Exhibit (10)(u)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1996
by Parker-Hannifin Corporation
Parker-Hannifin Corporation Deferred Compensation Plan
for Directors, as amended as of August 15, 1996
*Numbered in accordance with Item 601 of Regulation S-K.
DEFERRED COMPENSATION PLAN
FOR DIRECTORS OF PARKER-HANNIFIN CORPORATION
Parker-Hannifin Corporation has established the Deferred Compensation
Plan for Directors of Parker-Hannifin Corporation to provide Directors with
the opportunity to defer payment of their directors' fees in accordance with
the provisions of this Plan.
ARTICLE I
DEFINITIONS
For the purposes hereof, the following words and phrases shall have
the meaning indicated.
1. "Account" shall mean the aggregate of a Participant's Deferral
Account and his or her Parker Stock Account, if any.
2. "Beneficiary" shall mean the person designated by a Participant in
accordance with the Plan to receive payment of the remaining balance of a
Participant's Account in the event of the death of the Participant prior to
receipt of the entire amount credited to the Participant's Account.
3. "Change in Control" shall mean the occurrence of one of the
following events:
(i) any "person" (as such term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934 (the "Exchange Act") and as used in Sections
13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the 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 of Directors of the Corporation the "Board") (the
"Corporation 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
corporation or entity in which the Corporation has a direct or indirect
ownership interest of 50% or more of the total combined voting power of the
then outstanding securities of such corporation or other entity (a
"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 a Participant, any acquisition by the Participant or any group
of persons (within
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the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act) including
the Participant (or any entity in which the Participant or a group of persons
including the Participant, 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 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
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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
(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 Plan to the contrary, if the
Participant's employment is terminated prior to a Change in Control, and the
Participant 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 Plan, 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 Participant.
4. "Corporation" shall mean Parker-Hannifin Corporation, an Ohio
corporation, its corporate successors, and the surviving corporation resulting
from any merger of Parker-Hannifin Corporation with any other corporation or
corporations.
5. "Deferral Account" shall mean the bookkeeping account to which is
credited Fees deferred by a Director and any earnings or losses credited
thereto in accordance with the Plan.
6. "Director" shall mean any member of the Board of Directors of the
Corporation who is not an officer or common-law employee of the Corporation.
7. "Fees" shall mean the retainer and cash meeting fees earned by the
Director for his or her services as such.
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8. "Participant" shall mean any Director who has at any time elected
to defer the receipt of Fees in accordance with the Plan or with respect to
whom there has been established a Parker Stock Account under Article III.
9. "Parker Stock Account" shall mean the bookkeeping account to which
is credited notional stock with respect to certain Participants under Article
III, and any earnings and losses credited thereto in accordance with the Plan.
10. "Plan" shall mean the deferred compensation plan as set forth
herein, together with all amendments hereto, which Plan shall be called the
Deferred Compensation Plan for Directors of Parker-Hannifin Corporation.
11. "Year" shall mean a calendar year.
ARTICLE II
ELECTION TO DEFER
1. Eligibility. Any Director may elect to defer receipt of all or a
specified part of his or her Fees for any Year in accordance with Section 2 of
this Article. A Director's entitlement to defer shall cease with respect to
the Year following the Year in which he or she ceases to be a Director.
2. Election to Defer. A Director who desires to defer the payment of
all or a portion of his or her Fees earned in any Year must complete and
deliver an Election Agreement, as prescribed by the Corporation, to the
Secretary of the Corporation prior to January 1 of such Year; provided,
however, that any Director newly elected to the Board of Directors of the
Corporation may make an election to defer payment of Fees earned from the date
of such election through December 31 of that Year if the new Director delivers
an executed Election Agreement to the Secretary of the Corporation within 30
days of his or her election to the Board of Directors. A Director who timely
delivers the Election Agreement to the Secretary of the Corporation shall be a
Participant. A Director shall be required to execute an Election Agreement
with respect to each Year for which he or she defers Fees, which Election
Agreement shall be delivered to the Secretary of the Corporation prior to
January 1 of such Year. The value of a Participant's Deferral Account shall
be fully vested at all times.
3. Amount Deferred; Period of Deferral. A Participant shall
designate on the Election Agreement the percentage of his or her Fees that are
to be deferred. That percentage of Fees shall be deferred until the date
specified by the Participant in his or her Election Agreement, at which time
payment of the amount deferred shall be made in accordance with Section 5 or 6
of this Article; provided, however, that except as set forth in Section 8 of
this Article, no payment shall be made while a Participant is still serving as
a Director. Notwithstanding the foregoing, the Corporation reserves the right
to
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commence payment of the amount deferred in the calendar quarter following
the date the Participant ceases to be a Director, whether by death, retirement
or otherwise.
4. Deferral Account; Interest.
(a) The percentage of Fees which a Participant elects to
defer shall be credited to a bookkeeping Deferral Account under
the Plan as of the date the Fees otherwise would have been paid to
the Participant. A Participant's Deferral Account shall be
credited with gains or losses each calendar quarter based on the
applicable Crediting Rate as described below.
(b) The Crediting Rate shall mean any notional gains or
losses equal to those that would have been generated if part or
all of the Deferral Account balance had been invested in one or
more of the investment portfolios designated as available by the
Corporation, and/or as if part or all of the Deferral Account
balance were credited with interest at the prime rate, as elected
by the Participant, less any separate account fees and less any
applicable administrative charges determined annually by the
Administrator.
(c) The allocation of the Deferral Account shall be
determined by the Participant among one or more of the available
options pursuant to rules determined by the Corporation. The
gains or losses shall be credited based upon the daily unit values
from the portfolio(s) selected by the Participant and/or the
average prime rate as in effect for the preceding month, as
applicable. Gains and losses will be compounded daily and will be
credited to Participants' Deferral Accounts as of the first day of
the calendar quarter following the quarter to which they relate.
Notwithstanding the method of calculating the Crediting Rate, the
Company shall be under no obligation to purchase any investments
designated by a Participant.
5. Payment of Deferral Account. The amount of a Participant's
Deferral Account shall be paid to the Participant in a lump sum or in a number
of approximately equal quarterly installments (not to exceed 20), as
designated by the Participant on the Election Agreement. The amount of the
Deferral Account remaining unpaid shall continue to bear interest, as provided
in Section 4 of this Article. The lump sum payment or the first quarterly
installment, as the case may be, shall be made as of the first day of the
calendar quarter following the end of the period of deferral as specified in
Section 3 of this Article. The election as to the time for and method of
payment of the amount of the Deferral Account relating to Fees deferred for a
particular Year shall be made on the Election Agreement(s) and may not
thereafter be altered.
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6. Death of Participant. In the event of the death of a Participant,
the amount of the Participant's Deferral Account shall be paid to the
Beneficiary or Beneficiaries designated in a writing in such form as shall be
prescribed by the Corporation for such purpose, in accordance with the
Participant's Election Agreement and Section 5 of this Article. A
Participant's Beneficiary designation may be changed at any time prior to his
or her death by execution and delivery of a new Beneficiary designation form.
The form on file with the Corporation at the time of the Participant's death
which bears the latest date shall govern. In the absence of a Beneficiary
designation or the failure of any Beneficiary to survive the Participant, the
amount of the Participant's Deferral Account shall be paid to the
Participant's estate in a lump sum within ninety days after the appointment of
an executor or administrator. In the event of the death of a Beneficiary or
all of the Beneficiaries after the death of a Participant, but before all
amounts credited to the Participant's Deferral Account have been paid to such
Beneficiary or Beneficiaries according to the Participant's designation, the
remaining applicable amount of the Deferral Account shall be paid in a lump
sum to the estate of the deceased Beneficiary or estates of the deceased
Beneficiaries within ninety days after the appointment of an executor or
administrator.
7. Small Payments. Notwithstanding the foregoing, if the quarterly
installment payments elected by a Participant would result in a quarterly
payment of less than $1,000, the entire amount of the Account shall be paid in
a lump sum in accordance with Section 5 of this Article.
8. Acceleration. Notwithstanding the foregoing: (i) within 15 days
following a Change in Control, the value of a Participant's Deferral Account
as of the date of the Change in Control shall be paid to the Participant in a
lump sum; and (ii) the Board of Directors of the Corporation may, in its sole
discretion, accelerate payment of the amount of the Deferral Account of a
Participant in the event of financial hardship of the Participant due to
causes not within the control of the Participant.
9. Noncompetition. During the time any Participant is a Director of
the Corporation, he or she shall not, directly or indirectly, as officer,
director, shareholder (other than an interest of less than 1% of the stock of
any publicly held company), partner, employee or in any other capacity, engage
in competition with the Corporation in the manufacture, sale or distribution
of products or parts thereof. In the event of a breach of this provision, a
Participant shall forfeit all right and interest in the amounts credited to
his or her Deferral Account, and shall not be entitled to any distribution of
any deferred Fees.
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ARTICLE III
PARKER STOCK ACCOUNTS
1. Establishment of Parker Stock Account. There may be credits under
the Plan to a bookkeeping Parker Stock Account of amounts other than Fees to
which a Director may become entitled from the Corporation at the election of
the Board of Directors of the Corporation. Such amounts shall be credited to
the Parker Stock Account on the date of entitlement in the form of a number of
bookkeeping shares (calculated to the second decimal point) calculated at the
"Stock Value" as determined as follows. The "Stock Value" on a particular
date shall mean the closing sale price of a share of common stock of the
Corporation on the New York Stock Exchange ("NYSE") on such date as reported
in the principal consolidated transaction reporting system with respect to
securities listed as admitted to trading on the NYSE. A Participant's Parker
Stock Account shall be fully vested at all times.
2. Earnings on Parker Stock Account. A Participant's Parker Stock
Account shall be credited with gains or losses based on the "Stock Rate,"
determined as follows. The "Stock Rate" shall mean any notional gains or
losses equal to those generated as if the Parker Stock Account balance had
been invested in the common stock of the Corporation, including reinvestment
of dividends on the dividend payment date at the Stock Value.
3. Payment of Parker Stock Account. A Participant shall be entitled
to receive payment of his or her Parker Stock Account in 20 quarterly
installments beginning as of the first day of the calendar quarter following
the time the Participant ceases to be a Director. The amount of each
quarterly payment shall be determined by dividing the value of the Parker
Stock Account as of the date as of which payment is to be made by the number
of remaining installments to be made. The balance in the Parker Stock Account
shall continue to be credited with gains and losses at the Stock Rate
described in Section 2 above. In lieu of quarterly payments, the Participant
may elect to receive a single lump sum payment of the value of his or her
Parker Stock Account as of the date he or she ceases to be a Director;
provided, that if the election to receive a lump sum payment is received less
than 13 months prior to the cessation of services, the value of the Parker
Stock Account shall be reduced by 10%.
4. Death of a Participant. In the event of the death of a
Participant before his or her entire Parker Stock Account has been paid to him
or her, his or her designated Beneficiary, determined in accordance with the
rules set forth in paragraph 6 of Article 2, shall be entitled to receive a
lump sum payment equal to the value of the Parker Stock Account as of the date
of death.
5. Acceleration. Notwithstanding the foregoing: (i) within 15
business days following a Change in Control, the value of a Participant's
Parker Stock Account as of the date of the Change in Control shall be paid to
the Participant in a lump sum; and (ii) the
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Board may, in its sole discretion, accelerate payment of the amount of the
Parker Stock Account of a Participant in the event of financial hardship of
the Participant due to causes not within the control of the Participant.
6. Noncompetition. During the time any Participant is a Director of
the Corporation, he or she shall not, directly or indirectly, as officer,
director, shareholder (other than an interest of less than 1% of the stock of
any publicly held company), partner, employee or in any other capacity, engage
in competition with the Corporation in the manufacture, sale or distribution
of products or parts of a type manufactured, sold or distributed by the
Corporation. In the event of a breach of this provision, a Participant shall
forfeit all right and interest in the amounts credited to his or her
Parker Stock Account.
ARTICLE IV
ADMINISTRATION
The Corporation shall be responsible for the general administration of the
Plan and for carrying out the provisions hereof. The Corporation shall have
all such powers as may be necessary to carry out the provisions of the Plan,
including the power to determine all questions relating to eligibility for and
the amount in the Account and all questions pertaining to claims for benefits
and procedures for claim review; to resolve all other questions arising under
the Plan, including any questions of construction; and to take such further
action as the Corporation shall deem advisable in the administration of the
Plan. The actions taken and the decisions made by the Corporation hereunder
shall be final and binding upon all interested parties. The Corporation shall
provide a procedure for handling claims of Participants or their Beneficiaries
under this Plan. Such procedure shall provide adequate written notice within
a reasonable period of time with respect to the denial of any such claim as
well as a reasonable opportunity upon a Participant's request for a full and
fair review by the Corporation of any such denial.
ARTICLE V
AMENDMENT AND TERMINATION
The Corporation reserves the right to amend or terminate the Plan at any time
by action of its Board of Directors; provided, however, that no such action
shall adversely affect any Participant who has an Account or any Beneficiary.
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ARTICLE VI
PRIOR PLANS OR AGREEMENTS
The Plan supersedes all prior deferred compensation plans for Directors and
all prior deferred compensation arrangements with any individual Director,
except as to the obligation to make payment of the amount of the accounts of
participants in the prior plans or under the prior arrangements in accordance
with their respective terms. Fees earned after termination of the prior plan
or arrangement will not be eligible for deferral under such plan or
arrangement and deferral elections under the prior plan or arrangement will be
of no force or effect with respect to Fees earned after termination.
ARTICLE VII
MISCELLANEOUS
1. Nonalienation of Deferred Compensation. No Participant or Beneficiary
shall encumber or dispose of the right to receive any payments hereunder.
2. Interest of Directors. The obligation of the Corporation under the Plan
to make payment of amounts reflected on an Account merely constitutes the
unsecured promise of the Corporation to make payments from its general assets
as provided herein, and no Participant or Beneficiary shall have any interest
in, or a lien or prior claim upon, any property of the Corporation.
3. Claims of Other Persons. The provisions of the Plan shall in no event
be construed as giving any person, firm or corporation any legal or equitable
right as against the Corporation, or the officers, employees, or directors of
the Corporation, except any such rights as are specifically provided for in
the Plan or are hereafter created in accordance with the terms and provisions
of the Plan.
4. Severability. The invalidity and unenforceability of any particular
provision of the Plan shall not affect any other provision hereof, and the
Plan shall be construed in all respects as if such invalid or unenforceable
provision were omitted herefrom.
5. Gender, Singular and Plural. All pronouns and variations thereof shall
be deemed to refer to the masculine, feminine, or neuter, as the identity of
the person or persons may require. As the context may require, the singular
may be read as the plural and the plural as the singular.
6. Governing Law. The provisions of the Plan shall be governed and
construed in accordance with the laws of the State of Ohio.
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