PALL CORP
EMPLOYMENT AGREEMENT -- CHARLES GRIMM
<DOCUMENT>
<TYPE>EX-10.6
<SEQUENCE>9
<FILENAME>b316968ex_10-6.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT -- CHARLES GRIMM
<TEXT>
<PAGE>

                                  EXHIBIT 10.6
                                                           [Group Vice President
                                                                    Split Bonus]


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

         WHEREAS, the parties hereto are parties to an employment agreement
dated August 1, 1998 (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:

Section 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.

Section 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 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. 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 a Group
                  Vice President. The failure of any future Board of Directors
                  to elect Executive to the office just named shall not,
                  however, be deemed to relieve either party hereto of any of
                  his or its obligations under this Agreement.


<PAGE>

         (b)      If 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.

Section 3.        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 Executive a Base Salary (in addition to the
                  compensation provided for elsewhere in this Agreement) at the
                  rate of $203,216 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 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.


                                       2
<PAGE>

                         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 order 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 of Directors
                  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.

                  (i)      Plan Bonus. 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 28% of his Base Salary for such
                           Fiscal Year.

                                       3
<PAGE>

                  (ii)     Business Segment Bonus. Inasmuch as Executive's
                           services for the Company relate primarily to the
                           operations of a subsidiary, a division or other
                           segment of the overall operations of the Company and
                           its subsidiaries (a "Business Segment"), Executive
                           shall be considered for additional bonus compensation
                           for each Fiscal Year based on the results of
                           operations of such Business Segment for such Fiscal
                           Year. The amount of such additional bonus
                           compensation, if any, shall be determined by the
                           Chief Executive Officer in his sole discretion but in
                           no event shall such additional bonus compensation
                           exceed 42% of Executive's Base Salary.

                  (iii)    Payment of Bonus Compensation. Executive's Bonus
                           Compensation (which term as used herein includes both
                           the Plan Bonus and the Business Segment Bonus, if
                           any) shall be paid in accordance with ss.5 of the
                           Bonus Plan. With respect to any Fiscal Year which
                           falls in part but not in whole within the Term of
                           Employment, the pro rata portion of the Bonus
                           Compensation to which Executive is entitled under
                           this ss.3(b) shall be determined in accordance with
                           ss.3(c) of the Bonus Plan.

         (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>

Section 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
                  Executive's Bonus Compensation prorated to said last day of
                  the month 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 an amount
                  equal to 1/12th of 64% 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
                  64% 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 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, Executive's Base
                  Salary and Bonus Compensation prorated to the date on which
                  the Term of Employment ends. (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.

                                       5
<PAGE>

         (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.

Section 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.

Section 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>

Section 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.

Section 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.

Section 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.

                                       7
<PAGE>

Section 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.

Section 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.

Section 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.

Section 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>

Section 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


                                              EXECUTIVE

                                                   /s/ Charles Grimm
                                                   -----------------------------
                                                       Charles Grimm


                                       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


</TEXT>
</DOCUMENT>
