SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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/ / Preliminary Proxy Statement
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14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AIR PRODUCTS AND CHEMICALS, INC.
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(Name of Registrant as Specified in its Charter)
AIR PRODUCTS AND CHEMICALS, INC.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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(4) Date Filed: 11-21-95
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Air Products and Chemicals, Inc.
7201 Hamilton Boulevard
Allentown, PA 18195-1501
December 8, 1995
Dear Shareholder:
On behalf of your Board of Directors, I am pleased to invite you to attend the
1996 Annual Meeting of Shareholders of Air Products and Chemicals, Inc. The
meeting will be held on Thursday, January 25, 1996, at 2:00 p.m., in the
Tompkins College Center Theater at Cedar Crest College in Allentown,
Pennsylvania.
The attached Notice of Annual Meeting and Proxy Statement describe the business
to be conducted at the meeting, including the election of four directors. The
Board of Directors has nominated Dr. Ruth M. Davis and Messrs. Robert Cizik,
Terry R. Lautenbach and Ruud F. M. Lubbers.
It is important that your shares be represented at the meeting, regardless of
the number you may hold. Whether or not you can be present in person, please
sign, date and return your proxy as soon as possible. If you do attend, your
proxy can be revoked at your request in the event you wish to vote in person. A
summary report of actions taken at the meeting will be available upon request
with the financial results of the first quarter of fiscal year 1996.
We look forward to seeing you at the meeting.
Cordially,
Harold A. Wagner
Chairman of the Board, President
and Chief Executive Officer
Notice of Annual Meeting of Shareholders
to be held
January 25, 1996
To the Holders of Common Stock of
Air Products and Chemicals, Inc.
The Annual Meeting of Shareholders of Air Products and Chemicals, Inc., a
Delaware corporation, will be held in the Tompkins College Center Theater at
Cedar Crest College in Allentown, Pennsylvania, on Thursday, January 25, 1996,
at 2:00 p.m. for the following purposes:
1. To elect four directors each for a three-year term.
2. To ratify the appointment of independent certified public accountants for
the fiscal year ending September 30, 1996.
3. To consider and take action upon a proposal to amend Article Fourth of
the Company's Restated Certificate of Incorporation to increase the
number of shares of common stock authorized for issuance from 150,000,000
shares to 300,000,000 shares.
4. To consider and take action upon a proposal to approve 1997 Amendments
to the Company's 1990 Long-Term Incentive Plan.
5. To consider and take action upon a proposal to approve Internal Revenue
Code Section 162(m) Amendments to the Company's 1990 Long-Term Incentive
Plan.
6. To consider and take action upon a proposal to approve Internal Revenue
Code Section 162(m) Annual Incentive Plan Terms.
7. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Shareholders of record at the close of business on November 30, 1995, are
entitled to receive notice and to vote at the meeting. A complete list of such
shareholders will be open for examination by any shareholder for any purpose
germane to the meeting at the Company's office at 7201 Hamilton Boulevard,
Allentown, Pennsylvania 18195-1501, for a period of ten days prior to the
meeting.
If you do not plan to attend the meeting in person, you are urged to vote, sign,
date and mail the enclosed proxy immediately. The proxy is revocable and will
not affect your right to vote in person in the event you find it convenient to
attend the meeting.
By order of the Board of Directors
James H. Agger
Vice President, General Counsel
December 8, 1995 and Secretary
PROXY STATEMENT
Table of Contents
Page
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING.................................................................1
AGENDA ITEM NO. ONE: ELECTION OF DIRECTORS...........................................................1
The Board of Directors.......................................................................1
Nominees for Director........................................................................2
Directors Continuing in Office...............................................................3
Meetings and Committees of the Board.........................................................6
Other Relationships and Transactions.........................................................7
Remuneration of Directors....................................................................7
Director Term Limitation and Retirement Policy...............................................8
AGENDA ITEM NO. TWO: RATIFICATION OF APPOINTMENT OF
INDEPENDENT ACCOUNTANTS...........................................................................8
AGENDA ITEM NO. THREE: AMENDMENT TO RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE AUTHORIZED
SHARES............................................................................................8
AGENDA ITEM NO. FOUR: APPROVAL OF 1997 AMENDMENTS TO
THE 1990 LONG-TERM INCENTIVE PLAN................................................................10
AGENDA ITEM NO. FIVE: APPROVAL OF INTERNAL REVENUE
CODE SECTION 162(m) AMENDMENTS TO THE 1990 LONG-TERM
INCENTIVE PLAN...................................................................................12
AGENDA ITEM NO. SIX: APPROVAL OF INTERNAL REVENUE CODE
SECTION 162(m) ANNUAL INCENTIVE PLAN TERMS.......................................................14
OTHER MATTERS........................................................................................15
ADDITIONAL INFORMATION FOR SHAREHOLDERS.......................................................................15
COMPENSATION OF EXECUTIVE OFFICERS...................................................................15
Report of the Management Development and Compensation Committee.............................15
Compensation and Option Tables..............................................................18
Stock Performance Information...............................................................23
Pension Plans...............................................................................23
Certain Agreements With Executive Officers..................................................24
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.......................................................................................25
CERTAIN PROCEDURAL INFORMATION.......................................................................28
SUMMARY OF PRINCIPAL PROVISIONS OF AIR PRODUCTS AND
CHEMICALS, INC. 1997 LONG-TERM INCENTIVE PLAN...................................................A-1
AIR PRODUCTS AND CHEMICALS, INC. 1997 LONG-TERM INCENTIVE PLAN......................................A-4
Air Products and Chemicals, Inc.
7201 Hamilton Boulevard
Allentown, PA 18195 - 1501
Annual Meeting of Shareholders
January 25, 1996
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Air Products and Chemicals, Inc., a Delaware
corporation (the "Company" or "Air Products"), to be used at the Annual Meeting
of Shareholders of the Company to be held January 25, 1996, and at any
adjournment thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting of Shareholders and in this Proxy Statement.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
AGENDA ITEM NO. ONE: ELECTION OF DIRECTORS
The Board of Directors
The Board of Directors currently has 12 positions. Due to the retirement of
Will M.Caldwell in accordance with the Company's term limitation and retirement
policy for directors and assuming the election by the shareholders of the four
persons standing for election as directors on January 25, 1996, the Board will
have 11 members after the Annual Meeting. The Board is divided into three
classes, with each director normally elected to serve for a three-year term
and one full class of directors to be elected at each Annual Meeting.
At this year's meeting, Dr. Ruth M. Davis and Messrs. Robert Cizik and Terry R.
Lautenbach, three incumbent Class I directors whose terms are currently
scheduled to expire at the 1996 Annual Meeting, have been nominated for
re-election for three-year terms as Class I directors. Mr. Ruud F. M. Lubbers
has been nominated for re-election as a Class I director to fill a vacancy which
will exist in that class following the retirement referred to above.
The Board of Directors and management recommend a vote "FOR" the election to the
Board of Directors of Dr. Davis and Messrs. Cizik, Lautenbach, and Lubbers.
The following pages set forth information regarding the nominees for election as
well as information about the directors whose terms of office do not expire this
year. Each such director has consented to being named as nominee for director
and agreed to serve if elected. All of the nominees are currently directors and
all have been elected by the shareholders at prior meetings, except for Mr.
Lubbers who was elected as a Class II director by the directors in May 1995. Mr.
Lubbers will resign from his current class of director if elected as a member of
the new class for which he has been nominated.
Under applicable Delaware law, directors shall be elected by a plurality of the
shares present in person or represented by proxy at the Annual Meeting and
entitled to vote on the election of directors. Thus, the nominees for election
to the Board of Directors receiving the greatest number of the affirmative votes
cast, up to the number of directors to be elected, will be elected as directors.
Proxies will be voted for the election of all four of the foregoing nominees
unless instructions to "withhold" votes are set forth on the proxy card,
although withholding votes will not influence voting results so long as a quorum
is present. Abstentions may not be specified as to election of directors. Under
the rules of the New York Stock Exchange, Inc. ("NYSE") brokers who hold shares
1
in street name for customers have the authority to vote on certain items when
they have not received instructions from their customers, the beneficial owners
of the shares. Thus, brokers that do not receive instructions are entitled to
vote on the election of the foregoing four nominees for director. If, as a
result of circumstances not known or unforeseen, any of such nominees shall be
unavailable to serve as a director, proxies will be voted for the election of
any other person or persons as the Board of Directors may select.
Information follows with regard to the age, business experience and certain
Board committee memberships as of November 1, 1995 of the nominees for directors
and the directors continuing in office.
Nominees for Director:
Class I - To serve until the annual election of directors in 1999 or until their
successors are elected and qualified.
ROBERT CIZIK, age 64. Chairman of the Board of Cooper Industries, Inc. Director of the Company since 1992.
Member of the Audit and Management Development and Compensation Committees.
Mr. Cizik joined Cooper Industries, Inc., a diversified, worldwide manufacturing
company, in 1961 and served in various financial, planning and management
positions prior to becoming President and Chief Operating Officer in 1973. He
served as Cooper's Chief Executive Officer from 1975 to 1995, and has served as
Chairman of the Board since 1983. Mr. Cizik is a director of Harris Corporation,
Panhandle Eastern Corporation, Temple Inland Inc., and Cooper Cameron
Corporation.
RUTH M. DAVIS, age 67. Since 1981, President and Chief Executive Officer of The Pymatuning Group, Inc.,
Alexandria, Virginia, which specializes in technology management services. Director of the
Company since 1984. Chairman of the Environmental, Safety and Public Policy Committee and member
of the Executive and Nominating and Corporate Governance Committees.
Dr. Davis was Assistant Secretary of Energy from 1979 to 1981 and Deputy Under
Secretary of Defense for Research and Advanced Technology from 1977 to 1979. Dr.
Davis is chairman of the board of trustees of The Aerospace Corporation and
serves as a director or trustee of Sprint Corporation, Consolidated Edison
Company of New York, Inc., Varian Associates, Inc., Ceridian Corporation,
Premark International, Inc., Softech, Inc., Giddings & Lewis, Inc., BTG, Inc.,
and the Principal Financial Group of Des Moines, Iowa. Dr. Davis has been
elected to the National Academy of Engineering, the National Academy of Public
Administration and the American Academy of Arts and Sciences.
2
TERRY R. LAUTENBACH, age 57. Former Senior Vice President of International Business Machines Corporation.
Director of the Company since 1991. Chairman of the Management Development and Compensation
Committee and member of the Environmental, Safety and Public Policy Committee.
Mr. Lautenbach joined IBM, a manufacturer and supplier of information handling
systems, equipment and services, in 1959, and held numerous positions in the
marketing area until becoming IBM Vice President - Marketing in 1984, President
- -Communication Products Division in 1985, Vice President and Group Executive
- -Information Systems and Communications Group in 1986, and Senior Vice President
and General Manager in 1988. Mr. Lautenbach served as Senior Vice President and
was a member of IBM's Management Committee from 1990 to 1992. He serves as a
director of Melville Corp., Loomis Sayles Mutual Funds, Varian Associates, Inc.
and Xavier University.
RUUD F. M. LUBBERS, age 56. A Minister of State and the former Prime Minister of the Netherlands. Director of
the Company since 1995.
Mr. Lubbers held senior level positions within the Dutch government for over
twenty years. Between 1973 and 1977, he served as Minister for Economic Affairs,
in 1978 he became Parliamentary leader of the Christian Democratic Alliance, and
he was Prime Minister from 1982 until 1994. Mr. Lubbers is a professor of
international economics and globalization. He teaches at the Katholic University
Brabant and at the John F. Kennedy School of Government at Harvard University.
He serves as the Chair of the Institute of Foreign Relations in The Hague. Mr.
Lubbers serves as a director of Hollandia Industriele Maatschappij and Content.
Directors Continuing in Office:
Class II - To serve until the annual election of directors in 1997 or until
their successors are elected and qualified.
TOM H. BARRETT, age 65. Partner in American Industrial Partners, a
private investment partnership, since 1992. Prior to this, he
was Chairman of the Board, President and Chief Executive Officer
of The Goodyear Tire & Rubber Company until his retirement in
1991. Director of the Company since 1990. Member of the Audit,
Finance, and Management Development and Compensation Committees.
3
Mr. Barrett joined The Goodyear Tire & Rubber Company, a major producer of
tires, in 1953 and held numerous positions in the technical and production
areas. He was elected an officer of the Company in 1976, a director in 1979, and
President and Chief Operating Officer in 1982. He became Chief Executive Officer
in 1988 and Chairman in 1989. Mr. Barrett is a director of A. O. Smith
Corporation, Mutual Life Insurance of New York, Rubbermaid, Inc. and Fieldcrest
Cannon, Inc.
L. PAUL BREMER, III, age 54. Managing Director of Kissinger Associates.
Director of the Company since 1993. Chairman of the
Nominating and Corporate Governance Committee and member
of the Environmental, Safety and Public Policy Committee.
Former Ambassador Bremer joined Kissinger Associates, a strategic consulting
firm headed by former Secretary of State, Henry Kissinger, in 1989 following a
23 year career in the United States Diplomatic Service. Ambassador Bremer held
various assignments including political, economic and commercial officer at the
American Embassies in Afghanistan and Malawi and Deputy Chief of Mission and
charge' d' affaires at the American Embassy in Oslo, Norway. He was appointed
Executive Secretary of the State Department and Special Assistant to the
Secretary of State in 1981. In 1983, he was named United States Ambassador to
the Netherlands and in 1986 he was appointed Ambassador-at-Large for
Counter-Terrorism. Ambassador Bremer is also a director of Conner Peripherals,
Inc., the Foreign Policy Association and the Netherland-America Foundation.
JUDITH RODIN, age 51. President of the University of Pennsylvania.
Director of the Company since 1993. Chairman of the Audit
Committee and member of the Finance Committee.
Dr. Rodin became the President of the University of Pennsylvania in July 1994.
Prior to assuming her current position, Dr. Rodin was Provost of Yale
University. Dr. Rodin joined the Yale faculty in 1972, and held teaching and
research positions of increasing responsibility in the Department of Psychology,
in 1985 becoming Professor of Medicine and Psychology. She was Chair of the
Department of Psychology from 1989 to 1991, Dean of the Graduate School of Arts
and Sciences from 1991 to 1992 and assumed the position of Provost in 1992.
Also, since 1983, Dr. Rodin has served as the Chair of the John D. and Catherine
T. MacArthur Foundation Research Network on Determinants and Consequences of
Health-Promoting and Health-Damaging Behavior. Dr. Rodin is a director of Aetna.
HAROLD A. WAGNER, age 60. Chairman of the Board, President and Chief Executive Officer of the Company. Director
of the Company since 1991. Member of the Executive and Finance Committees.
Mr. Wagner joined the Company in 1963 and held various positions of increasing
responsibility becoming Vice President, Sales, Industrial Gas Division - U.S. in
1981. He became Vice President - Planning in 1982, Vice President - Business
Divisions, Chemicals Group in 1987, President of Air Products Europe, Inc. in
1988, Executive Vice President - Gases and Equipment in 1990, and President and
Chief Operating Officer in 1991. Mr. Wagner was elected to his present position
in 1992. Mr. Wagner is a director of United Technologies Corp. and the Chemical
Manufacturers Association, and a trustee of Lehigh University, the Committee for
Economic Development, and the Eisenhower Exchange Fellowships, Inc.
4
Class III - To serve until the annual election of directors in 1998 or until
their successors are elected and qualified.
DEXTER F. BAKER, age 68. Former Chairman of the Board and Chief Executive
Officer of the Company. Director of the Company since
1964. Chairman of the Executive Committee and member
of the Finance Committee.
Mr. Baker joined the Company in 1952 and became head of the Company's operations
in Europe in 1964. He was elected Executive Vice President in 1968, President
and Chief Operating Officer in 1978, and Chairman of the Board and Chief
Executive Officer in 1986. In 1988 he relinquished the position of President
which he reassumed in 1990 and relinquished again in 1991. In accordance with
the Company's retirement policy for senior executives, Mr. Baker retired from
his position of Chairman and Chief Executive Officer in 1992. Mr. Baker is a
director of AMP Incorporated and Eastman Chemical Co. He is a trustee of the
Harry C. Trexler Foundation.
TAKEO SHIINA, age 66. Chairman of IBM Japan, Ltd. Director of the
Company and Chairman of the Company's Japanese Advisory
Council since 1993. Member of the Environmental, Safety and
Public Policy and Nominating and Corporate Governance
Committees.
Mr. Shiina joined IBM Japan, Ltd., a manufacturer and supplier of information
handling systems, equipment and services, in 1953 and thereafter held marketing,
operations and corporate staff positions. Mr. Shiina was elected President of
IBM Japan, Ltd. in 1975, became its President and Chief Executive Officer in
1978, and its Chairman and Chief Executive Officer in January 1993. He was
elected Vice President of International Business Machines Corporation (U.S.) in
1989 and served until March 1993. Mr. Shiina assumed his current position and
became Chairman of the IBM Japan Advisory Board in March 1993. Mr. Shiina is a
director of IBM Asia Pacific, AMP Incorporated, and HOYA Corp. He is Senior
Advisor of Bankers Trust Company, Japan, serves on the European Advisory Board
of Bankers Trust Company, and is a trustee of the Aspen Institute.
LAWRASON D. THOMAS, age 61. Vice Chairman of Amoco Corporation. Director of
the Company since 1994. Member of the Audit and Nominating
and Corporate Governance Committees.
Mr. Thomas joined Amoco Chemical Company, a subsidiary of Amoco Corporation, an
integrated petroleum company, in 1958. He held various sales, marketing and
administrative positions with Amoco's chemical and oil subsidiaries before being
named Amoco Oil Company's Vice President of Operations, Planning, and
Transportation in 1976, Executive Vice President in 1979, and President in 1981.
He was elected a director of Amoco Corporation in 1989, Executive Vice President
in 1990 and assumed his current position as Vice Chairman in July 1992. Mr.
Thomas will retire as Vice Chairman and from the Board of Directors of Amoco
Corporation effective January 1, 1996 and will continue until April 1996 as
senior advisor to the Chairman and a senior representative to international
trade groups, partners and governments. Mr. Thomas is a member of the board of
directors of the American Petroleum Institute, the America-China Society, the
National Association of Manufacturers and the National Merit Scholarship
Program.
5
Meetings and Committees of the Board
The Board of Directors of the Company met seven times during fiscal year 1995
and the outside members of the Board of Directors met once for their annual
review of CEO performance, in a session led by the Chairman of the Management
Development and Compensation Committee and preceded by Mr. Wagner's review of
his corporate strategy and management succession and organizational plans.
During the year, the average attendance of directors at meetings of the Board of
Directors and meetings of committees of the Board to which they belonged was
approximately 94%, including that of Mr. Shiina who attended less than 75% of
such meetings.
The Board has six standing committees. These committee memberships are indicated
in the preceding biographical information.
The Audit Committee consists of four directors, none of whom is an employee of
the Company. The Committee, which met three times in fiscal year 1995, reviews
significant matters relating to the audit and internal controls of the Company,
reviews the results of audits by the Company's independent auditors, reviews the
activities of the internal audit staff, and recommends selection of the
Company's independent auditors for approval by the Board, subject to
ratification by the shareholders. The Committee reviews and transmits to the
Board the audited financial statements of the Company after the close of each
fiscal year.
The Environmental, Safety and Public Policy Committee, which consists of four
directors, met twice during the last fiscal year. The Committee is responsible
for monitoring for and reporting to the Board regarding Company responses to
issues and matters of concern in such areas as environmental compliance, safety,
government, political and economic matters, community relations, and corporate
and foundation philanthropic programs and charitable contributions.
The Executive Committee, which consists of four directors, met once during
fiscal year 1995. Such Committee has authority to act on most matters during
intervals between Board meetings.
The Finance Committee, which consists of five directors, met three times in
fiscal year 1995. The Committee reviews the Company's financial policies, keeps
informed of its operations and financial condition, including requirements for
funds, advises the Board concerning sources and disposition of Company funds,
evaluates investment programs, and reviews the Company's continuing financial
arrangements and methods of external financing.
The Management Development and Compensation Committee, which consists of four
non-employee directors, met five times in fiscal year 1995. The Committee
provides advice in connection with the Company's succession planning,
establishes the Company's executive compensation policies, oversees the
administration of the incentive compensation plans for executives and key
employees, and reviews the actions of those responsible for the administration
of the Company's pension and savings plans, from time to time approving
amendments to such incentive, pension and savings plans on behalf of the Board.
The Committee is also charged with the responsibility of approving the
individual salary, bonus and incentive plan awards of the chief executive
officer, the other executive officers and certain other senior executives, and
for annually reviewing with the Board of Directors the performance of the chief
executive officer.
The Nominating and Corporate Governance Committee, which consists of four
non-employee directors, met twice during the last fiscal year. The Committee
reviews possible candidates for membership on the Board of Directors, including
any recommended in good faith by a registered shareholder with the consent of
the candidate, and makes recommendations to the Board concerning candidates for
the Board of Directors. Any recommendations from shareholders should be sent to
the Secretary of the Company. The Committee also recommends for Board approval
the functions and schedules of the Board and of its various committees and the
membership of the committees; director remuneration, plans and programs; and
Board tenure and retirement policies.
6
Other Relationships and Transactions
During the past fiscal year, the Company has had commercial transactions in the
ordinary course of business with industrial corporations, banks, universities
and other entities with which certain of the directors are or were affiliated,
as indicated on pages 2-5 of this Proxy Statement. Such transactions arose out
of negotiations between the parties conducted at arm's length in competitive
situations, were on the same basis as those with nonaffiliated companies, and
the Company believes them to have been fair. The Company does not believe that
the interest of any such director in the transactions is material either to the
Company or to the individual involved. The Company anticipates that it will
continue to have similar transactions with such entities in the future.
Remuneration of Directors
Directors who are not employees of the Company are paid retainers at an annual
rate of $25,000 and, if they serve as chairman of a committee of the Board, an
additional annual retainer of $3,000. Non-employee directors are also paid
$1,000 for each Board and each committee meeting they attend, and $600 for
participating in a meeting by conference call unless there is more than one
conference call in one day, in which case the fee is $1,000. In addition,
non-employee directors are reimbursed for expenses incurred in performing their
duties as directors. Members of the Company's Japan Advisory Council, including
Mr. Shiina, receive an annual fee of $15,000 for serving on such Council, along
with reimbursement of their expenses incurred in performing related duties.
Non-employee directors are permitted to defer receiving payment of all or a
portion of their retainers and meeting fees until after their Board service ends
by making an irrevocable deferral election in advance of earning such
compensation under the deferred compensation plan for directors. Deferred
compensation is accrued on the books of the Company as an unfunded liability and
has been deemed to earn interest at Moody's long-term, "A"-rated industrial bond
rate. Effective October 19, 1995, the plan was amended to allow directors who
elect to defer compensation earned beginning in calendar year 1996 to
irrevocably choose between the foregoing interest account and a phantom Company
common stock account under which compensation otherwise payable is converted to
units by dividing the deferred amount by the market value of a share of common
stock and phantom dividends are deemed reinvested in further phantom stock
units. Also, directors who will continue to serve in 1996 were given the
opportunity to direct all or some of their existing plan account to the new
phantom stock account. Payments of deferred compensation can be made in a lump
sum or in up to ten installments and, if made in respect of the interest
account, are in the form of cash and, if in respect of the stock account, in
shares of Company common stock. In the case of the death of a director or a
change in control (as defined in the plan) followed by a director's cessation of
Board service, the director's entire plan account is payable immediately in a
single cash lump sum.
The Company provides pension benefits pursuant to an unfunded pension plan for
directors who have not been employees of the Company and who complete at least
six years of service as a director. Such eligible retired directors will receive
$3,750 quarterly for the remainder of their lives following the end of their
Board service, although directors who first served on the Board after calendar
year 1992 will not begin receiving these quarterly amounts until the later of
the end of their Board service and their attainment of age 65.
Each year under the Company's stock option plan for directors, directors who
have not been Company employees and who are members of the Board immediately
following the annual meeting of shareholders, receive an option to purchase
1,000 shares of Company common stock at market value on the date of grant. Each
option becomes exercisable six months after grant, and remains exercisable for
10 years after grant unless Board service ceases before six years (other than
for disability or death).
7
Director Term Limitation and Retirement Policy
The Company's term limitation and retirement policy for directors limits
directors to four three-year terms (or 12 years) of Board service, unless the
director had already attained age 65 when the term limitation policy was first
adopted. Further, directors who have never been Company employees are to tender
their resignation for consideration by the Nominating and Corporate Governance
Committee upon a change in principal position or identity other than due to
normal retirement and are not to stand for election to a term during which age
71 would be achieved. Finally, directors who are also Company employees,
including the chief executive officer, must retire from the Board upon
retirement on or after January 1, 1994 from active employment with the Company.
Company policy requires the chief executive officer and other executive officers
to retire from Company employment at age 65.
AGENDA ITEM NO. TWO: RATIFICATION OF
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
At its meeting held on November 16, 1995, the Board of Directors of the Company
upon recommendation of its Audit Committee approved the designation of Arthur
Andersen LLP of Philadelphia, Pennsylvania, as independent certified public
accountants for the Company for the fiscal year ending September 30, 1996,
subject to ratification by the shareholders at the Annual Meeting. This
accounting firm has performed such service since 1948.
A representative of Arthur Andersen LLP is expected to be present at the Annual
Meeting of Shareholders. Such representative will be offered the opportunity to
make a statement and will be available to respond to appropriate questions.
Under applicable Delaware law and the Company's By-Laws, as amended, the outcome
of this agenda item will be determined by the vote of the holders of a majority
of the shares present in person or represented by proxy at the Annual Meeting
and having voting power on this matter. Proxies marked as abstaining will be
counted in the tabulation of the vote cast and, thus, will have the effect of a
vote against the proposal. Under New York Stock Exchange Rules, brokers that do
not receive instructions from their customers may nevertheless vote on the
matter.
The Board of Directors and management recommend a vote "FOR" the ratification of
the appointment of Arthur Andersen LLP as independent certified public
accountants.
AGENDA ITEM NO. THREE: AMENDMENT TO RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE AUTHORIZED SHARES
The Board of Directors has unanimously approved for submission to a vote of the
shareholders of the Company a proposal to amend the first paragraph of Article
FOURTH of the Company's Restated Certificate of Incorporation so that additional
authorized shares of common stock will be available for issuance in order to
meet possible future developments for which the issuance of stock may be in the
interests of the Company. The text of the first paragraph of Article FOURTH, as
it is proposed to be amended, is as follows:
"FOURTH: The total number of shares of stock which the
Corporation shall have the authority to issue is three hundred
twenty-five million (325,000,000) shares, consisting of three hundred
million (300,000,000) shares of common stock having a par value of
$1 per share and twenty-five million (25,000,000) shares of preferred
stock having a par value of $1 per share."
Presently, the Company's Restated Certificate of Incorporation provides that the
total number of shares of stock authorized is 175,000,000 shares, of which
150,000,000 is common stock of the par value of $1 per share and 25,000,000 is
preferred stock of the par value of $1 per share. The Board has determined that
the Restated Certificate of Incorporation should be amended to increase the
authorized number of shares of common stock from 150,000,000 to 300,000,000.
This amount does not include or affect the 25,000,000 shares of preferred stock
8
which were previously authorized and shall remain unchanged.
Of the 150,000,000 shares of common stock presently authorized, as of November
30, 1995 121,802,283 shares were outstanding (including 10,000,000 shares held
under a trust created to provide for satisfaction of certain obligations of the
Company and its affiliates under various employee benefit and compensation
plans, programs, practices and structures), and 2,925,509 shares were held in
the Company's treasury. As of November 30, 1995, none of the 25,000,000 shares
of preferred stock presently authorized were issued or outstanding. If this
proposal to amend the Restated Certificate of Incorporation and the proposal to
approve 1997 Amendments to the Company's 1990 Long-Term Incentive Plan including
authorization for 6,000,000 shares of common stock for future awards under such
Plan (as described below under Agenda Item No. Four) are both approved by
shareholders at the Annual Meeting, 172,197,717 shares of common stock would be
unreserved and available for future issuance.
The purpose of the increase in authorized shares is to provide additional shares
of common stock that could be issued for corporate purposes without further
shareholder approval unless required by applicable law or regulation. Future
purposes for additional shares could include paying stock dividends, subdividing
outstanding shares through stock splits, effecting acquisitions of other
businesses or properties and securing additional financing for the operation of
the Company through the issuance of additional shares. The Company has no plan,
commitment or understanding at this time to issue any shares of the proposed
additional common stock.
The Board does not intend to issue any shares to be authorized under the
amendment except upon terms that the Board deems to be in the best interests of
the Company. The issuance of additional common stock without further shareholder
approval may, among other things, have a dilutive effect on earnings per share
and on the equity and voting rights of the present holders of common stock.
The additional shares of common stock for which authorization is sought would be
identical to the shares of common stock now authorized. The holders of common
stock do not presently have preemptive rights to subscribe for any of the
Company's securities and will not have any such rights to subscribe for the
additional common stock proposed to be authorized.
The Company intends to apply for the listing on the New York Stock Exchange of
any additional shares of common stock if and when such shares are issued.
Proxies will be voted for the proposed amendment to the Company's Restated
Certificate of Incorporation unless contrary instructions are set forth on the
proxy card. Under applicable Delaware law and the Company's By-Laws, as amended,
the outcome of this agenda item will be determined by the vote of the holders of
a majority of all of the issued and outstanding common stock of the Company as
of the November 30, 1995 record date for the Annual Meeting. Proxies marked as
abstaining will be counted in the tabulation of the vote cast and, thus, will
have the effect of a vote against the proposal. Under New York Stock Exchange
Rules, brokers that do not receive instructions from their customers may
nevertheless vote on the matter.
The Board of Directors and management recommend a vote "FOR" the proposed
Amendment to Restated Certificate of Incorporation to Increase
Authorized Shares.
9
AGENDA ITEM NO. FOUR: APPROVAL OF 1997 AMENDMENTS
TO THE 1990 LONG-TERM INCENTIVE PLAN
The Company's Incentive Compensation Program (the "Incentive Program")
previously approved, amended, or continued by the shareholders in 1979, 1984,
and 1989, currently consists of three separate plans: the 1990 Long-Term
Incentive Plan, the 1990 Deferred Stock Plan, and the 1990 Annual Incentive
Plan. These plans, which contemplate or permit the delivery of shares of the
Company's common stock to employees, were approved by shareholders to continue
in effect indefinitely, permitting additional awards to be granted thereunder
until any or all of the plans are terminated, amended or suspended by the
Management Development and Compensation Committee (the "Committee") of the Board
or until, in the case of the Long-Term Incentive Plan and the Deferred Stock
Plan (together, the "1990 Plans"), the respective maximum number of shares or
units which may be delivered under each of such plans has been delivered. The
Committee regularly reviews the Company's incentive compensation plans and has,
as permitted by the terms of the plans, from time to time approved certain plan
amendments in furtherance of the purposes of the Incentive Program. The
Committee currently believes there are insufficient shares authorized for
delivery under the 1990 Plans to cover awards under those plans beyond fiscal
year 1996.
The Committee and the Board of Directors continue to believe that the future
success of the Company depends in large measure on the Company's ability to
attract, retain and motivate executives and key employees with superior
training, experience and ability and have concluded that in order to continue to
retain and motivate such persons and to compete effectively for new talent, it
is desirable to allow the Incentive Program to continue largely intact into
fiscal year 1997 and beyond, except as required in order to qualify for
continued tax deductibility of cash and stock-related incentive compensation to
be paid to the Company's named executive officers for fiscal year 1996 and later
years. Therefore, the Company intends to continue the 1990 Annual Incentive Plan
and the 1990 Long-Term Incentive Plan (renaming each plan with reference to
"1997"); for simplicity of administration, to transfer authority for granting
deferred stock unit awards to executives and key employees from the 1990
Deferred Stock Plan to the renamed 1997 Long-Term Incentive Plan (the "Plan");
and, subject to shareholder approval, to obtain an additional share
authorization for Plan awards and to make certain amendments to the Plan.
Increased Share Authorization. In 1989, the shareholders authorized 6,000,000
shares of Company common stock to be used for awards under the 1990 Plans, in
addition to 776,846 shares authorized by shareholders in 1984 which were
remaining available for awards under the 1990 Deferred Stock Plan at the time
(the foregoing numbers having been adjusted for the 1986 and 1992 two-for-one
stock splits). All but about 150,300 shares of such authorization have been
committed or utilized under 1990 Plan awards granted for fiscal years 1990
through 1996. Accordingly, shareholder approval of an additional 5,849,700
shares of common stock for delivery under the Plan is requested, which will
permit the delivery of 6,000,000 shares for future Plan awards for fiscal year
1997 and beyond. The number of shares and awards authorized under the Plan are
subject to adjustment by the Committee to avoid dilution or consolidation of
interests.
Amendments. Further, it is proposed that the Plan be amended to provide for the
grant of deferred stock units (after which no further deferred stock unit awards
will be made to executives and key employees under the 1990 Deferred Stock
Plan); to provide for payment of stock appreciation rights at 100%, not 95%, of
the "spread", as described at page A-2 of Exhibit A appended to this Proxy
Statement under 1997 Long-Term Incentive Plan, III, Stock Appreciation Rights;
to permit stock appreciation rights to be granted separately without being
related in any way to any other Plan award; and to simplify shareholder approval
requirements for amending the Plan. As a result of the latter amendment, only
those revisions requiring shareholder approval as a matter of law or by rule of
any stock exchange on which the Company's common stock may be listed, for Plan
awards to qualify for the exemption from Section 16(b) of the Securities
Exchange Act of 1934 provided by Rule 16b-3 thereunder, and for incentive stock
10
options to meet the requirements of Section 422(b) of the Internal Revenue Code,
will be required to be submitted for approval by the Company's shareholders in
the future.
The above-described proposed share authorization and other amendments to the
Plan are referred to herein as the "1997 Amendments".
Plan Administration. The Plan will continue to be administered by the Committee.
Subject to the terms of the Plan, the Committee has the sole discretion to
determine the aggregate amount of Plan awards to be granted in a given year, the
classes of employees who will be granted awards, the terms and conditions of
awards, and the size and types of the individual awards for certain senior
executives including the chief executive officer and all other executive
officers. The Committee has delegated to management its authority to determine
the size and type, and to administer individual awards made to other eligible
executives and key employees. The Plan permits awards to executives and key
employees of the Company and entities affiliated with the Company, including
entities in which the Company holds less than a majority equity position,
whether or not such entities are controlling, controlled by or are under common
control with the Company.
The Committee will determine in its discretion whether to make awards for fiscal
year 1997 and thereafter under the Plan as proposed to be amended, and, if made,
the amount of the awards and recipients thereof. Therefore, it is not possible
to state the amount of the awards which will be granted in the future if the
proposed 1997 Amendments to the Plan are approved. However, such information
with respect to fiscal year 1995 awards granted to executives and key employees
under the 1990 Plans is as follows:
Deferred Stock Securities Underlying
Name and Principal Position Unit Award ($)(1) Stock Options (#)
Harold A. Wagner 346,875 50,000
Chairman, President and
Chief Executive Officer
James H. Agger 115,625 12,000
Vice President,
General Counsel and Secretary
Robert E. Gadomski 185,000 16,000
Group Vice President,
Chemicals Group
Joseph J. Kaminski 231,250 20,000
Executive Vice President,
Gases and Equipment
J. Robert Lovett 115,625 20,000
Executive Vice President,
Strategic Planning and Technology
All Current Executive Officers
as a group 1,179,375 139,100
All Other Employees, including all current
officers who are not executive officers, as a
group 4,338,250 612,570
(1) Based on the October 3, 1994 grant date market value of $46.25 per share.
It is currently anticipated that, if the 1997 Amendments are approved, awards
under the Plan will generally continue to be made to executives and key
employees who are in a position to contribute to the long-term growth of the
Company. There are approximately 350 of such individuals who received awards
under the 1990 Plans in fiscal year 1995. It is also expected that awards will
continue to be granted under the Plan annually by the Committee. An employee may
be granted more than one award under the Plan, and the Committee has granted
since fiscal year 1992, and currently intends to continue to grant, separate
11
awards of nonstatutory stock options and of deferred stock units, known as
"Career Shares", to eligible executives and key employees, including the chief
executive officer and each other executive officer. A Career Share entitles the
recipient to receive a share of Company common stock for each unit of the award
after a deferral period which generally ends two years following retirement from
Company employment. Since 1986 the Committee has not granted any stock
appreciation rights (other than restricted stock appreciation or similar rights
which are exercisable only upon and following a change in control of the
Company); and the Committee has granted no performance units since fiscal year
1991. There are no current plans to grant any stock appreciation rights or
performance units.
Federal Income Tax Consequences to the Company. The Company is advised by its
tax counsel that, under current interpretations of existing federal tax law, the
Company will be entitled to federal income tax deductions with respect to
nonstatutory stock options, stock appreciation rights, performance units, and
deferred stock unit awards at or following the time that taxable income is
realized by an employee with respect to such awards. Generally, income will be
realized upon the exercise of nonstatutory stock options and at the time cash or
stock is delivered to an employee in respect of the other types of awards. No
deduction is allowed to the Company with respect to the grant or exercise of an
incentive stock option. It is possible, however, for the Company to receive a
deduction with respect to an incentive stock option if the participant disposes
of his or her stock before satisfying the applicable holding period rules.
Proxies will be voted for the 1997 Amendments unless contrary instructions are
set forth on the proxy card. Under applicable Delaware law and the Company's
By-Laws, as amended, the outcome of this agenda item will be determined by the
vote of the holders of a majority of the shares present in person or represented
by proxy at the Annual Meeting and having voting power on this matter. Proxies
marked as abstaining will be counted in the tabulation of the vote cast and,
thus, will have the effect of a vote against the proposal. Under New York Stock
Exchange Rules, brokers that do not receive instructions from their customers
may nevertheless vote on this matter.
The Board of Directors and management recommend a vote "FOR" the proposed 1997
Amendments to the 1990 Long-Term Incentive Plan.
A summary of the principal provisions of the Plan as proposed to be amended by
the 1997 Amendments and the Section 162(m) Amendments, as defined and described
under Agenda Item No. Five below, and the full text of the Plan incorporating
such amendments, are appended to this Proxy Statement as Exhibit A. Such summary
is qualified in its entirety by reference to the Plan text.
AGENDA ITEM NO. FIVE: APPROVAL OF INTERNAL REVENUE CODE
SECTION 162(m) AMENDMENTS TO THE 1990 LONG-TERM INCENTIVE PLAN
In 1993, the United States Congress adopted Internal Revenue Code Section
162(m) ("Section 162(m)") which places limits on the federal income tax
deduction by the Company of certain compensation in excess of $1,000,000 for any
taxable year. In order for compensation attributable to future stock options,
deferred stock units, stock appreciation rights, and performance units granted
under the 1990 Long-Term Incentive Plan, as amended by the 1997 Amendments as
defined and described under Agenda Item No. Four above (the "Plan"), to be
"performance-based" compensation exempt from the limitations of Section 162(m),
shareholder approval is sought for the following Plan amendments and terms (the
"Section 162(m) Amendments"):
o amendments limiting to 500,000, the number of shares subject to
nonstatutory stock options and stock appreciation rights that can be
awarded annually to any one person (with awards of stock options and of
stock appreciation rights granted in "tandem" with each other, as
described under 1997 Long-Term Incentive Plan at page A-1 of Exhibit A
referenced under Agenda Item No. Four above, being deemed to have been
granted with respect to the same shares of common stock); to 50,000,
the number of deferred stock units that can be awarded annually to any
12
one person (superseding the current Plan limit of twice the person's
annualized base salary at the date of grant); and to the lesser of
$2,000,000 or 150% of annualized base salary as of the date of grant,
the value of performance units that can be granted annually to any one
person (superseding the current Plan limit on the dollar value of a
performance unit of not more than 75% of the fair market value of a
share of common stock on the date of grant and on the aggregate dollar
value of the performance units granted to one person of not more than
twice the person's annualized base salary at the date of grant) the
foregoing annual limits being referred to hereinafter as the
"Section 162(m) limits"; and
o the following continuing Plan terms: the class of persons eligible for
awards under the Plan being limited to executives and key employees
(including officers and directors who are also employees) of the Company
and its Participating Subsidiaries (as defined in the Plan) who have a
substantial opportunity to influence the long-term growth of the Company
or Participating Subsidiaries; and the minimum stock price at which
shares may be acquired pursuant to options granted under the Plan, and on
the basis of which stock appreciation rights may be valued, being the
fair market value (as defined in the Plan) of a share of the Company's
common stock on the date the award is granted.
o terms providing that the performance objectives for any performance
units granted for fiscal year 1996 and thereafter will be limited to
objective tests based on one or more of the following, any of which may
be measured either in absolute terms or as compared to another company or
companies: return on shareholder's equity (ROE); growth in net income;
growth in revenues; cash flow return on average total capital; profit
before interest and taxes; earnings growth; total return to shareholders;
and various techniques comparing actual returns with required returns
based on cost of capital criteria.
The Company is advised by its tax counsel that under current interpretations of
existing federal tax law, the Company will be entitled to federal income tax
deductions with respect to the foregoing Plan awards subject to the Section
162(m) limits at the time that income is realized by an employee with respect to
such awards. It should be noted that while the Committee's intent is to prevent
Section 162(m) from limiting the deductibility of compensation, final
regulations and guidelines for Section 162(m) have not been adopted by the
Internal Revenue Service. For this reason, and because of possible unforeseen
future events, it is impossible to be certain that all compensation in respect
of Plan awards paid by the Company will be tax deductible.
It is expected that the Plan will continue to be administered by the Committee
as described above under Agenda Item No. Four. Since the Committee will
determine in its discretion whether to make awards for fiscal year 1997 and
thereafter under the Plan as proposed to be amended by the Section 162(m)
Amendments, and, if made, the amount of the awards and recipients thereof, it is
not possible to state the amount of the awards which will be granted in the
future if the Section 162(m) Amendments are approved. However, such information
with respect to fiscal year 1995 awards granted to executives and key employees
under the 1990 Plans is set forth on page 11 above.
Proxies will be voted for the Section 162(m) Amendments unless contrary
instructions are set forth on the proxy card. Under applicable Delaware law and
the Company's By-Laws, as amended, the outcome of this agenda item will be
determined by the vote of the holders of a majority of the shares present in
person or represented by proxy at the Annual Meeting and having voting power on
this matter. Proxies marked as abstaining will be counted in the tabulation of
the vote cast and, thus, will have the effect of a vote against the proposal.
Under New York Stock Exchange Rules, brokers that do not receive instructions
from their customers may nevertheless vote on the matter.
The Board of Directors and management recommend a vote "FOR" the proposed
Section 162(m) Amendments in order to permit the exclusion of compensation in
respect of awards granted under the 1990 Long-Term Incentive Plan from the
deduction limitations imposed by Section 162(m) of the Internal Revenue Code.
13
AGENDA ITEM NO. SIX: APPROVAL OF INTERNAL REVENUE CODE
SECTION 162(m) ANNUAL INCENTIVE PLAN TERMS
Under Section 162(m) and Internal Revenue Service ("IRS") proposed regulations,
a bonus award paid to an executive under the 1990 Annual Incentive Plan renamed
the 1997 Annual Incentive Plan (the "Plan") is exempt from deduction limitations
if it qualifies as "performance based". The form and amount of bonus awards is
determined annually by the Committee taking into consideration (a) the
performance of the Company based upon such measure or measures of performance as
the Committee shall select and (b) as between employees, the contribution of the
employee during the fiscal year to the success of the Company, including his or
her position and level of responsibility, the achievements of his or her group,
division, or department, and the recommendations of his or her superiors. On
November 15, 1995, the Committee adopted terms, subject to shareholder approval,
with the intent that bonuses to be paid to executives subject to Section 162(m)
for fiscal year 1996 and later years would qualify as performance-based
compensation exempt from the limitations of Section 162(m). These terms (the
"Annual Incentive Plan Terms"), which are sought to be approved by shareholders,
are as follows:
o The class of persons covered by the Plan will consist of the named
executive officers, including the chief executive officer, and all other
executives and key employees.
o The performance criteria for bonus payments for fiscal year 1996 and
thereafter will be limited to objective tests based on one or more of the
following, any of which may be measured either in absolute terms or as
compared to another company or companies: return on shareholder's equity
(ROE); growth in net income; growth in revenues; cash flow return on
average total capital; profit before interest and taxes; earnings growth;
total return to shareholders; and various techniques comparing actual
returns with required returns based on cost of capital criteria.
o There will be a maximum individual annual bonus limit of the lesser of
$2,000,000 or 150% of the recipient's most recent annualized base salary
rate.
On November 15, 1995, the Committee adopted performance objectives for fiscal
year 1996 and established an objective formula for computing awards for the
chief executive officer and other executive officers and certain other senior
officers based on attainment of those performance objectives. In the
administration of the fiscal year 1996 bonus program and in determining fiscal
year 1996 bonus awards, the Committee will not have the flexibility to pay such
executives more than the incentive amount indicated by the formula. The
Committee will, however, have the flexibility, based upon its business judgment,
to reduce this amount.
It is not possible to determine the amount of compensation that will be
paid in 1996 or later years under the Plan as modified by the Annual Incentive
Plan Terms, since actual amounts will depend on actual performance measured
against pre-established performance objectives and on the Committee's
discretion. However, the fiscal year 1995 bonus compensation actually awarded to
the named executive officers is included in the Summary Compensation Table,
Table I, on page 19; and to all current executive officers as a group, was
$1,840,000. The fiscal year 1995 bonus compensation authorized for all other
employees, including all current officers who are not executive officers, as a
group, was $14,071,050.
The Company is advised by its tax counsel that under current interpretations of
existing federal tax law, the Company will be entitled to federal income tax
deductions with respect to Plan awards at the time that income is realized by an
employee with respect to such awards. It should be noted that while the
Committee's intent is to prevent Section 162(m) from limiting the deductibility
of bonuses paid under the Plan, final regulations and guidance for Section
162(m) have not been adopted by the IRS. For this reason, and because of
possible unforeseen future events, it is impossible to be certain that all bonus
payments paid by the Company will be tax deductible.
Proxies will be voted for the Annual Incentive Plan Terms unless contrary
instructions are set forth on the proxy card. Under applicable Delaware law and
the Company's By-Laws, as amended, the outcome of this agenda item will be
14
determined by the vote of the holders of a majority of the shares present in
person or represented by proxy at the Annual Meeting and having voting power on
this matter. Proxies marked as abstaining will be counted in the tabulation of
the vote cast and, thus, will have the effect of a vote against the proposal.
Under New York Stock Exchange Rules, brokers that do not receive instructions
from their customers may nevertheless vote on the matter.
The Board of Directors and management recommend a vote "FOR" the proposed
Annual Incentive Plan Terms in order to permit the exclusion of compensation
payable under the 1997 Annual Incentive Plan from the deduction limitations
imposed by Section 162(m) of the Internal Revenue Code.
OTHER MATTERS
The Board of Directors and management of the Company do not know of any matter
other than referred to in the foregoing Notice of Annual Meeting of Shareholders
and this Proxy Statement that may come before the meeting. However, if any other
matter should properly come before the meeting or any adjournment thereof, it is
the intention of the persons named in the proxy to vote such proxies in
accordance with their judgment on such matters.
ADDITIONAL INFORMATION FOR SHAREHOLDERS
COMPENSATION OF EXECUTIVE OFFICERS
Report of the Management Development and Compensation Committee
Introduction. This report describes how Air Products compensates its chief
executive officer ("CEO") and other executive officers. The Management
Development and Compensation Committee of the Company's Board of Directors (the
"Committee") or predecessor Board committees have been responsible for
determining and administering compensation policies for Air Products executives
since 1965 and, since 1977, these committees have been comprised entirely of
non-employee directors.
Compensation Policies Applicable to CEO and Executive Officers. The Company's
compensation policy is to pay for individual performance and responsibility,
while also relating executive pay programs to Company performance and the
creation of shareholder value. Shareholder value is enhanced when the Company
achieves an above average return on shareholders' equity in combination with
sustained long-term growth. The same financial goals that are used to guide the
Company's investment decisions and evaluate its overall performance are also
used in the design and delivery of the Company's management compensation
program.
The primary elements of the program are base salary, cash bonus, and stock
based long-term compensation. The same compensation principles and plans are
applied to approximately 350 key management and executive positions worldwide
including the executive officers whose compensation is described in detail in
this Proxy Statement. In planning for and administering compensation, the
Committee uses a prescribed annual cycle for setting performance goals as well
as target or guideline award levels. In the case of the CEO and other executive
officers, the Committee specifically determines all individual salaries,
short-term cash bonuses and long-term stock based incentives. The Committee
integrates these decisions with other important matters under its charter such
as executive development and succession planning, executive performance review,
top level organization structure, and other strategic human resources
initiatives designed to attract, retain, and motivate a high quality work force,
which is essential to the long-term success of the Company's complex, dynamic
and globally competitive businesses.
Air Products' current salary grade level conventions, attendant base salary
ranges, target cash bonus, and long-term incentive award guidelines,
appropriately adjusted for changes in Company size and market movement, have
been used by the Committee for the CEO position and other executive officer
15
positions since 1985. In all cases, overall corporate performance along with
individual performance, level of responsibility, position in salary range and
timing, are factors considered by the Committee as pay decisions are made.
Target salary, bonus and incentive award levels are established by the Committee
by using multiple executive compensation market studies which are generally
available surveys purchased from independent outside organizations. The
particular surveys used are for industrial companies with annual revenues
ranging from three to six billion dollars, with particular focus on chemical and
non-durable manufacturing companies in that revenue range. The Committee targets
the median level of the executive market as assessed by these surveys in making
its pay decisions.
By design, variable or at risk components of direct compensation are
progressively greater for higher level positions. For the five executives named
in this Proxy Statement, the variable portions of their compensation packages
range from a minimum of 58 percent to approximately 66 percent at the CEO level.
For the CEO, prospectively, targeted components of this variable compensation
are approximately 20 percent short-term cash bonus and 46 percent long-term
stock based incentives.
1995 Annual Cash Compensation - Base Salary. For 1995, the pertinent competitive
analyses were completed in the preceding fiscal year and the Committee set the
executive base salary budget for the upcoming fiscal year. Mr. Wagner's salary
rate was fixed by the Committee upon consideration of competitive data for
comparable positions derived from the survey methodology described above.
Additional factors considered by the Committee included position in salary
range, time since last increase and, most importantly, the Company's overall
performance as related to Mr. Wagner's leadership and individual performance. In
regard to the other senior officers, including the four other named executive
officers, a similar process was used by the Committee. Competitive compensation
data for comparable positions were determined using the external market
analyses, and position in salary range, time since last increase, Company
performance, and individual performance were used to determine the individual's
salary rate.
Bonus. Bonuses are considered for payment to executives and key employees
following the end of each fiscal year under the 1990 Annual Incentive Plan. This
shareholder approved plan provides that in granting awards the Committee shall
take into consideration the performance of the Company for the fiscal year based
upon such measure or measures of performance as the Committee shall select, and
that no award or awards may be granted to any participant for the same fiscal
year having an aggregate value in excess of 150% of such participant's
annualized base salary rate at the end of the fiscal year.
Performance goals and target bonus guidelines based on the executive market
median level referred to above are established by the Committee at the beginning
of each fiscal year. Such performance measures enable the Committee to establish
a range of payment for the overall bonus program, although the Committee may
consider other pertinent factors as it exercises its discretion in determining
the actual bonus award after the end of the fiscal year. One such factor which
the Committee usually considers is Air Products' financial performance relative
to the composite performance of the Standard and Poor's Industrial Index
(formerly known as the S&P 400 Industrials), which the Committee uses rather
than the S&P 500 in order to refine its analysis by elimination of the
financial, utility and transportation sectors included in the latter index.
Fiscal Year 1995 performance goals emphasized return on shareholders' equity
(ROE) and growth in net income, and to a lesser degree, growth in revenues,
profit before interest and taxes (PBIT) and in earnings per share (EPS). In
addition to reviewing performance against internal goals and composite S&P
Industrials performance, the Committee also compares Air Products
revenue growth and ROE to that of each of the nine other companies besides Air
Products which comprise the Standard and Poor's Chemicals Index.
In setting the bonus this year, the Committee considered in particular that the
Company exceeded its two major financial benchmarks. Fiscal year 1995 net income
was $368 million, an increase of 19% over the prior year, and return on
shareholders' equity improved to 16.1%. The Committee recognizes these measures
as critical indicators of Company performance. Revenue growth of 11% set a new
Air Products sales record of $3.9 billion. In addition to record sales and
earnings, the Company shipped record volumes of gases and chemicals, achieved
16
excellent safety and environmental performance, and recognized and acted upon
important strategic market opportunities. Capital investments for the year
approached $1 billion supported by record levels of cash flow. The Committee
considers the year's accomplishments to be a significant combination of
operating performance and exceptional achievement of long-term objectives which
position the Company for continued worldwide growth.
In determining Mr. Wagner's bonus, the Committee utilized the results of its CEO
performance review process, which focuses on specific objectives developed by
the Committee to assess Mr. Wagner's leadership to the Company, its various
stakeholders, and the Board of Directors.
At the November 1995 meeting, the Committee completed its assessment of the
Company's and Mr. Wagner's performance and determined the overall bonus award
level for fiscal year 1995, including Mr. Wagner's award, at 155% of the 1995
target bonus guideline.
1995 Stock Based Long-Term Compensation. Long-term compensation is a
particularly important component of Air Products' management compensation
program, as it reflects the Company's business portfolio which is capital
intensive and requires long-term commitments for success. Under the shareholder
approved long-term incentive program, executives and key employees receive
various forms of stock based awards. There are currently two main elements which
comprise stock based, long-term executive compensation--stock options and
deferred stock units.
Since options provide gains to executives only if the stock price improves over
the market value at the date of grant and since shares in payment of deferred
stock units are not delivered until two years following retirement, these awards
serve to retain and motivate the Company's executive officers and to align them
with the interests of Air Products' shareholders. Both forms of long-term awards
are subject to forfeiture should executives engage in certain activities
including competing with the Company.
Award guidelines are reviewed by the Committee each year to ensure consistency
with overall compensation targets. The Committee approved the guidelines used
for fiscal year 1995 awards in late fiscal year 1994, after considering data
from competitive surveys along with its policy standard of targeting long-term
incentive compensation above executive market median levels. Unit denominated
award guidelines are used to set awards whereby each salary grade level has a
range of options and deferred stock units associated with it reflecting job
responsibilities.
Individuals chosen for awards receive a number of units within the award range
of the salary grade level for their current position.
The options granted under the 1990 Long-Term Incentive Plan for fiscal year 1995
have an option exercise price which is the market value on the date of grant.
Selected executives and key employees, including all five officers named in this
Proxy Statement, also received grants of Career Shares (deferred stock units)
under the 1990 Deferred Stock Plan. The Committee established Mr. Wagner's
fiscal year 1995 stock option and Career Share awards consistent with award
guidelines for the CEO position. The Committee intends these awards to represent
approximately 46 percent of Mr. Wagner's 1995 compensation, thereby
significantly weighting the CEO's targeted mix of compensation toward long-term,
stock based incentives in an effort to establish a solid connection with
long-term corporate and stock market performance.
Tax Deductibility of Executive Compensation. Section 162(m) of the Internal
Revenue Code of 1986, as amended, generally provides that publicly held
corporations may not deduct in any taxation year certain compensation in excess
of $1,000,000 paid to the chief executive officer and the next four most highly
compensated executive officers. An exception is provided for so-called
performance-based compensation. Section 162(m) did not apply to the Company's
fiscal year 1994, but will apply to its fiscal year 1995.
Under a special transition rule, awards under the Company's existing long-term
stock based incentive plans made prior to the Annual Meeting of Shareholders in
January 1997 are exempt from the non-deductibility provisions of Section l62(m).
The only fiscal year 1995 compensation which may be subject to the law is annual
compensation--base salary and annual cash bonuses. At its September 1994
17
meeting, the Committee recognized that some part of the 1995 annual compensation
paid to the CEO might not be deductible under Section 162(m) due to the
Committee's exercise of discretion in determining these elements of
compensation. Nevertheless, the Committee determined not to change its practices
for setting bonuses for 1995 in order to have adequate time to evaluate the IRS
regulations under Section 162(m) and consider alternative plan designs which
would comply with the proposed regulations and still meet the goals of the
Company's compensation philosophy. Mr. Wagner is the only individual whose
annual compensation exceeded the non-deductibility limit in 1995.
The Committee and the Board of Directors approved, and are with this Proxy
Statement submitting to the Company's shareholders for approval, amendments and
terms applicable to the Company's 1990 Long-Term Incentive and Annual Incentive
Plans, respectively, in order to qualify for continued tax deductibility of all
cash and stock-related incentive compensation to be paid to the Company's
executive officers under those plans for fiscal year 1996 and later years (see
Agenda Item Nos. 5 and 6 above under the captions "Approval of Internal Revenue
Code Section 162(m) Amendments to the 1990 Long-Term Incentive Plan" and
"Approval of Internal Revenue Code Section 162(m) Annual Incentive Plan Terms,"
respectively). However, the Committee considers one of its primary
responsibilities to be providing a compensation program that will attract,
retain and reward executive talent necessary to maximize shareholder returns.
Accordingly, the Committee believes that the Company's interests may be best
served in some circumstances by providing compensation (such as salary and
perquisites) which might be subject to the tax deductibility limitation of
Section 162(m) and thus reserves the flexibility to provide for payments of such
compensation levels when the Committee believes it is appropriate to do so.
Summary. Air Products' management compensation program is designed to closely
link the performance of management to accomplishing long-term growth strategies
and building shareholder value. The individual elements are coherent and
collectively provide a package that is well suited to the type of
capital-intensive businesses in which Air Products is involved. At the same
time, the program falls within the market guidelines of similarly sized
companies. Air Products' management team clearly understands the linkage of
investment decision-making, operating performance, and compensation. Because of
this linkage, the Committee believes that management is clearly focused on
corporate growth and the interests of shareholders.
Management Development and Compensation Committee
Terry R. Lautenbach, Chairman
Tom H. Barrett
Will M. Caldwell
Robert Cizik
Compensation and Option Tables
Table 1 presents before-tax information concerning compensation earned, paid to,
awarded or accrued for services by the chief executive officer and four most
highly compensated executive officers of the Company as of the end of fiscal
year 1995, during fiscal years 1993, 1994 and 1995 including Career Share awards
(referred to under the column "Restricted Stock Awards") granted under the 1990
Deferred Stock Plan and options granted under the 1990 Long-Term Incentive Plan.
Table 2 presents more detailed information concerning the stock option awards
granted in fiscal year 1995 to the individuals named in Table 1 pursuant to the
1990 Long-Term Incentive Plan. Table 3 presents information as to options
exercised and held by such persons in fiscal year 1995.
18
TABLE 1
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation Awards
Securities
Other Annual Restricted Underlying
Fiscal Salary Bonus Compensation Stock Award Stock Options All Other
Name and Principal Position Year ($)(1) ($)(1) ($)(2) ($)(3)(5) (#)(4)(5) Compensation(6)
Harold A. Wagner 1995 $686,539 $640,000 $ 0 $346,875 50,000 $20,597(7)
Chairman, President and 1994 $600,000 $378,000 $ 207 $289,562 46,010 $18,653
Chief Executive Officer 1993 $569,231 $256,000 $74,707 $328,412 33,800 $17,285
James H. Agger 1995 $283,808 $176,000 $ 0 $115,625 12,000 $ 8,516(8)
Vice President, 1994 $254,000 $122,000 $ 0 $ 27,391 10,230 $ 8,186
General Counsel and Secretary 1993 $252,616 $ 76,000 $ 0 $ 31,066 7,890 $ 7,785
Robert E. Gadomski 1995 $297,962 $208,000 $ 0 $185,000 16,000 $ 8,940(9)
Group Vice President, 1994 $247,000 $119,000 $ 0 $ 43,043 14,060 $ 7,728
Chemicals Group 1993 $239,616 $ 77,000 $ 0 $ 48,818 9,180 $ 7,293
Joseph J. Kaminski 1995 $368,462 $257,000 $ 0 $231,250 20,000 $11,056(10)
Executive Vice President, 1994 $330,000 $178,000 $ 91,874 $ 66,521 16,620 $10,233
Gases and Equipment 1993 $311,539 $ 99,000 $289,008 $ 48,818 10,140 $ 9,451
J. Robert Lovett 1995 $378,846 $265,000 $ 0 $115,625 20,000 $11,366(11)
Executive Vice President, 1994 $350,000 $189,000 $ 0 $ 66,521 16,620 $11,158
Strategic Planning and 1993 $331,539 $112,000 $ 0 $ 75,446 12,400 $10,182
Technology
(1) Amounts shown include cash compensation earned in or for each fiscal year,
including amounts received by the executive as well as amounts earned but
deferred at the election of the executive.
(2) The value of perquisites and other personal benefits, if any, is not
included, because in each instance the aggregate incremental cost to the
Company for such benefits was below the Securities and Exchange Commission's
("SEC's") required disclosure thresholds. The amounts shown in this column
are comprised of payments made under the Company's plans applicable to all
employees who are U.S. citizens on international assignments. The amounts
shown for Mr. Wagner for fiscal years 1994 and 1993 were for tax
equalization relating to his overseas assignment which concluded during
fiscal year 1990. The amounts shown for Mr. Kaminski are comprised of
payments for foreign cost of living and exchange rate adjustments, foreign
housing costs and domestic housing management, and for tax equalization
relating to his overseas assignment which concluded during the 1993 fiscal
year.
(3) Deferred stock units referred to as "Career Shares" awarded to executives
at the beginning of the indicated fiscal years under the 1990 Deferred
Stock Plan, each unit entitling the recipient to receive from the Company
one share of Company common stock at or following the end of the applicable
deferral period, together with a cash payment equivalent to the dividends
which would have accrued on a share of common stock during the deferral
period. The deferral period established by the Management Development and
Compensation Committee is the earlier of two years following the executive's
retirement, disability, or death (but no earlier than two years from the
grant date), subject to acceleration by this Committee upon a change in
control of the Company as defined in the plan. Under the latter
circumstances, the Committee may determine to pay the units in cash in an
amount prescribed by a plan formula defining stock value. Amounts reported
in the Table are based on the grant date market values of $46.25 per share
for the fiscal year 1995 awards, $39.13 per share for the fiscal year 1994
awards, and $44.38 per share for the fiscal year 1993 awards (the mean of
the high and low sale prices as reported on NYSE Composite Transactions, for
the date indicated), without giving effect to the diminution of value
attributable to the nontransferability, absence of voting rights and other
features and restrictions applicable to such units. As of September 30,
1995, Mr. Wagner held an aggregate of 26,500 units valued at $1,389,594; Mr.
Agger held 4,600 units valued at $241,213; Mr. Gadomski held 6,900 units
valued at $361,819; Mr. Kaminski held 8,900 units valued at $466,694; and
Dr. Lovett held 7,200 units valued at $377,550, such values determined in
19
the same manner as were the amounts in the Table but based on the 1995
fiscal year-end $52.4375 market value of a share of Company common stock.
(4) During a thirty-day period following a change in control of the Company as
defined in the 1990 Long-Term Incentive Plan, pursuant to which the options
were granted, such options can be canceled upon or surrendered for payment
of 100% of the "spread" between the value of the shares of Company common
stock subject to the option, as defined in such plan, and the option
exercise price.
(5) Deferred stock unit and option awards are subject to forfeiture at the
discretion of the Management Development and Compensation Committee for
breaching any agreement with or obligation to the Company or engaging in
certain specified activities including competing with the Company.
(6) The amounts shown for fiscal years 1993 and 1994 are comprised principally
and the amounts shown for fiscal year 1995 are comprised solely of Company
matching contributions and/or accruals (together, the "Company match") under
the Company's qualified 401(k) and non-qualified supplementary defined
contribution savings plan (together, the "Savings Plan") under which the
Company matches 50% of each participant's Savings Plan elective salary
reduction up to 6% of base pay (i.e., a 3% match). In addition, incidental
amounts of interest deemed to be compensatory by the SEC (which do not
exceed $800 for each of fiscal years 1993 and 1994 for any of the named
executives) are included for the portion of the interest accrued on such
Savings Plan and certain deferred bonus accounts at a rate above 120% of
the applicable federal long-term rate for the applicable period of
compounding. No such compensatory interest was earned for fiscal year 1995.
Interest accrued on such deferred compensation at a rate below such a
market rate is not included because it is not treated as compensatory by
the SEC.
(7) The Savings Plan Company match for fiscal years 1995, 1994, and 1993 is
$20,597, $18,000, and $17,077, respectively.
(8) The Savings Plan Company match for fiscal years 1995, 1994, and 1993 is
$8,516, $7,621, and $7,579, respectively.
(9) The Savings Plan Company match for fiscal years 1995, 1994, and 1993 is
$8,940, $7,410, and $7,189, respectively.
(10) The Savings Plan Company match for fiscal years 1995, 1994, and 1993 is
$11,056, $9,900, and $9,347, respectively.
(11) The Savings Plan Company match for fiscal years 1995, 1994, and 1993 is
$11,366, $10,501, and $9,946, respectively.
20
TABLE 2
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
------------------------
Number of Percent (%) Potential Realizable Value at
Securities of Total Assumed Annual Rates of Stock
Underlying Options Price Appreciation for Ten
Options Granted to Exercise Year Option Term(3)
Granted Employees in Price Expiration -----------------------------
Name (#)(1) Fiscal Year ($/Sh)(2) Date 5% ($) 10% ($)
Harold A. Wagner 50,000 6.7% $46.25 October 4, 2004 $ 1,454,319 $3,685,529
James H. Agger 12,000 1.6% $46.25 October 4, 2004 $ 349,037 $ 884,527
Robert E. Gadomski 16,000 2.1% $46.25 October 4, 2004 $ 465,382 $1,179,369
Joseph J. Kaminski 20,000 2.7% $46.25 October 4, 2004 $ 581,728 $1,474,212
J. Robert Lovett 20,000 2.7% $46.25 October 4, 2004 $ 581,728 $1,474,212
5% 10%
($75.34/share) ($119.96/share)
Increase in market value of Air Products stock at assumed annual rates of stock
price appreciation used in Table 2 above over the ten-year period beginning on
October 3, 1994.(4)............................................................ $3.6 billion $9.1 billion
(1) Non-qualified stock options which become exercisable in one-third increments
on the first three anniversaries of grant except that upon a change in
control of the Company, as defined in the option plan, there would be an
automatic acceleration of their exercisability. During a thirty-day period
following such a change in control, options can be cancelled upon or
surrendered for payment of 100% of the "spread" between the market value of
the shares subject to the option, as defined in the option plan, and the
option exercise price. The option exercise price may be paid by delivery of
owned shares and/or tax withholding obligations relating to exercise may be
satisfied by delivery of owned shares and/or withholding shares purchased
upon exercise. Outstanding options are subject to forfeiture at the
discretion of the Management Development and Compensation Committee for
breaching any agreement with or obligation to the Company or engaging in
certain specified activities including competing with the Company. This
Committee also retains discretion, subject to plan limits, to modify
outstanding options. In general, options terminate when employment ends
except due to retirement, disability or death, where the exercisable options
(and unexercisable options prorated to termination of employment) continue
through their expiration date and, if the Committee so approves as has been
its practice for retiring executive officers including the chief executive
officer, unexercisable portions will become exercisable in accordance with
the original grant terms.
(2) Granted at market value (the mean of the high and low sale prices on the
grant date as reported on the NYSE--Composite Transactions).
(3) Figures shown under "Potential Realizable Value" are the pre-tax gains which
would be recognized on October 3, 2004 if an executive exercised all of his
1995 options on October 3, 2004 and Air Products stock price had grown
between October 3, 1994 and October 3, 2004 at the 5% and 10% assumed growth
rates set by the SEC to $75.34 and to $119.96 per share, respectively. The
amounts shown are not intended to forecast possible future appreciation, if
any, of the price of Air Products stock. Since granted at market value, no
gain to the optionees is possible without an increase in stock price, which
will benefit all shareholders commensurately.
(4) These amounts represent the increase in the market value of Air Products
outstanding shares (123.4 million) as of September 30, 1994, that would
result from the same stock price growth assumptions used to show the
Potential Realizable Values for the executives named in Table 2 above.
21
TABLE 3
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-The-Money Options
at Fiscal Year End (#) at Fiscal Year End ($)(2)
Shares Acquired Value ---------------------------- -----------------------------
Name on Exercise (#) Realized ($)(1) Exercisable Unexercisable Exercisable Unexercisable
Harold A. Wagner 0 $ 0 151,708 91,942 $3,551,183 $808,361
James H. Agger 9,780 $318,706 68,490 21,450 $1,805,690 $186,198
Robert E. Gadomski 9,320 $371,891 66,706 28,434 $1,707,203 $248,400
Joseph J. Kaminski 11,440 $442,413 75,380 34,460 $1,974,654 $298,431
J. Robert Lovett 22,180 $652,092 85,446 35,214 $2,131,093 $304,507
(1) Before-tax amounts determined by subtracting the exercise price from the
exercise date market value (the mean of the high and low sale prices on the
exercise date as reported on the NYSE--Composite Transactions).
(2) Derived by subtracting the aggregate of the option exercise prices from the
1995 fiscal year-end market value for all shares underlying outstanding
options since all of such options were "in-the-money"--that is, the
September 30, 1995 market value of $52.4375 exceeded the applicable option
exercise price.
As a general matter, whether or not financial benefit will be derived from
the exercise of options depends on the relationship between the market price
of the underlying securities and the exercise price of the options, and on
the executive's own investment decisions. To the extent that options have an
exercise price above the market price ("out-of-the-money"), such options may
ultimately confer no financial benefit to the executive as they may expire
before they can be exercised profitably. Similarly, options "in-the-money"
on a given date can become "out-of-the-money" due to price fluctuations in
the stock market. Also, the value of the stock purchased on exercise may
later decline to below the option exercise price before the stock is sold.
For these reasons, the Company believes that placing a current value on
outstanding options is highly speculative and that such valuations may not
represent the true benefit, if any, that may be realized by an executive.
22
Stock Performance Information
The following Graph compares the cumulative total shareholder returns of (a) the
Company's common stock, (b) the Standard & Poor's 500 Stock Index and (c) the
Standard & Poor's Chemicals Index, at each September 30 during the five-year
period beginning September 30, 1990 and ending September 30, 1995. The Graph
assumes the investment of $100 on September 30, 1990 in Air Products common
stock, in the S&P 500 and in the S&P Chemicals, and total shareholder return was
calculated on the basis that in each case all dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE SHAREHOLDER RETURN
Air Products, S&P 500 and S&P Chemicals
Comparative Growth of a $100 Investment
(Assumes Reinvestment of All Dividends)
[THE STOCK PERFORMANCE GRAPH APPEARS HERE]
Sep 90 Sep 91 Sep 92 Sep 93 Sep 94 Sep 95
------ ------ ------ ------ ------ ------
Air Products $100 $153 $207 $184 $227 $258
S&P 500 $100 $131 $146 $165 $171 $222
S&P Chemicals $100 $147 $161 $174 $229 $272
Pension Plans
The Company funds a tax-qualified, defined benefit pension plan for virtually
all U.S. employees, including four of the executives named in the Summary
Compensation Table. Retirement income benefits are based upon the participant's
years of credited service and average base salary for the highest three
consecutive years during the final ten years of service ("Final Average
Earnings"). In addition, the Company has an unfunded supplementary pension plan
under which certain employees, including four of those named in the Summary
Compensation Table, are provided pension benefits which cannot be paid under the
qualified pension plan because of Internal Revenue Code limitations, as well as
pension benefits which would be payable under the qualified plan if bonus
payments were taken into consideration in determining Final Average Earnings.
Table 4 shows the approximate annual retirement benefits payable to salaried
employees retiring at age 65 in calendar year 1995, after selected periods of
service with selected amounts of Final Average Earnings, under the straight-life
annuity option under the pension plans without reduction for any survivor
benefit.
23
TABLE 4
PENSION PLAN TABLE
Remuneration
(Final Average Years of Service
Earnings) 15 20 25 30 35 40 45
$ 300,000 $ 66,348 $ 88,463 $110,579 $132,695 $154,811 $177,311 $199,811
400,000 $ 88,848 $118,463 $148,079 $177,695 $207,311 $237,311 $267,311
500,000 $111,348 $148,463 $185,579 $222,695 $259,811 $297,311 $334,811
600,000 $133,848 $178,463 $223,079 $267,695 $312,311 $357,311 $402,311
700,000 $156,348 $208,463 $260,579 $312,695 $364,811 $417,311 $469,811
800,000 $178,848 $238,463 $298,079 $357,695 $417,311 $477,311 $537,311
900,000 $201,348 $268,463 $335,579 $402,695 $469,811 $537,311 $604,811
1,000,000 $223,848 $298,463 $373,079 $447,695 $522,311 $597,311 $672,311
1,100,000 $246,348 $328,463 $410,579 $492,695 $574,811 $657,311 $739,811
1,200,000 $268,848 $358,463 $448,079 $537,695 $627,311 $717,311 $807,311
1,300,000 $291,348 $388,463 $485,579 $582,695 $679,811 $777,311 $874,811
1,400,000 $313,848 $418,463 $523,079 $627,695 $732,311 $837,311 $942,311
Retirement benefits are not subject to any deductions for Social Security
benefits or other offsets. The normal form of benefit is an annuity, but a lump
sum payment is available, subject to certain conditions, as an optional form of
payment for the portion of the retirement benefit payable under the
supplementary pension plan.
In the case of the executives named in the Summary Compensation Table,
compensation covered by the pension plans which is used to calculate Final
Average Earnings is the annual compensation reported in the Salary and Bonus
columns of the Summary Compensation Table (Table 1, at page 19). The years of
service as of September 30, 1995 for the executive officers named in the Summary
Compensation Table who participate in the pension plans are: Mr. Wagner,
approximately 32 years; Mr. Agger, approximately 27 years; Mr. Gadomski,
approximately 25 years; and Mr. Kaminski, approximately 30 years. In lieu of
participation under the Company's pension plans, Dr. Lovett has a separate
agreement with the Company providing for retirement benefits equal to those to
which he would have been entitled if he had been an employee of the Company and
a participant under the pension plans since the date he joined a former
employer, thus giving him approximately 39 years of service.
The Company's obligations to pay benefits under the supplementary pension plan
and separate agreements in lieu of participation in the Company's pension plan,
including the agreement with Dr. Lovett referred to above, are secured by a
grantor trust. Likewise, the Company's obligation to pay benefits under the
non-qualified supplementary savings plan referred to in footnote 6 to Table 1,
Summary Compensation Table, at page 20, is secured by a grantor trust. The
Company's obligation to provide funding for each trust is secured by a letter of
credit. Each letter of credit permits and each trust agreement requires the
trustee to draw on the letter of credit to (a) pay benefits or trust
administration expenses which the Company fails to pay and (b) fund each trust
if the Company fails to maintain the letter of credit or if the Company fails to
cash fund the trust on the day a change in control of the Company occurs (as
defined in the trust). The assets of each trust will at all times be subject to
claims of the Company's creditors and the trustee will not be able to draw on
the letter of credit if the Company is insolvent (as defined in each trust).
Certain Agreements With Executive Officers
The Company has identical agreements ("employment agreements") with certain
Company executives including each of the current executive officers. The
24
employment agreements are designed to retain the executives and provide for
continuity of management in the event of any actual or threatened change in
control of the Company. The employment agreements provide that in the event of a
change in control of the Company (as defined in the employment agreements) each
executive would have the right to continue in the Company's employment and
receive compensation and benefits specified in the agreement to the earlier of
his age 65 or three years following the later of the change in control or a
subsequent merger, consolidation or reorganization of the Company occurring
within three years of the change in control while he is still employed. If,
during this period after such change in control, either the executive's
employment is terminated by the Company without cause (as defined) or the
executive is forced to resign due to a failure by the Company to comply with any
material provision of the employment agreement, the executive would generally be
entitled to receive liquidated damages equivalent to the compensation and
benefits he would have received during the then remaining period of the
employment agreement. This would include, in addition to continued medical,
dental and other welfare benefits for such period and reimbursement of legal
expenses, a lump sum cash payment equal to the then present value of (1) his
monthly base salary, bonus and Company matching contribution or accrual under
the Company's qualified 401(k) and non-qualified supplementary defined
contribution savings plans, multiplied by the number of months remaining in the
term of the employment agreement following his termination, and (2) the
difference between the pension benefits which would have been payable at the end
of the term of the employment agreement and the executive's earlier termination
under or by reference to the Company's defined benefit pension plans.
Each employment agreement provides for indemnification of the executive if he
becomes involved in litigation because he is a party to the agreement.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table furnishes information known by the Company as to the
beneficial owners of more than five percent of the Company's common stock, as of
September 30, 1995.
Amount and Nature of
Beneficial
Name and Address of Beneficial Owner Ownership Percent of Class
State Farm Mutual Automobile Insurance Company(1) 7,486,800 5.9%
One State Farm Plaza
Bloomington, IL 61710
State Street Bank and Trust Company, Trustee(2) 7,071,183 5.6%
P.O. Box 1389
Boston, MA 02104
Mellon Bank (DE) National Association 10,000,000 7.9%
Trustee of the Air Products and Chemicals, Inc.
Flexible Employee Benefits Trust (the "Trust")(3)
Mellon Bank Center
10th and Market Streets, 2nd Floor
Wilmington, DE 19801
- --------------------
(1) Based upon information filed by State Farm Mutual Automobile Insurance
Company ("State Farm") with the Securities and Exchange Commission
("SEC") in a report on Schedule 13F-E. State Farm has sole voting
power and sole investment power as to all 7,486,800 shares. In addition,
based upon information filed by State Farm Investment Management Corp.
("SFIMC") with the SEC and other information available to the
Company, the Company has reason to believe that SFIMC is the beneficial
owner of 725,000 shares, which represents 0.58% of the class, and that
SFIMC has sole voting and investment power as to all 725,000 shares.
(2) Based upon information in a report on Schedule 13G for the period ending
December 31, 1994 filed by State Street Bank and Trust Company ("State
Street") with the SEC, as updated by State Street through September 30,
1995. State Street shares voting and investment power as to 5,833,923
25
shares held in trust by it as Trustee for the Company's Retirement Savings
and Stock Ownership Plan (the "Savings Plan") representing 4.6% of the
class. The Savings Plan trust agreement provides that the Trustee will
vote, and tender or exchange, the shares held in the Savings Plan trust as
the participants in the Savings Plan direct, as described under Certain
Procedural Information at page 28 and in footnote 1(d) on page 27. State
Street also has sole investment power as to 1,009,846 shares held in trust
by it as trustee for various collective investment funds for employee
benefit plan and other index accounts, representing .8% of the class (of
which shares it has sole voting power over 848,466 shares and no voting
power over 161,380 shares); and has beneficial ownership of 227,414 shares
held in trust by it as trustee or co-trustee under various trust accounts,
representing .2% of the class (of which shares it has sole voting power
over 158,506 shares, shared voting power over 68,908 shares, sole
investment power over 125,359 shares, and shared investment power over
102,055 shares).
(3) As indicated in a report on Schedule 13D filed by the Trust with the
SEC, the Trust holds the Company's common stock under a grantor
trust agreement between the Company and Mellon Bank (DE) National
Association, as Trustee, creating the Trust which was entered into to
provide for the satisfaction of certain obligations of the Company and its
affiliates under various employee benefit and compensation plans, programs,
contracts and structures (the "plans"). Shares held in the Trust will
periodically be made available for transfer from the Trust to satisfy plan
obligations specified by the Company. Both the Trust and Trustee have
disclaimed beneficial ownership of all 10,000,000 shares. The Trustee has
no discretion in the manner in which the shares will be voted. The trust
agreement provides that the Trustee will vote, and tender or exchange, the
shares held in the Trust only in the same proportions and manner as the
participants in the Company's Savings Plan direct the trustee of the
Savings Plan with respect to shares of Company common stock held in the
Savings Plan trust. The particular rules for Savings Plan voting are
described under Certain Procedural Information at page 28, and, for
tendering or exchanging, in footnote 1(d) on page 27. The trust agreement
further provides that all voting and all tendering or exchange actions and
directions with respect to the shares will be held in confidence and not
disclosed to any person, including officers and employees of the Company.
The table below sets forth information furnished by the following persons and,
where possible, confirmed from records of the Company, as to the number of
shares of the Company's common stock beneficially owned by the directors,
nominees for director and executive officers of the Company as of November 1,
1995.
Amount and Nature of Beneficial
Name of Beneficial Owner Ownership(1) and Percent of Class(2)
James H. Agger 94,342 (3)
Dexter F. Baker 726,748 (3)(4)
Tom H. Barrett 6,441 (5)
L. Paul Bremer 3,348 (5)
Will M. Caldwell 4,800 (5)
Robert Cizik 5,880 (5)
Ruth M. Davis 4,272 (5)
Robert E. Gadomski 99,900 (3)
Joseph J. Kaminski 115,404 (3)
Terry R. Lautenbach 4,600 (5)
J. Robert Lovett 129,293 (3)
Ruud F. M. Lubbers 0
Judith Rodin 2,000 (5)
Takeo Shiina 2,500 (5)
Lawrason D. Thomas 1,750 (5)
Harold A. Wagner 254,794 (3)
All directors and executive officers as a group including 1,676,344 1.26%
the above (18 persons)
26
- --------------------
(1) Beneficial ownership of common stock as reported in the above table has
generally been determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934. Accordingly, all Company securities over
which the directors, nominees and executive officers named or the group
directly or indirectly have or share voting or investment power have been
deemed beneficially owned and have been included in the table. Except as
otherwise noted in this footnote, the directors, nominees and executive
officers have sole voting and investment power over the securities
indicated in the table as beneficially owned by them.
Included in the figures in the table are:
(a) an aggregate of 1,152,790 options granted under the Company's
Long-Term Incentive Plans and under the Company's Stock Option Plan
for Directors, an aggregate of 81,900 deferred stock units known as
"Career Shares" awarded under the Company's 1990 Deferred Stock Plan,
and an aggregate of 4,028 phantom stock units under the Deferred
Compensation Plan for Directors, as to which securities the recipient
directors and/or executive officers have no voting or investment
power;
(b) an aggregate of 13,992 shares held by, or for the benefit of, members
of the immediate families or other relatives of certain of the
directors, nominees and executive officers, of which amount such
directors, nominees and executive officers disclaim beneficial
ownership of 13,282 shares;
(c) an aggregate of 16,268 shares owned jointly by certain of the
directors, nominees and executive officers with their spouses with
whom they share voting and investment power; and
(d) shares represented by units of interest allocated to the account of
the current and former executive officers named above under the
Company's Retirement Savings and Stock Ownership Plan (the "Savings
Plan"). Participants are entitled to confidentially direct the
Savings Plan trustee as to how to vote such shares represented by
units of interest allocated to their Savings Plan accounts, as
described under Certain Procedural Information at page 28. Further,
participants have the right to confidentially direct the trustee as
to whether or not to tender or exchange such Savings Plan shares, but
if the trustee does not receive timely directions from participants
such shares will not be tendered or exchanged. The trustee will
respond as to fractional shares in the same proportions as Savings
Plan shares for which participant directions have been received.
(2) No individual director's, nominee's or executive officer's beneficial
holdings totaled 1% or more of the outstanding shares as of such date,
determined in accordance with Rule 13d-3 under the Securities Exchange Act
of 1934.
(3) These figures include shares which may be acquired in the following amounts
by exercise of stock options exercisable within 60 days of November 1,
1995, which options were granted under the Company's Long-Term Incentive
Plans: Mr. Agger - 78,530; Mr. Baker - 409,860; Mr. Gadomski - 79,785; Mr.
Kaminski - 90,966; Dr. Lovett - 101,786; and Mr. Wagner - 194,978.
(4) This figure includes 80,000 shares owned by a private corporation and
76,238 shares owned by a charitable foundation, as to which shares Mr.
Baker has shared voting and investment power.
(5) These figures include 2,000 shares which may be acquired by each
non-employee director by exercise of stock options exercisable within 60
days of November 1, 1995, granted under the Company's stock option plan for
directors (except that the figure shown for Mr. Thomas includes only 1,000
shares since Mr. Thomas was not serving as a director at the time of the
first grant under this plan).
27
CERTAIN PROCEDURAL INFORMATION
The Annual Report for the fiscal year ended September 30, 1995, including
financial statements, has been mailed to all shareholders together with this
Proxy Statement, which was first mailed December 8, 1995. The Annual Report is
not considered part of the proxy solicitation materials.
Only holders of common stock of record at the close of business on November 30,
1995, will be entitled to vote at the Annual Meeting. Under applicable Delaware
law and the Company's By-Laws, as amended, the holders of a majority of such
outstanding shares of common stock of the Company entitled to vote, present in
person or represented by proxy, will constitute a quorum for the transaction of
business at the meeting. Proxies marked as abstaining (and broker non-votes
which are described below) will be treated as present for purposes of
determining a quorum for the meeting.
Each holder of the 121,802,283 issued and outstanding shares of $1 par value
common stock of the Company as of the November 30, 1995 record date is entitled
to one vote in person or by proxy for each share held. Such shares represented
by each duly signed proxy will be voted as directed by the shareholder on the
reverse side of the proxy and, if no direction is given on a duly signed proxy,
such shares will be voted in favor of the proposals described in this Proxy
Statement. Such shares will be voted in the judgment of the persons named in the
proxy upon such other business as may properly come before the meeting.
A broker non-vote will occur when a broker who holds shares in street name for a
customer, does not have the authority under the rules of the New York Stock
Exchange ("NYSE") to cast a vote on a particular matter because its customer,
the beneficial owner of the shares, has not furnished voting instructions on the
matter. NYSE rules permit brokers to vote customer shares without instruction on
the type of proposals described in this Proxy Statement, so it is not expected
that broker non-votes will occur. Should any such proposal or other matter to
properly come before the Annual Meeting be or become subject to the NYSE broker
non-vote rules, broker non-votes would not be counted for any purpose as to any
matter for which non-vote is indicated on the broker's proxy and, thus, would
have no effect on the outcome of the vote on such matter.
Full shares of common stock held for the account of shareholders participating
in the Dividend Reinvestment and Stock Purchase Program will be voted in the
same manner as those shareholders have authorized their shares held of record to
be voted. If such shareholders fail to instruct how the shares registered in
their names shall be voted by not returning a proxy, the shares held in their
dividend reinvestment accounts will likewise not be voted. Full shares of common
stock represented by units of interest allocated to the account of participants
in the Company's Retirement Savings and Stock Ownership Plan will be voted by
the plan trustee pursuant to confidential directions received from the plan
participants. Any such shares for which the trustee receives no voting
directions and fractional shares will be voted by the trustee in the same
proportions as plan shares for which voting directions have been received.
The total expense of solicitation of proxies will be borne by the Company and
will include reimbursement paid to brokerage firms and others for their expenses
in forwarding solicitation material regarding the meeting to beneficial owners.
The Company has retained Morrow & Co. to assist in the solicitation of proxies
for a fee of approximately $7,500, plus expenses. It may be that further
solicitation of proxies will be made by telephone or oral communication by
employees of the Company who will not be directly compensated therefor and the
cost thereof will be borne by the Company.
Shareholders may submit proposals on matters appropriate for shareholder action
at the Company's annual meetings consistent with regulations adopted by the
Securities and Exchange Commission. For such proposals to be considered for
inclusion in the Proxy Statement and form of proxy relating to the 1997 Annual
Meeting, they must be received by the Company not later than August 10, 1996.
Such proposals should be directed to the attention of the Secretary of the
Company, at 7201 Hamilton Boulevard, Allentown, Pennsylvania 18195-1501.
28
Exhibit A
SUMMARY OF PRINCIPAL PROVISIONS OF
AIR PRODUCTS AND CHEMICALS, INC.
1997 LONG-TERM INCENTIVE PLAN
AS PROPOSED TO BE AMENDED AND RESTATED EFFECTIVE OCTOBER 1, 1996
1997 Long-Term Incentive Plan. The Plan provides for four types of long-term
incentive awards: stock options, stock appreciation rights, performance units,
and deferred stock units. Stock options may be granted in the form of
nonstatutory stock options and incentive stock options. Nonstatutory stock
options do not qualify for preferential federal income tax treatment under
Section 421(a) of the Internal Revenue Code, while incentive stock options are
intended to be eligible for preferential federal income tax treatment since they
comply with the requirements in Subsection (b) of Section 422 of the Internal
Revenue Code.
Under the Plan, a participant may be granted certain combinations of stock
options, stock appreciation rights, performance units, and deferred stock units.
The same person may be granted separate awards at or for the same period of time
under terms whereby the issuance of shares or payment under one award has no
effect on any other award; or stock appreciation rights and performance units
may be granted to a participant in relation to (i.e., in "tandem" with) a
previously or concurrently granted nonstatutory stock option under terms whereby
the issuance of shares or payment under one award reduces directly the number of
shares, units, and/or rights remaining available under the tandem award(s). Any
shares subject to a Plan award which for any reason expires, is forfeited, or
terminates unexercised may again be subject to a Plan award, but shares subject
to an award which are not issued as the result of exercise or payment of a
tandem award will not be available again for issuance under the Plan, regardless
of the form in which such tandem award was paid. Grants of stock options, stock
appreciation rights, performance units, and deferred stock units to any one
person cannot exceed the applicable Section 162(m) limits for such awards as
defined and described under Agenda Item No. Five at page 12 of the foregoing
Proxy Statement to which this Exhibit A is appended (the "Proxy Statement").
I. Plan Amendments. The Plan may be amended or suspended at any time by the
Management Development and Compensation Committee of the Company's Board of
Directors (the "Committee") but (a) unless required by law, no such action shall
adversely affect outstanding awards without the consent of affected participants
and (b) amendments of the type described under Agenda Item No. Four of the
foregoing Proxy Statement at pages 10 to 11 therof under Amendments, cannot be
made unless approved by the holders of a majority of the shares present in
person or represented by proxy at a meeting of the shareholders of the Company
and having voting power on the matter. Under current law such shareholder
approval would be required to increase the number of shares or benefits payable
under the Plan by more than 10%; or change the class of employees eligible to
receive incentive stock options or increase the number of shares with respect to
which incentive stock options may be granted.
II. Stock Options. Stock options will be exercisable during the period fixed by
the Committee which the Plan currently provides may begin no earlier than one
year and continue no longer than ten years and, as to nonqualified stock
options, ten years and one day, from their date of grant. Unless otherwise
determined by the Committee, each nonstatutory stock option will become
exercisable in installments of one-third of the shares subject to such option
beginning one year after the date of grant and an additional one-third of such
shares beginning on each of the second and third anniversaries of the date of
grant. The Plan provides that, unless the Committee determines otherwise, any
incentive stock options granted will become exercisable in full one year from
their date of grant. The Committee may accelerate the exercisability of any
stock option that has been outstanding for one year. Following a change in
control of the Company (as defined in the Plan) options which have been
outstanding for six months or more will immediately become exercisable in full.
In addition, the Committee may act at its discretion to require or any
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participant may choose to surrender such options in exchange for cash payments
valued at 100% of the "spread" used to value stock appreciation rights following
a change in control of the Company as described below under III. Stock
Appreciation Rights.
The purchase price deliverable upon the exercise of a stock option cannot be
less than 100% of the fair market value (as defined in the Plan) of a share of
common stock on the date the option is granted. Payment for optioned stock may
be made in cash or, if the Committee determines, in common stock currently owned
by the participant or a combination of cash and such stock. For purposes of
paying for optioned stock, currently owned common stock will be valued at its
fair market value as of the date of exercise of the option.
In the event of separation from service with the Company or a subsidiary by
reason of death, disability or retirement, a participant's options or portions
thereof which are then exercisable will continue to be exercisable in accordance
with their terms. In addition, if an option is only exercisable in part at the
time of such separation from service, a pro rata portion of the installment of
such option vesting in the fiscal year of separation, will become exercisable
following the separation on the next anniversary of the date of grant of such
award. Any options or portions thereof which, as of such date of separation from
service, have not or will not become exercisable will terminate unless the
Committee determines otherwise. Upon any other termination of employment, all
options will terminate unless otherwise determined by the Committee.
III. Stock Appreciation Rights. Stock appreciation rights will generally be
exercisable to the extent and upon the same conditions that an option would be
exercisable, except that stock appreciation rights granted in tandem with a
stock option will automatically terminate six months after the participant to
whom they were granted ceases for any reason to be employed by the Company or a
subsidiary and ceases, if applicable, to be a member of the Board of Directors
of the Company. Further, unless otherwise determined by the Committee, stock
appreciation rights cannot be exercised when the fair market value of a share of
common stock is more than three times the value thereof on the date of grant of
the stock appreciation right. However, following a change in control of the
Company, stock appreciation rights which have been outstanding for six months
will immediately become exercisable in full for a period of 30 days, without
regard to the foregoing restriction relating to the fair market value of common
stock.
The amount of the payment to be made upon the exercise of stock appreciation
rights cannot exceed in value 100% of the so-called "spread" between (a) the
aggregate fair market value (as defined in the Plan) of the number of shares
with respect to which the participant has elected to exercise stock appreciation
rights on the exercise date and (b) the aggregate purchase price of such shares
based on the fair market value (as defined in the Plan) of such number of shares
on the date the stock appreciation right was granted. The Committee in its
discretion may make payment of stock appreciation rights in cash or partly in
cash and partly in common stock. Following a change in control of the Company,
clause (a) of the foregoing formula is revised so that the value of each share
as to which stock appreciation rights are being exercised will be the greater of
the price paid or to be paid for a share of common stock in connection with the
change in control or the highest fair market value of a share of common stock
during the 60-day period preceding the stock appreciation rights exercise date.
IV. Performance Units. At the time a grant of performance units is made, the
Committee establishes performance objectives to be attained within the award
period for such units as a condition of recipients of such performance units
becoming entitled to each level of payment in respect of such units. The Plan
permits performance objectives to be based on such measure or measures of
Company performance as the Committee may choose other than changes in the market
value of common stock. The Committee is permitted to (a) establish different
performance objectives and award periods for participants employed by or
responsible for matters relating to different Company subsidiaries, divisions or
groups, (b) grant performance units after the award period has begun and (c)
equitably adjust performance objectives for outstanding performance units where
such action is warranted by any occurrence, condition, action, change or
development by or affecting the performance of the Company or any of its
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subsidiaries, such as an acquisition, disposition or divestiture of a business
or assets, a change in accounting principles or practices or the method of their
application, the occurrence of an extraordinary item for purposes of generally
accepted accounting principles, a change in the value or valuation of property
or assets, a change in any tax or other law or regulation, a change in business
or corporate strategy, structure or organization, or the effects of foreign
currency conversions or translations.
Participants will be entitled to payment (upon exercise) for each performance
unit remaining outstanding as of the date of the Committee's determination that
the performance objectives for the award period have been attained and the
dollar value of the performance units based on the level of performance
attained. Interest will accrue at market rates on the dollar value of each
performance unit from the date of the Committee's determination. Participants
whose earned performance units were granted in relation to a nonstatutory stock
option will have the right to elect to receive payment of the dollar value,
including accrued interest, of all or part of such performance units at any time
prior to the cancellation of those performance units upon the exercise of the
related nonstatutory stock option or stock appreciation rights and will
automatically be paid in respect of any such performance units which remain
outstanding following the expiration or termination unexercised of any such
option (other than by reason of the exercise of related stock appreciation
rights). Payment of performance units which were not granted in relation to
a nonstatutory stock option will generally be made by the Company promptly
following the Committee's determination.
Payment of any performance units and interest thereon may be made in cash and/or
shares of common stock, as the Committee determines. To the extent paid in
common stock, the number of shares will be determined by dividing the amount of
the payment by the fair market value of a share on the date, as the case may be,
of (a) receipt of written notice of the participant's election to receive
payment or expiration or termination of the related nonstatutory stock option or
(b) crediting of performance units granted alone. Following a change in control
of the Company, the Committee may determine to credit participants with a
prorated number of or dollar value as to any or all outstanding performance
units before the end of the applicable award period to the extent of the time
elapsed during such award period, but only to the extent equitably adjusted
performance objectives for the shorter period have been achieved.
Following termination of employment prior to the end of an award period, a
participant's performance units may, nevertheless, become payable if and to the
extent performance objectives are eventually achieved and to the extent and upon
the conditions the related nonstatutory stock option continues to be exercisable
as described above under II. Stock Options. If granted alone and such
termination is a result of death, disability or retirement, such performance
units, if earned, will become payable in proportion to the participant's service
during the award period, unless the Committee determines otherwise.
V. Deferred Stock Units. Deferred stock units are each equal in value to a share
of Company common stock. A deferred stock unit award entitles the holder to
receive, without payment to the Company, the value of each unit at the end of a
deferral period which is fixed by the Committee at the time it grants the
deferred stock unit award. At the end of the deferral period, payment of awards
may be made in shares of common stock and/or cash as determined by the
Committee. If paid in common stock, the participant will receive a number of
shares equal to the number of deferred stock units and, if paid in cash, the
participant will receive for each such unit an amount equal to the fair market
value of a share of common stock on the last day of the applicable deferral
period. In either case, the participant will also receive a cash payment equal
to any cash dividends paid during the deferral period on shares of common stock
equivalent in number to the number of deferred stock units being paid. The
deferral period can be no less than two years from the date of grant of the
award. However, following a change in control of the Company, the Committee may
determine to pay all or certain outstanding deferred stock units notwithstanding
that the applicable deferral periods have not been completed, and any deferred
stock unit paid in cash will be valued at the greater of the price paid or to be
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paid for a share of common stock in connection with the change in control or the
highest fair market value of a share of common stock during the 60-day period
preceding the change in control.
An employee whose employment is terminated other than due to death, disability
or retirement during the deferral period will forfeit the undelivered portion of
any award, unless the Committee determines that such awards should be paid at
the end of the deferral period or on some accelerated basis. If employment
terminates due to death, disability or retirement, the participant will receive
payment in respect of any outstanding awards at the end of the deferral period
or on such accelerated basis as the Committee may determine.
AIR PRODUCTS AND CHEMICALS, INC.
1997 LONG-TERM INCENTIVE PLAN
As Amended and Restated Effective October 1, 1996
1. Purposes of the Plan
The purposes of this Plan are: (i) to provide long-term incentives and
rewards to those executives or other key employees who are in a position to
contribute to the long-term success and growth of Air Products and Chemicals,
Inc. (the "Company") and Participating Subsidiaries, (ii) to assist the Company
and Participating Subsidiaries in attracting and retaining executives and other
key employees with experience and ability and (iii) to associate more closely
the interests of such executives and other key employees with those of the
Company's shareholders.
2. Administration of the Plan
The Plan shall be administered by the Management Development and
Compensation Committee (the "Committee") of the Company's Board of Directors
(the "Board") or such other committee thereof consisting of such members (not
less than three) of the Board as are appointed from time to time by the Board
and who, during the one year period prior to serving as a member of the
Committee and during such service, have not been and are not granted equity
securities of the Company under the Plan or under any other Company plan or
program (other than one which will not jeopardize the "disinterested" status of
such person within the meaning of Rule 16b-3(c)(2)(i) under the Act or any
predecessor or successor rule relating to exemption from Section 16(b) of the
Act) and who further constitute "outside directors" for purposes of Section
162(m) of the Internal Revenue Code.
The Committee shall have all necessary powers to administer and interpret
the Plan, such powers to include exclusive authority (within the limitations
described and except as otherwise provided in the Plan) to select the employees
or determine classes of employees to be granted awards under the Plan, to
determine the aggregate amount, type, size, and terms of the awards to be made,
to determine the time when awards will be granted and to establish and determine
whether performance objectives required for earning the right to payment in
respect of performance units have been attained. The Committee may take into
consideration recommendations from the appropriate officers of the Company and
of each Participating Subsidiary with respect to making the foregoing
determinations as to Plan awards, administration, and interpretation.
The Committee shall have full power and authority to adopt such rules,
regulations, agreements and instruments for the administration of the Plan and
for the conduct of its business as the Committee deems necessary or advisable.
The Committee's interpretations of the Plan and all action taken and
determinations made by the Committee pursuant to the powers vested in it
hereunder shall be conclusive and binding on all parties concerned, including
the Company, its shareholders and any employee of the Company or any Subsidiary.
Notwithstanding any other provision of the Plan to the contrary, the Committee
may delegate to appropriate Company officers its authority to take all final
action with respect to granting and administering Plan awards granted to
executives and key employees who are at the time of such action not members of
the Board or "officers" within the meaning of Rule 16a-1(f) of the Act,
including without limitation selecting the executives and key employees to whom
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such awards will be granted and determining the amount of any such awards to be
made to such executives and key employees, determining the terms and conditions
of such awards and administering, interpreting, and taking all action on behalf
of the Company with respect to administering, vesting, and paying such awards;
provided, however, that (i) all such awards shall be granted within the
limitations and subject to the terms and conditions required by the Plan and by
the Committee's determinations and interpretations thereof and thereunder; (ii)
the aggregate of such awards granted under the Plan for or with respect to a
given Fiscal Year shall not, when added to the awards approved by the Committee
for granting to individuals who are members of the Board of Directors or are
"officers" within the meaning of Rule 16a-1(f) of the Act for or with respect to
the same Fiscal Year, exceed the total amount of awards approved by the
Committee for or with respect to such Fiscal Year; and (iii) excepting any
action with respect to such awards taken because of or in connection with a
Change in Control of the Company or as contemplated by Section 11. With respect
to matters so delegated, the term "Committee" as used herein shall mean the
delegate.
3. Eligibility for Participation
Participation in the Plan shall be limited to executives or other key
employees (including officers and directors who are also employees) of the
Company and its Participating Subsidiaries who are determined by the Committee
to have a substantial opportunity to influence the long-term growth of the
Company or Participating Subsidiaries. Employees who participate in other
incentive or benefit plans of the Company or any Participating Subsidiary may
also participate in this Plan. As used herein, the term "employee" shall mean
any person employed full-time by the Company or a Participating Subsidiary on a
salaried basis, and the term "employment" shall mean full-time salaried
employment by the Company or a Subsidiary.
4. Shares of Stock Subject to the Plan
The shares that may be delivered upon exercise, in payment or in respect of
stock options, stock appreciation rights, performance units, and deferred stock
units granted under the Plan for, during, or in respect of Fiscal Year 1997 and
later years, shall not exceed in the aggregate 6,000,000 shares of common stock
of the Company ("Common Stock"), subject to adjustment as provided in Section
11. Any share subject to a Plan award which for any reason expires, is
forfeited, or terminates unexercised may again be subject to an award
subsequently granted under the Plan, but shares subject to an award which are
not issued or delivered as a result of the exercise or payment of a related
award shall not again be available for issuance under the Plan regardless of the
form in which such award was paid.
5. Awards
Awards under the Plan may be of the following types: (i) stock options,
(ii) stock appreciation rights, (iii) performance units, and/or (iv) deferred
stock units. Stock options ("Stock Options" or "Options") may be either
nonstatutory stock options ("Nonstatutory Stock Options") or incentive stock
options ("Incentive Stock Options"), both as described below. The Committee
shall designate each Stock Option grant as being either a Nonstatutory Stock
Option or an Incentive Stock Option. If the same individual receives both
Nonstatutory Stock Options and Incentive Stock Options, each type shall be
clearly identified and separately granted.
Stock Options, whether Nonstatutory Stock Options or Incentive Stock
Options, are rights to purchase Common Stock from the Company. Stock
appreciation rights ("Stock Appreciation Rights") are rights to receive cash
and/or Common Stock equivalent in value to the "spread" between (a) the
aggregate fair market value of the number of shares with respect to which the
Participant has elected to exercise Stock Appreciation Rights and (b) the
aggregate purchase price of such shares based on the Fair Market Value of a
share of Common Stock on the date the Stock Appreciation Rights were granted.
Performance units ("Performance Units") are awards having a unit dollar value
determined by the Committee and constitute rights to receive cash and/or Common
Stock equivalent in value to the value of the Performance Units, provided
specified performance objectives are met. Deferred stock units ("Deferred Stock
A-6
Units") are rights to receive at the end of a deferral period cash and/or Common
Stock equivalent in value to one share of Common Stock for each unit.
Nonstatutory Stock Options, Stock Appreciation Rights, Performance Units,
and Deferred Stock Units may be granted to the same person as separate awards at
or for the same period of time under terms whereby the issuance of shares or
payment under one award has no effect on any other award. Stock Appreciation
Rights and Performance Units may be granted to a Participant in relation to
(i.e., in "tandem" with) a previously or concurrently granted Nonstatutory Stock
Option under terms whereby the issuance of shares or payment under one award
reduces directly the number of shares, units, and/or rights remaining available
under the related award(s). Performance Units cannot be granted in conjunction
with, or in any way related to, Incentive Stock Options.
6. Stock Options
(a) Nonstatutory Stock Options. A Stock Option designated by the
Committee as a Nonstatutory Stock Option is one which is not eligible for
preferential tax treatment under Section 421(a) of the Internal Revenue Code.
The Committee may grant Nonstatutory Stock Options either alone or in
conjunction with and related to Stock Appreciation Rights and/or Performance
Units. All Nonstatutory Stock Options granted under the Plan shall be on the
following terms and conditions (and such other terms and conditions that the
Committee may establish which are consistent with the Plan and applicable law):
(i) Price. The purchase price per share of Common Stock
covered by each Nonstatutory Stock Option shall not be less than 100%
of the Fair Market Value of a share of Common Stock on the date of
grant of such Option.
(ii) Number of Shares. The Committee will determine,
absolutely or by formula related to the Fair Market Value of a share of
Common Stock, the number of shares of Common Stock to be subject to
each Nonstatutory Stock Option. The number of shares subject to an
outstanding Nonstatutory Stock Option will be reduced on a one-for-one
basis to the extent that (A) shares under such Nonstatutory Stock
Option are used to calculate the cash and/or shares received upon
exercise of related Stock Appreciation Rights and (B) any related
Performance Units are paid. In no event shall the number of shares
subject to nonstatutory stock options granted to any Participant in any
Fiscal Year exceed 500,000.
(iii) Term and Exercise Dates. The Committee shall fix the
term during which each Nonstatutory Stock Option may be exercised, but
no Nonstatutory Stock Option shall be exercisable after the first day
following the tenth anniversary of its date of grant. No Nonstatutory
Stock Option shall be exercisable prior to one year from its date of
grant, except as otherwise provided in Section 10. Unless otherwise
determined by the Committee and except as otherwise provided in Section
10, each Nonstatutory Stock Option shall become exercisable in
installments as follows:
1. One-third of the shares subject to such
Nonstatutory Stock Option may be purchased commencing one
year after the date of grant; and
2. An additional one-third of such shares subject to
such Nonstatutory Stock Option may be purchased commencing on
each of the second and third yearly anniversaries of the date
of grant.
In the event a Participant ceases to be an employee of the
Company or a Subsidiary by reason of Retirement, Disability or death
after the first anniversary of the date of grant to such person of a
Nonstatutory Stock Option but before the Option has become exercisable
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in full, a pro rata portion of the shares that would have become
exercisable on the next anniversary of the date of grant had the
Participant remained employed shall become exercisable commencing on
such next anniversary, based upon the proportion which the number of
full calendar months in such Fiscal Year prior to such termination of
employment bears to the 12 calendar months in the Fiscal Year.
Notwithstanding the foregoing or any other provision of the Plan, the
Committee may determine, in its discretion, that any unexercisable
Nonstatutory Stock Option or portion thereof shall not terminate or
have terminated on the date of the Participant's Retirement, Disability
or death, but shall continue or have continued on such terms and
subject to such conditions as the Committee shall specify.
Notwithstanding any other provision of the Plan, the Committee
may determine that the date on which any outstanding Nonstatutory Stock
Option or any portion thereof is exercisable shall be or shall have
been advanced to an earlier date or dates designated by the Committee
in accordance with such terms and subject to such conditions, if any,
as the Committee shall specify; provided, however, that any such
earlier date shall not be prior to one year from the date of grant of
such Nonstatutory Stock Option, except as otherwise provided in Section
10.
(iv) Exercise. A Participant wishing to exercise his or her
Nonstatutory Stock Option in whole or in part shall give written notice
of such exercise to the Company, accompanied by full payment of the
purchase price. The date of receipt of such notice (including by
facsimile transmission) and payment shall be the "Exercise Date" for
such Nonstatutory Stock Option or portion thereof; provided, however,
that if the Participant engages in a simultaneous Option exercise and
sale of shares of Common Stock, the Exercise Date shall be the date of
sale of the shares purchased by exercising such Option. No partial
exercise of a Nonstatutory Stock Option may be for less than 100 shares
of Common Stock.
(b) Incentive Stock Options. A Stock Option designated by the Committee
as an Incentive Stock Option is one which is intended to comply with the
requirements in Subsection (b) of Section 422 of the Internal Revenue Code so as
to be eligible for preferential income tax treatment and shall satisfy the
following terms and conditions (and such other terms and conditions that the
Committee may establish which are consistent with the Plan and applicable law):
(i) Price. The purchase price per share of Common Stock
covered by each Incentive Stock Option shall not be less than 100% of
the Fair Market Value of a share of Common Stock on the date of grant
of such Option. If an Incentive Stock Option is granted to an employee
who, on the date of grant, owns stock possessing more than 10% of the
total combined voting power of all outstanding classes of stock of the
Company or any affiliate, the purchase price per share under such
Incentive Stock Option shall be at least 110% of the Fair Market Value
of a share of Common Stock on the date of grant of such Option and such
Incentive Stock Option shall not be exercisable after the expiration of
five years from its date of grant.
(ii) Number of Shares. The Committee will determine,
absolutely or by formula related to the Fair Market Value of a share of
Common Stock, the number of shares of Common Stock to be subject to
each Incentive Stock Option. The number of shares subject to an
outstanding Incentive Stock Option will be reduced on a one-for-one
basis to the extent that shares under such Incentive Stock Option are
used to calculate the cash and/or shares received upon exercise of a
related Stock Appreciation Right.
(iii) Term and Exercise Dates. No Incentive Stock Option shall
be granted under this Plan more than 10 years after the date this Plan
is adopted or approved by the shareholders of the Company, whichever is
earlier. The Committee shall fix the term during which each Incentive
Stock Option may be exercised, but no Incentive Stock Option shall be
exercisable after ten years from its date of grant. No Incentive Stock
Option shall be exercisable prior to one year from its date of grant,
except as otherwise provided in Section 10. Unless otherwise determined
by the Committee and except as otherwise provided in Section 10, each
Incentive Stock Option shall be exercisable in full one year after its
date of grant.
In the event a Participant ceases to be an employee of the
Company or a Subsidiary by reason of Retirement, Disability or death
after the first anniversary of the date of grant to such person of an
Incentive Stock Option but before the Option has become exercisable in
full, a pro rata portion of the shares shall become exercisable
commencing on the next anniversary of the date of grant of such award,
based upon the proportion which the number of full calendar months in
such Fiscal Year prior to such termination of employment bears to the
12 calendar months in the Fiscal Year. Notwithstanding the foregoing or
any other provision of the Plan, the Committee may determine, in its
discretion, that any unexercisable Incentive Stock Option or portion
thereof shall not terminate or have terminated on the date of the
Participant's Retirement, Disability or death, but shall continue or
have continued on such terms and subject to such conditions as the
Committee shall specify.
Notwithstanding any other provision of the Plan, the Committee
may determine that the date on which any outstanding Incentive Stock
Option or any portion thereof is exercisable shall be or shall have
been advanced to an earlier date or dates designated by the Committee
in accordance with such terms and subject to such conditions, if any,
as the Committee shall specify, provided, however, that any such
earlier date shall not be prior to one year from the date of grant of
such Incentive Stock Option, except as otherwise provided in Section
10.
(iv) Exercise. A Participant wishing to exercise his or her
Incentive Stock Option in whole or in part shall give written notice of
such exercise to the Company, accompanied by full payment of the
purchase price. The date of receipt of such notice (including by
facsimile transmission) and payment shall be deemed to be the "Exercise
Date" for such Incentive Stock Option or portion thereof; provided,
however, that if the Participant engages in a broker-financed Option
exercise, the Exercise date shall be the date of sale of the shares
purchased by exercising such Option. No partial exercise of an
Incentive Stock Option may be for less than 100 shares of Common Stock.
(v) Annual Limit. The aggregate Fair Market Value, determined
on the date of grant, of stock with respect to which Incentive Stock
Options are exercisable for the first time by such Participant during
any calendar year (under this Plan and all such other plans of the
Company and any predecessor, parent, subsidiary or affiliate) shall not
exceed $100,000.
(c) Payment. The purchase price of shares purchased upon exercise of
any Option shall be paid in full in cash at the time of exercise of the Option,
except that the Committee, in its sole discretion, and on such terms and
conditions as it may specify, may approve payment by the exchange of shares of
Common Stock having a Fair Market Value on the Exercise Date equal to the
purchase price of such shares or by a combination of cash and Common Stock
having a Fair Market Value on the Exercise Date equal to the portion of such
purchase price not paid in cash; provided, however, that except as the Committee
shall otherwise determine, any such shares submitted in the exchange must have
been beneficially owned by the Participant for a certain period prior to the
Exercise Date, the duration of such period to be determined from time to time by
the Committee but in no event to be less than six months. Subject to any
administrative rules from time to time adopted by the Committee for
administering Option exercises, payment of the exercise price of the Option will
be permitted through the delivery (including by facsimile transmission) of an
irrevocable exercise notice coupled with irrevocable instructions to a
designated broker to simultaneously sell the underlying shares of Common Stock
and deliver to the Company on the settlement date the portion of the proceeds
representing the exercise price (and any taxes to be withheld).
(d) Termination of Employment or Death.
(i) In the event that a Participant ceases to be an employee
of the Company or a Subsidiary by reason of Retirement, Disability or
death, any portion of his or her Stock Option that is not, or will not
by its terms following such Retirement, Disability or death become,
exercisable shall terminate on the date of such Retirement, Disability
or death. The date of any such Disability shall be determined by the
Committee. The Participant whose employment is terminated by Retirement
or Disability, and, in the case of the Participant's death before or
after Retirement or Disability, the Participant's Designated
Beneficiary or, if none, his or her legal representative, shall
continue to have the same rights to exercise any unexercised portion of
the Participant's Stock Option which is exercisable at the time of, or
will by its terms become exercisable after such termination or death,
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as the Participant would have had if he or she had continued to be an
active or retired employee of the Company or a Subsidiary, as the case
may be.
(ii) Except as provided in clause (i) of this Section 6(d), if
prior to the expiration or cancellation of any Stock Option, the
Participant ceases to be employed by the Company or a Subsidiary for
any reason, any unexercised portion of his or her outstanding Option
shall automatically terminate unless the Committee, in its sole
discretion, shall determine otherwise, and except that when the
Participant's employment has ceased due to part-time employment or a
leave of absence, such Participant's Stock Option shall be treated in
accordance with guidelines for such situations established by the
Committee.
(iii) No provision of this Section 6(d) shall be deemed to
permit the exercise of any Stock Option after the expiration of the
normal stated term of such Option.
7. Stock Appreciation Rights
The Committee may grant Stock Appreciation Rights either alone or in
conjunction with and related to previously or concurrently granted Stock Options
and/or Performance Units. All Stock Appreciation Rights shall be granted on the
following terms and conditions (and such other terms and conditions that the
Committee may establish which are consistent with the Plan and applicable law):
(a) Number of Rights. The Committee shall determine, absolutely or by
formula related to the Fair Market Value of a share of Common Stock, the number
of Stock Appreciation Rights which shall be granted. As to any Stock
Appreciation Rights granted in tandem with another Plan award, such number shall
not be greater than the number of shares which are then subject to any Stock
Options related to such Stock Appreciation Rights, and the number of such Stock
Appreciation Rights will be reduced on a one-for-one basis to the extent that
(A) shares under any related Stock Option are purchased and (B) any Performance
Units related to any such Nonstatutory Stock Options are paid. In no event shall
the number of Stock Appreciation Rights granted to any Participant in any Fiscal
Year exceed 500,000.
(b) Exercise. Stock Appreciation Rights shall entitle the Participant,
to the extent he or she so elects from time to time, to receive, without any
payment to the Company, an amount of cash and/or a number of shares determined
and payable as provided in Section 7(c). Stock Appreciation Rights shall
generally be exercisable to the extent and upon the same conditions that Stock
Options are exercisable under clause (iii) of Sections 6(a) or 6(b), as the case
may be; provided, however, that, unless otherwise determined by the Committee,
Stock Appreciation Rights (i) may not be exercised when the Fair Market Value of
a share of Common Stock is more than three times the Fair Market Value of a
share of Common Stock on the date of grant of the Stock Appreciation Rights
(except as otherwise provided in Section 10), (ii) may not be exercised prior to
six months following the date of their grant, and (iii) if related to a Stock
Option, shall automatically terminate six months after the optionee ceases for
any reason to be employed by the Company or a Subsidiary and has ceased to be a
member of the Company's Board.
A Participant wishing to exercise Stock Appreciation Rights shall give
written notice of such exercise to the Company. The date of receipt of such
notice shall be the "Exercise Date" for such Stock Appreciation Rights. Promptly
after the Exercise Date or the end of the Exercise Period described below, if
later, the Company shall pay and/or deliver to the Participant the cash and/or
shares to which he or she is entitled. Unless otherwise determined by the
Committee and except as otherwise provided in Section 10, the Exercise Date
shall be limited to that period beginning on the third business day following
the date of release for publication of the Company's quarterly and annual
summary statements of sales and earnings and ending on the twelfth business day
following such date of release (the "Exercise Period").
(c) Amount of Cash and/or Number of Shares. Except as otherwise
provided in Section 10, the amount of the payment to be made upon exercise of
Stock Appreciation Rights shall be determined by multiplying (i) that portion,
as elected by the Participant, of the total number of shares as to which the
Participant is entitled to exercise the Stock Appreciation Rights award as of
the Stock Appreciation Right Exercise Date, by (ii) 100% of the amount by which
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the average of the Fair Market Values of a share of Common Stock on each trading
day during the Exercise Period exceeds the Fair Market Value of a share of
Common Stock on the date the Stock Appreciation Rights were granted. The
Committee may make payment in cash or partly in cash and partly in Common Stock,
all as determined by the Committee in its sole discretion. To the extent that
payment is made in Common Stock, the number of shares shall be determined by
dividing the amount of such payment by the foregoing average of the Fair Market
Values of a share of Common Stock on each trading day during the Exercise
Period. No fractional shares shall be issued, but instead the Participant shall
be entitled to receive a cash adjustment equal to the same fraction of the
foregoing average of Fair Market Values.
(d) Termination of Employment or Death. In the event that a recipient
of Stock Appreciation Rights ceases to be employed by the Company or a
Subsidiary by reason of Retirement, Disability or death after the first
anniversary of the date of the grant to such person of such Stock Appreciation
Rights, his or her Stock Appreciation Rights shall continue to be exercisable
following such termination of employment and termination of directorship, if
any, to the extent and upon the same conditions that a Stock Option is or
becomes exercisable under clause (iii) of Section 6(a) or 6(b), as the case may
be, (but subject to the conditions set forth in clauses (i) and (ii) of Section
7(b)), during such six-month period. Any such Stock Appreciation Rights related
to Stock Options shall automatically terminate six months after such termination
of employment and termination of directorship, if any. In the event a recipient
of Stock Appreciation Rights ceases to be employed by the Company or a
Subsidiary for a reason other than Retirement, Disability or death, his or her
Stock Appreciation Rights shall automatically terminate unless and to the extent
the Committee, in its sole discretion, shall determine otherwise.
(e) Stock Appreciation Rights Granted in Relation to Incentive Stock
Options. In order to assure that any Incentive Stock Option with respect to
which a Stock Appreciation Right is granted shall continue to comply with the
requirements in Subsection (b) of Section 422 of the Internal Revenue Code so as
to be eligible for preferential tax treatment, notwithstanding any other
provision of the Plan, any such Stock Appreciation Right granted under the Plan
shall entitle the Participant to payment of no more than 100% of the difference
between the purchase price of a share of Common Stock under the related
Incentive Stock Option and the Fair Market Value of such a share on the Stock
Appreciation Right Exercise Date and may be exercisable only when the Fair
Market Value of a share of Common Stock on the Stock Appreciation Right Exercise
Date exceeds the purchase price of a share of such Common Stock under the terms
of the related Incentive Stock Option. In addition, Stock Appreciation Rights
will expire no later than the expiration of any related Incentive Stock Option,
will be transferable only when, and under the same conditions, as the related
Incentive Stock Option is transferable and may be exercisable only when the
related Incentive Stock Option is exercisable. The Committee may, in its
discretion, from time to time impose such additional or different restrictions
on Stock Appreciation Rights relating to Incentive Stock Options as may be
necessary to maintain the eligibility of such Options for preferential tax
treatment.
8. Performance Units
All Performance Units awarded under the Plan shall be granted on the
following terms and conditions (and such other terms and conditions that the
Committee may establish which are consistent with the Plan and applicable law):
(a) Number and Value of Units. The Committee shall determine the number
of Performance Units to be granted to each employee selected for an award and
the maximum dollar value of each Performance Unit so granted. In the case of any
Performance Units granted in relation to a Nonstatutory Stock Option, the
initial number of Performance Units shall be no greater than the number of
shares which are then subject to the related Nonstatutory Stock Option. In no
event shall the maximum dollar value of Performance Units granted to any
Participant in any Fiscal Year exceed the lesser of $2,000,000 or 150% of the
annualized base salary as of the date of grant.
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In the case of any Performance Units granted in relation to a Nonstatutory
Stock Option, the number of such Performance Units shall be cancelled on a
one-for-one basis to the extent that (i) either before or after such Performance
Units have been earned and credited to Participants, shares are purchased upon
exercise under the related Nonstatutory Stock Option or shares under such
Nonstatutory Stock Option are used to calculate the cash and/or shares received
pursuant to related Stock Appreciation Rights, or (ii) before such Performance
Units have been earned and credited to Participants, the related Nonstatutory
Stock Option terminates in whole or in part as provided in clauses (i) or (ii)
of Section 6(d).
(b) Performance Objectives. Except as otherwise determined by the
Committee and as permitted by Section 10, the award period (the "Award Period")
in respect of any Performance Units shall be a four-year period commencing as of
the beginning of the Fiscal Year in or for which such Performance Units are
granted. At the time each grant of Performance Units is made, the Committee
shall establish and communicate to recipients of Performance Unit awards
performance objectives ("Performance Objectives") to be attained within the
Award Period as a condition to any right to receive payment in respect of such
Performance Units. The Committee may, in its discretion, establish different
Performance Objectives and/or Award Periods for Participants employed by or
responsible for matters relating to different Participating Subsidiaries or
different divisions, groups, departments or other subdivisions of the Company or
Participating Subsidiaries and make, in its discretion, any equitable
adjustments in Performance Objectives for Performance Units granted later than
similar Performance Units awarded for the same Award Period. The Performance
Objectives shall be determined by the Committee using such measure or measures
of the performance of the Company and/or its Subsidiaries over the Award Period
as the Committee shall select other than the market value of Common Stock of the
Company.
(c) Crediting and Payment. At the end of each Award Period, the
Committee shall determine the extent to which the Performance Objectives for the
Award Period have been attained and the dollar value of each Performance Unit
granted for such Award Period. Thereupon, each Participant will be
credited with an earned Performance Unit valued at such dollar value for each
Performance Unit granted to him or her for such Award Period which remains
outstanding as of the date of the Committee's determination. Interest will
accrue on the dollar value of each earned Performance Unit from the date of
credit at such rate as the Committee may from time to time determine to be
reasonable. Any interest earned on or in respect of an earned Performance
Unit that is subsequently cancelled other than by payment in respect thereof
shall be forfeited by the Participant.
A Participant whose earned Performance Units were granted in relation to a
Nonstatutory Stock Option may elect to receive payment of the dollar value,
including accrued interest thereon, of all or part of such earned Performance
Units at any time prior to the cancellation of those Performance Units in
accordance with Section 8(a), and shall be paid in respect of any such earned
Performance Units which remain outstanding promptly following the expiration or
termination unexercised of such Nonstatutory Stock Option (other than by reason
of the exercise of related Stock Appreciation Rights). Payment in respect of
earned Performance Units granted alone and not in relation to a Nonstatutory
Stock Option shall be made by the Company promptly following the crediting of
those Performance Units.
Payment in respect of Performance Units shall be made in cash, shares of
Common Stock or partly in cash and partly in shares of Common Stock, all as
determined by the Committee in its sole discretion. To the extent that payment
is made in Common Stock, the number of shares shall be determined by dividing
the amount of the payment to be made by the Fair Market Value of a share of
Common Stock on the date of (i) receipt of written notice of the Participant's
election to receive payment or expiration or termination of the related
Nonstatutory Stock Option or (ii) crediting of Performance Units granted alone
and not in relation to any Nonstatutory Stock Option. Upon payment in respect of
an earned Performance Unit, such Unit shall be cancelled.
(d) Termination of Employment or Death. In the event that a recipient
of a grant of Performance Units ceases to be an employee of the Company or a
Subsidiary prior to the end of the Award Period applicable to such Units by
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reason of Retirement, Disability or death, any of his or her outstanding
Performance Units granted in relation to Nonstatutory Stock Options (after
reduction on a one-for-one basis to the extent that related Nonstatutory Stock
Options terminate as provided in clause (iii) of Section 6(a) and clause (i) of
Section 6(d)) and which are eventually earned in accordance with Section 8(c),
shall be credited to such Participant or, in the case of such Participant's
death, his or her Designated Beneficiary or, if none, his or her legal
representative, and shall be payable at such times and in the manner provided in
Section 8(c). Any of his or her Performance Units not granted in relation to
Nonstatutory Stock Options and eventually earned in accordance with Section 8(c)
shall become payable as provided in Section 8(c), but in proportion to the
service of the Participant during the Award Period excluding any such service
following the last full calendar month of the Award Period preceding his or her
Retirement, Disability or death, unless the Committee determines, in its
discretion, that such Participant or his or her Designated Beneficiary or legal
representative should be eligible for eventual payment in full in respect of
such Performance Units as if the Participant had continued in service through
the end of the Award Period.
9. Deferred Stock Units
The Committee may grant Deferred Stock Units to Participants on the
following terms and conditions (and such other terms and conditions that the
Committee may establish which are consistent with the Plan and applicable law):
(a) Number, Value and Manner of Payment of Deferred Stock Units. Each
Deferred Stock Unit shall be equivalent in value to one share of Common Stock
and shall entitle the Participant to receive from the Company at the end of the
deferral period (the "Deferral Period") applicable to such Unit, without payment
of cash or other consideration to the Company but in consideration of services
performed for or for the benefit of the Company or a Participating Subsidiary by
such Participant, the value at such time of each Unit. Payment of the value of
such awards may be made in shares of Common Stock, cash or both as determined by
the Committee during, or as soon as practicable after the end of the Deferral
Period. If paid in Common Stock, the Participant shall receive a number of
shares of Common Stock equal to the number of matured or earned Deferred Stock
Units, and if paid in cash, the Participant shall receive for each matured
Deferred Stock Unit an amount equal to the Fair Market Value of a share of
Common Stock on the last day of the applicable Deferral Period (except as
otherwise provided in Section 10). Upon payment in respect of a Deferred Stock
Unit, such Unit shall be canceled. In no event shall the number of Deferred
Stock Units granted to any Participant in any Fiscal Year exceed 50,000.
(b) Deferral Period. Except as otherwise provided in Section
9(c), payments in respect of Deferred Stock Units shall be made only at the
end of the Deferral Period applicable to such Units, the duration of which
Deferral Period shall be fixed by the Committee at the time of grant of such
Deferred Stock Units. Deferral Periods shall be no less than two years.
(c) Termination of Employment or Death.
(i) If during a Deferral Period a Participant's full-time
employment with the Company or a Subsidiary is terminated for any
reason other than Retirement, Disability or death, such Participant
shall forfeit his or her Deferred Stock Units which would have matured
or been earned at the end of such Deferral Period, unless the Committee
determines in its discretion that such Deferred Stock Units should be
paid at the end of such Deferral Period or, notwithstanding any other
provision of the Plan, on some accelerated basis.
(ii) Unless otherwise specified by the Committee in the
applicable Deferred Stock Units agreement, a Participant whose
full-time employment with the Company or a Subsidiary terminates during
a Deferral Period due to Retirement or Disability or, in the case of
his or her death before or after Retirement or Disability, such
Participant's Designated Beneficiary or, if none, his or her legal
representative, shall receive payment in respect of such Participant's
Deferred Stock Units which would have matured or been earned at the end
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of such Deferral Period, at such time and in such manner as if the
Participant were still employed (and living) at the end of the Deferral
Period or, notwithstanding any other provision of the Plan, on such
accelerated basis as the Committee may determine.
(d) Dividends. No cash dividends or equivalent amounts shall be paid on
outstanding Deferred Stock Units. However, when payment of the value of an award
is made to the Participant, the Company shall pay to the Participant an
additional amount in cash which shall be equal to the cash dividends, if any
("Dividend Equivalent") which would have been paid during the period since the
award was granted with respect to issued and outstanding shares of Common Stock
equal in number to the number of Deferred Stock Units being paid. No interest
shall be paid on any such Dividend Equivalent or any part thereof.
10. Change in Control
Following or in connection with the occurrence of a Change in Control, the
following shall or may occur as specified below, notwithstanding any other
provisions of this Plan to the contrary:
(a) Acceleration and Exercisability of Stock Options and Stock
Appreciation Rights; Amount of Cash and/or Number of Shares for Stock
Appreciation Rights. All Stock Options and Stock Appreciation Rights shall
become immediately exercisable in full for the period of their remaining terms
automatically and without any action by the Committee, provided, however, that
the acceleration of the exercisability of any Stock Option or Stock Appreciation
Right that has not been outstanding for a period of at least six months from its
respective date of grant shall occur on the first day next following the end of
such six-month period. In addition to the normal Exercise Period for Stock
Appreciation Rights provided for in Section 7(b), Stock Appreciation Rights
shall be exercisable during the thirty-day period immediately following the
later of (i) the Change in Control or (ii) the date of acceleration of their
exercisability, that is, upon the first date more than six months from their
date of grant following the Change in Control. The amount of the payment to be
made upon the exercise of a Stock Appreciation Right following a Change in
Control shall be determined, without regard to the limitation contained in
clause (i) of Section 7(b), by multiplying (i) that portion, as elected by the
Participant, of the total number of shares as to which the Participant is
entitled to exercise the Stock Appreciation Rights as of the Exercise Date for
the Stock Appreciation Rights, by (ii) 100% of the amount by which
(A) the greater of (1) the highest tender or exchange offer
price paid or to be paid for Common Stock pursuant to the offer
associated with the Change in Control (such price to be determined by
the Committee from such source or sources of information as the
Committee shall determine including, without limitation, the Schedule
13D or an amendment thereto filed by the offeror pursuant to Rule 13d-1
under the Act), or the price paid or to be paid for Common Stock under
an agreement associated with the Change in Control, as the case may be,
and (2) the highest Fair Market Value of a share of Common Stock on any
day during the sixty-day period immediately preceding the Exercise Date
of the Stock Appreciation Rights, exceeds
(B) the Fair Market Value of a share of Common Stock on the
date of grant of the Stock Appreciation Rights.
For purposes of determining the price paid or to be paid for Common Stock
under clause (1) of paragraph (A) of the preceding formula, consideration other
than cash forming part or all of the consideration for Common Stock paid or to
be paid pursuant to the exchange offer or agreement associated with the Change
in Control shall be valued at the higher of the valuation placed thereon by the
Board of Directors or by the person making the offer or entering into the
agreement with the Company.
(b) Cash Surrender of Stock Options. All or certain outstanding Stock
Options may, at the discretion of the Committee, be required to be surrendered
by the holder thereof for cancellation in exchange for a cash payment for each
such Stock Option. In the absence of Committee action requiring the surrender of
Stock Options, each holder of Stock Options may elect to surrender all or
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certain of his or her outstanding Options which are then exercisable for
cancellation in exchange for a cash payment for each such Stock Option. In any
case, the cash payment received for each share subject to the Stock Option shall
be 100% of the amount by which the amount described in paragraph (A) of Section
10(a) exceeds the Fair Market Value of a share of Common Stock on the date
of grant of the Option. Such payments shall be due and payable immediately
upon surrender to the Committee for cancellation of appropriate award agreements
or other evidence in writing of the Participant's relinquishment of his or her
rights to such award or at such earlier date as the Committee shall determine
(but in no event earlier than the occurrence of a Change in Control) and shall
be valued as if the Exercise Date were the date of receipt of said materials or
such earlier date as the Committee shall determine.
(c) Accelerated Payment of Pro Rata Performance Units. The Committee
may in its sole discretion determine to credit Participants with a prorated
number of and/or dollar value as to any or all outstanding Performance Units to
the extent of the elapsed time of the Award Period, but only to the extent
Performance Objectives, equitably adjusted (pursuant to Section 11(a)) and
otherwise adjusted to reflect the shorter award period, have been achieved, as
determined by the Committee, as of the date of such determination. Participants
shall have the right to elect to receive payment of amounts in respect of such
earned Performance Units beginning no later than thirty days following the
Committee's determination to credit said Units under this Section 10(c) or at
such earlier date as the Committee shall determine, but in no event earlier than
the occurrence of a Change in Control.
(d) Reduction in Accordance with Plan. The number of shares covered by
Stock Options and Stock Appreciation Rights and the number of Performance Units
granted in relation to Nonstatutory Stock Options will be reduced on a
one-for-one basis to the extent related Stock Options or Stock Appreciation
Rights are exercised, or surrendered for cancellation in exchange for a cash
payment, or related Performance Units are paid, as the case may be, under this
Section 10.
(e) Accelerated Payment of Deferred Stock Units. The Committee may, in
its sole discretion, determine to pay in full any or all outstanding Deferred
Stock Units together with any Dividend Equivalents for the period for which such
Units have been outstanding, notwithstanding that the Deferral Periods as to
such Deferred Stock Units have not been completed. Such payment may be in cash
or in Common Stock, or a combination thereof, as determined by the Committee,
and shall be due and payable to Participants no later than thirty days following
the Committee's determination to pay said Deferred Stock Units under this
Section 10(e) or at such earlier date as the Committee shall determine, but in
no event earlier than the occurrence of a Change in Control. If paid in cash,
each Participant shall receive payment of an amount in respect of each Deferred
Stock Unit equal to the greater of (i) the highest tender or exchange offer
price paid or to be paid for Common Stock pursuant to the offer associated with
the Change in Control (such price to be determined by the Committee from such
source or sources of information as the Committee shall determine including,
without limitation, the Schedule 13D or an amendment thereto filed by the
offeror pursuant to Rule 13d-l under the Act) or the price paid or to be paid
for Common Stock under an agreement associated with the Change in Control, as
the case may be, and (ii) the highest Fair Market Value of a share of Common
Stock on any day during the sixty-day period immediately preceding the Change in
Control. For purposes of determining the price paid or to be paid for Common
Stock under clause (i) of the preceding sentence, consideration other than cash
forming part or all of the consideration for Common Stock paid or to be paid
pursuant to the exchange offer or agreement associated with the Change in
Control shall be valued at the higher of the valuation placed thereon by the
Board of Directors or by the person making the offer or entering into the
agreement with the Company.
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11. Dilution and Other Adjustments
(a) Notwithstanding any other provision of the Plan, in the event of
any change in the outstanding shares of Common Stock by reason of any stock
dividend or split, recapitalization, merger, consolidation, combination or
exchange of shares, a rights offering to purchase Common Stock at a price
substantially below fair market value, or other similar corporate change,
including without limitation in connection with a Change in Control, an
equitable adjustment shall be made, as determined by the Committee, so as to
preserve, without increasing or decreasing, the value of Plan awards and
authorizations (but subject to the last paragraph of Section 13), in (i) the
maximum number or kind of shares issuable or awards which may be granted under
the Plan, (ii) the amount payable upon exercise of Stock Appreciation Rights,
(iii) the maximum value payable in respect of Performance Units, (iv) the number
or kind of shares or purchase price per share subject to outstanding Stock
Options, (v) the number or value, or kind of shares which may be issued in
payment of outstanding Stock Appreciation Rights, (vi) the number or value of,
or the Performance Objectives or length of the Award Period for, outstanding
Performance Units, (vii) the value and attributes of Deferred Stock Units,
(viii) the maximum number, kind or value of any Plan awards which may be awarded
or paid to any one employee, (ix) any other aspect or aspects of the Plan or
outstanding awards made thereunder as specified by the Committee, or (x) any
combination of the foregoing. Such adjustments shall be made by the Committee
and shall be conclusive and binding for all purposes of the Plan.
(b) The Committee may, from time to time during an Award Period, in its
sole discretion (but subject to the last paragraph of Section 13), determine to
equitably adjust the Performance Objectives previously established by the
Committee for that Award Period as a condition of earning the right to receive
payment in respect of Performance Units or to equitably adjust Company
performance for all or any portion of the Award Period where such action is
warranted by any occurrence, condition, action, change or development by or
affecting the performance of the Company or any of its Subsidiaries, such as an
acquisition, disposition or divestiture of a business or assets; a change in
accounting principles or practices or the method of their application; the
occurrence of an extraordinary item for purposes of generally accepted
accounting principles; a change in the value or valuation of property or assets;
a change in any tax or other law or regulation; or a change in business or
corporate strategy, structure or organization. The Committee may also, in its
discretion, eliminate the effect of foreign currency conversion gains or losses
or translation adjustments from the reported consolidated earnings per share of
the Company if used in determining the attainment of any Performance Objectives
previously established.
12. Miscellaneous Provisions
(a) The holder of a Stock Option, Stock Appreciation Right, Performance
Unit, or Deferred Stock Unit shall have no rights as a Company shareholder with
respect thereto unless, and until the date as of which, certificates for shares
of Common Stock are issued upon exercise or payment in respect of such award.
(b) Except as the Committee shall otherwise determine in connection
with determining the terms of awards to be granted or shall thereafter permit,
no Stock Option, Stock Appreciation Right, Performance Unit, or Deferred Stock
Unit or any rights or interests therein of the recipient thereof shall be
assignable or transferable by such recipient except to his or her Designated
Beneficiary or by will or the laws of descent and distribution, and, except
as aforesaid, during the lifetime of the recipient, the Stock Option, Stock
Appreciation Right, Performance Unit, or Deferred Stock Unit shall be
exercisable only by, or payable only to, as the case may be, such recipient or
his or her guardian or legal representative.
(c) All Stock Options, Stock Appreciation Rights, Performance Units,
and Deferred Stock Units granted under the Plan shall be evidenced by agreements
in such form and containing such terms and conditions (not inconsistent with the
Plan and applicable domestic and foreign law) in addition to those provided for
herein as the Committee shall approve. Notwithstanding any other provision of
A-15
the Plan to the contrary, the Committee shall be empowered to grant Performance
Units in respect of which the recipient will have no immediate right to receive
payment upon the Committee's determination that the applicable Performance
Objectives have been achieved, to any Participant who does not or will not
reside or be domiciled in the United States if, as a result of any law
applicable to such Participant or such award or the potential effect of foreign
currency conversions or translations on such award, such award will, in the sole
discretion of the Committee, best serve the purposes of the Company to be
promoted by this Plan.
(d) No shares of Common Stock shall be issued or transferred upon
exercise of any Stock Options or Stock Appreciation Rights or in payment of any
Performance Units or Deferred Stock Units granted hereunder unless and until all
legal requirements applicable to the issuance or transfer of such shares have
been complied with to the satisfaction of the Committee and the Company. The
Committee and the Company shall have the right to condition any issuance of
shares of Common Stock made to any Participant hereunder on such Participant's
undertaking in writing to comply with such restrictions on his or her subsequent
disposition of such shares as the Committee and/or the Company shall deem
necessary or advisable as a result of any applicable law, regulation or official
interpretation thereof, and certificates representing such shares may be
legended to reflect any such restrictions.
(e) The Company shall have the right to deduct from all awards
hereunder paid in cash any federal, state, local or foreign taxes required by
law to be withheld with respect to such cash awards. In the case of awards to be
distributed in Common Stock, the Company shall have the right to require, as a
condition of such distribution, that the Participant or other person receiving
such Common Stock either (i) pay to the Company at the time of distribution
thereof the amount of any such taxes which the Company is required to withhold
with respect to such Common Stock or (ii) make such other arrangements as the
Company may authorize from time to time to provide for such withholding
including without limitation having the number of the units of the award
cancelled or the number of the shares of Common Stock to be distributed reduced
by an amount with a value equal to the value of such taxes required to be
withheld. The obligation of the Company to make delivery of awards in cash or
Common Stock shall be subject to currency or other restrictions imposed by any
government.
(f) No employee of the Company or a Subsidiary or other person shall
have any claim or right to be granted an award under this Plan. Neither this
Plan nor any action taken hereunder shall be construed as giving any employee
any right to be retained in the employ of the Company or a Subsidiary, it being
understood that all Company and Subsidiary employees who have or may receive
awards under this Plan are employed at the will of the Company or such
Subsidiary and in accord with all statutory provisions.
(g) Distributions of shares of Common Stock upon exercise, in payment
or in respect of awards made under this Plan may be made either from shares of
authorized but unissued Common Stock reserved for such purpose by the Board of
Directors or from shares of authorized and issued Common Stock reacquired by the
Company and held in its treasury or held under the Company's Flexible Employee
Benefits Trust, as from time to time determined by the Committee, the Board, or
pursuant to delegations of authority from either.
(h) The costs and expenses of administering this Plan shall be borne by
the Company and not charged to any award nor to any employee or Participant
receiving an award. However, the Company may charge the cost of any awards made
to employees of Participating Subsidiaries, including administrative costs and
expenses related thereto, to the respective Participating Subsidiaries by which
such persons are employed.
(i) This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any award under this Plan and payment of awards
shall be subordinate to the claims of the Company's general creditors.
(j) In addition to the terms defined elsewhere herein, the following
terms as used in this Plan shall have the following meanings:
A-16
"Act" shall mean the Securities Exchange Act of 1934 as amended from
time to time.
"Change in Control" shall mean the first to occur of any one of the
events described below:
(i) Stock Acquisition. Any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Act), other than the Company or a
corporation, a majority of whose outstanding stock entitled to vote is
owned, directly or indirectly, by the Company, or a trustee of an
employee benefit plan or trust sponsored solely by the Company and/or
such a corporation, is or becomes, other than by purchase from the
Company or such a corporation, the "beneficial owner" (as such term is
defined in Rule 13d-3 under the Act), directly or indirectly, of
securities of the Company representing 20% or more of the combined
voting power of the Company's then outstanding voting securities. Such
a Change in Control shall be deemed to have occurred on the first to
occur of the date securities are first purchased by a tender or
exchange offeror, the date on which the Company first learns of
acquisition of 20% of such securities, or the later of the effective
date of an agreement for the merger, consolidation or other
reorganization of the Company or the date of approval thereof by a
majority of the Company shareholders, as the case may be.
(ii) Change in Board. During any period of two consecutive
years, individuals who at the beginning of such period were members of
the Board of Directors cease for any reason to constitute at least a
majority of the Board of Directors, unless the election or nomination
for election by the Company's shareholders of each new director was
approved by a vote of at least two-thirds of the directors then still
in office who were directors at the beginning of the period. Such a
Change in Control shall be deemed to have occurred on the date upon
which the requisite majority of directors fails to be elected by the
shareholders of the Company.
(iii) Other Events. Any other event or series of events which,
notwithstanding any other provision of this definition, is determined,
by a majority of the outside members of the Board of Directors of the
Company serving in office at the time such event or events occur, to
constitute a change in control of the Company for purposes of this
Plan. Such a Change in Control shall be deemed to have occurred on the
date of such determination or on such other date as such majority of
outside members of the Board shall specify.
"Designated Beneficiary" shall mean the person or persons last
designated as such by the Participant on a form filed by him or her with
the Company in accordance with such procedures as the Committee shall approve,
provided, however, that in the absence of the filing of such a form with the
Company the Designated Beneficiary shall be the person or persons who are the
Participant's beneficiary or beneficiaries of the Company's basic life
insurance.
"Disability" shall mean permanent and total disability of an employee
participating in the Plan as determined by the Committee in accordance with
uniform principles consistently applied, upon the basis of such evidence as the
Committee deems necessary and desirable.
"Fair Market Value" of a share of Common Stock of the Company on any
date set forth herein (or, if such date is not expressly set forth herein, on
such date or dates as may be determined by the Committee, but not earlier than
five trading days prior to the transaction for which the determination is being
made), shall mean an amount equal to the mean of the high and low sale prices on
the New York Stock Exchange, as reported on the composite transaction tape, or
on such other exchange as the Committee may determine.
"Fiscal Year" shall mean the twelve-month period used as the annual
accounting period by the Company and shall be designated according to the
calendar year in which such period ends.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986 as
amended from time to time.
"Participant" shall mean, as to any award granted under this Plan and
for so long as such award is outstanding, the employee to whom such award has
been granted.
A-17
"Participating Subsidiary" shall mean any Subsidiary designated by the
Committee to participate in this Plan which Subsidiary requests or accepts, by
action of its board of directors or other appropriate authority, such
designation.
"Retirement" shall mean separating from service with the Company or a
Subsidiary with the right to begin receiving immediate pension benefits under
the Company's Pension Plan for Salaried Employees or under another defined
benefit pension plan sponsored or otherwise maintained by a Subsidiary for its
employees, in either case as then in effect or, in the absence of such Pension
Plan or such other pension plan being applicable to any Participant, as
determined by the Committee in its sole discretion.
"Subsidiary" shall mean any domestic or foreign corporation,
partnership, association, joint stock company, trust or unincorporated
organization "affiliated" with the Company, that is, directly or indirectly,
through one or more intermediaries, "controlling", "controlled by" or "under
common control with", the Company. "Control" for this purpose means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of such person, whether through the ownership of
voting securities, contract or otherwise.
13. Amendments and Termination
The Committee may at any time terminate or from time to time amend or
suspend the Plan in whole or in part in such respects as the Committee may deem
advisable in order that awards granted thereunder shall conform to any change in
the law, or in any other respect which the Committee may deem to be in the best
interests of the Company; provided, however, that no amendment of the Plan shall
be made without shareholder approval if (a) shareholder approval of the
amendment is at the time required for awards under the Plan to qualify for the
exemption from Section 16(b) of the Act provided by Rule 16b-3 thereunder, or by
the rules of the New York Stock Exchange or any stock exchange on which Common
Stock may be listed, or (b) the amendment would make changes in the class of
employees eligible to receive Incentive Stock Options under the Plan or would
increase the number of shares with respect to which Incentive Stock Options may
be granted under the Plan. With the consent of the Participant affected, the
Committee may amend outstanding agreements evidencing Stock Options, Stock
Appreciation Rights, Performance Units, or Deferred Stock Units in a manner not
inconsistent with the terms of the Plan.
The Committee shall have the power to amend the Plan in any manner
contemplated by Section 11 or deemed necessary or advisable for awards granted
under the Plan to qualify for the exemption provided by Rule 16b-3 (or any
successor rule relating to exemption from Section 16(b) of the Act) or to
qualify as "performance-based" compensation under Section 162(m) of the Internal
Revenue Code, and any such amendment shall, to the extent deemed necessary or
advisable by the Committee, be applicable to any outstanding awards theretofore
granted under the Plan notwithstanding any contrary provisions contained in any
award agreement. In the event of any such amendment to the Plan, the holder of
any award outstanding under the Plan shall, upon request of the Committee and as
a condition to the exercisability thereof, execute a conforming amendment in the
form prescribed by the Committee to any award agreement relating thereto within
such reasonable time as the Committee shall specify in such request.
Notwithstanding anything contained in this Section 13 or in any other
provision of the Plan, unless required by law, no action contemplated or
permitted by this Section 13 shall adversely affect any rights of Participants
or obligations of the Company to Participants with respect to any award
theretofore made under the Plan without the consent of the affected Participant.
A-18
14. Effective Date, Amendment and Restatement, and Term of the Plan
This Plan, previously denominated the "Air Products and Chemicals, Inc.
1990 Long-Term Incentive Plan," became effective for the Fiscal Year commencing
October 1, 1989 for awards to be made for the Fiscal Year commencing October 1,
1989 and for Fiscal Years thereafter and was continued in effect indefinitely
until terminated, amended, or suspended as permitted by its terms, following
approval by a majority of those present at the January 26, 1989 annual meeting
of shareholders of the Company and entitled to vote thereon. Following approval
by the holders of a majority of the shares of Common Stock of the Company
present and entitled to vote at a meeting of shareholders, the Plan, as amended
and restated herein, will continue in effect indefinitely for awards to be made
for the Fiscal Year commencing October 1, 1996 and for Fiscal Years thereafter,
until terminated, amended, or suspended as permitted under Section 13.
A-19
[ X ] PLEASE MARK VOTES
AS IN THIS EXAMPLE
For All
No. 1 ELECTION OF DIRECTORS. For Withheld Except
Election of R. Cizik, R. M. Davis, T. R. Lautenbach,
and R. F. M. Lubbers as Class I directors for three [ ] [ ] [ ]
year terms.
To withhold authority to vote for any individual nominee, mark the
"For All Except" box and write that nominee's name on the space
provided below.
RECORD DATE SHARES:
No. 2 APPOINTMENT OF AUDITORS. For Against Abstain
Ratification of appointment of Arthur Andersen LLP,
as independent certified public accountants for [ ] [ ] [ ]
fiscal year 1996.
No. 3 AUTHORIZED SHARE INCREASE. For Against Abstain
Approval to amend the Company's Restated
Certificate of Incorporation to increase the number [ ] [ ] [ ]
of shares of common stock authorized to be issued
from 150,000,000 shares to 300,000,000 shares.
No. 4 1997 AMENDMENTS TO LONG-TERM For Against Abstain
INCENTIVE PLAN.
Approval of 1997 Amendments to the Company's [ ] [ ] [ ]
1990 Long-Term Incentive Plan.
No. 5 SECTION 162(m) AMENDMENTS TO For Against Abstain
LONG-TERM INCENTIVE PLAN.
Approval of IRC Section 162(m) Amendments [ ] [ ] [ ]
to the Company's 1990 Long-Term Incentive Plan.
No. 6 ANNUAL INCENTIVE PLAN. For Against Abstain
Approval of IRC Section 162(m) Annual
Incentive Plan Terms. [ ] [ ] [ ]
STATE STREET BANK
AND TRUST COMPANY
The Board of Directors recommends a
vote FOR Nos. 1, 2, 3, 4, 5, and 6.
Please be sure to sign and date this Proxy.
[ ]
Participant sign here Date
- --------------------------------------------------------------------------------
DETACH CARD
STATE STREET BANK AND TRUST COMPANY
December 8, 1995
TO: ALL PARTICIPANTS IN THE AIR PRODUCTS AND CHEMICALS, INC.
RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
We are pleased to enclose the Notice of Annual Meeting of Shareholders of Air
Products and Chemicals, Inc. scheduled for January 25, 1996 and the accompanying
proxy statement.
As a participant in a Company-sponsored employee benefit savings plan that
provides for pass-through voting to participants, you are entitled to vote the
shares credited to your account and held by us in our capacity as Trustee under
the Air Products and Chemicals, Inc. Retirement Savings and Stock Ownership
Plan. These shares will be voted in confidence as you direct if the enclosed
voting direction form is completed by you and received by us on or before
January 19, 1996.
We would appreciate your filling in and signing the voting direction form and
returning it promptly in the postage-paid envelope.
Cordially yours,
STATE STREET BANK AND TRUST COMPANY, TRUSTEE
1996 Annual Meeting of Shareholders - Air Products and Chemicals, Inc.
State Street Bank and Trust Company Boston, MA
as Trustee for Air Products and Chemicals, Inc.
Retirement Savings and Stock Ownership Plan.
The Trustee is hereby directed to vote the shares of common stock of Air
Products and Chemicals, Inc. represented by units of interest (the "shares")
allocated to my account under the Retirement Savings and Stock Ownership Plan at
the annual meeting of shareholders of Air Products and Chemicals, Inc. to be
held on 25 January 1996 as directed on the reverse side with respect to
Proposals 1, 2, 3, 4, 5, and 6.
I understand that the whole shares allocated to my Plan account will be voted by
the Trustee in person or by proxy as so directed by me. If this form is signed
and returned without directions, the shares allocated to my account will be
voted by the Trustee for Proposals 1, 2, 3, 4, 5, and 6. Except as otherwise
provided in the Retirement Savings and Stock Ownership Plan, such shares will be
voted in the proxies' discretion upon such other business as may properly come
before the meeting. If this form is not returned or is returned unsigned, the
shares allocated to my account will be voted by the Trustee in the same
proportions as shares held under the Plan for which voting directions have been
received.
[PLEASE MARK AND DATE THE PROXY, AND SIGN YOUR NAME AS IT APPEARS ON
THE OTHER SIDE.]
Air Products and Chemicals, Inc.
7201 Hamilton Boulevard [LOGO]
Allentown, PA 18195-1501
Proxy Solicited by the
Board of Directors for Annual Meeting of Shareholders--January 25, 1996
The undersigned hereby appoints Harold A. Wagner, Arnold H. Kaplan, and James H.
Agger, or any one of them, with full power of substitution, to represent the
undersigned at the annual meeting of shareholders of Air Products and Chemicals,
Inc. on Thursday, January 25, 1996, and at any adjournments thereof, and to vote
at such meeting the shares which the undersigned would be entitled to vote if
personally present in accordance with the following instructions and to vote in
their judgment upon all other matters which may properly come before the meeting
and any adjournments thereof.
(Continued on reverse side)
- -------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
[Air Products logo appears here]
(Continued from other side)
The Board of Directors recommends a vote FOR Nos. 1, 2, 3, 4, 5, and 6.
No. 1. ELECTION OF DIRECTORS. Election of R. Cizik, R. M. Davis, T. R.
Lautenbach, and R. F. M. Lubbers as Class I directors for three year terms.
FOR WITHHELD To withhold authority to
vote for any individual nominee,
write that nominee's name on the
space provided below.
[ ] [ ] -----------------------------------
No. 2. APPOINTMENT OF AUDITORS. Ratification of appointment of Arthur
Andersen LLP, as independent certified public accountants for fiscal year 1996.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
No. 3. AUTHORIZED SHARE INCREASE. Approval to amend the Company's Restated
Certificate of Incorporation to increase the number of shares of common
stock authorized to be issued from 150,000,000 shares to 300,000,000 shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
No. 4. 1997 AMENDMENTS TO LONG-TERM INCENTIVE PLAN. Approval of 1997
Amendments to the Company's 1990 Long-Term Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
No. 5. SECTION 162(m) AMENDMENTS TO LONG-TERM INCENTIVE PLAN. Approval of
IRC Section 162(m) Amendments to the Company's 1990 Long-Term Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
No. 6. ANNUAL INCENTIVE PLAN. Approval of IRC Section 162(m) Annual Incentive
Plan Terms.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
The shares represented by this proxy
will be voted as directed by the
shareholder on this proxy with respect
to proposals 1, 2, 3, 4, 5, and 6. If no
direction is given, such shares will be
voted for proposals 1, 2, 3, 4, 5, and
6. Such shares will be voted in the
proxies' discretion upon such other
business as may properly come before the
meeting.
Dated ---------------------------, 1996
--------------------------------------
signature
--------------------------------------
Signature if held jointly
Please mark and date this proxy and sign
your name as it appears hereon. If
executed by a corporation, a duly
authorized officer should sign.
Executors, administrators, and trustees
should so indicate when signing. If
shares are held jointly, EACH holder
should sign.
"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES"
- -------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
[Air Products logo appears here]
Annual Meeting
of
Air Products and Chemicals, Inc.
Thursday - January 25, 1996
2:00 p.m.
Tompkins College Center Theater
Cedar Crest College, Allentown, PA.
