owned by the optionee. Fiscal 1997
grants and exercise prices have been adjusted for the 3-shares-for-2
common stock split paid on September 5, 1997.
(b) The potential realizable value illustrates the value that might be
recognized upon the exercise of the options immediately prior to the
expiration of their term, assuming the specified compounded rates of
appreciation over the entire term of the option. Shareholders of the
Corporation, as a group, would realize $1,728,684,426 and $4,380,998,076
at assumed annual rates of appreciation of 5% and 10%, respectively, over
the ten-year life of the options. There can be no assurance that the
amounts reflected in this table will be achieved.
(c) Represents the Corporation's actual rate of stock price appreciation over
the 10-year period ending June 30, 1997.
</FN>
</TABLE>
The following table summarizes exercises of stock options during the fiscal
year ended June 30, 1997 by each of the executive officers identified in the
Summary Compensation Table on page __ and the fiscal year-end value of
unexercised options for such executive officers:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND FISCAL YEAR-END OPTION VALUES
Number of
Securities Underlying Value of Unexercised
Shares Value Unexercised Options In-the-Money
Acquired on Realized at FY-End (#)(a) Options at FY-End ($)
Name Exercise (#)(a) ($) Exercisable / Unexercisable Exercisable / Unexercisable
___________________ _______________ ________ ___________________________ ___________________________
<S> <C> <C> <C> <C>
Duane E. Collins 19,125 419,156 319,500 / 88,500 7,175,379 / 1,397,565
Dennis W. Sullivan 16,875 242,775 237,375 / 39,000 6,648,104 / 615,876
Michael J. Hiemstra 19,125 414,375 175,500 / 18,000 4,514,770 / 284,251
Donald A. Zito - - 144,000 / 18,000 3,623,343 / 284,251
Stephen L. Hayes 15,000 319,614 60,000 / 18,000 1,227,743 / 284,251
<FN>
(a) Adjusted to reflect the 3-shares-for-2 common stock split paid on
September 5, 1997.
</FN>
</TABLE>
The following table summarizes awards by the Corporation during the fiscal
year ended June 30, 1997 to each of the executive officers identified in the
Summary Compensation Table on page __ under the Corporation's Long Term
Incentive Plan:
<TABLE>
<CAPTION>
LONG TERM INCENTIVE PLAN - AWARDS IN FISCAL 1997
Estimated Future Payouts under
Number of Performance or Non-Stock Price-Based Plans
Shares Other Period Until ________________________________________
Name (#) Maturation or Payout Threshold (#) Target (#) Maximum (#)
___________________ _________ ____________________ _____________ __________ ___________
<S> <C> <C> <C> <C> <C>
Duane E. Collins 23,398.5 3 Years 5,849.6 23,398.5 46,797.0
Dennis W. Sullivan 10,336.5 3 Years 2,584.1 10,336.5 20,673.0
Michael J. Hiemstra 5,911.5 3 Years 1,477.9 5,911.5 11,823.0
Donald A. Zito 5,911.5 3 Years 1,477.9 5,911.5 11,823.0
Stephen L. Hayes 5,911.5 3 Years 1,477.9 5,911.5 11,823.0
</TABLE>
Target awards under the Corporation's Long Term Incentive Plan ("LTIP")
during the last fiscal year were made in the form of restricted shares of the
Corporation's Common Stock and entitle each executive officer to receive a
pro rata share of his award based upon the Corporation's actual average return
on equity (threshold of 8%; target of 14%; maximum of 20%) for the three fiscal
years ending June 30, 1999. Awards are payable in August 1999. Executive
officers will receive cash in lieu of restricted shares under the LTIP if they
are retired at the time of payment or if they elect, prior to May 31, 1998, to
defer the amount earned under the LTIP pursuant to the Corporation's Executive
Deferral Plan. The target number of shares awarded under the LTIP and the
estimated future payouts have been adjusted for the 3-shares-for-2 common stock
split paid on September 5, 1997.
PENSION PLAN TABLE
The following table summarizes the estimated annual benefits payable upon
retirement to the executive officers identified in the Summary Compensation
Table on page __:
Years of Service
Remuneration 15 or more
____________ ________________
$ 300,000 $ 165,000
500,000 275,000
700,000 385,000
900,000 495,000
1,100,000 605,000
1,300,000 715,000
1,500,000 825,000
1,700,000 935,000
1,900,000 1,045,000
The foregoing table sets forth the straight-life annuity payable under the
Corporation's Supplemental Executive Retirement Benefits Program at the
normal retirement age of 65. The years of service under the Program for
each of the executive officers identified in the Summary Compensation Table
on page ___ (except for Mr. Zito), at their respective retirement dates, will
be as follows: Mr. Collins, 40 years; Mr. Sullivan, 44 years; Mr. Hiemstra, 25
years; and Mr. Hayes, 34 years. Mr. Zito has announced his early retirement
effective September 30, 1997 at which time he will have 35 years of service
under the Program (but will receive a reduced benefit in accordance with the
terms of the Program). The Program provides an annual benefit based upon the
average of the participant's three highest years of cash compensation (Salary,
RONA Bonus and Target Incentive Bonus) with the Corporation. Benefits payable
under the Program are based on calendar year compensation. Since the amounts
set forth in the "Salary" and "Bonus" columns in the Summary Compensation
Table on page __ are determined on a fiscal year basis and since the amounts
set forth in the "Bonus" column for Mr. Zito in fiscal 1996 and 1995 and
Mr. Hayes in fiscal 1997 and 1996 include payments received under the Volume
Incentive Plan (which is not included in determining benefits under the
Program), such amounts do not reflect the benefits payable under the Program.
If the benefits were to be payable to each named participant based on
retirement as of June 30, 1997, the average of the three highest calendar
years of cash compensation included in determining benefits under the Program
for each of the named participants would be as follows: Mr. Collins,
$1,316,404; Mr. Sullivan, $856,991; Mr. Hiemstra, $564,902; Mr. Zito,
$539,474; and Mr. Hayes, $440,427. Benefits are subject to reduction for
payments received under the Corporation's Retirement Plan plus 50% of
primary social security benefits.
COMMON SHARE PRICE PERFORMANCE GRAPH
The following graph sets forth a comparison of the cumulative shareholder
return on the Corporation's Common Shares with the S&P 500 Index and the S&P
Manufacturing (Diversified Industrials) Index during the period
June 30, 1992 through June 30, 1997, assuming the investment of $100 on
June 30, 1992, and the reinvestment of dividends.
<TABLE>
<CAPTION>
Comparison of Five Year Cumulative Total Return Among
Parker-Hannifin Corporation, the S&P 500 Index and the
S&P Manufacturing (Diversified Industrials) Index
6/30/92 6/30/93 6/30/94 6/30/95 6/30/96 6/30/97
<S> <C> <C> <C> <C> <C> <C>
Parker-Hannifin Corporation 100 117 155 202 241 351
S&P 500 Index 100 114 115 145 183 247
S&P Manufacturing (Diversified Industrials) Index 100 119 132 175 223 332
</TABLE>
"Change in Control" Severance Agreements with Officers. The
Corporation has entered into separate agreements (collectively the
"Agreements") with Messrs. Collins, Sullivan, Zito, Hiemstra and Hayes.
The Agreements are designed to retain the executives and provide for
continuity of management in the event of any actual or threatened change
in the control of the Corporation. Each Agreement only becomes operative
upon a "Change in Control" of the Corporation, as that term is defined in
the Agreements, and the subsequent termination of the employment of the
executive pursuant to the terms of the Agreement. A Change in Control of
the Corporation shall be deemed to have occurred if and when: (i) subject
to certain exceptions, any "person" (as such term is used in Sections
13(d)(2) and 14(d)(2) of the Securities Exchange Act of 1934, as amended)
is or becomes a beneficial owner, directly or indirectly, of securities of
the Corporation representing 20% or more of the combined voting power of
the Corporation's then outstanding securities; (ii) during any period of
twenty-four consecutive months, individuals who at the beginning of such
twenty-four month period were Directors of the Corporation (the "Incumbent
Board") cease to constitute at least a majority of the Board of Directors
of the Corporation, unless the election, or nomination for election, of
any person becoming a Director subsequent to the beginning of such twenty-
four month period was approved by a vote of at least two-thirds of the
Incumbent Board; (iii) the Corporation enters into a merger, consolidation
or other reorganization, or sells all its assets, unless (a) immediately
following the business combination: (1) more than 50% of the total voting
power eligible to elect directors of the resulting corporation is
represented by shares that were Common Shares immediately prior to the
business combination, (2) subject to certain exceptions, no person becomes
the beneficial owner, directly or indirectly, of 20% or more of the voting
power of the corporation resulting from the business combination, and (3)
at least a majority of the members of the board of directors of the
resulting corporation were members of the Incumbent Board at the time of
the Board of Directors of the Corporation's approval of the execution of
the initial agreement providing for such business combination, or (b) the
business combination is effected by means of the acquisition of Common
Shares from the Corporation, and the Board of Directors of the Corporation
approves a resolution providing expressly that such business combination
does not constitute a "Change in Control"; or (iv) the shareholders of the
Corporation approve a plan of complete liquidation or dissolution of the
Corporation.
Each Agreement provides that, if the employment of the executive is
terminated during the three years following a Change in Control of the
Corporation, either by the Corporation without "Cause" (as defined in the
Agreements) or by the executive for "Good Reason" (as defined in the
Agreements and described below), the executive shall be entitled to
receive (a) pro rata salary and bonus for the year of termination of
employment; (b) severance pay equal to three times the executive's annual
salary and bonus; (c) continuation of welfare benefits (e.g., medical,
life insurance, disability coverage) for a period of three years; (d) to the
extent not previously received, all amounts previously deferred under the
Corporation's non-qualified income deferral plans together with a "make
whole" amount designed to compensate the executive for the lost
opportunity to continue to defer receipt of such income (and the earnings
thereon) pursuant to elections made under such deferral plans; and (e) a
"gross-up" payment to offset the effect, if any, of the excise tax imposed
by Section 4999 of the Internal Revenue Code. "Good Reason" for
termination of employment by the executive includes, without limitation,
diminution in duties, reduction in compensation or benefits or relocation.
In addition, termination of employment by the executive for any or no
reason during the 180-day period beginning on the 91st day after the
Change in Control shall constitute Good Reason.
A Change in Control of the Corporation also has an effect under other
executive compensation plans of the Corporation, as follows: (1) any
outstanding unvested stock option held by an executive vests immediately
upon a Change in Control; (2) any outstanding unvested restricted stock
issued to an executive pursuant to the Corporation's Long Term Incentive
Plans ("LTIP") vests immediately in the event of a Change in Control; (3)
any outstanding LTIP award to an executive will be paid in full in cash
upon a Change in Control, at the target amount or on the basis of
corporate financial performance to the date of the Change in Control,
whichever is greater; (4) if previously elected by the executive, upon a
Change in Control, all amounts previously deferred by the executive under
the Executive Deferral Plan, together with the "make whole" amount
(described in subsection (d) of the preceding paragraph), will be paid to
the executive; and (5) upon a Change in Control, each participant under
the Corporation's Supplemental Executive Retirement Benefits Program will
receive three additional years of age and service credit under the Program
and will receive a lump-sum payment equal to the present value of the
participant's vested benefit under the Program.
ADOPTION OF AMENDMENTS TO AMENDED ARTICLES OF INCORPORATION
Increase in Authorized Shares. The Board of Directors recommends that
the shareholders adopt an amendment to the Corporation's Amended Articles
of Incorporation to increase the number of authorized common shares, $.50
par value ("Common Shares"), from 300,000,000 to 600,000,000. This action
would increase the total authorized shares of the Corporation from
303,000,000 to 603,000,000. The shares would consist of 600,000,000
Common Shares and 3,000,000 shares of Serial Preferred Stock.
On July 10, 1997, the Board of Directors approved a three-shares-for-
two stock split of the Commons Shares payable September 5, 1997 to
shareholders of record on August 21, 1997. The stock split increased by
50% the number of Common Shares outstanding on September 5, 1997. As of
September ___, 1997 there were __________________ Common Shares issued and
outstanding, ____________ Common Shares reserved for issuance under the
1997 Shareholder Rights Agreement, and _________________ Common Shares
reserved for issuance upon the exercise of stock options held by employees
under Employee Stock Option and Stock Incentive Plans, leaving only
__________________ authorized, unissued and unreserved Commons Shares. As
of September ____, 1997, there was no Serial Preferred Stock issued.
The availability of additional shares will enhance the Corporation's
flexibility in connection with possible future actions, such as stock
dividends, stock splits, financing alternatives, employee benefit
programs, acquisitions or other corporate actions. Although the
Corporation has no present plans, arrangements, understandings or
commitments to issue additional Common Shares, the Board of Directors
believes that it is in the best interests of the Corporation to have the
flexibility to issue such Common Shares without seeking shareholder
approval at the time possible actions are identified. The Board of
Directors will determine whether, when and on what terms the issuance of
Common Shares may be warranted in connection with any of the foregoing
purposes.
The availability for issuance of additional Common Shares could enable
the Board of Directors to render more difficult or discourage an attempt
to obtain control of the Corporation. For example, the issuance of Common
Shares in a public or private sale, merger or similar transaction would
increase the number of outstanding shares, thereby possibly diluting the
interest of a party attempting to gain control of the Corporation. The
Corporation is not aware, however, of any pending or threatened efforts to
obtain control of the Corporation.
The additional Common Shares, like the presently authorized Common
Shares, will not be subject to preemptive rights. The additional shares
may be issued by the Board of Directors without further authorization by
the shareholders, except in accordance with any requirements of applicable
law or if required by the policies of the New York Stock Exchange. It is
possible that under certain circumstances the issuance of such shares may
result in dilution of shareholders' voting rights and per share equity in
the earnings and assets of the Corporation.
Change in Principal Place of Business. In August 1997, the
Corporation moved to a new state-of-the art headquarters facility in
Mayfield Heights, Ohio from its previous headquarters in Cleveland, Ohio.
Accordingly, the Board of Directors recommends that the Corporation adopt
an amendment to the Corporation's Amended Articles of Incorporation to
change the location of the Corporation's principal place of business in
the State of Ohio from Cleveland to Mayfield Heights.
Vote Required for Adoption of the Amended Articles. The increase in
the number of authorized shares and the change in the location of the
Corporation's principal place of business would be effected by the
adoption of amendments to the Amended Articles of Incorporation. No
change other than the increase in the number of authorized Common Shares
from 300,000,000 to 600,000,000 and the change in the location of the
Corporation's principal place of business will be made in the existing
Amended Articles. Adoption of each of the amendments to the Amended
Articles of Incorporation requires the affirmative vote of the holders of
at least two-thirds of the outstanding Common Shares.
The Board of Directors unanimously recommends a vote FOR adoption of
the amendments to the Amended Articles of Incorporation.
AMENDMENT TO 1993 STOCK INCENTIVE PROGRAM
General. In 1993, the shareholders of the Corporation approved the
1993 Stock Incentive Program (the "1993 Program") in order to permit the
Corporation to continue to provide a long-term incentive to key employees
by encouraging them to participate in the Corporation's anticipated future
growth through the ownership of the Corporation's Common Shares made
available through the grant of stock options and other forms of stock
incentives. The 1993 Program permits the Corporation to grant to key
employees non-qualified stock options ("NQSOs"), incentive stock options
("ISOs"), stock appreciation rights, restricted stock, incentive shares and
dividend equivalent rights. The 1993 Program is administered by the
Compensation and Management Development Committee of the Board of
Directors which must be comprised of at least three non-employee Directors
of the Corporation. The 1993 Program provides for the annual grant of
awards in an amount not in excess of 1.5% of the Common Shares outstanding
on June 30 of the immediately preceding fiscal year, provided that Common
Shares available for awards in any fiscal year that are not utilized will
be available for use in subsequent years. In no event will the number of
Common Shares available for awards in any fiscal year exceed 2.5% of the
Common Shares outstanding on June 30 of the previous fiscal year. The
amount and terms of any awards are subject to the sole discretion of the
Committee; provided, however, that all stock option exercise prices must
be at least 100% of the fair market value of the Common Shares at the time
of grant.
Subject to limited exceptions, the Board of Directors may amend the
1993 Program or any award granted thereunder without the approval of the
shareholders. The 1993 Program will continue in effect until terminated
by the Board of Directors. The New York Stock Exchange closing price for
the Corporation's Common Shares on September ____, 1997 was $_________.
Eligibility. The persons eligible to receive awards under the 1993
Program are those key salaried employees of the Corporation or its
subsidiaries with executive, managerial, technical or professional
responsibility, including an officer who is also a Director. The
Committee, in its sole discretion, selects those persons entitled to
participate in the 1993 Program. There are approximately 900 employees of
the Corporation eligible to participate in the 1993 Program.
The Committee determines, subject to the terms of the 1993 Program,
the individuals to whom awards will be granted, the number and type of
awards to be granted and the terms and conditions of any award granted.
The Committee is also authorized to adopt rules, guidelines and practices
governing the 1993 Program and to interpret the provisions of the 1993
Program and any awards.
Income Tax Treatment of Options. Generally there are no federal
income tax consequences to the Corporation or to the recipient of ISOs
either at the time of grant or at the time of exercise of such options,
except that the excess of the fair market value at the time of exercise of
Common Shares acquired on exercise of ISOs over the option price may be
subject to the alternative minimum tax. If Common Shares acquired on
exercise of ISOs are held for at least two years after the date of grant
and for one year after acquisition of the Common Shares by the optionee
upon exercise, then any gain or loss on subsequent disposition of the
Common Shares will be treated for federal income tax purposes as long-
term capital gain or loss. If the foregoing holding period requirements
are not met, gain recognized on disposition of the Common Shares is
taxable as ordinary income to the optionee to the extent of the excess, if
any, of the fair market value of the Common Shares acquired on the
exercise date over the option price, and the Corporation will become
entitled to a deduction in the same amount. Any further gain or loss to
the optionee will be taxed as short-term or long-term capital gain
depending on the holding period.
A NQSO issued under the 1993 Program will not result in any taxable
income to the optionee or deduction to the Corporation at the time it is
granted. Unlike an ISO, the holder of a NQSO will be deemed to have
received compensation, taxable as ordinary income, at the time of exercise
of the option in an amount equal to the difference between the fair market
value of the Common Shares at the time of exercise and the option price,
and the Corporation will at the same time become entitled to a tax
deduction of like amount. If the Common Shares acquired are later sold or
exchanged, the difference between the sale price and the fair market value
of the shares on date of exercise of the option is taxable as long-term or
short-term capital gain or loss depending on the holding period.
Amendment. The Board of Directors seeks approval to amend the 1993
Program solely with respect to limiting the number of stock options
granted to any individual in a three-year period. Other than this
amendment, the 1993 Program will remain as currently in effect. Section
162(m) of the Internal Revenue Code generally disallows a tax deduction to
public companies for compensation over $1 million paid, or otherwise
taxable, to persons named in the Summary Compensation Table and employed
by the Company at the end of the applicable year. Qualifying performance-
based compensation will not be subject to the deduction limit if certain
requirements are met. In the case of stock options, one requirement is
that the 1993 Program state a maximum number of shares with respect to
which stock options may be granted during a specified period. The 1993
Program, as amended, provides that no employee shall be granted stock
options for more than 500,000 shares of Common Stock in a three-year
period, thereby satisfying the new requirement.
Set forth below is a table showing the number and dollar value of
shares of restricted stock granted in fiscal year 1997 and the number of
stock options which are outstanding as of August 20, 1997 under the 1993
Program for each of the named executive officers in the Summary
Compensation Table on page ____, all current executive officers as a
group, and all employees (except executive officers) as a group:
Number of Shares
and Value of Restricted
Name Number of Options Stock Granted in FY97
Duane E. Collins _______ _______ $_______
Dennis W. Sullivan _______ _______ $_______
Donald A. Zito _______ _______ $_______
Michael J. Hiemstra _______ _______ $_______
Stephen L. Hayes _______ _______ $_______
All current executive
officers as a group _______ _______ $_______
All employees (except
executive officers)
as a group _______ ________ $_______
Approval of the amendment to the 1993 Program requires the affirmative
vote of the holders of at least a majority of the votes present or
represented and entitled to vote on the proposal at the Annual Meeting.
The Board of Directors recommends a VOTE FOR approval of the
amendment.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee and the Board of Directors recommend the
appointment of Coopers & Lybrand L.L.P. as certified public accountants to
examine the financial statements of the Corporation as of and for the
fiscal year ending June 30, 1998. Coopers & Lybrand L.L.P. has made the
annual audit of the Corporation's accounts since its organization in 1938.
A representative of Coopers & Lybrand L.L.P. is expected to be present at
the meeting with an opportunity to make a statement if he desires to do so
and to respond to appropriate questions. Ratification of the appointment
of Coopers & Lybrand L.L.P. as certified public accountants requires the
affirmative vote of a majority of the votes cast thereon.
The Board of Directors unanimously recommends a vote FOR the proposal.
PRINCIPAL SHAREHOLDERS OF THE CORPORATION
The following table sets forth, as of August 20, 1997, the name and
address of each person believed to be a beneficial owner of more than 5%
of the Common Shares of the Corporation, the number of shares and the
percentage so owned, as well as the beneficial ownership of Common Shares
of the Corporation by the Directors, the executive officers of the
Corporation named in the Summary Compensation Table on page ______, and
all Directors and executive officers as a group:
Amount and Nature Percentage
Name of of of
Beneficial Owner Beneficial Ownership(A)(B) Class(C)
Capital Research and Management Company 5,740,000(D) 7.73%
333 South Hope Street
Los Angeles, CA 90071
Trimark Financial Corporation 4,010,000(E) 5.4%
One First Canadian Place
Suite 5600
Toronto, Ontario M5X 1E5
J. G. Breen __________
P. C. Ely __________
A. H. Ford __________
F. A. LePage __________
P. W. Likins __________
H. R. Ortino __________
P. S. Parker __________(F)
A. L. Rayfield __________
P. G. Schloemer __________(F)
W. R. Schmitt __________
D. L. Starnes __________
S. A. Streeter __________
M. A. Treschow __________
D. E. Collins __________(F)
D. W. Sullivan __________(F)
D. A. Zito __________(F)
M. J. Hiemstra __________(F)
S. L. Hayes __________(F)
All Directors and executive __________(F) ____%
officers as a group
(27 persons)
(A) Unless otherwise indicated, the beneficial owner has sole voting and
investment power.
(B) All share amounts have been adjusted for the three-shares-for-two
common stock split paid on September 5, 1997.
(C) No Director or executive officer beneficially owned more than 1% of
the Corporation's Common Stock as of August 20, 1997.
(D) Pursuant to a statement filed by Capital Research and Management
Company with the SEC in accordance with Rule 13d-1 of the Securities
Exchange Act of 1934, Capital Research Development Company has
reported that as of December 31, 1996, it had sole voting power over
__________ Common Shares and sole investment power over __________
Common Shares.
(E) Pursuant to a statement filed by Trimark Financial Corporation with
SEC in accordance with Rule 13d-1 of the Securities Exchange Act of
1934, Trimark Financial Corporation has reported that as of December
31, 1996, it had sole voting and investment power over 4,010,000
Common Shares.
(F) These amounts include _______, _________, _________, _________,
_________, _________, _________, and ______________ Common Shares
subject to options exercisable on or prior to October ____, 1997
granted under the Corporation's stock option plans held by Messrs.
Parker, Schloemer, Collins, Sullivan, Zito, Hiemstra and Hayes and all
Directors and executive officers as a group, respectively. Such
Common Shares are deemed to be outstanding only for the purpose of
computing the percentage of shares owned by each of the individuals
and the officers and Directors as a group. These amounts also include
________, ________, ________, ________, ________, ________, ________
and __________ Common Shares as to which Messrs. Parker, Schloemer,
Collins, Sullivan, Zito, Hiemstra, and Hayes and all Directors and
executive officers as a group, respectively, hold voting power
pursuant to the Corporation's Retirement Savings Plan as of June 30,
1997.
SHAREHOLDERS' PROPOSALS
The deadline for shareholders to submit proposals to be considered for
inclusion in the proxy statement for the 1998 Annual Meeting of
Shareholders is expected to be May 31, 1998.
GENERAL
The Board of Directors knows of no other matters which will be
presented at the meeting. However, if any other matters properly come
before the meeting or any adjournment, the person or persons voting the
proxies will vote in accordance with their best judgment on such matters.
The Corporation will bear the expense of preparing, printing and
mailing this Proxy Statement. In addition to solicitation by mail,
officers and other employees of the Corporation may solicit the return of
proxies. The Corporation will request banks, brokers and other
custodians, nominees and fiduciaries to send proxy material to beneficial
owners of Common Shares. The Corporation will, upon request, reimburse
them for their expenses in so doing. The Corporation has retained Kissel-
Blake Inc., 110 Wall Street, New York, New York, to assist in the
solicitation of proxies at an anticipated cost of $14,000, plus
disbursements.
You are urged to sign and return your Proxy promptly in order to make
certain your shares will be voted at the meeting. Shares represented by
properly executed proxies will be voted in accordance with any
specification made thereon and, if no specification is made, will be voted
in favor of fixing at five the number of Directors in the class whose
three-year term of office will expire in 2000 and for the election of the
nominees for Directors in such class; in favor of the amendments to the
Corporation's Amended Articles of Incorporation; in favor of the amendment
to the Corporation's 1993 Stock Incentive Program; and in favor of the
appointment of Coopers & Lybrand L.L.P. as independent public accountants
for the fiscal year ending June 30, 1998. Abstentions and broker non-
votes are counted in determining the votes present at a meeting.
Consequently, an abstention or a broker non-vote has the same effect as a
vote against a proposal, as each abstention or broker non-vote would be
one less vote in favor of a proposal. You may revoke your Proxy by giving
notice to the Corporation in writing or in open meeting, without affecting
any vote previously taken. However, your mere presence at the meeting
will not operate to revoke your Proxy.
The Annual Report of the Corporation, including financial statements for
the fiscal year ended June 30, 1997, is being mailed to shareholders with
this Proxy Statement.
By Order of the Board of Directors
JOSEPH D. WHITEMAN
JOSEPH D. WHITEMAN
Secretary
September 22, 1997
<PAGE>
PARKER-HANNIFIN CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS ON OCTOBER 22, 1997
This Proxy is Solicited on behalf of the Board of Directors
The undersigned hereby appoints PATRICK S. PARKER, DUANE E. COLLINS and
JOSEPH D. WHITEMAN, and any of them, as proxies to represent and to vote all
shares of stock of Parker-Hannifin Corporation which the undersigned is
entitled to vote at the Annual Meeting of Shareholders of the Corporation to
be held on October 22, 1997, and at any adjournments thereof, on the proposals
more fully described in the Proxy Statement for the Meeting in the manner
specified herein and on any other business that may properly come before
the Meeting.
_____________________________________________________________________________
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Please sign exactly as your name(s) appear(s) hereon. Executors,
administrators, guardians, officers of corporations and other signing in a
fiduciary capacity should state their full titles as such.
_____________________________________________________________________________
You are encouraged to specify your choices by marking the appropriate
boxes (SEE REVERSE SIDE) but you need not mark any boxes if you wish to
vote in accordance with the Board of Directors' recommendations. The
Proxies cannot vote your shares unless you sign and return this Card.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
_________________________________ ____________________________________
_________________________________ ____________________________________
_________________________________ ____________________________________
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[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE WITH- FOR ALL
FOR HOLD EXCEPT
1.Election of Directors [ ] [ ] [ ]
PARKER-HANNIFIN CORPORATION
Duane E. Collins Allen H. Ford
Allan L. Rayfield Paul G. Schloemer
Michael A. Treschow
RECORD DATE SHARES:
INSTRUCTION: To withhold authority to vote for
a particular nominee, mark the "For All Except"
box and strike a line through the name(s) of
the nominee(s). Your shares will be voted for
the remaining nominee(s).
FOR AGAINST ABSTAIN
2.Amendment to Amended [ ] [ ] [ ]
Articles of Incorporation
to increase authorized shares.
3.Amendment to Amended [ ] [ ] [ ]
Articles of Incorporation
to change principal place
of business.
4.Amendment to 1993 Stock [ ] [ ] [ ]
Incentive Program.
5.Appointment of Coopers & [ ] [ ] [ ]
Please be sure to sign and Lybrand L.L.P. as
date this Proxy. auditors for FY98.
__________________________ The Board of Directors recommends a vote FOR
Signature and Date Items 1, 2, 3, 4 and 5.
__________________________ Mark box at right if an address change or [ ]
Signature and Date comment has been noted on the reverse side
of this card.
Parker-Hannifin Corporation 1993 Stock Incentive Program
Effective: April 22, 1993
Amended: August 15, 1996
Proposed Amendment Effective: October 22, 1997
1. Purpose.
The 1993 Stock Incentive Program is intended to help maintain and develop
strong management through ownership of shares of the Corporation by key
employees of the Corporation and its Subsidiaries and for recognition of
efforts and accomplishments which contribute materially to the success of the
Corporation's business interests.
2. Definitions.
In this Program, except where the context otherwise indicates, the
following definitions apply:
(a) "Award" means a stock option, stock appreciation right ("SAR"),
restricted stock, incentive share, dividend equivalent right ("DER"), or other
award under this Program.
(b) "Board" means the Board of Directors of the Corporation.
(c) "Change in Control" means the occurrence of one of the following
events:
(i) any "person" (as such term is defined in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the
Exchange Act) is or becomes a "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of
the Corporation representing 20% or more of the combined voting power of
the Corporation's then outstanding securities eligible to vote for the
election of the Board (the "Corporation's Voting Securities"); provided,
however, that the event described in this paragraph shall not be deemed
to be a Change in Control by virtue of any of the following situations:
(A) an acquisition by the Corporation or any Subsidiary; (B) an
acquisition by any employee benefit plan sponsored or maintained by the
Corporation or any Subsidiary; (C) an acquisition by any underwriter
temporarily holding securities pursuant to an offering of such
securities; (D) a Non-Control Transaction (as defined in paragraph
(iii)); (E) as pertains to an individual Grantee, any acquisition by the
Grantee or any group of persons (within the meaning of Sections 13(d)(3)
and 14(d)(2) of the Exchange Act) including the Grantee (or any entity in
which the Grantee or a group of persons including the Grantee, directly
or indirectly, holds a majority of the voting power of such entity's
outstanding voting interests); or (F) the acquisition of Corporation
Voting Securities from the Corporation, if a majority of the Board
approves a resolution providing expressly that the acquisition pursuant
to this clause (F) does not constitute a Change in Control under this
paragraph (i);
(ii) individuals who, at the beginning of any period of twenty-
four (24) consecutive months, constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a majority thereof;
provided, that (A) any person becoming a director subsequent to the
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beginning of such twenty-four (24) month period, whose election, or
nomination for election, by the Corporation's shareholders was approved
by a vote of at least two-thirds of the directors comprising the
Incumbent Board who are then on the Board (either by a specific vote or
by approval of the proxy statement of the Corporation in which such
person is named as a nominee for director, without objection to such
nomination) shall be, for purposes of this paragraph (ii), considered as
though such person were a member of the Incumbent Board; provided,
however, that no individual initially elected or nominated as a director
of the Corporation as a result of an actual or threatened election
contest with respect to directors or any other actual or threatened
solicitation of proxies or consents by or on behalf of any person other
than the Board shall be deemed to be a member of the Incumbent Board;
(iii) the consummation of a merger, consolidation, share exchange
or similar form of corporate reorganization of the Corporation or any
Subsidiary that requires the approval of the Corporation's stockholders,
whether for such transaction or the issuance of securities in connection
with the transaction or otherwise (a "Business Combination"), unless (A)
immediately following such Business Combination: (1) more than 50% of the
total voting power of the corporation resulting from such Business
Combination (the "Surviving Corporation") or, if applicable, the ultimate
parent corporation which directly or indirectly has beneficial ownership
of 100% of the voting securities eligible to elect directors of the
Surviving Corporation (the "Parent Corporation"), is represented by
Corporation Voting Securities that were outstanding immediately prior to
the Business Combination (or, if applicable, shares into which such
Corporation Voting Securities were converted pursuant to such Business
Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Corporation
Voting Securities among the holders thereof immediately prior to the
Business Combination, (2) no person (other than any employee benefit plan
sponsored or maintained by the Surviving Corporation or the Parent
Corporation) is or becomes the beneficial owner, directly or indirectly,
of 20% or more of the total voting power of the outstanding voting
securities eligible to elect directors of the Parent Corporation (or, if
there is no Parent Corporation, the Surviving Corporation), and (3) at
least a majority of the members of the board of directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving
Corporation), following the Business Combination, were members of the
Incumbent Board at the time of the Board's approval of the execution of
the initial agreement providing for such Business Combination (a "Non-
Control Transaction") or (B) the Business Combination is effected by
means of the acquisition of Corporation Voting Securities from the
Corporation, and a majority of the Board approves a resolution providing
expressly that such Business Combination does not constitute a Change in
Control under this paragraph (iii); or
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(iv) the stockholders of the Corporation approve a plan of
complete liquidation or dissolution of the Corporation or the sale or
other disposition of all or substantially all of the assets of the
Corporation and its Subsidiaries.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any person acquires beneficial ownership of more than 20%
of the Corporation Voting Securities as a result of the acquisition of
Corporation Voting Securities by the Corporation which, by reducing the number
of Corporation Voting Securities outstanding, increases the percentage of
shares beneficially owned by such person; provided, that if a Change in
Control would occur as a result of such an acquisition by the Corporation (if
not for the operation of this sentence), and after the Corporation's
acquisition such person becomes the beneficial owner of additional Corporation
Voting Securities that increases the percentage of outstanding Corporation
Voting Securities beneficially owned by such person, a Change in Control shall
then occur.
Notwithstanding anything in this Program to the contrary, if a Grantee's
employment is terminated prior to a Change in Control, and the Grantee
reasonably demonstrates that such termination was at the request of a third
party who has indicated an intention or taken steps reasonably calculated to
effect a Change in Control, (a "Third Party"), then for all purposes of this
Program, the date immediately prior to the date of such termination of
employment shall be deemed to be the date of a Change in Control for such
Grantee.
(d) "Code" means the Internal Revenue Code, as in effect from time to
time.
(e) "Compensation and Management Development Committee" or "Committee"
means the committee of the Board so designated. The Committee will be
constituted in a manner that satisfies all applicable legal requirements,
including satisfying the disinterested administration standard set forth in
Rule 16b-3.
(f) "Corporation" means Parker-Hannifin Corporation, an Ohio
corporation, and its Subsidiaries.
(g) "Designated beneficiary" means the person designated by the grantee
of an award hereunder to be entitled, on the death of the grantee, to any
remaining rights arising out of such award. Such designation must be made in
writing and in accordance with such regulations as the Committee may
establish.
(h) "Detrimental activity" means activity that is determined in
individual cases, by the Committee or its express delegate, to be detrimental
to the interests of the Corporation or a Subsidiary, including without
limitation (i) the rendering of services for an organization, or engaging in a
business, that is, in the judgment of the Committee or its express delegate,
in competition with the Corporation; (ii) the disclosure to any one outside of
the Corporation, or the use for any purpose other than the Corporation's
business, of confidential information or material related to the Corporation,
whether acquired by the employee during or after employment with the
Corporation; or (iii) fraud, embezzlement, theft-in-office or other illegal
activity.
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(i) "Dividend equivalent right," herein sometimes called a "DER," means
the right of the holder thereof to receive, pursuant to the terms of the DER,
credits based on the cash dividends that would be paid on the shares specified
in the DER if such shares were held by the grantee, as more particularly set
forth in Section 12(a) below.
(j) "Eligible employee" means an employee who is an officer, or in a
managerial, executive, technical, professional, or other key position as
determined by the Committee.
(k) "Employee" means a regular employee of the Corporation or one of its
Subsidiaries.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
(m) "Fair market value" in relation to a share as of any specific time
shall mean such value as reported for New York Stock Exchange--Composite
Transactions on such date, or if no shares are traded on that date, the next
preceding date on which trading occurred.
(n) "Grantee" means a recipient of an award under this Program.
(o) "Incentive share" means an award of shares granted pursuant to
Section 11 below.
(p) "Incentive stock option," herein sometimes called an "ISO," means a
stock option meeting the requirements of Section 422 of the Code or any
successor provision.
(q) "Insider" means a person subject to the reporting requirements of
Section 16(a) of the Exchange Act with respect to equity securities of the
Corporation.
(r) "Restricted stock" means any share issued with the restriction that
the holder may not sell, transfer, pledge, or assign such share and such other
restrictions (which may include, but are not limited to, restrictions on the
right to vote or receive dividends) which may expire separately or in
combination, at one time or in installments, all as specified by the grant.
(s) "Rule 16b-3" means Rule 16b-3 (or any successor thereto) under the
Exchange Act that exempts from Section 16(b) of the Exchange Act transactions
under employee benefit plans, as in effect from time to time with respect to
this Program.
(t) "Share" means a common share, par value $.50, of the Corporation
issued and reacquired by the Corporation or previously authorized but
unissued.
(u) "Shareholder-approved plan" means any of the plans constituting
parts of any of the incentive programs previously or hereafter approved by
shareholders of the Corporation.
(v) "Stock appreciation right," herein sometimes called an "SAR," means
the right of the holder thereof to receive, pursuant to the terms of the SAR,
a number of shares or cash or a combination of shares and cash, based on the
increase in the value of the number of shares specified in the SAR, as more
particularly set forth in Section 9 below.
(w) "Subsidiary" means any corporation, partnership, or other entity in
which the Corporation, directly or indirectly, owns a 50 percent or greater
equity interest.
(x) "Terminate" means cease to be an employee, except by death, but a
change of employment from the Corporation or one Subsidiary to another
Subsidiary or to the Corporation shall not be considered a termination.
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(y) "Terminate normally" for an employee participating in this Program
means terminate
(i) as a result of retirement under the applicable
retirement plan or policy of the Corporation or a Subsidiary,
(ii) as a result of that employee becoming eligible for
disability income under the Corporation's long-term disability program,
or
(iii) with written approval of the Committee given in the
context of recognition that all or a specified portion of the
outstanding awards to that employee will not expire or be
forfeited or annulled because of such termination and, in each
such case, without being terminated for cause.
(z) "Year" means fiscal year.
3. Eligibility.
The selection of eligible employees to receive awards will be within the
discretion of the Committee. More than one award may be granted to the same
eligible employee. Members of the Committee are not eligible for the grant of
awards.
4. Administration.
(a) The Committee shall administer this Program. The Committee will,
subject to the terms of the Program, have the authority to (i) select the
eligible employees who will receive awards; (ii) grant awards; (iii) determine
the number and types of awards to be granted to employees; (iv) determine the
terms, conditions, vesting periods and restrictions applicable to awards;
(v) adopt, alter and repeal administrative rules and practices governing this
Program; (vi) interpret the terms and provisions of this Program and any
awards granted under this Program; (vii) prescribe the forms of any notices of
awards or other instruments relating to awards; and (viii) otherwise supervise
the administration of this Program. All decisions by the Committee will be
made with the approval of not less than a majority of its members.
(b) All determinations and interpretations pursuant to the provisions of
this Program shall be binding and conclusive upon the individual employees
involved and all persons claiming under them.
(c) With respect to Insiders, transactions under this Program are
intended to comply with all applicable conditions of Rule 16b-3. To the
extent any provision of this Program or any action by the Committee under this
Program fails to so comply, such provision or action shall, without further
action by any person, be deemed to be automatically amended to the extent
necessary to effect compliance with Rule 16b-3, provided that if such
provision or action cannot be amended to effect such compliance, such
provision or action shall be deemed null and void, to the extent permitted by
law and deemed advisable by the appropriate authority. Each award to an
Insider under this Program shall be deemed issued subject to the foregoing
qualification.
(d) An award under this Program is not transferable except, as provided
in the award, by will, pursuant to the laws of descent and distribution, or
pursuant to a qualified domestic relations order, and is not subject, in whole
or in part, to attachment, execution, or levy of any kind. The designation by
a grantee of a designated beneficiary shall not constitute a transfer.
Notwithstanding the foregoing, an employee may transfer any nonqualified stock
option granted under this Plan to members of his immediate family (defined as
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his children, grandchildren and spouse) or to one or more trusts for the
benefit of such family members or partnerships in which such family members
are the only partners if the instrument evidencing such stock option expressly
so provides (or is amended to so provide) and the employee does not receive
any consideration for the transfer; provided that any such transferred stock
option shall continue to be subject to the same terms and conditions that
are applicable to such stock option immediately prior to its transfer (except
that such transferred stock option shall not be further transferable by the
transferee inter vivos).
(e) Any rights with respect to an award granted under this Program
existing after the grantee dies are exercisable by the grantee's designated
beneficiary or, if there is no such designated beneficiary who may, and does,
lawfully do so, by the grantee's personal representative.
(f) Except as otherwise provided herein, a particular form of award may
be granted to an eligible employee either alone or in addition to other awards
hereunder. The provisions of particular forms of award need not be the same
with respect to each recipient.
(g) The Committee may delegate any of its authority to any other person
or persons that it deems appropriate, provided the delegation does not cause
the Program or any awards granted under this Program to fail to qualify for
the exemption provided by Rule 16b-3.
(h) This Program and all action taken under it shall be governed by the
laws of the State of Ohio without giving effect to the principles of conflict
of laws thereof.
5. Term.
This Program will continue in effect until terminated by the Board.
6. Awards That May Be Granted.
The aggregate number of shares that may be subject to awards granted
under this Program in any fiscal year, subject to adjustment as provided in
Section 7 below, will be equal to the sum of (a) one and one-half percent
(1.5%) of the number of shares outstanding on the last day of the previous
fiscal year; plus (b) the number of shares that were available for the grant
of awards in previous fiscal years; provided, that, in no event will the
number of shares available for the grant of awards in any fiscal year exceed
two and one-half percent (2.5%) of the shares outstanding on the last day of
the previous fiscal year. The aggregate number of shares that may be issued
upon exercise of ISOs is 1,000,000. When an unexercised award lapses, expires,
terminates or is forfeited, the related shares may be available for
distribution in connection with future awards but will continue to be subject
to the 2.5% maximum described above. The assumption of awards granted by an
organization acquired by the Corporation, or the grant of awards under this
Program in substitution for any such awards, will not reduce the number of
shares available in any fiscal year for the grant of awards under this
Program.
7. Adjustments.
In the event that the Committee shall determine that any stock dividend,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of shares, warrants
or rights offering to purchase common stock of the Corporation at a price
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substantially below fair market value, or other similar corporate event
affects the common stock of the Corporation such that an adjustment is
required in order to preserve the benefits or potential benefits intended to
be made available under this Program, then the Committee shall, in its sole
discretion, and in such manner as the Committee may deem equitable, adjust any
or all of (a) the number and kind of shares which thereafter may be the
subject of Awards under this Program, (b) the number and kind of shares
subject to outstanding Awards, and (c) the exercise price with respect to any
of the foregoing.
8. Stock Options.
One or more stock options can be granted to any eligible employee. No
employee may be granted stock options for more than 500,000 shares of common
stock in any three-year period. Each stock option so granted shall be subject
to such terms and conditions as the Committee shall impose. The exercise
price per share shall be specified by the grant, but shall in no instance be
less than 100 percent of fair market value at the time of grant. Payment of
the exercise price shall be made in cash, shares, or other consideration, or
any combination thereof, in accordance with the terms of this Program and any
applicable regulations of the Committee in effect at the time and valued at
fair market value on the date of exercise of the stock option. Stock options
granted hereunder may be designated as ISOs (except to the extent otherwise
specified in this Section 8) or nonqualified stock options. To the extent
that the aggregate fair market value of shares with respect to which stock
options designated as ISOs are exercisable for the first time by any grantee
during any year (under all plans of the Corporation and any Subsidiary
thereof) exceeds $100,000, such stock options shall be treated as not being
ISOs. ISOs must comply with requirements of Section 422 of the Code.
9. Stock Appreciation Rights.
(a) An SAR may be granted to an eligible employee as a separate award
hereunder. Any such SAR shall be subject to such terms and conditions as the
Committee shall impose, which shall include provisions that (i) such SAR shall
entitle the holder thereof, upon exercise thereof in accordance with such SAR
and the regulations of the Committee, to receive from the Corporation that
number of shares having an aggregate value equal to the excess of the fair
market value, at the time of exercise of such SAR, of one share over the
exercise price per share specified by the grant of such SAR (which shall in no
instance be less than 100 percent of fair market value at the time of grant)
times the number of shares specified in such SAR, or portion thereof, which is
so exercised.
(b) Any stock option granted under this Program may include an SAR,
either at the time of grant or by amendment. An SAR included in a stock
option shall be subject to such terms and conditions as the Committee shall
impose, which shall include provisions that
(i) such SAR shall be exercisable to the extent, and only to the
extent, the stock option is exercisable; and
(ii) such SAR shall entitle the optionee to surrender to the
Corporation unexercised the stock option in which the SAR is included,
or any portion thereof, and to receive from the Corporation in exchange
therefor that number of shares having an aggregate value equal to the
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excess of the fair market value, at the time of exercise of such SAR, of
one share over the exercise price specified in such stock option times
the number of shares specified in such stock option, or portion thereof,
which is so surrendered.
(c) In lieu of the right to receive all or any specified portion of such
shares, an SAR may entitle the holder thereof to receive the cash equivalent
thereof as specified by the grant.
(d) An SAR may provide that such SAR shall be deemed to have been
exercised at the close of business on the business day preceding the
expiration of such SAR or the related stock option, if any, if at such time
such SAR has positive value and would have expired.
10. Restricted Stock.
(a) An award of restricted stock may be granted hereunder to an eligible
employee, for no cash consideration, for such minimum consideration as may be
required by applicable law, or for such other consideration as may be
specified by the grant. The terms and conditions of restricted stock,
including the vesting period, shall be specified by the Committee, at its sole
discretion, in the grant.
(b) Any restricted stock issued hereunder may be evidenced in such
manner as the Committee in its sole discretion shall deem appropriate,
including, without limitation, book-entry registration or issuance of a stock
certificate or certificates. In the event any stock certificate is issued in
respect of shares of restricted stock awarded hereunder, such certificate
shall bear an appropriate legend with respect to the restrictions applicable
to such award.
11. Incentive Shares.
(a) An incentive award may be granted hereunder in the form of shares.
Incentive shares may be granted to an eligible employee for no cash
consideration, for such minimum consideration as may be required by applicable
law, or for such other consideration as may be specified by the grant. The
terms and conditions of incentive shares shall be specified by the grant.
(b) Incentive shares may be paid to the grantee in a single installment
or in installments and may be paid at the time of grant or deferred to a later
date or dates. Each grant shall specify the time and method of payment as
determined by the Committee.
12. Dividend Equivalent Rights; Interest Equivalents.
(a) A DER may be granted hereunder to an eligible employee, as a
component of another award or as a separate award. The terms and conditions
of DERs shall be specified by the grant. Dividend equivalents credited to the
holder of a DER may be paid currently or may be deemed to be reinvested in
additional shares (which may thereafter accrue additional dividend
equivalents). Any such reinvestment shall be at fair market value at the time
thereof. DERs may be settled in cash or shares or a combination thereof, in a
single installment or installments. A DER granted as a component of another
award may provide that such DER shall be settled upon exercise, settlement, or
payment of, or lapse of restrictions on, such other award, and that such DER
shall expire or be forfeited or annulled under the same conditions as such
other award. A DER granted as a component of another award may also contain
terms and conditions different from such other award.
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(b) Any award under this Program that is settled in whole or in part in
cash on a deferred basis may provide by the grant for interest equivalents to
be credited with respect to such cash payment. Interest equivalents may be
compounded and shall be paid upon such terms and conditions as may be
specified by the grant.
13. Deferral of Payment.
With the approval of the Committee, the delivery of shares, cash or any
combination thereof subject to an award may be deferred, either in the form of
installments or a single future delivery. The Committee may also permit
selected grantees to defer payment of some or all of their awards, as well as
other compensation, in accordance with procedures established by the Committee
to assure that recognition of taxable income is deferred under the Code.
14. Termination of Employment.
If the employment of a grantee terminates for any reason, all
unexercised, deferred and unpaid awards may be exercisable and paid only in
accordance with rules established by the Committee. These rules may provide,
as the Committee deems appropriate, for the expiration, continuation, or
acceleration of the vesting of all or part of the awards.
15. Detrimental Activity.
The Committee may cancel any unexpired, unpaid or deferred awards at any
time if the grantee is not in compliance with all applicable provisions of
this Program or with the terms of any notice of award or if the grantee
engages in detrimental activity. The Committee may, in its discretion and as a
condition to the exercise of an award, require a grantee to acknowledge that
he or she is in compliance with all applicable provisions of the Program and
of any notice of award and has not engaged in any detrimental activity.
16. Change in Control.
The Committee may in its discretion and upon such terms as it deems
appropriate, accelerate the date on which any outstanding option or SAR
becomes exercisable or waive the restrictions or other terms and conditions on
the vesting of any restricted or incentive shares in the event of a proposed
change in control of the Corporation. In addition to the foregoing, the
Corporation may, with the approval of the Committee, purchase stock options
previously granted to any person who is at the time of any such transaction an
employee of the Corporation for a price equal to the difference between the
consideration per share payable pursuant to the terms of the transaction and
the option price.
17. Substitute Awards.
The Committee may grant awards in substitution for, or upon the
assumption of, awards granted by another corporation that is merged into,
consolidated with, or all or a substantial part of the assets or stock of
which is acquired by the Corporation or a Subsidiary. The terms and
provisions of any awards granted under this Section 16 may vary from the terms
and provisions otherwise specified in this Program and may, instead,
correspond to the terms and provisions of the awards granted by the other
corporation.
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18. Amendments to This Program; Amendments of Outstanding Awards.
(a) The Board can from time to time amend or terminate this Program, or
any provision hereof. Approval of the shareholders of the Corporation will be
required only to the extent necessary to comply with Rule 16b-3 or any other
applicable law, regulation, or listing requirement, or to qualify for an
exemption or characterization that is deemed desirable by the Board.
(b) The Committee may, in its discretion, amend the terms of any award,
prospectively or retroactively, but no such amendment may impair the rights of
any grantee without his or her consent. The Committee may, in whole or in
part, waive any restrictions or conditions applicable to, or accelerate the
vesting of, any award.
19. Withholding Taxes.
The Corporation shall have the right to deduct from any cash payment made
under this Program any federal, state or local income or other taxes required
by law to be withheld with respect to such payment. It shall be a condition
to the obligation of the Corporation to deliver shares or securities of the
Corporation upon exercise of a stock option or SAR, upon settlement of a DER,
upon delivery of restricted stock or incentive shares, or upon exercise,
settlement, or payment of any other award under this Program, that the grantee
of such award pay to the Corporation such amount as may be requested by the
Corporation for the purpose of satisfying any liability for such withholding
taxes. Any award under this Program may provide by the grant that the grantee
of such award may elect, in accordance with any applicable regulations of the
granting authority, to pay a portion or all of the amount of such minimum
required or additional permitted withholding taxes in shares. The grantee
shall authorize the Corporation to withhold, or shall agree to surrender back
to the Corporation, on or about the date such withholding tax liability is
determinable, shares previously owned by such grantee or a portion of the
shares that were or otherwise would be distributed to such grantee pursuant to
such award having a fair market value equal to the amount of such required or
permitted withholding taxes to be paid in shares.
20. Grants of Awards to Employees Who are Foreign Nationals.
Without amending this Program, but subject to the limitations specified
in Section 18 above, the Committee can grant, amend, administer, annul, or
terminate awards to eligible employees who are foreign nationals on such terms
and conditions different from those specified in this Program as may in the
judgment of the granting authority be necessary or desirable to foster and
promote achievement of the purposes of this Program.
21. Rights of Employees.
Nothing in this Program will confer upon any grantee the right to
continued employment by the Corporation or limit in any way the Corporation's
right to terminate any grantee's employment at will.
22. Effective Date.
This Program was ratified by the Board and became effective on
April 22, 1993, subject to approval of the shareholders on or before
October 28, 1993. Awards may be granted prior to approval of the Program by
shareholders, but no such award may be exercised until after the Program has
been approved by shareholders. If the shareholders do not approve the Program
on or before October 28, 1993, all awards granted under the Program shall
terminate.
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