Exhibit 10(k)

 

Parker-Hannifin Corporation

 

Supplemental Executive

Retirement Benefits Program

 

WHEREAS, by instrument effective as of January 1, 1980, a supplemental executive
retirement benefits program was established for the benefit of certain employees
of Parker-Hannifin Corporation and their beneficiaries; and

 

WHEREAS, said Program was amended and restated from time to time; and

 

WHEREAS, it is desired to restate the terms, provisions, and conditions of said
Program;

 

NOW, THEREFORE, effective as of July 1, 2004, said Program is hereby amended and
restated in its entirety to provide as hereinafter set forth.

 

1. Definitions

 

Except as otherwise required by the context, the terms used in this Program
shall have the meaning hereinafter set forth.

 

(a) Actuarial Equivalent or Actuarially Equivalent: An amount that is the
actuarial equivalent of a value using the actuarial assumptions specified for
the relevant purpose under the Consolidated Plan.

 

(b) Board: The Board of Directors of the Company

 

(c) Change in Control: Any one or more of the following occurrences:

 

(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) as pertains to a Participant,
any acquisition by the Participant or any group of persons (within the meaning
of Sections 13(d)(3) and 14(d)(2) of the Exchange Act) including the
Participant(or any entity in which the Participant or a group of persons
including the Participant, directly or indirectly, holds a majority of the
voting power of such entity’s outstanding voting interests); or (F) the
acquisition of Company Voting Securities from the Company, if a majority of the
Board approves a resolution providing expressly that the acquisition pursuant to
this clause (F) does not constitute a Change in Control under this paragraph
(i);

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(ii) individuals who, at the beginning of any period of twenty-four (24)
consecutive months, constitute the Board (the “Incumbent Board”) cease for any
reason to constitute at least a majority thereof; provided, that (A) any person
becoming a director subsequent to the beginning of such twenty-four (24) month
period, whose election, or nomination for election, by the 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 the Parent Corporation) is or becomes the beneficial owner,
directly or indirectly, of 20% or more of the total voting power of the
outstanding voting securities eligible to elect directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving Corporation),
and (3) at least a majority of the members of the board of directors of the
Parent Corporation (or, if there is no Parent Corporation, the Surviving
Corporation), following the Business Combination, were members of the Incumbent
Board at the time of the Board’s approval of the execution of the initial
agreement providing for such Business Combination (a “Non-Control Transaction”)
or (B) the Business Combination is effected by means of the acquisition of
Company Voting Securities from the Company, and a majority of the Board approves
a resolution providing expressly that such Business Combination does not
constitute a Change in Control under this paragraph (iii); or

 

(iv) the stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or the sale or other disposition of all or
substantially all of the assets of the Company and its Subsidiaries.

 

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Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any person acquires beneficial ownership of more than 20% of the
Company Voting Securities as a result of the acquisition of Company Voting
Securities by the Company which, by reducing the number of Company Voting
Securities outstanding, increases the percentage of shares beneficially owned by
such person; provided, that if a Change in Control would occur as a result of
such an acquisition by the Company (if not for the operation of this sentence),
and after the Company’s acquisition such person becomes the beneficial owner of
additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such person, a
Change in Control shall then occur.

 

Notwithstanding anything in this Program to the contrary, if the Participant’s
employment is terminated prior to a Change in Control, and the Participant
reasonably demonstrates that such termination was at the request of a third
party who has indicated an intention or taken steps reasonably calculated to
effect a Change in Control (a “Third Party”), then for all purposes of this
Program, the date immediately prior to the date of such termination of
employment shall be deemed to be the date of a Change in Control for such
Participant.

 

(d) Change in Control Lump Sum Payment: The lump sum payment made upon a Change
in Control as calculated under Section 4.03(a).

 

(e) Change in Control Severance Agreement: The agreement between an Eligible
Executive and the Company that provides for certain benefits if the Eligible
Executive’s employment terminates following a Change in Control; provided, that
in the case of a former Participant who is receiving benefits under the Program,
Change in Control Severance Agreement shall mean the change in control severance
agreement that was in effect between the Participant and the Company at the time
of his retirement.

 

(f) Code: The Internal Revenue Code of 1986, as amended, or any successor
statute.

 

(g) Committee: The Compensation and Management Development Committee of the
Board.

 

(h) Company: Parker-Hannifin Corporation, an Ohio corporation, its corporate
successors, and the surviving corporation resulting from any merger of
Parker-Hannifin Corporation with any other corporation or corporations.

 

(i) Consolidated Plan: The Parker-Hannifin Consolidated Pension Plan.

 

(j) Contingent Annuitant: The person designated by a Participant as a contingent
annuitant as provided in the Consolidated Plan.

 

(k) Controlled Group: The Company, its Subsidiaries or any entity that owns,
directly or indirectly, 50% or more of the total combined voting power of the
Company’s then outstanding securities eligible to vote for the election of the
Board of Directors of the Company.

 

(l) Disability: Disability that entitles a Participant to benefits under the
Company’s long-term disability program.

 

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(m) Highest Average Three-Year Compensation: One-third of the aggregate amount
of compensation paid to a Participant from the Controlled Group during the three
calendar years of the Participant’s employment which were the three highest
years of annual compensation, including base salary, bonuses payable under the
Company’s Return on Net Assets Plan (RONA) and Target Incentive Program, any
amounts which would otherwise be paid as compensation during a calendar year but
which are deferred by a Participant pursuant to any qualified or nonqualified
deferred compensation program sponsored by the Controlled Group, and any amounts
that would otherwise be paid as compensation during a calendar year but which
are deferred under Section 125 of the Code, but excluding: (i) any deferred
compensation received during any such year but credited under the Program to the
Participant for a prior year; (ii) any income realized due to the exercise of
stock options or stock appreciation rights; (iii) any payments, in cash,
deferred or otherwise, payable to the Participant under the Company’s Long-Term
Incentive Plan, under any extraordinary bonus arrangements, under any severance
agreement (other than as may be required under Section 4.03(a)), or as an
executive perquisite; and (iv) such items as fringe benefits includible in
income as compensation for federal tax purposes, moving and educational
reimbursement expenses, overseas allowances received by the Participant from the
Controlled Group, and any other irregular payments.

 

(n) Life Expectancy: The expected remaining lifetime (to the nearest integer)
based on the Mortality Table and the age at the nearest birthday of the
Participant or Recipient at the date the Lump Sum Payment or Change in Control
Lump Sum Payment is made (unless otherwise specified herein). If a joint and
contingent survivor annuity has been elected, then Life Expectancy shall reflect
the joint Life Expectancy of the Participant or Recipient and Contingent
Annuitant.

 

(o) Lump Sum Payment: The Lump Sum Payment provided in Section 4.02 of the
Program with the amount determined as set forth in Section 4.03.

 

(p) Mortality Table: Eighty percent (80%) of the 1983 Group Annuity Mortality
factor (male only).

 

(q) Normal Retirement Date: The definition set forth in the Consolidated Plan.

 

(r) Participant: An employee of the Company designated to participate in the
Program pursuant to Article 2 of the Program, while so employed; provided,
however, that any employee of the Company who, as of the date of a Change in
Control, has entered into a Change in Control Severance Agreement with the
Company shall automatically be a Participant in the Plan.

 

(s) Profit Sharing Account Balance: The definition set forth in the Consolidated
Plan.

 

(t) Program: The Supplemental Executive Retirement Benefits Program set forth
herein.

 

(u) Qualified Plan Death Benefit: The death benefit payable to the Spouse under
the Consolidated Plan (and/or any death benefit payable to a Spouse under any
other defined benefit

 

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arrangement described in Sections 3.03(c), (d), or (g)), multiplied by a factor
equal to [1 plus (0.025 multiplied by each year of Service less than 35 but
equal to or greater than 15)]. Thus, the factor will range from 1.5 at 15 years
of Service to 1 at 35 or more years of Service, as illustrated by the following
examples:

 

Years of Service

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   Factor

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35 or more

   1.000

30

   1.125

25

   1.250

20

   1.375

15

   1.500

 

(v) Recipient: A retiree, Contingent Annuitant, term certain beneficiary, or
Surviving Spouse, who is currently receiving benefits or is entitled to receive
benefits under the Program.

 

(w) RIA Balance: The total contributions to the Participant’s Retirement Income
Account under the Savings Plan (or any successor thereto) and the Participant’s
Nonqualified Retirement Income Account under the Parker-Hannifin Corporation
Savings Restoration Plan (or any successor thereto), plus hypothetical
earnings/losses calculated as if the accounts had been invested from the time of
the first contribution 60% in the securities represented in the Standard &
Poor’s 500 Index (in the proportions represented therein) and 40% in the
securities represented in the Lehman Brothers Intermediate Government/Corporate
Bond Fund Index (in the proportions represented therein).

 

(x) Savings Plan: The Parker Retirement Savings Plan.

 

(y) Service: Employment as an employee by any member of the Controlled Group, as
well as employment by a corporation, trade or business, that is now part of the
Controlled Group at a time prior to its becoming part of the Controlled Group,
but in such case only if and to the extent that the Committee shall so direct at
any time prior to retirement. For purposes of determining a Participant’s
eligibility to receive a benefit hereunder, Service shall include any additional
years credited to a Participant under Section 4.03(a)(i)).

 

(z) Specified Rate: The average of the daily closing On-The-Run Long Bond rates
as displayed by the Bloomberg Professional Financial System at screen “GT 30
GVT” (or any successor screen), for the second full calendar month preceding the
month in which a payment is to be made; provided that if the U.S. Treasury
should resume issuance of 30-Year Treasury Bonds, the Specified Rate shall be
the monthly average annual yield of 30-Year United States Treasury Bonds for
constant maturities as published by the Federal Reserve Bank and in effect on
the first day of the month prior to the month in which a payment is to be made.
Notwithstanding the foregoing, for purposes of calculating a Change in Control
Lump Sum Payment, the Specified Rate shall be the interest rate for immediate
annuities of the Pension Benefit Guaranty Corporation (PBGC) in effect on the
date of the Change in Control as set forth in Appendix B to Part 2619 of 29 Code
of Federal Regulations, or any other successor or similar rate.

 

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(aa) Subsidiary: 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.

 

(bb) Surviving Spouse: 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.

 

2. Participation

 

2.01 Participants. The Participants in the Program shall be: (i) such officers
and other key executives of the Company as shall be designated as Participants
from time to time by the Committee; and (ii) upon a Change in Control, those
individuals who have entered into a Change in Control Severance Agreement with
the Company as of the date of such Change in Control.

 

2.02 Designation of Participants. An individual may be designated a Participant
by action of the Committee or in a written employment agreement approved by the
Committee. Participation of each individual designated as a Participant shall be
subject to the terms, conditions, and limitations set forth in the Program and
to such other terms, conditions and limitations as the Committee may, in its
discretion, impose upon the participation of any such individual at the time the
individual is designated a Participant in the Program.

 

2.03 Continuation of Participation. Subject only to the provisions of Section
2.04 and Article 6 of the Program, an individual designated as a Participant
shall continue to be a Participant for the purpose of eligibility to receive the
supplemental retirement benefits provided by the Program and his participation
in the Program shall not be terminated; provided, however, that a Participant
who terminates employment at a time when he is not eligible for a benefit under
Article 3 shall cease to be a Participant in the Program.

 

2.04 Effect of Voluntary Termination of Employment. To be eligible for
supplemental retirement benefits under the Program a Participant shall not
voluntarily terminate employment with the Company without the consent of the
Committee for a period, not exceeding 60 calendar months, set by the Committee
at the time he is designated a Participant. If he shall so voluntarily terminate
his employment within such period, his participation in the Program shall
terminate, he shall cease to be a Participant and (subject to Section 3.02) he
shall forfeit all benefits under the Program. Notwithstanding the foregoing, for
purposes of this Section 2.04, in no event shall an exercise by a Participant of
his right to terminate his employment for “Good Reason” as defined under any
Change in Control Severance Agreement between the Participant and the Company be
deemed to be a voluntary termination of employment with the Company.

 

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3. Supplemental Retirement Benefits

 

3.01 Eligibility at or After Normal Retirement Date. Any provision of Section
2.04 to the contrary notwithstanding, any Participant with at least 120 calendar
months of Service who terminates his employment with the Controlled Group on or
after his Normal Retirement Date shall be eligible for a monthly supplemental
retirement benefit computed as set forth in Section 3.03.

 

3.02 Eligibility Prior to Normal Retirement Date. Any Participant with at least
120 calendar months of Service: (i) who terminates his employment with the
Controlled Group with the consent of the Committee after attainment of age 55;
or (ii) who is employed at the time of a Change in Control of the Company; or
(iii) whose employment with the Controlled Group is terminated by the Company
for reasons other than for cause (as determined solely by the Committee) after
attainment of age 55 but prior to the expiration of the requisite period of
employment established by the Committee with respect to him pursuant to Section
2.04; or (iv) who terminates his employment with the Controlled Group due to
Disability prior to his Normal Retirement Date; or (v) who terminates his
employment with the Controlled Group after attainment of age 60 (and after
completion of the requisite period of employment established by the Committee
with respect to him pursuant to Section 2.04) but prior to his Normal Retirement
Date; shall be eligible for a monthly supplemental retirement benefit as set
forth in Section 3.04.

 

3.03 Amount of Normal Retirement Supplemental Benefit. The monthly supplemental
retirement benefit payable to an eligible Participant at Normal Retirement Date
shall be an amount equal to 1/12th of 55% of his Highest Average Three-Year
Compensation, reduced by all of the following that are applicable:

 

(a) in the case of a Participant who does not have at least 15 years of Service
at the time of his retirement, .3055 percent for each calendar month his Service
is less than 15 years;

 

(b) the monthly single life Actuarial Equivalent of any benefit to which the
Participant is entitled under the Consolidated Plan, including the single life
monthly equivalent attributable to the Participant’s Profit-Sharing Account
Balance, determined as if the Profit-Sharing Account Balance had remained in the
Consolidated Plan until retirement, whether or not such Profit-Sharing Account
Balance has been transferred to the Savings Plan;

 

(c) the monthly single life Actuarial Equivalent of any benefit to which the
Participant is entitled under any other tax-qualified defined benefit plan of
the Company and which is attributable to contributions of the Company, unless
benefit service for employment on which such benefit is based is credited to the
Participant under the Consolidated Plan;

 

(d) the monthly single life Actuarial Equivalent of any benefit to which the
Participant is entitled under any non-qualified defined benefit program of the
Company;

 

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(e) the monthly single life Actuarial Equivalent of any benefit attributable to
the Participant’s RIA Balance;

 

(f) 50 percent of the monthly primary social security benefit to which the
Participant is entitled or would be entitled as of the earliest date following
the Participant’s termination of employment for which social security benefits
would be payable (whether or not social security benefits are actually paid to
the Participant at such time), with such reduction to begin at the earliest date
after retirement for which social security benefits would be payable to the
Participant; and

 

(g) the monthly single life Actuarial Equivalent of any benefit which the
Participant is entitled to receive from any previous employer, provided that a
contract between the Participant and the Company grants the Participant service
for service with the previous employer and the contract states the amount to be
offset.

 

3.04 Amount of Early Retirement Supplemental Benefit. The monthly supplemental
retirement benefit payable to a Participant who is retiring prior to Normal
Retirement Date shall be an amount equal to 1/12th of 55 percent of the Highest
Average Three-Year Compensation, reduced by all of the following that are
applicable:

 

(a) in the case of a Participant who does not have at least 15 years of Service
at the time of his retirement, .3055 percent for each month that his Service is
less than 15 years;

 

(b) after applying Section 3.04(a) if applicable, .1515 percent for each of the
first 60 months by which commencement of the benefit precedes Normal Retirement
Date, and by .3030 percent for each additional month by which commencement of
the benefit precedes Normal Retirement Age; provided, however, that if the
Participant has at least 30 years of Service, and entitlement to payment is a
result of a Change in Control, the .1515 shall be reduced to .07575, and the
.3030 shall be reduced to .1515; and

 

(c) any amounts described in Sections 3.03(b)-(g).

 

3.05 Gross-Up Payment. Anything in this Program notwithstanding, in the event it
shall be determined that any payment, distribution or acceleration of vesting of
any benefit hereunder would be subject to the excise tax imposed by Section 4999
of the Code, or any interest or penalties are incurred by the Participant with
respect to such excise tax, then the Participant shall be entitled to receive an
additional payment calculated as set forth in the Change in Control Severance
Agreement with respect to such benefit hereunder; provided, however, that there
shall be no duplication of such additional payment under this Program and the
Change in Control Severance Agreement.

 

4. Payment of Benefits

 

4.01 Commencement of Benefits. Subject to Sections 4.02 (b) and (c),
supplemental retirement benefits shall be payable monthly to an eligible
Participant commencing as of the first of the month following retirement and
terminating with the month in which the death of such Participant occurs.

 

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4.02 Payments Under Certain Situations.

 

(a) Optional Methods of Payment. Subject to Sections 4.02 (b) and (c), an
optional method of payment selected by the Participant for payment of his
retirement benefit under the Consolidated Plan shall automatically be applicable
to the payment of the supplemental retirement benefits provided by the Program.
The benefits provided pursuant to any such optional method of payment shall be
the Actuarial Equivalent of the monthly amount of benefit to which the
Participant otherwise would be entitled under the Program.

 

(b) Payment Upon a Change in Control. Within 15 business days of a Change in
Control, in lieu of any other payments due with respect to benefits earned under
the Program to the date of the Change in Control, each Participant and each
Recipient shall receive a Change in Control Lump Sum Payment, as calculated
under Section 4.03(a).

 

(c) Election to Receive a Lump Sum Payment. A Participant who is eligible to
receive benefits under the Program pursuant to Section 3.01 or 3.02, or a
Recipient, may file a written request with the Committee, subject to the terms
and conditions hereinafter set forth, to receive, in lieu of future payments of
any and all then unpaid accrued and vested benefits under the Program, a Lump
Sum Payment determined in accordance with Section 4.03(b). If the request for a
Lump Sum Payment is filed at least 13 months prior to the Participant’s
termination of employment and is approved by the Committee, then 100% of such
Lump Sum Payment shall be paid on the date on which the first monthly benefit
payment under the Program would otherwise be made. In any case in which the
request for a Lump Sum Payment is not filed at least 13 months prior to the
Participant’s termination of employment or is denied by the Committee, then the
Participant or Recipient shall receive 90% of the Lump Sum Payment, and the
remaining 10% shall be forfeited to the Company.

 

4.03 Determination of the Lump Sum Payment.

 

(a) The Change in Control Lump Sum Payment referred to in Section 4.02(b) shall
be equal to the present value of the monthly payments to which a Participant or
Recipient would be entitled under the Program based on the following
assumptions: (i) the Participant (but not a Recipient) is treated as having been
employed, for purposes of determining age and service hereunder, for the lesser
of (A) the duration of the “Termination Period”, if any, under Participant’s
Change in Control Severance Agreement or (B) the period of time remaining until
Normal Retirement Date; (ii) Highest Average Three-Year Compensation shall be
the greater of (A) the amount that would be taken into account in determining a
Participant’s benefit under the Program as of the date of the Change in Control
if there were no Change in Control or (B) the lump sum severance payment under
Section 2(a)(ii) of the Participant’s (but not the Recipient’s) Change in
Control Severance Agreement (as if he had been terminated immediately following
the Change in Control) divided by the multiple used under such section to
determine severance pay; (iii) the discount rate equals the Specified Rate; (iv)
the Participant (or, if applicable, Recipient) lives the number of years equal
to his Life Expectancy (calculated as of the date which includes any additional
Service credited hereunder); and (v) with respect to any benefit to be deducted
as an offset as described in Section 3.03(b) through (f), the Participant
terminated employment with the Company on the date of the Change in Control and
began to receive such benefits at the earliest date thereafter permitted under
the applicable plan, agreement or statute.

 

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(b) The Lump Sum Payment referred to in Section 4.02(c) shall be equal to the
present value of the future monthly payments to which the participant is
entitled under the Program based on the following assumptions: (i) the discount
rate equals the Specified Rate; and (ii) the Participant lives the number of
years equal to his Life Expectancy on the later of (A) date of his election to
receive a Lump Sum Payment, or (B) the date of his termination of employment.

 

4.04 Certain Matters Following a Lump Sum Payment.

 

(a) A Participant who has received a Change in Control Lump Sum Payment pursuant
to Section 4.02(b) shall thereafter: (i) while in the employ of the Company,
continue to accrue benefits under the Program, and (ii) be eligible for further
benefits under Section 4.01 or 4.02(a), (b) or (c). The amount of such benefit
shall be determined by:

 

(i) calculating the benefit that would be payable to the Participant if there
had been no previous Change in Control Lump Sum Payment;

 

(ii) determining the present lump sum value of such benefit, using the Specified
Rate as the discount rate and assuming the Participant lives the number of years
equal to his Life Expectancy on the date of his retirement or termination of
employment;

 

(iii) determining the present lump sum value of the Change in Control Lump Sum
Payment, assuming the Change in Control Lump Sum Payment had earned interest at
the average Specified Rate in effect from the time of payment of the Change in
Control Lump Sum Payment until the date of retirement or other termination of
employment;

 

(iv) reducing the amount determined in (ii) by the amount determined in (iii);
and

 

(v) if applicable, converting the amount determined in (iv) to an Actuarially
Equivalent single life only form of payment.

 

5. Death Benefits

 

5.01 Eligibility. If a Participant dies after completing 120 calendar months of
Service (without regard to the requirements of Section 2.04) but prior to the
earlier of his retirement or his Normal Retirement Date, his Surviving Spouse
(or, in the event there is no surviving spouse, or there is a common death, his
estate) shall be eligible for a benefit under this Article 5.

 

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5.02 Benefit Amount.

 

(a) The monthly amount of a benefit payable under this Article 5 to a deceased
Participant’s Surviving Spouse who has applied therefor, shall be equal to the
monthly payment the spouse would have received had the Participant retired on
the day before his death after having effectively elected to receive payment in
the form of a Joint and 100% Survivor Annuity under the Consolidated Plan, with
his spouse as his Contingent Annuitant under such option; provided, that (i) in
lieu of the offset for the Participant’s primary social security benefit under
Section 3.03(f), the benefit to the Surviving Spouse shall be offset by 50% of
the primary or survivor social security benefit to which the Surviving Spouse is
entitled at the earliest date as of which such payments become payable, and (ii)
in lieu of the offset for the Consolidated Plan benefit set forth in Section
3.03(b) (and/or any other retirement benefit under any defined benefit
arrangement described in Sections 3.03(c), (d), or (g)), the benefit to the
Surviving Spouse shall be offset by the Qualified Plan Death Benefit. If the
estate is the death beneficiary, the estate shall receive a lump sum payment
equal to the present value (using the Specified Rate) of the total monthly
payments that would have been paid to the Participant assuming he had not died
but rather that he: (i) retired on the day before the date of his death (or the
first day of the month following the time he would have reached age 55, if
later); (ii) elected the 10-Year Certain Annuity under the Consolidated Plan;
and (iii) received 120 monthly payments.

 

(b) If the Participant dies before reaching the age that is ten years prior to
the Participant’s Normal Retirement Date, then the monthly benefit used to
determine the death benefit shall be further reduced by .3030 for each month
that the Participant was under such age at the time of his death.

 

5.03 Benefit Payments. Subject to Section 4.02 (b) and (c), the benefit under
this Article 5 shall be paid to the deceased Participant’s Surviving Spouse
commencing with the first day of the month following the month in which the
Participant’s death occurs, and shall be payable monthly thereafter during the
life of the Surviving Spouse, the last payment being for the month in which the
death of the Surviving Spouse shall occur. If payment is made to the estate of
the Participant, payment shall be made within 30 days of the date of the
Participant’s death.

 

6. Non-Competition

 

6.01 Condition of Payment. Payment of supplemental retirement benefits under the
Program shall be subject to the condition that the Participant or
retiree-Recipient shall not have engaged in competition (as defined in Section
6.02) with the Company at any time prior to the date of such payment; provided,
however, that this Section 6.01 shall not apply to a Participant following his
termination of employment if such termination occurs after the date of a Change
in Control that occurs at the time the Participant is actively participating in
the Program.

 

6.02 Competition. Competition for purposes of the Program shall mean assuming an
ownership position or a consulting, management, employee or director position
with a business engaged in the manufacture, processing, purchase or distribution
of products of the type manufactured, processed or distributed by the Controlled
Group; provided, however, that in no event shall ownership of less than two
percent of the outstanding capital stock entitled to vote for the election of
directors of a corporation with a class of equity securities held of record by
more

 

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than 500 persons in itself be deemed Competition; and provided further, that all
of the following shall have taken place:

 

(a) the Secretary of the Company shall have given written notice to the
Participant or retiree-Recipient that, in the opinion of the Committee, the
Participant or retiree-Recipient is engaged in Competition within the meaning of
the foregoing provisions of this Section 6.02, specifying the details;

 

 

(b) the Participant or retiree-Recipient shall have been given a reasonable
opportunity, upon receipt of such notice, to appear before and to be heard by
the Committee with respect to his views regarding the Committee’s opinion that
the Participant or retiree-Recipient engaged in Competition;

 

(c) following any hearing pursuant to Section 6.02(b), the Secretary of the
Company shall have given written notice to the Participant or retiree-Recipient
that the Committee determined that the Participant or retiree-Recipient is
engaged in Competition; and

 

(d) the Participant or retiree-Recipient shall neither have ceased to engage in
such Competition within thirty days from his receipt of notice of such
determination nor diligently taken all reasonable steps to that end during such
thirty-day period and thereafter.

 

7. General Provisions

 

7.01 Denial of Claims. Whenever the Company denies, in whole or in part, a claim
for benefits filed by any person (hereinafter referred to as the “Claimant”),
the Company shall transmit a written notice setting forth, in a manner
calculated to be understood by the Claimant, a statement of the specific reasons
for the denial of the claim, references to the specific Program provisions on
which the denial is based, a description of any additional material or
information necessary to perfect the claim and an explanation of why such
material or information is necessary, and an explanation of the claims review
procedure as set forth in Section 7.02. In addition, the written notice shall
contain the date on which the written notice was sent and a statement advising
the Claimant that, within 60 days of the date on which such notice was received,
he may obtain review of the decision of the Company.

 

7.02 Claims Review Procedure. Within 60 days of the date on which the notice of
denial of claim is received by the Claimant, the Claimant, or his authorized
representative, may request that the claim denial be reviewed by filing with the
Company a written request therefor, which request shall contain the following
information:

 

(a) The date on which the notice of denial of claim was received by the
Claimant;

 

(b) The date on which the Claimant’s request was filed with the Company;
provided, however, that the date on which the Claimant’s request for review was
in fact filed with the Company shall control in the event that the date of the
actual filing is later than the date stated by the Claimant pursuant to this
subsection (b);

 

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(c) The specific portions of the denial of his claim which the Claimant requests
the Company to review;

 

(d) A statement by the Claimant setting forth the basis upon which he believes
the Company should reverse its previous denial of his claim for benefits and
accept his claim as made; and

 

(e) Any written material (included as exhibits) which the Claimant desires the
Company to examine in its consideration of his position as stated pursuant to
subsection (d).

 

Within 60 days of the date determined pursuant to Section 7.02(b), the Company
shall conduct a full and fair review of the decision denying the Claimant’s
claim for benefits. Within ten days following the date of such review, the
Company will send to the Claimant its written decision setting forth, in a
manner calculated to be understood by the Claimant, a statement of the specific
reasons for its decision, including references to the specific Program provision
relied upon. If the Claimant disputes the Company’s decision, such dispute shall
be resolved by arbitration in Cleveland, Ohio under the rules of the American
Arbitration Association.

 

7.03 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.

 

7.04 Trust. The Company shall be responsible for the payment of all benefits
under the Plan. At its discretion, 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 a Participant from any
such trust shall be considered paid by the Company for purposes of meeting the
obligations of the Company under the Plan.

 

7.05 Rights of Participants. Except as expressly provided in any grantor trust
agreement established by the Company:

 

(a) no Participant or Recipient shall have any right, title, or interest
whatsoever in or to any investments which the Company may make to aid it in
meeting its obligations under the Program;

 

(b) nothing contained in the Program shall create or be construed to create a
trust of any kind, or a fiduciary relationship between the Company and any
Participant, Recipient or any other person;

 

(c) to the extent that any person acquires a right to receive payments from the
Company under the Program, such right shall be no greater than the right of an
unsecured general creditor of the Company; and

 

(d) all payments to be made under the Program shall be paid from the general
funds of the Company and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of amounts payable under
the Program.

 

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7.06 Administration. The Committee shall be responsible for the general
administration of the Program and for carrying out the provisions thereof. Any
act authorized, permitted or required to be taken by the Company under the
Program may be taken by action of the Committee. Subject to the provisions of
Section 7.01 relating to denial of claims and claims review procedure, any
action taken by the Committee which is authorized, permitted or required under
the Program shall be final and binding upon the Company, all persons who have or
who claim an interest under the Program, and all third parties dealing with the
Company.

 

7.07 Program Non-Contractual. Nothing herein contained shall be construed as a
commitment or agreement on the part of any person to continue his employment
with the Company, and nothing herein contained shall be construed as a
commitment on the part of the Company to continue the employment or the rate of
compensation of any such person for any period, and all employees of the Company
shall remain subject to discharge to the same extent as if the Program had never
been put into effect.

 

7.08 Non-Alienation of Retirement Rights or Benefits. No right or benefit under
the Program shall at any time be subject in any manner to alienation or
encumbrances. If any person shall attempt to, or shall, alienate or in any way
encumber his rights or benefits under the Program, or any part thereof, or if by
reason of his bankruptcy or other event happening at any time any such benefits
would otherwise be received by anyone else or would not be enjoyed by him, his
interest in all such benefits shall automatically terminate and the same, at the
discretion of the Company, shall be held or applied to or for the benefit of
such person, his spouse, children, or other dependents as the Company may
select.

 

7.09 Payment of Benefits to Others. If any person to whom a retirement benefit
is payable is unable to care for his affairs because of illness or accident, any
payment due (unless prior claim therefor shall have been made by a duly
qualified guardian or legal representative) may be paid to the spouse, parent,
brother, or sister, or any other individual deemed by the Company to be
maintaining or responsible for the maintenance of such person. The monthly
payment of a retirement benefit to a person for the month in which he dies, if
not paid to such person prior to his death, shall be paid to his estate. Any
payment made in accordance with the provisions of this Section 7.09 shall be a
complete discharge of any liability of the Program with respect to the
retirement benefit so paid.

 

7.10 Notices. All notices provided for by the Program shall be in writing and
shall be sufficiently given if and when mailed in the continental United States
by registered or certified mail or personally delivered to the party entitled
thereto at the address stated below or to such changed address as the addressee
may have given by a similar notice:

 

To the Company:

 

Attention: Secretary

   

Parker-Hannifin Corporation

   

6035 Parkland Blvd.

   

Cleveland, Ohio 44124-4141

To the Participant:

 

address of residence

 

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Any such notice delivered in person shall be deemed to have been received on the
date of delivery.

 

7.11 Amendment, Modification, Termination. The Program may at any time be
terminated, or at any time or from time to time be amended or otherwise
modified, prospectively, by the Board of Directors of the Company; provided,
however, that no such termination, amendment or modification of the Program
shall operate to:

 

(a) reduce or terminate the benefit of a Participant participating in the
Program at the time of any such termination, amendment, or modification;

 

(b) terminate the participation of a Participant participating in the Program at
the time of any such termination, amendment, or modification;

 

(c) increase the eligibility requirements applicable to a Participant
participating in the Program at the time of any such termination, amendment or
modification; or

 

(d) terminate the Program, or reduce or terminate any benefit, or terminate the
participation or any rights or benefits, after the occurrence of a Change in
Control, with respect to a Participant or Recipient who was a Participant or
Recipient, or became a Participant or Recipient, at the time of the occurrence
of the Change in Control.

 

7.12 Applicable Law. Except to the extent preempted by ERISA, the laws of the
State of Ohio shall govern the Program and any disputes arising thereunder.

 

7.13 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.

 

7.14 Headings. All headings are for convenience only and shall not be used in
interpreting any text to which they relate.

 

EXECUTED in Cleveland, Ohio as of the      day of                     , 2004.

 

PARKER-HANNIFIN CORPORATION

By:

 

 

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