ý
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Ohio
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34-0451060
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(State or other jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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6035 Parkland Boulevard, Cleveland, Ohio
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44124-4141
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(Address of Principal Executive Offices)
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(Zip Code)
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Title of Each Class
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Name of Each Exchange
on which Registered
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Common Shares, $.50 par value
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New York Stock Exchange
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Large Accelerated Filer:
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ý
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Accelerated Filer:
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¨
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Non-Accelerated Filer:
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¨
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Smaller Reporting Company:
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¨
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(Do not check if a smaller reporting company)
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PART I
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Item 1.
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Item 1A.
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Item 1B.
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Item 1C.
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Item 2.
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Item 3.
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Item 4.
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PART II
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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PART III
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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PART IV
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Item 15.
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Automation
Group: |
• Battery Energy Storage
• Factory automation
• Food and beverage
• Heavy industry
• Industrial machinery
|
• Life sciences
• Packaging
• Semiconductor and electronics
• Transportation
|
|
|
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Engineered Materials Group:
|
• Aerospace
• Chemical processing
• Consumer
• Fluid power
• General industrial
• Information technology
• Life sciences
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• Microelectronics
• Military
• Oil and gas
• Power generation
• Renewable energy
• Telecommunications
• Transportation
|
|
|
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Filtration
Group: |
• Agriculture
• Aerospace and defense
• Construction
• Food and beverage
• Industrial machinery
• Life sciences
• Marine
|
• Mining
• Oil and gas
• Power generation
• Renewable energy
• Transportation
• Water purification
|
|
|
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Fluid
Connectors Group: |
• Aerial lift
• Agriculture
• Bulk chemical handling
• Construction machinery
• Food and beverage
• Fuel and gas delivery
• Industrial machinery
|
• Life sciences
• Marine
• Mining
• Mobile
• Oil and gas
• Renewable energy
• Transportation
|
|
|
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Hydraulics
Group: |
• Aerial lift
• Agriculture
• Air conditioning
• Construction machinery
• Entertainment
• Forestry
• Industrial machinery
• Machine tools
• Marine
|
• Material handling
• Mining
• Oil and gas
• Power generation
• Recreational vehicles
• Refuse vehicles
• Renewable energy
• Truck hydraulics
• Turf equipment
|
|
|
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• Commercial transports
• Engines
• General and business aviation
• Helicopters
• Military aircraft
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• Missiles
• Power generation
• Regional transports
• Unmanned aerial vehicles
• Aftermarket services
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• Air regulators/filters
• Electric actuators and stages
• Fluid control valves
• Fluid system mass flow meters/controllers
• Grippers
• Inverters
• Miniature air/liquid pumps
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• Motion controllers
• Pneumatic control valves
• Pneumatic cylinders
• Pressure and flow controls
• Servo motors and drives
• Solenoid valves
• Vacuum variable frequency drives
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• Aerospace filters and systems
• Compressed air and gas treatment solutions
• Engine fuel, oil, air and closed crankcase ventilation
filtration systems
• Filtration and purification systems
• Fluid condition monitoring systems
• Hydraulic and lubrication filters
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• Industrial and analytical gas generators
• Instrumentation filters
• Membrane and fiber filters
• Process liquid, air and gas filters
• Sterile air filters
• Water purification filters and systems
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• Check valves
• Diagnostic equipment
• Hose couplings
• Industrial hose
• Low pressure fittings and adapters
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• Polytetrafluoroethylene ("PTFE") hose and tubing
• Quick couplings
• Rubber and thermoplastic hose
• Tube fittings and adapters
• Tubing and plastic fittings
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• Accumulators
• Cartridge valves
• Coolers
• Electrohydraulic actuators
• Electronic displays and human machine interfaces
• Electronic I/O controllers
• Fan drives
• Hybrid drives
• Hydraulic cylinders
• Hydraulic motors and pumps
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• Hydraulic systems
• Hydraulic valves and controls
• Hydrostatic steering units
• Integrated hydraulic circuits
• Intensifiers
• Power take-offs
• Power units
• Rotary actuators
• Sensors
• Telematic controllers
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• Accumulators
• Analytical instruments and sample conditioning systems
• Carbon dioxide controls
• Compressed natural gas dispensers
• Cryogenic valves
• Electronic controllers
• Electronic valves
• Filter driers
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• Fluid system fittings, valves, regulators and manifold valves
• Fluoropolymer chemical delivery fittings, valves and pumps
• High pressure fittings, valves, pumps and systems
• High-purity gas delivery fittings, valves and regulators
• Natural gas on-board fuel systems
• Pressure regulating valves
• Refrigeration and air conditioning electronic controls and monitoring
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• Control actuation systems and components
• Engine systems and components
• Fluid conveyance systems and components
• Fluid metering, delivery and atomization devices
• Fuel systems and components
• Fuel tank inerting systems
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• Hydraulic systems and components
• Lubrication components
• Power conditioning and management systems
• Thermal management
• Wheels and brakes
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•
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decentralized operating structure that allows each division to focus on its customers and respond quickly at the local level;
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•
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systems solution capabilities that use the Company’s core technologies from both of its segments;
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•
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global presence; and
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•
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a strong global distribution network.
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•
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fluctuations in currency exchange rates;
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•
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limitations on ownership and on repatriation of earnings;
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•
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transportation delays and interruptions;
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•
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political, social and economic instability and disruptions;
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•
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government embargoes or trade restrictions;
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•
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the imposition of duties and tariffs and other trade barriers;
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•
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import and export controls;
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•
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labor unrest and current and changing regulatory environments;
|
•
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the potential for nationalization of enterprises;
|
•
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difficulties in staffing and managing multi-national operations;
|
•
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limitations on the Company’s ability to enforce legal rights and remedies;
|
•
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potentially adverse tax consequences; and
|
•
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difficulties in implementing restructuring actions on a timely basis.
|
•
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changes in business relationships with and purchases by or from major customers, suppliers or distributors, including delays or cancellations in shipments, disputes regarding contract terms or significant changes in financial condition, and changes in contract cost and revenue estimates for new development programs;
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•
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changes in product mix;
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•
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changes in the market acceptance of the Company’s products;
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•
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increased competition in the markets the Company serves;
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•
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declines in the general level of industrial production;
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•
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weakness in the end-markets the Company serves;
|
•
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fluctuations in the availability or the prices of raw materials; and
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•
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fluctuations in currency exchange rates.
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Name
|
|
Position
|
|
Officer
Since(1)
|
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Age as of
8/15/2016
|
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Thomas L. Williams
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Chairman of the Board, Chief Executive Officer and Director
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2005
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57
|
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Lee C. Banks
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President, Chief Operating Officer and Director
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2001
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53
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Jon P. Marten
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Executive Vice President – Finance & Administration and Chief Financial Officer
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2008
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60
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Mark J. Hart
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Executive Vice President – Human Resources & External Affairs
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2016
|
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51
|
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Robert W. Bond
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Vice President – eBusiness, IoT and Services
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2000
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58
|
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Yoon "Michael" Chung
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Vice President and President – Automation Group
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2008
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53
|
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John G. Dedinsky, Jr.
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Vice President – Global Supply Chain and Procurement
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2006
|
|
59
|
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William G. Eline
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Vice President – Chief Information Officer
|
|
2002
|
|
60
|
|
John R. Greco
|
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Vice President and President – Instrumentation Group
|
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2006
|
|
62
|
|
Kurt A. Keller
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Vice President and President – Asia Pacific Group
|
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2009
|
|
58
|
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Joseph R. Leonti
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Vice President, General Counsel and Secretary
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2014
|
|
44
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Robert W. Malone
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Vice President and President – Filtration Group
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2014
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52
|
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M. Craig Maxwell
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Vice President – Chief Technology and Innovation Officer
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2003
|
|
58
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Jennifer A. Parmentier
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Vice President and President – Engineered Materials Group
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2015
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49
|
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Andrew D. Ross
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Vice President and President – Fluid Connectors Group
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2012
|
|
49
|
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Daniel S. Serbin
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Vice President
|
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2005
|
|
62
|
|
Roger S. Sherrard
|
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Vice President and President – Aerospace Group
|
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2003
|
|
50
|
|
Catherine A. Suever
|
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Vice President and Controller
|
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2010
|
|
57
|
|
Andrew M. Weeks
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Vice President and President – Hydraulics Group
|
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2015
|
|
53
|
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(1)
|
Executive officers of the Company are elected by the Board of Directors to serve for a term of one year or until their respective successors are elected, except in the case of death, resignation or removal. Messrs. Marten, Dedinsky, Eline, Greco, and Maxwell and Ms. Suever have served in the executive capacities indicated above opposite their respective names during each of the past five years.
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Type of Facility
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|||||||
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Manufacturing
Plants
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Distribution
Centers
|
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Sales and
Administrative Offices
|
|||
Diversified Industrial
|
275
|
|
|
81
|
|
|
140
|
|
Aerospace Systems
|
17
|
|
|
7
|
|
|
14
|
|
Total
|
292
|
|
|
88
|
|
|
154
|
|
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Geographic Location
|
||||||||||
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North America
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Europe
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Asia-Pacific
|
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Latin America
|
||||
Diversified Industrial
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225
|
|
|
143
|
|
|
108
|
|
|
20
|
|
Aerospace Systems
|
32
|
|
|
4
|
|
|
2
|
|
|
—
|
|
Total
|
257
|
|
|
147
|
|
|
110
|
|
|
20
|
|
(a)
|
Market for the Registrant’s Common Equity
.
The Company’s common stock is listed for trading on the New York Stock Exchange (NYSE) under the symbol "PH". Information regarding stock price as reported on the NYSE and dividend information with respect to the Company’s common stock, is included in the table below.
|
(In dollars)
|
|
1st
|
|
|
2nd
|
|
|
3rd
|
|
|
4th
|
|
|
Fiscal Year
|
|
|||||
2016
|
High
|
$
|
117.98
|
|
|
$
|
108.00
|
|
|
$
|
113.51
|
|
|
$
|
117.78
|
|
|
$
|
117.98
|
|
|
Low
|
94.64
|
|
|
93.47
|
|
|
83.32
|
|
|
99.10
|
|
|
83.32
|
|
|||||
|
Dividends
|
0.63
|
|
|
0.63
|
|
|
0.63
|
|
|
0.63
|
|
|
2.52
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2015
|
High
|
$
|
127.60
|
|
|
$
|
133.41
|
|
|
$
|
129.54
|
|
|
$
|
125.33
|
|
|
$
|
133.41
|
|
|
Low
|
105.91
|
|
|
99.82
|
|
|
115.86
|
|
|
115.65
|
|
|
99.82
|
|
|||||
|
Dividends
|
0.48
|
|
|
0.63
|
|
|
0.63
|
|
|
0.63
|
|
|
2.37
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2014
|
High
|
$
|
110.21
|
|
|
$
|
129.77
|
|
|
$
|
129.40
|
|
|
$
|
130.44
|
|
|
$
|
130.44
|
|
|
Low
|
94.81
|
|
|
103.36
|
|
|
108.66
|
|
|
118.46
|
|
|
94.81
|
|
|||||
|
Dividends
|
0.45
|
|
|
0.45
|
|
|
0.48
|
|
|
0.48
|
|
|
1.86
|
|
(b)
|
Use of Proceeds
.
Not Applicable.
|
(c)
|
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
.
|
ISSUER PURCHASES OF EQUITY SECURITIES
|
|||||||||||||
Period
|
|
(a) Total
Number
of Shares
Purchased
|
|
(b) Average
Price Paid
Per Share
|
|
(c) Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs (1)
|
|
(d) Maximum Number
(or Approximate
Dollar Value) of
Shares that May Yet
Be Purchased
Under the Plans or
Programs
|
|||||
April 1, 2016 through April 30, 2016
|
|
147,500
|
|
|
$
|
111.82
|
|
|
147,500
|
|
|
20,122,709
|
|
May 1, 2016 through May 31, 2016
|
|
404,100
|
|
|
$
|
111.70
|
|
|
404,100
|
|
|
19,718,609
|
|
June 1, 2016 through June 30, 2016
|
|
401,504
|
|
|
$
|
114.20
|
|
|
401,504
|
|
|
19,317,105
|
|
Total:
|
|
953,104
|
|
|
$
|
112.77
|
|
|
953,104
|
|
|
19,317,105
|
|
(1)
|
On August 16, 1990, the Company publicly announced that its Board of Directors authorized the repurchase by the Company of up to 3 million shares of its common stock. From time to time thereafter, the Board of Directors has adjusted the overall maximum number of shares authorized for repurchase under this program. On October 22, 2014, the Company publicly announced that the Board of Directors increased the overall maximum number of shares authorized for repurchase under this program so that, beginning on such date, the aggregate number of shares authorized for repurchase was 35 million shares. There is no limitation on the amount of shares that can be repurchased in a year. There is no expiration date for this program.
|
(Amounts in thousands, except per share information)
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
Net sales
|
|
$
|
11,360,753
|
|
|
$
|
12,711,744
|
|
|
$
|
13,215,971
|
|
|
$
|
13,015,704
|
|
|
$
|
13,145,942
|
|
Net income attributable to common shareholders
|
|
806,840
|
|
|
1,012,140
|
|
|
1,041,048
|
|
|
948,427
|
|
|
1,151,823
|
|
|||||
Basic earnings per share
|
|
5.96
|
|
|
7.08
|
|
|
6.98
|
|
|
6.36
|
|
|
7.62
|
|
|||||
Diluted earnings per share
|
|
5.89
|
|
|
6.97
|
|
|
6.87
|
|
|
6.26
|
|
|
7.45
|
|
|||||
Cash dividends per share
|
|
2.52
|
|
|
$
|
2.37
|
|
|
$
|
1.86
|
|
|
$
|
1.70
|
|
|
$
|
1.54
|
|
|
Total assets (1)
|
|
12,056,738
|
|
|
12,279,282
|
|
|
13,259,815
|
|
|
12,502,478
|
|
|
11,126,276
|
|
|||||
Long-term debt
|
|
2,675,000
|
|
|
2,723,960
|
|
|
1,508,142
|
|
|
1,495,960
|
|
|
1,503,946
|
|
•
|
changes in business relationships with and purchases by or from major customers, suppliers or distributors, including delays or cancellations in shipments, disputes regarding contract terms or significant changes in financial condition, changes in contract cost and revenue estimates for new development programs, and changes in product mix;
|
•
|
ability to identify acceptable strategic acquisition targets;
|
•
|
uncertainties surrounding timing, successful completion or integration of acquisitions and similar transactions;
|
•
|
the ability to successfully divest businesses planned for divestiture and realize the anticipated benefits of such divestitures;
|
•
|
the determination to undertake business realignment activities and the expected costs thereof and, if undertaken, the ability to complete such activities and realize the anticipated cost savings from such activities;
|
•
|
ability to implement successfully the Company's capital allocation initiatives, including timing, price and execution of share repurchases;
|
•
|
increases in raw material costs that cannot be recovered in product pricing;
|
•
|
the Company's ability to manage costs related to insurance and employee retirement and health care benefits;
|
•
|
threats associated with and efforts to combat terrorism and cyber-security risks;
|
•
|
uncertainties surrounding the ultimate resolution of outstanding legal proceedings, including the outcome of any appeals;
|
•
|
competitive market conditions and resulting effects on sales and pricing; and
|
•
|
global economic factors, including manufacturing activity, air travel trends, currency exchange rates, difficulties entering new markets and general economic conditions such as inflation, deflation, interest rates and credit availability.
|
•
|
Purchasing Managers Index (PMI) on manufacturing activity specific to regions around the world with respect to most mobile and industrial markets;
|
•
|
Global aircraft miles flown and global revenue passenger miles for commercial aerospace markets and Department of Defense spending for military aerospace markets; and
|
•
|
Housing starts with respect to the North American residential air conditioning market and certain mobile construction markets.
|
|
June 30, 2016
|
|
|
March 31, 2016
|
|
|
June 30, 2015
|
|
United States
|
53.2
|
|
|
51.8
|
|
|
53.5
|
|
Eurozone countries
|
52.8
|
|
|
51.6
|
|
|
52.5
|
|
China
|
48.6
|
|
|
49.7
|
|
|
49.4
|
|
Brazil
|
43.2
|
|
|
46.0
|
|
|
46.5
|
|
•
|
Serving the customer and continuously enhancing its experience with the Company;
|
•
|
Successfully executing its Win Strategy initiatives relating to premier customer service, financial performance and profitable growth;
|
•
|
Maintaining its decentralized division and sales company structure;
|
•
|
Fostering an entrepreneurial culture;
|
•
|
Engineering innovative systems and products to provide superior customer value through improved service, efficiency and productivity;
|
•
|
Delivering products, systems and services that have demonstrable savings to customers and are priced by the value they deliver;
|
•
|
Acquiring strategic businesses;
|
•
|
Organizing around targeted regions, technologies and markets;
|
•
|
Driving efficiency by implementing lean enterprise principles; and
|
•
|
Creating a culture of empowerment through its values, inclusion and diversity, accountability and teamwork.
|
(dollars in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Net sales
|
|
$
|
11,361
|
|
|
$
|
12,712
|
|
|
$
|
13,216
|
|
Gross profit margin
|
|
22.3
|
%
|
|
24.0
|
%
|
|
22.9
|
%
|
|||
Selling, general and administrative expenses
|
|
$
|
1,359
|
|
|
$
|
1,545
|
|
|
$
|
1,634
|
|
Selling, general and administrative expenses, as a percent of sales
|
|
12.0
|
%
|
|
12.2
|
%
|
|
12.4
|
%
|
|||
Goodwill and intangible asset impairment
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
189
|
|
Interest expense
|
|
137
|
|
|
118
|
|
|
83
|
|
|||
Other (income), net
|
|
(62
|
)
|
|
(43
|
)
|
|
(26
|
)
|
|||
(Gain) loss on disposal of assets
|
|
(11
|
)
|
|
4
|
|
|
(409
|
)
|
|||
Effective tax rate
|
|
27.6
|
%
|
|
29.3
|
%
|
|
33.1
|
%
|
|||
Net income attributable to common shareholders
|
|
$
|
807
|
|
|
$
|
1,012
|
|
|
$
|
1,041
|
|
|
2016
|
|
2015
|
|
2014
|
||||||
Sales
|
|
|
|
|
|
||||||
North America
|
$
|
4,955
|
|
|
$
|
5,716
|
|
|
$
|
5,694
|
|
International
|
4,145
|
|
|
4,741
|
|
|
5,288
|
|
|||
Operating income
|
|
|
|
|
|
||||||
North America
|
790
|
|
|
956
|
|
|
946
|
|
|||
International
|
448
|
|
|
584
|
|
|
572
|
|
|||
Operating income as a percent of sales
|
|
|
|
|
|
||||||
North America
|
15.9
|
%
|
|
16.7
|
%
|
|
16.6
|
%
|
|||
International
|
10.8
|
%
|
|
12.3
|
%
|
|
10.8
|
%
|
|||
Backlog
|
$
|
1,455
|
|
|
$
|
1,586
|
|
|
$
|
1,861
|
|
Assets
|
8,729
|
|
|
8,735
|
|
|
9,471
|
|
|||
Return on average assets
|
14.2
|
%
|
|
16.9
|
%
|
|
16.1
|
%
|
(dollars in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Diversified Industrial North America
|
|
$
|
31
|
|
|
$
|
4
|
|
|
$
|
2
|
|
Diversified Industrial International
|
|
60
|
|
|
27
|
|
|
99
|
|
|
2016
|
|
2015
|
|
2014
|
||||||
Sales
|
$
|
2,260
|
|
|
$
|
2,255
|
|
|
$
|
2,235
|
|
Operating income
|
338
|
|
|
299
|
|
|
271
|
|
|||
Operating income as a percent of sales
|
14.9
|
%
|
|
13.3
|
%
|
|
12.1
|
%
|
|||
Backlog
|
$
|
1,762
|
|
|
$
|
1,756
|
|
|
$
|
1,994
|
|
Assets
|
1,431
|
|
|
1,376
|
|
|
1,359
|
|
|||
Return on average assets
|
24.1
|
%
|
|
21.9
|
%
|
|
21.7
|
%
|
(dollars in millions)
|
2016
|
|
2015
|
|
2014
|
||||||
Foreign currency transaction
|
$
|
23
|
|
|
$
|
(78
|
)
|
|
$
|
5
|
|
Stock compensation
|
49
|
|
|
57
|
|
|
71
|
|
|||
Pensions
|
116
|
|
|
97
|
|
|
108
|
|
|||
Divestitures and asset sales and writedowns
|
(11
|
)
|
|
4
|
|
|
(409
|
)
|
|||
Goodwill and intangible asset impairment
|
—
|
|
|
—
|
|
|
189
|
|
|||
Interest income
|
(18
|
)
|
|
(15
|
)
|
|
(11
|
)
|
|||
Other items, net
|
(8
|
)
|
|
7
|
|
|
16
|
|
|||
|
$
|
151
|
|
|
$
|
72
|
|
|
$
|
(31
|
)
|
(dollars in millions)
|
|
2016
|
|
|
2015
|
|
||
Cash
|
|
$
|
2,104
|
|
|
$
|
1,914
|
|
Trade accounts receivable, net
|
|
1,594
|
|
|
1,620
|
|
||
Inventories
|
|
1,173
|
|
|
1,300
|
|
||
Shareholders' equity
|
|
4,575
|
|
|
5,104
|
|
||
Working capital
|
|
$
|
2,842
|
|
|
$
|
3,092
|
|
Current ratio
|
|
2.2
|
|
|
2.3
|
|
(dollars in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Cash provided by (used in):
|
|
|
|
|
|
|
||||||
Operating activities
|
|
$
|
1,170
|
|
|
$
|
1,302
|
|
|
$
|
1,388
|
|
Investing activities
|
|
(265
|
)
|
|
(579
|
)
|
|
(646
|
)
|
|||
Financing activities
|
|
(802
|
)
|
|
(1,045
|
)
|
|
(958
|
)
|
|||
Effect of exchange rates
|
|
(62
|
)
|
|
(111
|
)
|
|
48
|
|
|||
Net increase (decrease) in cash and cash equivalents
|
|
$
|
41
|
|
|
$
|
(433
|
)
|
|
$
|
(168
|
)
|
Debt to Debt-Shareholders' Equity Ratio (dollars in millions)
|
|
2016
|
|
2015
|
||||
Debt
|
|
$
|
3,037
|
|
|
$
|
2,947
|
|
Debt & Shareholders' Equity
|
|
7,612
|
|
|
8,051
|
|
||
Ratio
|
|
39.9
|
%
|
|
36.6
|
%
|
(dollars in millions)
|
|
Payments due by period
|
||||||||||||||||||
Contractual obligations
|
|
Total
|
|
|
Less than 1 year
|
|
|
1-3 years
|
|
|
3-5 years
|
|
|
More than 5 years
|
|
|||||
Long-term debt
(Note 9)
|
|
$
|
2,733
|
|
|
$
|
58
|
|
|
$
|
550
|
|
|
$
|
—
|
|
|
$
|
2,125
|
|
Interest on long-term debt
|
|
1,708
|
|
|
122
|
|
|
211
|
|
|
181
|
|
|
1,194
|
|
|||||
Operating leases
(Note 9)
|
|
195
|
|
|
69
|
|
|
72
|
|
|
24
|
|
|
30
|
|
|||||
Retirement benefits
(Note 10)
|
|
367
|
|
|
312
|
|
|
14
|
|
|
13
|
|
|
28
|
|
|||||
Total
|
|
$
|
5,003
|
|
|
$
|
561
|
|
|
$
|
847
|
|
|
$
|
218
|
|
|
$
|
3,377
|
|
|
|
Page Number
in Form 10-K
|
Financial Statements
|
|
|
|
||
|
||
|
||
|
||
|
||
|
||
|
|
|
For the years ended June 30,
|
||||||||||
(Dollars in thousands, except per share amounts)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Net Sales
|
|
$
|
11,360,753
|
|
|
$
|
12,711,744
|
|
|
$
|
13,215,971
|
|
Cost of sales
|
|
8,823,384
|
|
|
9,655,245
|
|
|
10,188,227
|
|
|||
Gross profit
|
|
2,537,369
|
|
|
3,056,499
|
|
|
3,027,744
|
|
|||
Selling, general and administrative expenses
|
|
1,359,360
|
|
|
1,544,746
|
|
|
1,633,992
|
|
|||
Goodwill and intangible asset impairment (Note 7)
|
|
—
|
|
|
—
|
|
|
188,870
|
|
|||
Interest expense
|
|
136,517
|
|
|
118,406
|
|
|
82,566
|
|
|||
Other (income), net
|
|
(62,199
|
)
|
|
(43,374
|
)
|
|
(25,513
|
)
|
|||
(Gain) loss on disposal of assets (Note 2)
|
|
(11,037
|
)
|
|
4,481
|
|
|
(408,891
|
)
|
|||
Income before income taxes
|
|
1,114,728
|
|
|
1,432,240
|
|
|
1,556,720
|
|
|||
Income taxes (Note 4)
|
|
307,512
|
|
|
419,687
|
|
|
515,302
|
|
|||
Net Income
|
|
807,216
|
|
|
1,012,553
|
|
|
1,041,418
|
|
|||
Less: Noncontrolling interest in subsidiaries' earnings
|
|
376
|
|
|
413
|
|
|
370
|
|
|||
Net Income Attributable to Common Shareholders
|
|
$
|
806,840
|
|
|
$
|
1,012,140
|
|
|
$
|
1,041,048
|
|
|
|
|
|
|
|
|
||||||
Earnings per Share Attributable to Common Shareholders
(Note 5)
|
|
|
|
|
|
|
||||||
Basic earnings per share
|
|
$
|
5.96
|
|
|
$
|
7.08
|
|
|
$
|
6.98
|
|
Diluted earnings per share
|
|
$
|
5.89
|
|
|
$
|
6.97
|
|
|
$
|
6.87
|
|
|
|
For the years ended June 30,
|
||||||||||
(Dollars in thousands)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Net Income
|
|
$
|
807,216
|
|
|
$
|
1,012,553
|
|
|
$
|
1,041,418
|
|
Less: Noncontrolling interests in subsidiaries' earnings
|
|
376
|
|
|
413
|
|
|
370
|
|
|||
Net income attributable to common shareholders
|
|
806,840
|
|
|
1,012,140
|
|
|
1,041,048
|
|
|||
|
|
|
|
|
|
|
||||||
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
||||||
Foreign currency translation adjustment and other (net of tax of $(2,342), $(31,024) and $4,591 in 2016, 2015 and 2014)
|
|
(203,299
|
)
|
|
(765,659
|
)
|
|
193,130
|
|
|||
Retirement benefits plan activity (net of tax of $152,203, $88,547 and $(54,473) in 2016, 2015 and 2014)
|
|
(286,044
|
)
|
|
(149,710
|
)
|
|
91,182
|
|
|||
Other comprehensive income (loss)
|
|
(489,343
|
)
|
|
(915,369
|
)
|
|
284,312
|
|
|||
Less: Other comprehensive (loss) for noncontrolling interests
|
|
(196
|
)
|
|
(249
|
)
|
|
(23
|
)
|
|||
Other comprehensive income (loss) attributable to common shareholders
|
|
(489,147
|
)
|
|
(915,120
|
)
|
|
284,335
|
|
|||
Total Comprehensive Income Attributable to Common Shareholders
|
|
$
|
317,693
|
|
|
$
|
97,020
|
|
|
$
|
1,325,383
|
|
(Dollars in thousands)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Net Sales:
|
|
|
|
|
|
|
||||||
Diversified Industrial:
|
|
|
|
|
|
|
||||||
North America
|
|
$
|
4,955,211
|
|
|
$
|
5,715,742
|
|
|
$
|
5,693,527
|
|
International
|
|
4,145,272
|
|
|
4,741,376
|
|
|
5,287,916
|
|
|||
Aerospace Systems
|
|
2,260,270
|
|
|
2,254,626
|
|
|
2,234,528
|
|
|||
|
|
$
|
11,360,753
|
|
|
$
|
12,711,744
|
|
|
$
|
13,215,971
|
|
Segment Operating Income:
|
|
|
|
|
|
|
||||||
Diversified Industrial:
|
|
|
|
|
|
|
||||||
North America
|
|
$
|
789,667
|
|
|
$
|
955,501
|
|
|
$
|
946,493
|
|
International
|
|
448,457
|
|
|
583,937
|
|
|
572,476
|
|
|||
Aerospace Systems
|
|
337,531
|
|
|
298,994
|
|
|
271,238
|
|
|||
Total segment operating income
|
|
1,575,655
|
|
|
1,838,432
|
|
|
1,790,207
|
|
|||
Corporate administration
|
|
173,203
|
|
|
215,396
|
|
|
181,926
|
|
|||
Income before interest expense and other
|
|
1,402,452
|
|
|
1,623,036
|
|
|
1,608,281
|
|
|||
Interest expense
|
|
136,517
|
|
|
118,406
|
|
|
82,566
|
|
|||
Other expense (income)
|
|
151,207
|
|
|
72,390
|
|
|
(31,005
|
)
|
|||
Income before income taxes
|
|
$
|
1,114,728
|
|
|
$
|
1,432,240
|
|
|
$
|
1,556,720
|
|
|
|
|
|
|
|
|
||||||
Assets (a):
|
|
|
|
|
|
|
||||||
Diversified Industrial
|
|
$
|
8,728,671
|
|
|
$
|
8,734,942
|
|
|
$
|
9,470,822
|
|
Aerospace Systems (b)
|
|
1,430,577
|
|
|
1,375,845
|
|
|
1,359,063
|
|
|||
Corporate (c)
|
|
1,897,490
|
|
|
2,168,495
|
|
|
2,429,930
|
|
|||
|
|
$
|
12,056,738
|
|
|
$
|
12,279,282
|
|
|
$
|
13,259,815
|
|
|
|
|
|
|
|
|
||||||
Property Additions:
|
|
|
|
|
|
|
||||||
Diversified Industrial
|
|
$
|
134,618
|
|
|
$
|
190,580
|
|
|
$
|
189,832
|
|
Aerospace Systems
|
|
10,857
|
|
|
18,427
|
|
|
23,261
|
|
|||
Corporate
|
|
3,932
|
|
|
6,520
|
|
|
3,247
|
|
|||
|
|
$
|
149,407
|
|
|
$
|
215,527
|
|
|
$
|
216,340
|
|
|
|
|
|
|
|
|
||||||
Depreciation:
|
|
|
|
|
|
|
||||||
Diversified Industrial
|
|
$
|
163,014
|
|
|
$
|
174,102
|
|
|
$
|
187,347
|
|
Aerospace Systems
|
|
18,469
|
|
|
19,509
|
|
|
19,193
|
|
|||
Corporate
|
|
8,825
|
|
|
9,165
|
|
|
8,425
|
|
|||
|
|
$
|
190,308
|
|
|
$
|
202,776
|
|
|
$
|
214,965
|
|
(Dollars in thousands)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
By Geographic Area (d)
|
|
|
|
|
|
|
||||||
Net Sales:
|
|
|
|
|
|
|
||||||
North America
|
|
$
|
7,144,481
|
|
|
$
|
7,891,571
|
|
|
$
|
7,853,603
|
|
International
|
|
4,216,272
|
|
|
4,820,173
|
|
|
5,362,368
|
|
|||
|
|
$
|
11,360,753
|
|
|
$
|
12,711,744
|
|
|
$
|
13,215,971
|
|
Long-Lived Assets:
|
|
|
|
|
|
|
||||||
North America
|
|
$
|
817,872
|
|
|
$
|
856,947
|
|
|
$
|
861,300
|
|
International
|
|
750,228
|
|
|
807,075
|
|
|
962,994
|
|
|||
|
|
$
|
1,568,100
|
|
|
$
|
1,664,022
|
|
|
$
|
1,824,294
|
|
(a)
|
Amounts in 2015 and 2014 have been adjusted to reflect the retrospective adoption of Accounting Standards Update (ASU) 2015-17 in the fourth quarter of 2016.
|
(b)
|
Includes an investment in a joint venture in which ownership is
50 percent
or less and in which the Company does not have operating control (
2016
-
$241,728
;
2015
-
$251,365
;
2014
-
$263,246
).
|
(c)
|
Corporate assets are principally cash and cash equivalents, marketable securities and other investments, domestic deferred income taxes, deferred compensation plan assets, headquarters facilities and the major portion of the Company’s domestic data processing equipment.
|
(d)
|
Net sales are attributed to countries based on the location of the selling unit. North America includes the United States, Canada and Mexico. No country other than the United States represents greater than
10 percent
of consolidated sales. Long-lived assets are comprised of plant and equipment based on physical location.
|
(Dollars in thousands)
|
|
|
||||||
June 30,
|
|
2016
|
|
|
2015
|
|
||
Assets
|
|
|
|
|
||||
Current Assets
|
|
|
|
|
||||
Cash and cash equivalents (Note 1)
|
|
$
|
1,221,653
|
|
|
$
|
1,180,584
|
|
Marketable securities and other investments (Note 1)
|
|
882,342
|
|
|
733,490
|
|
||
Trade accounts receivable, net (Note 1)
|
|
1,593,920
|
|
|
1,620,194
|
|
||
Non-trade and notes receivable (Note 1)
|
|
232,183
|
|
|
364,534
|
|
||
Inventories (Note 6)
|
|
1,173,329
|
|
|
1,300,459
|
|
||
Prepaid expenses
|
|
104,360
|
|
|
241,684
|
|
||
Total Current Assets
|
|
5,207,787
|
|
|
5,440,945
|
|
||
Plant and equipment (Note 1)
|
|
4,737,141
|
|
|
4,862,611
|
|
||
Less: Accumulated depreciation
|
|
3,169,041
|
|
|
3,198,589
|
|
||
|
|
1,568,100
|
|
|
1,664,022
|
|
||
Deferred income taxes (Notes 1 and 4)
|
|
605,155
|
|
|
406,267
|
|
||
Investments and other assets (Note 1)
|
|
850,088
|
|
|
811,930
|
|
||
Intangible assets, net (Notes 1 and 7)
|
|
922,571
|
|
|
1,013,439
|
|
||
Goodwill (Notes 1 and 7)
|
|
2,903,037
|
|
|
2,942,679
|
|
||
Total Assets
|
|
$
|
12,056,738
|
|
|
$
|
12,279,282
|
|
|
|
|
|
|
||||
Liabilities and Equity
|
|
|
|
|
||||
Current Liabilities
|
|
|
|
|
||||
Notes payable and long-term debt payable within one year (Notes 8 and 9)
|
|
$
|
361,840
|
|
|
$
|
223,142
|
|
Accounts payable, trade
|
|
1,034,589
|
|
|
1,092,138
|
|
||
Accrued payrolls and other compensation
|
|
382,945
|
|
|
409,762
|
|
||
Accrued domestic and foreign taxes
|
|
127,597
|
|
|
139,285
|
|
||
Other accrued liabilities
|
|
458,970
|
|
|
484,793
|
|
||
Total Current Liabilities
|
|
2,365,941
|
|
|
2,349,120
|
|
||
Long-term debt (Note 9)
|
|
2,675,000
|
|
|
2,723,960
|
|
||
Pensions and other postretirement benefits (Note 10)
|
|
2,076,143
|
|
|
1,699,197
|
|
||
Deferred income taxes (Notes 1 and 4)
|
|
54,395
|
|
|
63,222
|
|
||
Other liabilities
|
|
306,581
|
|
|
336,214
|
|
||
Total Liabilities
|
|
7,478,060
|
|
|
7,171,713
|
|
||
Equity
(Note 11)
|
|
|
|
|
||||
Shareholders' Equity
|
|
|
|
|
||||
Serial preferred stock, $.50 par value, authorized 3,000,000 shares; none issued
|
|
—
|
|
|
—
|
|
||
Common stock, $.50 par value, authorized 600,000,000 shares; issued 181,046,128 shares in 2016 and 2015
|
|
90,523
|
|
|
90,523
|
|
||
Additional capital
|
|
628,451
|
|
|
622,729
|
|
||
Retained earnings
|
|
10,302,866
|
|
|
9,841,885
|
|
||
Accumulated other comprehensive (loss)
|
|
(2,227,765
|
)
|
|
(1,738,618
|
)
|
||
Treasury shares at cost: 47,033,896 in 2016 and 42,487,389 in 2015
|
|
(4,218,820
|
)
|
|
(3,712,232
|
)
|
||
Total Shareholders' Equity
|
|
4,575,255
|
|
|
5,104,287
|
|
||
Noncontrolling interests
|
|
3,423
|
|
|
3,282
|
|
||
Total Equity
|
|
4,578,678
|
|
|
5,107,569
|
|
||
Total Liabilities and Equity
|
|
$
|
12,056,738
|
|
|
$
|
12,279,282
|
|
|
|
For the years ended June 30,
|
||||||||||
(Dollars in thousands)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Cash Flows From Operating Activities
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
807,216
|
|
|
$
|
1,012,553
|
|
|
$
|
1,041,418
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
||||||
Depreciation
|
|
190,308
|
|
|
202,776
|
|
|
214,965
|
|
|||
Amortization
|
|
116,535
|
|
|
114,715
|
|
|
121,737
|
|
|||
Goodwill and intangible asset impairment
|
|
—
|
|
|
—
|
|
|
188,870
|
|
|||
Stock incentive plan compensation
|
|
71,293
|
|
|
96,093
|
|
|
103,161
|
|
|||
Deferred income taxes
|
|
(65,686
|
)
|
|
18,865
|
|
|
(74,139
|
)
|
|||
Foreign currency transaction loss (gain)
|
|
22,750
|
|
|
(77,784
|
)
|
|
5,398
|
|
|||
Loss on disposal of assets
|
|
414
|
|
|
14,953
|
|
|
2,997
|
|
|||
Gain on sale of businesses
|
|
(10,666
|
)
|
|
(6,420
|
)
|
|
—
|
|
|||
Net gain on deconsolidation
|
|
—
|
|
|
—
|
|
|
(412,612
|
)
|
|||
(Gain) loss on sale of marketable securities
|
|
(723
|
)
|
|
3,817
|
|
|
—
|
|
|||
Changes in assets and liabilities, net of effects from acquisitions:
|
|
|
|
|
|
|
||||||
Accounts receivable
|
|
17,549
|
|
|
143,179
|
|
|
(99,144
|
)
|
|||
Inventories
|
|
120,243
|
|
|
(70,377
|
)
|
|
(3,816
|
)
|
|||
Prepaid expenses
|
|
136,034
|
|
|
(116,561
|
)
|
|
58,117
|
|
|||
Other assets
|
|
(5,033
|
)
|
|
20,976
|
|
|
(79,158
|
)
|
|||
Accounts payable, trade
|
|
(52,378
|
)
|
|
(86,750
|
)
|
|
92,927
|
|
|||
Accrued payrolls and other compensation
|
|
(22,865
|
)
|
|
(12,657
|
)
|
|
20,840
|
|
|||
Accrued domestic and foreign taxes
|
|
(17,430
|
)
|
|
(66,870
|
)
|
|
86,745
|
|
|||
Other accrued liabilities
|
|
(61,424
|
)
|
|
(46,633
|
)
|
|
(23,480
|
)
|
|||
Pensions and other postretirement benefits
|
|
(45,796
|
)
|
|
156,859
|
|
|
99,569
|
|
|||
Other liabilities
|
|
(30,498
|
)
|
|
1,207
|
|
|
43,498
|
|
|||
Net cash provided by operating activities
|
|
1,169,843
|
|
|
1,301,941
|
|
|
1,387,893
|
|
|||
Cash Flows From Investing Activities
|
|
|
|
|
|
|
||||||
Acquisitions (less cash acquired of $3,814 in 2016, $8,332 in 2015 and $1,780 in 2014)
|
|
(67,552
|
)
|
|
(18,618
|
)
|
|
(17,593
|
)
|
|||
Capital expenditures
|
|
(149,407
|
)
|
|
(215,527
|
)
|
|
(216,340
|
)
|
|||
Proceeds from disposal of assets
|
|
18,821
|
|
|
19,655
|
|
|
14,368
|
|
|||
Proceeds from sale of businesses
|
|
24,325
|
|
|
37,265
|
|
|
—
|
|
|||
Net proceeds from deconsolidation
|
|
—
|
|
|
—
|
|
|
202,498
|
|
|||
Purchase of marketable securities and other investments
|
|
(1,351,464
|
)
|
|
(1,747,333
|
)
|
|
(624,880
|
)
|
|||
Maturities and sales of marketable securities and other investments
|
|
1,300,633
|
|
|
1,391,396
|
|
|
—
|
|
|||
Other
|
|
(39,995
|
)
|
|
(46,001
|
)
|
|
(4,454
|
)
|
|||
Net cash (used in) investing activities
|
|
(264,639
|
)
|
|
(579,163
|
)
|
|
(646,401
|
)
|
|||
Cash Flows From Financing Activities
|
|
|
|
|
|
|
||||||
Proceeds from exercise of stock options
|
|
126
|
|
|
3,355
|
|
|
8,013
|
|
|||
Payments for common shares
|
|
(557,575
|
)
|
|
(1,398,446
|
)
|
|
(204,043
|
)
|
|||
Tax benefit from stock incentive plan compensation
|
|
11,145
|
|
|
23,429
|
|
|
33,732
|
|
|||
Proceeds from (payments for) notes payable, net
|
|
303,624
|
|
|
(815,171
|
)
|
|
(515,387
|
)
|
|||
Proceeds from long-term borrowings
|
|
2,287
|
|
|
1,483,015
|
|
|
748
|
|
|||
Payments for long-term borrowings
|
|
(220,068
|
)
|
|
(537
|
)
|
|
(2,934
|
)
|
|||
Dividends paid
|
|
(341,962
|
)
|
|
(340,389
|
)
|
|
(278,244
|
)
|
|||
Net cash (used in) financing activities
|
|
(802,423
|
)
|
|
(1,044,744
|
)
|
|
(958,115
|
)
|
|||
Effect of exchange rate changes on cash
|
|
(61,712
|
)
|
|
(111,005
|
)
|
|
48,766
|
|
|||
Net increase (decrease) in cash and cash equivalents
|
|
41,069
|
|
|
(432,971
|
)
|
|
(167,857
|
)
|
|||
Cash and cash equivalents at beginning of year
|
|
1,180,584
|
|
|
1,613,555
|
|
|
1,781,412
|
|
|||
Cash and cash equivalents at end of year
|
|
$
|
1,221,653
|
|
|
$
|
1,180,584
|
|
|
$
|
1,613,555
|
|
Supplemental Data:
|
|
|
|
|
|
|
||||||
Cash paid during the year for:
|
|
|
|
|
|
|
||||||
Interest
|
|
$
|
133,999
|
|
|
$
|
105,202
|
|
|
$
|
77,144
|
|
Income taxes
|
|
250,155
|
|
|
515,350
|
|
|
472,369
|
|
(Dollars in thousands)
|
|
Common Stock
|
|
Additional Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive (Loss)
|
|
Treasury Shares
|
|
Noncontrolling Interests
|
|
Total
|
||||||||||||||
Balance June 30, 2013
|
|
$
|
90,523
|
|
|
$
|
608,752
|
|
|
$
|
8,421,270
|
|
|
$
|
(1,107,833
|
)
|
|
$
|
(2,274,286
|
)
|
|
$
|
3,055
|
|
|
$
|
5,741,481
|
|
Net income
|
|
|
|
|
|
1,041,048
|
|
|
|
|
|
|
370
|
|
|
1,041,418
|
|
|||||||||||
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
284,335
|
|
|
|
|
(23
|
)
|
|
284,312
|
|
|||||||||||
Dividends paid
|
|
|
|
|
|
(278,222
|
)
|
|
|
|
|
|
(22
|
)
|
|
(278,244
|
)
|
|||||||||||
Stock incentive plan activity
|
|
|
|
(13,254
|
)
|
|
(9,907
|
)
|
|
|
|
97,002
|
|
|
|
|
73,841
|
|
||||||||||
Shares purchased at cost
|
|
|
|
|
|
|
|
|
|
(200,000
|
)
|
|
|
|
(200,000
|
)
|
||||||||||||
Balance June 30, 2014
|
|
$
|
90,523
|
|
|
$
|
595,498
|
|
|
$
|
9,174,189
|
|
|
$
|
(823,498
|
)
|
|
$
|
(2,377,284
|
)
|
|
$
|
3,380
|
|
|
$
|
6,662,808
|
|
Net income
|
|
|
|
|
|
1,012,140
|
|
|
|
|
|
|
413
|
|
|
1,012,553
|
|
|||||||||||
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
(915,120
|
)
|
|
|
|
(249
|
)
|
|
(915,369
|
)
|
|||||||||||
Dividends paid
|
|
|
|
|
|
(340,132
|
)
|
|
|
|
|
|
(257
|
)
|
|
(340,389
|
)
|
|||||||||||
Stock incentive plan activity
|
|
|
|
27,231
|
|
|
(4,312
|
)
|
|
|
|
58,630
|
|
|
|
|
81,549
|
|
||||||||||
Liquidation activity
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
(5
|
)
|
|||||||||||
Shares purchased at cost
|
|
|
|
|
|
|
|
|
|
(1,393,578
|
)
|
|
|
|
(1,393,578
|
)
|
||||||||||||
Balance June 30, 2015
|
|
$
|
90,523
|
|
|
$
|
622,729
|
|
|
$
|
9,841,885
|
|
|
$
|
(1,738,618
|
)
|
|
$
|
(3,712,232
|
)
|
|
$
|
3,282
|
|
|
$
|
5,107,569
|
|
Net income
|
|
|
|
|
|
806,840
|
|
|
|
|
|
|
376
|
|
|
807,216
|
|
|||||||||||
Other comprehensive (loss)
|
|
|
|
|
|
|
|
|
(489,147
|
)
|
|
|
|
(196
|
)
|
|
(489,343
|
)
|
||||||||||
Dividends paid
|
|
|
|
|
|
(341,923
|
)
|
|
|
|
|
|
(39
|
)
|
|
(341,962
|
)
|
|||||||||||
Stock incentive plan activity
|
|
|
|
5,722
|
|
|
(3,936
|
)
|
|
|
|
50,916
|
|
|
|
|
|
52,702
|
|
|||||||||
Shares purchased at cost
|
|
|
|
|
|
|
|
|
|
|
(557,504
|
)
|
|
|
|
|
(557,504
|
)
|
||||||||||
Balance June 30, 2016
|
|
$
|
90,523
|
|
|
$
|
628,451
|
|
|
$
|
10,302,866
|
|
|
$
|
(2,227,765
|
)
|
|
$
|
(4,218,820
|
)
|
|
$
|
3,423
|
|
|
$
|
4,578,678
|
|
1.
|
Significant Accounting Policies
|
June 30,
|
|
2016
|
|
|
2015
|
|
||
Notes receivable
|
|
$
|
102,400
|
|
|
$
|
90,470
|
|
Reverse repurchase agreements
|
|
—
|
|
|
113,558
|
|
||
Accounts receivable, other
|
|
129,783
|
|
|
160,506
|
|
||
Total
|
|
$
|
232,183
|
|
|
$
|
364,534
|
|
June 30,
|
|
2016
|
|
|
2015
|
|
||
Land and land improvements
|
|
$
|
291,122
|
|
|
$
|
294,537
|
|
Buildings and building equipment
|
|
1,437,601
|
|
|
1,457,650
|
|
||
Machinery and equipment
|
|
2,933,818
|
|
|
3,017,011
|
|
||
Construction in progress
|
|
74,600
|
|
|
93,413
|
|
||
Total
|
|
$
|
4,737,141
|
|
|
$
|
4,862,611
|
|
|
As Previously
Reported
|
|
Revised
|
||||
Current Assets
|
|
|
|
||||
Deferred income taxes
|
$
|
142,147
|
|
|
$
|
—
|
|
Noncurrent Assets
|
|
|
|
||||
Deferred income taxes
|
—
|
|
|
406,267
|
|
||
Investments and other assets
|
1,091,805
|
|
|
811,930
|
|
||
Current Liabilities
|
|
|
|
||||
Accrued domestic and foreign taxes
|
140,295
|
|
|
139,285
|
|
||
Noncurrent Liabilities
|
|
|
|
||||
Deferred income taxes
|
77,967
|
|
|
63,222
|
|
2.
|
Acquisitions and Deconsolidation of Subsidiary
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Assets:
|
|
|
|
|
|
||||||
Accounts receivable
|
$
|
6,793
|
|
|
$
|
7,656
|
|
|
$
|
954
|
|
Inventories
|
12,041
|
|
|
3,099
|
|
|
2,184
|
|
|||
Prepaid expenses
|
1,350
|
|
|
91
|
|
|
57
|
|
|||
Deferred income taxes
|
—
|
|
|
5
|
|
|
189
|
|
|||
Plant and equipment
|
5,647
|
|
|
1,123
|
|
|
11,211
|
|
|||
Intangible and other assets
|
26,849
|
|
|
7,794
|
|
|
5,646
|
|
|||
Goodwill
|
31,134
|
|
|
10,430
|
|
|
3,195
|
|
|||
|
83,814
|
|
|
30,198
|
|
|
23,436
|
|
|||
Liabilities:
|
|
|
|
|
|
||||||
Notes payable
|
720
|
|
|
—
|
|
|
—
|
|
|||
Accounts payable, trade
|
2,536
|
|
|
2,689
|
|
|
915
|
|
|||
Accrued payrolls and other compensation
|
1,310
|
|
|
243
|
|
|
263
|
|
|||
Accrued domestic and foreign taxes
|
604
|
|
|
777
|
|
|
1
|
|
|||
Other accrued liabilities
|
1,804
|
|
|
5,267
|
|
|
3,864
|
|
|||
Long-term debt
|
1,743
|
|
|
—
|
|
|
—
|
|
|||
Deferred income taxes
|
7,545
|
|
|
2,604
|
|
|
—
|
|
|||
Other liabilities
|
—
|
|
|
—
|
|
|
800
|
|
|||
|
16,262
|
|
|
11,580
|
|
|
5,843
|
|
|||
Net assets acquired
|
$
|
67,552
|
|
|
$
|
18,618
|
|
|
$
|
17,593
|
|
3.
|
Charges Related to Business Realignment
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Diversified Industrial
|
$
|
91,404
|
|
|
$
|
30,882
|
|
|
$
|
101,524
|
|
Aerospace Systems
|
3,629
|
|
|
967
|
|
|
925
|
|
|||
Corporate administration
|
2,215
|
|
|
458
|
|
|
—
|
|
|||
Other expense (income)
|
116
|
|
|
2,399
|
|
|
1,331
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Diversified Industrial
|
3,515
|
|
|
668
|
|
|
1,581
|
|
Aerospace Systems
|
81
|
|
|
21
|
|
|
44
|
|
Corporate administration
|
53
|
|
|
18
|
|
|
—
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Cost of sales
|
$
|
76,197
|
|
|
$
|
19,419
|
|
|
$
|
63,575
|
|
Selling, general and administrative expenses
|
21,051
|
|
|
12,888
|
|
|
38,874
|
|
|||
(Gain) loss on disposal of assets
|
116
|
|
|
2,399
|
|
|
1,331
|
|
4.
|
Income Taxes
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
United States
|
$
|
672,907
|
|
|
$
|
779,782
|
|
|
$
|
1,115,010
|
|
Foreign
|
441,821
|
|
|
652,458
|
|
|
441,710
|
|
|||
|
$
|
1,114,728
|
|
|
$
|
1,432,240
|
|
|
$
|
1,556,720
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Federal
|
|
|
|
|
|
||||||
Current
|
$
|
235,557
|
|
|
$
|
185,761
|
|
|
$
|
377,404
|
|
Deferred
|
(45,797
|
)
|
|
28,108
|
|
|
(45,643
|
)
|
|||
Foreign
|
|
|
|
|
|
||||||
Current
|
113,146
|
|
|
189,826
|
|
|
168,177
|
|
|||
Deferred
|
(7,006
|
)
|
|
(11,208
|
)
|
|
(28,016
|
)
|
|||
State and local
|
|
|
|
|
|
||||||
Current
|
24,495
|
|
|
25,235
|
|
|
43,860
|
|
|||
Deferred
|
(12,883
|
)
|
|
1,965
|
|
|
(480
|
)
|
|||
|
$
|
307,512
|
|
|
$
|
419,687
|
|
|
$
|
515,302
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Statutory Federal income tax rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State and local income taxes
|
0.6
|
|
|
1.1
|
|
|
1.8
|
|
Goodwill and intangible asset impairment
|
—
|
|
|
—
|
|
|
4.5
|
|
Tax related to international activities
|
(5.2
|
)
|
|
(4.5
|
)
|
|
(5.6
|
)
|
Cash surrender value of life insurance
|
0.2
|
|
|
(0.1
|
)
|
|
(0.9
|
)
|
Federal manufacturing deduction
|
(1.0
|
)
|
|
(1.6
|
)
|
|
(1.0
|
)
|
Research tax credit
|
(1.9
|
)
|
|
(0.8
|
)
|
|
(0.3
|
)
|
Other
|
(0.1
|
)
|
|
0.2
|
|
|
(0.4
|
)
|
Effective income tax rate
|
27.6
|
%
|
|
29.3
|
%
|
|
33.1
|
%
|
|
2016
|
|
|
2015
|
|
||
Retirement benefits
|
$
|
815,545
|
|
|
$
|
614,127
|
|
Other liabilities and reserves
|
126,524
|
|
|
127,838
|
|
||
Long-term contracts
|
64,371
|
|
|
49,929
|
|
||
Stock-based incentive compensation
|
67,138
|
|
|
66,015
|
|
||
Loss carryforwards
|
326,707
|
|
|
316,994
|
|
||
Unrealized currency exchange gains and losses
|
(19,491
|
)
|
|
(17,218
|
)
|
||
Inventory
|
14,693
|
|
|
16,659
|
|
||
Foreign tax credit carryforward
|
24,051
|
|
|
29,965
|
|
||
Depreciation and amortization
|
(536,070
|
)
|
|
(531,258
|
)
|
||
Valuation allowance
|
(332,708
|
)
|
|
(330,006
|
)
|
||
Net deferred tax asset
|
$
|
550,760
|
|
|
$
|
343,045
|
|
|
|
|
|
||||
Change in net deferred tax asset:
|
|
|
|
||||
Provision for deferred tax
|
$
|
65,686
|
|
|
$
|
(18,865
|
)
|
Items of other comprehensive (loss)
|
149,861
|
|
|
57,523
|
|
||
Acquisitions and other
|
(7,832
|
)
|
|
(1,225
|
)
|
||
Total change in net deferred tax
|
$
|
207,715
|
|
|
$
|
37,433
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Balance July 1
|
$
|
145,688
|
|
|
$
|
164,813
|
|
|
$
|
107,440
|
|
Additions for tax positions related to current year
|
7,025
|
|
|
6,090
|
|
|
7,752
|
|
|||
Additions for tax positions of prior years
|
2,582
|
|
|
14,989
|
|
|
55,136
|
|
|||
Reductions for tax positions of prior years
|
(627
|
)
|
|
(6,945
|
)
|
|
(1,359
|
)
|
|||
Reductions for settlements
|
(10,284
|
)
|
|
—
|
|
|
(1,856
|
)
|
|||
Reductions for expiration of statute of limitations
|
(4,142
|
)
|
|
(6,251
|
)
|
|
(5,005
|
)
|
|||
Effect of foreign currency translation
|
(335
|
)
|
|
(27,008
|
)
|
|
2,705
|
|
|||
Balance June 30
|
$
|
139,907
|
|
|
$
|
145,688
|
|
|
$
|
164,813
|
|
5.
|
Earnings Per Share
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Numerator:
|
|
|
|
|
|
||||||
Net income attributable to common shareholders
|
$
|
806,840
|
|
|
$
|
1,012,140
|
|
|
$
|
1,041,048
|
|
Denominator:
|
|
|
|
|
|
||||||
Basic - weighted-average common shares
|
135,353,321
|
|
|
142,925,327
|
|
|
149,099,448
|
|
|||
Increase in weighted-average common shares from dilutive effect of stock-based awards
|
1,558,369
|
|
|
2,186,823
|
|
|
2,344,655
|
|
|||
Diluted - weighted-average common shares, assuming exercise of stock-based awards
|
136,911,690
|
|
|
145,112,150
|
|
|
151,444,103
|
|
|||
Basic earnings per share
|
$
|
5.96
|
|
|
$
|
7.08
|
|
|
$
|
6.98
|
|
Diluted earnings per share
|
$
|
5.89
|
|
|
$
|
6.97
|
|
|
$
|
6.87
|
|
6.
|
Inventories
|
June 30,
|
|
2016
|
|
|
2015
|
|
||
Finished products
|
|
$
|
458,657
|
|
|
$
|
526,708
|
|
Work in process
|
|
639,907
|
|
|
688,727
|
|
||
Raw materials
|
|
74,765
|
|
|
85,024
|
|
||
Total
|
|
$
|
1,173,329
|
|
|
$
|
1,300,459
|
|
7.
|
Goodwill and Intangible Assets
|
|
Diversified Industrial Segment
|
|
Aerospace Systems Segment
|
|
Total
|
||||||
Balance June 30, 2014
|
$
|
3,072,724
|
|
|
$
|
98,701
|
|
|
$
|
3,171,425
|
|
Acquisitions
|
10,430
|
|
|
—
|
|
|
10,430
|
|
|||
Divestitures
|
(4,757
|
)
|
|
—
|
|
|
(4,757
|
)
|
|||
Foreign currency translation and other
|
(234,352
|
)
|
|
(67
|
)
|
|
(234,419
|
)
|
|||
Balance June 30, 2015
|
$
|
2,844,045
|
|
|
$
|
98,634
|
|
|
$
|
2,942,679
|
|
Acquisitions
|
31,134
|
|
|
—
|
|
|
31,134
|
|
|||
Foreign currency translation and other
|
(70,776
|
)
|
|
—
|
|
|
(70,776
|
)
|
|||
Balance June 30, 2016
|
$
|
2,804,403
|
|
|
$
|
98,634
|
|
|
$
|
2,903,037
|
|
|
2016
|
|
2015
|
||||||||||||
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
||||||||
Patents
|
$
|
150,914
|
|
|
$
|
95,961
|
|
|
$
|
149,066
|
|
|
$
|
88,540
|
|
Trademarks
|
340,805
|
|
|
179,156
|
|
|
355,108
|
|
|
172,187
|
|
||||
Customer lists and other
|
1,362,521
|
|
|
656,552
|
|
|
1,369,380
|
|
|
599,388
|
|
||||
Total
|
$
|
1,854,240
|
|
|
$
|
931,669
|
|
|
$
|
1,873,554
|
|
|
$
|
860,115
|
|
|
Purchase Price Allocation
|
|
Weighted-Average Life
|
||
Patents
|
$
|
565
|
|
|
12 years
|
Trademarks
|
761
|
|
|
5 years
|
|
Customer lists and other
|
25,523
|
|
|
11 years
|
|
Total
|
$
|
26,849
|
|
|
11 years
|
8.
|
Financing Arrangements
|
9.
|
Debt
|
June 30,
|
|
2016
|
|
|
2015
|
|
||
Domestic:
|
|
|
|
|
||||
Fixed rate medium-term notes 3.30% to 6.55%, due 2018-2045
|
|
$
|
2,675,000
|
|
|
$
|
2,675,000
|
|
Foreign:
|
|
|
|
|
||||
Bank loans, including revolving credit 1% to 11.75%, due 2016
|
|
—
|
|
|
322
|
|
||
Euro bonds 4.125%, due 2016
|
|
—
|
|
|
222,820
|
|
||
Japanese Yen credit facility JPY Libor plus 55 bps, due 2017
|
|
58,140
|
|
|
48,960
|
|
||
Total long-term debt
|
|
2,733,140
|
|
|
2,947,102
|
|
||
Less: Long-term debt payable within one year
|
|
58,140
|
|
|
223,142
|
|
||
Long-term debt, net
|
|
$
|
2,675,000
|
|
|
$
|
2,723,960
|
|
10.
|
Retirement Benefits
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Benefit cost
|
|
|
|
|
|
||||||
Service cost
|
$
|
94,650
|
|
|
$
|
97,960
|
|
|
$
|
99,929
|
|
Interest cost
|
181,469
|
|
|
176,556
|
|
|
190,999
|
|
|||
Special termination cost
|
7,088
|
|
|
21,174
|
|
|
—
|
|
|||
Settlement cost
|
5,102
|
|
|
—
|
|
|
—
|
|
|||
Expected return on plan assets
|
(221,629
|
)
|
|
(218,938
|
)
|
|
(226,884
|
)
|
|||
Amortization of prior service cost
|
7,470
|
|
|
9,437
|
|
|
14,644
|
|
|||
Amortization of unrecognized actuarial loss
|
170,407
|
|
|
152,664
|
|
|
159,584
|
|
|||
Amortization of initial net obligation
|
17
|
|
|
17
|
|
|
19
|
|
|||
Net periodic benefit cost
|
$
|
244,574
|
|
|
$
|
238,870
|
|
|
$
|
238,291
|
|
|
2016
|
|
|
2015
|
|
||
Change in benefit obligation
|
|
|
|
||||
Benefit obligation at beginning of year
|
$
|
4,867,703
|
|
|
$
|
4,749,447
|
|
Service cost
|
94,650
|
|
|
97,960
|
|
||
Interest cost
|
181,469
|
|
|
176,556
|
|
||
Special termination cost
|
7,088
|
|
|
21,174
|
|
||
Actuarial loss
|
487,523
|
|
|
237,896
|
|
||
Benefits paid
|
(230,551
|
)
|
|
(261,473
|
)
|
||
Plan amendments
|
2,992
|
|
|
3,033
|
|
||
Foreign currency translation and other
|
(95,219
|
)
|
|
(156,890
|
)
|
||
Benefit obligation at end of year
|
$
|
5,315,655
|
|
|
$
|
4,867,703
|
|
|
|
|
|
||||
Change in plan assets
|
|
|
|
||||
Fair value of plan assets at beginning of year
|
$
|
3,238,307
|
|
|
$
|
3,499,274
|
|
Actual gain on plan assets
|
97,165
|
|
|
51,514
|
|
||
Employer contributions
|
279,140
|
|
|
62,852
|
|
||
Benefits paid
|
(230,551
|
)
|
|
(261,473
|
)
|
||
Foreign currency translation and other
|
(77,014
|
)
|
|
(113,860
|
)
|
||
Fair value of plan assets at end of year
|
$
|
3,307,047
|
|
|
$
|
3,238,307
|
|
Funded status
|
$
|
(2,008,608
|
)
|
|
$
|
(1,629,396
|
)
|
Amounts recognized on the Consolidated Balance Sheet
|
|
|
|
||||
Other accrued liabilities
|
$
|
(42,763
|
)
|
|
$
|
(31,206
|
)
|
Pensions and other postretirement benefits
|
(1,965,845
|
)
|
|
(1,598,190
|
)
|
||
Net amount recognized
|
$
|
(2,008,608
|
)
|
|
$
|
(1,629,396
|
)
|
|
|
|
|
||||
Amounts recognized in Accumulated Other Comprehensive (Loss)
|
|
|
|
||||
Net actuarial loss
|
$
|
2,047,103
|
|
|
$
|
1,639,010
|
|
Prior service cost
|
27,723
|
|
|
32,126
|
|
||
Transition obligation
|
103
|
|
|
103
|
|
||
Net amount recognized
|
$
|
2,074,929
|
|
|
$
|
1,671,239
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
U.S. defined benefit plans
|
|
|
|
|
|
|||
Discount rate
|
4.19
|
%
|
|
4.05
|
%
|
|
4.52
|
%
|
Average increase in compensation
|
5.14
|
%
|
|
5.12
|
%
|
|
5.13
|
%
|
Expected return on plan assets
|
7.5
|
%
|
|
7.5
|
%
|
|
8.0
|
%
|
Non-U.S. defined benefit plans
|
|
|
|
|
|
|||
Discount rate
|
0.7 to 6.0%
|
|
|
0.9 to 4.2%
|
|
|
1.5 to 4.59%
|
|
Average increase in compensation
|
2.0 to 5.5%
|
|
|
2.0 to 5.0%
|
|
|
2.0 to 6.0%
|
|
Expected return on plan assets
|
1.0 to 5.75%
|
|
|
1.0 to 6.25%
|
|
|
1.0 to 6.25%
|
|
|
2016
|
|
|
2015
|
|
U.S. defined benefit plans
|
|
|
|
||
Discount rate
|
3.33
|
%
|
|
4.19
|
%
|
Average increase in compensation
|
5.02
|
%
|
|
5.14
|
%
|
Non-U.S. defined benefit plans
|
|
|
|
||
Discount rate
|
0.23 to 7.75%
|
|
|
0.7 to 6.0%
|
|
Average increase in compensation
|
2.0 to 5.5%
|
|
|
2.0 to 5.5%
|
|
|
2016
|
|
|
2015
|
|
Equity securities
|
39
|
%
|
|
41
|
%
|
Debt securities
|
51
|
%
|
|
47
|
%
|
Other investments
|
10
|
%
|
|
12
|
%
|
|
100
|
%
|
|
100
|
%
|
|
June 30, 2016
|
|
Quoted Prices In
Active Markets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
Cash and cash equivalents
|
$
|
46,052
|
|
|
$
|
45,474
|
|
|
$
|
578
|
|
|
$
|
—
|
|
Equity securities
|
|
|
|
|
|
|
|
||||||||
U.S. based companies
|
292,138
|
|
|
292,138
|
|
|
—
|
|
|
—
|
|
||||
Non-U.S. based companies
|
191,647
|
|
|
191,647
|
|
|
—
|
|
|
—
|
|
||||
Fixed income securities
|
|
|
|
|
|
|
|
||||||||
Corporate bonds
|
141,549
|
|
|
73,685
|
|
|
67,864
|
|
|
—
|
|
||||
Government issued securities
|
203,000
|
|
|
141,935
|
|
|
61,065
|
|
|
—
|
|
||||
Mutual funds
|
|
|
|
|
|
|
|
||||||||
Equity funds
|
149,807
|
|
|
149,807
|
|
|
—
|
|
|
—
|
|
||||
Fixed income funds
|
151,649
|
|
|
151,649
|
|
|
—
|
|
|
—
|
|
||||
Mutual funds measured at net asset value
|
246,075
|
|
|
|
|
|
|
|
|||||||
Common/Collective trusts
|
|
|
|
|
|
|
|
||||||||
Equity funds
|
65,404
|
|
|
65,404
|
|
|
—
|
|
|
—
|
|
||||
Fixed income funds
|
43,981
|
|
|
43,981
|
|
|
—
|
|
|
—
|
|
||||
Common/Collective trusts measured at net asset value
|
1,487,170
|
|
|
|
|
|
|
|
|||||||
Limited Partnerships measured at net asset value
|
280,248
|
|
|
|
|
|
|
|
|||||||
Miscellaneous
|
8,327
|
|
|
—
|
|
|
8,327
|
|
|
—
|
|
||||
Total at June 30, 2016
|
$
|
3,307,047
|
|
|
$
|
1,155,720
|
|
|
$
|
137,834
|
|
|
$
|
—
|
|
|
June 30, 2015
|
|
Quoted Prices In
Active Markets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
Cash and cash equivalents
|
$
|
75,015
|
|
|
$
|
75,015
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equity securities
|
|
|
|
|
|
|
|
||||||||
U.S. based companies
|
299,321
|
|
|
299,321
|
|
|
—
|
|
|
—
|
|
||||
Non-U.S. based companies
|
203,199
|
|
|
203,199
|
|
|
—
|
|
|
—
|
|
||||
Fixed income securities
|
|
|
|
|
|
|
|
||||||||
Corporate bonds
|
165,226
|
|
|
77,224
|
|
|
88,002
|
|
|
—
|
|
||||
Government issued securities
|
143,697
|
|
|
90,785
|
|
|
52,912
|
|
|
—
|
|
||||
Mutual funds
|
|
|
|
|
|
|
|
||||||||
Equity funds
|
149,383
|
|
|
149,383
|
|
|
—
|
|
|
—
|
|
||||
Fixed income funds
|
135,949
|
|
|
135,949
|
|
|
—
|
|
|
—
|
|
||||
Mutual funds measured at net asset value
|
5,564
|
|
|
|
|
|
|
|
|||||||
Common/Collective trusts
|
|
|
|
|
|
|
|
||||||||
Equity funds
|
77,429
|
|
|
77,429
|
|
|
—
|
|
|
—
|
|
||||
Fixed income funds
|
46,184
|
|
|
46,184
|
|
|
—
|
|
|
—
|
|
||||
Common/Collective trusts measured at net asset value
|
1,635,135
|
|
|
|
|
|
|
|
|||||||
Limited Partnerships measured at net asset value
|
290,904
|
|
|
|
|
|
|
|
|||||||
Miscellaneous
|
11,301
|
|
|
—
|
|
|
11,301
|
|
|
—
|
|
||||
Total at June 30, 2015
|
$
|
3,238,307
|
|
|
$
|
1,154,489
|
|
|
$
|
152,215
|
|
|
$
|
—
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Shares held by ESOP
|
7,728,332
|
|
|
8,407,858
|
|
|
8,944,697
|
|
|||
Company matching contributions
|
$
|
58,922
|
|
|
$
|
63,914
|
|
|
$
|
63,441
|
|
|
2016
|
|
|
2015
|
|
||
Change in benefit obligation
|
|
|
|
||||
Benefit obligation at beginning of year
|
$
|
75,953
|
|
|
$
|
76,207
|
|
Service cost
|
591
|
|
|
632
|
|
||
Interest cost
|
2,834
|
|
|
2,723
|
|
||
Special termination cost
|
4,521
|
|
|
—
|
|
||
Actuarial loss
|
10,217
|
|
|
655
|
|
||
Benefits paid
|
(4,331
|
)
|
|
(4,264
|
)
|
||
Benefit obligation at end of year
|
$
|
89,785
|
|
|
$
|
75,953
|
|
Funded status
|
$
|
(89,785
|
)
|
|
$
|
(75,953
|
)
|
|
2016
|
|
|
2015
|
|
||
Amounts recognized on the Consolidated Balance Sheet
|
|
|
|
||||
Other accrued liabilities
|
$
|
(6,216
|
)
|
|
$
|
(5,629
|
)
|
Pensions and other postretirement benefits
|
(83,569
|
)
|
|
(70,324
|
)
|
||
Net amount recognized
|
$
|
(89,785
|
)
|
|
$
|
(75,953
|
)
|
|
|
|
|
||||
Amounts recognized in Accumulated Other Comprehensive (Loss)
|
|
|
|
||||
Net actuarial loss
|
$
|
22,914
|
|
|
$
|
13,626
|
|
Prior service credit
|
(556
|
)
|
|
(676
|
)
|
||
Net amount recognized
|
$
|
22,358
|
|
|
$
|
12,950
|
|
11.
|
Equity
|
|
Foreign Currency Translation Adjustment and Other
|
|
Retirement Benefit Plans
|
|
Total
|
||||||
Balance June 30, 2014
|
$
|
124,392
|
|
|
$
|
(947,890
|
)
|
|
$
|
(823,498
|
)
|
Other comprehensive (loss) before reclassifications
|
(769,431
|
)
|
|
(253,206
|
)
|
|
(1,022,637
|
)
|
|||
Amounts reclassified from accumulated other comprehensive (loss)
|
4,021
|
|
|
103,496
|
|
|
107,517
|
|
|||
Balance June 30, 2015
|
$
|
(641,018
|
)
|
|
$
|
(1,097,600
|
)
|
|
$
|
(1,738,618
|
)
|
Other comprehensive (loss) before reclassifications
|
(202,444
|
)
|
|
(400,053
|
)
|
|
(602,497
|
)
|
|||
Amounts reclassified from accumulated other comprehensive (loss)
|
(659
|
)
|
|
114,009
|
|
|
113,350
|
|
|||
Balance June 30, 2016
|
$
|
(844,121
|
)
|
|
$
|
(1,383,644
|
)
|
|
$
|
(2,227,765
|
)
|
Details about Accumulated Other Comprehensive (Loss) Components
|
|
Income (Expense) Reclassified from Accumulated Other Comprehensive (Loss)
|
|
Consolidated Statement of Income Classification
|
||
Retirement benefit plans
|
|
|
|
|
||
Amortization of prior service cost and initial net obligation
|
|
$
|
(7,366
|
)
|
|
See Note 10
|
Recognized actuarial loss
|
|
(171,337
|
)
|
|
See Note 10
|
|
Total before tax
|
|
(178,703
|
)
|
|
|
|
Tax benefit
|
|
64,694
|
|
|
Income taxes
|
|
Net of tax
|
|
$
|
(114,009
|
)
|
|
|
Details about Accumulated Other Comprehensive (Loss) Components
|
|
Income (Expense) Reclassified from Accumulated Other Comprehensive (Loss)
|
|
Consolidated Statement of Income Classification
|
||
Retirement benefit plans
|
|
|
|
|
||
Amortization of prior service cost and initial net obligation
|
|
$
|
(9,333
|
)
|
|
See Note 10
|
Recognized actuarial loss
|
|
(153,770
|
)
|
|
See Note 10
|
|
Total before tax
|
|
(163,103
|
)
|
|
|
|
Tax benefit
|
|
59,607
|
|
|
Income taxes
|
|
Net of tax
|
|
$
|
(103,496
|
)
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Shares repurchased
|
5,121,051
|
|
|
11,091,759
|
|
|
1,741,143
|
|
|||
Average price per share
|
$
|
108.87
|
|
|
$
|
125.64
|
|
|
$
|
114.87
|
|
12.
|
Stock Incentive Plans
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Risk-free interest rate
|
1.9
|
%
|
|
2.0
|
%
|
|
1.55
|
%
|
|||
Expected life of award
|
5.4 yrs
|
|
|
5.4 yrs
|
|
|
5.1 yrs
|
|
|||
Expected dividend yield of stock
|
1.9
|
%
|
|
1.8
|
%
|
|
1.9
|
%
|
|||
Expected volatility of stock
|
28.7
|
%
|
|
32.3
|
%
|
|
39.1
|
%
|
|||
Weighted-average fair value
|
$
|
26.88
|
|
|
$
|
30.50
|
|
|
$
|
32.57
|
|
|
Number of Shares
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average Remaining Contractual Term
|
|
Aggregate Intrinsic Value
|
|||||
Outstanding June 30, 2015
|
8,134,206
|
|
|
$
|
79.84
|
|
|
|
|
|
||
Granted
|
968,445
|
|
|
113.23
|
|
|
|
|
|
|||
Exercised
|
(945,191
|
)
|
|
67.65
|
|
|
|
|
|
|||
Canceled
|
(101,012
|
)
|
|
108.32
|
|
|
|
|
|
|||
Outstanding June 30, 2016
|
8,056,448
|
|
|
$
|
84.93
|
|
|
5.3 years
|
|
$
|
199.2
|
|
Exercisable June 30, 2016
|
6,018,552
|
|
|
$
|
75.80
|
|
|
4.3 years
|
|
$
|
198.4
|
|
|
Number of Shares
|
|
Weighted-Average Grant Date Fair Value
|
|||
Nonvested June 30, 2015
|
2,310,089
|
|
|
$
|
30.71
|
|
Granted
|
968,445
|
|
|
26.88
|
|
|
Vested
|
(1,164,552
|
)
|
|
29.80
|
|
|
Canceled
|
(76,086
|
)
|
|
29.31
|
|
|
Nonvested June 30, 2016
|
2,037,896
|
|
|
$
|
29.46
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Net cash proceeds
|
$
|
126
|
|
|
$
|
3,355
|
|
|
$
|
8,013
|
|
Intrinsic value
|
40,612
|
|
|
72,140
|
|
|
155,903
|
|
|||
Income tax benefit
|
7,188
|
|
|
17,355
|
|
|
37,993
|
|
|
Number of Shares
|
|
Weighted-Average Grant Date Fair Value
|
|||
Nonvested June 30, 2015
|
449,288
|
|
|
$
|
105.63
|
|
Granted
|
180,487
|
|
|
113.19
|
|
|
Vested
|
(210,777
|
)
|
|
100.45
|
|
|
Canceled
|
(44,830
|
)
|
|
108.68
|
|
|
Nonvested June 30, 2016
|
374,168
|
|
|
$
|
111.82
|
|
Stock issued for LTIP
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
LTIP three-year plan
|
|
2013-14-15
|
|
|
2012-13-14
|
|
|
2011-12-13
|
|
|||
Number of shares issued
|
|
175,291
|
|
|
185,063
|
|
|
298,813
|
|
|||
Average share value on date of issuance
|
|
$
|
113.91
|
|
|
$
|
119.06
|
|
|
$
|
126.17
|
|
Total value
|
|
$
|
19,967
|
|
|
$
|
22,034
|
|
|
$
|
37,701
|
|
|
Number of Shares
|
|
Weighted-Average Grant Date Fair Value
|
|||
Nonvested June 30, 2015
|
876,171
|
|
|
$
|
109.27
|
|
Granted
|
262,032
|
|
|
88.63
|
|
|
Vested
|
(298,105
|
)
|
|
93.05
|
|
|
Canceled
|
(26,336
|
)
|
|
115.60
|
|
|
Nonvested June 30, 2016
|
813,762
|
|
|
$
|
108.37
|
|
13.
|
Shareholders' Protection Rights Agreement
|
14.
|
Research and Development
|
15.
|
Financial Instruments
|
|
June 30, 2016
|
|
June 30, 2015
|
||||||||||||
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
||||||||
Less than one year
|
$
|
29,960
|
|
|
$
|
29,990
|
|
|
$
|
13,561
|
|
|
$
|
13,555
|
|
One to three years
|
144,100
|
|
|
144,625
|
|
|
188,539
|
|
|
188,057
|
|
||||
Over three years
|
34,276
|
|
|
34,275
|
|
|
15,673
|
|
|
15,587
|
|
|
|
2016
|
|
|
2015
|
|
||
Carrying value of long-term debt
|
|
$
|
2,733,140
|
|
|
$
|
2,947,102
|
|
Estimated fair value of long-term debt
|
|
3,133,989
|
|
|
3,107,735
|
|
|
Balance Sheet Caption
|
|
2016
|
|
|
2015
|
|
||
Net investment hedges
|
|
|
|
|
|
||||
Cross-currency swap contracts
|
Other assets
|
|
$
|
24,771
|
|
|
$
|
17,994
|
|
Cash flow hedges
|
|
|
|
|
|
||||
Costless collar contracts
|
Non-trade and notes receivable
|
|
—
|
|
|
5,627
|
|
||
Costless collar contracts
|
Other accrued liabilities
|
|
8,368
|
|
|
1,970
|
|
|
2016
|
|
|
2015
|
|
||
Cross-currency swap contracts
|
$
|
6,869
|
|
|
$
|
39,406
|
|
Foreign denominated debt
|
(8,180
|
)
|
|
37,871
|
|
|
|
June 30, 2016
|
|
|
Quoted Prices In
Active Markets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||||
Assets:
|
|
|
|
|
|
|
|
|
||||||||
Equity securities
|
|
$
|
1,296
|
|
|
$
|
1,296
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Government bonds
|
|
15,764
|
|
|
15,764
|
|
|
—
|
|
|
—
|
|
||||
Corporate bonds
|
|
184,380
|
|
|
184,380
|
|
|
—
|
|
|
—
|
|
||||
Asset-backed and mortgage-backed securities
|
|
8,746
|
|
|
—
|
|
|
8,746
|
|
|
—
|
|
||||
Derivatives
|
|
25,303
|
|
|
—
|
|
|
25,303
|
|
|
—
|
|
||||
Investments measured at net asset value
|
|
361,770
|
|
|
|
|
|
|
|
|||||||
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Derivatives
|
|
13,028
|
|
|
—
|
|
|
13,028
|
|
|
—
|
|
|
|
June 30, 2015
|
|
|
Quoted Prices In
Active Markets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||||
Assets:
|
|
|
|
|
|
|
|
|
||||||||
Government bonds
|
|
$
|
60,512
|
|
|
$
|
60,512
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Corporate bonds
|
|
145,717
|
|
|
145,717
|
|
|
—
|
|
|
—
|
|
||||
Asset-backed and mortgage-backed securities
|
|
10,970
|
|
|
—
|
|
|
10,970
|
|
|
—
|
|
||||
Derivatives
|
|
23,598
|
|
|
—
|
|
|
23,598
|
|
|
—
|
|
||||
Investments measured at net asset value
|
|
187,534
|
|
|
|
|
|
|
|
|||||||
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Derivatives
|
|
1,970
|
|
|
—
|
|
|
1,970
|
|
|
—
|
|
16.
|
Contingencies
|
17.
|
Quarterly Information
(Unaudited)
|
2016
|
|
1st
|
|
|
2nd
|
|
|
3rd
|
|
|
4th
|
|
|
Total
|
|
|||||
Net sales
|
|
$
|
2,869,348
|
|
|
$
|
2,705,590
|
|
|
$
|
2,828,665
|
|
|
$
|
2,957,150
|
|
|
$
|
11,360,753
|
|
Gross profit
|
|
668,444
|
|
|
564,966
|
|
|
619,264
|
|
|
684,695
|
|
|
2,537,369
|
|
|||||
Net income attributable to common shareholders
|
|
194,978
|
|
|
182,982
|
|
|
187,084
|
|
|
241,796
|
|
|
806,840
|
|
|||||
Diluted earnings per share
|
|
1.41
|
|
|
1.33
|
|
|
1.37
|
|
|
1.77
|
|
|
5.89
|
|
2015
|
|
1st
|
|
|
2nd
|
|
|
3rd
|
|
|
4th
|
|
|
Total
|
|
|||||
Net sales
|
|
$
|
3,269,932
|
|
|
$
|
3,134,993
|
|
|
$
|
3,162,311
|
|
|
$
|
3,144,508
|
|
|
$
|
12,711,744
|
|
Gross profit
|
|
810,067
|
|
|
733,409
|
|
|
789,295
|
|
|
723,728
|
|
|
3,056,499
|
|
|||||
Net income attributable to common shareholders
|
|
280,089
|
|
|
267,252
|
|
|
285,345
|
|
|
179,454
|
|
|
1,012,140
|
|
|||||
Diluted earnings per share
|
|
1.85
|
|
|
1.80
|
|
|
2.02
|
|
|
1.27
|
|
|
6.97
|
|
|
|
Page Number
in Form 10-K
|
1.
Financial Statements
|
|
|
|
Consolidated Statement of Income
|
|
|
Consolidated Statement of Comprehensive Income
|
|
|
Business Segment Information
|
|
|
Consolidated Balance Sheet
|
|
|
Consolidated Statement of Cash Flows
|
|
|
Consolidated Statement of Equity
|
|
|
Notes to Consolidated Financial Statements
|
|
|
|
|
2.
Schedule
|
|
|
|
II - Valuation and Qualifying Accounts
|
|
|
|
|
3.
Exhibits
|
|
|
|
The exhibits listed in the accompanying Exhibit Index and required by Item 601 of Regulation S-K (numbered in accordance with Item 601 of Regulation S-K) are filed, furnished or incorporated by reference as part of this Annual Report on Form 10-K.
|
|
|
PARKER-HANNIFIN CORPORATION
|
||
|
|
|
|
|
By:
|
|
/s/ Jon P. Marten
|
|
|
|
Jon P. Marten
|
|
|
|
Executive Vice President - Finance &
|
|
|
|
Administration and Chief Financial Officer
|
/s/ Jon P. Marten
|
|
Jon P. Marten, Executive Vice President –
Finance & Administration and Chief Financial
Officer (Principal Financial Officer and
Attorney-in-Fact)
|
|
Column A
|
|
Column B
|
|
Column C
|
|
Column D
|
|
Column E
|
||||||||
Description
|
|
Balance at
Beginning
Of Period
|
|
Additions
Charged to
Costs and
Expenses
|
|
Other
(Deductions)/
Additions (A)
|
|
Balance
At End
Of Period
|
||||||||
Allowance for doubtful accounts:
|
|
|
|
|
|
|
|
|
||||||||
Year ended June 30, 2014
|
|
$
|
14,824
|
|
|
$
|
9,649
|
|
|
$
|
(8,433
|
)
|
|
$
|
16,040
|
|
Year ended June 30, 2015
|
|
$
|
16,040
|
|
|
$
|
2,685
|
|
|
$
|
(9,441
|
)
|
|
$
|
9,284
|
|
Year ended June 30, 2016
|
|
$
|
9,284
|
|
|
$
|
1,419
|
|
|
$
|
(2,693
|
)
|
|
$
|
8,010
|
|
Deferred tax asset valuation allowance:
|
|
|
|
|
|
|
|
|
||||||||
Year ended June 30, 2014
|
|
$
|
273,413
|
|
|
$
|
74,032
|
|
|
$
|
1,392
|
|
|
$
|
348,837
|
|
Year ended June 30, 2015
|
|
$
|
348,837
|
|
|
$
|
(18,831
|
)
|
|
$
|
—
|
|
|
$
|
330,006
|
|
Year ended June 30, 2016
|
|
$
|
330,006
|
|
|
$
|
2,702
|
|
|
$
|
—
|
|
|
$
|
332,708
|
|
(A)
|
For allowance for doubtful accounts, net balance is comprised of deductions due to uncollectible accounts charged off, additions due to acquisitions or recoveries, and currency translation adjustments. For deferred tax asset valuation allowance, the balance primarily represents adjustments due to acquisitions.
|
Exhibit No.
|
|
Description of Exhibit
|
|
|
Articles of Incorporation and By-Laws
:
|
|
|
|
(3)(a)
|
|
Amended Articles of Incorporation.*
|
|
|
|
(3)(b)
|
|
Code of Regulations, as amended, incorporated by reference to Exhibit 3(ii) to the Registrant’s Report on Form 10-Q for the quarterly period ended December 31, 2007 (Commission File No. 1-4982).
|
|
|
|
|
|
Instruments Defining Rights of Security Holders
:
|
|
|
|
(4)(a)
|
|
Shareholder Protection Rights Agreement, dated as of February 8, 2007, between the Registrant and Wells Fargo Bank, N.A. (as successor to National City Bank), as Rights Agent, incorporated by reference to Exhibit 1 to the Registrant’s Form 8-A filed on February 8, 2007 (Commission File No. 1-4982).
|
|
|
|
(4)(b)
|
|
First Amendment to Shareholder Protection Rights Agreement, dated as of July 6, 2009, between the Registrant and Wells Fargo Bank, N.A. (as successor to National City Bank), as Rights Agent, incorporated by reference to Exhibit 4(a) to the Registrant’s Report on Form 10-K for the fiscal year ended June 30, 2009 (Commission File No. 1-4982).
|
|
|
|
|
|
The Registrant is a party to other instruments, copies of which will be furnished to the Commission upon request, defining the rights of holders of its long-term debt identified in Note 9 of the Notes to Consolidated Financial Statements included within Part II, Item 8 of this Annual Report on From 10-K.
|
|
|
|
|
|
Material Contracts
:
|
|
|
|
(10)(a)
|
|
Form of Parker-Hannifin Corporation Amended and Restated Change in Control Severance Agreement entered into by the Registrant and executive officers incorporated by reference to Exhibit 10(a) to the Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2008 (Commission File No. 1-4982).
|
|
|
|
(10)(b)
|
|
Termination Amendment to Parker-Hannifin Corporation Amended and Restated Change in Control Severance Agreement between Donald E. Washkewicz and the Registrant effective February 1, 2015 incorporated by reference to Exhibit 10(b) to the Registrant’s Report on Form 10-Q for the quarterly period ended March 31, 2015 (Commission File No. 1-4982).
|
|
|
|
(10)(c)
|
|
Form of Parker-Hannifin Corporation Change in Control Severance Agreement for executive officers elected after September 1, 2015 at or above Grade 29.*
|
|
|
|
(10)(d)
|
|
Form of Parker-Hannifin Corporation Change in Control Severance Agreement for executive officers elected after September 1, 2015 below Grade 29.*
|
|
|
|
(10)(e)
|
|
Parker-Hannifin Corporation Amended and Restated Change in Control Severance Plan incorporated by reference to Exhibit 10(b) to the Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2008 (Commission File No. 1-4982).
|
|
|
|
(10)(f)
|
|
Form of Indemnification Agreement entered into by the Registrant and its directors and executive officers incorporated by reference to Exhibit 10(c) to the Registrant’s Report on Form 10-K for the fiscal year ended June 30, 2003 (Commission File No. 1-4982).
|
|
|
|
(10)(g)
|
|
Description of the Parker-Hannifin Corporation Officer Life Insurance Plan incorporated by reference to Exhibit 10(h) to the Registrant’s Report on Form 10-K for the fiscal year ended June 30, 2005 (Commission File No. 1-4982).
|
|
|
|
(10)(h)
|
|
Parker-Hannifin Corporation Amended and Restated Supplemental Executive Retirement Benefits Program, effective July 1, 2014, incorporated by reference to Exhibit 10(a) to the Registrant’s Report on Form 10-Q for the quarterly period ended March 31, 2016 (Commission File No. 1-4982).
|
|
|
|
(10)(i)
|
|
Parker-Hannifin Corporation Amended and Restated Defined Contribution Supplemental Executive Retirement Program, effective January 22, 2015, incorporated by reference to Exhibit 10(c) to the Registrant’s Report on Form 10-Q for the quarterly period ended December 31, 2015 (Commission File No. 1-4982).
|
|
|
|
(10)(j)
|
|
Summary of the Parker-Hannifin Corporation Executive Disability Insurance Plan.*
|
|
|
|
(10)(k)
|
|
Parker-Hannifin Corporation Amended and Restated 2003 Stock Incentive Plan incorporated by reference to Exhibit 10(b) to the Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2010 (Commission File No. 1-4982).
|
|
|
|
(10)(l)
|
|
Parker-Hannifin Corporation Amended and Restated 2009 Omnibus Stock Incentive Plan incorporated by reference to Appendix A to the Registrant’s Definitive Proxy Statement filed with the Commission on September 24, 2012 (Commission File No. 1-4982).
|
|
|
|
(10)(m)
|
|
Parker-Hannifin Corporation 2010 Performance Bonus Plan incorporated by reference to Exhibit A to the Registrant’s Definitive Proxy Statement filed with the Commission on September 27, 2010 (Commission File No. 1-4982).
|
|
|
|
(10)(n)
|
|
Parker-Hannifin Corporation 2015 Performance Bonus Plan incorporated by reference to Appendix B to the Registrant’s Definitive Proxy Statement filed with the Commission on September 28, 2015 (Commission File No. 1-4982).
|
|
|
|
(10)(o)
|
|
Form of 2007 Notice of Grant of Stock Options with Tandem Stock Appreciation Rights for executive officers incorporated by reference to Exhibit 10.3 to the Registrant’s Report on Form 8-K filed with the Commission on August 22, 2006 (Commission File No. 1-4982).
|
|
|
|
(10)(p)
|
|
Form of 2008 Notice of Grant of Stock Options with Tandem Stock Appreciation Rights for executive officers incorporated by reference to Exhibit 10.1 to the Registrant’s Report on Form 8-K/A filed with the Commission on September 5, 2007 (Commission File No. 1-4982).
|
|
|
|
(10)(q)
|
|
Form of 2009 Notice of Stock Options Award with Tandem Stock Appreciation Rights for executive officers incorporated by reference to Exhibit 10(d) to the Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2008 (Commission File No. 1-4982).
|
|
|
|
(10)(r)
|
|
Form of 2010 Notice of Stock Options with Tandem Stock Appreciation Rights for executive officers incorporated by reference to Exhibit 10(d) to the Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2009 (Commission File No. 1-4982).
|
|
|
|
(10)(s)
|
|
Form of FY2011 Parker-Hannifin Corporation Stock Appreciation Rights Award Agreement for executive officers incorporated by reference to Exhibit 10.2 to the Registrant’s Report on Form 8-K filed with the Commission on August 17, 2010 (Commission File No. 1-4982).
|
|
|
|
(10)(t)
|
|
FY2011 Parker-Hannifin Corporation Stock Appreciation Rights Terms and Conditions for executive officers incorporated by reference to Exhibit 10.1 to the Registrant’s Report on Form 8-K filed with the Commission on August 17, 2010 (Commission File No. 1-4982).
|
|
|
|
(10)(u)
|
|
Form of Parker-Hannifin Corporation Stock Appreciation Rights Award Agreement for executive officers incorporated by reference to Exhibit 10(a) to the Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2011 (Commission File No. 1-4982).
|
|
|
|
(10)(v)
|
|
Parker-Hannifin Corporation Stock Appreciation Rights Terms and Conditions for executive officers incorporated by reference to Exhibit 10(b) to the Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2011(Commission File No. 1-4982).
|
|
|
|
(10)(w)
|
|
Parker-Hannifin Corporation Target Incentive Plan incorporated by reference to Exhibit 10(d) to the Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2010 (Commission File No. 1-4982).
|
|
|
|
(10)(x)
|
|
Parker-Hannifin Corporation Target Incentive Plan Subject to Performance Bonus Plan incorporated by reference to Exhibit 10(e) to the Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2010 (Commission File No. 1-4982).
|
|
|
|
(10)(y)
|
|
Parker-Hannifin Corporation Long-Term Incentive Performance Plan Under the Performance Bonus Plan incorporated by reference to Exhibit 10(a) to the Registrant’s Report on Form 10-Q for the quarterly period ended March 31, 2013 (Commission File No. 1-4982).
|
|
|
|
(10)(z)
|
|
Form of Parker-Hannifin Corporation Long-Term Incentive Performance Award Under the Performance Bonus Plan incorporated by reference to Exhibit 10.2 to the Registrant’s Report on Form 8-K filed with the Commission on February 1, 2011 (Commission File No. 1-4982).
|
|
|
|
(10)(aa)
|
|
Parker-Hannifin Corporation Long-Term Incentive Performance Plan Under the Performance Bonus Plan, as amended and restated, effective January 20, 2016.*
|
|
|
|
(10)(bb)
|
|
Form of Notice of Award under the Parker-Hannifin Corporation Long-Term Incentive Performance Plan Under the Performance Bonus Plan, as amended and restated.*
|
|
|
|
(10)(cc)
|
|
Parker-Hannifin Corporation Restricted Stock Unit Award Agreement dated August 14, 2013 for Jeffery A. Cullman incorporated by reference to Exhibit 10(a) to the Registrant's Report on Form 10-Q for the quarterly period ended September 30, 2014 (Commission File No. 1-4982).
|
|
|
|
(10)(dd)
|
|
Parker-Hannifin Corporation Restricted Stock Unit Terms and Conditions for Jeffery A. Cullman incorporated by reference to Exhibit 10(b) to the Registrant's Report on Form 10-Q for the quarterly period ended September 30, 2014 (Commission File No. 1-4982).
|
|
|
|
(10)(ee)
|
|
Parker-Hannifin Corporation Profitable Growth Incentive Plan incorporated by reference to Exhibit 10(c) to the Registrant's Report on Form 10-Q for the quarterly period ended September 30, 2014 (Commission File No. 1-4982).
|
|
|
|
(10)(ff)
|
|
Form of Notice of RONA Bonus Award Under the Parker-Hannifin Corporation Performance Bonus Plan incorporated by reference to Exhibit 10(h) to the Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2009 (Commission File No. 1-4982).
|
|
|
|
(10)(gg)
|
|
Parker-Hannifin Corporation RONA Plan Subject to Performance Bonus Plan incorporated by reference to Exhibit 10(f) to the Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2010 (Commission File No. 1-4982).
|
|
|
|
(10)(hh)
|
|
Parker-Hannifin Corporation Summary of RONA Bonus Awards in Lieu of Certain Executive Perquisites incorporated by reference to Exhibit 10(h) to the Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2008 (Commission File No. 1-4982).
|
|
|
|
(10)(ii)
|
|
Parker-Hannifin Corporation Amended and Restated Savings Restoration Plan, as of September 1, 2004, incorporated by reference to Exhibit 10(t) to the Registrant’s Report on Form 10-K for the fiscal year ended June 30, 2004 (Commission File No. 1-4982).
|
|
|
|
(10)(jj)
|
|
Parker-Hannifin Corporation Amended and Restated Savings Restoration Plan, effective January 22, 2015, incorporated by reference to Exhibit 10(d) to the Registrant’s Report on Form 10-Q for the quarterly period ended December 31, 2015 (Commission File No. 1-4982).
|
|
|
|
(10)(kk)
|
|
Parker-Hannifin Corporation Amended and Restated Savings Restoration Plan, effective July 1, 2016.*
|
|
|
|
(10)(ll)
|
|
Parker-Hannifin Corporation Amended and Restated Pension Restoration Plan, effective January 22, 2015, incorporated by reference to Exhibit 10(e) to the Registrant’s Report on Form 10-Q for the quarterly period ended December 31, 2015 (Commission File No. 1-4982).
|
|
|
|
(10)(mm)
|
|
Parker-Hannifin Corporation Amended and Restated Pension Restoration Plan, effective July 1, 2016.*
|
|
|
|
(10)(nn)
|
|
Parker-Hannifin Corporation Amended and Restated Executive Deferral Plan, as of September 1, 2004, incorporated by reference to Exhibit 10(v) to the Registrant’s Report on Form 10-K for the fiscal year ended June 30, 2004 (Commission File No. 1-4982).
|
|
|
|
(10)(oo)
|
|
Parker-Hannifin Corporation Amended and Restated Executive Deferral Plan, effective January 22, 2015, incorporated by reference to Exhibit 10(f) to the Registrant’s Report on Form 10-Q for the quarterly period ended December 31, 2015 (Commission File No. 1-4982).
|
|
|
|
(10)(pp)
|
|
Parker-Hannifin Corporation Amended and Restated Executive Deferral Plan, effective September 2, 2015.*
|
|
|
|
(10)(qq)
|
|
Parker-Hannifin Corporation Global Employee Stock Purchase Plan incorporated by reference to Appendix A to the Registrant's Definitive Proxy Statement filed with the Securities and Exchange Commission on September 22, 2014 (Commission File No. 1-4982).
|
|
|
|
(10)(rr)
|
|
Parker-Hannifin Corporation Claw-back Policy incorporated by reference to Exhibit 10.2 to the Registrant’s Report on Form 8-K filed with the Commission on August 18, 2009 (Commission File No. 1-4982).
|
|
|
|
(10)(ss)
|
|
Parker-Hannifin Corporation Amended and Restated 2004 Non-Employee Directors’ Stock Incentive Plan incorporated by reference to Exhibit 10(aa) to the Registrant’s Report on Form 10-K for the fiscal year ended June 30, 2009 (Commission File No. 1-4982).
|
|
|
|
(10)(tt)
|
|
Form of Parker-Hannifin Corporation Non-Employee Directors’ Restricted Stock Award Agreement incorporated by reference to Exhibit 10(a) to the Registrant’s Report on Form 10-Q for the quarterly period ended December 31, 2011 (Commission File No. 1-4982).
|
|
|
|
(10)(uu)
|
|
Parker-Hannifin Corporation Non-Employee Directors’ Restricted Stock Award Terms and Conditions incorporated by reference to Exhibit 10(b) to the Registrant’s Report on Form 10-Q for the quarterly period ended December 31, 2011 (Commission File No. 1-4982).
|
|
|
|
*
|
Submitted electronically herewith.
|
Company Percentile Ranking Among Peer Group:
|
% of Allocable Target Shares Earned:
|
75th percentile or higher
|
200%
|
50th percentile
|
100% (Target Shares)
|
35th percentile
|
50%
|
lower than 35th percentile
|
0%
|
▪
|
Active employees
: Update your address and contact information directly through your Personal Profile section in the Employee Self-Service site.
|
▪
|
Retired, terminated or family member of deceased Participant
: Contact the Benefits Service Center at 1-800-992-5564.
|
Grant Date
[Grant Date]
|
|
Performance Period
(in Calendar Years)
CY 20XX-20XX-20XX
|
|
Maximum Shares
[Number]
|
|
Target Shares
[Number Granted]
|
(a)
|
“Affiliated Group” means the Company and all entities with which the Company would be considered a single employer under Sections 414(b) and 414(c) of the Code, provided that in applying Section 1563(a)(1), (2), and (3) of the Code, for purposes of determining a controlled group of corporations under Section 414(b) of the Code, the language “at least 50 percent” is used instead of “at least 80 percent” each place it appears in Section 1563(a)(1), (2), and (3) of the Code, and in applying Section 1.414(c)-2 of the Treasury Regulations for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of Section 414(c) of the Code, “at least 50 percent” is used instead of “at least 80 percent” each place it appears in that regulation. Such term shall be interpreted in a manner consistent with the definition of “service recipient” contained in Section 409A of the Code.
|
(b)
|
“Board” means the Board of Directors of the Company.
|
(c)
|
“Bonus” means the annual bonuses payable pursuant to the RONA Plan and the Target Incentive Program, except to the extent determined by the Company to be extraordinary.
|
(d)
|
“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(d)
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 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.
|
(e)
|
“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 securities 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
|
(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 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
|
(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.
|
(f)
|
“Code” means the Internal Revenue Code of 1986, as amended, or any successor statute, and regulations or other guidance issued thereunder.
|
(g)
|
“Company” means Parker-Hannifin Corporation, an Ohio corporation.
|
(h)
|
“Corporate Change 409A Event” means the occurrence of one of the following events:
|
(i)
|
A change in ownership of the Company, which occurs on the date that any one person or more than one person acting as a group (within the meaning of the Regulations under Section 409A of the Code) acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50% of the total voting power of the stock of the Company. Notwithstanding the foregoing, if any one person or group is considered to own more than 50% of the total voting power of the stock of the Company, the acquisition of additional stock by the same person or group is not considered to cause a change in the ownership of the Company or a change in the effective control of the Company
|
(ii)
|
A change in effective control of the Company, which occurs on either of the following dates:
|
(A)
|
The date that any one person or more than one person acting as a group (within the meaning of the Regulations under Section 409A of the Code) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or group) ownership of stock of the Company possessing 30% or more of the total voting power of the Company. Notwithstanding the foregoing, if any one person or group is considered to own 30% or more of total voting power of the stock of the Company, the acquisition of additional stock by the same person or group is not considered to cause a change in the effective control of the Company or a change in ownership of the Company (within the meaning of
Section 1(h)(i)
of this Agreement). Notwithstanding the foregoing, a Corporate Change 409A Event shall not be deemed to occur solely because any person acquires ownership of more than 30% of the total voting power of the stock of the Company as a result of the acquisition by the Company of stock of the Company which, by reducing the number of shares outstanding, increases the percentage of shares beneficially owned by such person; provided, that if a Corporate Change 409A Event 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 stock of the Company that increases the percentage of outstanding shares of stock of the Company owned by such person, a Corporate Change 409A Event shall then occur.
|
(B)
|
The date that a majority of the Company’s Board is replaced during any 12-month period by directors whose appointment or election was not endorsed by a majority of the members of the Board prior to the date of such appointment or election.
|
(iii)
|
a change in the ownership of a substantial portion of the Company’s assets, which occurs on the date that any one person or more than one person acting as a group
|
(i)
|
“Date of Termination” means the date of the Executive’s separation from service with the Company, within the meaning of Section 1.409A-1(h) of the Regulations; provided, that in applying Section 1.409A-1(h)(ii) of the Regulations, a separation from service shall be
|
(j)
|
“Disability” means the condition whereby the Executive is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under any accident and health plan covering employees of the Company. The Company, in its complete and sole discretion, shall determine the Executive’s Disability. The Company may require that the Executive submit to an examination on an annual basis, at the expense of the Company, by a competent physician or medical clinic selected by the Company to confirm Disability. On the basis of such medical evidence, the determination of the Company as to whether or not a condition of Disability exists or continues shall be conclusive.
|
(k)
|
“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 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 Executive’s dependents with welfare benefits (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and dismemberment and travel accident insurance plans and programs) in accordance with the most favorable plans, practices, programs and policies of the Company and the Affiliated Group 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 the Affiliated Group 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 the Affiliated Group 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 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 10(b)
.
|
(l)
|
“Nonqualifying Termination” means the Executive’s separation from service (within the meaning of Section 1.409A-1(h) of the Regulations and
Section 1(i)
of this Agreement) (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, or (iv) as a result of the Executive’s Retirement.
|
(m)
|
“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”).
|
(n)
|
“Regulations” means regulations issued under Section 409A of the Code. Reference to any section of the Regulations shall be read to include any amendment or revision of such Regulation.
|
(o)
|
“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.
|
(p)
|
“RONA Plan” means the Company’s Return on Net Assets Plan, or any successor thereto.
|
(q)
|
“Specified Employee” means a person designated from time to time as such by the Company pursuant to Section 409A(a)(2)(B)(i) of the Code and the Company’s policy for determining specified employees.
|
(r)
|
“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.
|
(s)
|
“Target Bonus Amount” means, with respect to any Year, the Executive’s target Bonus for such Year.
|
(t)
|
“Target Incentive Program” means the Company’s Target Incentive Program, or any successor thereto.
|
(u)
|
“Termination Period” means the period of time beginning with a Change in Control and ending three (3) years following such Change in Control.
|
(v)
|
“Year” means the fiscal year of the Company.
|
(a)
|
If during the Termination Period the employment of the Executive shall terminate, other than by reason of a Nonqualifying Termination, then, subject to
Sections 2(g)
and
2(h)
, the Company shall pay to the Executive (or the Executive’s Beneficiary (as defined in
Section 9(c)
) 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”), (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. Notwithstanding the foregoing, in the event of an Anticipatory Termination, in lieu of the payment referred to in
Section 2(a)(i)(D)
, the Company shall pay to the Executive (or the Executive’s Beneficiary (as defined in
Section 9(c)
or estate), within two and one-half (2 1/2) months after the end of the Year in which the Executive’s Date of Termination occurs, a pro-rata portion of the Bonus earned based on Company performance as certified by the Compensation and Human Resources Committee of the Board after the end of such Year;
provided
, however, that if a Change in Control occurs after such Anticipatory Termination and prior to such payment, payment of a pro-rata portion of the Executive’s Projected Bonus Amount shall be paid, in accordance with
Section 2(a)(i)(D)
, within five (5) days after such Change in Control.
|
(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
|
(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 (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, with any payment required to keep the Executive in the same after-tax position made no later than the end of the calendar year in which the Executive remits the related taxes), 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 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 or the Executive shall suffer a Disability, then, subject to
Sections 2(g)
and
2(h)
, the Company shall pay to the Executive within thirty (30) days following the Date of Termination or Disability, 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 or Disability and any outstanding Bonus or long-term bonus awards for which
|
(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), then, subject to
Section 2(h)
, 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 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.
|
(g)
|
Notwithstanding any of the foregoing provisions of this
Section 2
, (i) the amounts described in
Section 2(a)(i)(B)
and Section 2(d)(ii) of this Agreement shall be paid as a lump sum only if (A) the Date of Termination occurs within two years following a Corporate Change 409A Event, or (B) to the extent that payment in a lump sum is otherwise permitted by Section 409A of the Code.
|
(h)
|
Notwithstanding any of the foregoing provisions of this
Section 2
, in the event that the Executive is a Specified Employee upon the Date of Termination, to the extent required in order to comply with Section 409A of the Code, amounts and benefits to be paid or provided under this Agreement following the Date of Termination and not on account of the Executive’s Disability shall be paid or provided to the Executive on the first day of the seventh month following the Date of Termination.
|
(a)
|
Notwithstanding any other provision of this Agreement or any other agreement or plan to the contrary, if any of the payments or benefits provided or to be provided by the Company or its affiliates to the Executive or for the Executive’s benefit pursuant to the terms of this Agreement or otherwise (“Covered Payments”) constitute parachute payments within the meaning of Section 280G of the Code and would, but for this
Section 3
, be subject to the excise tax imposed under Section 4999 of the Code or any similar tax imposed by state or local law or any interest or penalties with respect to such taxes (collectively, the “Excise Tax”), then prior to making the Covered Payments, a calculation shall be made comparing (i) the “Net Benefit” (as defined below) to the Executive of the Covered Payments after payment of the Excise Tax to (ii) the Net Benefit to the Executive if the Covered Payments are limited to the extent necessary to avoid being subject to the Excise Tax. Only if the amount calculated under (i) above is less than the amount under (ii) above will the Covered Payments be reduced to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax. “Net Benefit” shall mean the present value of the Covered Payments net of all federal, state, local, foreign income, employment and excise taxes.
|
(b)
|
Any such reduction of Covered Payments under
Section 3(a)
shall be made in accordance with Section 409A of the Code and the following:
|
(iii)
|
the Covered Payments which do not constitute nonqualified deferred compensation subject to Section 409A of the Code shall be reduced first; and
|
(iv)
|
all other Covered Payments shall then be reduced as follows: (A) cash payments shall be reduced before non-cash payments, (B) cancellation of accelerated vesting of equity awards (based on the reverse order of the date of grant) before reduction of welfare benefits, and (C) payments to be made on a later payment date shall be reduced before payments to be made on an earlier payment date.
|
(c)
|
All determinations required to be made under this
Section 3
shall be made by such professional consulting firm engaged by the Company from time to time as its independent consultant (the “Consulting Firm”). The Consulting Firm shall provide its calculations, together with detailed supporting documentation, both to the Company and the Executive (collectively, the “Determination”). In the event that the Consulting Firm is serving as a consultant for the individual, entity or group effecting the Change in Control, the Company shall prior to the Change in Control appoint a nationally recognized public accounting firm to make the determination required under this Agreement (which accounting firm shall then be referred to as the Consulting Firm under this Agreement). All fees, costs and expenses (including, but not limited to, the costs of retaining experts) of the Consulting Firm shall be borne by the Company. The Determination by the Consulting Firm shall be binding upon the Company and the Executive (except as provided in Subsection (d) below).
|
(d)
|
If it is established pursuant to a final determination of a court or an Internal Revenue Service (the “IRS”) proceeding which has been finally and conclusively resolved, that payments have been made to, or provided for the benefit of, the Executive by the Company that are in the aggregate more than the amount provided under this
Section 3
(hereinafter referred
|
(a)
|
This Agreement shall not be terminated by any Business Combination or transfer of assets. In the event of any Business Combination or transfer of 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 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 (the “Beneficiary” or “Beneficiaries”) or, if no person is so appointed, to the Executive’s estate.
|
(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:
|
(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 Date of Termination (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.
|
PARKER-HANNIFIN CORPORATION:
|
||
|
|
|
By:
|
______________________________________________
|
|
|
|
|
|
|
|
EXECUTIVE:
|
||
|
|
|
|
______________________________________________
|
|
Printed: _________________________________
|
(a)
|
“Affiliated Group” means the Company and all entities with which the Company would be considered a single employer under Sections 414(b) and 414(c) of the Code, provided that in applying Section 1563(a)(1), (2), and (3) of the Code, for purposes of determining a controlled group of corporations under Section 414(b) of the Code, the language “at least 50 percent” is used instead of “at least 80 percent” each place it appears in Section 1563(a)(1), (2), and (3) of the Code, and in applying Section 1.414(c)-2 of the Treasury Regulations for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of Section 414(c) of the Code, “at least 50 percent” is used instead of “at least 80 percent” each place it appears in that regulation. Such term shall be interpreted in a manner consistent with the definition of “service recipient” contained in Section 409A of the Code.
|
(b)
|
“Board” means the Board of Directors of the Company.
|
(c)
|
“Bonus” means the annual bonuses payable pursuant to the RONA Plan and the Target Incentive Program, except to the extent determined by the Company to be extraordinary.
|
(d)
|
“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(d)
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 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.
|
(e)
|
“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 securities 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
|
(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 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
|
(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.
|
(f)
|
“Code” means the Internal Revenue Code of 1986, as amended, or any successor statute, and regulations or other guidance issued thereunder.
|
(g)
|
“Company” means Parker-Hannifin Corporation, an Ohio corporation.
|
(h)
|
“Corporate Change 409A Event” means the occurrence of one of the following events:
|
(i)
|
A change in ownership of the Company, which occurs on the date that any one person or more than one person acting as a group (within the meaning of the Regulations under Section 409A of the Code) acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50% of the total voting power of the stock of the Company. Notwithstanding the foregoing, if any one person or group is considered to own more than 50% of the total voting power of the stock of the Company, the acquisition of additional stock by the same person or group is not considered to cause a change in the ownership of the Company or a change in the effective control of the Company
|
(ii)
|
A change in effective control of the Company, which occurs on either of the following dates:
|
(A)
|
The date that any one person or more than one person acting as a group (within the meaning of the Regulations under Section 409A of the Code) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or group) ownership of stock of the Company possessing 30% or more of the total voting power of the Company. Notwithstanding the foregoing, if any one person or group is considered to own 30% or more of total voting power of the stock of the Company, the acquisition of additional stock by the same person or group is not considered to cause a change in the effective control of the Company or a change in ownership of the Company (within the meaning of
Section 1(h)(i)
of this Agreement). Notwithstanding the foregoing, a Corporate Change 409A Event shall not be deemed to occur solely because any person acquires ownership of more than 30% of the total voting power of the stock of the Company as a result of the acquisition by the Company of stock of the Company which, by reducing the number of shares outstanding, increases the percentage of shares beneficially owned by such person; provided, that if a Corporate Change 409A Event 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 stock of the Company that increases the percentage of outstanding shares of stock of the Company owned by such person, a Corporate Change 409A Event shall then occur.
|
(B)
|
The date that a majority of the Company’s Board is replaced during any 12-month period by directors whose appointment or election was not endorsed by a majority of the members of the Board prior to the date of such appointment or election.
|
(iii)
|
a change in the ownership of a substantial portion of the Company’s assets, which occurs on the date that any one person or more than one person acting as a group
|
(i)
|
“Date of Termination” means the date of the Executive’s separation from service with the Company, within the meaning of Section 1.409A-1(h) of the Regulations; provided, that in applying Section 1.409A-1(h)(ii) of the Regulations, a separation from service shall be
|
(j)
|
“Disability” means the condition whereby the Executive is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under any accident and health plan covering employees of the Company. The Company, in its complete and sole discretion, shall determine the Executive’s Disability. The Company may require that the Executive submit to an examination on an annual basis, at the expense of the Company, by a competent physician or medical clinic selected by the Company to confirm Disability. On the basis of such medical evidence, the determination of the Company as to whether or not a condition of Disability exists or continues shall be conclusive.
|
(k)
|
“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 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 Executive’s dependents with welfare benefits (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and dismemberment and travel accident insurance plans and programs) in accordance with the most favorable plans, practices, programs and policies of the Company and the Affiliated Group 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 the Affiliated Group 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 the Affiliated Group 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 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 10(b)
.
|
(l)
|
“Nonqualifying Termination” means the Executive’s separation from service (within the meaning of Section 1.409A-1(h) of the Regulations and
Section 1(i)
of this Agreement) (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, or (iv) as a result of the Executive’s Retirement.
|
(m)
|
“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”).
|
(n)
|
“Regulations” means regulations issued under Section 409A of the Code. Reference to any section of the Regulations shall be read to include any amendment or revision of such Regulation.
|
(o)
|
“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.
|
(p)
|
“RONA Plan” means the Company’s Return on Net Assets Plan, or any successor thereto.
|
(q)
|
“Specified Employee” means a person designated from time to time as such by the Company pursuant to Section 409A(a)(2)(B)(i) of the Code and the Company’s policy for determining specified employees.
|
(r)
|
“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.
|
(s)
|
“Target Bonus Amount” means, with respect to any Year, the Executive’s target Bonus for such Year.
|
(t)
|
“Target Incentive Program” means the Company’s Target Incentive Program, or any successor thereto.
|
(u)
|
“Termination Period” means the period of time beginning with a Change in Control and ending three (3) years following such Change in Control.
|
(v)
|
“Year” means the fiscal year of the Company.
|
(a)
|
If during the Termination Period the employment of the Executive shall terminate, other than by reason of a Nonqualifying Termination, then, subject to
Sections 2(g)
and
2(h)
, the Company shall pay to the Executive (or the Executive’s Beneficiary (as defined in
Section 9(c)
) 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”), (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. Notwithstanding the foregoing, in the event of an Anticipatory Termination, in lieu of the payment referred to in
Section 2(a)(i)(D)
, the Company shall pay to the Executive (or the Executive’s Beneficiary (as defined in
Section 9(c)
or estate), within two and one-half (2 1/2) months after the end of the Year in which the Executive’s Date of Termination occurs, a pro-rata portion of the Bonus earned based on Company performance as certified by the Compensation and Human Resources Committee of the Board after the end of such Year;
provided
, however, that if a Change in Control occurs after such Anticipatory Termination and prior to such payment, payment of a pro-rata portion of the Executive’s Projected Bonus Amount shall be paid, in accordance with
Section 2(a)(i)(D)
, within five (5) days after such Change in Control.
|
(ii)
|
A lump-sum cash amount equal to the product of: (A) the lesser of (1) two (2) 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)
|
(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 two (2) 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, with any payment required to keep the Executive in the same after-tax position made no later than the end of the calendar year in which the Executive remits the related taxes), 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 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 or the Executive shall suffer a Disability, then, subject to
Sections 2(g)
and
2(h)
, the Company shall pay to the Executive within thirty (30) days following the Date of Termination or Disability, 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 or Disability 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
|
(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), then, subject to
Section 2(h)
, 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 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.
|
(g)
|
Notwithstanding any of the foregoing provisions of this
Section 2
, (i) the amounts described in
Section 2(a)(i)(B)
and Section 2(d)(ii) of this Agreement shall be paid as a lump sum only if (A) the Date of Termination occurs within two years following a Corporate Change 409A Event, or (B) to the extent that payment in a lump sum is otherwise permitted by Section 409A of the Code.
|
(h)
|
Notwithstanding any of the foregoing provisions of this
Section 2
, in the event that the Executive is a Specified Employee upon the Date of Termination, to the extent required in order to comply with Section 409A of the Code, amounts and benefits to be paid or provided under this Agreement following the Date of Termination and not on account of the Executive’s Disability shall be paid or provided to the Executive on the first day of the seventh month following the Date of Termination.
|
(a)
|
Notwithstanding any other provision of this Agreement or any other agreement or plan to the contrary, if any of the payments or benefits provided or to be provided by the Company or its affiliates to the Executive or for the Executive’s benefit pursuant to the terms of this Agreement or otherwise (“Covered Payments”) constitute parachute payments within the meaning of Section 280G of the Code and would, but for this
Section 3
, be subject to the excise tax imposed under Section 4999 of the Code or any similar tax imposed by state or local law or any interest or penalties with respect to such taxes (collectively, the “Excise Tax”), then prior to making the Covered Payments, a calculation shall be made comparing (i) the “Net Benefit” (as defined below) to the Executive of the Covered Payments after payment of the Excise Tax to (ii) the Net Benefit to the Executive if the Covered Payments are limited to the extent necessary to avoid being subject to the Excise Tax. Only if the amount calculated under (i) above is less than the amount under (ii) above will the Covered Payments be reduced to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax. “Net Benefit” shall mean the present value of the Covered Payments net of all federal, state, local, foreign income, employment and excise taxes.
|
(b)
|
Any such reduction of Covered Payments under
Section 3(a)
shall be made in accordance with Section 409A of the Code and the following:
|
(iii)
|
the Covered Payments which do not constitute nonqualified deferred compensation subject to Section 409A of the Code shall be reduced first; and
|
(iv)
|
all other Covered Payments shall then be reduced as follows: (A) cash payments shall be reduced before non-cash payments, (B) cancellation of accelerated vesting of equity awards (based on the reverse order of the date of grant) before reduction of welfare benefits, and (C) payments to be made on a later payment date shall be reduced before payments to be made on an earlier payment date.
|
(c)
|
All determinations required to be made under this
Section 3
shall be made by such professional consulting firm engaged by the Company from time to time as its independent consultant (the “Consulting Firm”). The Consulting Firm shall provide its calculations, together with detailed supporting documentation, both to the Company and the Executive (collectively, the “Determination”). In the event that the Consulting Firm is serving as a consultant for the individual, entity or group effecting the Change in Control, the Company shall prior to the Change in Control appoint a nationally recognized public accounting firm to make the determination required under this Agreement (which accounting firm shall then be referred to as the Consulting Firm under this Agreement). All fees, costs and expenses (including, but not limited to, the costs of retaining experts) of the Consulting Firm shall be borne by the Company. The Determination by the Consulting Firm shall be binding upon the Company and the Executive (except as provided in Subsection (d) below).
|
(d)
|
If it is established pursuant to a final determination of a court or an Internal Revenue Service (the “IRS”) proceeding which has been finally and conclusively resolved, that payments have been made to, or provided for the benefit of, the Executive by the Company that are in the aggregate more than the amount provided under this
Section 3
(hereinafter referred
|
(a)
|
This Agreement shall not be terminated by any Business Combination or transfer of assets. In the event of any Business Combination or transfer of 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 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 (the “Beneficiary” or “Beneficiaries”) or, if no person is so appointed, to the Executive’s estate.
|
(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:
|
(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 Date of Termination (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.
|
PARKER-HANNIFIN CORPORATION:
|
||
|
|
|
By:
|
______________________________________________
|
|
|
|
|
|
|
|
EXECUTIVE:
|
||
|
|
|
|
______________________________________________
|
|
Printed: _________________________________
|
•
|
$15,000 Group Long Term Disability (LTD)
|
•
|
$20,000 Individual Disability (IDI) policy - $10,000 of basic monthly benefits and an additional $10,000 monthly catastrophic benefit if you should be disabled from two (2) or more Activities of Daily Living (ADLs), have a cognitive impairment, or a total permanent disability based on your state of residence when the policy was issued.
|
1.1.
|
Account
shall mean the notional account established for record-keeping purposes for a Participant pursuant to
Article 5
. The term Account shall include the Restoration Account and/or the Excess RIA Account, as applicable.
|
1.2.
|
Adjusted Matching Percentage
shall mean the sum of 100% of the first 3% of a Participant's Total Deferral Percentage, plus 50% of the next 2% of the Participant's Total Deferral Percentage. The maximum Adjusted Matching Percentage for any Plan Year shall be 4%.
|
1.3.
|
Administrator
shall mean the Parker Total Rewards Administration Committee of the Company or, if applicable, the administration subcommittee appointed by the Parker Total Rewards Administration Committee with respect to the Plan.
|
1.4.
|
Affiliated Group
shall mean the Company and all entities with which the Company would be considered a single employer under Sections 414(b) and 414(c) of the Code, provided that in applying Section 1563(a)(1), (2), and (3) of the Code for purposes of determining a controlled group of corporations under Section 414(b) of the Code, the language “at least 50 percent” is used instead of “at least 80 percent” each place it appears in Section 1563(a)(1), (2), and (3) of the Code, and in applying Section 1.414(c)-2 of the Treasury Regulations for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of Section 414(c) of the Code, “at least 50 percent” is used instead of “at least 80 percent” each place it appears in that regulation. Such term shall be interpreted in a manner consistent with the definition of “service recipient” contained in Section 409A of the Code.
|
1.5.
|
Annual Deferral
shall mean the amount of Compensation which the Participant elects to defer for a Plan Year pursuant to
Articles 2 and 3
.
|
1.6.
|
Annualized Base Salary
shall mean a Participant's annualized base salary, determined by the Administrator as of November 1 of the calendar year immediately preceding the Plan Year for which the Matching Limit is being determined.
|
1.7.
|
Applicable Dollar Amount
shall mean the “applicable dollar amount” determined under Section 402(g)(1)(B) of the Code for the Plan Year for which the Matching Limit is being determined.
|
1.8.
|
Beneficiary
shall mean the person or persons or entity designated as such in accordance with
Article 14
.
|
1.9.
|
Change in Control
means the occurrence of one of the following events:
|
(a)
|
A change in ownership of the Company, which occurs on the date that any one person or more than one person acting as a group (within the meaning of the Regulations under Section 409A of the Code) acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50% of the total voting power of the stock of the Company. Notwithstanding the foregoing, if any one person or group is considered to own more than 50% of the total voting power of the stock of the Company, the acquisition of additional stock by the same person or group is not considered to cause a change in the ownership of the Company or a change in the effective control of the Company (within the meaning of
Section 1.9(b)
of this Plan). Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person acquires ownership of more than 50% of the total voting power of the stock of the Company as a result of the acquisition by the Company of stock of the Company which, by reducing the number of shares outstanding, increases the percentage of shares beneficially owned by such person; provided, that if a Change in Control would
|
(b)
|
A change in effective control of the Company, which occurs on either of the following dates:
|
(i)
|
The date that any one person or more than one person acting as a group (within the meaning of the Regulations under Section 409A of the Code) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or group) ownership of stock of the Company possessing 30% or more of the total voting power of the Company. Notwithstanding the foregoing, if any one person or group is considered to own 30% or more of the total voting power of the stock of the Company, the acquisition of additional stock by the same person or group is not considered to cause a change in the effective control of the Company or a change in ownership of the Company (within the meaning of
Section 1.9(a)
of this Plan). Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person acquires ownership of more than 30% of the total voting power of the stock of the Company as a result of the acquisition by the Company of stock of the Company which, by reducing the number of shares 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 stock of the Company that increases the percentage of outstanding shares of stock of the Company owned by such person, a Change in Control shall then occur.
|
(ii)
|
The date that a majority of the Company’s board of directors is replaced during any 12-month period by directors whose appointment or election was not endorsed by a majority of the members of the board prior to the date of such appointment or election.
|
(c)
|
a change in the ownership of a substantial portion of the Company’s assets, which occurs on the date that any one person or more than one person acting as a group (within the meaning of the Regulations under Section 409A of the Code) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or group) assets that have a total gross fair market value equal to or more than 65% of the total gross fair market value of all the assets of the Company immediately before such acquisition or acquisitions. The gross fair market value of assets shall be determined without regard to liabilities associated with such assets. Notwithstanding the foregoing, a transfer of assets shall not result in a change in ownership of a substantial portion of the Company's assets if such transfer is to: (i) a shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock, (ii)
|
1.10.
|
Code
shall mean the Internal Revenue Code of 1986, as amended, or any successor statute, and regulations or other guidance issued thereunder.
|
1.11.
|
Committee
shall mean the Administrator, the Investment Committee or the Compensation Committee, as applicable.
|
1.12.
|
Compensation
shall mean:
|
(a)
|
For amounts that are due and payable before January 1, 2007, the sum of the Participant's base salary and regular bonuses (including profit-sharing, the Company's Return on Net Assets (RONA) Plan, and target incentive bonus, but excluding sales commissions, payments under any long term incentive plan, volume incentive plan, or other extraordinary bonus or incentive plan) for a Plan Year before reductions for deferrals under the Plan, or the Executive Deferral Plan, or the Savings Plan, or the Parker-Hannifin Corporation Cafeteria Plan, or the Group Insurance Plan for Hourly and Salaried Employees of Parker-Hannifin Corporation.
|
(b)
|
For Plan Years beginning on and after January 1, 2007, Compensation shall mean a Participant’s base salary before reductions for deferrals under the Plan, or the Executive Deferral Plan, or the Savings Plan, or the Parker-Hannifin Corporation Cafeteria Plan, or the Group Insurance Plan for Hourly and Salaried Employees of Parker-Hannifin Corporation. Compensation shall not include any amounts payable on account of Termination of Employment, whether paid periodically or in a lump sum.
|
1.13.
|
Compensation Committee
shall mean the Human Resources and Compensation Committee of the Board.
|
1.14.
|
Crediting Rate
shall mean: (a) the amount described in
Section 1.14.1
to the extent the Account balance represents either Annual Deferrals under
Article 3
or earnings previously credited on such deferrals under
Section 5.2(d)
, or Excess RIA Contributions under
Section 4.1(b)
or earnings previously credited on such Excess RIA Contributions under
Section 5.2(d)
; or (b) the amount described in
Section 1.14.2
to the extent the Restoration Account balance represents either Matching Credits under
Section 4.1(a)
or interest previously credited on such Matching Credits under
Section 5.2(d)
.
|
1.15.
|
Disability
shall mean the condition whereby a Participant is (a) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or (b) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under any accident and health plan covering employees of the Company. The Administrator, in its complete and sole discretion, shall determine a Participant's Disability. The Administrator may require that the Participant submit to an examination on an annual basis, at the expense of the Company, by a competent physician or medical clinic selected by the Administrator to confirm Disability. On the basis of such medical evidence, the determination of the Administrator as to whether or not a condition of Disability exists or continues shall be conclusive.
|
1.16.
|
Disability Benefit
shall mean the benefit payable pursuant to
Article 9
.
|
1.17.
|
Early Retirement Date
shall mean age 55 with ten or more years of employment with the Company.
|
1.18.
|
Eligible Executive
shall mean a key employee of the Company or any of its subsidiaries who: (a) is designated by the Administrator as eligible to participate in the Plan; and (b) qualifies as a member of the “select group of management or highly compensated employees” under ERISA.
|
1.19.
|
Eligible RIA Executive
shall mean an employee of the Company or any of its subsidiaries who is entitled to receive an allocation to the Retirement Income Account portion of the Savings Plan, and (a) who receives compensation, as such term is used to determine contributions under the Savings Plan, in excess of the amount specified in Section 401(a)(17) of the Code, or (b) whose benefits payable from the Savings Plan are directly or indirectly limited pursuant to Section 415(c) of the Code.
|
1.20.
|
ERISA
shall mean the Employee Retirement Income Security Act of 1974, as amended, or any successor statute, and regulations or other guidance issued thereunder.
|
1.21.
|
Estimated Bonuses
shall mean:
|
(a)
|
For each Plan Year beginning before January 1, 2007, the sum of a Participant's RONA and Target Incentive bonuses payable during the Plan Year for which the Matching Limit is being determined, estimated in good faith by the Administrator as of November 1 of the immediately preceding calendar year.
|
(b)
|
For each Plan Year beginning on and after January 1, 2007, the sum of a Participant's RONA and Target Incentive bonuses payable in August of the Plan Year for which the Matching Limit is being determined, estimated in good faith by the Administrator as of November 1 of the immediately preceding calendar year.
|
1.22.
|
Excess RIA Account
shall mean the Account established pursuant to
Section 5.1(b)
of this Plan.
|
1.23.
|
Excess RIA Contribution
shall mean the difference between the amount actually contributed to a Participant’s Retirement Income Account under the Savings Plan with respect to a Plan Year and the amount that would have been contributed for such Plan Year but for the application of the Statutory Limits, as adjusted for cost of living increases.
|
1.24.
|
Executive Deferral Plan
shall mean the Parker-Hannifin Corporation Amended and Restated Executive Deferral Plan as it currently exists and as it may subsequently be amended.
|
1.25.
|
Investment Committee
shall mean the Parker Total Rewards Investment Committee of the Company or, if applicable, the investment subcommittee appointed by the Parker Total Rewards Investment Committee with respect to the Plan.
|
1.26.
|
Matching Credit
shall mean the Company's credit to the Participant's Restoration Account under
Section 4.1(a)
.
|
1.27.
|
Matching Limit
shall mean, for any Plan Year, the excess of: (a) the lesser of: (i) $17,000 or (ii) the product of the Adjusted Matching Percentage times the sum of the Participant's Projected Gross Compensation, over (b) the product of 4% times the lesser of: (i) the Statutory Limit under Section 401(a)(17) of the Code on compensation that may be taken into account under the Savings Plan for the Plan Year, or (ii) the excess of a Participant's Projected Gross Compensation over the Participant's Projected SRP Deferral and Projected EDP Deferral.
|
1.28.
|
Matching Percentage
shall mean, for any Plan Year, the percentage determined by dividing a Participant's Matching Limit by the Participant's Projected SRP Deferral.
|
1.29.
|
Normal Retirement Date
shall mean the date on which a Participant attains age 65.
|
1.30.
|
Participant
shall mean an Eligible Executive who has elected to participate and has completed a Participation Agreement pursuant to
Article 2
or an Eligible RIA Executive entitled to receive an Excess RIA Contribution.
|
1.31.
|
Participation Agreement
shall mean the Eligible Executive’s or Eligible RIA Executive’s written or electronic election to participate in the Plan and/or to select distribution options in accordance with
Article 6
.
|
1.32.
|
Plan Year
shall mean the calendar year.
|
1.33.
|
Projected EDP Deferral
shall mean the amount that would be deferred by a Participant under Section 3.1(a) of the Executive Deferral Plan for the Plan Year for which the Matching Limit is being determined, if the terms “Salary” and “Bonuses” used therein referred to the Participant's Annualized Base Salary and Estimated Bonuses, respectively.
|
1.34.
|
Projected Gross Compensation
shall mean the sum of a Participant's RONA and target incentive bonuses payable during the Plan Year for which the Matching Limit is being determined, estimated in good faith by the Administrator as of November 1 of the immediately preceding calendar year, plus the Participant's Annualized Base Salary.
|
1.35.
|
Projected Savings Plan Deferral
shall mean the lesser of (a) the Applicable Dollar Amount, or (b) 75% of the excess of a Participant's Projected Gross Compensation over the Participant's Projected SRP Deferral and Projected EDP Deferral.
|
1.36.
|
Projected SRP Deferral
shall mean:
|
(a)
|
For the Plan Year beginning January 1, 2005:
|
(i)
|
For a Participant who is not eligible to participate in the Executive Deferral Plan for such Plan Year, the lesser of: (A) $25,000 or (B) the product of the sum of the Participant's Annualized Base Salary and Estimated Bonuses times the percentage of Compensation specified in the Participant's Annual Deferral under
Section 3.1
for the Plan Year for which the Matching Limit is being determined.
|
(ii)
|
For a Participant who is eligible to participate in the Executive Deferral Plan for such Plan Year, the lesser of: (A) $7,600 or (B) the product of the sum of the Participant's Annualized Base Salary and Estimated Bonuses times the percentage of Compensation specified in the Participant's Annual Deferral under
Section 3.1
for the Plan Year for which the Matching Limit is being determined.
|
(b)
|
For the Plan Year beginning January 1, 2006, the lesser of: (i) $25,000 or (ii) the product of the sum of the Participant's Annualized Base Salary and Estimated Bonuses times the percentage of Compensation specified in the Participant's Annual Deferral under
Section 3.1
for the Plan Year for which the Matching Limit is being determined.
|
(c)
|
For each Plan Year beginning on and after January 1, 2007, the lesser of: (i) $25,000 or (ii) the product of the Participant's Annualized Base Salary times the percentage of Compensation specified in the Participant's Annual Deferral under
Section 3.1
for the Plan Year for which the Matching Limit is being determined.
|
1.37.
|
Regulations
shall mean regulations issued under Section 409A of the Code. Reference to any section of the Regulations shall be read to include any amendment or revision of such Regulation.
|
1.38.
|
Restoration Account
shall mean the Account established pursuant to
Section 5.1(a)
.
|
1.39.
|
Retirement
shall mean a Separation from Service from the Affiliated Group that follows Normal or Early Retirement Date.
|
1.40.
|
Retirement Benefit
shall mean the benefit payable pursuant to
Article 6
.
|
1.41.
|
Savings Plan
shall mean the Parker Retirement Savings Plan, as it currently exists and as it may subsequently be amended.
|
1.42.
|
Separation from Service
shall have the meaning set out in Section 1.409A-1(h) of the Regulations; provided, that in applying Section 1.409A-1(h)(ii) of the Regulations, a separation from service shall be deemed to occur if the Company and the Participant reasonably anticipate that the level of bona fide services the Participant will perform for the Affiliated Group after a certain date (whether as an employee or as an independent contractor) will permanently decrease to less than 50% of the average level of bona fide services performed by the Participant for the Affiliated Group (whether as an employee or as an independent contractor) over the immediately preceding 36-month period (or the full period of services performed for the Affiliated Group if the Participant has been providing services to the Affiliated Group for less than 36 months). In the event of a disposition of assets by the Company to an unrelated person, the Administrator reserves the discretion to specify (in accordance with Section 1.409A-1(h)(4) of the Regulations) whether a Participant who would otherwise experience a Separation from Service with the Company as part of the disposition of assets will be considered to experience a separation from service for purposes of Section 1.409A-1(h) of the Regulations.
|
1.43.
|
Specified Employee
shall mean a person designated from time to time as such by the Administrator pursuant to Section 409A(a)(2)(B)(i) of the Code and the Company's policy for determining specified employees.
|
1.44.
|
Spouse
shall mean an individual of the same or opposite sex of a Participant to whom the Participant is married in, and under the laws of, the state of celebration of such marriage.
|
1.45.
|
Statutory Limits
shall mean any limit on compensation taken into account in calculating benefits under the Savings Plan under Section 401(a)(17) of the Code or that directly or indirectly affects the amount of benefits payable from the Savings Plan pursuant to Section 415(c) of the Code or any other applicable Section of the Code.
|
1.46.
|
Subsidiary
shall mean 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 or interests of such corporation or other entity.
|
1.47.
|
Survivor Benefit
shall mean the benefit payable pursuant to
Article 8.
|
1.48.
|
Termination Benefit
shall mean the benefit payable pursuant to
Article 7
.
|
1.49.
|
Termination of Employment
shall mean Separation from Service from the Affiliated Group, other than Separation from Service due to Retirement, Disability or death.
|
1.50.
|
Total Deferral Percentage
shall mean the percentage determined by dividing the sum of a Participant's Projected SRP Deferral and Projected Savings Plan Deferral by the Participant's Projected Gross Compensation.
|
1.51.
|
Unforeseeable Emergency
shall mean a severe financial hardship arising from: (a) the illness or accident of the Participant, the Participant’s Spouse, or the Participant’s dependent (as defined in Section 152(a) of the Code), (b) loss of the Participant’s property due to casualty, or (c) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The determination of when a Participant has incurred an Unforeseeable Emergency shall be made by the Administrator, in its sole discretion, pursuant to and subject to the conditions of Section 409A of the Code and Regulations thereunder.
|
1.52.
|
Valuation Date
shall mean each day on which the New York Stock Exchange is open, except that for purposes of determining the value of a distribution under
Articles 6, 7, 8, 9 or 15
, it shall mean the 24th day of each month (or the most recent business day preceding such date) immediately preceding the month in which a distribution is to be made.
|
2.1.
|
Participant Deferral or Automatic Participation
.
|
(a)
|
An Eligible Executive shall become a Participant in the Plan on the first day of the Plan Year coincident with or next following the date the individual becomes an Eligible Executive, provided such Eligible Executive has submitted to the Administrator a Participation Agreement prior to the beginning of the Plan Year and within the enrollment period designated by the Administrator. In the Participation Agreement, and subject to the restrictions in
Article 3
, the Eligible Executive shall designate the Annual Deferral for the covered Plan Year.
|
(b)
|
An Eligible RIA Executive shall become a Participant in this Plan automatically on January 1 of the Plan Year immediately following the first Plan Year that the Participant's right to an Excess RIA Contribution accrues. A Participant who is not an Eligible Executive for the first Plan Year that such Participant is an Eligible RIA Executive (or any earlier Plan Year) shall submit an initial Participation Agreement to the Administrator within thirty (30) days of becoming a Participant in this Plan. To the extent permitted under Section 409A of the Code, such a Participant's election of a distribution option in such an initial Participation Agreement submitted within thirty (30) days of becoming
|
(c)
|
An individual may be both an Eligible Executive and an Eligible RIA Executive.
|
2.2.
|
Continuation of Participation
. An individual who has become a Participant in this Plan pursuant to
Section 2.1
shall continue as a Participant in the Plan even though such individual ceases to be an Eligible Executive and/or an Eligible RIA Executive; provided that any such Participant shall not be eligible to: (a) make an Annual Deferral for a Plan Year unless the Participant is an Eligible Executive for such Plan Year, or (b) receive an allocation of an Excess RIA Contribution for a Plan Year if the Participant is not an Eligible RIA Participant for such Plan Year.
|
3.1.
|
Deferral Election
. A Participant may elect on the Participation Agreement to make an Annual Deferral to defer a specified percentage of Compensation relating to services performed during a Plan Year. Except as may be otherwise permitted under Section 409A of the Code, an election to make Annual Deferrals with respect to Compensation relating to services performed during a Plan Year must be made prior to the beginning of such Plan Year. An election to make Annual Deferrals for a Plan Year shall be irrevocable, except as otherwise permitted by the Regulations, including Section 1.409A-3(j)(4)(viii) of the Regulations, where cancellation of a deferral election is required by Section 401(k) of the Code upon the Participant’s taking a hardship withdrawal from the Savings Plan.
|
3.2.
|
Amount of Annual Deferral
. The Annual Deferral shall be determined as follows:
|
(a)
|
For the Plan Year beginning January 1, 2005:
|
(i)
|
For a Participant who is not eligible to participate in the Executive Deferral Plan, any whole percentage between 1 and 15% of Compensation (maximum Annual Deferral of $25,000).
|
(ii)
|
For a Participant who is eligible to participate in the Executive Deferral Plan, any whole percentage between 1 and 5% of Compensation (maximum Annual Deferral of $7,600).
|
(b)
|
For the Plan Year beginning January 1, 2006, any whole percentage between 1 and 15% of Compensation (maximum Annual Deferral of $25,000).
|
(c)
|
For any Plan Year beginning January 1, 2007 or later, any whole percentage between 1 and 20% of Compensation (maximum Annual Deferral of $25,000).
|
3.3.
|
Vesting
. The Participant's right to his or her Annual Deferrals and gains or losses thereon, shall be 100% vested at all times.
|
4.1.
|
Amount
.
|
(a)
|
Matching Credit
. The Company's Matching Credit in each Plan Year shall equal the product of the Participant's Annual Deferral for such Plan Year times the Matching Percentage for the Plan Year; provided, however, that in no event shall the Matching Credit credited to a Participant's Account in any Plan Year exceed the Matching Limit for such Plan Year. The Matching Percentage and Matching Limit for a Participant for any Plan Year shall be determined in good faith by the Administrator as of December 31 of the immediately preceding calendar year.
|
(b)
|
Excess RIA Contributions
. Effective April 1, 2004, in the Plan Year following any Plan Year in which an Eligible RIA Participant has an Excess RIA Contribution with respect to the Savings Plan, the Eligible RIA Participant shall receive an allocation of an amount equal to such Excess RIA Contribution.
|
4.2.
|
Vesting
.
|
(a)
|
The Participant's right to receive Matching Credits and gains or losses thereon credited to the Participant's Restoration Account shall be one hundred percent (100%) vested.
|
(b)
|
From April 1, 2004 to December 31, 2006, the Participant’s right to his or her Excess RIA Account and gains or losses thereon shall be 100% vested after the Participant has 5 years of Service, as such term is defined in the Savings Plan, or upon attainment of Normal Retirement Age as that term is defined in the Savings Plan.
|
(c)
|
Effective January 1, 2007, the Participant’s right to his or her Excess RIA Account and gains or losses thereon shall be 100% vested after the Participant has 3 years of Service, as such term is defined in the Savings Plan, or upon attainment of Normal Retirement Age as that term is defined in the Savings Plan.
|
5.1.
|
Accounts
. Solely for record keeping purposes, the Company shall maintain an Account for each Participant, which Account shall consist of one or more sub-accounts, as follows:
|
(a)
|
A Restoration Account to which shall be credited all Annual Deferrals made by a Participant and Matching Credits, as well as all gains or losses with respect thereto.
|
(b)
|
An Excess RIA Account to which shall be credited the amount of the Participant’s Excess RIA Contributions, as well as all gains and losses with respect thereto.
|
(c)
|
The Account for a Participant listed on
Appendix A
shall have sub-accounts for pre-2016 and post-2015 amounts credited to the Participant’s Account if, prior to January 1, 2016, such Participant elects a time and form of payment for such post-2015 amounts other than monthly installments over fifteen (15) years without an annual lump sum payment.
|
5.2.
|
The Timing of Credits
.
|
(a)
|
Annual Deferrals made under
Article 3
shall be credited to the Restoration Account on the same day the deferrals would otherwise have been paid to the Participant but for the deferral election;
|
(b)
|
Matching Credits under
Article 4
shall be credited to the Restoration Account as of the day the corresponding Annual Deferrals are credited to the Restoration Account;
|
(c)
|
Excess RIA Contributions shall be credited to the Participant’s Excess RIA Account as of February 1 (or the next business day thereafter) of the year in which the Participant’s Excess RIA Contribution with respect to a Plan Year is determined; and
|
(d)
|
Gains or losses shall be credited to the Participant’s Account as of the close of business on each Valuation Date, based on the Crediting Rate in effect for the day under
Section 1.14
.
|
5.3.
|
Terminations
. Following a Participant's Termination of Employment, Retirement or death, gains or losses shall continue to be credited to the Participant’s Account through the final Valuation Date.
|
5.4.
|
Statement of Accounts
. The Administrator shall provide periodically to each Participant a statement setting forth the balance of the Account maintained for such Participant.
|
6.1.
|
Amount
. Upon Retirement, the Company shall pay to the Participant the value of his or her vested Account at the time and in the manner determined pursuant to the rules set forth in this
Article 6
.
|
6.2.
|
Form of Retirement Benefits
.
|
(a)
|
Except as otherwise provided pursuant to an election under
Section 6.4(c)
, for Participants whose initial participation date under the Plan is prior to January 1, 2017, the Retirement Benefit shall be paid monthly over a period of fifteen (15) years; provided, however, that the Participant may elect in accordance with the terms of
Section 6.4
to have payment made in one of the following options:
|
(i)
|
a single lump sum payment in cash;
|
(ii)
|
monthly installments over 5, 10 or 15 years; or
|
(iii)
|
an annual lump sum amount equal to a specified whole number percentage (1-8%) of the account balance as of the Valuation Date preceding each such annual payment, plus monthly installments of the remaining balance of the Account over 5, 10 or 15 years. Annual lump sum payments pursuant to this
Section 6.2(a)(iii)
, with respect to all Retirement Benefits under this Plan, including
|
(b)
|
Except as otherwise provided pursuant to an election under
Section 6.4(c)
, for Participants whose initial participation date under the Plan is on or after January 1, 2017, the Retirement Benefit shall be paid in a single lump sum; provided, however, that the Participant may elect in accordance with the terms of
Section 6.4
to have payment made in one of the following options:
|
(i)
|
monthly installments over 5, 10 or 15 years; or
|
(ii)
|
an annual lump sum amount equal to a specified whole number percentage (1-8%) of the account balance as of the Valuation Date preceding each such annual payment, plus monthly installments of the remaining balance of the Account over 5, 10 or 15 years. Annual lump sum payments pursuant to this
Section 6.2(b)(ii)
, with respect to all Retirement Benefits under this Plan, including Grandfathered Amounts, shall be paid as follows: (A) the first lump sum payment shall be made on the first day of the second month after the Participant's Retirement, and (B) the remaining lump sum payments shall be made on January 1 of each succeeding year in the applicable 5, 10 or 15 year period.
|
6.3.
|
Time of Payment
. Except as otherwise provided pursuant to an election under
Section 6.4(c)
, payment of a Participant's Account shall be made or shall begin as of the first day of the second month after the Participant's Retirement or on the first day of the month following the first, second, third, fourth or fifth anniversary of the Participant’s Retirement, as elected by the Participant in accordance with the terms of
Section 6.4
. Notwithstanding the foregoing, payment to any Specified Employee will be made or will commence on the first day of the seventh month following the Participant’s Retirement and shall include any payments that would have been made between the Participant’s Retirement and the actual date of commencement of payment if the Participant had not been a Specified Employee.
|
6.4.
|
Elections
.
|
(a)
|
Initial Election
.
|
(b)
|
One-Time Change by Participant
. To the extent permitted by Section 409A of the Code, a Participant may make a one-time election to delay payment or change the form of payment at any time up to 12 months before the first scheduled payment; provided, however, that: (i) any such election shall not be effective for at least 12 months following the date made; (ii) to the extent required by Section 409A of the Code, as a result of any such change, payment or commencement of payment shall be delayed for 5 years from the date the first payment was scheduled to have been paid (taking into account any delay in payment or commencement of payment under
Section 6.3
on account of a Participant's status as a Specified Employee); (iii) any such change made by a Participant listed on
Appendix A
to the Plan shall apply to both pre-2016 and post-2015 amounts credited to the Participant’s Account to the extent permitted by Section 409A of the Code; and (iv) any such change made by a Participant who makes an election pursuant to
Section 6.4(a)(ii)(B)
shall apply to all amounts credited to the Participant’s Account, to the extent permitted by Section 409A of the Code.
|
(c)
|
Transitional Rule
. Notwithstanding any other elections made hereunder and only to the extent permitted by the Company and transitional rules issued under Section 409A of the Code, through such date as specified by the Company pursuant to transitional guidance issued under Section 409A of the Code, a Participant may make one or more elections as to time and form of payment of his or her Account under this Plan, provided that: (i) any such election(s) made during 2006 shall be available only for amounts that are payable after the 2006 calendar year and cannot accelerate any payment into the 2006 calendar year, (ii) any such election(s) made during 2007 shall be available only
|
6.5.
|
Small Benefit Exception
.
|
(a)
|
Benefits Payable Prior to January 1, 2008
. Notwithstanding the foregoing, with respect to a Participant's Retirement Benefit under the Plan that would otherwise be paid in installments (or as a combination of lump sums and installments) prior to January 1, 2008, if the balance of the Participant's Account under the Plan as of the date payment would otherwise commence is less than or equal to ten thousand dollars ($10,000), the Company shall pay such benefit in a single lump sum; provided, however, that payment of a Retirement Benefit to any Specified Employee pursuant to this
Section 6.5(a)
will be made on the first day of the seventh month following the Participant's Termination of Employment.
|
(b)
|
Benefits Payable After December 31, 2007
. Notwithstanding the foregoing, effective December 31, 2007 with respect to a Participant's Retirement Benefit under the Plan that would otherwise be paid in installments (or as a combination of lump sums and installments) after December 31, 2007, if the aggregate balances of the Participant's accounts under the Plan, the Executive Deferral Plan and any other nonqualified deferred compensation arrangement that is aggregated with any portion of the Plan or the Executive Deferral Plan under Section 1.409A-1(c) of the Regulations as of the date payment would otherwise commence is less than or equal to the applicable dollar amount in effect on such date under Section 402(g)(1)(B) of the Code, the Company shall pay the Retirement Benefit under the Plan in a single lump sum; provided, however, that payment of a Retirement Benefit to any Specified Employee pursuant to this
Section 6.5(b)
will be made on the first day of the seventh month following the Participant's Termination of Employment.
|
7.1.
|
Amount and Time of Payment
. As of the first day of the second month after Termination of Employment, the Company shall pay to the Participant a Termination Benefit equal to the value of the vested Account as of the Valuation Date. Notwithstanding the foregoing, payment of a Termination Benefit to any Specified Employee pursuant to this
Article 7
will be made on the first day of the seventh month following the Participant's Termination of Employment.
|
7.2.
|
Form of Termination Benefits
. The Company shall pay the Termination Benefits in a single lump sum.
|
8.1.
|
Amount
. If the Participant dies (whether before or after Retirement or other Termination of Employment) with any balance remaining in his or her Account, the Company shall pay to the Participant’s Beneficiary a Survivor Benefit equal to the vested balance of the Account on the date of death.
|
8.2.
|
Form of Survivor Benefits
. The Company shall pay the vested balance of the Participant's Account in a single lump sum payment in cash; provided, however, that the Participant may elect in accordance with the terms of
Section 6.4
to have payment made in one of the following options:
|
(a)
|
a single lump sum payment in cash; or
|
(b)
|
monthly installments over 5, 10 or 15 years.
|
8.3.
|
Time of Payment
. Payment of Survivor Benefits shall be made or shall begin as of the first day of the second month following the date of death, and the provisions of
Sections 6.3 and 6.4
regarding payment to a Specified Employee and the 5-year delay of payments following certain elections shall be disregarded for purposes of the payment of the Survivor Benefit pursuant to this
Article 8
.
|
8.4.
|
Survivor Benefits Paid From Grandfathered Amounts
. To the extent that the Company pays to a Participant's Beneficiary a Survivor Benefit consisting of Grandfathered Amounts, the time and form of payment of such Grandfathered Amounts shall be governed by the Participant's election as in effect on December 31, 2006 and the terms of the Plan as in effect on December 31, 2004; provided, however, that after December 31, 2006 a Participant may make a one-time election to have all Grandfathered Amounts paid in a lump sum as of the first day of the second month after the Participant's death (regardless of whether the Participant dies before or after the date that payment of Grandfathered Amounts would otherwise commence under the Plan). In accordance with the terms of the Plan as in effect on December 31, 2004, any election to change the form of payment of Survivor Benefits from Grandfathered Amounts must be filed at least thirteen (13) months prior to the date that payment of Survivor Benefits would otherwise commence or be made, unless the Participant's Beneficiary agrees to take a ten percent (10%) reduction in the value of the Grandfathered Amounts.
|
8.5.
|
Small Benefit Payments
.
|
(a)
|
Benefits Payable Prior to January 1, 2008
. Notwithstanding the foregoing, with respect to a Survivor Benefit under the Plan that would otherwise be paid in installments prior to January 1, 2008, if the balance of the Participant's Account under the Plan as of the date that payment of the Survivor Benefit would otherwise commence is less than or equal to ten thousand dollars ($10,000), the Company shall pay such benefit in a single lump sum.
|
(b)
|
Benefits Payable After December 31, 2007
. Notwithstanding the foregoing, effective December 31, 2007 with respect to a Survivor Benefit under the Plan that would otherwise be paid in installments after December 31, 2007, if the aggregate balances of the Participant's accounts under the Plan, the Executive Deferral Plan and any other nonqualified deferred compensation arrangement that is aggregated with any portion of the Plan or the Executive Deferral Plan under Section 1.409A-1(c) of the Regulations as of the date that payment of the Survivor Benefit would otherwise commence is less than or equal to the applicable dollar amount in effect on such date under Section 402(g)(1)(B) of the Code, the Company shall pay the Survivor Benefit under the Plan in a single lump sum.
|
12.1.
|
Non-assignability
. The benefits provided under the Plan may not be alienated, assigned, transferred, pledged or hypothecated by or to any person or entity, at any time or in any manner whatsoever. These benefits shall be exempt from the claims of creditors of any Participant or other claimants and from all orders, decrees, levies, garnishment or executions against any Participant to the fullest extent allowed by law.
|
12.2.
|
No Right to Company Assets
. The benefits paid under the Plan shall be paid from the general funds of the Company, and the Participants and any Beneficiaries shall be no more than unsecured general creditors of the Company with no special or prior right to any assets of the Company for payment of any obligations under this Plan.
|
12.3.
|
Protective Provisions
. Each Participant shall cooperate with the Company by furnishing any and all information requested by the Administrator, in order to facilitate the payment of benefits under this Plan, taking such physical examinations as the Administrator may deem necessary and taking such other actions as may be requested by the Administrator. If a Participant refuses to cooperate, the Company shall have no further obligation to the Participant under the Plan. If a Participant makes any material misstatement of information or nondisclosure of medical history, then no benefits shall be payable to the Participant or the Participant's Beneficiary or estate under the Plan beyond the sum of the Participant's Annual Deferrals.
|
12.4.
|
Withholding
. Each Participant and Beneficiary shall make appropriate arrangements with the Company for satisfaction of any federal, state or local income tax withholding requirements and Social Security or other employee tax requirements applicable to the payment of benefits under the Plan. If no other arrangements are made, the Company may provide, at its discretion, for such withholding and tax payments as may be required.
|
15.1.
|
Amendment of Plan
.
|
(a)
|
The Company may at any time amend the Plan in whole or in part, provided, however, that such amendment: (i) shall not decrease the balance of the Participant's Account at the time of such amendment; and (ii) shall not retroactively decrease the applicable Crediting Rate of the Plan prior to the time of such amendment.
|
(b)
|
In addition, no amendment shall permit an acceleration of time of payment of a Participant’s benefit under the Plan, other than: (i) as necessary to comply with a certificate of divestiture, as defined in Section 1043(b)(2) of the Code; (ii) in accordance with
Sections 6.5 and 8.5
with respect to small cashouts; (iii) as necessary to pay Federal Insurance Contribution (“FICA”) taxes and any resulting federal, state, local or foreign income taxes attributable to amounts deferred under the Plan, subject to the limitations of Section 1.409A-3(j)(4)(vi) of the Regulations; (iv) in the event the arrangement fails to meet the requirements of Section 409A of the Code with respect to one or more Participants, and then only in such amount as is included in income of such Participant(s) as a result of such failure; (v) due to a termination of the Plan pursuant to
Section 15.2
that meets the requirements of Section 1.409A-3(j)(4)(ix) of the Regulations; or (vi) as otherwise may be permitted under Section 409A of the Code.
|
(c)
|
The Company may amend the Crediting Rate of the Plan prospectively, in which case the Company shall notify the Participants of such amendment in writing within thirty (30) days after such amendment.
|
15.2.
|
Termination of Plan
. The Company may terminate the Plan only as permitted by Section 1.409A-3(j)(4)(ix) of the Regulations (Plan Terminations and Liquidations), or as otherwise may be permitted by future Regulations or other guidance under Section 409A of the Code. Notwithstanding the foregoing, the Company may at any time determine to cease all future deferrals and contributions to the Plan. In such event, Participants' Accounts shall continue to be held and administered in accordance with the terms of this Plan; provided, however that the Company shall determine, in its sole discretion, whether to continue to credit Participants' Accounts with earnings at the otherwise applicable Crediting Rates or instead to credit Participants' Accounts, as of January 1 of the year that all future deferrals and contributions to the Plan are ceased, with a reasonable rate of interest, not less than the prime rate as published in the Wall Street Journal, in either case continuing until distribution of Participants' Accounts in accordance with the terms of the Plan.
|
15.3.
|
Company Action
. Except as provided in
Section 15.4
, the Company's power to amend or terminate the Plan shall be exercisable by the Company's Board of Directors or by the committee or individual authorized by the Company's Board of Directors to exercise such powers.
|
15.4.
|
Distribution on Income Inclusion Under Section 409A
. In the event the Administrator determines that amounts deferred under the Plan fail to meet the requirements of Section 409A of the Code and must be recognized as income for federal income tax purposes, distribution of the amount required to be included in income shall be made to affected Participants to the extent permitted by Section 409A of the Code.
|
16.1.
|
Successors of the Company
. The rights and obligations of the Company under the Plan shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company.
|
16.2.
|
ERISA Plan
. The Plan is intended to be an unfunded plan maintained primarily to provide deferred compensation benefits for “a select group of management or highly compensated employees” within the meaning of Sections 201, 301 and 401 of ERISA and therefore to be exempt from Parts 2, 3 and 4 of Title I of ERISA.
|
16.3.
|
Trust
. The Company shall be responsible for the payment of all benefits under the Plan. The Company may establish one or more grantor trusts for the purpose of providing for payment of benefits under the Plan. Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of the Company's creditors. Benefits paid to the Participant from any such trust shall be considered paid by the Company for purposes of meeting the obligations of the Company under the Plan.
|
16.4.
|
Employment Not Guaranteed
. Nothing contained in the Plan nor any action taken under this Plan shall be construed as a contract of employment or as giving any Participant any right to continued employment with the Company.
|
16.5.
|
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.
|
16.6.
|
Captions
. The captions of the articles and sections of the Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.
|
16.7.
|
Validity
. If any provision of the Plan is held invalid, void or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provisions of the Plan.
|
16.8.
|
Waiver of Breach
. The waiver by the Company of any breach of any provision of the Plan by a Participant shall not operate or be construed as a waiver of any subsequent breach by such Participant.
|
16.9.
|
Applicable Law.
The Plan shall be governed and construed in accordance with the laws of the State of Ohio except where the laws of the State of Ohio are preempted by ERISA or the Code.
|
16.10.
|
Notice
. Any notice or filing required or permitted to be given to the Company or the Administrator under the Plan shall be sufficient if in writing and hand-delivered, or sent by first class mail, facsimile, or electronic mail to the principal office of the Company, directed to the attention of the Administrator. Such notice shall be deemed given as of the date of delivery, or, if delivery is made by mail, as of the date shown on the postmark.
|
17.1.
|
Claims Procedure
. The Administrator shall notify a Participant in writing, within ninety (90) days after his or her written application for benefits, of his or her eligibility or noneligibility for benefits under the Plan. If the Administrator determines that a Participant is not eligible for benefits or full benefits, the notice shall set forth: (a) the specific reasons for such denial; (b) a specific reference to the provisions of the Plan on which the denial is based; (c) a description of any additional information or material necessary for the claimant to perfect his or her claim, and a description of why it is needed; and (d) an explanation of the Plan's claims review procedure and other appropriate information as to the steps to be taken if the Participant wishes to have the claim reviewed. If the Administrator determines that there are special circumstances requiring additional time to make a decision, the Administrator shall notify the Participant of the special circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional ninety-day period.
|
17.2.
|
Review Procedure
. If a Participant is determined by the Administrator not to be eligible for benefits, or if the Participant believes that he or she is entitled to greater or different benefits, the Participant shall have the opportunity to have such claim reviewed by the Administrator by filing a petition for review with the Administrator within sixty (60) days after receipt of the notice issued by the Administrator. Said petition shall state the specific reasons which the Participant believes entitle him or her to benefits or to greater or different benefits. Within sixty (60) days after receipt by the Administrator of the petition, the Administrator shall afford the Participant (and counsel, if any) an opportunity to present his or her position to the Administrator in writing, and the Participant (or counsel) shall have the right to review the pertinent documents. The Administrator shall notify the Participant of its decision in writing within the sixty-day period, stating specifically the basis of its decision, written in a manner calculated to be understood by the Participant and the specific provisions of the Plan on which the decision is based. If the sixty-day period is not sufficient, the decision may be deferred for up to another sixty-day period at the election of the Administrator, but notice of this deferral shall be given to the Participant. In the event of the death of the Participant, the same procedures shall apply to the Participant's beneficiaries.
|
17.3.
|
Payment
. Any benefits paid in accordance with the procedures provided in this Article 17 shall be made consistent with the rules of Section 409A of the Code.
|
1.1.
|
Actuarial Value
shall mean the actuarial present value of the benefits calculated by an actuary selected by the Administrator and using the actuarial assumptions employed under the Qualified Plan.
|
1.2.
|
Administrator
shall mean the Parker Total Rewards Administration Committee of the Company or, if applicable, the administration subcommittee appointed by the Parker Total Rewards Administration Committee with respect to the Plan.
|
1.3.
|
Affiliated Group
shall mean the Company and all entities with which the Company would be considered a single employer under Sections 414(b) and 414(c) of the Code, provided that in applying Sections 1563(a)(1), (2), and (3) of the Code for purposes of determining a controlled group of corporations under Section 414(b) of the Code, the language "at least 50 percent" is used instead of "at least 80 percent" each place it appears in Sections 1563(a)(1), (2), and (3) of the Code, and in applying Section 1.414(c)-2 of the Treasury Regulations for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of Section 414(c) of the Code, "at least 50 percent" is used instead of "at least 80 percent" each place it appears in that regulation. Such
|
1.4.
|
Beneficiary
shall mean the person or persons or entity designated as such in accordance with
Article 10
of the Plan.
|
1.5.
|
Change in Control
shall mean the occurrence of one of the following events:
|
(a)
|
A change in ownership of the Company, which occurs on the date that any one person or more than one person acting as a group (within the meaning of the Regulations under Section 409A of the Code) acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50% of the total voting power of the stock of the Company. Notwithstanding the foregoing, if any one person or group is considered to own more than 50% of the total voting power of the stock of the Company, the acquisition of additional stock by the same person or group is not considered to cause a change in the ownership of the Company or a change in the effective control of the Company (within the meaning of
Section 1.5(b)
of this Plan). Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person acquires ownership of more than 50% of the total voting power of the stock of the Company as a result of the acquisition by the Company of stock of the Company which, by reducing the number of shares 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 stock of the Company that increases the percentage of outstanding shares of stock of the Company owned by such person, a Change in Control shall then occur.
|
(b)
|
A change in effective control of the Company, which occurs on either of the following dates:
|
(i)
|
The date that any one person or more than one person acting as a group (within the meaning of the Regulations under Section 409A of the Code) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or group) ownership of stock of the Company possessing 30% or more of the total voting power of the Company. Notwithstanding the foregoing, if any one person or group is considered to own 30% or more of the total voting power of the stock of the Company, the acquisition of additional stock by the same person or group is not considered to cause a change in the effective control of the Company or a change in ownership of the Company (within the meaning of
Section 1.5(a)
of this Plan). Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person acquires ownership of more than 30% of the total voting power of the stock of the Company as a result of the acquisition by the Company of stock of the Company which, by
|
(ii)
|
The date that a majority of the Company’s board of directors is replaced during any 12-month period by directors whose appointment or election was not endorsed by a majority of the members of the board prior to the date of such appointment or election.
|
(c)
|
A change in the ownership of a substantial portion of the Company’s assets, which occurs on the date that any one person or more than one person acting as a group (within the meaning of the Regulations under Section 409A of the Code) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or group) assets that have a total gross fair market value equal to or more than 65% of the total gross fair market value of all the assets of the Company immediately before such acquisition or acquisitions. The gross fair market value of assets shall be determined without regard to liabilities associated with such assets. Notwithstanding the foregoing, a transfer of assets shall not result in a change in ownership of a substantial portion of the Company's assets if such transfer is to (i) a shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock, (ii) an entity 50% or more of the total value or voting power of which is owned, directly or indirectly, by the Company, (iii) a person or group (within the meaning of the Regulations under Section 409A of the Code) that owns, directly or indirectly, 50% or more of the total value or voting power of the stock of the Company; or (iv) an entity, at least 50% of the total value or voting power of which is owned, directly or indirectly by a person or group described in
Section 1.5(c)(iii)
of this Plan.
|
1.6.
|
Code
shall mean the Internal Revenue Code of 1986, as amended, or any successor statute, and regulations or other guidance issued thereunder.
|
1.7.
|
Committee
shall mean the Administrator, the Investment Committee or the Compensation Committee, as applicable.
|
1.8.
|
Compensation Committee
shall mean the Human Resources and Compensation Committee of the Company’s Board of Directors.
|
1.9.
|
Disability
shall mean the condition whereby a Participant is:
|
(a)
|
unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or
|
(b)
|
by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under any accident and health plan covering employees of the Company. The Administrator, in its complete and sole discretion, shall determine a Participant's Disability. The Administrator may require that the Participant submit to an examination on an annual basis, at the expense of the Company, by a competent physician or medical clinic selected by the Administrator to confirm Disability. On the basis of such medical evidence, the determination of the Administrator as to whether or not a condition of Disability exists or continues shall be conclusive.
|
1.10.
|
Early Retirement Date
shall mean the "Early Retirement Date" as defined in the Qualified Plan.
|
1.11.
|
EDP
shall mean the Parker-Hannifin Corporation Amended and Restated Executive Deferral Plan as it currently exists and as it may subsequently be amended.
|
1.12.
|
Eligible Executive
shall mean an employee of the Company or any of its subsidiaries who:
|
(a)
|
is designated by the Administrator as eligible to participate in the Plan; and
|
(b)
|
qualifies as a member of the "select group of management or highly compensated employees" under ERISA.
|
1.13.
|
ERISA
shall mean the Employee Retirement Income Security Act of 1974, as amended, or any successor statute, and regulations or other guidance issued thereunder.
|
1.14.
|
Investment Committee
shall mean the Parker Total Rewards Investment Committee of the Company or, if applicable, the investment subcommittee appointed by the Parker Total Rewards Investment Committee with respect to the Plan.
|
1.15.
|
Normal Retirement Date
shall mean the "Normal Retirement Date" as defined in the Qualified Plan.
|
1.16.
|
Participant
shall mean an Eligible Executive who has become a participant hereunder pursuant to
Article 2
.
|
1.17.
|
Qualified Plan
shall mean the Parker-Hannifin Consolidated Pension Plan as it currently exists and as it may subsequently be amended, or any other qualified defined benefit plan maintained by the Company and in which an Eligible Executive participates.
|
1.18.
|
Regulations
shall mean regulations issued under Section 409A of the Code. Reference to any section of the Regulations shall be read to include any amendment or revision of such Regulation.
|
1.19.
|
Separation from Service
shall have the meaning set out in Section 1.409A-1(h) of the Regulations; provided, that in applying Section 1.409A-1(h)(ii) of the Regulations, a separation from service shall be deemed to occur if the Company and the Participant reasonably anticipate that the level of bona fide services the Participant will perform for the Affiliated Group after a certain date (whether as an employee or as an independent contractor) will permanently decrease to less than 50% of the average level of bona fide services performed by the Participant for the Affiliated Group (whether as an employee or as an independent contractor) over the immediately preceding 36-month period (or the full period of services performed for the Affiliated Group if the Participant has been providing services to the Affiliated Group for less than 36 months). In the event of a disposition of assets by the Company to an unrelated person, the Administrator reserves the discretion to specify
|
1.20.
|
SERP
shall mean the Parker-Hannifin Corporation Amended and Restated Supplemental Executive Retirement Benefits Program as it currently exists and as it may subsequently be amended.
|
1.21.
|
SERP Participant
shall mean a Participant in the Plan who also is a participant in the SERP.
|
1.22.
|
SERP Participation Date
shall mean the date that a Participant in the Plan becomes a SERP Participant.
|
1.23.
|
SERP Vesting Date
shall mean the date that a SERP Participant becomes vested in a benefit under the SERP.
|
1.24.
|
Specified Employee
shall mean a person designated from time to time as such by the Administrator pursuant to Section 409A(a)(2)(B)(i) of the Code and the Company's policy for determining specified employees.
|
1.25.
|
SRP
shall mean the Parker-Hannifin Corporation Amended and Restated Savings Restoration Plan as it currently exists and as it may subsequently be amended.
|
1.26.
|
Statutory Limit
shall mean any limit on compensation taken into account in calculating benefits under the Qualified Plan under Section 401(a)(17) of the Code, any limit on benefits or contributions to the Qualified Plan under Section 415 of the Code, or any other limit that directly or indirectly affects the amount of benefits payable from the Qualified Plan.
|
1.27.
|
Subsidiary
shall mean 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 or interests of such corporation or other entity.
|
1.28.
|
Surviving Spouse
shall mean the person who is the Participant's spouse at the time of the Participant's death and who has been such spouse for at least one year immediately prior to the date of the Participant's death.
|
1.29.
|
Termination of Employment
shall mean Separation from Service with the Affiliated Group for any reason whatsoever, whether voluntary or involuntary, other than as a result of the Participant's Disability or death.
|
(a)
|
the date the Eligible Executive's retirement benefits under the Qualified Plan first become limited by any Statutory Limit;
|
(b)
|
the date the Eligible Executive first elects to defer compensation under the SRP or EDP;
|
(c)
|
the date of a Change in Control of the Company; or
|
(d)
|
the date designated by the Administrator in a written agreement.
|
3.1.
|
Amount
.
|
(a)
|
For Eligible Executives who are Participants in this Plan as of December 31, 2008, upon Termination of Employment on or after Normal or Early Retirement Date, or after the Participant has a nonforfeitable right to a benefit under the Qualified Plan, the Participant shall be entitled to a retirement benefit payable in the form provided in
Section 3.3
and at the time provided in
Section 3.4
.
|
(b)
|
For Eligible Executives who become Participants in this Plan after December 31, 2008, upon Termination of Employment on or after Normal or Early Retirement Date, or after the Participant has a nonforfeitable right to a benefit under the Qualified Plan, the Participant shall be entitled to a retirement benefit as provided in
Section 3.3
, provided that the Participant has satisfied the vesting requirement of
Section 3.2
.
|
(c)
|
The retirement benefit of a Participant under
Section 3.1(a) or 3.1(b)
of the Plan shall equal (i) the benefit that would be payable to the Participant under the Qualified Plan calculated as if (A) no Statutory Limit applies to such benefit; (B) the Participant had not elected to defer any compensation under the SRP or the EDP; (C) Compensation for purposes of calculating the benefit under the Qualified Plan includes incentive payments or bonuses (other than long term incentive payments or other irregular or extraordinary incentive or bonus payments) paid after the month in which the Participant has a Termination of Employment; and (D) Compensation and Years of Participation for purposes of calculating the benefit under the Qualified Plan include any additional amounts as agreed to by the Company, less (ii) the benefit that is actually payable under the Qualified Plan, plus (iii) any additional benefit that the Company agrees to provide to a Participant under this Plan by a written agreement with specific reference to this Plan. Notwithstanding the foregoing and solely for purposes of calculating the amount of a Participant's retirement benefit under the Plan, on and after any SERP Participant's SERP Vesting Date that occurs after December 31, 2007, the retirement benefit of such SERP Participant under
Section 3.1(a)
or
Section 3.1(b)
of the Plan shall equal the greater of: (y) the retirement benefit determined under this
Section 3.1(c)
(in the form of payment in effect on the
|
3.2.
|
Vesting Requirement
. An Eligible Executive who becomes a Participant after December 31, 2008 shall satisfy the vesting requirement of this
Section 3.2
if such Participant remains employed by the Affiliated Group until the date which is 13 months after the date upon which either:
|
(a)
|
the Participant's retirement benefits under the Qualified Plan first became limited by a Statutory Limit; or
|
(b)
|
the Participant first elects to defer compensation under the SRP and/or EDP.
|
3.3.
|
Form of Retirement Benefits
.
|
(a)
|
Termination of Employment Before Early Retirement Date
. Upon Termination of Employment before his Early Retirement Date, a Participant's retirement benefit shall be paid in the form of a single lump sum payment.
|
(b)
|
Termination of Employment On or After Early Retirement Date
. Absent an election under
Sections 3.3(b)(i) through 3.3(b)(v)
, or as otherwise provided pursuant to
Section 3.3(b)(vi)
, upon Termination of Employment on or after his Early Retirement Date, a Participant's retirement benefit shall be paid in the default form of a single life annuity.
|
(i)
|
Initial Payment Elections by Participants
. To the extent permitted by Section 409A of the Code and Section 1.409A-2(a)(5) of the Regulations, within 30 days following the date an Eligible Executive becomes a Participant, the Participant may elect for retirement benefits under this Plan to be paid in the form of (A) a single lump sum payment equal to the Actuarial Value of the Participant's retirement benefits under this Plan, (B) a single life annuity, or (C) annuity offered under the Qualified Plan that is the actuarial equivalent of the single life annuity in
Section 3.3(b)(i)(B)
. In the event that the vesting requirement of
Section 3.2
is accelerated for any Participant on account of death, Disability or a Change of Control, any election made by such Participant under this
Section 3.3(b)(ii)
will be disregarded.
|
(ii)
|
Changes Between Actuarially Equivalent Forms of Annuity
. A Participant may elect at any time prior to Termination of Employment to convert his retirement benefit from a single life annuity or any of the actuarially equivalent forms of annuity offered under the Qualified Plan to a single life annuity or any of the forms of annuity offered under the Qualified Plan that is the actuarial equivalent of the single life annuity in
Section 3.3(b)(i)(B)
.
|
(iii)
|
Changes by SERP Participants
. To the extent required by Section 409A of the Code, if any SERP Participant elects under the SERP to receive payment of his SERP benefit in a form different from that previously in effect for such Participant's retirement benefit under this Plan, the Company shall change the form of payment of such SERP Participant's retirement benefit under this Plan to the form of payment elected by such SERP Participant under the SERP. Any change in the form of payment of a Participant's retirement benefit pursuant to this
Section 3.3(b)(iii)
shall cause the payment of such Participant's retirement benefit under this Plan to be delayed for five years from the date payment would otherwise commence or be made (taking into account any delay in payment or commencement of payment under
Section 3.4
on account of a Participant's status as a Specified Employee).
|
(iv)
|
Transitional Rule
. Notwithstanding any other elections made hereunder and only to the extent permitted by the Company and transitional rules issued under Section 409A of the Code, through such date as specified by the Company pursuant to transitional guidance issued under Section 409A of the Code, a Participant may make one or more elections as to time and form of payment of his retirement benefit under this Plan, provided that (a) any such election(s) made during 2006 shall be available only for amounts that are payable after the 2006 calendar year and cannot accelerate any payment into the 2006 calendar year, (b) any such election(s) made during 2007 shall be available only for amounts that are payable after the 2007 calendar year and cannot accelerate any payment into the 2007 calendar year, and (c) any such election(s) made during 2008 shall be available only for amounts that are payable after the 2008 calendar year and cannot accelerate any payment into the 2008 calendar year. Any such election(s) must be made by the date specified by the Company consistent with guidance pursuant to Section 409A of the Code.
|
(v)
|
One-Time Change by Participants
. In addition to any election permitted by
Sections 3.3(b)(i) through (iv)
, to the extent permitted by Section 409A of the Code, a Participant may make a one-time election to change the form of payment at any time up to 12 months before the first scheduled payment; provided, however, that (a) any such election shall not be effective for at least 12 months following the date made; and (b) to the extent required by Section 409A of the Code, as a result of any such change, payment or commencement of payment shall be delayed for 5 years from the date the first payment was scheduled to have been paid (taking into account any delay in payment or commencement of
|
(vi)
|
Small Benefit Exception
.
|
(i)
|
Benefits Payable Prior to January 1, 2008
. Notwithstanding the foregoing provisions of this
Section 3.3(b)
, with respect to a Participant's retirement benefit under the Plan that would otherwise be paid as an annuity prior to January 1, 2008, if the Actuarial Value of the benefit payable to the Participant under the Plan as of the date payment is scheduled to commence is less than fifteen thousand dollars ($15,000), the Company shall pay such benefit in a single lump sum; provided, however, that payment of a retirement benefit to any Specified Employee pursuant to this
Section 3.3(b)(vi)(A)
will be made on the first day of the seventh month following the Participant's Termination of Employment.
|
(ii)
|
Benefits Payable After December 31, 2007
. Notwithstanding the foregoing provisions of this
Section 3.3(b)
, effective December 31, 2007 with respect to a Participant's benefit under the Plan that would otherwise be paid as an annuity after December 31, 2007, if the aggregate of the Actuarial Value of all remaining benefits payable to the Participant under the Plan and the present value of all other remaining benefits under the SERP and any other nonqualified deferred compensation arrangement that is aggregated with the Plan and the SERP under Section 1.409A-1(c) of the Regulations as of the date payment is scheduled to commence is not greater than the applicable dollar amount in effect on such date under Section 402(g)(1)(B) of the Code, the Company shall pay the retirement benefit under the Plan in a single lump sum; provided, however, that payment of a retirement benefit to any Specified Employee pursuant to this
Section 3.3(b)(vi)(B)
will be made on the first day of the seventh month following the Participant's Termination of Employment.
|
3.4.
|
Time of Payment of Retirement Benefits
. Payment of a Participant's retirement benefit shall commence or shall be made as of the first of the month following the Participant's Termination of Employment; provided, however, that payment of retirement benefits to any Specified Employee will commence or be made on the first day of the seventh month following the Participant's Termination of Employment based on the Participant’s age and actuarial assumptions in effect on the first day of the month following the Participant’s Termination of Employment and in the case of payments paid in any form of annuity shall include any payments that would have been made between the Participant's Termination of Employment and the actual date of commencement of payment if the Participant had not been a Specified Employee. Notwithstanding the foregoing, to the extent required by
Section 3.3(b)(iii) or Section 3.3(b)(v),
payment of a Participant's retirement benefit shall commence
|
3.5.
|
Special Rule Applicable to Specified Employees
. If a Specified Employee dies after Termination of Employment but prior to commencement of benefits, the Specified Employee’s Beneficiary shall receive a payment as of the first of the month following the Specified Employee’s date of death equal to the aggregate of the monthly payments that would have been made to the Specified Employee in accordance with
Section 3.4
but substituting the Specified Employee’s date of death for the actual date of commencement of payment; provided however that if the Specified Employee’s retirement benefit is payable in the form of a lump sum, such amount shall be calculated as of the Specified Employee’s Termination of Employment and paid on the first of the month following the Specified Employee’s date of death. Any additional amounts payable to the Specified Employee’s Beneficiary shall be determined in accordance with the form of payment applicable to the Specified Employee as of the Specified Employee’s Termination of Employment.
|
3.6.
|
Benefits in Foreign Currency
. To the extent that a Participant’s retirement benefit under this Plan is calculated with reference to a benefit denominated in a currency other than U.S. Dollars and payable over the Participant’s life expectancy, then for purposes of determining the retirement benefit payable under this Plan, such benefit shall be converted to the U.S. Dollar equivalent based on the Foreign Exchange Rate. For purposes of this Plan, the Foreign Exchange Rate means the fixed exchange rate derived from the two-point average of the Bid/Asked spread of the market implied forward exchange rates as calculated by Bloomberg's FRD function, or its successor function on the same or comparable financial information system, determined on a weighted average basis for the period beginning at the date of Separation from Service of the Participant and ending on a date estimated to be the Participant 's date of death based upon the applicable mortality table prescribed under Section 417(e) of the Code for qualified plans.
|
4.1.
|
Eligibility
. If a Participant suffers a Disability prior to Termination of Employment, the Participant shall be eligible for a benefit under this
Article 4
.
|
4.2.
|
Amount
.
|
(a)
|
Disability Before January 27, 2012
. If a Participant suffers a Disability before January 27, 2012, the amount of the benefit payable to the Participant under this
Article 4
shall be equal to the Retirement Benefit described in
Article 3
, determined as if the Participant's Termination of Employment occurred on the date of the Participant's Disability.
|
(b)
|
Disability on or After January 27, 2012
.
|
(i)
|
Disability After Age 55
. If a Participant suffers a Disability on or after January 27, 2012 and after the Participant's attainment of age 55, the amount of the benefit payable to the Participant under this
Article 4
shall be equal to the Actuarial Value of the Retirement Benefit described in
Article 3
, determined as if the Participant was not a Specified Employee and had retired on the date of his or her Disability.
|
(ii)
|
Disability Before Age 55
. If a Participant suffers a Disability on or after January 27, 2012 and prior to the Participant's attainment of age 55, then the amount of the benefit payable to the Participant under this
Article 4
shall be determined by (i) calculating the Actuarial Value of the Retirement Benefit described in
Article 3
(using the actuarial assumptions and the Participant's Compensation determined as of the date of the Participant's Disability) that the Participant would be eligible to receive as of the first of the month following attainment of age 55 if the Participant had not become Disabled and had continued to be employed by the Company (with credit for Years of Participation) until retirement on the date that the Participant would attain age 55 (assuming, for this purpose, that the Participant would not be a Specified Employee on such date); and (ii) discounting the amount determined under the preceding clause (i) from the first of the month following the date the Participant would attain age 55 to the first of the month following the Participant's Disability, using the actuarial assumptions in effect on the date of the Participant's Disability.
|
4.3.
|
Form of Disability Benefits
.
|
(a)
|
Disability Before January 27, 2012
. If a Participant suffers a Disability before January 27, 2012, the Participant's disability benefit pursuant to this
Article 4
shall be paid in the form of a single life annuity; provided, however, that if the aggregate of the Actuarial Value of all remaining benefits payable to the Participant under the Plan and the present value of all other remaining benefits under the SERP and any other nonqualified deferred compensation arrangement that is aggregated with the Plan and the SERP under Section 1.409A-1(c) of the Regulations as of the date payment is scheduled to commence is not greater than the applicable dollar amount in effect on such date under Section 402(g)(1)(B) of the Code, the Company shall pay the disability benefit under this
Section 4.2(a)
in a single lump sum.
|
(b)
|
Disability on or After January 27, 2012
. If a Participant suffers a Disability on or after January 27, 2012, the Participant's disability benefit pursuant to this
Article 4
shall be paid in the form of a single lump sum payment.
|
4.4.
|
Time of Payment of Disability Benefits
. Payment of a Participant's disability benefit shall be made (or commence, as applicable) as of the first of the month following the Participant's Disability, and the provisions of
Article 3
regarding payment to a Specified Employee and the 5-year delay of payments following certain elections shall be disregarded for purposes of the payment of benefits pursuant to this
Article 4
.
|
5.1.
|
Amount
. If a Participant dies prior to Termination of Employment and a benefit is payable to the Participant's Surviving Spouse under the Qualified Plan, the Participant's Surviving Spouse shall be eligible for a survivor benefit under this
Article 5
. The survivor benefit payable to a Participant's Surviving Spouse under this
Article 5
shall equal the Actuarial Value of the excess of the total monthly survivor benefit that would be payable under the Qualified Plan calculated as if no Statutory Limit applies to such benefit and the Participant had not elected to defer any compensation under the SRP or the EDP, over the total monthly survivor benefit that is actually payable under the Qualified Plan. For this purpose, Actuarial Value shall be determined based on the age of the Surviving Spouse.
|
5.2.
|
Form of Survivor Benefits
. The survivor benefit payable under this
Article 5
shall be paid to the Participant's Surviving Spouse in the form of a single lump sum payment.
|
5.3.
|
Time of Payment of Survivor Benefits
. Payment of the survivor benefit shall be made as of the first of the month following the date of the Participant's death, and the provisions of
Article 3
regarding payment to a Specified Employee and the 5-year delay of payments following certain elections shall be disregarded for purposes of the payment of survivor benefits pursuant to this
Article 5
.
|
6.1.
|
Non-assignability
. The benefits provided under the Plan may not be alienated, assigned, transferred, pledged or hypothecated by or to any person or entity, at any time or any manner whatsoever. These benefits shall be exempt from the claims of creditors of any Participant or other claimants and from all orders, decrees, levies, garnishment or executions against any Participant to the fullest extent allowed by law.
|
6.2.
|
No Right to Company Assets
. The benefits paid under the Plan shall be paid from the general funds of the Company, and the Participant and any Beneficiary shall be no more than unsecured general creditors of the Company with no special or prior right to any assets of the Company for payment of any obligations hereunder.
|
6.3.
|
Protective Provisions
. The Participant shall cooperate with the Company by furnishing any and all information requested by the Administrator, in order to facilitate the payment of benefits hereunder, taking such physical examinations as the Administrator may deem necessary and taking such other actions as may be requested by the Administrator. If the Participant refuses to cooperate, the Company shall have no further obligation to the Participant under the Plan. In the event of a Participant's suicide during the first two (2) years of participation in the Plan, or if the Participant makes any material misstatement of information or nondisclosure of medical history, then no benefits shall be payable to the Participant or the Participant's Beneficiary under the Plan.
|
6.4.
|
Withholding
. The Participant or the Beneficiary shall make appropriate arrangements with the Company for satisfaction of any federal, state or local income tax withholding requirements and Social Security or other employee tax requirements applicable to the payment of benefits under the Plan. If no other arrangements are made, the Company may provide, at its discretion, for such withholding and tax payments as may be required.
|
9.1.
|
Amendment of Plan
.
|
(a)
|
The Company may at any time amend the Plan in whole or in part, provided, however, that such amendment shall not decrease the value of benefits accrued under the Plan prior to the time of such amendment.
|
(b)
|
In addition, no amendment shall permit an acceleration of time of payment of a Participant’s benefit under the Plan, other than:
|
(i)
|
as necessary to comply with a certificate of divestiture, as defined in Section 1043(b)(2) of the Code;
|
(ii)
|
in accordance with
Section 3.2(e)
with respect to small cashouts;
|
(iii)
|
as necessary to pay Federal Insurance Contribution (“FICA”) taxes and any resulting federal, state, local or foreign income taxes attributable to amounts deferred under the Plan, subject to the limitations of Section 1.409A-3(j)(4)(vi) of the Regulations;
|
(iv)
|
in the event the arrangement fails to meet the requirements of Section 409A of the Code with respect to one or more Participants, and then only in such amount as is included in income of such Participant(s) as a result of such failure;
|
(v)
|
due to a termination of the Plan pursuant to
Section 9.2
of the Plan that meets the requirements of Section 1.409A-3(j)(4)(ix) of the Regulations; or
|
(vi)
|
as otherwise may be permitted under Section 409A of the Code.
|
9.2.
|
Termination of Plan
. The Company may terminate the Plan only as permitted by Section 1.409A-3(j)(4)(ix) of the Regulations (Plan Terminations and Liquidations), or as otherwise may be permitted by future Regulations or other guidance under Section 409A of the Code.
|
9.3.
|
Company Action
. Except as provided in
Section 9.4
, the Company's power to amend or terminate the Plan shall be exercisable by the Company's Board of Directors or by the committee or individual authorized by the Company's Board of Directors to exercise such powers.
|
9.4.
|
Distribution on Income Inclusion Under Section 409A
. In the event the Administrator determines that benefits under the Plan fail to meet the requirements of Section 409A of the Code and must be recognized as income for federal income tax purposes, distribution of the amount required to be included in income shall be made to affected Participants to the extent permitted by Section 409A of the Code.
|
11.1.
|
Successors of the Company
. The rights and obligations of the Company under the Plan shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company.
|
11.2.
|
ERISA Plan
. The Plan is intended to be an unfunded plan maintained primarily to provide deferred compensation benefits for "a select group of management or highly compensated employees" within the meaning of Sections 201, 301 and 401 of ERISA and therefore to be exempt from Parts 2, 3 and 4 of Title I of ERISA.
|
11.3.
|
Trust
. The Company shall be responsible for the payment of all benefits under the Plan. The Company may establish one or more grantor trusts for the purposes of providing for payment of benefits under the Plan. Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of the Company's creditors. Benefits paid to the Participant from any such trust shall be considered paid by the Company for purposes of meeting the obligations of the Company under the Plan.
|
11.4.
|
Employment Not Guaranteed
. Nothing contained in the Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any Participant any right to continued employment with the Company.
|
11.5.
|
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.
|
11.6.
|
Captions
. The captions of the articles and paragraphs of the Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.
|
11.7.
|
Validity
. If any provision of the Plan is held invalid, void or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provisions of the Plan.
|
11.8.
|
Waiver of Breach
. The waiver by the Company of any breach of any provision of the Plan by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant.
|
11.9.
|
Applicable Law
. The Plan shall be governed and construed in accordance with the laws of the State of Ohio except where the laws of the State of Ohio are preempted by ERISA.
|
11.10.
|
Notice
. Any notice or filing required or permitted to be given to the Company under the Plan shall be sufficient if in writing and hand-delivered, or sent by first class mail to the principal office of the Company, directed to the attention of the Administrator. Such notice
|
12.1.
|
Claims Procedure
. The Administrator shall notify a Participant in writing, within ninety (90) days after his or her written application for benefits, of his or her eligibility or noneligibility for benefits under the Plan. If the Administrator determines that a Participant is not eligible for benefits or full benefits, the notice shall set forth:
|
(a)
|
the specific reasons for such denial;
|
(b)
|
a specific reference to the provisions of the Plan on which the denial is based;
|
(c)
|
a description of any additional information or material necessary for the claimant to perfect his or her claim, and a description of why it is needed; and
|
(d)
|
an explanation of the Plan's claims review procedure and other appropriate information as to the steps to be taken if the Participant wishes to have the claim reviewed. If the Administrator determines that there are special circumstances requiring additional time to make a decision, the Administrator shall notify the Participant of the special circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional ninety-day period.
|
12.2.
|
Review Procedure
. If a Participant is determined by the Administrator not to be eligible for benefits, or if the Participant believes that he or she is entitled to greater or different benefits, the Participant shall have the opportunity to have such claim reviewed by the Administrator by filing a petition for review with the Administrator within sixty (60) days after receipt of the notice issued by the Administrator. Said petition shall state the specific reasons which the Participant believes entitle him or her to benefits or to greater or different benefits. Within sixty (60) days after receipt by the Administrator of the petition, the Administrator shall afford the Participant (and counsel, if any) an opportunity to present his or her position to the Administrator in writing, and the Participant (or counsel) shall have the right to review the pertinent documents. The Administrator shall notify the Participant of its decision in writing within the sixty-day period, stating specifically the basis of its decision, written in a manner calculated to be understood by the Participant and the specific provisions of the Plan on which the decision is based. If the sixty-day period is not sufficient, the decision may be deferred for up to another sixty-day period at the election of the Administrator, but notice of this deferral shall be given to the Participant. In the event of the death of the Participant, the same procedures shall apply to the Participant's Beneficiary.
|
1.1
|
Account
shall mean the sum of the Annual Deferral Account, all LTI Deferral Accounts (vested and unvested), and all Discretionary Company Credit Accounts, if any.
|
1.2
|
Administrator
shall mean the Parker Total Rewards Administration Committee of the Company or, if applicable, the administration subcommittee appointed by the Parker Total Rewards Administration Committee with respect to the Plan.
|
1.3
|
Affiliated Group
shall mean the Company and all entities with which the Company would be considered a single employer under Sections 414(b) and 414(c) of the Code, provided that in applying Section 1563(a)(1), (2), and (3) of the Code for purposes of determining a controlled group of corporations under Section 414(b) of the Code, the language “at least 50 percent” is used instead of “at least 80 percent” each place it appears in Section 1563(a)(1), (2), and (3) of the Code, and in applying Section 1.414(c)-2 of the Treasury Regulations for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of Section 414(c) of the Code, “at least 50 percent” is used instead of “at least 80 percent” each place it appears in that regulation. Such term shall be interpreted in a manner consistent with the definition of “service recipient” contained in Section 409A of the Code.
|
1.4
|
Annual Deferral
shall mean the amount of Compensation which the Participant elects to defer for a Plan Year pursuant to
Articles 2 and 3
.
|
1.5
|
Annual Deferral Account
shall mean the notional account established with respect to a Participant’s Annual Deferrals for recordkeeping purposes pursuant to
Article 5
.
|
1.6
|
Beneficiary
shall mean the person or persons or entity designated as such in accordance with
Article 14
.
|
1.7
|
Board
shall mean the Board of Directors of the Company.
|
1.8
|
Bonuses
shall mean:
|
(a)
|
For amounts that are due and payable before January 1, 2007, amounts payable in cash to the Participant by the Company, in the form of annual and other regular periodic bonuses, before reductions for deferrals under this Plan,
the Savings Plan or the Savings Restoration Plan. “Annual and other regular periodic bonuses” shall include amounts payable under the Company’s Return on Net Assets (RONA) Plan and the Target Incentive Program, but shall exclude any payments under any long-term incentive program, any volume incentive or similar bonus program, and any other extraordinary bonus or incentive program.
|
(b)
|
For Plan Years beginning on and after January 1, 2007, amounts payable to the Participant by the Company in August of each such Plan Year under the Company’s RONA Plan (except to the extent determined by the Compensation Committee to be extraordinary) and Target Incentive Program.
|
1.9
|
Business Combination
shall mean 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 issuance of securities in connection with the transaction or otherwise.
|
1.10
|
Change in Control
shall mean the occurrence of one of the following events:
|
(a)
|
A change in ownership of the Company, which occurs on the date that any one person or more than one person acting as a group (within the meaning of the Regulations under Section 409A of the Code) acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50% of the total voting power of the stock of the Company. Notwithstanding the foregoing, if any one person or group is considered to own more than 50% of the total voting power of the stock of the Company, the acquisition of additional stock by the same person or group is not considered to cause a change in the ownership of the Company or a change in the effective control of the Company (within the meaning of
Section 1.10(b)
of this Plan). Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person acquires ownership of more than 50% of the total voting power of the stock of the Company as a result of the acquisition by the Company of stock of the Company which, by reducing the number of shares 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 stock of the Company that increases the percentage of outstanding shares of stock of the Company owned by such person, a Change in Control shall then occur.
|
(b)
|
A change in effective control of the Company, which occurs on either of the following dates:
|
(i)
|
The date that any one person or more than one person acting as a group (within the meaning of the Regulations under Section 409A of the Code) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or group) ownership of stock of the Company possessing 30% or more of the total voting power of the Company. Notwithstanding the foregoing, if any one person or group is considered to own 30% or more of total voting power of the stock of the Company, the acquisition of additional stock by the same person or group is not considered to cause a change in the effective control of the Company or a change in ownership of the Company (within the meaning
|
(ii)
|
The date that a majority of the Company’s board of directors is replaced during any 12-month period by directors whose appointment or election was not endorsed by a majority of the members of the board prior to the date of such appointment or election.
|
(c)
|
A change in the ownership of a substantial portion of the Company’s assets, which occurs on the date that any one person or more than one person acting as a group (within the meaning of the Regulations under Section 409A of the Code) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or group) assets that have a total gross fair market value equal to or more than 65% of the total gross fair market value of all the assets of the Company immediately before such acquisition or acquisitions. The gross fair market value of assets shall be determined without regard to liabilities associated with such assets. Notwithstanding the foregoing, a transfer of assets shall not result in a change in ownership of a substantial portion of the Company’s assets if such transfer is to (A) a shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock, (B) an entity 50% or more of the total value or voting power of which is owned, directly or indirectly, by the Company, (C) a person or group (within the meaning of the Regulations under Section 409A of the Code) that owns, directly or indirectly, 50% or more of the total value or voting power of the stock of the Company, or (D) an entity, at least 50% of the total value or voting power of which is owned, directly or indirectly by a person or group described in
Section 1.10(c)(iii)
of this Plan.
|
1.11
|
Code
shall mean the Internal Revenue Code of 1986, as amended, or any successor statute, and regulations or other guidance issued thereunder.
|
1.12
|
Committee
shall mean the Administrator, the Investment Committee or the Compensation Committee, as applicable.
|
1.13
|
Company Voting Securities
shall mean securities of the Company eligible to vote for the election of the Board.
|
1.14
|
Compensation
shall mean the sum of the Participant’s Salary and anticipated Bonuses for a Plan Year before reductions for deferrals under this Plan, the Savings Plan, the Savings Restoration Plan, the Parker-Hannifin Corporation Cafeteria Plan, or the Group Insurance Plan for Hourly and Salaried Employees of Parker-Hannifin Corporation. Compensation shall not include any amounts payable on account of Termination of Employment, whether paid periodically or in a lump sum.
|
1.15
|
Compensation Committee
shall mean the Human Resources and Compensation Committee of the Board.
|
1.16
|
Corporate Change Vesting Event
shall mean any of the following events have occurred:
|
(a)
|
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 Company Voting Securities; provided, however, that
|
(b)
|
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 (b), 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;
|
(c)
|
the consummation of a Business Combination, unless: (i) immediately following such Business Combination: (A) more than 50% of the total voting power of the Surviving Corporation resulting from such Business Combination or, if applicable, the Parent Corporation of such Surviving 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, (B) 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
|
(d)
|
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.
|
1.17
|
Crediting Rate
shall mean any notional gains or losses equal to those generated as if the Participant’s Account balance had been invested in one or more of the investment portfolios designated as available by the Investment Committee, less separate account fees and less applicable administrative charges determined annually by the Administrator.
|
1.18
|
Disability
shall mean the condition whereby a Participant is (a) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or (b) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under any accident and health plan covering employees of the Company. The Administrator, in its complete and sole discretion, shall determine a Participant’s Disability. The Administrator may require that the Participant submit to an examination on an annual basis, at the expense of the Company, by a competent physician or medical clinic selected by the Administrator to confirm Disability. On the basis of such medical evidence, the determination of the Administrator as to whether or not a condition of Disability exists or continues shall be conclusive.
|
1.19
|
Discretionary Company Credit
shall mean the amount, if any, which the Company credits to a Participant’s Account in accordance with
Article 4
.
|
1.20
|
Discretionary Company Credit Account
shall mean the one or more notional accounts established with respect to a Participant’s Discretionary Company Credits, if any, for recordkeeping purposes pursuant to
Article 5
.
|
1.21
|
Early Retirement Date
shall mean age 55 with ten or more years of employment with the Company; provided, however, that any Early Retirement prior to age 60 must be with the consent of the Compensation Committee.
|
1.22
|
Eligible Executive
shall mean a key employee of the Company or any of its Subsidiaries who: (a) is designated by the Administrator as eligible to participate in the Plan; and (b) qualifies as a member of the “select group of management or highly compensated employees” under ERISA.
|
1.23
|
ERISA
shall mean the Employee Retirement Income Security Act of 1974, as amended, or any successor statute, and regulations or other guidance issued thereunder.
|
1.24
|
Investment Committee
shall mean the Parker Total Rewards Investment Committee of the Company or, if applicable, the investment subcommittee appointed by the Parker Total Rewards Investment Committee with respect to the Plan.
|
1.25
|
LTI Deferral
shall mean the amount of any LTI Payment which the Participant elects to defer with respect to a Plan Year pursuant to
Articles 2 and 3
.
|
1.26
|
LTI Deferral Account
shall mean the one or more notional accounts established with respect to a Participant’s LTI Deferrals for recordkeeping purposes pursuant to
Article 5
.
|
1.27
|
LTI Payment
shall mean the amount that would otherwise be payable to an Eligible Executive for a Plan Year under any long-term incentive program of the Company.
|
1.28
|
Normal Retirement Date
shall mean the date on which a Participant attains age 65.
|
1.29
|
Parent Corporation
shall mean the ultimate parent corporation which directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of a Surviving Corporation.
|
1.30
|
Participant
shall mean an Eligible Executive who has elected to participate and has completed a Participation Agreement pursuant to
Article 2
.
|
1.31
|
Participation Agreement
shall mean the Participant’s written election to participate in the Plan.
|
1.32
|
Performance Period
shall have the meaning provided by the applicable long-term incentive program of the Company.
|
1.33
|
Plan Year
shall mean the calendar year.
|
1.34
|
Retirement
shall mean a termination of employment following Normal or Early Retirement Date.
|
1.35
|
Salary
shall mean the Participant’s annual basic rate of pay from the Company (excluding Bonuses, commissions and other non-regular forms of compensation) before reductions for deferrals under this Plan, the Savings Plan, the Savings Restoration Plan, the Parker-Hannifin Corporation Cafeteria Plan, or the Group Insurance Plan for Hourly and Salaried Employees of Parker-Hannifin Corporation.
|
1.36
|
Savings Plan
shall mean The Parker Retirement Savings Plan as it currently exists and as it may subsequently be amended.
|
1.37
|
Savings Restoration Plan
shall mean the Parker-Hannifin Corporation Amended and Restated Savings Restoration Plan as it currently exists and as it may subsequently be amended.
|
1.38
|
Separation from Service
shall have the meaning set out in Section 1.409A-1(h) of the Regulations; provided, that in applying Section 1.409A-1(h)(ii) of the Regulations, a separation from service shall be deemed to occur if the Company and the Participant reasonably anticipate that the level of bona fide services the Participant will perform for the Affiliated Group after a certain date (whether as an employee or as an independent contractor) will permanently decrease to less than 50% of the average level of bona fide services performed by the Participant for the Affiliated Group (whether as an employee or as an independent contractor) over the immediately preceding 36-month period (or the full period of services performed for the Affiliated Group if the Participant has been providing services to the Affiliated Group for less than 36 months). In the event of a disposition of assets by the Company to an unrelated person, the Administrator reserves
|
1.39
|
Specified Employee
shall mean a person designated from time to time as such by the Administrator pursuant to Section 409A(a)(2)(B)(i) of the Code and the Company’s policy for determining specified employees.
|
1.40
|
Subsidiary
shall mean 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 or interests of such corporation or other entity.
|
1.41
|
Surviving Corporation
shall mean the corporation resulting from a Business Combination.
|
1.42
|
Termination of Employment
shall mean Separation from Service from the Affiliated Group, other than Separation from Service due to Retirement, Disability or death.
|
1.43
|
Unforeseeable Emergency
shall mean a severe financial hardship arising from (a) the illness or accident of the Participant, the Participant’s spouse, or the Participant’s dependent (as defined in Section 152(a) of the Code), (b) loss of the Participant’s property due to casualty, or (c) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The determination of when a Participant has incurred an Unforeseeable Emergency shall be made by the Administrator in its sole discretion, pursuant to and subject to the conditions of Section 409A of the Code and Regulations thereunder.
|
1.44
|
Valuation Date
shall mean each day on which the New York Stock Exchange is open, except that for purposes of determining the value of a distribution under
Article 6, 7, 8, 9 or 15
, it shall mean the 24th day of each month (or the most recent business day preceding such date) immediately preceding the month in which a distribution is to be made.
|
2.1
|
Participation Agreement/Deferrals
.
|
(a)
|
An Eligible Executive shall become a Participant in the Plan on the first day of the Plan Year following appointment as an Eligible Executive and submission to the Administrator of an Annual Participation Agreement. To be effective, the Eligible Executive must submit the Annual Participation Agreement to the Administrator prior to the beginning of the Plan Year and during the enrollment period designated by the Administrator. In the Annual Participation Agreement,
|
(b)
|
With respect to those Participants who are eligible for an LTI Payment pursuant to a long-term incentive award from the Company for a performance cycle beginning before July 1, 2008, the Administrator shall provide for an enrollment period and LTI Participation Agreements each year under which the Participant may designate any LTI Deferrals for a specified Plan Year. To be effective, the Participant must submit the LTI Participation Agreement during the enrollment period designated by the Administrator pursuant to
Section 6.4(c)
of this Plan. Except as otherwise determined by the Administrator, no LTI Deferrals shall be allowed with respect to any long-term incentive award period beginning on or after July 1, 2008.
|
2.2
|
Continuation of Participation
. An Eligible Executive who has become a Participant in the Plan shall continue as a Participant in the Plan even though such executive ceases to be an Eligible Executive. However, a Participant shall not be eligible to elect a new Annual Deferral or LTI Deferral unless the Participant is an Eligible Executive for the Plan Year for which the election is made.
|
3.1
|
Deferral Commitment
.
|
(a)
|
A Participant may elect in the Annual Participation Agreement to defer an amount equal to a specified dollar amount of Salary to be earned by such Participant during the next Plan Year and a percentage (up to a maximum specified dollar amount) of Bonuses to be earned by such Participant during the Company’s fiscal year beginning during the next Plan Year.
|
(b)
|
A Participant may elect in the LTI Participation Agreement to defer an amount equal to a specified dollar amount or a percentage of the LTI Payment that may be payable to the Participant in the next Plan Year pursuant to a long-term incentive award from the Company for a performance cycle beginning before July 1, 2008.
|
(c)
|
Annual Deferrals and LTI Deferrals under this Plan shall be irrevocable.
|
3.2
|
Minimum Annual Election
.
|
(a)
|
A Participant’s elected Annual Deferral for a Plan Year must equal at least five thousand dollars ($5,000), from either Salary or Bonuses or a combination of Salary and Bonuses.
|
(b)
|
The elected LTI Deferral for a Plan Year must equal at least five thousand dollars ($5,000).
|
(c)
|
Where a Participant elects to defer a specified percentage of Salary, Bonuses, and/or LTI Payment, the determination of whether the Annual Deferral or LTI Deferral is at least five thousand dollars ($5,000) shall be made by multiplying the applicable elected percentages of Salary, Bonuses, and/or LTI Payment to be deferred by the Participant’s anticipated Salary, Bonuses, and/or LTI Payment in the Plan Year immediately preceding the Plan Year for which the Deferral is being made. The Administrator may, in its sole discretion, permit Participants to elect to defer amounts in the form of a percentage based on anticipated future Salary, Bonuses, and/or LTI Payments.
|
3.3
|
Maximum Deferral Commitment
.
|
(a)
|
Maximum Annual Deferral
.
|
(i)
|
Effective January 1, 2005, the Annual Deferral for any Plan Year may not exceed 90% of Salary plus 90% of Bonuses; provided, that the Annual Deferral may not reduce the Participant’s income to an amount below the old age, survivor, and disability insurance wage base under Social Security.
|
(ii)
|
Effective January 1, 2007, the Annual Deferral for any Plan Year may not exceed 80% of Salary plus 80% of Bonuses; provided, that the Annual Deferral may not reduce the Participant’s income to an amount below the old age, survivor, and disability insurance wage base under Social Security.
|
(b)
|
Maximum LTI Deferral
. The maximum LTI Deferral for a Plan Year is 100% of the LTI Payment.
|
3.4
|
Vesting
. Subject to
Section 12.3
:
|
(a)
|
The Participant’s right to the value of his or her Annual Deferral Account, as adjusted for gains and losses, shall be 100% vested at all times.
|
(b)
|
The Participant’s right to the value of each LTI Deferral Account, as adjusted for gains and losses, shall be 100% vested as of the third June 30 following the time the LTI Deferral Account is established; provided, however, that the Participant shall be fully vested in all LTI Deferrals as of the time: (i) the Participant is vested in his or her benefit under the Parker-Hannifin Corporation Amended and Restated Supplemental Executive Retirement Benefits Program; (ii) the Participant retires prior to age 60 with permission of the Compensation Committee; (iii) the Participant retires due to Disability; (iv) the Participant dies; (v) there is a Corporate Change Vesting Event; or (vi) the Plan terminates.
|
(c)
|
Unless otherwise provided by the Compensation Committee in the notice of award, the Participant’s right to the value of each Discretionary Company Credit Account, if any, as adjusted for gains and losses, shall be 100% vested at all times.
|
5.1
|
Accounts
. Solely for recordkeeping purposes, the Company shall maintain for each Participant one Annual Deferral Account for all Annual Deferrals, a separate LTI Deferral Account with respect to each LTI Deferral made by the Participant, and a separate Discretionary Company Credit Account with respect to each Discretionary Company Credit, if any, made by the Company with respect to the Participant.
|
5.2
|
Timing of Credits—Pre-Termination
. Each Plan Year, the Company shall credit to the Annual Deferral Account a Participant’s Annual Deferrals as of the time the deferrals would otherwise have been paid to the Participant but for the Annual Deferral election, the Company shall credit to a separate LTI Deferral Account a Participant’s LTI Deferral as of the time the deferrals would otherwise have been paid to the Participant but for the LTI Deferral election, and the Company shall credit to a separate Discretionary Company Credit Account a Participant’s Discretionary Company Credit, if any, as of the time stated in the notice of award with respect to any such Discretionary Company Credit. Gains or losses shall be credited to the Participant’s Account as of the close of business on each Valuation Date, based on the Crediting Rate(s) in effect for the day under
Section 1.17
.
|
5.3
|
Terminations
. Following a Participant’s Termination of Employment, Retirement or death, gains or losses shall continue to be credited to the Participant’s Account through the final Valuation Date.
|
5.4
|
Statement of Accounts
. The Administrator shall provide periodically to each Participant a statement setting forth the balance of the Annual Deferral Account and each LTI Deferral Account maintained for such Participant.
|
6.1
|
Amount
. Upon Retirement, the Company shall pay to the Participant the value of his or her Account at the time and in the manner selected by the Participant pursuant to the rules set forth in this
Article 6
.
|
6.2
|
Form of Retirement Benefits
. The Retirement Benefit shall be paid monthly over a period of fifteen (15) years; provided, however, that the Participant may elect in accordance with the terms of
Section 6.4
to have payment made in one of the following options:
|
(a)
|
a single lump sum payment in cash;
|
(b)
|
monthly installments over 5, 10 or 15 years; or
|
(c)
|
an annual lump sum amount equal to a specified whole number percentage (1-8%) of the account balance as of the Valuation Date preceding each such annual payment, plus monthly installments of the remaining balance of the Account over 5, 10 or 15 years. Annual lump sum payments pursuant to this
Section 6.2(c)
, with respect to all Retirement Benefits under this Plan, including Grandfathered Amounts, shall be paid as follows: (i) the first lump sum payment shall be made on the first day of the second month after the Participant’s Retirement, and (ii) the remaining lump sum payments shall be made on January 1 of each succeeding year in the applicable 5, 10 or 15 year period.
|
6.3
|
Time of Payment
. Payment of a Participant’s Account shall be made or shall begin as of the first day of the second month after the Participant’s Retirement or on the first day of the month following the first, second, third, fourth or fifth anniversary of the Participant’s Retirement, as elected by the Participant in accordance with the terms of
Section 6.4
. Notwithstanding the foregoing, payment to any Specified Employee will commence on the first day of the seventh month following the Participant’s Retirement and shall include any payments that would have been made between the Participant’s Retirement and the actual date of commencement of payment if the Participant had not been a Specified Employee.
|
6.4
|
Elections
.
|
(a)
|
Initial Election
. A Participant shall elect the time and form of payment of his or her Account payable on Retirement on his or her initial Participation Agreement, in accordance with such rules as the Administrator shall reasonably apply.
|
(b)
|
One-Time Change by Participant
. To the extent permitted by Section 409A of the Code, a Participant may make a one-time election to delay payment or change the form of payment at any time up to 12 months before the first scheduled payment; provided, however, that (i) any such election shall not be effective for at least 12 months following the date made; and (ii) to the extent required by Section 409A of the Code, as a result of any such change, payment or commencement of payment shall be delayed for 5 years from the date the first payment was scheduled to have been paid (taking into account any delay in payment or commencement of payment under
Section 6.3
on account of a Participant’s status as a Specified Employee).
|
(c)
|
Transitional Rule
. Notwithstanding any other elections made hereunder and only to the extent permitted by the Company and transitional rules issued under Section 409A of the Code, through such date as specified by the Company pursuant to transitional guidance issued under Section 409A of the Code, a Participant may make one or more elections as to time and form of payment of his or her Account under this Plan, provided that: (i) any such election(s) made during 2006 shall be available only for amounts that are payable after the 2006 calendar year and cannot accelerate any payment into the 2006 calendar year, (ii) any such election(s) made during 2007 shall be available only for amounts that are payable after the 2007 calendar year and cannot accelerate any payment into the 2007 calendar year; and (iii) any such election(s) made during 2008 shall be available only for amounts that are payable after the 2008 calendar year and cannot accelerate any payment into the 2008 calendar year. Any such election(s) must be made by the date specified by the Company consistent with guidance pursuant to Section 409A of the Code.
|
6.5
|
Small Benefit Exception
.
|
(d)
|
Benefits Payable Prior to January 1, 2008
. Notwithstanding the foregoing, with respect to a Participant’s Retirement Benefit under the Plan that would otherwise be paid in installments (or as a combination of lump sums and installments) prior to January 1, 2008, if the balance of the Participant’s Account under the Plan as of the date payment would otherwise commence is less than or equal to ten thousand dollars ($10,000), the Company shall pay such benefit in a single lump sum; provided, however, that payment of a Retirement Benefit to any Specified Employee pursuant to this
Section 6.5(a)
will be made on the first day of the seventh month following the Participant’s Termination of Employment.
|
(e)
|
Benefits Payable After December 31, 2007
. Notwithstanding the foregoing, effective December 31, 2007 with respect to a Participant’s Retirement Benefit under the Plan that would otherwise be paid in installments (or as a combination
|
7.1
|
Amount and Time of Payment
. As of the first day of the second month after Termination of Employment, the Company shall pay to the Participant a termination benefit equal to the vested balance as of the Valuation Date of the Participant’s Account. Notwithstanding the foregoing, payment of a Termination Benefit to any Specified Employee pursuant to this
Article 7
will be made on the first day of the seventh month following the Participant’s Termination of Employment.
|
7.2
|
Form of Termination Benefits
. The Company shall pay the termination benefits in a single lump sum.
|
8.1
|
Amount
. If the Participant dies (whether before or after Retirement or other Termination of Employment) with any balance remaining in his or her Account, the Company shall pay to the Participant’s Beneficiary a Survivor Benefit equal to the vested balance of the Account on the date of death.
|
8.2
|
Form of Survivor Benefits
. The Company shall pay the vested balance of the Participant’s Account in a single lump sum payment in cash; provided, however, that the Participant may elect in accordance with the terms of
Section 6.4
to have payment made in one of the following options:
|
(d)
|
a single lump sum payment in cash; or
|
(e)
|
monthly installments over 5, 10 or 15 years.
|
8.3
|
Time of Payment
. Payment of Survivor Benefits shall be made or shall begin as of the first day of the second month following the date of death, and the provisions of
|
8.4
|
Survivor Benefits Paid From Grandfathered Amounts
. To the extent that the Company pays to a Participant’s Beneficiary a Survivor Benefit consisting of Grandfathered Amounts, the time and form of payment of such Grandfathered Amounts shall be governed by the Participant’s election as in effect on December 31, 2006 and the terms of the Plan as in effect on December 31, 2004; provided, however, that after December 31, 2006 a Participant may make a one-time election to have all Grandfathered Amounts paid in a lump sum as of the first of the second month after the Participant’s death (regardless of whether the Participant dies before or after the date that payment of Grandfathered Amounts would otherwise commence under the Plan). In accordance with the terms of the Plan as in effect on December 31, 2004, any election to change the form of payment of Survivor Benefits from Grandfathered Amounts must be filed at least thirteen (13) months prior to the date that payment of the Survivor Benefits would otherwise commence or be made, unless the Participant’s Beneficiary agrees to take a ten percent (10%) reduction in the value of the Grandfathered Amounts.
|
8.5
|
Small Benefit Payments
.
|
(a)
|
Benefits Payable Prior to January 1. 2008
. Notwithstanding the foregoing, with respect to a Survivor Benefit under the Plan that would otherwise be paid in installments prior to January 1, 2008, if the vested balance of the Participant’s Account under the Plan as of the date payment would otherwise commence is less than or equal to ten thousand dollars ($10,000), the Company shall pay such benefit in a single lump sum.
|
(b)
|
Benefits Payable After December 31, 2007
. Notwithstanding the foregoing, effective December 31, 2007 with respect to a Survivor Benefit under the Plan that would otherwise be paid in installments after December 31, 2007, if the aggregate vested balances of the Participant’s accounts under the Plan, the Savings Restoration Plan and any other nonqualified deferred compensation arrangement that is aggregated with any portion of the Plan or the Savings Restoration Plan under Section 1.409A-1(c) of the Regulations as of the date payment would otherwise commence is less than or equal to the applicable dollar amount in effect on such date under Section 402(g)(1)(B) of the Code, the Company shall pay the Survivor Benefit under the Plan in a single lump sum.
|
10.1
|
Distribution
. If a Change in Control occurs, the Participant (or after the Participant’s death the Participant’s Beneficiary) shall receive a lump sum payment of the balance of the Participant’s Account within thirty (30) days after the Change of Control. In the case of an individual who is a Participant in the Plan on September 1, 2015, if either: (a) such a distribution is made on a Change in Control; or (b) 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 (such a termination of employment an “Anticipatory Termination”) and the Participant receives a lump sum payment of the Participant’s Account in connection with such Anticipatory Termination, the Participant shall receive an additional adjustment payment within thirty (30) days after the Change in Control calculated in accordance with the formula set forth in Exhibit A hereto. The adjustment payment described in this
Section 10.1
shall not be made with respect to an individual who becomes a Participant in the Plan on or after September 2, 2015.
|
10.2
|
Section 280G
.
|
(a)
|
In addition to any other amounts payable under this Plan, in the event it shall be determined that any payment, distribution or acceleration of vesting of any benefit under this Plan with respect to an individual who is a Participant in the Plan on September 1, 2015 would be subject to the excise tax imposed by Section 4999 of the Code, or any interest or penalties are incurred by such Participant with respect to such excise tax, then the Participant shall be entitled to receive an additional “gross-up payment” calculated as set forth in the change in control severance agreement in effect between the Company and the Participant as of the date of the Change in Control; provided, however, that if the Participant does not have a change in control severance agreement, the payment under this Section shall be determined in accordance with the calculation set forth in the most recent change in control severance agreement entered into by the Company and any executive of the Company; provided, further, that there shall be no duplication of such additional payment under this Plan and any change in control severance agreement. Any “gross-up payment” pursuant to this
Section 10.2(a)
shall be made no later than December 31 of the calendar year next following the calendar year in which the Section 4999 excise tax is remitted. No “gross-up payment” shall be made pursuant to this
Section 10.2(a)
to any individual who becomes a Participant in the Plan on or after September 2, 2015.
|
(b)
|
(i) Notwithstanding any other provision of the Plan or any other agreement or plan to the contrary, if any of the payments or benefits provided or to be provided by the Company or its affiliates to an individual who becomes a Participant in the Plan on or after September 2, 2015, or for such Participant’s benefit pursuant to the terms of the Plan or otherwise (“Covered Payments”) constitute parachute payments within the meaning of Section 280G of the Code and would, but for this
Section 10.2(b)
, be subject to the excise tax imposed under Section 4999 of the Code or any similar tax imposed by state or local law or any interest or penalties with respect to such taxes (collectively, the “Excise Tax”), then prior to making the Covered Payments, a calculation shall be made comparing (A) the “Net Benefit” (as defined below) to the Participant of the Covered Payments after payment of the Excise Tax to (B) the Net Benefit to the Participant if the Covered Payments are limited to the extent necessary to avoid being subject to the Excise Tax. Only if the amount calculated under (A) above is less than the amount under (B) above will the Covered Payments be reduced to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax. “Net Benefit” shall mean the present value of the Covered Payments net of all federal, state, local, foreign income, employment and excise taxes.
|
(ii)
|
Any such reduction of Covered Payments under
Section 10.2(b)(i)
shall be made in accordance with Section 409A of the Code and the following:
|
(A)
|
the Covered Payments which do not constitute nonqualified deferred compensation subject to Section 409A of the Code shall be reduced first; and
|
(B)
|
all other Covered Payments shall then be reduced as follows: (1) cash payments shall be reduced before non-cash payments, (2) cancellation of accelerated vesting of equity awards (based on the reverse order of the date of grant) before reduction of welfare benefits, and (3) payments to be made on a later payment date shall be reduced before payments to be made on an earlier payment date.
|
(iii)
|
All determinations required to be made under this
Section 10.2(b)
shall be made by such professional consulting firm engaged by the Company from time to time as its independent consultant (the “Consulting Firm”). The Consulting Firm shall provide its calculations, together with detailed supporting documentation, both to the Company and the Participant (collectively, the “Determination”). In the event that the Consulting Firm is serving as a consultant for the individual, entity or group effecting the Change in Control, the Company shall prior to the Change in Control appoint a nationally recognized public accounting firm to make the determination required under this Agreement (which accounting firm shall
|
(iv)
|
If it is established pursuant to a final determination of a court or an Internal Revenue Service (the “IRS”) proceeding which has been finally and conclusively resolved, that payments have been made to, or provided for the benefit of, the Participant by the Company that are in the aggregate more than the amount provided under this
Section 10.2(b)
(hereinafter referred to as an “Overpayment”), then the Participant shall pay any such Overpayment to the Company together with interest at the applicable federal rate (as defined in Section 7372(f)(2)(A) of the Code) from the date of the Participant’s receipt of the Overpayment until the date of such repayment. 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 payments which will not have been made by the Company should have been made (an “Underpayment”), consistent with the calculations required to be made under this
Section 10.2(b)
. In the event that it is determined: (i) by the Consulting Firm, the Company (which shall include the position taken by the Company, or together with its consolidated group, on its federal income tax return) or the IRS; or (ii) pursuant to a determination by a court, that an Underpayment has occurred, the Company shall promptly pay an amount equal to such Underpayment to the Participant, and in no event later than sixty (60) days following the date on which the Underpayment is determined, together with interest on such amount at the applicable federal rate from the date such amount would have been paid to the Participant until the date of payment.
|
(v)
|
The provisions of this
Section 10.2(b)
shall not apply to any individual who is a Participant in the Plan on September 1, 2015.
|
12.1
|
Non-assignability
. The benefits provided under the Plan may not be alienated, assigned, transferred, pledged or hypothecated by or to any person or entity, at any time or in any manner whatsoever. These benefits shall be exempt from the claims of creditors of any Participant or other claimants and from all orders, decrees, levies, garnishment or executions against any Participant to the fullest extent allowed by law.
|
12.2
|
No Right to Company Assets
. The benefits paid under the Plan shall be paid from the general funds of the Company, and the Participants and any Beneficiaries shall be no more than unsecured general creditors of the Company with no special or prior right to any assets of the Company for payment of any obligations under this Plan.
|
12.3
|
Protective Provisions
. The Participant shall cooperate with the Company by furnishing any and all information requested by the Administrator, in order to facilitate the payment of benefits under this Plan, taking such physical examinations as the Administrator may deem necessary and taking such other actions as may be requested by the Administrator. If the Participant refuses to cooperate, the Company shall have no further obligation to the Participant under the Plan. If the Participant makes any material misstatement of information or nondisclosure of medical history, then no benefits shall be payable to the Participant or the Participant’s Beneficiary or estate under the Plan beyond the sum of the Participant’s Annual Deferrals, LTI Deferrals, and Discretionary Company Credits, if any.
|
12.4
|
Withholding
. The Participant or the Beneficiary shall make appropriate arrangements with the Company for satisfaction of any federal, state or local income tax withholding
|
15.1
|
Amendment of Plan
.
|
(a)
|
The Company may at any time amend the Plan in whole or in part, provided, however, that such amendment: (i) shall not decrease the balance of the Participant’s Account at the time of such amendment; and (ii) shall not retroactively decrease the applicable Crediting Rate of the Plan prior to the time of such amendment. The Company may amend the Crediting Rate or Fixed Crediting Rate of the Plan prospectively, in which case, the Company shall notify the Participants of such amendment in writing within thirty (30) days after such amendment.
|
(b)
|
Notwithstanding the foregoing, no amendment shall permit an acceleration of time of payment of a Participant’s benefit under the Plan, other than: (i) as necessary to comply with a certificate of divestiture, as defined in Section 1043(b)(2) of the Code; (ii) in accordance with Sections 6.5 and 8.5 of the Plan with respect to small cashouts; (iii) as necessary to pay Federal Insurance Contribution (“FICA”) taxes and any resulting federal, state, local or foreign income taxes attributable to amounts deferred under the Plan, subject to the limitations of Section 1.409A-3(j)(4)(vi) of the Regulations; (iv) in the event the arrangement fails to meet the requirements of Section 409A of the Code with respect to one or more Participants, and then only in such amount as is included in income of such Participant(s) as a result of such failure; (v) due to a termination of the Plan pursuant to Section 15.2 of the Plan that meets the requirements of Section 1.409A-3(j)(4)(ix) of the Regulations; or (f) as otherwise may be permitted under Section 409A of the Code.
|
15.2
|
Termination of Plan
. The Company may terminate the Plan only as permitted by Section 1.409A-3(j)(4)(ix) of the Regulations (Plan Terminations and Liquidations), or as otherwise may be permitted by future Regulations or other guidance under Section 409A of the Code. Notwithstanding the foregoing, the Company may at any time determine to cease all future deferrals and contributions to the Plan. In such event, Participants’ Accounts shall continue to be held and administered in accordance with the terms of this Plan; provided, however that the Company shall determine, in its sole discretion, whether to continue to credit Participants’ Accounts with earnings at the otherwise applicable Crediting Rates or instead to credit Participants’ Accounts, as of January 1 of the year that all future deferrals and contributions to the Plan are ceased, with a reasonable rate of interest, not less than the prime rate as published in the Wall Street Journal, in either case continuing until distribution of Participants’ Accounts in accordance with the terms of the Plan.
|
15.3
|
Company Action
. Except as provided in
Section 15.4
, the Company’s power to amend or terminate the Plan shall be exercisable by the Company’s Board of Directors or by the committee or individual authorized by the Company’s Board of Directors to exercise such powers.
|
15.4
|
Distribution on Income Inclusion Under Section 409A
. In the event the Administrator determines that amounts deferred under the Plan fail to meet the requirements of Section 409A of the Code and must be recognized as income for federal income tax purposes, distribution of the amount required to be included in income shall be made to affected Participants to the extent permitted by Section 409A of the Code.
|
16.1
|
Successors of the Company
. The rights and obligations of the Company under the Plan shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company.
|
16.2
|
ERISA Plan
. The Plan is intended to be an unfunded plan maintained primarily to provide deferred compensation benefits for “a select group of management or highly compensated employees” within the meaning of Sections 201, 301 and 401 of ERISA and therefore to be exempt from Parts 2, 3 and 4 of Title I of ERISA.
|
16.3
|
Trust
. The Company shall be responsible for the payment of all benefits under the Plan. The Company may establish one or more grantor trusts for the purpose of providing for payment of benefits under the Plan. Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of the Company’s creditors. Benefits paid to the Participant from any such trust shall be considered paid by the Company for purposes of meeting the obligations of the Company under the Plan.
|
16.4
|
Employment Not Guaranteed
. Nothing contained in the Plan nor any action taken under this Plan shall be construed as a contract of employment or as giving any Participant any right to continued employment with the Company.
|
16.5
|
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.
|
16.6
|
Captions
. The captions of the articles and sections of the Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.
|
16.7
|
Validity
. If any provision of the Plan is held invalid, void or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provisions of the Plan.
|
16.8
|
Waiver of Breach
. The waiver by the Company of any breach of any provision of the Plan by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant.
|
16.9
|
Applicable Law
. The Plan shall be governed and construed in accordance with the laws of the State of Ohio except where the laws of the State of Ohio are preempted by ERISA.
|
16.10
|
Notice
. Any notice or filing required or permitted to be given to the Company or the Administrator under the Plan shall be sufficient if in writing and hand-delivered, or sent by first class mail, facsimile or electronic mail to the principal office of the Company, directed to the attention of the Administrator. Such notice shall be deemed given as of the date of delivery, or, if delivery is made by mail, as of the date shown on the postmark.
|
17.1
|
Claims Procedure
. The Administrator shall notify a Participant in writing, within ninety (90) days after his or her written application for benefits, of his or her eligibility or noneligibility for benefits under the Plan. If the Administrator determines that a Participant is not eligible for benefits or full benefits, the notice shall set forth: (a) the specific reasons for such denial; (b) a specific reference to the provisions of the Plan on which the denial is based; (c) a description of any additional information or material necessary for the claimant to perfect his or her claim, and a description of why it is needed; and (d) an explanation of the Plan’s claims review procedure and other appropriate information as to the steps to be taken if the Participant wishes to have the claim reviewed. If the Administrator determines that there are special circumstances requiring additional time to make a decision, the Administrator shall notify the Participant of the special circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional ninety-day period.
|
17.2
|
Review Procedure
. If a Participant is determined by the Administrator not to be eligible for benefits, or if the Participant believes that he or she is entitled to greater or different benefits, the Participant shall have the opportunity to have such claim reviewed by the Administrator by filing a petition for review with the Administrator within sixty (60) days after receipt of the notice issued by the Administrator. Said petition shall state the specific reasons which the Participant believes entitle him or her to benefits or to greater or different benefits. Within sixty (60) days after receipt by the Administrator of the petition, the Administrator shall afford the Participant (and counsel, if any) an opportunity to present his or her position to the Administrator in writing, and the Participant (or counsel) shall have the right to review the pertinent documents. The Administrator shall notify the Participant of its decision in writing within the sixty-day period, stating specifically the basis of its decision, written in a manner calculated to be understood by the Participant and the specific provisions of the Plan on which the decision is based. If the sixty-day period is not sufficient, the decision may be deferred for up to another sixty-day period at the election of the Administrator, but notice of this deferral shall be given to the Participant. In the event of the death of the Participant, the same procedures shall apply to the Participant’s beneficiaries.
|
1.
|
The Participant’s Account balance under the Plan as of the date of the Change in Control (or as of the Anticipatory Termination date, if larger) (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 Change in Control (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 Participant’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 Participant’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 Participant.
|
(b)
|
The after-tax Made Whole Amount will be deemed to be invested, by the Participant in a tax-deferred annuity that is structured to make payments beginning on the Commencement Date in the same form as elected by the Participant 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”.
|
|
Fiscal Year Ended June 30,
|
||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
EARNINGS
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from continuing operations before income taxes and noncontrolling interests
|
$
|
1,114,728
|
|
|
$
|
1,432,240
|
|
|
$
|
1,556,720
|
|
|
$
|
1,311,001
|
|
|
$
|
1,576,698
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest on indebtedness, exclusive of interest capitalized
|
133,004
|
|
|
115,077
|
|
|
79,845
|
|
|
88,668
|
|
|
89,888
|
|
|||||
Amortization of deferred loan costs
|
3,513
|
|
|
3,329
|
|
|
2,721
|
|
|
2,884
|
|
|
2,902
|
|
|||||
Portion of rents representative of interest factor
|
39,668
|
|
|
41,886
|
|
|
43,983
|
|
|
44,493
|
|
|
41,515
|
|
|||||
(Income) loss of equity investees
|
(25,648
|
)
|
|
(23,204
|
)
|
|
(11,141
|
)
|
|
(247
|
)
|
|
1,237
|
|
|||||
Distributed income of equity investees
|
36,616
|
|
|
31,723
|
|
|
1,661
|
|
|
—
|
|
|
—
|
|
|||||
Amortization of previously capitalized interest
|
152
|
|
|
179
|
|
|
190
|
|
|
193
|
|
|
196
|
|
|||||
Income as adjusted
|
$
|
1,302,033
|
|
|
$
|
1,601,230
|
|
|
$
|
1,673,979
|
|
|
$
|
1,446,992
|
|
|
$
|
1,712,436
|
|
FIXED CHARGES
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest on indebtedness, exclusive of interest capitalized
|
$
|
133,004
|
|
|
$
|
115,077
|
|
|
$
|
79,845
|
|
|
$
|
88,668
|
|
|
$
|
89,888
|
|
Amortization of deferred loan costs
|
3,513
|
|
|
3,329
|
|
|
2,721
|
|
|
2,884
|
|
|
2,902
|
|
|||||
Portion of rents representative of interest factor
|
39,668
|
|
|
41,886
|
|
|
43,983
|
|
|
44,493
|
|
|
41,515
|
|
|||||
Fixed charges
|
$
|
176,185
|
|
|
$
|
160,292
|
|
|
$
|
126,549
|
|
|
$
|
136,045
|
|
|
$
|
134,305
|
|
RATIO OF EARNINGS TO FIXED CHARGES
|
7.39x
|
|
9.99x
|
|
13.23x
|
|
10.64x
|
|
12.75x
|
Name of Subsidiary
|
State/Country of Incorporation
|
Warner Lewis GmbH
|
Germany
|
Parker Hannifin (Gibraltar) Holding Limited
|
Gibraltar
|
Parker Hannifin (Gibraltar) Properties Limited
|
Gibraltar
|
Parker Hannifin Hong Kong, Ltd.
|
Hong Kong
|
Parker International Capital Management Hungary Limited Liability Company
|
Hungary
|
Parker Hannifin India Private Ltd.
|
India
|
Parker Hannifin Manufacturing (Ireland) Limited
|
Ireland
|
Parker Hannifin Italy srl
|
Italy
|
Parker Hannifin Manufacturing Holding Italy srl
|
Italy
|
Parker Hannifin Manufacturing srl
|
Italy
|
Parker Hannifin Japan Holdings GK
|
Japan
|
Parker Hannifin Japan Ltd.
|
Japan
|
Taiyo, Ltd.
|
Japan
|
Parker Hannifin Connectors Ltd.
|
Korea
|
Parker Korea Ltd.
|
Korea
|
Parker Hannifin (Luxembourg) S.a.r.l.
|
Luxembourg
|
Parker Hannifin Bermuda Luxembourg S.C.S.
|
Luxembourg
|
Parker Hannifin Europe S.a.r.l.
|
Luxembourg
|
Parker Hannifin Global Capital Management S.a.r.l
|
Luxembourg
|
Parker Hannifin Holding EMEA S.a.r.l.
|
Luxembourg
|
Parker Hannifin Lux FinCo S.a.r.l.
|
Luxembourg
|
Parker Hannifin Luxembourg Acquisitions S.a.r.l.
|
Luxembourg
|
Parker Hannifin Luxembourg Finance S.à r.l.
|
Luxembourg
|
Parker Hannifin Luxembourg Investments 1 S.a.r.l.
|
Luxembourg
|
Parker Hannifin Partnership S.C.S.
|
Luxembourg
|
Parker Hannifin de Mexico, S.A. de C.V.
|
Mexico
|
Parker Industrial, S. de R.L. de C.V.
|
Mexico
|
Parker Hannifin B.V.
|
Netherlands
|
Parker Hannifin Manufacturing Netherlands (Process Filtration) B.V.
|
Netherlands
|
Parker Hannifin Netherlands Holdings 2 B.V.
|
Netherlands
|
Parker Hannifin Netherlands Holdings B.V.
|
Netherlands
|
Parker Hannifin VAS Netherlands B.V.
|
Netherlands
|
Twin Filter B.V.
|
Netherlands
|
Parker Hannifin (Norway) Holdings AS
|
Norway
|
Parker Hannifin Singapore Private Limited
|
Singapore
|
Rayco Technologies Pte. Ltd.
|
Singapore
|
Parker Hannifin Cartera Industrial S.L.
|
Spain
|
Parker Hannifin España S.L.
|
Spain
|
Parker Hannifin Industries and Assets Holding S.L.
|
Spain
|
Parker Hannifin Aktiebolag
|
Sweden
|
Parker Hannifin Manufacturing Sweden AB
|
Sweden
|
Parker Hannifin Cartera Industrial S.L., Bilboa (Espagne), succursale de Carouge
|
Switzerland
|
Parker Hannifin Manufacturing Switzerland SA
|
Switzerland
|
Parker Hannifin Taiwan Co., Ltd.
|
Taiwan
|
Alenco (Holdings) Limited
|
United Kingdom
|
Name of Subsidiary
|
State/Country of Incorporation
|
Commercial Intertech Holdings Limited
|
United Kingdom
|
Domnick Hunter Fabrication Limited
|
United Kingdom
|
Domnick Hunter Group Limited
|
United Kingdom
|
Domnick Hunter Limited
|
United Kingdom
|
Kittiwake Developments Limited
|
United Kingdom
|
Olaer Group Limited
|
United Kingdom
|
Parker Hannifin (GB) Limited
|
United Kingdom
|
Parker Hannifin (Holdings) Limited
|
United Kingdom
|
Parker Hannifin 2007 LLP
|
United Kingdom
|
Parker Hannifin Industries Limited
|
United Kingdom
|
Parker Hannifin Limited
|
United Kingdom
|
Parker Hannifin Manufacturing (UK) Limited
|
United Kingdom
|
Parker Hannifin Manufacturing Limited
|
United Kingdom
|
President Engineering Group Limited
|
United Kingdom
|
SSD Drives Limited
|
United Kingdom
|
|
|
Date
|
|
|
|
Date
|
/s/ Thomas L. Williams
|
|
8/17/2016
|
|
/s/ Klaus-Peter Müller
|
|
8/17/2016
|
Thomas L. Williams, Chairman of the
|
|
|
|
Klaus-Peter Müller, Director
|
|
|
Board and Chief Executive Officer (Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Jon P. Marten
|
|
8/17/2016
|
|
/s/ Candy M. Obourn
|
|
8/17/2016
|
Jon P. Marten, Executive Vice
|
|
|
|
Candy M. Obourn, Director
|
|
|
President – Finance & Administration
|
|
|
|
|
|
|
and Chief Financial Officer
|
|
|
|
/s/ Joseph Scaminace
|
|
8/17/2016
|
(Principal Financial Officer)
|
|
|
|
Joseph Scaminace, Director
|
|
|
|
|
|
|
|
|
|
/s/ Catherine A. Suever
|
|
8/17/2016
|
|
/s/ Wolfgang R. Schmitt
|
|
8/17/2016
|
Catherine A. Suever, Vice President and
|
|
|
|
Wolfgang R. Schmitt, Director
|
|
|
Controller (Principal Accounting Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Lee C. Banks
|
|
8/17/2016
|
|
/s/ Åke Svensson
|
|
8/17/2016
|
Lee C. Banks, Director
|
|
|
|
Åke Svensson, Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Robert G. Bohn
|
|
8/17/2016
|
|
/s/ James R. Verrier
|
|
8/17/2016
|
Robert G. Bohn, Director
|
|
|
|
James R. Verrier, Director
|
|
|
|
|
|
|
|
|
|
/s/ Linda S. Harty
|
|
8/17/2016
|
|
/s/ James L. Wainscott
|
|
8/17/2016
|
Linda S. Harty, Director
|
|
|
|
James L. Wainscott, Director
|
|
|
|
|
|
|
|
|
|
/s/ Robert J. Kohlhepp
|
|
8/17/2016
|
|
/s/ D. E. Washkewicz
|
|
8/17/2016
|
Robert J. Kohlhepp, Director
|
|
|
|
Donald E. Washkewicz, Director
|
|
|
|
|
|
|
|
|
|
/s/ Kevin A. Lobo
|
|
8/17/2016
|
|
|
|
|
Kevin A. Lobo, Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
I have reviewed this annual report on Form 10-K of Parker-Hannifin Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4.
|
The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5.
|
The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
|
/s/ Thomas L. Williams
|
|
Thomas L. Williams
|
|
Chief Executive Officer
|
1.
|
I have reviewed this annual report on Form 10-K of Parker-Hannifin Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4.
|
The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5.
|
The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
|
/s/ Jon P. Marten
|
|
Jon P. Marten
|
|
Executive Vice President – Finance &
|
|
Administration and Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
|
|
/s/ Thomas L. Williams
|
|
Name: Thomas L. Williams
|
|
Title: Chief Executive Officer
|
|
|
|
/s/ Jon P. Marten
|
|
Name: Jon P. Marten
|
|
Title: Executive Vice President-Finance &
|
|
Administration and Chief Financial Officer
|