Document:

Form of Grant Letter for Stock Options with Tandem Stock Appreciation Rights

 Exhibit 10.1 
 

 
 Name:
                                        
                     
 PID:
                                       
      
 NOTICE OF GRANT OF STOCK OPTIONS WITH 
 TANDEM STOCK APPRECIATION RIGHTS 
 The Human Resources and Compensation Committee of the Board
of Directors (“Committee”) of Parker-Hannifin Corporation (“Company”) hereby grants to you, under the Company’s 2003 Stock Incentive Plan (“Plan”), stock options (“Options”) with tandem stock appreciation
rights (“SARs”) with respect to the number of common shares of stock in the Company (“Common Shares”) set forth below. Your Options/SARs under this grant have a grant price (“Grant Price”) that is 100% of the fair
market value of the Common Shares. The fair market value of the Common Shares is equal to the reported closing price of the Common Shares on the New York Stock Exchange-Composite Transactions on the Grant Date. This grant will expire at the date and
time indicated below (“Expiration Date”) unless an earlier lapse date (“Lapse Date”) applies (as described in this grant) due to a change in your employment status. 
  

			
	Grant Date:	  	XX/XX/XXXX
	No. of Shares to Which Options/SARs Apply:	  	XXX
	Grant Price:	  	$XX.XX
	Expiration Date:	  	XX/XX/XXXX, at 4:00 PM Eastern Time

 You may exercise all or any portion of this grant as either Options or SARs but not both. The exercise of any
portion of the grant as Options automatically cancels the corresponding SARs, and the exercise of any portion of the grant as SARs automatically cancels the corresponding Options. 
 Each Option entitles you to purchase the Common Shares covered by the Option at the Grant Price. Each SAR entitles you to receive the increase in value (“Appreciation”) of one Common Share between the Grant
Date and the Exercise Date. 
 SARs. Upon the exercise of a SAR, the Appreciation will be paid to you in Common Shares having a value
equal to the Appreciation calculated in the manner described below. The Company may elect, in its sole discretion, to pay the Appreciation in cash in lieu of issuing Common Shares. 
 Calculation of SAR Appreciation. Appreciation is calculated by subtracting the Grant Price from the reported closing price of the Common Shares on the New York Stock Exchange on the day prior to
the Exercise Date (“Prior Day’s Close”) and multiplying the result by the number of SARs exercised. The number of Common Shares issued on exercise will be that number (rounded down to the nearest whole number) derived from dividing
the Appreciation by the Prior Day’s Close per Common Share. No cash consideration will be paid for the fractional portion eliminated by rounding. 

 Vesting Schedule. Except as provided below, while you are an active full-time employee, this grant will
vest in one-third increments in accordance with the following schedule (“Vesting Schedule”): 
 [Vesting Schedule] 
 In the event of a Change in Control of the Company (as defined in the Plan), all of the Options/SARs awarded in this grant will immediately vest and become exercisable.

 If your continuous full-time employment is terminated prior to a scheduled vesting date as a result of your death, long-term disability, or retirement
under the applicable retirement plan or Company policy, any unvested Options/SARs will continue to vest in accordance with the Vesting Schedule above. 
 Upon vesting, your Options/SARs are exercisable in accordance with the terms of this grant and the Plan only while you are a full-time employee of the Company or one of its subsidiaries at any time until the Expiration Date or Lapse Date,
as the case may be. Vested Options/SARs may also be exercised upon termination of your continuous full-time employment in accordance with the specific status change rules set forth below. 
 Effect of Status Changes. If your continuous full-time employment is terminated prior to a vesting date for any reason other than death, long-term
disability, or retirement under the applicable retirement plan or Company policy, then all unvested Options/SARs as of the date of termination will lapse and cannot be exercised. 
 If your continuous full-time employment is terminated for any reason (including death, long-term disability, or retirement), then vested Options/SARs are exercisable any time before the applicable Lapse Date shown
below. 
  

			
	 Status Change – If your continuous full-time employment terminates due
to:
	  	 Lapse Date – Then the Options/SARs awarded in this grant will lapse on:

	 (A) Long-Term Disability or Retirement 
	  	The Expiration Date.
		
	 (B) Death
	  	The earlier of: (i) Two (2) years after your death or (ii) the Expiration Date.
		
	 (C) Any Other Termination
	  	The earlier of: (i) Three (3) months from the date of termination or (ii) the Expiration Date.

 Exercise and Settlement Procedures. To exercise all or any portion of your vested Options/SARs, you
are required to complete and deliver a Notice of Exercise Form to the Company on or before the Expiration Date or before any applicable Lapse Date. The Exercise Date of your Options or SARS will be the date the Company receives your properly
completed Notice of Exercise Form (and, in the case of Options, the Exercise Price) if received prior to the applicable cut-off time established by the Company; otherwise, it will be the following business day. The Exercise Price for Options may be

  

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paid in cash or in Common Shares. If paid in Common Shares, the number of shares to be surrendered in payment of the Exercise Price shall be valued using the
Prior Day’s Close. 
 To settle the exercise of the Options/SARs, the Company will instruct its stock transfer agent to issue the net number of Common
Shares you are entitled to receive. If any portion of the grant is exercised as SARs, the Company may, in its sole discretion, elect to settle the exercise in cash. 
 Automatic Self-Exercise Prior to Expiration. Any vested Options/SARs under this grant that have a positive net Appreciation (after all applicable withholding taxes) but remain unexercised on the business
day preceding the Expiration Date will automatically self-exercise as SARs on the Expiration Date to prevent forfeiture. 
 Compensation and Payment of
Income Withholding Taxes. If you are a U.S. citizen, you do not recognize taxable income upon the grant of the Options/SARs. In certain foreign countries, however, you may be taxed upon grant, and you should review the taxation with the
local country Financial Service Manager. In the year in which you exercise Options or SARs, the Appreciation on the SARs or the difference between the Grant Price and the fair market value on the Exercise Date of the Options will be reported as
additional compensation and will be subject to applicable income and employment taxes. Parker will report the additional income on your W-2 and will observe all applicable tax withholding requirements at the time of exercise. For U.S. citizens,
withholding may include federal, state and local income tax, FICA, Medicare, or other statutorily-required taxes (“Taxes”). All Taxes must be paid at the time of exercise by surrendering a portion of the Common Shares received in
settlement except where transferred options are exercised by a transferee, in which case the Taxes must be paid in cash by you. In the event the Company elects to settle exercised SARs in cash, the Taxes due upon exercise will be deducted
from the cash settlement prior to payment. 
 Tax Withholding Calculation. The Company will withhold for Taxes the number of Common Shares
having an aggregate value based on the Prior Day’s Close at least equal to the amount required to be withheld by law. If the value of the withheld Common Shares exceeds the withholding tax amount due, the excess (which will be less than the
value of one Common Share) will be credited to federal income tax withholding. 
 Reloadability. If you tender Common Shares of the Company to
satisfy an Option Exercise Price, you will receive one (1) restorative or “reload” grant of SARs (“Reload SARs”) effective on the Exercise Date and equivalent to the number of Common Shares surrendered to satisfy the
Exercise Price. The Reload SARs will have a Grant Price equal to the fair market value of the Common Shares on the Exercise Date. The fair market value is the reported closing price of the Common Shares on the New York Stock Exchange Composite
Transactions on the Exercise Date. Except as otherwise set forth in this grant, no Reload SARs may be exercised (a) prior to the completion of one (1) year of continuous full-time employment following the Exercise Date; and (b) unless
you have retained ownership of the Common Shares resulting from the Option exercise (less a sufficient number of Common Shares to satisfy withholding tax obligations) for a period of one (1) year from the Exercise Date. All other terms and
conditions of the Reload SARs will be identical to those initially awarded in this grant, including, without limitation, the original Expiration Date. 
  

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 Transferability. Your Options/SARs are not transferable or assignable during your life except to
(a) your spouse, children or their lineal descendants (“Immediate Family Members”), (b) one or more trusts for the benefit of you and/or one or more of your Immediate Family Members; or (c) a partnership or limited liability
company in which you or your Immediate Family Members are the only partners or members; provided, however, in each case that you (i) submit a completed Stock Option/SAR Assignment Form to the Stock Incentive Plan
Administrator and (ii) do not receive any consideration for the transfer. All transferred Options/SARs remain subject to the terms and conditions of this grant and the Plan (except that such transferred Options/SARs are not transferable by the
transferee during life). 
 Detrimental Activity. If you engage in any Detrimental Activity (as defined in the Plan), the Committee may at any
time and in its sole discretion cancel and revoke all or any portion of your unexercised Options/SARs or require repayment to the Company of any compensation received (in the form of cash or Common Shares) from your exercise of any portion of the
Options/SARs. The Plan defines Detrimental Activity as any activity that is determined in individual cases, by the Committee or its express delegate, to be detrimental to the interests of the Company or a subsidiary, including without limitation
(i) rendering of services to an organization, or engaging in a business, that is, in the judgment of the Committee or its express delegate, in competition with the Company; (ii) disclosure to anyone outside of the Company, or the use for
any purpose other than the Company’s business, of confidential information or material related to the Company, whether acquired during or after employment with the Company; (iii) fraud, embezzlement, theft-in-office or other illegal
activity; or (iv) violation of the Company’s Code of Ethics. 
 Consent to Use Data. By acknowledging the terms of this grant, you
hereby consent to the cross-border collection, use and disclosure by the Company and its subsidiaries of certain personal data required solely for the purpose of the administration and exercise of this grant. Disclosure of personal data shall be
limited to your name, gender, address, telephone number, date of birth, date of hire, position, grade, supervisor, country of residence and country of employment. All personal data shall be treated as highly confidential and shall not be used for
any purpose other than Stock Incentive Plan administration. 
 Notification of Change in Personal Data. If your address or contact
information changes while any portion of this grant remains unexercised, the Company must be notified in order to administer this grant. Notification of such changes should be provided to the Company as follows: 
  

	 	•	 	 Domestic Participants (employees who are on the U.S. or Canadian payroll system): 

  

	 	•	 	 Active employees: Update your address and contact information directly through your Personal Profile section in the Employee Self-Service site.

  

	 	•	 	 Retired, terminated, or family member of deceased participant: Contact the Benefits Service Center at 1-800-992-5564. 

  

	 	•	 	 International Participants (employees who are not on U.S. or Canadian payroll system): 

  

	 	•	 	 Active, retired, terminated, or family member of deceased participant: Contact your country Human Resources Manager, who will, in turn, advise the Corporate
Director of Compensation. 

 Prospectus Notification. A Memorandum dated July 29, 2004 (“Prospectus”)
describing the terms of the 2003 Stock Incentive Program which governs this grant and the most recent Annual Report  

  

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and Proxy Statement issued by Parker-Hannifin Corporation are available for your review on your Stock Incentives Web page. You have the right to
receive a printed copy of the Prospectus upon request by either calling the Stock Incentive Plan Administrator at 216-896-2950 or by sending your written request to Parker’s Legal Department. 
 All Terms Subject to the Plan. This grant and all rights under this grant are at all times subject to all other terms, conditions and provisions of the
Plan (and any rules or procedures adopted under the Plan by the Committee). All capitalized terms shall have the meaning ascribed to such terms in the Plan. In the event of a conflict between the terms of the Plan and this grant, the terms of the
Plan control. 
 By acknowledging the terms of this grant, you acknowledge that: (i) any grant of Options/SARs or other equity compensation is purely
discretionary and is not compensation/salary for termination indemnity purposes; (ii) future awards of Options/SARs or other equity incentives may be discontinued at any time; and (iii) a grant of Options/SARs or other equity compensation
in one year does not guarantee a grant in future years. 
 Your Action Items. Please take the following actions, as appropriate: 
  

	 	•	 	 Acknowledge your receipt of this grant and your agreement to its terms by clicking on the “Accept” button below. Failure to acknowledge receipt
of this grant and agree to its terms will jeopardize your ability to exercise the Options/SARs awarded in this grant. 

  

	 	•	 	 Inform the Company of any change in address or contact information. Refer, if necessary, to the section titled “Notification of Change in Personal
Data” for instructions on how to provide notification to the Company. 

 Sincerely yours, 
 Thomas A. Piraino, Jr. 
 Vice President, General Counsel and Secretary

  

 Page 5Form of 2008 Target Incentive Bonus Award Letter

 Exhibit 10.3 
 

 
  

	TO:	[Name] 

  
 August 15, 2007 
 NOTICE OF FISCAL YEAR 2008 
 TARGET INCENTIVE BONUS AWARD 
 UNDER
PERFORMANCE BONUS PLAN 
 Dear
                                : 
 On August 15, 2007, the Human Resources and Compensation Committee of the Board of Directors (“Committee”) of Parker-Hannifin Corporation
(“Company”) authorized a Target Incentive Bonus award (“Award”) to you under the Company’s Performance Bonus Plan (“Bonus Plan”). Payments made under the Plan will be qualified as “performance-based
compensation” for purposes of Section 162(m) of the Internal Revenue Code of 1986 and Section 1.162-27 of the Treasury Regulations promulgated thereunder. Your Award is in the target amount of
$             (“Target Amount”), subject to the following terms and conditions: 
 1. Your payout under this Award (“Payout”) will be based upon the Company’s actual operating cash flow less capital expenditures (free cash flow) expressed as a percent of the Company’s sales
(“FCF Margin”) for fiscal year 2008 (“Performance Period”). Discretionary pension contributions by the Company are not included in the calculation of the FCF Margin. You will receive a Payout of 100% of your Target Amount if the
Company achieves an FCF Margin of 6% for the Performance Period. If the Company’s FCF Margin is above or below 6% for the Performance Period, your Payout will be a proportion of the Target Amount as set forth in the table below. The minimum
threshold for any Payout under the Award is 3% FCF Margin during the Performance Period. 
  

																	
	 FY08
 FCF Margin:
	  	<3.00%	  	3.00%	  	4.00%	  	5.00%	  	6.00%	  	7.00%	  	8.00%	  	39.00%
									
	Payout %:	  	0%	  	25%	  	50%	  	75%	  	100%	  	133%	  	167%	  	200%

 2. The Payout earned under the Award will be paid at the end of the Performance Period.

 3. If you retire (at or after age 60, or earlier with the consent of the Committee), die or become disabled during the Performance Period
or otherwise have not served in an eligible position during the full Performance Period, then, you will be entitled to receive a portion of the Payout in proportion to the number of full months worked during the Performance Period. Termination of
your employment for any other reason during the Performance Period will result in full forfeiture of your Award. 

 4. Your Payout will be paid in cash, or you may elect to receive the Payout in the form of a credit to
your Executive Deferral Plan account in accordance with rules established by the Company. The Payout will be made following certification of the calculation of the FCF Margin by the Committee at the end of the Performance Period. The Committee
retains the ability to reduce the Payout at its sole discretion. The amount of the Payout is also subject to the payout limitations set forth in Section 5(c) of the Bonus Plan. 
 5. The Award is subject to all terms, conditions and provisions of the Bonus Plan to the extent not specifically addressed herein. In the event of any
conflict between the terms of the Bonus Plan and the Award, the Bonus Plan will control. 
 Please acknowledge receipt of the Award and indicate your
agreement with the terms hereof by signing and returning a copy to me as soon as possible. 
 Thomas A. Piraino, Jr. 
 Vice President, General Counsel 
     And Secretary

  
 Receipt Acknowledged and Agreed: 
  
                                       
                                        
                                        
  Date:

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