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EXHIBIT 10(b)
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. The Plan is hereby amended as of January 1, 1997.
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
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pertains to a Participant, any acquisition by the Participant or any group of
persons (within 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
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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.
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 in accordance with Section 2 of this Article.
2. ELECTION TO DEFER. A Director who desires to defer the payment of
all or a portion of his or her Fees shall complete and deliver to the Secretary
of the Corporation an Election Agreement, as prescribed by the Corporation, to
be effective as of the first day of any calendar quarter beginning at least
three (3) months after the date of the election. An election to defer Fees shall
remain effective until cancelled by the Participant, provided that any such
cancellation shall be effective only with respect to Fees earned after the
September 30 following such election.
3. DEFERRAL ACCOUNT; EARNINGS
(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. A Participants Deferral Account
shall be fully vested at all times.
(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
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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.
4. 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 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 termination of the Participant's services as a
director. An election as to form of payment may be changed by filing a new
election with the Secretary of the Corporation; provided, however, that if the
election is received less than thirteen months before the date payment is to be
made or begin, the Participant's Deferral Account shall be reduced by ten
percent (10%). If payment is made in quarterly installments, the Deferral
Account shall continue to be credited with earnings in accordance with the
appropriate Crediting Rate in accordance with Section 3. The number of years
over which quarterly installments shall be paid will be reduced as needed to
insure that each quarterly installment, when added to any payments under
Section 3 of Article III, is at least $3,000.
5. 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
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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.
6. 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.
7. 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.
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
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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%. The number of years
over which quarterly installments shall be paid will be reduced as needed to
insure that each such installment, when added to any installment payments under
Section 4 of Article II, is at least $3,000. A Participant may not elect to
receive payment of his Parker Stock Account in a form different than the form
elected for his Deferral Account.
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 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.
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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.
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.
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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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