Exhibit (10)(h)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1996
by Parker-Hannifin Corporation
Parker-Hannifin Corporation 1993 Stock Incentive Program,
as amended as of August 15, 1996
*Numbered in accordance with Item 601 of Regulation S-K.
Parker-Hannifin Corporation 1993 Stock Incentive Program
Effective: April 22, 1993
Amended: August 15, 1996
1. Purpose.
The 1993 Stock Incentive Program is intended to help maintain and develop
strong management through ownership of shares of the Corporation by key
employees of the Corporation and its Subsidiaries and for recognition of
efforts and accomplishments which contribute materially to the success of the
Corporation's business interests.
2. Definitions.
In this Program, except where the context otherwise indicates, the
following definitions apply:
(a) "Award" means a stock option, stock appreciation right ("SAR"),
restricted stock, incentive share, dividend equivalent right ("DER"), or other
award under this Program.
(b) "Board" means the Board of Directors of the Corporation.
(c) "Change in Control" means the occurrence of one of the following
events:
(i) any "person" (as such term is defined in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the
Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting power of the
Corporation's then outstanding securities eligible to vote for the
election of the Board (the "Corporation's Voting Securities"); provided,
however, that the event described in this paragraph shall not be deemed
to be a Change in Control by virtue of any of the following situations:
(A) an acquisition by the Corporation or any Subsidiary; (B) an
acquisition by any employee benefit plan sponsored or maintained by the
Corporation or any Subsidiary; (C) an acquisition by any underwriter
temporarily holding securities pursuant to an offering of such
securities; (D) a Non-Control Transaction (as defined in paragraph
(iii)); (E) as pertains to an individual Grantee, any acquisition by the
Grantee or any group of persons (within the meaning of Sections 13(d)(3)
and 14(d)(2) of the Exchange Act) including the Grantee (or any entity in
which the Grantee or a group of persons including the Grantee, directly
or indirectly, holds a majority of the voting power of such entity's
outstanding voting interests); or (F) the acquisition of Corporation
Voting Securities from the Corporation, if a majority of the Board
approves a resolution providing expressly that the acquisition pursuant
to this clause (F) does not constitute a Change in Control under this
paragraph (i);
(ii) individuals who, at the beginning of any period of twenty-
four (24) consecutive months, constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a majority thereof;
provided, that (A) any person becoming a director subsequent to the
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beginning of such twenty-four (24) month period, whose election, or
nomination for election, by the Corporation's shareholders was approved
by a vote of at least two-thirds of the directors comprising the
Incumbent Board who are then on the Board (either by a specific vote or
by approval of the proxy statement of the Corporation in which such person
is named as a nominee for director, without objection to such nomination)
shall be, for purposes of this paragraph (ii), considered as though such
person were a member of the Incumbent Board; provided, however, that no
individual initially elected or nominated as a director of the Corporation
as a result of an actual or threatened election contest with respect to
directors or any other actual or threatened solicitation of proxies or
consents by or on behalf of any person other than the Board shall be
deemed to be a member of the Incumbent Board;
(iii) the consummation of a merger, consolidation, share exchange
or similar form of corporate reorganization of the Corporation or any
Subsidiary that requires the approval of the Corporation's stockholders,
whether for such transaction or the issuance of securities in connection
with the transaction or otherwise (a "Business Combination"), unless (A)
immediately following such Business Combination: (1) more than 50% of the
total voting power of the corporation resulting from such Business
Combination (the "Surviving Corporation") or, if applicable, the ultimate
parent corporation which directly or indirectly has beneficial ownership
of 100% of the voting securities eligible to elect directors of the
Surviving Corporation (the "Parent Corporation"), is represented by
Corporation Voting Securities that were outstanding immediately prior to
the Business Combination (or, if applicable, shares into which such
Corporation Voting Securities were converted pursuant to such Business
Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Corporation
Voting Securities among the holders thereof immediately prior to the
Business Combination, (2) no person (other than any employee benefit plan
sponsored or maintained by the Surviving Corporation or the Parent
Corporation) is or becomes the beneficial owner, directly or indirectly,
of 20% or more of the total voting power of the outstanding voting
securities eligible to elect directors of the Parent Corporation (or, if
there is no Parent Corporation, the Surviving Corporation), and (3) at
least a majority of the members of the board of directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving
Corporation), following the Business Combination, were members of the
Incumbent Board at the time of the Board's approval of the execution of
the initial agreement providing for such Business Combination (a "Non-
Control Transaction") or (B) the Business Combination is effected by means
of the acquisition of Corporation Voting Securities from the Corporation,
and a majority of the Board approves a resolution providing expressly that
such Business Combination does not constitute a Change in Control under
this paragraph (iii); or
(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.
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Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any person acquires beneficial ownership of more than 20%
of the Corporation Voting Securities as a result of the acquisition of
Corporation Voting Securities by the Corporation which, by reducing the number
of Corporation Voting Securities outstanding, increases the percentage of
shares beneficially owned by such person; provided, that if a Change in
Control would occur as a result of such an acquisition by the Corporation (if
not for the operation of this sentence), and after the Corporation's
acquisition such person becomes the beneficial owner of additional Corporation
Voting Securities that increases the percentage of outstanding Corporation
Voting Securities beneficially owned by such person, a Change in Control shall
then occur.
Notwithstanding anything in this Program to the contrary, if a Grantee's
employment is terminated prior to a Change in Control, and the Grantee
reasonably demonstrates that such termination was at the request of a third
party who has indicated an intention or taken steps reasonably calculated to
effect a Change in Control, (a "Third Party"), then for all purposes of this
Program, the date immediately prior to the date of such termination of
employment shall be deemed to be the date of a Change in Control for such
Grantee.
(d) "Code" means the Internal Revenue Code, as in effect from time to
time.
(e) "Compensation and Management Development Committee" or "Committee"
means the committee of the Board so designated. The Committee will be
constituted in a manner that satisfies all applicable legal requirements,
including satisfying the disinterested administration standard set forth in
Rule 16b-3.
(f) "Corporation" means Parker-Hannifin Corporation, an Ohio
corporation, and its Subsidiaries.
(g) "Designated beneficiary" means the person designated by the grantee
of an award hereunder to be entitled, on the death of the grantee, to any
remaining rights arising out of such award. Such designation must be made in
writing and in accordance with such regulations as the Committee may
establish.
(h) "Detrimental activity" means activity that is determined in
individual cases, by the Committee or its express delegate, to be detrimental
to the interests of the Corporation or a Subsidiary, including without
limitation (i) the rendering of services for an organization, or engaging in a
business, that is, in the judgment of the Committee or its express delegate,
in competition with the Corporation; (ii) the disclosure to any one outside of
the Corporation, or the use for any purpose other than the Corporation's
business, of confidential information or material related to the Corporation,
whether acquired by the employee during or after employment with the
Corporation; or (iii) fraud, embezzlement, theft-in-office or other illegal
activity.
(i) "Dividend equivalent right," herein sometimes called a "DER," means
the right of the holder thereof to receive, pursuant to the terms of the DER,
credits based on the cash dividends that would be paid on the shares specified
in the DER if such shares were held by the grantee, as more particularly set
forth in Section 12(a) below.
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(j) "Eligible employee" means an employee who is an officer, or in a
managerial, executive, technical, professional, or other key position as
determined by the Committee.
(k) "Employee" means a regular employee of the Corporation or one of its
Subsidiaries.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
(m) "Fair market value" in relation to a share as of any specific time
shall mean such value as reported for New York Stock Exchange--Composite
Transactions on such date, or if no shares are traded on that date, the next
preceding date on which trading occurred.
(n) "Grantee" means a recipient of an award under this Program.
(o) "Incentive share" means an award of shares granted pursuant to
Section 11 below.
(p) "Incentive stock option," herein sometimes called an "ISO," means a
stock option meeting the requirements of Section 422 of the Code or any
successor provision.
(q) "Insider" means a person subject to the reporting requirements of
Section 16(a) of the Exchange Act with respect to equity securities of the
Corporation.
(r) "Restricted stock" means any share issued with the restriction that
the holder may not sell, transfer, pledge, or assign such share and such other
restrictions (which may include, but are not limited to, restrictions on the
right to vote or receive dividends) which may expire separately or in
combination, at one time or in installments, all as specified by the grant.
(s) "Rule 16b-3" means Rule 16b-3 (or any successor thereto) under the
Exchange Act that exempts from Section 16(b) of the Exchange Act transactions
under employee benefit plans, as in effect from time to time with respect to
this Program.
(t) "Share" means a common share, par value $.50, of the Corporation
issued and reacquired by the Corporation or previously authorized but
unissued.
(u) "Shareholder-approved plan" means any of the plans constituting
parts of any of the incentive programs previously or hereafter approved by
shareholders of the Corporation.
(v) "Stock appreciation right," herein sometimes called an "SAR," means
the right of the holder thereof to receive, pursuant to the terms of the SAR,
a number of shares or cash or a combination of shares and cash, based on the
increase in the value of the number of shares specified in the SAR, as more
particularly set forth in Section 9 below.
(w) "Subsidiary" means any corporation, partnership, or other entity in
which the Corporation, directly or indirectly, owns a 50 percent or greater
equity interest.
(x) "Terminate" means cease to be an employee, except by death, but a
change of employment from the Corporation or one Subsidiary to another
Subsidiary or to the Corporation shall not be considered a termination.
(y) "Terminate normally" for an employee participating in this Program
means terminate
(i) as a result of retirement under the applicable
retirement plan or policy of the Corporation or a Subsidiary,
(ii) as a result of that employee becoming eligible for
disability income under the Corporation's long-term disability
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program, or
(iii) with written approval of the Committee given in the
context of recognition that all or a specified portion of the
outstanding awards to that employee will not expire or be
forfeited or annulled because of such termination and, in each
such case, without being terminated for cause.
(z) "Year" means fiscal year.
3. Eligibility.
The selection of eligible employees to receive awards will be within the
discretion of the Committee. More than one award may be granted to the same
eligible employee. Members of the Committee are not eligible for the grant of
awards.
4. Administration.
(a) The Committee shall administer this Program. The Committee will,
subject to the terms of the Program, have the authority to (i) select the
eligible employees who will receive awards; (ii) grant awards; (iii) determine
the number and types of awards to be granted to employees; (iv) determine the
terms, conditions, vesting periods and restrictions applicable to awards;
(v) adopt, alter and repeal administrative rules and practices governing this
Program; (vi) interpret the terms and provisions of this Program and any
awards granted under this Program; (vii) prescribe the forms of any notices of
awards or other instruments relating to awards; and (viii) otherwise supervise
the administration of this Program. All decisions by the Committee will be
made with the approval of not less than a majority of its members.
(b) All determinations and interpretations pursuant to the provisions of
this Program shall be binding and conclusive upon the individual employees
involved and all persons claiming under them.
(c) With respect to Insiders, transactions under this Program are
intended to comply with all applicable conditions of Rule 16b-3. To the
extent any provision of this Program or any action by the Committee under this
Program fails to so comply, such provision or action shall, without further
action by any person, be deemed to be automatically amended to the extent
necessary to effect compliance with Rule 16b-3, provided that if such
provision or action cannot be amended to effect such compliance, such
provision or action shall be deemed null and void, to the extent permitted by
law and deemed advisable by the appropriate authority. Each award to an
Insider under this Program shall be deemed issued subject to the foregoing
qualification.
(d) An award under this Program is not transferable except, as provided
in the award, by will, pursuant to the laws of descent and distribution, or
pursuant to a qualified domestic relations order, and is not subject, in whole
or in part, to attachment, execution, or levy of any kind. The designation by
a grantee of a designated beneficiary shall not constitute a transfer.
(e) Any rights with respect to an award granted under this Program
existing after the grantee dies are exercisable by the grantee's designated
beneficiary or, if there is no such designated beneficiary who may, and does,
lawfully do so, by the grantee's personal representative.
(f) Except as otherwise provided herein, a particular form of award may
be granted to an eligible employee either alone or in addition to other awards
hereunder. The provisions of particular forms of award need not be the same
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with respect to each recipient.
(g) The Committee may delegate any of its authority to any other person
or persons that it deems appropriate, provided the delegation does not cause
the Program or any awards granted under this Program to fail to qualify for
the exemption provided by Rule 16b-3.
(h) This Program and all action taken under it shall be governed by the
laws of the State of Ohio without giving effect to the principles of conflict
of laws thereof.
5. Term.
This Program will continue in effect until terminated by the Board.
6. Awards That May Be Granted.
The aggregate number of shares that may be subject to awards granted
under this Program in any fiscal year, subject to adjustment as provided in
Section 7 below, will be equal to the sum of (a) one and one-half percent
(1.5%) of the number of shares outstanding on the last day of the previous
fiscal year; plus (b) the number of shares that were available for the grant
of awards in previous fiscal years; provided, that, in no event will the
number of shares available for the grant of awards in any fiscal year exceed
two and one-half percent (2.5%) of the shares outstanding on the last day of
the previous fiscal year. The aggregate number of shares that may be issued
upon exercise of ISOs is 1,000,000. When an unexercised award lapses, expires,
terminates or is forfeited, the related shares may be available for
distribution in connection with future awards but will continue to be subject
to the 2.5% maximum described above. The assumption of awards granted by an
organization acquired by the Corporation, or the grant of awards under this
Program in substitution for any such awards, will not reduce the number of
shares available in any fiscal year for the grant of awards under this
Program.
7. Adjustments.
In the event that the Committee shall determine that any stock dividend,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of shares, warrants
or rights offering to purchase common stock of the Corporation at a price
substantially below fair market value, or other similar corporate event
affects the common stock of the Corporation such that an adjustment is
required in order to preserve the benefits or potential benefits intended to
be made available under this Program, then the Committee shall, in its sole
discretion, and in such manner as the Committee may deem equitable, adjust any
or all of (a) the number and kind of shares which thereafter may be the
subject of Awards under this Program, (b) the number and kind of shares
subject to outstanding Awards, and (c) the exercise price with respect to any
of the foregoing.
8. Stock Options.
One or more stock options can be granted to any eligible employee. Each
stock option so granted shall be subject to such terms and conditions as the
Committee shall impose. The exercise price per share shall be specified by
the grant, but shall in no instance be less than 100 percent of fair market
value at the time of grant. Payment of the exercise price shall be made in
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cash, shares, or other consideration, or any combination thereof, in
accordance with the terms of this Program and any applicable regulations of
the Committee in effect at the time and valued at fair market value on the
date of exercise of the stock option. Stock options granted hereunder may be
designated as ISOs (except to the extent otherwise specified in this Section
8) or nonqualified stock options. To the extent that the aggregate fair
market value of shares with respect to which stock options designated as ISOs
are exercisable for the first time by any grantee during any year (under all
plans of the Corporation and any Subsidiary thereof) exceeds $100,000, such
stock options shall be treated as not being ISOs. ISOs must comply with
requirements of Section 422 of the Code.
9. Stock Appreciation Rights.
(a) An SAR may be granted to an eligible employee as a separate award
hereunder. Any such SAR shall be subject to such terms and conditions as the
Committee shall impose, which shall include provisions that (i) such SAR shall
entitle the holder thereof, upon exercise thereof in accordance with such SAR
and the regulations of the Committee, to receive from the Corporation that
number of shares having an aggregate value equal to the excess of the fair
market value, at the time of exercise of such SAR, of one share over the
exercise price per share specified by the grant of such SAR (which shall in no
instance be less than 100 percent of fair market value at the time of grant)
times the number of shares specified in such SAR, or portion thereof, which is
so exercised.
(b) Any stock option granted under this Program may include an SAR,
either at the time of grant or by amendment. An SAR included in a stock
option shall be subject to such terms and conditions as the Committee shall
impose, which shall include provisions that
(i) such SAR shall be exercisable to the extent, and only to the
extent, the stock option is exercisable; and
(ii) such SAR shall entitle the optionee to surrender to the
Corporation unexercised the stock option in which the SAR is included,
or any portion thereof, and to receive from the Corporation in exchange
therefor that number of shares having an aggregate value equal to the
excess of the fair market value, at the time of exercise of such SAR, of
one share over the exercise price specified in such stock option times
the number of shares specified in such stock option, or portion thereof,
which is so surrendered.
(c) In lieu of the right to receive all or any specified portion of such
shares, an SAR may entitle the holder thereof to receive the cash equivalent
thereof as specified by the grant.
(d) An SAR may provide that such SAR shall be deemed to have been
exercised at the close of business on the business day preceding the
expiration of such SAR or the related stock option, if any, if at such time
such SAR has positive value and would have expired.
10. Restricted Stock.
(a) An award of restricted stock may be granted hereunder to an eligible
employee, for no cash consideration, for such minimum consideration as may be
required by applicable law, or for such other consideration as may be
specified by the grant. The terms and conditions of restricted stock,
including the vesting period, shall be specified by the Committee, at its sole
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discretion, in the grant.
(b) Any restricted stock issued hereunder may be evidenced in such
manner as the Committee in its sole discretion shall deem appropriate,
including, without limitation, book-entry registration or issuance of a stock
certificate or certificates. In the event any stock certificate is issued in
respect of shares of restricted stock awarded hereunder, such certificate
shall bear an appropriate legend with respect to the restrictions applicable
to such award.
11. Incentive Shares.
(a) An incentive award may be granted hereunder in the form of shares.
Incentive shares may be granted to an eligible employee for no cash
consideration, for such minimum consideration as may be required by applicable
law, or for such other consideration as may be specified by the grant. The
terms and conditions of incentive shares shall be specified by the grant.
(b) Incentive shares may be paid to the grantee in a single installment
or in installments and may be paid at the time of grant or deferred to a later
date or dates. Each grant shall specify the time and method of payment as
determined by the Committee.
12. Dividend Equivalent Rights; Interest Equivalents.
(a) A DER may be granted hereunder to an eligible employee, as a
component of another award or as a separate award. The terms and conditions
of DERs shall be specified by the grant. Dividend equivalents credited to the
holder of a DER may be paid currently or may be deemed to be reinvested in
additional shares (which may thereafter accrue additional dividend
equivalents). Any such reinvestment shall be at fair market value at the time
thereof. DERs may be settled in cash or shares or a combination thereof, in a
single installment or installments. A DER granted as a component of another
award may provide that such DER shall be settled upon exercise, settlement, or
payment of, or lapse of restrictions on, such other award, and that such DER
shall expire or be forfeited or annulled under the same conditions as such
other award. A DER granted as a component of another award may also contain
terms and conditions different from such other award.
(b) Any award under this Program that is settled in whole or in part in
cash on a deferred basis may provide by the grant for interest equivalents to
be credited with respect to such cash payment. Interest equivalents may be
compounded and shall be paid upon such terms and conditions as may be
specified by the grant.
13. Deferral of Payment.
With the approval of the Committee, the delivery of shares, cash or any
combination thereof subject to an award may be deferred, either in the form of
installments or a single future delivery. The Committee may also permit
selected grantees to defer payment of some or all of their awards, as well as
other compensation, in accordance with procedures established by the Committee
to assure that recognition of taxable income is deferred under the Code.
14. Termination of Employment.
If the employment of a grantee terminates for any reason, all
unexercised, deferred and unpaid awards may be exercisable and paid only in
accordance with rules established by the Committee. These rules may provide,
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as the Committee deems appropriate, for the expiration, continuation, or
acceleration of the vesting of all or part of the awards.
15. Detrimental Activity.
The Committee may cancel any unexpired, unpaid or deferred awards at any
time if the grantee is not in compliance with all applicable provisions of
this Program or with the terms of any notice of award or if the grantee
engages in detrimental activity. The Committee may, in its discretion and as a
condition to the exercise of an award, require a grantee to acknowledge that
he or she is in compliance with all applicable provisions of the Program and
of any notice of award and has not engaged in any detrimental activity.
16. Change in Control.
The Committee may in its discretion and upon such terms as it deems
appropriate, accelerate the date on which any outstanding option or SAR
becomes exercisable or waive the restrictions or other terms and conditions on
the vesting of any restricted or incentive shares in the event of a proposed
change in control of the Corporation. In addition to the foregoing, the
Corporation may, with the approval of the Committee, purchase stock options
previously granted to any person who is at the time of any such transaction an
employee of the Corporation for a price equal to the difference between the
consideration per share payable pursuant to the terms of the transaction and
the option price.
17. Substitute Awards.
The Committee may grant awards in substitution for, or upon the
assumption of, awards granted by another corporation that is merged into,
consolidated with, or all or a substantial part of the assets or stock of
which is acquired by the Corporation or a Subsidiary. The terms and
provisions of any awards granted under this Section 16 may vary from the terms
and provisions otherwise specified in this Program and may, instead,
correspond to the terms and provisions of the awards granted by the other
corporation.
18. Amendments to This Program; Amendments of Outstanding Awards.
(a) The Board can from time to time amend or terminate this Program, or
any provision hereof. Approval of the shareholders of the Corporation will be
required only to the extent necessary to comply with Rule 16b-3 or any other
applicable law, regulation, or listing requirement, or to qualify for an
exemption or characterization that is deemed desirable by the Board.
(b) The Committee may, in its discretion, amend the terms of any award,
prospectively or retroactively, but no such amendment may impair the rights of
any grantee without his or her consent. The Committee may, in whole or in
part, waive any restrictions or conditions applicable to, or accelerate the
vesting of, any award.
19. Withholding Taxes.
The Corporation shall have the right to deduct from any cash payment made
under this Program any federal, state or local income or other taxes required
by law to be withheld with respect to such payment. It shall be a condition
to the obligation of the Corporation to deliver shares or securities of the
Corporation upon exercise of a stock option or SAR, upon settlement of a DER,
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upon delivery of restricted stock or incentive shares, or upon exercise,
settlement, or payment of any other award under this Program, that the grantee
of such award pay to the Corporation such amount as may be requested by the
Corporation for the purpose of satisfying any liability for such withholding
taxes. Any award under this Program may provide by the grant that the grantee
of such award may elect, in accordance with any applicable regulations of the
granting authority, to pay a portion or all of the amount of such minimum
required or additional permitted withholding taxes in shares. The grantee
shall authorize the Corporation to withhold, or shall agree to surrender back
to the Corporation, on or about the date such withholding tax liability is
determinable, shares previously owned by such grantee or a portion of the
shares that were or otherwise would be distributed to such grantee pursuant to
such award having a fair market value equal to the amount of such required or
permitted withholding taxes to be paid in shares.
20. Grants of Awards to Employees Who are Foreign Nationals.
Without amending this Program, but subject to the limitations specified
in Section 18 above, the Committee can grant, amend, administer, annul, or
terminate awards to eligible employees who are foreign nationals on such terms
and conditions different from those specified in this Program as may in the
judgment of the granting authority be necessary or desirable to foster and
promote achievement of the purposes of this Program.
21. Rights of Employees.
Nothing in this Program will confer upon any grantee the right to
continued employment by the Corporation or limit in any way the Corporation's
right to terminate any grantee's employment at will.
22. Effective Date.
This Program was ratified by the Board and became effective on
April 22, 1993, subject to approval of the shareholders on or before
October 28, 1993. Awards may be granted prior to approval of the Program by
shareholders, but no such award may be exercised until after the Program has
been approved by shareholders. If the shareholders do not approve the Program
on or before October 28, 1993, all awards granted under the Program shall
terminate.
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