Document:

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                                                                   EXHIBIT 10.2

         EMPLOYMENT AGREEMENT dated December 18, 2001, between PALL CORPORATION,
a New York corporation (the "Company"), and JEREMY HAYWARD-SURRY ("Executive").

         WHEREAS, the parties hereto are parties to an Employment Agreement
dated November 15, 2001 (the "Existing Agreement"), and

         WHEREAS, on the date hereof the Compensation Committee of the Board of
Directors of the Company has approved the substitution of subsection (f) of ss.6
hereof for ss.6(f) of the Existing Agreement and, accordingly, the parties
desire to terminate the Existing Agreement and simultaneously replace it with
this Agreement, effective August 1, 2001 (that having been the effective date of
the Existing Agreement),

         NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements hereinafter set forth, the parties hereto agree as follows:

         ss.1. Employment and Term.

         The Company hereby employs Executive, and Executive hereby agrees to
serve, as an executive employee of the Company, with the duties set forth in
ss.2, for a term (hereinafter called the "Term of Employment") which began
August 1, 2001 (the "Term Commencement Date") and ending, unless sooner
terminated under ss.4, on the effective date specified in a notice of
termination given by either party to the other except that such effective date
shall not be earlier than the second anniversary of the date on which such
notice is given.

         ss.2. Duties.

         (a) Executive agrees that during the Term of Employment he will hold
such offices or positions with the Company, and perform such duties and
assignments relating to the business of the Company, as the Board of Directors
or the chief executive officer of the Company shall direct except that Executive
shall not be required to hold any office or position or to perform any duties or
assignment inconsistent with his experience and qualifications or not
customarily performed by a corporate officer. The Company represents to
Executive that the Board of Directors (acting by its Compensation Committee) has
authorized the making of this Agreement and expressed its present intention that
during the Term of Employment Executive will be an elected officer of the
Company. The failure of any future Board of Directors to elect Executive as an
officer of the Company shall not, however, be deemed to relieve either party
hereto of any of his or its obligations under this Agreement.

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         (b) If the Board of Directors or the chief executive officer of the
Company so directs, Executive shall serve as an officer of one or more
subsidiaries of the Company (provided that the duties of such office are not
inconsistent with Executive's experience and qualifications and are duties
customarily performed by a corporate officer) and part or all of the
compensation to which Executive is entitled hereunder may be paid by such
subsidiary or subsidiaries. However, such employment and/or payment of Executive
by a subsidiary or subsidiaries shall not relieve the Company from any of its
obligations under this Agreement except to the extent of payments actually made
to Executive by a subsidiary.

         (c) During the Term of Employment, Executive shall, except during
customary vacation periods and periods of illness, devote substantially all of
his business time and attention to the performance of his duties hereunder and
to the business and affairs of the Company and its subsidiaries and to promoting
the best interests of the Company and its subsidiaries, and he shall not, either
during or outside of such normal business hours, engage in any activity inimical
to such best interests.

         ss.3. Compensation and Benefits During Term of Employment.

         (a) Base Salary. With respect to the period beginning on the Term
Commencement Date and ending on July 31, 2002, the Company shall pay Executive a
Base Salary (in addition to the compensation provided for elsewhere in this
Agreement) at the rate of $455,729 per annum (hereinafter called the "Original
Base Salary"). With respect to each Contract Year beginning with the Contract
Year which starts August 1, 2002, the Company shall pay Executive a Base Salary
at such rate as the Board of Directors may determine but not less than the
Original Base Salary adjusted as follows: The term "Contract Year" as used
herein means the period from August 1 of each year through July 31 of the
following year. For each Contract Year during the Term of Employment beginning
with the Contract Year which starts August 1, 2002, the minimum compensation
payable to Executive under this ss.3(a) (hereinafter called the "Minimum Base
Salary") shall be determined by increasing (or decreasing) the Original Base
Salary by the percentage increase (or decrease) of the Consumer Price Index (as
hereinafter defined) for the month of June immediately preceding the start of
the Contract Year in question over (or below) the Consumer Price Index for June
2001. The term "Consumer Price Index" as used herein means the "Consumer Price
Index for all Urban Consumers" compiled and published by the Bureau of Labor
Statistics of the United States Department of Labor for "New York - Northern N.
J. - Long Island, NY-NJ-CT-PA". To illustrate the operation of the foregoing
provisions of this ss.3(a): Executive's Base Salary for the Contract Year August
1, 2002 through July 31, 2003 shall be not less than the Original Base Salary
adjusted by the percentage increase (or decrease) of the Consumer Price Index
for June 2002 over (or below) said Index for June 2001. Further adjustment in
the Minimum Base Salary shall be made for each ensuing Contract Year, in each
case (i) using the Consumer Price Index for June 2001 as the base except as
provided in the immediately following paragraph hereof and (ii) applying the
percentage increase (or decrease) in the Consumer Price Index since said base
month to the Original Base Salary to determine the Minimum Base Salary. The Base
Salary shall be paid in such periodic installments as the Company may determine
but not less often than monthly.

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         If with respect to any Contract Year (including the Contract Year
beginning August 1, 2002) the Board of Directors fixes the Base Salary at an
amount higher than the Minimum Base Salary, then (unless a resolution adopted
simultaneously with the resolution fixing such higher Base Salary for such
Contract Year provides otherwise), for the purpose of determining the Minimum
Base Salary for subsequent Contract Years: (i) the amount of the higher Base
Salary so fixed shall be deemed substituted for the Original Base Salary
wherever the Original Base Salary is referred to in the immediately preceding
paragraph hereof, and (ii) the base month for determining the Consumer Price
Index adjustment shall be June of the calendar year in which the Contract Year
to which such higher Base Salary is applicable begins (e.g., if the Board fixes
a Base Salary for the Contract Year beginning August 1, 2002 which is higher
than the Minimum Base Salary, then June 2002 would become the base month for the
purposes of making the CPI adjustment to determine the Minimum Base Salary for
subsequent Contract Years).

         (b) Bonus Compensation. With respect to each Fiscal Year of the Company
falling in whole or in part within the Term of Employment beginning with the
Fiscal Year ending August 3, 2002, Executive shall be eligible to receive a
Bonus (in addition to his Base Salary) in accordance with the terms of the Pall
Corporation Executive Incentive Bonus Plan adopted by the Compensation Committee
of the Board of Directors of the Company on July 17, 2001 and approved by
shareholders at the annual meeting of shareholders on November 14, 2001, a copy
of which is annexed hereto and incorporated herein by reference (the "Bonus
Plan"). Words and terms used herein with initial capital letters and not defined
herein are used herein as defined in the Bonus Plan. For purposes of determining
the amount of the Bonus payable to Executive for any Fiscal Year under the Bonus
Plan (the "Plan Bonus"), Executive's Target Bonus Percentage shall be 75% of his
Base Salary for such Fiscal Year.

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         (c) Fringe Benefits and Perquisites. During the Term of Employment,
Executive shall enjoy the customary perquisites of office, including but not
limited to office space and furnishings, secretarial services, expense
reimbursements, and any similar emoluments customarily afforded to senior
executive officers of the Company. Executive shall also be entitled to receive
or participate in all "fringe benefits" and employee benefit plans provided or
made available by the Company to its executives or management personnel
generally, such as, but not limited to, group hospitalization, medical, life and
disability insurance, and pension, retirement, profit-sharing and stock option
or purchase plans.

         (d) Vacation. Executive shall be entitled each year to a vacation or
vacations in accordance with the policies of the Company as determined by the
Board or by an authorized senior officer of the Company from time to time. The
Company shall not pay Executive any additional compensation for any vacation
time not used by Executive.

         ss.4. Termination by Reason of Disability, Death, Retirement or Change
in Control.

         (a) Disability or Death. If, during the Term of Employment, Executive,
by reason of physical or mental disability, has been incapable of performing his
principal duties hereunder for an aggregate of 130 working days out of any
period of 12 consecutive months, the Company at its option may terminate the
Term of Employment effective immediately by notice to Executive given within 90
days after the end of such 12-month period. If Executive shall die during the
Term of Employment or if the Company terminates the Term of Employment pursuant
to the immediately preceding sentence by reason of Executive's disability, the
Company shall pay to Executive, or to Executive's legal representatives, or in
accordance with a direction given by Executive to the Company in writing, (i)
Executive's Base Salary to the end of the month in which such death or
termination for disability occurs and (ii) any Plan Bonus or pro rata portion
thereof that Executive is entitled to receive in accordance with the terms of
the Bonus Plan.

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         (b) Retirement.

               (i) The Term of Employment shall end automatically, without
         action by either party, on Executive's 65th birthday unless prior to
         such birthday Executive and the Company have agreed in writing that the
         Term of Employment shall continue past such 65th birthday. In the
         latter event, unless the parties have agreed otherwise, the Term of
         Employment shall be automatically renewed and extended each year, as of
         Executive's birthday, for an additional one-year term, unless either
         party has given a Non-Renewal Notice. A Non-Renewal Notice shall be
         effective as of Executive's ensuing birthday only if given not less
         than 60 days before such birthday and shall state that the party giving
         such notice elects that this Agreement shall not automatically renew
         itself further, with the result that the Term of Employment shall end
         on Executive's ensuing birthday.

               (ii) If the Term of Employment ends pursuant to this ss.4(b) by
         reason of a notice given by either party as herein permitted or
         automatically at age 65 or any subsequent birthday, the Company shall
         pay to Executive, or to another payee specified by Executive to the
         Company in writing, (i) Executive's Base Salary prorated to the date on
         which the Term of Employment ends and (ii) any Plan Bonus or pro rata
         portion thereof that Executive is entitled to receive in accordance
         with the terms of the Bonus Plan.

               (iii) Anything hereinabove to the contrary notwithstanding, if
         any provision of this ss.4(b) violates federal or applicable state law
         relating to discrimination on account of age, such provision shall be
         deemed modified or suspended to the extent necessary to eliminate such
         violation of law. If at a later date, by reason of changed
         circumstances or otherwise, the enforcement of such provision as set
         forth herein would no longer constitute a violation of law, then it
         shall be enforced in accordance with its terms as set forth herein.

         (c) Change in Control. In event of a Change in Control (as defined in
the Bonus Plan), Executive shall have the right to terminate the Term of
Employment, by notice to the Company given at any time after such Change in
Control, effective on the date specified in such notice, which date shall not be
more than (but can be less than) one year after the giving of such notice.

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         ss.5. Severance.

         Executive shall be entitled to receive severance pay from the Company,
in the amount determined as hereinafter in this paragraph provided, in the event
that the Term of Employment is terminated by the Company under ss.1 hereof or by
Executive under ss.4(c) hereof. The amount of such severance pay shall be an
amount equal to the Base Salary which would have been payable to Executive
during the 12 months following the date on which the Term of Employment ends by
reason of such termination, plus 75% of such Base Salary (representing the
maximum Bonus payable to Executive under the Bonus Plan). Executive shall have
the option of (i) having such severance payment made in installments, over the
12 months following the end of the Term of Employment, at the same times at
which Executive's Base Salary and Bonus would have been paid had the Term of
Employment not been terminated or (ii) accepting as such severance pay an amount
equal to the present value, as of the date on which the Term of Employment ends,
of the stream of payments payable under clause "(i)" of this sentence, except
that if Executive elects a lump-sum payment under this clause "(ii)", there
shall be no cost-of-living adjustment of the Base Salary as would otherwise be
made in accordance with ss.3(a) hereof (because at the time such lump-sum
payment is made, the amount of the cost-of-living adjustment would not be
known). In determining such present value, a discount rate of 8% shall be
utilized. The severance payment provided for herein if Executive elects a lump
sum shall be made within 20 days after the end of the Term of Employment.

         ss.6. Annual Contract Pension and Medical Coverage After Term of
Employment.

         (a) For a period of 60 consecutive months beginning at the end of the
Term of Employment (unless Executive is entitled to severance pay under ss.5
hereof, in which event said period of months shall begin on the first
anniversary of the end of the Term of Employment), the Company shall pay

               (i) to Executive during his lifetime, and

               (ii) if Executive is not living at the time any such payment is
         due, then to such payee or payees (including a trust or trusts) as
         Executive may at any time (whether during or after the Term of
         Employment) designate by written notice to the Company or in his last
         will and testament or, if no such designation is made, then to the
         legal representatives of Executive's estate (any such designated payee
         or estate being hereinafter called "Executive's Successor")

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an "Annual Contract Pension" computed as follows: The term "Final Pay" as used
herein means one-third of the aggregate of Executive's total cash compensation
(i.e., Base Salary plus incentive compensation and any other bonus payments) for
those three full fiscal years out of the last five full fiscal years of the Term
of Employment with respect to which three fiscal years Executive received the
highest total cash compensation. The Annual Contract Pension payable to
Executive for each "Retirement Year" (as hereinafter defined) shall be an amount
determined by (I) adjusting Executive's Final Pay for changes in the Consumer
Price Index in the manner set forth in ss.3(a) except that for purposes of the
adjustment under this ss.6, the base month, instead of being June 2001, shall be
the month preceding the month in which payment of the Annual Contract Pension
commences and the comparison month shall be the same month in each succeeding
year and (II) multiplying the Final Pay as so adjusted by 60% and subtracting
therefrom Executive's Qualified Plan Pension Benefit (as hereinafter defined).
As used herein, "Executive's Qualified Plan Pension Benefit" means the annual
amount which Executive would be entitled to receive as a pension benefit under
the Pall Corporation Cash Balance Pension Plan in the form of a pension (i)
payable only to him and during his lifetime (whether or not he elects to receive
payment of his qualified plan pension in some other form, e.g., a joint and
survivor annuity) and (ii) which begins on the first day of the month in which
payment of the Annual Contract Pension commences (whether or not the qualified
plan pension in fact begins on such first day). The amount of the offset for
Executive's Qualified Plan Pension Benefit as fixed in accordance with the
preceding sentence shall remain constant throughout the term of the Annual
Contract Pension irrespective of any election which Executive may make under the
Pall Corporation Cash Balance Pension Plan, e.g., an election to defer the start
of benefit payments under that plan to a later date.

         (b) Each 12-month period beginning on the first day of the month in
which the Annual Contract Pension first becomes payable hereunder and on the
first day of the same month during each of the succeeding years in which the
Annual Contract Pension is payable hereunder is herein called a "Retirement
Year." There shall be no adjustment of the Final Pay based on the Consumer Price
Index for the purpose of determining the Annual Contract Pension for the first
Retirement Year so that during such first Retirement Year the Annual Contract
Pension shall be 60% of Final Pay minus Executive's Qualified Plan Pension
Benefit; there shall be such CPI adjustment of Final Pay for the purpose of
determining the Annual Contract Pension for the second and each succeeding
Retirement Year.

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         (c) The Annual Contract Pension shall be paid in equal monthly
installments on the last business day of each month during the period with
respect to which the Annual Contract Pension is payable.

         (d) So long as Executive is living it shall be a condition of the
payment of the Annual Contract Pension that, to the extent permitted by
Executive's health, he shall be available for advisory services requested by the
Board of Directors of the Company, the Executive Committee of said Board or the
chief executive officer of the Company, provided that such advisory services
shall not require more than 15 hours in any month. The Company shall reimburse
Executive for all travel and other expenses which he incurs in connection with
such advisory services.

         (e) At the option of the Board of Directors of the Company, payment of
the Annual Contract Pension shall cease and the right of Executive and
Executive's Successor to all future such payments shall be forfeited if
Executive shall, without the written consent of the chief executive officer of
the Company, render services to any corporation or other entity engaged in any
activity, or himself engage in any activity, which is competitive to any
material extent with the business in which the Company or any of its
subsidiaries shall be engaged at the end of the Term of Employment and in which
the Company or any such subsidiary shall still be engaged at the date such
services or activity is rendered or engaged in by Executive, provided, however,
that if the Company terminates under ss.1 following a Change in Control (as
defined in the Bonus Plan), the provisions of this ss.6(e) shall be deemed
deleted from this Agreement and shall have no force or effect.

         (f) Beginning at the end of the Term of Employment, the Company at its
sole expense shall provide, in accordance with the provisions set forth below,
medical coverage for Executive and his spouse during his lifetime and following
Executive's death, if he is survived by his spouse (Executive's "Surviving
Spouse"), for Executive's Surviving Spouse during her lifetime.

                   (i) Subject to (ii) and (iii) below, the medical coverage to
          be provided hereunder shall consist of the same coverages and benefits
          as provided under the terms of the hospitalization, medical and dental
          plans maintained by the Company for its U.S. employees who are not
          covered by a collective bargaining agreement (the "Company's Medical
          Plans"), as in effect immediately prior to the end of the Term of
          Employment.

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                   (ii) If prior to the end of the Term of Employment any of the
          Company's Medical Plans is amended following the occurrence of a
          Change in Control (as defined in the Bonus Plan) to eliminate any
          coverage or benefit previously provided under such Plan, or to make
          any coverage or benefit so provided available on terms less favorable
          to Executive than those in effect prior to such amendment, such
          coverage or benefit, as provided under the terms of the Plan in effect
          immediately prior to such amendment, shall be included in the medical
          coverage to be provided under this Section 6 (f).

                   (iii) If at any time after the end of the Term of Employment
         any of the Company's Medical Plans is amended to add any coverage or
         benefit that was not provided under such Plan immediately prior to the
         end of the Term of Employment, or to provide any coverage or benefit on
         terms more favorable than those applicable to Executive, or to his
         Surviving Spouse, under the Plan as in effect immediately prior to the
         end of the Term of Employment, the coverage or benefit so added or so
         modified shall be included in the medical coverage to be provided under
         this Section 6 (f), commencing as of the effective date of such
         amendment. As soon as practicable after any amendment is made to any of
         the Company's Medical Plans after the end of the Term of Employment,
         the Company shall furnish to Executive, or to his Surviving Spouse, a
         revised Summary Plan Description for such Plan and copies of any other
         written notices that the Company furnishes to its employees explaining
         the changes made to the Plan pursuant to such amendment.

                   (iv) The coverages and benefits to be provided hereunder
         shall be provided upon the same terms and conditions (including
         required deductibles, co-payments and annual and lifetime maximum
         benefits) as would have applied to Executive, or to his Surviving
         Spouse, if such coverages and benefits had been provided under the
         Company's Medical Plans as in effect on the date or dates applicable
         hereunder, other than any provision therein requiring an employee or
         his spouse to make payments to the Company, by payroll deduction or
         otherwise, towards the cost of his or her coverage under such Plan.

                   (v) At the Company's option, the coverages and benefits to be
         provided hereunder may be provided through insurance, or by the Company
         directly paying, or reimbursing Executive or his Surviving Spouse for
         his or her payment of, expenses covered under this Section 6 (f).

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                   (vi) The Company's obligation to provide any coverage or
         benefit otherwise required under this Section 6(f) shall be reduced to
         the extent that such coverage or benefit has been or will be provided
         under (A) any policy of insurance maintained by Executive or his
         Surviving Spouse, (B) any plan, program or insurance policy maintained
         by a subsequent employer of Executive or by any employer of Executive's
         Surviving Spouse, or (C) the provisions of any federal or state law.
         However, neither Executive nor his Surviving Spouse shall be required
         to obtain any hospitalization, medical or dental coverage from any
         source referred to in clause (A), (B) or (C) of the preceding sentence
         as a condition for eligibility for the medical coverage to be provided
         under this Section 6(f).

         ss.7. Internal Revenue Code ss.4999.

         If any payments to Executive, whether under this Agreement or
otherwise, would be subject to excise tax under Section 4999 of the Internal
Revenue Code of 1986, as amended, then payments hereunder shall be reduced or
deferred to the extent required (and only to the extent required) to avoid the
application of Section 4999; provided, however, that no such reduction or
deferral shall be made unless as a result thereof Executive's after-tax economic
position (taking into account not only payments under this Agreement and the
taxes thereon, but also the taxes that would otherwise be imposed on any
payments to which Executive is otherwise entitled) would be improved. In making
the determination whether Executive's after-tax economic position would be so
improved, the judgment of a certified public accountant or attorney chosen by
Executive shall be final. In the event of a reduction or deferral of payments
pursuant to this paragraph, Executive shall be entitled to specify which
payments shall be reduced or deferred.

         ss.8. Acceleration of Stock Options.

         On the date which is 30 days before the date on which the Term of
Employment will end by reason of a notice of termination given by either party
hereto under any of the provisions hereof, all employee stock options held by
Executive shall become exercisable in full (i.e., to the extent that any such
option or portion thereof is not yet exercisable, the right to exercise the same
in full shall be accelerated) and such option shall thereafter be fully vested
and exercisable in full (to the extent not theretofore exercised) until it
expires by its terms.

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         ss.9. Covenant Not to Compete.

         For a period of 18 months after the end of the Term of Employment if
the Term of Employment is terminated by notice to the Company given by Executive
under ss.1 or ss.4 hereof, or for a period of 12 months after the end of the
Term of Employment if the Term of Employment is terminated by notice to
Executive given by the Company under ss.1 or ss.4 hereof or terminates under
ss.4 by reason of Executive's attaining the age of 65, Executive shall not
render services to any corporation or other entity engaged in any activity, or
himself engage directly or indirectly in any activity, which is competitive to
any material extent with the business of the Company or any of its subsidiaries,
provided, however, that if the Company terminates under ss.1 following a Change
in Control (as defined in the Bonus Plan), the foregoing covenant not to compete
shall not apply.

         ss.10. Company's Right to Injunctive Relief.

         Executive acknowledges that his services to the Company are of a unique
character, which gives them a peculiar value to the Company, the loss of which
cannot be reasonably or adequately compensated in damages in an action at law,
and that therefore, in addition to any other remedy which the Company may have
at law or in equity, the Company shall be entitled to injunctive relief for a
breach of this Agreement by Executive.

         ss.11. Inventions and Patents.

         All inventions, ideas, concepts, processes, discoveries, improvements
and trademarks (hereinafter collectively referred to as intangible rights),
whether patentable or registrable or not, which are conceived, made, invented or
suggested either by Executive alone or by Executive in collaboration with others
during the Term of Employment, and whether or not during regular working hours,
shall be disclosed to the Company and shall be the sole and exclusive property
of the Company. If the Company deems that any of such intangible rights are
patentable or otherwise registrable under any federal, state or foreign law,
Executive, at the expense of the Company, shall execute all documents and do all
things necessary or proper to obtain patents and/or registrations and to vest
the Company with full title thereto.

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         ss.12. Trade Secrets and Confidential Information.

         Executive shall not, either directly or indirectly, except as required
in the course of his employment by the Company, disclose or use at any time,
whether during or subsequent to the Term of Employment, any information of a
proprietary nature owned by the Company, including but not limited to records,
data, formulae, documents, specifications, inventions, processes, methods and
intangible rights which are acquired by him in the performance of his duties for
the Company and which are of a confidential information or trade-secret nature.
All records, files, drawings, documents, equipment and the like, relating to the
Company's business, which Executive shall prepare, use, construct or observe,
shall be and remain the Company's sole property. Upon the termination of his
employment or at any time prior thereto upon request by the Company, Executive
shall return to the possession of the Company any materials or copies thereof
involving any confidential information or trade secrets and shall not take any
material or copies thereof from the possession of the Company.

         ss.13. Mergers and Consolidations; Assignability.

         In the event that the Company, or any entity resulting from any merger
or consolidation referred to in this ss.13 or which shall be a purchaser or
transferee so referred to, shall at any time be merged or consolidated into or
with any other entity or entities, or in the event that substantially all of the
assets of the Company or any such entity shall be sold or otherwise transferred
to another entity, the provisions of this Agreement shall be binding upon and
shall inure to the benefit of the continuing entity in or the entity resulting
from such merger or consolidation or the entity to which such assets shall be
sold or transferred. Except as provided in the immediately preceding sentence of
this ss.13, this Agreement shall not be assignable by the Company or by any
entity referred to in such immediately preceding sentence. This Agreement shall
not be assignable by Executive, but in the event of his death it shall be
binding upon and inure to the benefit of his legal representatives to the extent
required to effectuate the terms hereof.

         ss.14. Captions.

         The captions in this Agreement are not part of the provisions hereof,
are merely for the purpose of reference and shall have no force or effect for
any purpose whatsoever, including the construction of the provisions of this
Agreement, and if any caption is inconsistent with any provisions of this
Agreement, said provisions shall govern.

         ss.15. Choice of Law.

         This Agreement is made in, and shall be governed by and construed in
accordance with the laws of, the State of New York.

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         ss.16. Entire Contract.

         This Agreement contains the entire agreement of the parties on the
subject matter hereof except that the rights of the Company hereunder shall be
deemed to be in addition to and not in substitution for its rights under the
Company's standard printed form of "Employee's Secrecy and Invention Agreement"
or "Employee Agreement" if heretofore or hereafter entered into between the
parties hereto so that the making of this Agreement shall not be construed as
depriving the Company of any of its rights or remedies under any such Secrecy
and Invention Agreement or Employee Agreement. This Agreement may not be changed
orally, but only by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.

         ss.17. Notices.

         All notices given hereunder shall be in writing and shall be sent by
registered or certified mail or overnight delivery service such as Federal
Express or delivered by hand, and, if intended for the Company, shall be
addressed to it (if sent by mail or overnight delivery service) or delivered to
it (if delivered by hand) at is principal office for the attention of the
Secretary of the Company, or at such other address and for the attention of such
other person of which the Company shall have given notice to Executive in the
manner herein provided, and, if intended for Executive, shall be delivered to
him personally or shall be addressed to him (if sent by mail or overnight
delivery service) at his most recent residence address shown in the Company's
employment records or at such other address or to such designee of which
Executive shall have given notice to the Company in the manner herein provided.
Each such notice shall be deemed to be given on the date on which it is mailed
or received by the overnight delivery service or, if delivered personally, on
the date so delivered.

         ss.18. Termination of Existing Agreement.

         The Existing Agreement is hereby terminated and replaced and superseded
by this Agreement, effective August 1, 2001. All payments, of Base Salary or
otherwise, made by the Company under the Existing Agreement (or under the
Restated and Amended Employment Agreement dated October 6, 1997 which was
replaced by the Existing Agreement), with respect to any period commencing on or
after August 1, 2001, shall be credited against the corresponding payment
obligations of the Company under this Agreement.

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         IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the day and year first above written.

                                    PALL CORPORATION

                                    By: /s/ Eric Krasnoff
                                        ---------------------------------------
                                        Eric Krasnoff
                                        Chairman and Chief Executive Officer

                                         /s/ Jeremy Hayward-Surry
                                         --------------------------------------
                                             Jeremy Hayward-Surry

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                                PALL CORPORATION

                         EXECUTIVE INCENTIVE BONUS PLAN

                                      -----

1.       Purpose

         This document sets forth the Pall Corporation Executive Incentive Bonus
Plan as adopted effective July 17, 2001.

         The purpose of the Plan is to encourage greater focus on performance
among the key executives of the Corporation by relating a significant portion of
their total compensation to the achievement of annual financial objectives.

2.       Certain Definitions

         As used herein with initial capital letters, the following terms shall
have the following meanings:

         "Average Equity" shall mean, for any Fiscal Year, the average of
stockholders' equity as shown on the fiscal year-end consolidated balance sheet
of the Corporation and its subsidiaries as of the end of such Fiscal Year and as
of the end of the immediately preceding Fiscal Year except that the amounts
shown on said balance sheets as "Accumulated other comprehensive" income or
loss, as the case may be, shall be disregarded.

         "Base Salary" shall mean, with respect to any Executive and for any
Fiscal Year, the annual rate of base salary in effect for the Executive as of
the first day of such year or, if later, as of the first day of the Executive's
Term of Employment, as determined under the Executive's Employment Agreement.

         "Board of Directors" shall mean the Board of Directors of the
Corporation.

         "Bonus" shall mean the bonus payable to an Executive under this Plan
for any Fiscal Year.

         "CEO" shall mean the Chief Executive Officer of the Corporation.

         "Change in Control" means the occurrence of any of the following:

         (a)      the "Distribution Date" as defined in Section 3 of the Rights
                  Agreement dated as of November 17, 1989 between the
                  Corporation and United States Trust Company of New York as
                  Rights Agent, as amended by Amendment No. 1 thereto dated
                  April 20, 1999, and as the same may have been further amended
                  or extended to the time in question or in any successor
                  agreement (the "Rights Agreement"); or

                                      -15-
<PAGE>

         (b)      any event described in Section 11(a)(ii)(B) of the Rights
                  Agreement; or

         (c)      any event described in Section 13 of the Rights Agreement; or

         (d)      the date on which the number of duly elected and qualified
                  directors of the Corporation who were not either elected by
                  the Board of Directors or nominated by the Board of Directors
                  or its Nominating Committee for election by the shareholders
                  shall equal or exceed one-third of the total number of
                  directors of the Corporation as fixed by its by-laws;

provided, however, that no Change in Control shall be deemed to have occurred,
and no rights arising upon a Change in Control as provided in Section 6 shall
exist, to the extent that the Board of Directors so determines by resolution
adopted prior to the Change in Control.

         "Code" shall mean the Internal Revenue Code of 1986, as amended.

         "Committee" shall mean the Compensation Committee of the Board of
Directors.

         "Corporation" shall mean Pall Corporation.

         "Covered Executive" shall mean, with respect to any Fiscal Year, each
individual who is a "Covered Employee" of the Corporation for such year for the
purpose of section 162(m) of the Code.

         "Employment Agreement" shall mean, with respect to any executive
employee of the Corporation, an employment agreement between the Corporation and
such employee which provides that the employee shall be eligible to receive
annual bonuses under this Plan.

         "Executive" shall mean an executive employee of the Corporation with
whom the Corporation has entered into an Employment Agreement.

         "Fiscal Year" shall mean the fiscal year of the Corporation ending on
August 3, 2002, and each subsequent fiscal year of the Corporation.

         "Maximum R.O.E. Target" shall mean, for any Fiscal Year, the Return on
Equity that must be achieved or exceeded in order for the Performance Percentage
for the year to equal 100%, as determined by the Committee prior to the first
day of such year or within such period of time thereafter as may be permitted
under the regulations issued under section 162(m) of the Code.

         "Minimum R.O.E. Target" shall mean, for any Fiscal Year, the Return on
Equity that must be exceeded in order for any Bonus to be paid to any Executive
for the year, as determined by the Committee prior to the first day of such year
or within such period of time thereafter as may be permitted under the
regulations issued under section 162(m) of the Code.

         "Net Earnings" shall mean, for any Fiscal Year, the after-tax
consolidated net earnings of the Corporation and its subsidiaries as certified
by the Corporation's independent accountants for inclusion in the annual report
to shareholders ("Annual Report"), adjusted so as to eliminate the effects of
any decreases in or charges to earnings for (a) the effect of foreign currency
exchange rates, (b) any acquisitions, divestitures, discontinuance of business
operations, restructuring or any other special charges, (c) the cumulative
effect of any accounting changes, and (d) any "extraordinary items" as
determined under generally accepted accounting principles, to the extent such
decreases or charges referred to in clauses (a) through (d) are separately
disclosed in the Corporation's Annual Report for the year.

                                      -16-
<PAGE>

         "Plan" shall mean the Pall Corporation Executive Incentive Bonus Plan,
as set forth herein and as amended from time to time.

         "Return on Equity" shall mean, for any Fiscal Year, the percentage
determined by dividing the Net Earnings for the year by the Average Equity for
the year.

         "Target Bonus Percentage" shall mean, with respect to any Executive,
the target bonus percentage specified for such Executive in his or her
Employment Agreement.

3.       Determination of Bonus Amounts

         For each Fiscal Year falling in whole or in part within an Executive's
Term of Employment, as defined in his or her Employment Agreement, the Executive
shall be entitled to receive a Bonus in an amount determined in accordance with
the provisions of this Section 3, subject, however, to the provisions of Section
4.

         (a) The amount of the Bonus payable to an Executive for each such
Fiscal Year shall be equal to (i) the Target Bonus Percentage of the Executive's
Base Salary for such year, multiplied by (ii) the Performance Percentage for
such year, as determined under (b) below.

         (b) The Performance Percentage for any Fiscal Year shall be determined
in accordance with he following provisions:

                  (i) If the Return on Equity equals or exceeds the Maximum
         R.O.E. Target for the year, the Performance Percentage for the year
         shall be 100%.

                  (ii) If the Return on Equity is less than the Maximum R.O.E.
         Target for the year but exceeds the Minimum R.O.E. Target for the year,
         the Performance Percentage for the year shall be equal to the quotient
         resulting from dividing (A) the excess of the Return on Equity for the
         year over the Minimum R.O.E. Target for the year, by (B) the excess of
         the Maximum R.O.E. Target for the year over the Minimum R.O.E. Target
         for the year.

                  (iii) If the Return on Equity equals or is less than the
         Minimum R.O.E. Target for the year, the Performance Percentage for the
         year shall be zero, and no Bonus shall be payable under the Plan for
         such year to any Executive.

                                      -17-
<PAGE>

         (c) If an Executive's Term of Employment commences after the start of a
Fiscal Year, or ends prior to the close of a Fiscal Year, the amount of the
Bonus payable to the Executive for the Fiscal Year in which the Executive's Term
of Employment commences, or for the Fiscal Year in which the Executive's Term of
Employment ends, as determined in accordance with the other applicable
provisions of the Plan, shall be prorated on the basis of the number of days of
such Fiscal Year that fall within the Executive's Term of Employment; provided,
however, that (i) if an Executive's Term of Employment ends within 5 days prior
to the close of a Fiscal Year, there shall be no proration and the Executive
shall be entitled to receive the entire amount of the Bonus payable to the
Executive for such year, as determined in accordance with such other provisions,
and (ii) if the Executive's Term of Employment ends within 5 days following the
start of a Fiscal Year, the Executive shall not be entitled to receive any Bonus
with respect to such Fiscal Year.

4.       Adjustment of and Limitation on Bonus Amounts

         The amount of the Bonus otherwise payable to an Executive for any
Fiscal Year in accordance with Section 3 shall be subject to the following
adjustments and limitation:

         (a) The Committee may, in its discretion, reduce the amount of the
Bonus otherwise payable to any Executive in accordance with Section 3, (i) to
reflect any decreases in or charges to earnings that were not taken into account
in determining Net Earnings for the year pursuant to clause (a), (b), (c) or (d)
contained in the definition of such term in Section 2, (ii) to reflect any
credits to earnings for extraordinary items of income or gain that were taken
into account in determining Net Earnings for the year, (iii) to reflect the
Committee's evaluation of the Executive's individual performance, or (iv) to
reflect any other events, circumstances or factors which the Committee believes
to be appropriate in determining the amount of the Bonus to be paid to the
Executive for the year.

         (b) The Committee may, in its discretion, increase the amount of the
Bonus otherwise payable to any Executive who is not a Covered Executive, as
determined under Section 3, to reflect the Committee's evaluation of the
Executive's individual performance, or to reflect such other circumstances or
factors as the Committee believes to be appropriate in determining the amount of
the Bonus to be paid to the Executive for the year. The Committee shall not have
any discretion to increase the amount of the Bonus payable to any Covered
Executive for the year, as determined under Section 3.

         (c) Notwithstanding any other provision herein to the contrary, the
amount of the Bonus otherwise payable to any Executive for any Fiscal Year shall
not exceed the lesser of (i) $1.0 million and (ii) 100% of the Executive's Base
Salary for the year.

5.       Payment of Bonuses

         The Bonus payable to an Executive for any Fiscal Year shall be paid in
accordance with the following provisions:

         (a) Except as otherwise provided in (b) or (c) below,

                  (i) if the Executive is not a Covered Executive for such year,
         50% of the estimated amount of the Executive's Bonus shall be paid to
         the Executive at such date in August next following the close of such
         year as the Committee in its discretion shall determine, and the
         remaining amount of the Executive's Bonus shall be paid to the
         Executive by no later than January 15 next following the close of such
         year;

                                      -18-
<PAGE>

                  (ii) if the Executive is a Covered Executive for such year,
         50% of the amount of the Executive's Bonus shall be paid to the
         Executive as soon as practicable after the Committee has certified in
         writing that all conditions for the payment of such Bonus to the
         Executive for such year have been satisfied, and the remaining amount
         of the Executive's Bonus shall be paid to the Executive by no later
         than January 15 next following the close of such year;

                  (iii) each amount payable to an Executive under (i) and (ii)
         above, reduced by the amount of all federal, state and local taxes
         required by law to be withheld therefrom, shall be paid to the
         Executive in the form of a single lump sum cash payment.

         (b) To the extent that an Executive has elected under the applicable
provisions of the Pall Corporation Management Stock Purchase Plan (the "MSPP")
to have any part of the Bonus payable to the Executive for any Fiscal Year paid
in the form of Restricted Units to be credited to the Executive's account under
the MSPP, no cash payments shall be made to the Executive pursuant to (a) above
with respect to the part of the Executive Bonus that is subject to such
election; and the obligation of the Corporation under this Plan with respect to
payment of such part of the Executive's Bonus shall be fully discharged upon the
crediting of Restricted Units to the Executive's account under the MSPP in
accordance with the applicable provisions of such Plan.

         (c) To the extent that an Executive has elected under the applicable
provisions of the Pall Corporation Profit-Sharing Plan (the "Profit-Sharing
Plan") to have any part of the Bonus payable to the Executive for any Fiscal
Year reduced, and to have an amount equal to such part of the Executive's Bonus
contributed to the Profit-Sharing Plan as a 401(k) Contribution on the
Executive's behalf, an amount equal to such part of the Executive's Bonus shall
be contributed to the Profit-Sharing Plan on behalf of the Executive; and
thereupon, the obligation of the Corporation under this Plan with respect to
payment of such part of the Executive's Bonus shall be fully discharged.
However, no such contribution shall be made to the extent it would cause any
limitation applicable under the 401(k) Plan to be exceeded.

6.        Change in Control

         Notwithstanding any other provision in the Plan to the contrary (but
subject to the "provided, however" clause contained in the definition of "Change
in Control" in Section 2), upon the occurrence of a Change in Control, the
following provisions shall apply.

         (a) The amount of the Bonus payable to any Executive for the Fiscal
Year in which a Change in Control occurs shall be at least equal to the Target
Bonus Percentage of the Executive's Base Salary for such year or, in the case of
any Executive whose Term of Employment commences after the start of such year or
ends prior to the close of such year, a pro rata portion thereof determined on
the basis of the number of days of such Fiscal Year that fall within the
Executive's Term of Employment.

                                      -19-
<PAGE>

         (b) Each Executive whose Term of Employment has not ended prior to the
occurrence of a Change in Control shall be entitled to receive a Bonus for each
Contract Year (as defined in the Executive's Employment Agreement) that falls in
whole or in part within the Executive's Term of Employment and that ends after
the Fiscal Year in which the Change in Control occurs. The amount of the Bonus
payable to the Executive for each such Contract Year shall be at least equal to
the Target Bonus Percentage of the Executive's Base Salary for such Contract
Year or, in the case of any Executive whose Term of Employment ends after the
start of such Contract Year but prior to the close of such year, a pro rata
portion thereof determined on the basis of the number of days of such Contract
Year that fall within the Executive's Term of Employment.

         (c) The entire amount of the Bonus payable to an Executive for any
Fiscal Year or Contract Year pursuant to (a) or (b) above, reduced by the amount
of all federal, state and local taxes required to be withheld therefrom, shall
be paid to the Executive in a single cash lump sum as soon as practicable after
the close of such Fiscal Year or Contract Year.

7.       Rights of Executives

         An Executive's rights and interests under the Plan shall be subject to
the following provisions:

         (a) An Executive's rights to payments under the Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by creditors of the Executive.

         (b) Neither the Plan nor any action taken hereunder shall be construed
as giving any Executive any right to be retained in the employment of the
Corporation or any of its subsidiaries.

8.       Administration

         The Plan shall be administered by the Committee. A majority of the
members of the Committee shall constitute a quorum. The Committee may act at a
meeting, including a telephone meeting, by action of a majority of the members
present, or without a meeting by unanimous written consent. In addition to the
responsibilities and powers assigned to the Committee elsewhere in the Plan, the
Committee shall have the authority, in its discretion, to establish from time to
time guidelines or regulations for the administration of the Plan, interpret the
Plan, and make all determinations considered necessary or advisable for the
administration of the Plan.

         The Committee may delegate any ministerial or nondiscretionary function
pertaining to the administration of the Plan to any one or more officers of the
Corporation.

         All decisions, actions or interpretations of the Committee under the
Plan shall be final, conclusive and binding upon all parties. Notwithstanding
the foregoing, any determination made by the Committee after the occurrence of a
Change in Control that denies in whole or in part any claim made by any
individual for benefits under the Plan shall be subject to judicial review,
under a "de novo", rather than a deferential standard.

                                      -20-
<PAGE>

9.       Amendment or Termination

         The Board of Directors may, with prospective or retroactive effect,
amend, suspend or terminate the Plan or any portion thereof at any time;
provided, however, that (a) no amendment, suspension or termination of the Plan
shall adversely affect the rights of any Executive with respect to any Bonus
that has become payable to the Executive under the Plan, without his or her
written consent, and (b) following a Change in Control, no amendment to Section
6, and no termination of the Plan, shall be effective if such amendment or
termination adversely affects the rights of any Executive under the Plan.

10.      Successor Corporation

         The obligations of the Corporation under the Plan shall be binding upon
any successor corporation or organization resulting from the merger,
consolidation or other reorganization of the Corporation, or upon any successor
corporation or organization succeeding to substantially all of the assets and
business of the Corporation. The Corporation agrees that it will make
appropriate provision for the preservation of Executives' rights under the Plan
in any agreement or plan which it may enter into or adopt to effect any such
merger, consolidation, reorganization or transfer of assets.

11.      Governing Law

         The Plan shall be governed by and construed in accordance with the laws
of the State of New York.

12.      Effective Date

         The Plan was adopted effective as of July 17, 2001 by the Board of
Directors, acting by the Committee, subject, however, to approval by the
shareholders of the Corporation by a majority of the votes cast in person or by
proxy at the 2001 annual meeting of the Corporation's shareholders, including
any adjournment thereof.

[The Plan was approved
by shareholders at the
annual meeting on
November 14, 2001.]

                                      -21-<PAGE>

                                  EXHIBIT 10.3

         EMPLOYMENT AGREEMENT dated November 15, 2001 between PALL CORPORATION,
a New York corporation (the "Company") and Donald B. Stevens ("Executive").

         WHEREAS, the parties hereto are parties to an Employment Agreement
dated January 22, 2001 (the "Existing Agreement"), and

         WHEREAS, in light of the approval by the shareholders of the Company on
November 14, 2001 of the Pall Corporation Executive Incentive Bonus Plan, the
parties desire to terminate the Existing Agreement and simultaneously replace it
with this Agreement, effective August 1, 2001,

         NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the parties hereto agree as follows:

ss.1.    Employment and Term

         The Company hereby employs Executive, and Executive hereby agrees to
serve, as an executive employee of the Company with the duties set forth in
ss.2, for a term (hereinafter called the "Term of Employment") which began
August 1, 2001 (the "Term Commencement Date") and ending, unless sooner
terminated under ss.4, on the effective date specified in a notice of
termination given by either party to the other except that such effective date
shall not be earlier than the second anniversary of the date on which such
notice is given.

ss.2.    Duties

         (a)      Executive agrees that during the Term of Employment he will
                  hold such offices or positions with the Company, and perform
                  such duties and assignments relating to the business of the
                  Company, as the Board of Directors or the Chief Executive
                  Officer of the Company shall direct except that Executive
                  shall not be required to hold any office or position or to
                  perform any duties or assignment inconsistent with his
                  experience and qualifications or not customarily performed by
                  a corporate officer. The Company represents to Executive that
                  the Board of Directors (acting by its Compensation Committee)
                  has authorized the making of this Agreement and expressed its
                  present intention that during the Term of Employment Executive
                  will be an elected officer of the Company. The failure of any
                  future Board of Directors to elect Executive as an officer of
                  the Company shall not, however, be deemed to relieve either
                  party hereto of any of his or its obligations under this
                  Agreement.
<PAGE>

         (b)      If the Board of Directors or the Chief Executive Officer of
                  the Company so directs, Executive shall serve as an officer of
                  one or more subsidiaries of the Company (provided that the
                  duties of such office are not inconsistent with Executive's
                  experience and qualifications and are duties customarily
                  performed by a corporate officer) and part or all of the
                  compensation to which Executive is entitled hereunder may be
                  paid by such subsidiary or subsidiaries. However, such
                  employment and/or payment of Executive by a subsidiary or
                  subsidiaries shall not relieve the Company from any of its
                  obligations under this Agreement except to the extent of
                  payments actually made to Executive by a subsidiary.

         (c)      During the Term of Employment Executive shall, except during
                  customary vacation periods and periods of illness, devote
                  substantially all of his business time and attention to the
                  performance of his duties hereunder and to the business and
                  affairs of the Company and its subsidiaries and to promoting
                  the best interests of the Company and its subsidiaries and he
                  shall not, either during or outside of such normal business
                  hours, engage in any activity inimical to such best interests.

                                       2
<PAGE>

ss.2.    Compensation During Term of Employment

         (a)      Base Salary. With respect to the period beginning on the Term
                  Commencement Date and ending on July 31, 2002, the Company
                  shall pay to Executive a Base Salary (in addition to the
                  compensation provided for elsewhere in this Agreement) at the
                  rate of $354,309 per annum (hereafter called the "Original
                  Base Salary"). With respect to each Contract Year beginning
                  with the Contract Year which starts August 1, 2002, the
                  Company shall pay Executive a Base Salary at such rate as the
                  Board of Directors may determine but not less than the
                  Original Base Salary adjusted, as follows: The term "Contract
                  Year" as used herein means the period from August 1 of each
                  year through July 31 of the following year. For each Contract
                  Year during the Term of Employment beginning with the Contract
                  Year which starts August 1, 2002, the minimum compensation
                  payable to Executive under this ss.3(a) (hereinafter called
                  the "Minimum Base Salary") shall be determined by increasing
                  (or decreasing) the Original Base Salary by the percentage
                  increase (or decrease) of the Consumer Price Index (as
                  hereinafter defined) for the month of June immediately
                  preceding the start of the Contract Year in question over (or
                  below) the Consumer Price Index for June 2001. The term
                  "Consumer Price Index" as herein used means the "Consumer
                  Price Index for all Urban Consumers" compiled and published by
                  the Bureau of Labor Statistics of the United States Department
                  of Labor for "New York - Northern N. J. - Long Island,
                  NY-NJ-CT-PA". To illustrate the operation of the foregoing
                  provisions of this ss.3(a): Executive's Base Salary for the
                  Contract Year August 1, 2002 through July 31, 2003 shall be
                  not less than the Original Base Salary adjusted by the
                  percentage increase (or decrease) of the Consumer Price Index
                  for June 2002 over (or below) said Index for June 2001.
                  Further adjustment in the Minimum Base Salary shall be made
                  for each ensuing Contract Year, in each case (i) using the
                  Consumer Price Index for June 2001 as the base except as
                  provided in the immediately following paragraph hereof and
                  (ii) applying the percentage increase (or decrease) in the
                  Consumer Price Index since said base month to the Original
                  Base Salary to determine the Minimum Base Salary. The Base
                  Salary shall be paid in such periodic installments as the
                  Company may determine but not less often than monthly.

                  If with respect to any Contract Year (including the Contract
                  Year beginning August 1, 2002) the Board of Directors fixes
                  the Base Salary at an amount higher than the Minimum Base
                  Salary, then (unless the resolution fixing such higher Base
                  Salary provides otherwise), for the purpose of determining the
                  Minimum Base Salary for subsequent Contract Years: (1) the
                  amount of the higher Base Salary so fixed shall be deemed
                  substituted for the Original Base Salary wherever the Original
                  Base Salary is referred to in the immediately preceding
                  paragraph hereof, and (ii) the base month for determining the
                  Consumer Price Index adjustment shall be June of the calendar
                  year in which the Contract Year to which such higher Base
                  Salary is applicable begins (e.g., if the Board fixes a Base
                  Salary for the Contract Year beginning August 1, 2002 which is
                  higher than the Minimum Base Salary, then June 2002 would
                  become the base month for the purposes of making the CPI
                  adjustment to determine the Minimum Base Salary for subsequent
                  Contract Years).

                                       3
<PAGE>

         (b)      Bonus Compensation. With respect to each Fiscal Year of the
                  Company falling in whole or in part within the Term of
                  Employment beginning with the Fiscal Year ending August 3,
                  2002, Executive shall be eligible to receive a Bonus (in
                  addition to his Base Salary) in accordance with the terms of
                  the Pall Corporation Executive Incentive Bonus Plan adopted by
                  the Compensation Committee of the Board of Directors of the
                  Company on July 17, 2001 and approved by shareholders at the
                  annual meeting of shareholders on November 14, 2001, a copy of
                  which is annexed hereto and incorporated herein by reference
                  (the "Bonus Plan"). Words and terms used herein with initial
                  capital letters and not defined herein are used herein as
                  defined in the Bonus Plan. For purposes of determining the
                  amount of the Bonus payable to Executive for any Fiscal Year
                  under the Bonus Plan (the "Plan Bonus"), Executive's Target
                  Bonus Percentage shall be 70% of his Base Salary for such
                  Fiscal Year.

         (c)      Fringe Benefits and Perquisites. During the Term of
                  Employment, Executive shall enjoy the customary perquisites of
                  office, including but not limited to office space and
                  furnishings, secretarial services, expense reimbursements, and
                  any similar emoluments customarily afforded to senior
                  executive officers of the Company at the same level as
                  Executive. Executive shall also be entitled to receive or
                  participate in all "fringe benefits" and employee benefit
                  plans provided or made available by the Company to its
                  executives or management personnel generally, such as, but not
                  limited to, group hospitalization, medical, life and
                  disability insurance, and pension, retirement, profit-sharing
                  and stock option or purchase plans.

         (d)      Vacations. Executive shall be entitled each year to a vacation
                  or vacations in accordance with the policies of the Company as
                  determined by the Board or by an authorized senior officer of
                  the Company from time to time. The Company shall not pay
                  Executive any additional compensation for any vacation time
                  not used by Executive.

                                       4
<PAGE>

ss.4.    Termination by Reason of Disability, Death, Retirement or Change in
         Control

         (a)      Disability or Death. If, during the Term of Employment,
                  Executive, by reason of physical or mental disability, is
                  incapable of performing his principal duties hereunder for an
                  aggregate of 130 working days out of any period of twelve
                  consecutive months, the Company at its option may terminate
                  the Term of Employment effective immediately by notice to
                  Executive given within 90 days after the end of such
                  twelve-month period. If Executive shall die during the Term of
                  Employment or if the Company terminates the Term of Employment
                  pursuant to the immediately preceding sentence by reason of
                  Executive's disability, the Company shall pay to Executive, or
                  to Executive's legal representatives, or in accordance with a
                  direction given by Executive to the Company in writing, the
                  following: (i) Executive's Base Salary to the end of the month
                  in which such death or termination for disability occurs and
                  any Plan Bonus or pro rata portion thereof that Executive is
                  entitled to receive in accordance with the terms of the Bonus
                  Plan and (ii) for each month in the period from the end of the
                  month in which such death or termination for disability occurs
                  until the earlier of (x) the first anniversary of the date of
                  death or termination and (y) the date on which the Term of
                  Employment would have ended but for such death or termination
                  for disability, monthly payments of any amount equal to 1/12th
                  of 85% of the annual rate of Base Salary in effect for
                  Executive immediately prior to the date on which Executive's
                  death or termination for disability occurs (such 85% being
                  comprised of one-half of such Base Salary and one-half of
                  Executive's Target Bonus Percentage set forth in ss.3(b)
                  hereof).

         (b)      Retirement. (i) The Term of Employment shall end
                  automatically, without action by either party, on Executive's
                  65th birthday unless, prior to such birthday, Executive and
                  the Company have agreed in writing that the Term of Employment
                  shall continue past such 65th birthday. In that event, unless
                  the parties have agreed otherwise, the Term of Employment
                  shall be automatically renewed and extended each year, as of
                  Executive's birthday, for an additional one-year term, unless
                  either party has given a Non-Renewal Notice. A Non-Renewal
                  Notice shall be effective as of Executive's ensuing birthday
                  only if given not less than 60 days before such birthday, and
                  shall state that the party giving such notice elects that this
                  Agreement shall not automatically renew itself further, with
                  the result that the Term of Employment shall end on
                  Executive's ensuing birthday.

                                       5
<PAGE>

                     (ii) If the Term of Employment ends pursuant to this
                  paragraph by reason of a notice given by either party as
                  herein permitted or automatically at age 65 or any subsequent
                  birthday, the Company shall pay to Executive, or to another
                  payee specified by Executive to the Company in writing,
                  Executive's Base Salary prorated to the date on which the Term
                  of Employment ends and (ii) any Plan Bonus or pro rata portion
                  thereof that Executive is entitled to receive in accordance
                  with the terms of the Bonus Plan.

                     (iii) Anything hereinabove to the contrary notwithstanding,
                  if any provision of this paragraph violates federal or
                  applicable state law relating to discrimination on account of
                  age, such provision shall be deemed modified or suspended to
                  the extent necessary to eliminate such violation of law. If at
                  a later date, by reason of changed circumstances or otherwise,
                  the enforcement of such provision as set forth herein would no
                  longer constitute a violation of law, then it shall be
                  enforced in accordance with its terms as set forth herein. (

         c)       Change in Control. In event of a Change in Control (as defined
                  in the Bonus Plan), Executive shall have the right to
                  terminate the Term of Employment, by notice to the Company
                  given at any time after such Change in Control, effective on
                  the date specified in such notice, which date shall not be
                  more than (but can be less than) one year after the giving of
                  such notice.

ss.5.    Covenant Not to Compete

         For a period of eighteen months after the end of the Term of Employment
if the Term of Employment is terminated by notice to the Company given by
Executive under ss.1 or ss.4 hereof, or for a period of twelve months after the
end of the Term of Employment if the Term of Employment is terminated by notice
to Executive given by the Company under ss.1 or ss.4 hereof or terminates under
ss.4 by reason of Executive attaining the age of 65, Executive shall not render
services to any corporation, individual or other entity engaged in any activity,
or himself engage directly or indirectly in any activity, which is competitive
to any material extent with the business of the Company or any of its
subsidiaries, provided, however, that if the Company terminates under ss.1
following a Change in Control (as defined in the Bonus Plan), the foregoing
covenant not to compete shall not apply.

ss.6.    Company's Right to Injunctive Relief

         Executive acknowledges that his services to the Company are of a unique
character, which gives them a peculiar value to the Company, the loss of which
cannot be reasonably or adequately compensated in damages in an action at law,
and that therefore, in addition to any other remedy which the Company may have
at law or in equity, the Company shall be entitled to injunctive relief for a
breach of this Agreement by Executive.

                                       6
<PAGE>

ss.7.    Inventions and Patents

         All inventions, ideas, concepts, processes, discoveries, improvements
and trademarks (hereinafter collectively referred to as intangible rights),
whether patentable or registrable or not, which are conceived, made, invented or
suggested either by Executive alone or by Executive in collaboration with others
during the Term of Employment, and whether or not during regular working hours,
shall be disclosed to the Company and shall be the sole and exclusive property
of the Company. If the Company deems that any of such intangible rights are
patentable or otherwise registrable under any federal, state or foreign law,
Executive, at the expense of the Company, shall execute all documents and do all
things necessary or proper to obtain patents and/or registrations and to vest
the Company with full title thereto.

ss.8.    Trade Secrets and Confidential Information

         Executive shall not, either directly or indirectly, except as required
in the course of his employment by the Company, disclose or use at any time,
whether during or subsequent to the Term of Employment, any information of a
proprietary nature owned by the Company, including but not limited to, records,
data, formulae, documents, specifications, inventions, processes, methods and
intangible rights which are acquired by him in the performance of his duties for
the Company and which are of a confidential information or trade-secret nature.
All records, files, drawings, documents, equipment and the like, relating to the
Company's business, which Executive shall prepare, use, construct or observe,
shall be and remain the Company's sole property. Upon the termination of his
employment or at any time prior thereto upon request by the Company, Executive
shall return to the possession of the Company any materials or copies thereof
involving any confidential information or trade secrets and shall not take any
material or copies thereof from the possession of the Company.

                                       7
<PAGE>

ss.9.    Mergers and Consolidations; Assignability

         In the event that the Company, or any entity resulting from any merger
or consolidation referred to in this ss.9 or which shall be a purchaser or
transferee so referred to, shall at any time be merged or consolidated into or
with any other entity or entities, or in the event that substantially all of the
assets of the Company or any such entity shall be sold or otherwise transferred
to another entity, the provisions of this Agreement shall be binding upon and
shall inure to the benefit of the continuing entity in or the entity resulting
from such merger or consolidation or the entity to which such assets shall be
sold or transferred. Except as provided in the immediately preceding sentence of
this ss.9, this Agreement shall not be assignable by the Company or by any
entity referred to in such immediately preceding sentence. This Agreement shall
not be assignable by Executive, but in the event of his death it shall be
binding upon and inure to the benefit of his legal representatives to the extent
required to effectuate the terms hereof.

ss.10.   Captions

         The captions in this Agreement are not part of the provisions hereof,
are merely for the purpose of reference and shall have no force or effect for
any purpose whatsoever, including the construction of the provisions of this
Agreement, and if any caption is inconsistent with any provisions of this
Agreement, said provisions shall govern.

ss.11.   Choice of Law

         This Agreement is made in, and shall be governed by and construed in
accordance with the laws of, the State of New York.

ss.12.   Entire Contract

         This instrument contains the entire agreement of the parties on the
subject matter hereof except that the rights of the Company hereunder shall be
deemed to be in addition to and not in substitution for its rights under the
Company's standard printed form of "Employee's Secrecy and Invention Agreement"
or "Employee Agreement" if heretofore or hereafter entered into between the
parties hereto so that the making of this Agreement shall not be construed as
depriving the Company of any of its rights or remedies under any such Secrecy
and Invention Agreement or Employee Agreement. This Agreement may not be changed
orally, but only by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.

ss.13.   Notices

         All notices given hereunder shall be in writing and shall be sent by
registered or certified mail or delivered by hand, and, if intended for the
Company, shall be addressed to it (if sent by mail) or delivered to it (if
delivered by hand) at its principal office for the attention of the Secretary of
the Company, or at such other address and for the attention of such other person
of which the Company shall have given notice to Executive in the manner herein
provided, and, if intended for Executive, shall be delivered to him personally
or shall be addressed to him (if sent by mail) at his most recent residence
address shown in the Company's employment records or at such other address or to
such designee of which Executive shall have given notice to the Company in the
manner herein provided. Each such notice shall be deemed to be given on the date
of mailing thereof or, if delivered personally, on the date so delivered.

                                        8
<PAGE>

ss.14.   Termination of Existing Agreement

         The Existing Agreement is hereby terminated and replaced and superseded
by this Agreement, effective August 1, 2001. All payments, of Base Salary or
otherwise, made by the Company under the Existing Agreement with respect to any
period commencing on or after August 1, 2001 shall be credited against the
corresponding payment obligations of the Company under this Agreement.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

                                            PALL CORPORATION

                                            By:  /s/ Jeremy Hayward-Surry
                                                 ------------------------
                                                     Jeremy Hayward-Surry
                                                     President

                                                 /s/ Donald B. Stevens
                                                 ------------------------
                                                     Donald B. Stevens

                                       9
<PAGE>

                                PALL CORPORATION

                         EXECUTIVE INCENTIVE BONUS PLAN

                                      -----

1.       Purpose

         This document sets forth the Pall Corporation Executive Incentive Bonus
Plan as adopted effective July 17, 2001.

         The purpose of the Plan is to encourage greater focus on performance
among the key executives of the Corporation by relating a significant portion of
their total compensation to the achievement of annual financial objectives.

2.       Certain Definitions

         As used herein with initial capital letters, the following terms shall
have the following meanings:

         "Average Equity" shall mean, for any Fiscal Year, the average of
stockholders' equity as shown on the fiscal year-end consolidated balance sheet
of the Corporation and its subsidiaries as of the end of such Fiscal Year and as
of the end of the immediately preceding Fiscal Year except that the amounts
shown on said balance sheets as "Accumulated other comprehensive" income or
loss, as the case may be, shall be disregarded.

         "Base Salary" shall mean, with respect to any Executive and for any
Fiscal Year, the annual rate of base salary in effect for the Executive as of
the first day of such year or, if later, as of the first day of the Executive's
Term of Employment, as determined under the Executive's Employment Agreement.

         "Board of Directors" shall mean the Board of Directors of the
Corporation.

         "Bonus" shall mean the bonus payable to an Executive under this Plan
for any Fiscal Year.

         "CEO" shall mean the Chief Executive Officer of the Corporation.

         "Change in Control" means the occurrence of any of the following:

         (a)      the "Distribution Date" as defined in Section 3 of the Rights
                  Agreement dated as of November 17, 1989 between the
                  Corporation and United States Trust Company of New York as
                  Rights Agent, as amended by Amendment No. 1 thereto dated
                  April 20, 1999, and as the same may have been further amended
                  or extended to the time in question or in any successor
                  agreement (the "Rights Agreement"); or

<PAGE>

         (b)      any event described in Section 11(a)(ii)(B) of the Rights
                  Agreement; or

         (c)      any event described in Section 13 of the Rights Agreement; or

         (d)      the date on which the number of duly elected and qualified
                  directors of the Corporation who were not either elected by
                  the Board of Directors or nominated by the Board of Directors
                  or its Nominating Committee for election by the shareholders
                  shall equal or exceed one-third of the total number of
                  directors of the Corporation as fixed by its by-laws;

provided, however, that no Change in Control shall be deemed to have occurred,
and no rights arising upon a Change in Control as provided in Section 6 shall
exist, to the extent that the Board of Directors so determines by resolution
adopted prior to the Change in Control.

         "Code" shall mean the Internal Revenue Code of 1986, as amended.

         "Committee" shall mean the Compensation Committee of the Board of
Directors.

         "Corporation" shall mean Pall Corporation.

         "Covered Executive" shall mean, with respect to any Fiscal Year, each
individual who is a "Covered Employee" of the Corporation for such year for the
purpose of section 162(m) of the Code.

         "Employment Agreement" shall mean, with respect to any executive
employee of the Corporation, an employment agreement between the Corporation and
such employee which provides that the employee shall be eligible to receive
annual bonuses under this Plan.

         "Executive" shall mean an executive employee of the Corporation with
whom the Corporation has entered into an Employment Agreement.

         "Fiscal Year" shall mean the fiscal year of the Corporation ending on
August 3, 2002, and each subsequent fiscal year of the Corporation.

         "Maximum R.O.E. Target" shall mean, for any Fiscal Year, the Return on
Equity that must be achieved or exceeded in order for the Performance Percentage
for the year to equal 100%, as determined by the Committee prior to the first
day of such year or within such period of time thereafter as may be permitted
under the regulations issued under section 162(m) of the Code.

         "Minimum R.O.E. Target" shall mean, for any Fiscal Year, the Return on
Equity that must be exceeded in order for any Bonus to be paid to any Executive
for the year, as determined by the Committee prior to the first day of such year
or within such period of time thereafter as may be permitted under the
regulations issued under section 162(m) of the Code.

         "Net Earnings" shall mean, for any Fiscal Year, the after-tax
consolidated net earnings of the Corporation and its subsidiaries as certified
by the Corporation's independent accountants for inclusion in the annual report
to shareholders ("Annual Report"), adjusted so as to eliminate the effects of
any decreases in or charges to earnings for (a) the effect of foreign currency
exchange rates, (b) any acquisitions, divestitures, discontinuance of business
operations, restructuring or any other special charges, (c) the cumulative
effect of any accounting changes, and (d) any "extraordinary items" as
determined under generally accepted accounting principles, to the extent such
decreases or charges referred to in clauses (a) through (d) are separately
disclosed in the Corporation's Annual Report for the year.

                                       2
<PAGE>

         "Plan" shall mean the Pall Corporation Executive Incentive Bonus Plan,
as set forth herein and as amended from time to time.

         "Return on Equity" shall mean, for any Fiscal Year, the percentage
determined by dividing the Net Earnings for the year by the Average Equity for
the year.

         "Target Bonus Percentage" shall mean, with respect to any Executive,
the target bonus percentage specified for such Executive in his or her
Employment Agreement.

3.       Determination of Bonus Amounts

         For each Fiscal Year falling in whole or in part within an Executive's
Term of Employment, as defined in his or her Employment Agreement, the Executive
shall be entitled to receive a Bonus in an amount determined in accordance with
the provisions of this Section 3, subject, however, to the provisions of Section
4.

         (a) The amount of the Bonus payable to an Executive for each such
Fiscal Year shall be equal to (i) the Target Bonus Percentage of the Executive's
Base Salary for such year, multiplied by (ii) the Performance Percentage for
such year, as determined under (b) below.

         (b) The Performance Percentage for any Fiscal Year shall be determined
in accordance with he following provisions:

                  (i) If the Return on Equity equals or exceeds the Maximum
         R.O.E. Target for the year, the Performance Percentage for the year
         shall be 100%.

                  (ii) If the Return on Equity is less than the Maximum R.O.E.
         Target for the year but exceeds the Minimum R.O.E. Target for the year,
         the Performance Percentage for the year shall be equal to the quotient
         resulting from dividing (A) the excess of the Return on Equity for the
         year over the Minimum R.O.E. Target for the year, by (B) the excess of
         the Maximum R.O.E. Target for the year over the Minimum R.O.E. Target
         for the year.

                  (iii) If the Return on Equity equals or is less than the
         Minimum R.O.E. Target for the year, the Performance Percentage for the
         year shall be zero, and no Bonus shall be payable under the Plan for
         such year to any Executive.

                                       3
<PAGE>

         (c) If an Executive's Term of Employment commences after the start of a
Fiscal Year, or ends prior to the close of a Fiscal Year, the amount of the
Bonus payable to the Executive for the Fiscal Year in which the Executive's Term
of Employment commences, or for the Fiscal Year in which the Executive's Term of
Employment ends, as determined in accordance with the other applicable
provisions of the Plan, shall be prorated on the basis of the number of days of
such Fiscal Year that fall within the Executive's Term of Employment; provided,
however, that (i) if an Executive's Term of Employment ends within 5 days prior
to the close of a Fiscal Year, there shall be no proration and the Executive
shall be entitled to receive the entire amount of the Bonus payable to the
Executive for such year, as determined in accordance with such other provisions,
and (ii) if the Executive's Term of Employment ends within 5 days following the
start of a Fiscal Year, the Executive shall not be entitled to receive any Bonus
with respect to such Fiscal Year.

4.       Adjustment of and Limitation on Bonus Amounts

         The amount of the Bonus otherwise payable to an Executive for any
Fiscal Year in accordance with Section 3 shall be subject to the following
adjustments and limitation:

         (a) The Committee may, in its discretion, reduce the amount of the
Bonus otherwise payable to any Executive in accordance with Section 3, (i) to
reflect any decreases in or charges to earnings that were not taken into account
in determining Net Earnings for the year pursuant to clause (a), (b), (c) or (d)
contained in the definition of such term in Section 2, (ii) to reflect any
credits to earnings for extraordinary items of income or gain that were taken
into account in determining Net Earnings for the year, (iii) to reflect the
Committee's evaluation of the Executive's individual performance, or (iv) to
reflect any other events, circumstances or factors which the Committee believes
to be appropriate in determining the amount of the Bonus to be paid to the
Executive for the year.

         (b) The Committee may, in its discretion, increase the amount of the
Bonus otherwise payable to any Executive who is not a Covered Executive, as
determined under Section 3, to reflect the Committee's evaluation of the
Executive's individual performance, or to reflect such other circumstances or
factors as the Committee believes to be appropriate in determining the amount of
the Bonus to be paid to the Executive for the year. The Committee shall not have
any discretion to increase the amount of the Bonus payable to any Covered
Executive for the year, as determined under Section 3.

         (c) Notwithstanding any other provision herein to the contrary, the
amount of the Bonus otherwise payable to any Executive for any Fiscal Year shall
not exceed the lesser of (i) $1.0 million and (ii) 100% of the Executive's Base
Salary for the year.

5.       Payment of Bonuses

         The Bonus payable to an Executive for any Fiscal Year shall be paid in
accordance with the following provisions:

         (a) Except as otherwise provided in (b) or (c) below,

                  (i) if the Executive is not a Covered Executive for such year,
         50% of the estimated amount of the Executive's Bonus shall be paid to
         the Executive at such date in August next following the close of such
         year as the Committee in its discretion shall determine, and the
         remaining amount of the Executive's Bonus shall be paid to the
         Executive by no later than January 15 next following the close of such
         year;

                                       4
<PAGE>

                  (ii) if the Executive is a Covered Executive for such year,
         50% of the amount of the Executive's Bonus shall be paid to the
         Executive as soon as practicable after the Committee has certified in
         writing that all conditions for the payment of such Bonus to the
         Executive for such year have been satisfied, and the remaining amount
         of the Executive's Bonus shall be paid to the Executive by no later
         than January 15 next following the close of such year;

                  (iii) each amount payable to an Executive under (i) and (ii)
         above, reduced by the amount of all federal, state and local taxes
         required by law to be withheld therefrom, shall be paid to the
         Executive in the form of a single lump sum cash payment.

         (b) To the extent that an Executive has elected under the applicable
provisions of the Pall Corporation Management Stock Purchase Plan (the "MSPP")
to have any part of the Bonus payable to the Executive for any Fiscal Year paid
in the form of Restricted Units to be credited to the Executive's account under
the MSPP, no cash payments shall be made to the Executive pursuant to (a) above
with respect to the part of the Executive Bonus that is subject to such
election; and the obligation of the Corporation under this Plan with respect to
payment of such part of the Executive's Bonus shall be fully discharged upon the
crediting of Restricted Units to the Executive's account under the MSPP in
accordance with the applicable provisions of such Plan.

         (c) To the extent that an Executive has elected under the applicable
provisions of the Pall Corporation Profit-Sharing Plan (the "Profit-Sharing
Plan") to have any part of the Bonus payable to the Executive for any Fiscal
Year reduced, and to have an amount equal to such part of the Executive's Bonus
contributed to the Profit-Sharing Plan as a 401(k) Contribution on the
Executive's behalf, an amount equal to such part of the Executive's Bonus shall
be contributed to the Profit-Sharing Plan on behalf of the Executive; and
thereupon, the obligation of the Corporation under this Plan with respect to
payment of such part of the Executive's Bonus shall be fully discharged.
However, no such contribution shall be made to the extent it would cause any
limitation applicable under the 401(k) Plan to be exceeded.

6.        Change in Control

         Notwithstanding any other provision in the Plan to the contrary (but
subject to the "provided, however" clause contained in the definition of "Change
in Control" in Section 2), upon the occurrence of a Change in Control, the
following provisions shall apply.

         (a) The amount of the Bonus payable to any Executive for the Fiscal
Year in which a Change in Control occurs shall be at least equal to the Target
Bonus Percentage of the Executive's Base Salary for such year or, in the case of
any Executive whose Term of Employment commences after the start of such year or
ends prior to the close of such year, a pro rata portion thereof determined on
the basis of the number of days of such Fiscal Year that fall within the
Executive's Term of Employment.

                                       5
<PAGE>

         (b) Each Executive whose Term of Employment has not ended prior to the
occurrence of a Change in Control shall be entitled to receive a Bonus for each
Contract Year (as defined in the Executive's Employment Agreement) that falls in
whole or in part within the Executive's Term of Employment and that ends after
the Fiscal Year in which the Change in Control occurs. The amount of the Bonus
payable to the Executive for each such Contract Year shall be at least equal to
the Target Bonus Percentage of the Executive's Base Salary for such Contract
Year or, in the case of any Executive whose Term of Employment ends after the
start of such Contract Year but prior to the close of such year, a pro rata
portion thereof determined on the basis of the number of days of such Contract
Year that fall within the Executive's Term of Employment.

         (c) The entire amount of the Bonus payable to an Executive for any
Fiscal Year or Contract Year pursuant to (a) or (b) above, reduced by the amount
of all federal, state and local taxes required to be withheld therefrom, shall
be paid to the Executive in a single cash lump sum as soon as practicable after
the close of such Fiscal Year or Contract Year.

7.       Rights of Executives

         An Executive's rights and interests under the Plan shall be subject to
the following provisions:

         (a) An Executive's rights to payments under the Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by creditors of the Executive.

         (b) Neither the Plan nor any action taken hereunder shall be construed
as giving any Executive any right to be retained in the employment of the
Corporation or any of its subsidiaries.

8.       Administration

         The Plan shall be administered by the Committee. A majority of the
members of the Committee shall constitute a quorum. The Committee may act at a
meeting, including a telephone meeting, by action of a majority of the members
present, or without a meeting by unanimous written consent. In addition to the
responsibilities and powers assigned to the Committee elsewhere in the Plan, the
Committee shall have the authority, in its discretion, to establish from time to
time guidelines or regulations for the administration of the Plan, interpret the
Plan, and make all determinations considered necessary or advisable for the
administration of the Plan.

         The Committee may delegate any ministerial or nondiscretionary function
pertaining to the administration of the Plan to any one or more officers of the
Corporation.

         All decisions, actions or interpretations of the Committee under the
Plan shall be final, conclusive and binding upon all parties. Notwithstanding
the foregoing, any determination made by the Committee after the occurrence of a
Change in Control that denies in whole or in part any claim made by any
individual for benefits under the Plan shall be subject to judicial review,
under a "de novo", rather than a deferential standard.

                                       6
<PAGE>

9.       Amendment or Termination

         The Board of Directors may, with prospective or retroactive effect,
amend, suspend or terminate the Plan or any portion thereof at any time;
provided, however, that (a) no amendment, suspension or termination of the Plan
shall adversely affect the rights of any Executive with respect to any Bonus
that has become payable to the Executive under the Plan, without his or her
written consent, and (b) following a Change in Control, no amendment to Section
6, and no termination of the Plan, shall be effective if such amendment or
termination adversely affects the rights of any Executive under the Plan.

10.      Successor Corporation

         The obligations of the Corporation under the Plan shall be binding upon
any successor corporation or organization resulting from the merger,
consolidation or other reorganization of the Corporation, or upon any successor
corporation or organization succeeding to substantially all of the assets and
business of the Corporation. The Corporation agrees that it will make
appropriate provision for the preservation of Executives' rights under the Plan
in any agreement or plan which it may enter into or adopt to effect any such
merger, consolidation, reorganization or transfer of assets.

11.      Governing Law

         The Plan shall be governed by and construed in accordance with the laws
of the State of New York.

12.      Effective Date

         The Plan was adopted effective as of July 17, 2001 by the Board of
Directors, acting by the Committee, subject, however, to approval by the
shareholders of the Corporation by a majority of the votes cast in person or by
proxy at the 2001 annual meeting of the Corporation's shareholders, including
any adjournment thereof.

[The Plan was approved
by shareholders at the
annual meeting on
November 14, 2001.]

                                       7

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