Exhibit (10)(a)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1996
by Parker-Hannifin Corporation
Form of Change in Control Severance Agreement
entered into by the Registrant and
certain executive officers, dated
as of August 15, 1996
*Numbered in accordance with Item 601 of Regulation S-K.
PARKER-HANNIFIN CORPORATION
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AGREEMENT is entered into as of the 15th day
of August, 1996, by and between Parker-Hannifin Corporation
(the "Company") and _____ (the "Executive").
W I T N E S S E T H
WHEREAS, the Company considers the establishment
and maintenance of a sound and vital management to be
essential to protecting and enhancing the best interests of
the Company and its stockholders; and
WHEREAS, the Company recognizes that, as is the
case with many publicly held corporations, the possibility
of a change in control may arise and that such possibility
may result in the departure or distraction of management
personnel to the detriment of the Company and its
stockholders; and
WHEREAS, the Board (as defined in Section 1) has
determined that it is in the best interests of the Company
and its stockholders to secure the Executive's continued
services and to ensure the Executive's continued and
undivided dedication to his duties in the event of any
threat or occurrence of a change in control of the Company;
and
WHEREAS, the Board has authorized the Company to
enter into this Agreement.
NOW, THEREFORE, for and in consideration of the
premises and the mutual covenants and agreements herein
contained, the Company and the Executive hereby agree as
follows:
1. Definitions. As used in this Agreement, the
following terms shall have the respective meanings set forth
below:
(a) "Board" means the Board of Directors of the
Company.
(b) "Bonus" means the annual bonuses payable
pursuant to the RONA Plan and the Target Incentive Program.
(c) "Cause" means (i) a material breach by the
Executive of the duties and responsibilities of the
Executive (other than as a result of incapacity due to
physical or mental illness) which is demonstrably willful
and deliberate on the Executive's part, which is committed
in bad faith or without reasonable belief that such breach
is in the best interests of the Company and which is not
remedied in a reasonable period of time after receipt of
written notice from the Company specifying such breach or
(ii) the commission by the Executive of a felony involving
moral turpitude. The determination of Cause shall be made
by the Board. Cause shall not exist unless and until the
Company has delivered to the Executive a copy of a
resolution duly adopted by three-quarters (3/4) of the Board
at a meeting of the Board called and held for such purpose
(after reasonable notice to the Executive and an opportunity
for the Executive, together with the Executive's counsel, to
be heard before the Board), finding that in the good faith
opinion of the Board the Executive was guilty of the conduct
set forth in this Section 1(c) and specifying the
particulars thereof in detail. The Company must notify the
Executive that it believes Cause has occurred within ninety
(90) days of its knowledge of the event or condition
constituting Cause or such event shall not constitute Cause
under this Agreement. For purposes of clause (i) above, any
act, or failure to act, by the Executive based upon
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authority given pursuant to a resolution duly adopted by the
Board or based upon the advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best
interests of the Company.
(d) "Change in Control" means the occurrence of
one of the following events:
(i) any "person" (as such term is defined in
Section 3(a)(9) of the Securities Exchange Act of 1934
(the "Exchange Act") and as used in Sections 13(d)(3)
and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of
the Company representing 20% or more of the combined
voting power of the Company's then outstanding securi-
ties eligible to vote for the election of the Board
(the "Company Voting Securities"); provided, however,
that the event described in this paragraph shall not be
deemed to be a Change in Control by virtue of any of
the following situations: (A) an acquisition by the
Company or any Subsidiary; (B) an acquisition by any
employee benefit plan sponsored or maintained by the
Company 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) any
acquisition by the Executive or any group of persons
(within the meaning of Sections 13(d)(3) and 14(d)(2)
of the Exchange Act) including the Executive (or any
entity in which the Executive or a group of persons
including the Executive, directly or indirectly, holds
a majority of the voting power of such entity's
outstanding voting interests); or (F) the acquisition
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of Company Voting Securities from the Company, 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 any person becoming a director
subsequent to the beginning of such twenty-four
(24) month period, whose election, or nomination for
election, by the Company's shareholders was approved by
a vote of at least two-thirds of the directors
comprising the Incumbent Board who are then on the
Board (either by a specific vote or by approval of the
proxy statement of the Company in which such person is
named as a nominee for director, without objection to
such nomination) shall be, for purposes of this
paragraph (ii), considered as though such person were a
member of the Incumbent Board; provided, however, that
no individual initially elected or nominated as a
director of the Company as a result of an actual or
threatened election contest with respect to directors
or any other actual or threatened solicitation of
proxies or consents by or on behalf of any person other
than the Board 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 Company or any
Subsidiary that requires the approval of the Company's
stockholders, whether for such transaction or the
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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 Company Voting Securities that were
outstanding immediately prior to the Business
Combination (or, if applicable, shares into which such
Company 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 Company 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 Parent Corporation) is or
becomes the beneficial owner, directly or indirectly,
of 20% or more of the total voting power of the
outstanding voting securities eligible to elect
directors of the Parent Corporation (or, if there is no
Parent Corporation, the Surviving Corporation), and
(3) at least a majority of the members of the board of
directors of the Parent Corporation (or, if there is no
Parent Corporation, the Surviving Corporation),
following the Business Combination, were members of the
Incumbent Board at the time of the Board's approval of
the execution of the initial agreement providing for
such Business Combination (a "Non-Control Transaction")
or (B) the Business Combination is effected by means of
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the acquisition of Company Voting Securities from the
Company, 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 Company approve
a plan of complete liquidation or dissolution of the
Company or the sale or other disposition of all or
substantially all of the assets of the Company 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
Company Voting Securities as a result of the acquisition of
Company Voting Securities by the Company which, by reducing
the number of Company Voting Securities outstanding,
increases the percentage of shares beneficially owned by
such person; provided, that if a Change in Control would
occur as a result of such an acquisition by the Company (if
not for the operation of this sentence), and after the
Company's acquisition such person becomes the beneficial
owner of additional Company Voting Securities that increases
the percentage of outstanding Company Voting Securities
beneficially owned by such person, a Change in Control shall
then occur.
Notwithstanding anything in this Agreement to the
contrary, if the Executive's employment is terminated prior
to a Change in Control, and the Executive 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 Agreement, the
date immediately prior to the date of such termination of
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employment shall be deemed to be the date of a Change in
Control.
(e) "Company" means Parker-Hannifin Corporation,
an Ohio corporation.
(f) "Date of Termination" means the date on which
the Executive's employment by the Company terminates.
(g) "Good Reason" means, without the Executive's
express written consent, the occurrence of any of the
following events after a Change in Control:
(i) the assignment to the Executive of any
duties (including a diminution of duties) inconsistent
in any adverse respect with the Executive's
position(s), duties, responsibilities or status with
the Company immediately prior to such Change in
Control; (ii) an adverse change in the Executive's
reporting responsibilities, titles or offices with the
Company as in effect immediately prior to such Change
in Control; (iii) any removal or involuntary
termination of the Executive from the Company otherwise
than as expressly permitted by this Agreement or any
failure to re-elect the Executive to any position with
the Company held by the Executive immediately prior to
such Change in Control; (iv) a reduction by the Company
in the Executive's rate of annual base salary as in
effect immediately prior to such Change in Control or
as the same may be increased from time to time
thereafter; (v) any requirement of the Company that the
Executive (A) be based anywhere more than twenty-five
(25) miles from the facility where the Executive is
located at the time of the Change in Control or
(B) travel on Company business to an extent
substantially more burdensome than the travel
obligations of the Executive immediately prior to such
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Change in Control; (vi) the failure of the Company to
(A) continue in effect any employee benefit plan or
compensation plan in which the Executive is
participating immediately prior to such Change in
Control, or the taking of any action by the Company
which would adversely affect the Executive's
participation in or reduce the Executive's benefits
under any such plan (including the failure to provide
the Executive with a level of discretionary incentive
award grants consistent with the past practice of the
Company in granting such awards to the Executive during
the three-Year period immediately preceding the Change
in Control), (B) provide the Executive and the Executi-
ve's dependents with welfare benefits (including,
without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group
life, accidental death and travel accident insurance
plans and programs) in accordance with the most
favorable plans, practices, programs and policies of
the Company and its affiliated companies in effect for
the Executive immediately prior to such Change in
Control, (C) provide fringe benefits in accordance with
the most favorable plans, practices, programs and
policies of the Company and its affiliated companies in
effect for the Executive immediately prior to such
Change in Control, or (D) provide the Executive with
paid vacation in accordance with the most favorable
plans, policies, programs and practices of the Company
and its affiliated companies as in effect for the
Executive immediately prior to such Change in Control,
unless in the case of any violation of (A), (B) or (C)
above, the Executive is permitted to participate in
other plans, programs or arrangements which provide the
Executive (and, if applicable, the Executive's
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dependents) with no less favorable benefits at no
greater cost to the Executive; or (vii) the failure of
the Company to obtain the assumption agreement from any
successor as contemplated in Section 9(b).
Any event or condition described in
Sections 1(g)(i) through (vi) which occurs prior to a Change
in Control, but was at the request of a Third Party, shall
constitute Good Reason following a Change in Control for
purposes of this Agreement (as if a Change in Control had
occurred immediately prior to the occurrence of such event
or condition) notwithstanding that it occurred prior to the
Change in Control. For purposes of this Agreement, any good
faith determination of Good Reason made by the Executive
shall be conclusive; provided, however, that an isolated,
insubstantial and inadvertent action taken in good faith and
which is remedied by the Company promptly after receipt of
notice thereof given by an Executive shall not constitute
Good Reason. The Executive's right to terminate employment
for Good Reason shall not be affected by the Executive's
incapacitation due to mental or physical illness and the
Executive's continued employment shall not constitute
consent to or a waiver of rights with respect to any event
or condition constituting Good Reason. The Executive must
provide notice of termination within ninety (90) days of his
knowledge of an event or condition constituting Good Reason
hereunder or such event shall not constitute Good Reason
hereunder. A transaction which results in the Company no
longer being a publicly traded entity shall not in and of
itself be treated as Good Reason unless and until one of the
events or conditions set forth in Sections 1(g)(i) through
(vii) occurs.
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Notwithstanding anything in this Section 1(g) to
the contrary, if during the 180-day period commencing upon
the 91st day immediately following a Change in Control, the
Executive's employment terminates for any or no reason
(other than for Cause) such termination shall be treated as
a termination for Good Reason hereunder.
(h) "Nonqualifying Termination" means a
termination of the Executive's employment (i) by the Company
for Cause, (ii) by the Executive for any reason other than
Good Reason, (iii) as a result of the Executive's death,
(iv) by the Company due to the Executive's absence from his
duties with the Company on a full-time basis for at least
one hundred eighty (180) consecutive days as a result of the
Executive's incapacity due to physical or mental illness or
(v) as a result of the Executive's Retirement.
(i) "Projected Bonus Amount" means, with respect
to any Year, the greater of (i) the Executive's Target Bonus
Amount for such Year; or (ii) to the extent calculable after
at least one calendar quarter of the Year, the Bonus the
Executive would have earned in the Year in which the
Executive's Date of Termination occurs had the Company's
financial performance through the end of the fiscal quarter
immediately preceding the Date of Termination continued
throughout said Year (the "Earned Bonus Amount").
(j) "Retirement" means the Executive's mandatory
retirement (not including any mandatory early retirement) in
accordance with the Company's retirement policy generally
applicable to its salaried employees, as in effect
immediately prior to the Change in Control, or in accordance
with any retirement arrangement established with respect to
the Executive with the Executive's written consent.
(k) "RONA Plan" means the Company's Return on Net
Assets Plan, or any successor thereto.
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(l) "Subsidiary" means any corporation or other
entity in which the Company 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.
(m) "Target Bonus Amount" means, with respect to
any Year, the Participant's target Bonus for such Year based
upon the Company's forecasted Operational Plan.
(n) "Target Incentive Program" means the
Company's Target Incentive Program, or any successor
thereto.
(o) "Termination Period" means the period of time
beginning with a Change in Control and ending three (3)
years following such Change in Control.
(p) "Year" means the fiscal year of the Company.
2. Payments Upon Termination of Employment.
(a) If during the Termination Period the
employment of the Executive shall terminate, other than by
reason of a Nonqualifying Termination, then the Company
shall pay to the Executive (or the Executive's beneficiary
or estate), within five (5) days following the Date of
Termination, as compensation for services rendered to the
Company:
(i) a lump-sum cash amount equal to the sum of
(A) the Executive's base salary from the Company and
its Subsidiaries through the Date of Termination and
any outstanding Bonus or long-term bonus awards for
which payment is due and owing at such time, (B) any
compensation previously deferred by the Executive other
than pursuant to a tax-qualified plan (together with
any interest and earnings thereon) (the "Deferred
Amount"), plus an additional adjustment payment
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calculated in accordance with the formula set forth in
Exhibit A hereto, (C) any accrued vacation pay, and
(D) to the extent not provided under the Company's
Bonus plans, a pro-rata portion of the Executive's
Projected Bonus Amount for the Year in which the
Executive's Date of Termination occurs, in each case to
the extent not theretofore paid; plus
(ii) a lump-sum cash amount equal to the product
of (A) the lesser of (1) three (3) and (2) the quotient
resulting from dividing the number of full and partial
months from the Executive's Date of Termination until
the Executive would be subject to Retirement, by
twelve (12) and (B) the sum of (1) the Executive's
highest annual rate of base salary during the 12-month
period immediately preceding the Date of Termination
and (2) the highest of (x) the Executive's average
Bonus (annualized for any partial Years of employment)
earned during the 3-Year period immediately preceding
the Year in which the Date of Termination occurs (or
shorter annualized period if the Executive had not been
employed for the full three-Year period), (y) the
Executive's Target Bonus Amount for the Year in which
the Change in Control occurs and (z) the Executive's
Target Bonus Amount for the Year in which the Date of
Termination occurs; provided, that any amount paid
pursuant to this Section 2(a)(ii) shall offset an equal
amount of any severance relating to salary or bonus
continuation to be received by the Executive upon
termination of employment of the Executive under any
severance plan, policy, or arrangement of the Company.
(b) If during the Termination Period, the
employment of the Executive shall terminate, other than by
reason of a Nonqualifying Termination, for a period of three
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(3) years (or, if lesser, the period ending on the date on
which the Executive would be subject to Retirement)
commencing on the Date of Termination, the Company shall
continue to keep in full force and effect (or otherwise
provide) all policies of medical, accident, disability and
life insurance with respect to the Executive and his
dependents with the same level of coverage, upon the same
terms and otherwise to the same extent (and on the same
after-tax basis), as such policies shall have been in effect
immediately prior to the Date of Termination (or, if more
favorable to the Executive, immediately prior to the Change
in Control), and the Company and the Executive shall share
the costs of the continuation of such insurance coverage in
the same proportion as such costs were shared immediately
prior to the Date of Termination.
(c) If during the Termination Period the
employment of the Executive shall terminate, other than by
reason of a Nonqualifying Termination, then the Executive
shall be credited with three (3) years additional age and
service credit for purposes of qualifying for any retiree
medical benefits programs of the Company, although receipt
of such retiree medical benefits shall not commence until
the Executive is otherwise eligible under the terms of the
retiree medical plan. If the Executive is terminated
pursuant to a Nonqualifying Termination and would have been
eligible to retire under the terms and conditions of the
Company's retiree medical program as of immediately prior to
the Executive's Date of Termination (or, if more favorable
to the Executive, as of immediately prior to the Change in
Control), the Executive's termination of employment shall be
treated as a retirement under the Company's retiree medical
program. The retiree medical benefits (and cost) to be
provided to the Executive (and the Executive's eligible
dependents) by the Company shall be no less favorable than
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the benefits (and cost) under the retiree medical program of
the Company as of immediately prior to the Executive's Date
of Termination (or, if more favorable to the Executive, as
of immediately prior to the Change in Control), and shall be
provided notwithstanding any amendment to, or termination
of, the Company's retiree medical program.
(d) If during the Termination Period the
employment of the Executive shall terminate by reason of a
Nonqualifying Termination, then the Company shall pay to the
Executive within thirty (30) days following the Date of
Termination, a cash amount equal to the sum of (i) the
Executive's base salary from the Company and its
Subsidiaries through the Date of Termination and any
outstanding Bonus or long-term bonus awards for which
payment is due and owing at such time, (ii) any compensation
previously deferred by the Executive other than pursuant to
a tax-qualified plan (together with any interest and
earnings thereon), (iii) any accrued vacation pay, and (iv)
if the Nonqualifying Termination is other than for Cause, to
the extent not provided under the Company's Bonus plans, a
pro-rata portion of the Executive's Earned Bonus Amount for
the Year in which the Executive's Date of Termination
occurs, in each case to the extent not theretofore paid.
(e) If subsequent to a Change in Control and the
end of the Termination Period, the employment of the
Executive shall be terminated by the Company (other than by
reason of a Nonqualifying Termination), the Company shall
pay the Executive within five (5) days following his Date of
Termination a lump sum cash payment equal to the sum of
(i) the Executive's highest annual rate of base salary
during the 12-month period immediately preceding the Date of
Termination and (ii) the higher of (A) the Executive's
average Bonus (annualized for any partial years of
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employment) earned during the 3-year period immediately
preceding the year in which the Date of Termination occurs
and (B) the Executive's Target Bonus Amount for the year in
which the Date of Termination occurs; provided, that any
amount paid pursuant to clauses (i) and (ii) of this
Section 2(e) shall offset an equal amount of any severance
relating to salary or bonus continuation to be received by
the Executive upon termination of employment of the
Executive under any severance plan, policy or arrangement of
the Company.
(f) If subsequent to a Change in Control and the
end of the Termination Period, the employment of the
Executive shall be terminated by the Company, the Company
shall pay the Executive within five (5) days following his
Date of Termination a lump sum cash payment equal to (i) the
Executive's base salary from the Company and its
Subsidiaries through the Date of Termination and any
outstanding Bonus or long-term bonus awards for which
payment is due and owing at such time, (ii) any accrued
vacation pay, and (iii) if the termination is other than for
Cause, to the extent not provided under the Company's Bonus
plans, a pro-rata portion of the Executive's Earned Bonus
Amount for the year in which the Executive's Date of
Termination occurs, in each case to the extent not
theretofore paid.
3. Gross-Up Payment.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that
any payment, distribution or acceleration of vesting of any
award or benefit by the Company or its Subsidiaries to or
for the benefit of the Executive (whether paid or payable,
distributed or distributable or accelerated or subject to
acceleration pursuant to the terms of this Agreement or
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otherwise) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code, or any interest or
penalties are incurred by the Executive with respect to such
excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as
the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to
such taxes) imposed upon the Gross-Up Payment, the Executive
retains an amount equal to the sum of (i) the Excise Tax
imposed upon the Payments and (ii) the product of any
deductions disallowed because of the inclusion of the
Gross-Up Payment in the Executive's adjusted gross income
for federal income tax purposes and the highest applicable
marginal rate of federal income taxation for the calendar
year in which the Gross-Up Payment is to be made. For
purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to (1) pay applicable federal
income taxes at the highest applicable marginal rates of
federal income taxation for the calendar year in which the
Gross-Up Payment is to be made, (2) pay applicable state and
local income taxes at the highest applicable marginal rate
of taxation for the calendar year in which the Gross-Up
Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction
of such state and local taxes and (3) have otherwise
allowable deductions for federal income tax purposes at
least equal to those which could be disallowed because of
the inclusion of the Gross-Up Payment in the Executive's
adjusted gross income. The payment of a Gross-Up Payment
under this Section 3(a) shall in no event be conditioned
upon the Executive's termination of employment or the
receipt of severance benefits under this Agreement.
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(b) Subject to the provisions of Section 3(a),
all determinations required to be made under this Section 3,
including whether and when a Gross-Up Payment is required
and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be
made by Mullin Consulting Inc. (the "Accounting Firm") which
shall provide detailed supporting calculations both to the
Company and the Executive within fifteen (15) business days
of the receipt of notice from the Company or the Executive
that there has been a Payment, or such earlier time as is
requested by the Company (collectively, the
"Determination"). In the event that the Accounting Firm is
serving as a consultant for the individual, entity or group
effecting the Change in Control, the Executive may appoint a
nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne
solely by the Company and the Company shall enter into any
agreement requested by the Accounting Firm in connection
with the performance of the services hereunder. The Gross-
Up Payment under this Section 3 with respect to any Payments
shall be made no later than thirty (30) days following the
date of such Payment. If the Accounting Firm determines
that no Excise Tax is payable by the Executive, it shall
furnish the Executive with a written opinion to such effect,
and to the effect that failure to report the Excise Tax, if
any, on the Executive's applicable federal income tax return
will not result in the imposition of a negligence or similar
penalty. The Determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of
the uncertainty in the application of Section 4999 of the
Code at the time of the Determination, it is possible that
Gross-Up Payments which will not have been made by the
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Company should have been made ("Underpayment") or Gross-Up
Payments are made by the Company which should not have been
made ("Overpayment"), consistent with the calculations
required to be made hereunder. In the event that the
Executive thereafter is required to make payment of any
additional Excise Tax, the Accounting Firm shall determine
the amount of the Underpayment that has occurred and any
such Underpayment (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code) shall be
promptly paid by the Company to or for the benefit of the
Executive. In the event the amount of the Gross-Up Payment
exceeds the amount necessary to reimburse the Executive for
his Excise Tax, the Accounting Firm shall determine the
amount of the Overpayment that has been made and any such
Overpayment (together with interest at the rate provided in
Section 1274(b)(2) of the Code) shall be promptly paid by
the Executive to or for the benefit of the Company. The
Executive shall cooperate, to the extent his expenses are
reimbursed by the Company, with any reasonable requests by
the Company in connection with any contests or disputes with
the Internal Revenue Service in connection with the Excise
Tax.
(c) Notwithstanding Section 6 hereof, this
Section 3 shall survive the termination of this Agreement
unless the Executive's employment was terminated by the
Company for Cause.
4. Withholding Taxes. The Company may withhold
from all payments due to the Executive (or his beneficiary
or estate) hereunder all taxes which, by applicable federal,
state, local or other law, the Company is required to
withhold therefrom.
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5. Reimbursement of Expenses. If any contest or
dispute shall arise under this Agreement involving
termination of the Executive's employment with the Company
or involving the failure or refusal of the Company to
perform fully in accordance with the terms hereof, the
Company shall reimburse the Executive, on a current basis,
for all legal fees and expenses, if any, incurred by the
Executive in connection with such contest or dispute
(regardless of the result thereof), together with interest
in an amount equal to the prime rate of Key Bank from time
to time in effect, but in no event higher than the maximum
legal rate permissible under applicable law, such interest
to accrue from the date the Company receives the Executive's
statement for such fees and expenses through the date of
payment thereof.
6. Termination of Agreement. This Agreement
shall be effective on the date hereof and shall continue
until the first to occur of (i) the termination of the
Executive's employment with the Company prior to a Change in
Control (except as otherwise provided hereunder), (ii) a
Nonqualifying Termination, or (iii) the Executive's
termination of employment following the Termination Period.
7. Scope of Agreement. Nothing in this
Agreement shall be deemed to entitle the Executive to
continued employment with the Company or its Subsidiaries,
and if the Executive's employment with the Company shall
terminate prior to a Change in Control, the Executive shall
have no further rights under this Agreement (except as
otherwise provided hereunder); provided, however, that
notwithstanding anything herein to the contrary, any term-
ination of the Executive's employment following a Change in
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Control shall be subject to all of the benefit and payment
provisions of this Agreement.
8. Obligations of the Executive.
The Executive agrees that if a Change in Control
shall occur, the Executive shall not voluntarily leave the
employ of the Company without Good Reason during the 90-day
period immediately following a Change in Control.
9. Successors' Binding Obligation.
(a) This Agreement shall not be terminated by any
Business Combination or transfer of assets. In the event of
any Business Combination or transfer or assets, the
provisions of this Agreement shall be binding upon the
surviving or resulting corporation or any person or entity
to which the assets of the Company are transferred.
(b) The Company agrees that concurrently with any
Business Combination or transfer of assets, it will cause
any successor or transferee unconditionally to assume by
written instrument delivered to the Executive (or his
beneficiary or estate) all of the obligations of the Company
hereunder. Failure of the Company to obtain such assumption
prior to the effectiveness of any such Business Combination
or transfer of assets that results in a Change in Control
shall constitute Good Reason hereunder and shall entitle the
Executive to compensation and other benefits from the
Company in the same amount and on the same terms as the
Executive would be entitled hereunder if the Executive's
employment were terminated following a Change in Control
other than by reason of a Nonqualifying Termination. For
purposes of implementing the foregoing, the date on which
any such Business Combination or transfer of assets becomes
effective shall be deemed the date Good Reason occurs, and
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the Executive may terminate employment for Good Reason on or
following such date.
(c) This Agreement shall inure to the benefit of
and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If the
Executive shall die while any amounts would be payable to
the Executive hereunder had the Executive continued to live,
all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to such
person or persons appointed in writing by the Executive to
receive such amounts or, if no person is so appointed, to
the Executive's estate.
10. Notice. (a) For purposes of this Agreement,
all notices and other communications required or permitted
hereunder shall be in writing and shall be deemed to have
been duly given when delivered or five (5) days after
deposit in the United States mail, certified and return
receipt requested, postage prepaid, addressed as follows:
If to the Executive:
If to the Company:
Parker-Hannifin Corporation
17325 Euclid Avenue
Cleveland, Ohio 44122
Attention: Secretary
or to such other address as either party may have furnished
to the other in writing in accordance herewith, except that
notices of change of address shall be effective only upon
receipt. Alternatively, notice may be deemed to have been
delivered when sent by facsimile or telex to a location
provided by the other party hereto.
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(b) A written notice of the Executive's Date of
Termination by the Company or the Executive, as the case may
be, to the other, shall (i) indicate the specific
termination provision in this Agreement relied upon, (ii) to
the extent applicable, set forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so
indicated and (iii) specify the termination date (which date
shall not be less than fifteen (15) nor more than sixty
(60) days after the giving of such notice). The failure by
the Executive or the Company to set forth in such notice any
fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive
or the Company hereunder or preclude the Executive or the
Company from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
11. Full Settlement; No Mitigation. The
Company's obligation to make any payments provided for by
this Agreement to the Executive and otherwise to perform its
obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or
action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to
seek other employment or take other action by way of
mitigation of the amounts payable to the Executive under any
of the provisions of this Agreement and such amounts shall
not be reduced whether or not the Executive obtains other
employment.
12. Employment with Subsidiaries. Employment
with the Company for purposes of this Agreement shall
include employment with any Subsidiary.
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13. Governing Law; Validity. The interpretation,
construction and performance of this Agreement shall be
governed by and construed and enforced in accordance with
the internal laws of the State of Ohio without regard to the
principle of conflicts of laws. The invalidity or
unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other
provision of this Agreement, which other provisions shall
remain in full force and effect.
14. Counterparts. This Agreement may be executed
in counterparts, each of which shall be deemed to be an
original and all of which together shall constitute one and
the same instrument.
15. Miscellaneous. No provision of this
Agreement may be modified or waived unless such modification
or waiver is agreed to in writing and signed by the
Executive and by a duly authorized officer of the Company.
No waiver by either party hereto at any time of any breach
by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any
prior or subsequent time. Failure by the Executive or the
Company to insist upon strict compliance with any provision
of this Agreement or to assert any right the Executive or
the Company may have hereunder, including without
limitation, the right of the Executive to terminate
employment for Good Reason, shall not be deemed to be a
waiver of such provision or right or any other provision or
right of this Agreement. Except as otherwise specifically
provided herein, the rights of, and benefits payable to, the
Executive, his estate or his beneficiaries pursuant to this
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Agreement are in addition to any rights of, or benefits
payable to, the Executive, his estate or his beneficiaries
under any other employee benefit plan or compensation
program of the Company.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by a duly authorized officer of the
Company and the Executive has executed this Agreement as of
the day and year first above written.
PARKER-HANNIFIN CORPORATION
By:_________________________
_________________________
[EXECUTIVE]
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EXHIBIT A
The purpose of the adjustment payment to be added to the Deferred
Amount pursuant to Section 2(a)(i)(3) (the "Make Whole Amount") is
to offset the Executive's inability to defer until retirement or
later the payment of taxes on both the Deferred Amount and the
earnings and interest that would have otherwise accrued between the
Date of Termination and the date on which the Executive elected to
commence receipt of the Deferred Amount (the "Commencement Date")
under the Company's Executive Deferral Plan (the "Plan").
The Make Whole Amount shall be calculated as follows:
1. The Executive's Deferred Amount under the Plan as of the Date
of Termination (the "EDP Amount") will be projected
forward to the Commencement Date at an assumed tax-deferred
annual earnings rate equal to the Moody's Seasoned Baa
Corporate Bond Yield Average for the last twelve full calendar
months prior to the Date of Termination (the "Moody's Rate")
(such projected amount shall be known as the "Projected
Balance"). The Projected Balance will then be converted into
annual installment benefit payments based upon the Executive's
elected form of retirement payments under the Plan, assuming
continued tax-deferred earnings on the undistributed balance
at the Moody's Rate (the "Projected Annual Payouts"). The
Projected Annual Payouts will then be reduced for assumed
income taxes at the highest applicable federal, state and
local marginal rates of taxation in effect in the Executive's
taxing jurisdiction(s) for the calendar year in which the Make
Whole Amount is paid (the "Tax Rate"). The after-tax Projected
Annual Payouts will be known as the "After-Tax Projected
Benefits".
2. The term "Made Whole Amount", as used herein, shall mean the
EDP Amount plus the Make Whole Amount. The Make Whole Amount
is the amount which, when added to the EDP Amount, will yield
After-Tax Annuity Benefits (as hereinafter defined) equal to
the After-Tax Projected Benefits, based on the following
assumptions:
a. The Made Whole Amount will be taxed at the Tax Rate upon
receipt by the Executive.
b. The after-tax Made Whole Amount will be deemed to be invested
by the Executive in a tax-deferred annuity that is structured
to make payments beginning on the Commencement Date in the
same form as elected by the Executive under the Plan (the
"Annuity").
c. The Annuity will accrue interest at the Moody's Rate,
less 80 basis points (i.e., 0.80%).
d. Annual Annuity payments will be taxed at the Tax Rate
(after taking into account the annuity exclusion ratio),
yielding "After-Tax Annuity Benefits".