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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to ______________________
Commission File No. 1-4982
PARKER-HANNIFIN CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 34-0451060
(State of Incorporation) (I.R.S. Employer
Identification No.)
17325 Euclid Avenue, Cleveland, Ohio 44112
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (216) 531-3000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class which Registered
Common Shares, $.50 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days.
Yes X . No .
The sequential page in this Report where the Exhibit Index appears
is page 23.
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K [ ].
The aggregate market value of the voting stock held by non-affiliates
of the Registrant as of August 18, 1994, excluding, for purposes of this
computation, only stock holdings of the Registrant's Directors and Officers.
$1,958,010,570.
The number of Common Shares outstanding on August 18, 1994 was 48,966,848.
Portions of the following documents are incorporated by reference:
(1) Annual Report to Shareholders of the Company for the fiscal year ended
June 30, 1994. Incorporated by reference into Parts I, II and IV
hereof.
(2) Definitive Proxy Statement for the Company's 1994 Annual Meeting of
Shareholders. Incorporated by reference into Part III hereof.
PARKER-HANNIFIN CORPORATION
FORM 10-K
Fiscal Year Ended June 30, 1994
PART I
ITEM 1. Business. Parker-Hannifin Corporation is a leading
worldwide full-line manufacturer of motion control products, including fluid
power systems, electromechanical controls and related components. Fluid power
involves the transfer and control of power through the medium of liquid, gas
or air, in both hydraulic and pneumatic applications. Fluid power systems
move and position materials, control machines, vehicles and equipment and
improve industrial efficiency and productivity. Components of a simple fluid
power system include a pump which generates pressure, valves which control the
fluid's flow, a cylinder which translates the pressure in the fluid into
mechanical energy, a filter to remove contaminants and numerous hoses,
couplings, fittings and seals. Electromechanical control involves the use of
electronic components and systems to control motion and precisely locate or
vary speed in automation applications.
The Company was incorporated in Ohio in 1938. Its principal
executive offices are located at 17325 Euclid Avenue, Cleveland, Ohio 44112,
telephone (216) 531-3000. As used in this Report, unless the context
otherwise requires, the term "Company" or "Parker" refers to Parker-Hannifin
Corporation and its subsidiaries.
The Company's manufacturing, service, distribution and
administrative facilities are located in 33 states, Puerto Rico and worldwide
in 30 foreign countries. Its motion control technology is used in the
products of its two business Segments: Industrial and Aerospace. The
products are sold as original and replacement equipment through product and
distribution centers worldwide. The Company markets its products through its
direct-sales employees and more than 5,000 independent distributors. Parker
products are supplied to over a quarter million customer outlets in virtually
every major manufacturing, transportation and processing industry. For the
fiscal year ended June 30, 1994, net sales were $2,576,337,000; Industrial
Segment products accounted for 79% of net sales and Aerospace Segment products
for 21%.
During the fiscal year the Company made three acquisitions. In
November, 1993, the Company acquired the Electro-pneumatic Division of
Telemecanique in Evreux, France, a leading European manufacturer of pneumatic
products. In December, 1993, the Company increased its ownership from 40% to
100% in LDI Pneutronics Corp., located in Hollis, New Hampshire, which
specializes in advanced-technology pneumatic valves and components. In
April, 1994, the Company purchased the assets of Finn-Filter Oy, a leading
Scandinavian filter manufacturer with manufacturing locations in Urjala and
Hyrynsalmi, Finland and a sales subsidiary in Sweden.
- 3 -
Markets
Motion control systems are used throughout industry in
applications which require substantial amounts of energy. Such applications
include moving of materials, controlling machines, vehicles and equipment and
positioning materials during the manufacturing process. Motion control
systems contribute to the efficient use of energy and improve industrial
productivity.
The more than a quarter million customer outlets which carry the
Company's parts are found throughout virtually every significant
manufacturing, transportation and processing industry. No customer accounted
for more than 3% of the Company's total net sales for the fiscal year.
The major markets for products of the Fluid Connector, Motion &
Control, Filtration and Seal Groups of the Industrial Segment are agricultural
machinery, construction equipment, food production, industrial machinery,
instrumentation, lumber and paper, machine tools, marine, mining, mobile
equipment, chemicals, petrochemicals, robotics, textiles, transportation and
every other major production and processing industry. Products manufactured
by the Industrial Segment's Automotive and Refrigeration Group are utilized
principally in automotive and mobile air conditioning systems, industrial
refrigeration systems and home and commercial air conditioning equipment.
Sales of Industrial Segment products are made to original equipment
manufacturers and their replacement markets.
Aerospace Segment sales are made primarily to the commercial,
military and general aviation markets and are made to original equipment
manufacturers and to end users for maintenance, repair and overhaul.
Principal Products, Methods of Distribution and Competitive Conditions
Industrial Segment. The product lines of the Company's Industrial
Segment cover most of the components of motion control systems. The Motion
& Control Group manufactures components and systems used to provide motion,
control and conditioning through the medium of pressurized fluids and
electricity. Products include hydraulic and precision metering pumps, power
units, control valves, accumulators, cylinders, servo actuators, rotary
actuators and motors, pneumatic control valves, pressure regulators,
lubricators, hydrostatic steering components, electronic controls and systems
and automation devices. The Filtration Group manufactures filters to remove
contaminants from fuel, air, oil, water and other fluids in industrial,
process, mobile and environmental applications. The Fluid Connectors Group
manufactures connectors, including tube fittings and hose fittings, hoses and
couplers which transmit and contain fluid. The Seal Group manufactures
sealing devices, including o-rings and o-seals, gaskets and packings which
insure leak proof connections. The Automotive and Refrigeration Group
manufactures components for use in industrial and automotive air conditioning
and refrigeration systems and other automotive applications, including
pressure regulators, solenoid valves, expansion valves, filter-dryers,
gerotors and hose assemblies.
- 4 -
Industrial Segment products include both standard items which are
produced in large quantities and custom units which are engineered and
produced to original equipment manufacturers' specifications for application
to a particular end product. Both standard and custom products are also used
in the replacement of original motion control system components. Industrial
Segment products are marketed primarily through field sales employees and more
than 5,000 independent distributors.
Aerospace Segment. The principal products of the Company's
Aerospace Segment are hydraulic, pneumatic, and fuel systems and components
which are utilized on virtually every domestic commercial, military and
general aviation aircraft.
Hydraulic systems and components include precision hydraulic and
electro-hydraulic servo systems used for precise control of rudders,
elevators, ailerons, and other aerodynamic control surfaces of aircraft,
utility hydraulic components such as reservoirs, accumulators, selector
valves, nose wheel steering systems, engine controls, electromechanical
actuators, and electronic controllers.
Pneumatic systems and components include bleed air control
systems, pressure regulators, low pressure pneumatic controls, heat transfer
systems, engine start systems, engine bleed control and anti-ice systems, and
electronic control and monitoring computers.
Fuel systems and components include fuel transfer and
pressurization control, in-flight refueling systems, fuel pumps, quantity
gaging systems and center of gravity control, fuel injection nozzles and
augmentor controls, fuel tank inerting systems, fuel tank ducting and hose
assemblies, and electronic monitoring computers.
The Aerospace Segment also designs and manufactures lightweight
aircraft wheels and brakes for the general aviation market and supplies to the
space market propellant control systems, tankage, and environmental control
components used extensively on the Space Shuttle and on unmanned satellites
and launch vehicles.
The Aerospace Segment products are marketed by Parker's field
sales force and are sold directly to the manufacturer and to the end user.
Competition. All aspects of the Company's business are highly
competitive. No single manufacturer competes with respect to all products
manufactured and sold by the Company and the degree of competition varies with
different products. In the Industrial Segment, the Company competes on the
basis of product quality and innovation, customer service, its manufacturing
and distribution capability, and price. The Company believes that, in most
of its major product markets, it is one of the principal suppliers of motion
control systems and components. In the Aerospace Segment, the Company
utilizes its advanced technological capability to obtain original equipment
business on new aircraft programs for its fluid handling systems and
components and, thereby, to obtain the follow-on repair and replacement
business for these programs. The Company believes that it is one of the
primary suppliers in this area.
- 5 -
Research and Product Development
The Company continually researches the feasibility of new products
through its development laboratories and testing facilities in many of its
worldwide manufacturing locations. Its research and product development staff
includes chemists, mechanical, electronic and electrical engineers and
physicists.
Research and development costs relating to the development of new
products or services and the improvement of existing products or services
amounted to $64,518,000 in fiscal 1994, $60,054,000 in 1993, and $50,019,000
in 1992. Customer reimbursements included in the total cost for each of the
respective years were $22,640,000, $16,648,000, and $20,089,000.
Patents, Trademarks, Licenses
The Company owns a number of patents, trademarks and licenses
related to its products and has exclusive and non-exclusive rights under
patents owned by others. In addition, patent applications on certain products
are now pending, although there can be no assurance that patents will be
issued. The Company is not dependent to any material extent on any single
patent or group of patents.
Backlog and Seasonal Nature of Business
The Company's backlog at June 30, 1994 was approximately
$852,482,000 and at June 30, 1993 was approximately $856,517,000.
Approximately 75% of the Company's backlog at June 30, 1994 is scheduled for
delivery in the succeeding twelve months. The Company's business generally
is not seasonal in nature.
Environmental Regulation
The Company is subject to federal, state and local laws and
regulations designed to protect the environment and to regulate the discharge
of materials into the environment. Among other environmental laws, the
Company is subject to the federal "Superfund" law, under which the Company has
been designated as a "potentially responsible party" and may be liable for
clean up costs associated with various waste sites, some of which are on the
U.S. Environmental Protection Agency Superfund priority list. The Company
believes that its policies, practices and procedures are properly designed to
prevent unreasonable risk of environmental damage and the consequent financial
liability to the Company. Compliance with environmental laws and regulations
requires continuing management effort and expenditures by the Company.
Compliance with environmental laws and regulations has not had in the past,
and, the Company believes, will not have in the future, material effects on
the capital expenditures, earnings, or competitive position of the Company.
The information set forth in Footnote 12 to the Financial Statements contained
on page 37 of the Company's Annual Report to Shareholders for the fiscal year
ended June 30, 1994 ("Annual Report") as specifically excerpted on pages 13-31
and 13-32 of Exhibit 13 hereto is incorporated herein by reference.
- 6 -
Energy Matters and Sources and Availability of Raw Materials
The Company's primary energy source for each of its business
segments is electric power. While the Company cannot predict future costs
of such electric power, the primary source for production of the required
electric power will be coal from substantial, proven reserves. The Company
is subject to governmental regulations in regard to energy supplies both in
the United States and elsewhere. To date the Company has not experienced any
significant disruptions of its operations due to energy curtailments.
Steel, brass, aluminum and elastomeric materials are the principal
raw materials used by the Company. These materials are available from
numerous sources in quantities sufficient to meet the requirements of the
Company.
Employees
The Company employed approximately 26,730 persons as of June 30,
1994, of whom approximately 7,993 were employed by foreign subsidiaries.
Business Segment Information
The net sales, income from operations before corporate general and
administrative expenses and identifiable assets by business segment and by
geographic area for the past three fiscal years, as set forth on page 31 of
the Annual Report and specifically excerpted on pages 13-16 through 13-18 of
Exhibit 13 hereto is incorporated herein by reference.
Item 1A. Executive Officers of the Company
The Company's Executive Officers are as follows:
Officer
Name Position Since(1) Age
Duane E. Collins President, Chief Executive Officer 1983 58
and Director
Dennis W. Sullivan Executive Vice President - Industrial 1978 55
and Automotive and Director
Paul L. Carson Vice President, Information 1993 58
Services
Richard F. Ferrel Vice President and President, 1993 60
Applied Technologies Operations
of the Motion and Control Group
John L. Hanson Vice President - Human Resources 1981 61
Stephen L. Hayes Vice President and President, 1993 53
Aerospace
- 7 -
Michael J. Hiemstra Vice President - Finance and 1987 47
Administration and Chief
Financial Officer
Lawrence J. Hopcraft Vice President and President, 1990 51
Automotive and Refrigeration
Joseph D. Whiteman Vice President, General Counsel 1977 61
and Secretary
William D. Wilkerson Vice President - Technical Director 1987 58
Lawrence M. Zeno Vice President and President, 1993 52
Motion and Control
Donald A. Zito Vice President and President, 1988 54
Fluid Connectors
Harold C. Gueritey, Jr. Controller 1980 55
Timothy K. Pistell Treasurer 1993 47
(1) Officers of Parker-Hannifin serve for a term of office from
the date of election to the next organizational meeting of the
Board of Directors and until their respective successors are
elected, except in the case of death, resignation or removal.
Messrs. Sullivan, Hanson, Hiemstra, Gueritey, Whiteman,
Wilkerson and Zito have served in the executive capacities
indicated above during the past five years.
Mr. Collins was elected as President and Chief Executive Officer of the
Company effective July, 1993. He was elected as Vice Chairman of the Board
in July, 1992 and Executive Vice President in July, 1988. He was President
of the International Sector from January, 1987 until June, 1992.
Mr. Carson was elected a Vice President in October, 1993. He was Vice
President of Management Information Systems from July 1, 1983 to October,
1993.
Mr. Ferrel was elected a Vice President in October, 1993. He has been
President of Applied Technologies Operation since July, 1993 and was President
of the Applied Technology Group from July, 1990 to June, 1993; President of
the Nichols\Electromechanical Group from January, 1990 to June, 1990; and
President of the Nichols Group from March, 1985 to December, 1989.
Mr. Hayes was elected as Vice President and named President of the
Aerospace Group in April, 1993. He was a Group Vice President of the
Aerospace Group from February, 1985 to April, 1993.
- 8 -
Mr. Hopcraft was elected a Vice President in October, 1990. He has
been President of the Automotive and Refrigeration Group since 1989 and was
President of the Refrigeration Group from 1980 to 1989.
Mr. Zeno was elected a Vice President in October, 1993. He has been
President of the Motion and Control Group since January, 1994 and was Vice
President-Operations of the Motion and Control Group (formerly the Fluidpower
Group) from July, 1988 to December, 1993.
Mr. Pistell was elected as Treasurer of the Company in July, 1993. He
was Director of Business Planning from January, 1993 to July, 1993; and Vice
President-Finance\Controller of the International Sector from October, 1988
to December, 1992.
ITEM 2. Properties. The following table sets forth the principal
plants and other materially important properties of the Company and its
subsidiaries. The leased properties are indicated with an asterisk.
UNITED STATES
State City
__________________ _________________
Alabama Boaz(1)
Decatur(1)
Huntsville(1)
Jacksonville(1)
Arizona Glendale(2)
Tolleson(2)
Tucson*(1)
Arkansas Trumann(1)
California City of Industry(2)
Culver City*(1)
Irvine(1)(2)
Modesto(1)
Moorpark*(2)
Rohnert Park(1)
Colorado Sheridan*(1)
Connecticut Enfield(1)
Florida Longwood(1)
Miami*(1)
Georgia Fulton*(1)
Illinois Broadview(1)
Des Plaines(1)
Elgin(1)
Niles*(1)
Indiana Albion(1)
Ashley(1)
Ft. Wayne(1)
Lebanon(1)
Tell City(1)
- 9 -
State City
__________________ _________________
Iowa Red Oak(1)
Kansas Manhattan(1)
Kentucky Berea(1)
Lexington(1)
Louisiana Harvey*(1)
Maine Portland(1)
Massachusetts Sharon(2)
Waltham(2)
Michigan Lakeview(1)
Otsego(1)
Oxford(1)
Richland(1)
Troy*(1)
Minnesota Golden Valley(1)
Mississippi Batesville(1)
Booneville(1)
Madison(1)
Missouri Kennett(1)
Nebraska Lincoln(1)
New Hampshire Portsmouth*(1)
Hollis*(1)
New Jersey North Brunswick(1)
New York Clyde(2)
Lyons(1)
Smithtown(2)
North Carolina Forest City(1)
Hillsborough(1)
Mooresville(1)
Sanford(1)
Wake Forest*(1)
Ohio Akron(1)
Andover(2)
Avon(2)
Brookville(1)
Cleveland(1)(2)
Columbus(1)
Cuyahoga Falls*(1)
Eastlake(1)
Eaton(1)
Elyria(1)(2)
Forest(2)
Green Camp(1)
Kent(1)
Lewisburg(1)
Metamora(1)
Ravenna(1)
St. Marys(1)
Wadsworth(1)
Waverly(1)
Wickliffe(1)
Oregon Eugene(1)
- 10 -
State City
__________________ _________________
Pennsylvania Canton(1)
Harrison City(1)
Reading(1)
South Carolina Spartanburg(1)
Tennessee Greenfield(1)
Greenville(1)
Texas Cleburne(1)
Ft. Worth(1)(2)
Mansfield(2)
McAllen(1)
Utah Ogden(2)
Salt Lake City(1)
Wisconsin Grantsburg(1)
Mauston(1)
Territory City
Puerto Rico Ponce*(2)
FOREIGN COUNTRIES
Country City
__________________ _________________
Argentina Buenos Aires(1)
Australia Castle Hill(1)
Wodonga*(1)
Austria Wiener Neustadt(1)
Belgium Brussels*(1)
Brazil Jacarei(1)
Sao Paulo(1)
Canada Burlington(1)
Grimsby(1)
Owen Sound(1)
Czech Republic Prague*(1)
Denmark Copenhagen*(1)
Helsingor(1)
England Barnstaple(1)
Cannock(1)
Derby(1)
Hemel Hempstead(1)
Littlehampton(1)
Morley(1)
Poole*(1)
Rotherham(1)
Watford(1)
Finland Helsinki*(1)
Hyrynsalmi(1)
Urjala(1)
- 11 -
Country City
__________________ _________________
France Annemasse(1)
Contamine(1)
Evreux(1)
Pontarlier(1)
Germany Bielefeld(1)
Bietigheim-Bissingen(1)
Cologne(1)
Hamburg*(2)
Hildburghausen(1)
Hochmossingen(1)
Kaarst(1)
Mucke(1)
Pleidelsheim(1)
Quekborn(1)
Velbert(1)
Hong Kong Hong Kong(1)
Hungary Budapest*(1)
India Bombay*(1)
Italy Arsago Seprio(1)
Capriolo*(1)
Gessate(1)
Milan(1)
Japan Yokohama(1)
Mexico Matamoros(1)
Monterrey(1)
Tijuana(1)
Netherlands Hoogezand(1)
Naarden(1)
0ldenzaal(1)
New Zealand Mt. Wellington(1)
Norway Langhus(1)
Peoples Republic of China Shanghai*(1)
Poland Warsaw*(1)
Singapore Singapore*(1)(2)
South Africa Johannesburg*(1)
South Korea Seoul*(1)
Spain Madrid*(1)
Sweden Falkoping(1)
Stockholm(1)
Ulricehamn(1)
Taiwan Taipei*(1)
Venezuela Caracas*(1)
Puerto Ordaz*(1)
The Company believes that its properties have been adequately
maintained, are in good condition generally and are suitable and adequate for
its business as presently conducted. The extent of utilization of the
Company's properties varies among its plants and from time to time. The
Company's restructuring efforts over the past several years have brought
capacity levels closer to present and anticipated needs. Although capacity
has been reduced and production volume has increased over the last fiscal
year, most of the Company's material manufacturing facilities remain capable
of handling additional volume increases.
- 12 -
(1) Indicates properties occupied by the Company's industrial
segment.
(2) Indicates properties occupied by the Company's aerospace
segment.
ITEM 3. Legal Proceedings. Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders. Not
applicable.
PART II
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters. As of August 30, 1994, the approximate number of
shareholders of record of the Company was 4,071. The Company's common shares
are traded on the New York Stock Exchange ("NYSE"). Set forth below is a
quarterly summary of the high and low sales prices on the NYSE for the
Company's common shares and dividends declared for the two most recent fiscal
years:
Fiscal Year 1st 2nd 3rd 4th Full Year
1994 High $ 35 $ 38-1/8 $ 39-1/2 $ 44-7/8 $ 44-7/8
Low 30 33-7/8 34-3/4 34 30
Dividends .24 .24 .25 .25 .98
1993 High $ 32 $ 30-1/2 $ 34-1/4 $ 34-1/8 $ 34-1/4
Low 27-5/8 26-1/8 29-1/2 28 26-1/8
Dividends .24 .24 .24 .24 .96
ITEM 6. Selected Financial Data. The information set forth on pages
38 and 39 of the Annual Report as specifically excerpted on page 13-36 of
Exhibit 13 hereto is incorporated herein by reference.
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations. The information set forth on pages 23, 24, 26, 28
and 30 of the Annual Report as specifically excerpted on pages 13-1 through
13-10 of Exhibit 13 hereto is incorporated herein by reference.
ITEM 8. Financial Statements and Supplementary Data. The information
set forth on pages 22, 25, 27, 29 and 31 through 37 of the Annual Report as
specifically excerpted on pages 13-11 to 13-35 of Exhibit 13 hereto is
incorporated herein by reference.
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure. Not applicable.
- 13 -
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
Information required as to the Directors of the Company is contained on pages
1 to 3 of the Company's definitive Proxy Statement dated September 26, 1994
(the "Proxy Statement") under the caption "Election of Directors."
Information required with respect to compliance with Section 16(a) of the
Securities Exchange Act of 1934 is contained in the first paragraph on page
13 of the Proxy Statement. The foregoing information is incorporated herein
by reference. Information as to the executive officers of the Company is
included in Part I hereof.
ITEM 11. Executive Compensation. The information set forth under the
caption "Compensation of Directors" on page 3 of the Proxy Statement, under
the caption "Executive Compensation" on pages 5 to 9 of the Proxy Statement
and under the caption "Common Share Price Performance Graph" on page 11 of the
Proxy Statement is incorporated herein by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management. The information set forth under the caption "Officer Agreements
Effective Upon "Change in Control"" on page 10 of the Proxy Statement and
under the caption "Principal Shareholders of the Corporation" on page 12 of
the Proxy Statement is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions. The
information set forth under the caption "Transactions With Management" on page
11 of the Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K.
a. The following are filed as part of this report:
1. Financial Statements and Schedules
The financial statements and schedules listed in the
accompanying Index to Consolidated Financial
Statements and Schedules are filed or incorporated by
reference as part of this Report.
2. The exhibits listed in the accompanying
Exhibit Index and required by Item 601 of
Regulation S-K (numbered in accordance with
Item 601 of Regulation S-K) are filed or
incorporated by reference as part of this
Report.
b. The Registrant filed a report on Form 8-K on April 15,
1994 with respect to its April 14, 1994 announcement
of its intention to record a charge of $52.7 million
or $1.08 per share in the third
- 14 -
quarter, ended March 31, 1994, to reduce the value
of certain long-term assets and to recognize
downsizing and relocation activities.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PARKER-HANNIFIN CORPORATION
Michael J. Hiemstra
By: Michael J. Hiemstra
Vice President - Finance and
Administration
September 28, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report on Form 10-K has been signed below by the following persons in the
capacities and on the date indicated.
Signature and Title
PATRICK S. PARKER, Chairman of the Board of Directors;
DUANE E. COLLINS, President, Chief Executive Officer and
Director; HAROLD C. GUERITEY, JR., Controller and Principal
Accounting Officer; JOHN G. BREEN, Director; PAUL C.
ELY, JR., Director; ALLEN H. FORD, Director; FRANK A.
LePAGE, Director; PETER W. LIKINS, Director; ALLAN L.
RAYFIELD, Director; PAUL G. SCHLOEMER, Director;
WOLFGANG R. SCHMITT, Director; WALTER SEIPP, Director;
and DENNIS W. SULLIVAN, Director.
Date: September 28, 1994
Michael J. Hiemstra
By: Michael J. Hiemstra,
Vice President - Finance and Administration,
Principal Financial Officer
and Attorney-in-Fact
- 15 -
PARKER-HANNIFIN CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
Reference
Excerpt from Annual
Form 10-K Report as set forth
Annual Report in Exhibit 13
(Page) (Page)
Data incorporated by reference from the
Annual Report as specifically excerpted
in Exhibit 13 hereto:
Report of Independent Accountants --- 13-35
Consolidated Statement of Income for the
years ended June 30, 1994, 1993 and 1992 --- 13-11
Consolidated Balance Sheet at June 30, 1994
and 1993 --- 13-12 and 13-13
Consolidated Statement of Cash Flows for
the years ended June 30, 1994, 1993 and 1992 --- 13-14 and 13-15
Notes to Consolidated Financial Statements --- 13-19 to 13-33
Consent and Report of Independent Accountants F-2 ---
Schedules:
V - Property, Plant and Equipment F-3 ---
VI - Accumulated Depreciation, Depletion
and Amortization of Property, Plant
and Equipment F-4 ---
VIII - Valuation and Qualifying Accounts F-5 ---
IX - Short-Term Borrowings F-6 ---
X - Supplementary Income Statement
Information F-7 ---
Individual financial statements and related applicable schedules for the
Registrant (separately) have been omitted because the Registrant is primarily
an operating company and its subsidiaries are considered to be totally-held.
Schedules other than those listed above have been omitted from this
Annual Report because they are not required, are not applicable, or the
required information is included in the consolidated financial statements or
the notes thereto.
F-1
Coopers certified public accountants
& Lybrand
CONSENT AND REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Parker Hannifin Corporation
Our report on the consolidated financial statements of Parker Hannifin
Corporation has been incorporated by reference from page 22 of the 1994
Annual Report to Shareholders of Parker Hannifin Corporation, as
specifically excerpted on page 13-35 of Exhibit 13 to this Form 10-K. In
connection with our audit of such financial statements, we have also
audited the related financial statement schedules listed in the index on
page F-1 of this Form 10-K.
In our opinion, the financial statements schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
We consent to the incorporation by reference in the registration statement
of Parker Hannifin Corporation on Forms S-8 (File Nos. 33-53193, 33-43938
and 2-66732) of our report dated August 4, 1994 on our audit of the
consolidated financial statements and financial statement schedules of
Parker Hannifin Corporation as of June 30, 1994 and 1993, and for the years
ended June 30, 1994, 1993, and 1992, which report is included in Exhibit 13
of this Form 10-K.
Coopers & Lybrand LLP
Coopers & Lybrand L.L.P.
Cleveland, Ohio
September 28, 1994
F-2
PARKER-HANNIFIN CORPORATION
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED JUNE 30, 1992, 1993 and 1994
(Dollars in Thousands)
Column A Column B Column C Column D Column E (A) Column F
Balance at Other Balance
Beginning Additions Changes - At End
Classification Of Period At Cost Retirements Add (Deduct) Of Period
______________ ____________ __________ ____________ _____________ ____________
Year Ended June 30, 1992:
Land and land improvements $ 73,381 $ 6,133 $ 996 $ 1,509 $ 80,027
Buildings and building equipment 346,989 10,186 3,263 15,811 369,723
Machinery and equipment 954,259 81,852 31,701 29,548 1,033,958
Construction in progress 57,316 (13,216) 81 (8,640) 35,379
____________ __________ __________ __________ ____________
$ 1,431,945 $ 84,955 $ 36,041 $ 38,228 (A) $ 1,519,087
============ ========== ========== ========== ============
Year Ended June 30, 1993:
Land and land improvements $ 80,027 $ 1,971 $ 232 $ (311) $ 81,455
Buildings and building equipment 369,723 10,485 2,120 (1,512) 376,576
Machinery and equipment 1,033,958 74,225 27,366 (1,921) 1,078,896
Construction in progress 35,379 4,803 17 (7,743) 32,422
____________ __________ __________ __________ ____________
$ 1,519,087 $ 91,484 $ 29,735 $ (11,487) (A) $ 1,569,349
============ ========== ========== ========== ============
Year Ended June 30, 1994:
Land and land improvements $ 81,455 $ 854 $ 2,482 $ 2,073 $ 81,900
Buildings and building equipment 376,576 15,419 13,711 9,480 387,764
Machinery and equipment 1,078,896 68,194 58,329 25,947 1,114,708
Construction in progress 32,422 15,447 637 (9,776) 37,456
____________ __________ __________ __________ ____________
$ 1,569,349 $ 99,914 $ 75,159 $ 27,724 (A) $ 1,621,828
============ ========== ========== ========== ============
NOTES:
(A) Includes assets of companies acquired during the year, foreign currency
translation adjustments, and FAS 109 adjustments as follows:
1992 1993 1994
____________ __________ __________
Assets $ 6,127 $ 23,491 $ 10,299
Translation adjustments 20,627 (34,978) $ 17,425
FAS 109 adjustments * 11,474
____________ __________ __________
Total $ 38,228 $(11,487) $ 27,724
============ ========== ==========
* FAS 109 adjustments reflect the write-up of assets obtained through purchase
acquisitions due to adoption of Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes.
(B) The estimated useful lives of depreciable assets are as follows:
Classification of Properties Life
____________________________ ___________
Roadways and grounds 6-40 years
Buildings 10-40 years
Building equipment 5-40 years
Machinery & equipment 3-15 years
Furniture and fixtures 3-15 years
Transportation equipment 5 years
Leasehold improvements 2-25 years
F-3
PARKER-HANNIFIN CORPORATION
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED JUNE 30, 1992, 1993 and 1994
(Dollars in Thousands)
Column A Column B Column C Column D Column E Column F
Additions
Balance at Charged to Other Balance
Beginning Costs and Changes - At End
Description Of Period Expenses Retirements Add (Deduct) Of Period
___________ ___________ ___________ ____________ ____________ __________
Year Ended June 30, 1992:
Land and land improvements $ 8,653 $ 1,320 $ 330 $ 281 $ 9,924
Buildings and building equipment 110,505 15,102 1,731 2,437 126,313
Machinery and equipment 554,850 86,206 23,955 13,259 630,360
__________ __________ __________ __________ __________
$ 674,008 $ 102,628 $ 26,016 $ 15,977 (A) $ 766,597
========== ========== ========== ========== ==========
Year Ended June 30, 1993:
Land and land improvements $ 9,924 $ 1,406 $ 30 $ (151) $ 11,149
Buildings and building equipment 126,313 15,730 1,300 (2,170) 138,573
Machinery and equipment 630,360 92,537 23,962 (15,364) 683,571
__________ __________ __________ __________ __________
$ 766,597 $ 109,673 $ 25,292 $ (17,685) (A) $ 833,293
========== ========== ========== ========== ==========
Year Ended June 30, 1994:
Land and land improvements $ 11,149 $ 1,389 $ 345 $ 66 $ 12,259
Buildings and building equipment 138,573 15,588 2,065 1,690 153,786
Machinery and equipment 683,571 89,569 43,067 8,410 738,483
__________ __________ __________ __________ __________
$ 833,293 $ 106,546 $ 45,477 $ 10,166 (A) $ 904,528
========== ========== ========== ========== ==========
NOTES:
(A) Includes foreign currency translation adjustments,
and FAS 109 adjustments as follows:
1992 1993 1994
__________ __________ __________
Translation adjustments $ 10,708 $ (17,685) $ 10,166
FAS 109 adjustments 5,269
__________ __________ __________
Total $ 15,977 $ (17,685) $ 10,166
========== ========== ==========
F-4
PARKER-HANNIFIN CORPORATION
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 1992, 1993 and 1994
(Dollars in Thousands)
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Balance
Beginning Costs and At End
Description Of Period Expenses Deductions (A) Of Period
___________ _________ __________ __________ _________
Allowance for doubtful accounts:
Year Ended June 30, 1992 $ 3,848 $ 2,882 $ 2,867 $ 3,863
Year Ended June 30, 1993 3,863 1,940 1,657 4,146
Year Ended June 30, 1994 4,146 2,597 2,012 4,731
NOTES:
(A) Uncollectible accounts charged off, less recoveries.
F-5
PARKER-HANNIFIN CORPORATION
SCHEDULE IX - SHORT-TERM BORROWINGS
FOR THE YEARS ENDED JUNE 30, 1992, 1993 and 1994
(Dollars in Thousands)
Column A Column B Column C Column D Column E Column F
Maximum Average Weighted
Category of Weighted Amount Amount Average
Aggregate Balance at Average Outstanding Outstanding Interest Rate
Short-Term End of Interest During the During the During the
Borrowings (A) Period Rate Period Period (B) Period (C)
___________ __________ ________ ___________ ___________ _____________
Year Ended June 30, 1992:
Notes payable to banks $ 11,281 11.5% $ 29,313 $ 21,395 14.3%
Year Ended June 30, 1993:
Notes payable to banks $ 23,733 9.8% $ 26,121 $ 19,908 10.5%
Year Ended June 30, 1994:
Notes payable to banks $ 6,422 7.6% $ 35,188 $ 22,343 7.3%
NOTES:
(A) Notes payable to banks primarily represent short-term borrowings from
foreign banks.
(B) Average of month-end balances.
(C) The Weighted Average Interest Rate During the Period was computed by
dividing actual interest expense by the average short-term debt
outstanding during the period.
F-6
PARKER-HANNIFIN CORPORATION
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED JUNE 30, 1992, 1993 and 1994
(Dollars in Thousands)
Column A Column B
Charged to
Items Costs and Expenses
_____ ______________________________
1992 1993 1994
________ ________ ________
Maintenance and repairs $ 72,447 $ 76,833 $80,767
Note:
(A) Items other than those presented above have been omitted because the
amounts individually are less than one percent of sales and revenues.
F-7
Exhibit Index
Exhibit No. Description of Exhibit
(3) Articles of Incorporation and By-Laws
(3)(a) Amended Articles of Incorporation (A).
(3)(b) Code of Regulations, as amended (A).
(4) Instruments Defining Rights of Security Holders:
(4)(a) Rights Agreement, dated February 10, 1987, between the
Registrant and Society National Bank (as successor to
Ameritrust Company National Association) (A).
The Registrant is a party to other instruments, copies
of which will be furnished to the Commission upon
request, defining the rights of holders of its long-
term debt identified in Note 7 of the Notes to
Consolidated Financial Statements appearing on page 34
in the Annual Report as specifically excerpted on
pages 13-24 and 13-25 of Exhibit 13 hereto, which Note
is incorporated herein by reference.
(10) Material Contracts:
(10)(a) Form of Change in Control Agreement entered into by
the Registrant and certain executive officers (1981).*
(10)(b) Form of Change in Control Agreement entered into by
the Registrant and certain executive officers (1984).*
(10)(c) Form of Change in Control Agreement entered into by
the Registrant and certain executive officers (1988).*
(10)(d) Form of Change in Control Agreement entered into by
the Registrant and certain executive officers (1991).*
(10)(e) Form of Change in Control Agreement entered into by
the Registrant and certain executive officers (1994).*
(10)(f) Form of Indemnification Agreement entered into by the
Registrant and its directors and certain executive
officers.
(10)(g) Executive Liability and Indemnification Insurance
Policy.
(10)(h) Parker-Hannifin Corporation Supplemental Executive
Retirement Benefits Program. (July 16, 1992
Restatement)(B).*
(10)(i) Parker-Hannifin Corporation 1982 Employees Stock
Option Plan, as amended October 25, 1984 and
January 29, 1987.*
Exhibit No. Description of Exhibit
(10)(j) Parker-Hannifin Corporation 1987 Employees Stock
Option Plan.*
(10)(k) Parker-Hannifin Corporation 1990 Employees Stock
Option Plan.*
(10)(l) Amendment to Parker-Hannifin Corporation 1990
Employees Stock Option Plan (C).*
(10)(m) Parker-Hannifin Corporation 1993 Stock Incentive
Plan (D).*
(10)(n) Retirement Plan for Outside Directors of Parker-
Hannifin Corporation.*
(10)(o) Parker-Hannifin Corporation 1994 Target Incentive
Bonus Plan Description(E).*
(10)(p) Parker-Hannifin Corporation 1995 Target Incentive
Bonus Plan Description.*
(10)(q) Parker-Hannifin Corporation 1993-94-95 Long Term
Incentive Plan Description(F).*
(10)(r) Parker-Hannifin Corporation 1994-95-96 Long Term
Incentive Plan Description(G).*
(10)(s) Parker-Hannifin Corporation 1995-96-97 Long Term
Incentive Plan Description.*
(11) Computation of Common Shares Outstanding and Earnings
Per Share.
(13) Excerpts from Annual Report to Shareholders for the
fiscal year ended June 30, 1994 which are incorporated
herein by reference thereto.
(21) List of subsidiaries of the Registrant.
(24) Consents of Experts (contained in Consent and Report
of Independent Accountants appearing on Page F-2 of
this Form 10-K).
(25) Power of Attorney
(27) Financial Data Schedules
*Management contracts or compensatory plans or arrangements.
(A) Incorporated by reference to Exhibits to the
Registrant's Registration Statement on Form S-8 (No.
333193) filed with the Commission on April 20, 1994.
(B) Incorporated by reference to Exhibit 10(e) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1992.
(C) Incorporated by reference to Exhibit 10(i) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1993.
(D) Incorporated by reference to Exhibit 10(j) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1993.
(E) Incorporated by reference to the pertinent information
contained in the Compensation and Management
Development Committee Report on Executive Compensation
contained on pages 4 and 5 of the Company's Proxy
Statement for the 1994 Annual Meeting of Shareholders
(the "1994 Proxy Statement").
(F) Incorporated by reference to the table captioned "Long
Term Incentive Plan-Awards in Fiscal 1993" contained
on page 7 of the Company's Proxy Statement for the
1993 Annual Meeting of Shareholders.
(G) Incorporated by reference to the table captioned "Long
Term Incentive Plan-Awards in Fiscal 1994" on page 9
of the 1994 Proxy Statement.
Shareholders may request a copy of any of the exhibits to this Annual Report
on Form 10-K by writing to the Secretary, Parker-Hannifin Corporation, 17325
Euclid Avenue, Cleveland, Ohio 44112.
Exhibit (10)(a)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1994
by Parker-Hannifin Corporation
Form of Change in Control Agreement
entered into by the Registrant and
certain executive officers (1981)
*Numbered in accordance with Item 601 of Regulation S-K.
A G R E E M E N T
between
PARKER-HANNIFIN CORPORATION
and
__________________
dated ___________, 1981
TABLE OF CONTENTS
Section Page
Recitals 1
1 Operation of Agreement 1
2 Employment; Period of Employment 2
3 Position, Duties, Responsibilities 2
4 Compensation, Compensation Plans, Perquisites 4
5 Employee Benefit Plans 6
6 Effect of Death or Disability 7
7 Termination 8
8 Obligation to Mitigate Damages 16
9 Confidential Information 17
10 Severance Allowance 18
11 Withholding 19
12 Notices 19
13 General Provisions 19
14 Amendment or Modification, Waiver 21
15 Severability 22
16 Successors to the Company 22
17 Change in Control 22
Exhibits (5)
AGREEMENT between PARKER-HANNIFIN
CORPORATION, an Ohio Corporation (the "Company"), and _____________________
(the "Executive"), dated the ______ day of ___________, 1981.
W I T N E S S E T H :
WHEREAS,
A. The Executive is a principal officer of the Company and an
integral part of its management.
B. The Company wishes to assure both itself and the Executive
of continuity of management in the event of any actual or threatened change
in control of the Company.
C. This agreement is not intended to alter materially the
compensation and benefits that the Executive could reasonably expect in the
absence of a change in control of the Company and, accordingly, this
Agreement, though taking effect upon execution thereof, will be operative
only upon a change in control of the Company, as that term is hereafter
defined.
NOW, THEREFORE, it is hereby agreed by and between the parties as
follows:
1. OPERATION OF AGREEMENT
This Agreement shall be effective immediately upon its execution
by the parties hereto, but, anything in this Agreement to the contrary
notwithstanding, neither the Agreement nor any provision thereof shall be
operative unless and until there has been a
Change in Control of the Company, as defined in Section 17 below while the
Executive is in the employ of the Company. Upon such a Change in Control
of the Company, this Agreement and all provisions thereof shall become
operative immediately.
2. EMPLOYMENT; PERIOD OF EMPLOYMENT
2.01 The Company hereby agrees to continue the Executive in its employ,
and the Executive hereby agrees to remain in the employ of the Company, for the
period set forth in paragraph 2.02 below (the Period of Employment), in the
position and with the duties and responsibilities set forth in Section 3
below, and upon the other terms and conditions hereinafter stated.
2.02 The Period of Employment shall be deemed to have commenced on the
date of this Agreement and, subject only to the provisions of Section 6
below, relating to death or Disability, shall continue until the close of
business on the date stated in Exhibit A attached to and made part of this
Agreement. In the event that the Executive shall continue in the full-time
employment of the Company after the latter date, such continued employment
shall be subject to the terms and conditions of this Agreement and the Period
of Employment shall include the period during which the Executive in fact so
continues in such employment.
3. POSITION, DUTIES, RESPONSIBILITIES
3.01 (a) It is contemplated that during the Period of Employment the
Executive shall continue to serve as a principal officer of the Company with
the office(s) and title(s),
- 2 -
set forth in Exhibit B attached to and made part
of this Agreement, reporting as set in such Exhibit B and with duties and
responsibilities including those specifically set forth in such Exhibit B.
(b) At all times during the Period of Employment, the Executive
shall hold a position of responsibility and importance and a position of
scope, with the functions, duties and responsibilities attached thereto, at
least equal in responsibility and importance and in scope to and
commensurate with his position on the date of this Agreement described in
general terms in subparagraph 3.01(a) above.
3.02 During the Period of Employment, the Executive shall also
serve and continue to serve, if and when elected and reelected, as an
officer or director, or both, of any subsidiary, division or affiliate of
the Company.
3.03 Throughout the Period of Employment the Executive shall devote
his full time and undivided attention during normal business hours to the
business and affairs of the Company, except for reasonable vacations and
except for illness or incapacity, but nothing in this Agreement shall
preclude the Executive from devoting reasonable periods required for serving
as a director or member of a committee of any organization involving no conflict
of interest with the interests of the Company, from engaging in charitable
and community activities, and from managing his personal investments,
provided that such activities do not materially interfere with the regular
performance of his duties and responsibilities under this Agreement.
- 3 -
3.04 The office of the Executive shall be located at the principal
offices of the Company within the area described in Exhibit C attached to
and made part of this Agreement, and the Executive shall not be required to
locate his office elsewhere without his prior written consent, nor shall he
be required to be absent therefrom on travel status or otherwise more than
the total number of working days in any calendar year stated in such Exhibit C.
4. COMPENSATION, COMPENSATION PLANS, PERQUISITES
4.01 (a) For all services rendered by the Executive in any capacity
during the Period of Employment, including, without limitation, services as
an executive, officer, director or member of any committee of the Company
or of any subsidiary, division or affiliate thereof, the Executive shall be
paid as compensation:
(i) A base salary, payable not less often than monthly, at a rate
of no less than $_____________ per month, with such increases in such rate as
shall be awarded from time to time in accordance with the Company's regular
administrative practices of salary increases applicable to executives of the
Company in effect and on the date of this Agreement, and
(ii) An executive performance award or bonus under the Company's
Executive Compensation Plan, or such equivalent successor plan as may be
adopted by the Company, upon a basis that will render total compensation
for any calendar month, consisting of the minimum base salary provided in
clause (i) of this subparagraph 4.01(a) plus bonus for such month determined
by dividing the award made for the fiscal year of the Company in which such
month occurred by the number of months in such fiscal year, equal to no less
than the amount set forth from
- 4 -
time to time in Exhibit D to this Agreement,
which amount shall be equal to $_____________ plus such salary increases as
may have been granted pursuant to clause (i) of this subparagraph 4.01(a).
(b) Subject to the provisions of clause (ii) of subparagraph
4.01(a) above, nothing in this Agreement shall preclude a change in the mix
between the base salary and bonus of the Executive by increasing the base
salary of the Executive.
(c) Any increase in salary pursuant to clause (i) of
subparagraph 4.01(a) or in bonus or other compensation shall in no way
diminish any other obligation of the Company under this Agreement.
4.02 During the Period of Employment the Executive shall be and
continue to be a full participant in the Company's Deferred Compensation
Plan, its 1977 Employees Stock Option Plan and 1977 Stock Appreciation Rights
Plan, or equivalent successor plans that may be adopted by the Company,
with at least the same reward opportunities as that have been heretofore
provided. Nothing in this Agreement shall preclude improvement of reward
opportunities in such plans or other plans in accordance with the present
practice of the Company.
4.03 During the Period of Employment, the Executive shall be entitled to
perquisites, including, without limitation, an office, secretarial and clerical
staff, and to fringe benefits, including, without limitation, the business and
personal use of an automobile and payment or reimbursement of club dues, in
each case at least equal to those attached to his office on the date of this
Agreement, as well as to reimbursement, upon proper accounting,
- 5 -
of reasonable expenses and disbursements incurred by him in the course of his
duties.
5. EMPLOYEE BENEFIT PLANS
5.01 The compensation provided for in Section 4 above, together with
other matters therein set forth, is in addition to the benefits provided for
in this Section 5.
5.02 In the event that the Executive shall not heretofore have been
designated a Participant in the Supplemental Executive Retirement Benefits
Program of the Company, the Executive shall be and hereby is designated a
Participant in that Program on and as of the date this Agreement becomes
operative in accordance with the provisions of Section 1 of this Agreement.
5.03 The Executive, his dependents and beneficiaries shall be entitled
to all payments and benefits and service credit for benefits during the
Period of Employment to which officers of the Company, their dependents and
beneficiaries are entitled as the result of the employment of such officers
during the Period of Employment under the terms of employee plans and
practices of the Company, including, without limitation, the Company's
retirement program (consisting of its Retirement Plan for Salaried Employees,
its Excess Benefits Plan, if any, and its Supplemental Executive Retirement
Benefits Program) the Company's stock purchase and savings, thrift and
investment plans, if any, the Company's Group Life Insurance Plan, its
accidental death and dismemberment insurance, disability, medical, dental and
health and welfare plans) and other present or equivalent successor plans and
practices of the Company, its subsidiaries and divisions, for which officers,
their
- 6 -
dependents and beneficiaries are eligible, and to all payments or other
benefits under any such plan or practice after the Period of Employment as a
result of participation in such plan or practice during the Period of
Employment.
5.04 Nothing in this Agreement shall preclude the Company from amending
or terminating any employee benefit plan or practice, but, it being the
intent of the parties that the Executive shall continue to be entitled during
the Period of Employment to perquisites as set forth in paragraph 4.03 above,
and to benefits and service credit for benefits under paragraph 5.03 above at
least equal to those attached to his position on the date of this Agreement,
nothing in this Agreement shall operate as, or be construed or reduce or
authorize, a reduction without the Executive's written consent in the level
of such perquisites, benefits or service credit for benefits; in the event of
any such reduction, by amendment or termination of any plan or practice or
otherwise, the Executive, his dependents and beneficiaries shall continue to be
entitled to perquisites, benefits and service credit for benefits at least
equal to the perquisites and to benefits and service credit for benefits
under such plans or practices that he or his dependents and beneficiaries
would have received if such reduction had not taken place.
6. EFFECT OF DEATH OR DISABILITY
6.01 In the event of the death of the Executive during the Period of
Employment, the legal representative of the Executive shall be entitled to
the compensation provided for in paragraph 4.01 above for the month in
which death shall have taken place at the rate being paid at the time of
death, and the Period of Employment shall be deemed to have
- 7 -
ended as of the close of business on the last day of the month in which
death shall have occurred, but without prejudice to any payments due in
respect of the Executive's death.
6.02 (a) The term "Disability", as used in this Agreement, shall
mean an illness or accident which prevents the Executive from performing
his duties under this Agreement for a period of six consecutive months.
The Period of Employment shall be deemed to have ended as of the close of
business on the last day of such six months period but without prejudice
to any payments due the Executive in respect of disability.
(b) In the event of the Disability of the Executive during
the Period of Employment, the Executive shall be paid an amount equal to
the Minimum Total Monthly Compensation for the month in which such
Disability commenced. Such amount shall be paid at the end of each month
during the period of such Disability but not in excess of six months.
(c) The amount of any payments due under this paragraph 6.02
shall be reduced by any payments to which the Executive may be entitled
for the same period because of disability under any disability or pension
plan of the Company or of any subsidiary or affiliate thereof.
7. TERMINATION
7.01 In the event of a Termination, as defined in paragraph 7.03 below,
during the Period of Employment, the provisions of this Section 7 shall apply.
7.02 In the event of a Termination and subject to the provisions of
Section 8 of this
- 8 -
Agreement relating to mitigation of damages and to
compliance by the Executive with the provisions of paragraph 7.04 below,
relating to Competition, and of Section 9 below, relating to confidential
information, the Company shall, as liquidated damages or severance pay, or
both, pay to the Executive and provide him, his dependents, beneficiaries and
estate, with the following:
(a) The Company shall pay the Executive (i) the compensation provided in
paragraph 4.01 above for the month in which Termination shall have occurred at
the rate being paid at the time of Termination and (ii) during the remainder
of the Period of Employment an amount equal to the total compensation provided
in clause (ii) of subparagraph 4.01(a). Such amount shall be paid in monthly
installments at the end of each month commencing with the month next following
the month in which Termination occurred and continuing during the remainder
of the Period of Employment or through the month in which the death of the
Executive shall have occurred if earlier.
(b) During the period that the payments provided for in subparagraph
(a) of this paragraph 7.02 are required to be made, the Executive, his
dependents, beneficiaries and estate, shall continue to be entitled to all
benefits and service credit for benefits under employee benefit plans of
the Company as if still employed during such period under this Agreement
and, if and to the extent that such benefits or service credit for benefits
shall not be payable or provided under any such plans to the Executive, his
dependents, beneficiaries and estate, by reason of his no longer being an
employee of the Company as the result of Termination, the Company shall
itself pay or provide for payment of such benefits and service credit
for benefits to the Executive, his dependents, beneficiaries and estate.
(c) The remainder of the period of Employment shall be considered
service with
- 9 -
the Company for the purpose (i) of continued credits under
the Company's retirement program, (consisting of its Retirement Plan for
Salaried Employees, its Excess Benefits Plan, if any, and its Supplemental
Executive Retirement Benefits Program) as each such plan or program was in
effect immediately prior to Termination and (ii) of all other benefit plans
of the Company as in effect immediately prior to Termination.
(d) In the event that the Executive shall at the time of Termination
hold an outstanding and unexercised (whether or not exercisable at the time)
option or options theretofore granted by the Company, the Company shall, in
addition to the amounts provided for in subparagraphs 7.02(a) and 7.02(b),
pay to the Executive in a lump sum an amount equal to the excess above the
option price under each such option of the Fair Market Value at the time of
Termination of the shares subject to each such option. Solely for the
purpose of this subparagraph (d), Fair Market Value at the time of Termination
shall be deemed to mean the higher of (i) the average of the reported closing
prices of the Common Shares of the Company, as reported on the New York Stock
Exchange-Composite Transactions, on the last trading day prior to the
Termination and on the last trading day of each of the two preceding thirty-
day periods, and (ii) in the event that a Change in Control, as defined in
Section 17 below, prior to Termination shall have taken place as the result
of a tender offer and such Change in Control was consummated within twelve
months of Termination, the highest consideration paid for Common Shares of
the Company in the course of such tender or exchange offer. Upon receiving
the payment from the Company called for by clause (i) of subparagraph (a) of
this paragraph 7.02, the Executive shall execute and deliver to the Company
a general release in favor of the Company, its successors and assigns, in
respect of any and all matters, including, without limitation, any
- 10 -
and all rights under any outstanding and unexercisable options at the time of
Termination, except for the payments and obligations required to be made or
assumed by the Company under this Agreement which at the time had not yet
been made or assumed by the Company and except for such other valid
obligations of the Company as shall be set forth in such release.
7.03 The word "Termination", for the purpose of this Section 7 and
any other provision of this Agreement, shall mean:
(a) Termination by the Company of the employment of the Executive by
the Company and its subsidiaries for any reason other than for Cause as
defined in paragraph 7.05 below or for Disability as defined in
subparagraph 6.02(a) above; or
(b) Termination by the Executive of his employment by the Company
and its subsidiaries upon the occurrence of any of the following events:
(i) Failure to elect or reelect the Executive to, or removal of
the Executive from, any of the offices described in paragraph 3.01 above.
(ii) A significant change in the nature or scope of the
authorities, powers, functions or duties attached to the position summarized
in paragraph 3.01 above, or a reduction in compensation, which is not
remedied within 30 days after receipt by the Company of written notice
from the Executive.
(iii) A determination by the Executive made in good faith that as a
result of a Change in Control of the Company, as defined in Section 17 below,
and a change in circumstances thereafter and since the date of this Agreement
significantly affecting his position, he is unable to carry out the
authorities, powers, functions or
- 11 -
duties attached to his position and contemplated by Section 3 of this
Agreement and the situation is not remedied within 30 days after receipt by
the Company of written notice from the Executive of such determination.
(iv) A breach by the Company of any provision of this Agreement not
embraced within the foregoing clauses (i), (ii) and (iii) of this
subparagraph 7.03(b) which is not remedied within 30 days after receipt by
the Company of written notice from the Executive.
(v) The liquidation, dissolution, consolidation or merger of the
Company or transfer of all or a significant portion of its assets unless a
successor or successors (by merger, consolidation or otherwise) to which
all or a significant portion of its assets have been transferred shall have
assumed all duties and obligations of the Company under this Agreement,
provided that in any event set forth in this subparagraph 7.03(b) above, the
Executive shall have elected to terminate his employment under this Agreement
upon not less than forty and not more than ninety days' advance written
notice to the Board of Directors of the Company, Attention of the Secretary,
given, except in the case of a continuing breach, within three calendar
months after (A) failure to be so elected or reelected, or removal, (B)
expiration of the thirty-day cure period with respect to such event, or (C)
the closing date of such liquidation, dissolution, consolidation, merger or
transfer of assets, as the case may be.
An election by the Executive to terminate his employment given
under the provisions of this paragraph 7.03 shall not be deemed a voluntary
termination of employment by the Executive for the purpose of this Agreement
or any plan or practice of
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the Company.
7.04 (a) There shall be no obligation on the part of the Company to
make any further payments provided for in paragraph 7.02 above or to provide
any further benefits specified in such paragraph 7.02 if the Executive shall,
during the period that such payments are being made or benefits provided,
engage in Competition with the Company as hereinafter defined, provided all
of the following shall have taken place:
(i) the Secretary of the Company, pursuant to resolution of the
Board of Directors of the Company, shall have given written notice to the
Executive that, in the opinion of the Board of Directors, the Executive is
engaged in such Competition, specifying the details;
(ii) the Executive shall have been give a reasonable opportunity
to appear before the Board of Directors prior to the determination of the
Board evidenced by such resolution; and
(iii) the Executive shall neither have ceased to engage in such
Competition within thirty days from his receipt of such notice nor
diligently taken all reasonable steps to that end during such thirty-day
period and thereafter.
(b) The word "Competition" for purposes of this paragraph 7.04 and
any other provision of this Agreement shall mean taking a management
position with or control of a business engaged in the manufacture,
processing, purchase of distribution of products which constituted 15% or
more of the sales of the Company and its subsidiaries and divisions during
the last fiscal year of the Company preceding the termination of the
Executive's employment (or during any fiscal year of the Company during the
Period of Employment);
- 13 -
provided, however, that in no event shall ownership of
less than 5% of the outstanding capital stock entitled to vote for the
election of directors of a corporation with a class of equity securities held
of record by more than 500 persons, standing alone, be deemed Competition
with the Company within the meaning of this paragraph 7.04.
7.05 For the purpose of any provision of this Agreement, the
termination of the Executive's employment shall be deemed to have been for
Cause only
(a) if termination of his employment shall have been the result of an
act or acts of dishonesty on the part of the Executive constituting a felony
and resulting or intended to result directly or indirectly in gain or
personal enrichment at the expense of the Company, or
(b) if there has been a breach by the Executive during the Period of
Employment of the provisions of paragraph 3.03 above, relating to the time
to be devoted to the affairs of the Company, or of Section 9, relating to
confidential information, and such breach results in demonstrably material
injury to the Company, and with respect to any alleged breach of paragraph
3.03 hereof, the Executive shall have both failed to remedy such alleged
breach within thirty days from his receipt of written notice by the Secretary
of the Company pursuant to resolution duly adopted by the Board of Directors
of the Company after notice to the Executive and an opportunity to be heard
demanding that he remedy such alleged breach, and failed to take all
reasonable steps to that end during such thirty-day period and thereafter;
provided that there shall have been delivered to the Executive a certified
copy of a resolution of the Board of Directors of the Company adopted by the
affirmative vote of not less than three-fourths of the entire membership of
the Board of Directors called and
- 14 -
held for that purpose and at which the Executive was given an opportunity to
be heard, finding that the Executive was guilty of conduct set forth in
subparagraphs (a) or (b) above, specifying the particulars thereof in detail.
Anything in this paragraph 7.05 or elsewhere in this Agreement to the
contrary notwithstanding, the employment of the Executive shall in no event
be considered to have been terminated by the Company for Cause if termination
of his employment took place (i) as the result of bad judgment or negligence
on the part of the Executive, or (ii) as the result of an act or omission
without intent of gaining therefrom directly or indirectly a profit to which
the Executive was not legally entitled, or (iii) because of an act or
omission believed by the Executive in good faith to have been in or not
opposed to the interests of the Company, or (iv) for any act or omission in
respect of which a determination could properly be made that the Executive
met the applicable standard of conduct prescribed for indemnification or
reimbursement or payment of expenses under the Code of Regulations of the
Company or the laws of the State of Ohio or the directors' and officers'
liability insurance of the Company, in each case as in effect at the time
of such act or omission, or (v) as the result of an act or omission which
occurred more than twelve calendar months prior to the Executive's having
been given notice of the termination of his employment for such act or
omission unless the commission of such act or such omission could not at the
time of such commission or omission have been known to a member of the
Board of Directors of the Company (other than the Executive, if he is then a
member of the Board of Directors), in which case more than twelve calendar
months from the date that the commission of such act or such omission was or
could reasonably have been so known, or (vi) as the result of a continuing
course of action which commenced and was or could
- 15 -
reasonably have been known to a member of the Board of Directors of the
Company (other than the Executive) more than twelve calendar months prior
to notice having been given to the Executive of the termination of his
employment.
7.06 In the event that the Executive's employment shall be terminated
by the Company during the Period of Employment and such termination is
alleged to be for Cause, or the Executive's right to terminate his employment
under paragraph 7.03(b) above shall be questioned by the Company, or the
Company shall withhold payments or provision of benefits because the
Executive is alleged to be engaged in Competition in breach of the provisions
of paragraph 7.04 above or for any other reason, the Executive shall have the
right, in addition to all other rights and remedies provided by law, at his
election either to seek arbitration within the area described in Exhibit C
attached hereto and made part of this Agreement under the rules of the
American Arbitration Association by serving a notice to arbitrate upon the
Company or to institute a judicial proceeding, in either case within ninety
days after having received notice of termination of his employment or
notice in any form that the termination of his employment under paragraph
7.03(b) is subject to question or that the Company is withholding or proposed
to withhold payments or provision of benefits or within such longer period as
may reasonably be necessary for the Executive to take action in the event
that his illness or incapacity should preclude his taking such action within
such ninety-day period.
8. OBLIGATION TO MITIGATE DAMAGES
8.01 In the event of a Termination, as defined in paragraph 7.03 above,
the
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Executive shall make reasonable efforts to mitigate damages by seeking
other employment; provided, however, that he shall not be required to accept
a position of less dignity and importance or of substantially different
character than the highest position theretofore held by him with the Company
or a position that would call upon him to engage in competition within the
meaning of paragraph 7.04(b) above, nor shall he be required to accept a
position other than in a location reasonably convenient to his principal
residence immediately prior to such Termination.
8.02 To the extent that the Executive shall receive compensation,
benefits and service credit for benefits from other employment secured
pursuant to the provisions of paragraph 8.01 above, the payments to be
made and the benefits and service credit for benefits to be provided by
the Company under the provisions of paragraph 7.02 above shall be
correspondingly reduced. Such reduction shall, in the event of any
question, be determined jointly by the firm of certified public
accountants selected by the Executive, in each case upon the advice of
actuaries to the extent the certified public accountants consider
necessary, and, in the event such accountants are unable to agree on a
resolution of the question, such reduction shall be determined by an
independent firm of certified public accountants selected jointly by
both firms of accountants.
9. CONFIDENTIAL INFORMATION
9.01 The Executive agrees not to disclose, either while in the
Company's employ or at any time thereafter, to any person not employed by
the Company, or not engaged to render services to the Company, any
confidential information obtained by him while in the
- 17 -
employ of the Company, including, without limitation, any of the Company's
inventions, processes, methods of distribution or customers or trade secrets;
provided, however, that this provision shall not preclude the Executive from
use or disclosure of information known generally to the public or of
information not considered confidential by persons engaged in the business
conducted by the Company or from disclosure required by law or Court order.
9.02 The Executive also agrees that upon leaving the Company's employ,
he will not take with him, without the prior written consent of an officer
authorized to act in the matter by the Board of Directors of the Company, any
drawing, blueprint, specification or other document of the Company, its
subsidiaries, affiliates and divisions, which is of a confidential nature
relating to the Company, its subsidiaries, affiliates and divisions, or
without limitation, relating to its or their methods of distribution, or any
description of any formulae or secret processes.
10. SEVERANCE ALLOWANCE
In the event that, following the specific date set forth in paragraph
2.02 of this Agreement, the employment of the Executive shall be terminated
by the Company prior to his normal retirement date and such termination shall
be for any reason other than for Cause, as defined in paragraph 7.05 above,
the Company shall pay the Executive as a severance allowance a lump sum equal
to 50% of his annual compensation for one year, consisting of base salary at
the rate paid for the month prior to such termination of employment plus his
most recent executive performance award of bonus under the Company's annual
incentive plan.
- 18 -
11. WITHHOLDING
Anything to the contrary notwithstanding, all payments required to be
made by the Company hereunder to the Executive or his estate or beneficiaries
shall be subject to the withholding of such amounts, if any, relating to tax
and other payroll deductions as the Company may reasonably determine it
should withhold pursuant to any applicable law or regulation. In lieu of
withholding such amounts, the Company may accept other provisions to the end
that it has sufficient funds to pay all taxes required by law to be withheld
in respect of any or all of such payments.
12. NOTICES
All notices, requests, demands and other communications provided for
by this Agreement shall be in writing and shall be sufficiently given if and
when mailed in the continental United States by registered or certified mail
or personally delivered to the party entitled thereto at the address stated
from time to time in Exhibit E to this Agreement which address shall be such
address as the addressee may have given most recently by a similar notice.
Any such notice, request, demand or other communication delivered in person
shall be deemed to have been received on the date of delivery.
13. GENERAL PROVISIONS
13.01 There shall be no right of set-off or counter-claim, in respect
of any claim, debt or obligation, against any payments to the Executive, his
dependents, beneficiaries or estate provided for in this Agreement.
13.02 The Company and the Executive recognize that each party will
have no
- 19 -
adequate remedy at law for breach by the other of any of the
agreements contained herein and, in the event of any such breach, the Company
and the Executive hereby agree and consent that the other shall be entitled
to a decree of specific performance, mandamus or other appropriate remedy to
enforce performance of such agreements.
13.03 No right or interest to or in any payments shall be assignable by
the Executive; provided, however, that this provision shall not preclude him
from designating one or more beneficiaries to receive any amount that may be
payable after his death and shall not preclude the legal representative of
his estate from assigning any right hereunder to the person or persons
entitled thereto under his will or, in the case of intestacy, to the person
or persons entitled thereto under the laws of intestacy applicable to his
estate. The term "beneficiaries" as used in this Agreement shall mean a
beneficiary or beneficiaries so designated to receive any such amount or,
if no beneficiary has been so designated, the legal representative of the
Executive's estate.
13.04 No right, benefit or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt or obligation, or
to execution, attachment, levy or similar process, or assignment by
operation of law. Any attempt, voluntary or involuntary, to effect any
action specified in the immediately preceding sentence shall, to the full
extent permitted by law, be null, void and of no effect.
13.05 In the event of the Executive's death or a judicial determination
of his
- 20 -
incompetence, reference in this Agreement to the Executive shall be
deemed, where appropriate, to refer to his legal representative or, where
appropriate, to his beneficiary or beneficiaries.
13.06 The titles to sections in this Agreement are intended solely for
convenience and no provision of this Agreement is to be construed by reference
to the title of any section.
13.07 This Agreement shall be binding upon and shall inure to the
benefit of the Executive, his heirs and legal representatives, and the
Company and its successors as provided in Section 16 hereof.
14. AMENDMENT OR MODIFICATION; WAIVER
No provision of this Agreement may be amended, modified or waived unless
such amendment, modification or waiver shall be authorized by the Board of
Directors of the Company or any authorized committee of the Board of Directors
and shall be agreed to in writing, signed by the Executive and by an officer
of the Company thereunto duly authorized. Except as otherwise specifically
provided in this Agreement, no waiver by either party hereto of any breach
by the other party hereto of any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of a subsequent
breach of such condition or provision or a waiver of a similar or dissimilar
provision or condition at the same or at any prior or subsequent time.
- 21 -
15. SEVERABILITY
In the event that any provision of this Agreement, or portion thereof,
shall be determined to be invalid or unenforceable for any reason, in whole
or in part, the remaining provisions of this Agreement and parts of such
provision not so invalid or unenforceable shall be unaffected thereby and
shall remain in full force and effect to the fullest extent permitted by law.
16. SUCCESSORS TO THE COMPANY
Except as otherwise provided herein, this Agreement shall be binding upon
and inure to the benefit of the Company and any successor of the Company,
including, without limitation, any corporation or corporations acquiring
directly or indirectly all or substantially all of the assets of the Company
whether by merger, consolidation, sale or otherwise (and such successor shall
thereafter be deemed "the Company" for the purposes of this Agreement), but
shall not otherwise be assignable by the Company.
17. CHANGE IN CONTROL
For the purpose of this Agreement, the term "Change in Control of the
Company" shall mean a change in control of a nature that would be required to
be reported in response to Item 5(f) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934 as in effect on the
date of this Agreement; provided that, without limitation, such a change in
control shall be deemed to have occurred if and when (a) any "person" (as
such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934) is or becomes a beneficial owner, directly or indirectly, of
securities of the Company representing 25% or more of the combined voting
power of the Company's
- 22 -
then outstanding securities or (b) during any period
of 24 consecutive months, commencing before or after the date of this
Agreement, individuals who at the beginning of such twenty-four month
period were directors of the Company for whom the Executive shall have voted
cease for any reason to constitute at least a majority of the Board of
Directors of the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as the day and year first above written.
[seal]
ATTEST: PARKER-HANNIFIN CORPORATION,
an Ohio corporation
_______________________________ By:_________________________
THE EXECUTIVE
_____________________________
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Exhibit (10)(b)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1994
by Parker-Hannifin Corporation
Form of Change in Control Agreement
entered into by the Registrant and
certain executive officers (1984)
*Numbered in accordance with Item 601 of Regulation S-K.
A G R E E M E N T
between
PARKER-HANNIFIN CORPORATION
and
__________________
dated ___________, 1984
TABLE OF CONTENTS
Section Page
Recitals 1
1 Operation of Agreement 1
2 Employment; Period of Employment 2
3 Position, Duties, Responsibilities 2
4 Compensation, Compensation Plans, Perquisites 4
5 Employee Benefit Plans 6
6 Effect of Death or Disability 7
7 Termination 8
8 Obligation to Mitigate Damages 16
9 Confidential Information 17
10 Severance Allowance 18
11 Withholding 19
12 Notices 19
13 General Provisions 19
14 Amendment or Modification, Waiver 21
15 Severability 22
16 Successors to the Company 22
17 Change in Control 22
Exhibits (5)
AGREEMENT between PARKER-HANNIFIN CORPORATION, an Ohio
Corporation (the "Company"), and _____________________ (the "Executive"),
dated the______ day of ___________, 1984.
W I T N E S S E T H :
WHEREAS,
A. The Executive is a principal officer of the Company and an
integral part of its management.
B. The Company wishes to assure both itself and the Executive
of continuity of management in the event of any actual or threatened change in
control of the Company.
C. This agreement is not intended to alter materially the
compensation and benefits that the Executive could reasonably expect in the
absence of a change in control of the Company and, accordingly, this
Agreement, though taking effect upon execution thereof, will be operative only
upon a change in control of the Company, as that term is hereafter defined.
NOW, THEREFORE, it is hereby agreed by and between the parties as
follows:
1. OPERATION OF AGREEMENT
This Agreement shall be effective immediately upon its execution
by the parties hereto, but, anything in this Agreement to the contrary
notwithstanding, neither the Agreement nor any provision thereof shall be
operative unless and until there has been a
Change in Control of the Company, as defined in Section 17 below while the
Executive is in the employ of the Company. Upon such a Change in Control of
the Company, this Agreement and all provisions thereof shall become operative
immediately.
2. EMPLOYMENT; PERIOD OF EMPLOYMENT
2.01 The Company hereby agrees to continue the Executive in its employ,
and the Executive hereby agrees to remain in the employ of the Company, for
the period set forth in paragraph 2.02 below (the Period of Employment), in
the position and with the duties and responsibilities set forth in Section 3
below, and upon the other terms and conditions hereinafter stated.
2.02 The Period of Employment shall be deemed to have commenced on the
date of this Agreement and, subject only to the provisions of Section 6 below,
relating to death or Disability, shall continue until the close of business on
the date stated in Exhibit A attached to and made part of this Agreement. In
the event that the Executive shall continue in the full-time employment of the
Company after the latter date, such continued employment shall be subject to
the terms and conditions of this Agreement and the Period of Employment shall
include the period during which the Executive in fact so continues in such
employment.
3. POSITION, DUTIES, RESPONSIBILITIES
3.01 (a) It is contemplated that during the Period of Employment the
Executive shall continue to serve as a principal officer of the Company with
the office(s) and title(s),
- 2 -
set forth in Exhibit B attached to and made part
of this Agreement, reporting as set in such Exhibit B and with duties and
responsibilities including those specifically set forth in such Exhibit B.
(b) At all times during the Period of Employment, the Executive shall
hold a position of responsibility and importance and a position of scope, with
the functions, duties and responsibilities attached thereto, at least equal in
responsibility and importance and in scope to and commensurate with his
position on the date of this Agreement described in general terms in
subparagraph 3.01(a) above.
3.02 During the Period of Employment, the Executive shall also serve
and continue to serve, if and when elected and reelected, as an officer or
director, or both, of any subsidiary, division or affiliate of the Company.
3.03 Throughout the Period of Employment the Executive shall devote his
full time and undivided attention during normal business hours to the business
and affairs of the Company, except for reasonable vacations and except for
illness or incapacity, but nothing in this Agreement shall preclude the
Executive from devoting reasonable periods required for serving as a director
or member of a committee of any organization involving no conflict of interest
with the interests of the Company, from engaging in charitable and community
activities, and from managing his personal investments, provided that such
activities do not materially interfere with the regular performance of his
duties and responsibilities under this Agreement.
- 3 -
3.04 The office of the Executive shall be located at the principal offices of
the Company within the area described in Exhibit C attached to and made part
of this Agreement, and the Executive shall not be required to locate his
office elsewhere without his prior written consent, nor shall he be required
to be absent therefrom on travel status or otherwise more than the total
number of working days in any calendar year stated in such Exhibit C.
4. COMPENSATION, COMPENSATION PLANS, PERQUISITES
4.01 (a) For all services rendered by the Executive in any capacity during
the Period of Employment, including, without limitation, services as an
executive, officer, director or member of any committee of the Company or of
any subsidiary, division or affiliate thereof, the Executive shall be paid as
compensation:
(i) A base salary, payable not less often than monthly, at a
rate of no less than $_____________ per month, with such increases in such
rate as shall be awarded from time to time in accordance with the Company's
regular administrative practices of salary increases applicable to executives
of the Company in effect and on the date of this Agreement, and
(ii) An executive performance award or bonus under the Company's
Executive Compensation Plan, or such equivalent successor plan as may be
adopted by the Company, upon a basis that will render total compensation for
any calendar month, consisting of the minimum base salary provided in clause
(i) of this subparagraph 4.01(a) plus bonus for such month determined by
dividing the award made for the fiscal year of the Company in which such month
occurred by the number of months in such fiscal year, equal to no less than
the amount set forth from
- 4 -
time to time in Exhibit D to this Agreement, which amount shall be equal to
$_____________ plus such salary increases as may have been granted pursuant
to clause (i) of this subparagraph 4.01(a).
(b) Subject to the provisions of clause (ii) of subparagraph 4.01(a)
above, nothing in this Agreement shall preclude a change in the mix between
the base salary and bonus of the Executive by increasing the base salary of
the Executive.
(c) Any increase in salary pursuant to clause (i) of subparagraph
4.01(a) or in bonus or other compensation shall in no way diminish any other
obligation of the Company under this Agreement.
4.02 During the Period of Employment the Executive shall be and continue to
be a full participant in the Company's Deferred Compensation Plan, its 1977
and 1982 Employees Stock Option Plan, or equivalent successor plans that may
be adopted by the Company, with at least the same reward opportunities as that
have been heretofore provided. Nothing in this Agreement shall preclude
improvement of reward opportunities in such plans or other plans in accordance
with the present practice of the Company.
4.03 During the Period of Employment, the Executive shall be entitled
to perquisites, including, without limitation, an office, secretarial and
clerical staff, and to fringe benefits, including, without limitation, the
business and personal use of an automobile and payment or reimbursement of
club dues, in each case at least equal to those attached to his office on the
date of this Agreement, as well as to reimbursement, upon proper accounting,
of reasonable expenses and disbursements incurred by him in the course of his
duties.
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5. EMPLOYEE BENEFIT PLANS
5.01 The compensation provided for in Section 4 above, together with
other matters therein set forth, is in addition to the benefits provided for
in this Section 5.
5.02 In the event that the Executive shall not heretofore have been
designated a Participant in the Supplemental Executive Retirement Benefits
Program of the Company, the Executive shall be and hereby is designated a
Participant in that Program on and as of the date this Agreement becomes
operative in accordance with the provisions of Section 1 of this Agreement.
5.03 The Executive, his dependents and beneficiaries shall be entitled
to all payments and benefits and service credit for benefits during the Period
of Employment to which officers of the Company, their dependents and
beneficiaries are entitled as the result of the employment of such officers
during the Period of Employment under the terms of employee plans and
practices of the Company, including, without limitation, the Company's
retirement program (consisting of its Retirement Plan for Salaried Employees,
its Excess Benefits Plan, if any, and its Supplemental Executive Retirement
Benefits Program) the Company's stock purchase and savings, thrift and
investment plans, if any, the Company's Group Life Insurance Plan, its
accidental death and dismemberment insurance, disability, medical, dental and
health and welfare plans) and other present or equivalent successor plans and
practices of the Company, its subsidiaries and divisions, for which officers,
their dependents and beneficiaries are eligible, and to all payments or other
benefits under any such plan or practice after the Period of Employment as a
result of participation in such
- 6 -
plan or practice during the Period of Employment.
5.04 Nothing in this Agreement shall preclude the Company from amending
or terminating any employee benefit plan or practice, but, it being the intent
of the parties that the Executive shall continue to be entitled during the
Period of Employment to perquisites as set forth in paragraph 4.03 above, and
to benefits and service credit for benefits under paragraph 5.03 above at
least equal to those