EXHIBIT 10.3 (a)
PALL CORPORATION
2001 Stock Option Plan for Non-Employee Directors
ss. 1. Purpose
The purpose of this Pall Corporation 2001 Stock Option Plan for
Non-Employee Directors (the "Plan") is to secure for Pall Corporation (the
"Company") and its stockholders the benefits of the incentive inherent in
increased common stock ownership by the members of the Board of Directors of the
Company (the "Board") who are not employees of the Company or any of its
subsidiaries.
ss. 2. Administration
The Plan shall be administered by the Compensation Committee of the
Board (the "Committee"). The Committee shall have all the powers vested in it by
the terms of the Plan. However, the Board, not the Committee, shall have the
sole power and authority (within the limitations described herein) to prescribe
the form of the document embodying and evidencing stock options granted under
the Plan ("Options"). The Committee shall, subject to the provisions of the
Plan, have the power to construe the Plan, to determine all questions arising
thereunder and to adopt and amend such rules and regulations for the
administration of the Plan as it may deem desirable. Any decision of the
Committee in the administration of the Plan, as described herein, shall be final
and conclusive. The Committee may act only by a majority of its members in
office, except that the members thereof may authorize any one or more of their
number or the Secretary or any other officer of the Company to execute and
deliver documents in connection with the Plan, including Options granted under
the Plan. No member of the Committee shall be liable for anything done or
omitted to be done by such member or by any other member of the Committee in
connection with the Plan, except for his or her own willful misconduct or as
expressly provided by statute.
ss. 3. Amount of Stock
The stock which may be issued and sold under the Plan shall be the
Common Stock of the Company ("Common Stock") of a total number not exceeding
400,000 shares, subject to adjustment as provided in ss. 6 hereof. The stock to
be issued may be either authorized and unissued shares or reacquired shares. In
the event that Options granted under the Plan shall terminate or expire without
having been exercised in full, new Options may be granted covering the shares
not purchased under such lapsed Options.
ss. 4. Eligibility and Grant of Options
As used herein, the term "Granting Date" means the fifth day of January
in each year during which the Plan is in effect beginning with the year 2002
except that if said date is not a day on which trading takes place on the New
York Stock Exchange, the Granting Date shall be the first day after January 5th
on which trading does take place on said Exchange. Each member of the Board who
is not an employee of the Company or any of its subsidiaries at the time when
Options are to be granted under the ensuing provisions of this ss. 4 (a
"Non-Employee Director") shall automatically, by virtue of the Plan and without
any action by the Committee or the Board, be granted an Option as follows:
(a) On each Granting Date, each Non-Employee Director who was elected a
director of the Company by shareholders at the annual meeting of shareholders
next preceding such Granting Date for the first time (i.e., disregarding any
previous election of such person by the Board) shall be granted an Option on
12,000 shares (an "Initial Grant").
(b) On the Granting Date in 2002 and in every second year thereafter
(e.g., 2004, 2006, etc.), each person who is a Non-Employee Director on such
Granting Date and who is not entitled to an Initial Grant under ss. 4(a) on such
Granting Date shall be granted an Option on 7,500 shares.
ss. 5. Terms and Conditions of Options
Each Option granted under the Plan shall be evidenced by an instrument
in such form as the Board shall prescribe from time to time in accordance with
the Plan and all applicable laws and regulations and shall be subject to the
following terms and conditions and those set forth elsewhere in the Plan, which
terms and conditions shall be deemed incorporated in each Option by reference to
the provisions of the Plan:
(a) The Option exercise price shall be the Fair Market Value (as
defined in ss. 7(a) hereof) of the shares of Common Stock subject to such Option
on the date the Option is granted (the "date of grant") but in no event less
than the par value of the shares.
(b) No part of an Option may be exercised (i) before the first
anniversary of the date of grant or (ii) after the tenth anniversary of the date
of grant. The minimum number of shares with respect to which an Option may be
exercised in part at one time shall be the lesser of (i) 100 or (ii) the number
of shares remaining available under the Option. Subject to the foregoing and to
the ensuing provisions of this ss. 5, an Option may be exercised as follows:
(i) at any time or times from the first anniversary of the
date of grant to the date preceding the second anniversary, both such
dates inclusive, for any number of shares up to 25 percent of the
number of shares covered thereby;
(ii) at any time or times from the second anniversary of the
date of grant to the date preceding the third anniversary, both such
dates inclusive, as to any number of shares which, when added to the
shares as to which such Option has theretofore been exercised, will not
exceed 50 percent of the number of shares covered thereby;
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(iii) at any time or times from the third anniversary of the
date of grant to the date preceding the fourth anniversary, both such
dates inclusive, as to any number of shares which, when added to the
shares as to which such Option has theretofore been exercised, will not
exceed 75 percent of the shares covered thereby; and
(iv) at any time or times from the fourth anniversary of the
date of grant to the tenth anniversary, both such dates inclusive, as
to any number of shares which, when added to the shares as to which the
Option has theretofore been exercised, will not exceed the total number
of shares covered thereby.
(c) The Option shall not be transferable by the optionee otherwise than
by will or the laws of descent and distribution, and shall be exercisable during
the optionee's lifetime only by the optionee, or if a legal guardian or other
legal representative is appointed for an optionee, by such guardian or
representative, except that an Option in its entirety (or the entire portion
thereof remaining after any partial exercise thereof) is transferable to any
"family member" of the optionee, as the term "family member" is defined, at the
time of any such proposed transfer, in the General Instructions to Form S-8
promulgated by the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933 as amended (the "Securities Act"). It is a condition
to any such transfer to a family member that (i) not less than 20 days before
any such transfer, or such shorter period as the Committee may authorize in a
particular case, the optionee has notified the Secretary of the Company of his
or her intention to make such transfer and (ii) such transfer complies with the
requirements of said General Instructions to Form S-8 which are conditions to
the registration under the Securities Act on said Form S-8 of the issuance and
sale to the transferee of the shares issuable upon exercise of the Option,
including but not limited to the provision of said General Instructions that
Form S-8 is not available for the exercise of Options transferred "for value" as
defined therein. (For the information of optionees, at the time of adoption of
this Plan said General Instructions to Form S-8 define "family member" as
follows: "For purposes of this form, 'family member' includes any child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse,
sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships, any person sharing the employees [sic] household (other than a
tenant or employee), a trust in which these persons have more than fifty percent
of the beneficial interest, a foundation in which these persons (or the
employee) control the management of assets, and any other entity in which these
persons (or the employee) own more than fifty percent of the voting interests."
In the event that the Commission should change that definition prior to any
proposed transfer, the definition as so changed shall apply and govern.)
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(d) No Option or any part of an Option shall be exercisable:
(i) unless written notice of exercise, in form satisfactory to
the Committee, is given to the Company; and
(ii) unless the person exercising the Option makes payment to
the Company in full in United States dollars by cash or check of such
amount as is sufficient to satisfy the Company's obligation, if any, to
withhold federal, state and local taxes by reason of such exercise or
makes such other arrangement satisfactory to the Committee as will
enable the Company to satisfy any such obligation.
(e) At the time notice of exercise of an Option is given pursuant to
ss. 5(d)(i) hereof, the person exercising the Option shall either (I) make full
payment in United States dollars by cash or check of the Option exercise price
of the shares being acquired (sometimes hereinafter called the "purchase price")
or (II) if the person exercising the Option is the individual to whom the Option
was granted and at the time of exercise such individual is a member of the
Board, such optionee may elect to pay the purchase price on an installment
payment basis on the following terms and conditions:
(A) The installments payable shall be the minimum amounts
required to be paid by Regulation U of the Board of Governors of the
Federal Reserve System as in effect as of the date of exercise of the
Option or any successor regulation (hereinafter "Regulation U") or
such greater installment payments as the Board may prescribe.
(B) The optionee shall not be required to pay interest to the
Company on the unpaid balance of the purchase price.
(C) The unpaid balance of the purchase price shall be
immediately payable in full upon demand made by the Company to the
optionee (or, if the optionee has died, to the legal representatives
of his or her estate or the successor owner of the stock, hereinafter
collectively "Optionee's Successors").
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(D) The shares for which the Option is exercised shall be
issued to and registered in the name of the optionee but shall be
endorsed by the optionee in blank (either on the certificate or on a
separate stock power) and held by the Company as collateral security
for the unpaid balance of the purchase price. Neither the optionee nor
the Optionee's Successors shall be permitted to sell, withdraw, pledge
or otherwise dispose of all or any part of such collateral except at a
time when such sale, withdrawal, pledge or other disposition is
permitted by Regulation U. Subject to compliance with the immediately
preceding sentence, the optionee (and the Optionee's Successors) shall
have the right at any time and from time to time to withdraw part or
all of the shares from the collateral so held by the Company upon
payment of the unpaid balance of the purchase price of the shares
withdrawn. For purposes of determining such unpaid balance, each
payment made otherwise than to obtain withdrawal of shares under the
immediately preceding sentence shall be applied pro rata to all shares
which at the time of such payment are held by the Company as
collateral for the payment of the balance of the purchase price. Upon
default by the optionee (or the Optionee's Successors) in the making
of any payment due under the foregoing provisions of this ss. 5(e),
the Company shall have with respect to the collateral all of the
rights of a secured party under the Uniform Commercial Code as in
effect in the State of New York. In addition, upon a default in the
making of any payment due under these installment-payment provisions,
the Company shall have the right, but not the obligation, to give
written notice to the optionee (or the Optionee's Successors) to the
effect that if such payment is not received by the Company by the
payment date specified in such notice, which date shall be not less
than 21 days after the date of giving of such notice, (i) the Company
shall have the right to retain and cancel the shares held as
collateral, crediting against the payment due the Fair Market Value
(as defined in ss. 7(a) hereof) of such shares on the payment date
specified in such notice and (ii) the optionee (and the Optionee's
Successors) shall be and remain liable for any balance due after such
crediting.
(E) The optionee (and the Optionee's Successors) shall be
entitled, from the date of exercise of such Option, to all of the
rights of a shareholder, including the right to vote the shares and
(subject to the rights of the Company pursuant to subparagraph (D)
next above in the event of a payment default) to receive and retain
all dividends paid thereon.
(f) Except as limited by ss. 7(c) hereof, the Board is authorized in
its discretion, and with the consent of the optionee, to make amendments, not in
conflict with the Plan or any applicable law or regulation, in the terms of any
Option granted under the Plan.
(g) In addition to the methods of payment of the Option exercise price
authorized by ss. 5(e) hereof, the person exercising the Option, at his or her
election, shall have the right to make payment at the time of exercise by
delivering to the Company shares of Common Stock of the Company having a total
Fair Market Value (as defined in ss. 7(a) hereof) equal to the Option exercise
price, or a combination of cash and such shares having a total Fair Market Value
equal to the Option exercise price, provided, however, that all shares so
delivered must have been beneficially owned by the person exercising the Option
for at least six months prior to the Option exercise date and, upon request, the
Company shall be given satisfactory proof of such beneficial ownership.
Certificates representing shares delivered to the Company pursuant to this
paragraph shall be duly endorsed or accompanied by appropriate stock powers, in
either case with signature guaranteed if so required by the Company.
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(h) If at the time of the death of an optionee an Option granted under
the Plan has not been fully exercised and is outstanding, the optionee's estate
or any person who has acquired the right to exercise the Option by bequest or
inheritance or by reason of the optionee's death or by transfer during the
optionee's lifetime to a "family member" in accordance with ss. 5(c) hereof may,
until the date one year after the date of the optionee's death and not
thereafter (but in no event after the tenth anniversary of the date of grant),
exercise the Option with respect to the number of shares as to which the
optionee could have exercised it at the time of his or her death.
(i) If an optionee ceases to be a member of the Board for any reason
other than death or removal from the Board for cause in accordance with law,
then, except as provided in the next sentence hereof, the Option shall
thereafter be exercisable until the date one year after the date on which the
optionee ceases to be a member of the Board and not thereafter (but in no event
after the tenth anniversary of the date of grant) and only with respect to the
number of shares as to which the optionee could have exercised the Option at the
time that he or she ceased to be a member of the Board. Notwithstanding the
immediately preceding sentence, if at the time that an optionee ceases to be a
member of the Board he or she has been a member of the Board for at least two
full three-year terms (six years, more or less, depending on the dates of annual
meetings, which vary somewhat from year to year), the Option shall continue to
vest in accordance with the vesting schedule set forth in ss. 5(b) and shall
remain outstanding and exercisable until the tenth anniversary of the date of
grant (subject to the provisions of ss. 5(h) if the optionee shall die prior to
such tenth anniversary).
ss. 6. Adjustment in the Event of Change in Stock
If the Company effects any stock split, stock dividend, combination,
exchange of shares or similar capital adjustment, the aggregate number and kind
of shares available under the Plan, the number, kind and price of shares subject
to outstanding Options and the number of shares constituting an Option grant
under ss. 4 hereof, shall be appropriately and equitably adjusted so as to
reflect such change, all as determined by the Board.
ss. 7. Miscellaneous Provisions
(a) As used in the Plan, "Fair Market Value" means the arithmetic mean
of the highest and lowest sales prices of the Common Stock on the date of grant
or other date as of which the Common Stock is to be valued hereunder, as
reported in New York Stock Exchange Composite Transactions. If no sale shall be
reported in New York Stock Exchange Composite Transactions for the valuation
date in question, Fair Market Value shall be determined by the Committee in
accordance with Treasury Regulations applicable to incentive stock options.
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(b) Nothing in the Plan or in any Option granted under the Plan shall
confer any rights on any director to continue as a director of the Company or
shall interfere in any way with the right of the Company or its shareholders to
remove such person as a director in accordance with applicable law. If a
director shall be removed for cause in accordance with law, any Option held by
such person shall automatically terminate as of the date of such removal.
(c) It is the intent of the Company that the Plan comply in all
respects with Rule 16b-3 or any successor rule ("Rule 16b-3") under the
Securities Exchange Act of 1934, as amended and that any ambiguities or
inconsistencies in the Plan be interpreted to give effect to such intention. The
Committee may adopt rules and regulations under, and amend, the Plan in
furtherance of such intent. Anything elsewhere in the Plan to the contrary
notwithstanding, neither the Board nor the Committee shall have the power to
amend the Plan in any way or take any other action which would cause the Plan to
fail to qualify as or be disqualified as a "formula plan" under and for purposes
of Rule 16b-3 and the instructions thereto.
(d) Any director has the right to waive the granting of Options to him
or her on the next Granting Date on which an Option would be granted to such
director, by notice to the Secretary of the Company given prior to such Granting
Date.
ss. 8. Change in Control
(a) In the event of a "Change in Control" of the Company (as defined in
ss. 8(b) hereof), Options outstanding under the Plan on the date on which the
Change in Control occurs shall become exercisable in full on said date (i.e., to
the extent that any such Option or portion thereof is not yet exercisable on the
date on which the Change in Control occurs, the right to exercise such Option as
to all or any part of the shares covered thereby shall be accelerated).
(b) A "Change in Control" for purposes of the Plan shall mean the
occurrence of any of the following:
(i) the "Distribution Date" as defined in ss. 3 of the Rights
Agreement dated as of November 17, 1989 between the Company and United
States Trust Company of New York as Rights Agent, as amended by
Amendment No. 1 thereto dated April 20, 1999, and as the same may have
been further amended or extended to the time in question or in any
successor agreement (the "Rights Agreement"); or
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(ii) any event described in ss. 11(a)(ii)(B) of the Rights
Agreement; or
(iii) any event described in ss. 13 of the Rights Agreement,
or
(iv) the date on which the number of duly elected and
qualified directors of the Company who were not either elected by the
Board or nominated by the Board or its Nominating Committee for
election by the shareholders shall equal or exceed one-third of the
total number of directors of the Company as fixed by its by-laws;
provided, however, that no Change in Control shall be deemed to have occurred,
and no rights arising upon a Change in Control pursuant to ss. 8(a) shall exist,
to the extent that the Board so determines by resolution adopted prior to the
Change in Control. Any such resolution may be rescinded or countermanded by the
Board at any time.
ss. 9. Amendment
Except as provided in ss. 7(c) hereof, the Plan may be amended at any
time and from time to time by the Board as the Board shall deem advisable,
including, but not limited to, amendments necessary to qualify for any exemption
or to comply with applicable law or regulations; provided, however, that the
Plan may not, without further approval by the shareholders of the Company, be
amended to increase the total number of shares of Common Stock which may be
issued upon the exercise of Options granted under the Plan above the number set
forth in ss. 3 hereof as said number may have been adjusted pursuant to ss. 6
hereof. No amendment of the Plan shall alter or impair any of the rights or
obligations of any optionee, without his or her consent, with respect to any
Option theretofore granted under the Plan.
ss. 10. Termination
The Plan shall terminate upon the earlier of the following dates or
events to occur:
(a) upon the adoption of a resolution of the Board terminating the
Plan; or
(b) on a Granting Date if on said date the number of shares remaining
available for grant of Options under the Plan is not sufficient for the making
of the grants required by ss. 4 hereof to be made on such Granting Date.
No termination of the Plan shall alter or impair any of the rights or
obligations of any optionee, without his or her consent, with respect to any
Option theretofore granted under the Plan.
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ss. 11. Shareholder Approval
The Plan shall be submitted to the shareholders of the Company for
their approval at the 2001 annual meeting of shareholders. The shareholders
shall be deemed to have approved the Plan if it is approved at said meeting,
including any adjournment thereof, in accordance with the Business Corporation
Law of the State of New York. If the shareholders do not approve the Plan at
said meeting, including any adjournment thereof, the Plan shall thereupon
terminate and shall be of no further force or effect.
[Note: This Plan was adopted by the
Board of Directors on July 17, 2001,
subject to approval by shareholders, and
was approved by shareholders at the
annual meeting on November 14, 2001.]
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