<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
AIR PRODUCTS AND CHEMICALS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
AIR PRODUCTS AND CHEMICALS, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
[Air Products Logo]
----------------------------------------------------------------------------
AIR PRODUCTS AND CHEMICALS, INC.
7201 Hamilton Boulevard
Allentown, PA 18195-1501
December 15, 1999
Dear Shareholder:
On behalf of your Board of Directors, I am pleased to invite you to attend
the 2000 Annual Meeting of Shareholders of Air Products and Chemicals, Inc.
The Notice of Annual Meeting, Proxy Statement, and proxy card accompanying
my letter describe the business to be conducted at the meeting, including
the election of five directors. In addition to myself, the Board of
Directors has nominated Messrs. Mario L. Baeza, L. Paul Bremer III, Edward
E. Hagenlocker, and Terry R. Lautenbach.
It is important that your shares be represented and voted at the Annual
Meeting. THIS YEAR, YOU MAY VOTE BY TELEPHONE OR INTERNET AS DESCRIBED ON
THE PROXY CARD OR YOU MAY FILL IN, SIGN, DATE, AND MAIL THE PROXY CARD.
We look forward to seeing you at the meeting.
Cordially,
/s/ Harold A. Wagner
Harold A. Wagner
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AIR PRODUCTS AND CHEMICALS, INC.
TIME.......................... 2:00 p.m., Thursday, January 27, 2000
PLACE......................... Tompkins College Center Theater at Cedar Crest
College in Allentown, Pennsylvania. Free
parking will be available.
ITEMS OF BUSINESS............. 1. Elect four directors each for a three-year
term and one director for a one-year term.
2. Ratify the appointment of independent
auditors for the fiscal year ending
September 30, 2000.
3. Attend to such other business as may
properly come before the meeting or any
postponement or adjournment of the meeting.
RECORD DATE................... Shareholders of record at the close of business
on November 30, 1999, are entitled to receive
this notice and to vote at the meeting.
NEW WAYS TO SUBMIT YOUR
VOTE.......................... This year, you have the alternatives of voting
your shares by using a toll-free telephone
number or the Internet as described on the
proxy card, or you may fill in, sign, date, and
mail the proxy card. We encourage you to
complete and file your proxy electronically or
by telephone if those options are available to
you.
IMPORTANT..................... Whether you plan to attend the meeting or not,
please submit your proxy as soon as possible in
order to avoid additional soliciting expense to
the Company. 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. If you find that you are unable to
attend, you may request a summary of actions
taken at the meeting which will be available
along with our financial results for the first
quarter of fiscal year 2000.
<TABLE>
<S> <C>
7201 Hamilton Boulevard By order of the Board of Directors,
Allentown, Pennsylvania 18195-1501
/s/ W. Douglas Brown
W. Douglas Brown
Vice President, General Counsel
and Secretary
December 15, 1999
</TABLE>
<PAGE> 4
PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS....................................... 1
PROPOSALS YOU MAY VOTE ON................................... 5
1. ELECTION OF DIRECTORS................................. 5
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT
ACCOUNTANTS............................................ 5
THE BOARD OF DIRECTORS...................................... 6
DIRECTORS STANDING FOR ELECTION THIS YEAR................. 6
DIRECTORS CONTINUING IN OFFICE............................ 7
BOARD MEETINGS AND COMMITTEES............................. 9
DIRECTOR COMPENSATION..................................... 10
DIRECTOR TERM LIMITATION AND RETIREMENT POLICY............ 11
COMPENSATION OF EXECUTIVE OFFICERS.......................... 11
REPORT OF THE MANAGEMENT DEVELOPMENT AND COMPENSATION
COMMITTEE.............................................. 11
EXECUTIVE COMPENSATION TABLES............................. 13
1999 SUMMARY COMPENSATION TABLE........................ 13
OPTION GRANTS IN 1999.................................. 14
OPTIONS EXERCISED IN 1999 AND 1999 YEAR-END OPTION
VALUES................................................ 14
1999 LONG-TERM INCENTIVE AWARDS........................ 15
PENSION PLAN TABLE..................................... 15
SEVERANCE AND OTHER CHANGE IN CONTROL ARRANGEMENTS........ 16
INFORMATION ABOUT STOCK PERFORMANCE AND OWNERSHIP........... 17
STOCK PERFORMANCE GRAPH................................... 17
PERSONS OWNING MORE THAN 5% OF AIR PRODUCTS STOCK......... 18
AIR PRODUCTS STOCK BENEFICIALLY OWNED BY OFFICERS AND
DIRECTORS.............................................. 19
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE... 19
</TABLE>
<PAGE> 5
[Air Products Logo]
- --------------------------------------------------------------------------------
AIR PRODUCTS AND CHEMICALS, INC.
7201 Hamilton Boulevard
Allentown, PA 18195-1501
ANNUAL MEETING OF SHAREHOLDERS
JANUARY 27, 2000
PROXY STATEMENT
We have sent you this Notice of Annual Meeting and Proxy Statement and proxy
card because the Board of Directors of Air Products and Chemicals, Inc. (the
"Company" or "Air Products") is soliciting your proxy to vote at the Company's
Annual Meeting of Shareholders on January 27, 2000 (the "Annual Meeting"). This
Proxy Statement contains information about the items being voted on at the
Annual Meeting and information about the Company.
QUESTIONS AND ANSWERS
WHAT MAY I VOTE ON?
- - The election of five nominees to serve on our Board of Directors.
- - The appointment of independent accountants to audit the Company's financial
statements for our fiscal year 2000.
HOW DOES THE BOARD RECOMMEND I VOTE ON THE PROPOSALS?
The Board recommends votes
- FOR each of the nominees for the Board of Directors, and
- FOR the appointment of the independent accountants.
WHO IS ENTITLED TO VOTE?
Only shareholders who owned Air Products common stock, par value $1.00 per share
("Company Stock"), as of the close of business on November 30, 1999, the "Record
Date" for the Annual Meeting, may vote.
WHO COUNTS THE VOTES?
Representatives of our Transfer Agent, First Chicago Trust Company, a division
of EquiServe, will tabulate the votes and act as the independent inspectors of
the election.
WHAT SHARES ARE INCLUDED ON MY PROXY CARD?
The shares on your proxy card or cards are all of the shares registered in your
name with our Transfer Agent on the Record Date, including shares in the Direct
Investment Program administered for Air Products shareholders by our Transfer
Agent. If you have shares registered in the name of a bank, broker, or other
registered owner, you should receive instructions from that registered owner
about how to instruct them to vote those shares.
1
<PAGE> 6
HOW DO I VOTE THE SHARES ON MY PROXY CARD?
You may vote by signing and dating the proxy card(s) and returning the card(s)
in the prepaid envelope.
ALSO, THIS YEAR AIR PRODUCTS IS OFFERING YOU THE OPPORTUNITY TO VOTE BY USING A
TOLL-FREE TELEPHONE NUMBER OR THE INTERNET. Instructions about these ways to
vote appear on the proxy card. If you vote by telephone or Internet, please have
your proxy card and social security number available. The sequence of numbers
appearing on your card and your social security number are necessary to verify
your vote.
Votes submitted by mail, telephone, or Internet will be voted in the manner you
indicate by the individuals named on the proxy. If you do not specify how you
want your shares voted, they will be voted according to the Board's
recommendations for the two proposals.
MAY I CHANGE MY VOTE?
You may revoke your proxy at any time before the Annual Meeting by returning a
later-dated proxy card or phone or Internet vote; notifying us that you have
revoked your proxy; or attending the Annual Meeting, giving notice of revocation
and voting in person.
HOW IS COMPANY STOCK IN THE COMPANY'S RETIREMENT SAVINGS
AND STOCK OWNERSHIP PLAN ("RSSOP") VOTED?
If you are an employee or former employee who owns shares of Company Stock under
the RSSOP, you will be furnished a separate voting direction form by the RSSOP
Trustee, State Street Bank and Trust Company. The Trustee will vote shares of
Company Stock represented by units of interest allocated to your RSSOP account
on the Record Date. The vote cast will follow the directions you give when you
complete and return your voting direction form to the Trustee, or give your
instructions by telephone or Internet. The Trustee will cast your vote in a
manner which will protect your voting privacy. If you do not give voting
instructions or your instructions are unclear, the Trustee will vote the shares
in proportion to the way the other RSSOP participants voted their RSSOP shares.
The Trustee will also vote fractional shares in proportion to the way that all
voting RSSOP participants voted their shares.
HOW MANY SHARES CAN VOTE AT THE 2000 ANNUAL MEETING?
As of the Record Date, November 30, 1999, 229,304,812 shares of Company Stock
were issued and outstanding, which are the only shares entitled to vote at the
Annual Meeting. Every owner of Company Stock is entitled to one vote for each
share owned.
WHAT IS A "QUORUM"?
A quorum is necessary to hold a valid meeting of shareholders. A majority of the
outstanding shares of Company Stock present in person or represented by proxy
makes a quorum. If you vote -- including by Internet, telephone, or proxy
card -- you will be considered part of the quorum for the Annual Meeting.
WHAT VOTE IS NECESSARY TO PASS THE ITEMS OF BUSINESS AT THE ANNUAL MEETING?
If a quorum is present at the Annual Meeting, director candidates receiving the
highest number of votes for each open seat on the Board will be elected. If you
vote and are part of the quorum, your shares will be voted for election of all
five of the director candidates unless you give instructions to "withhold"
votes, although withholding votes and broker non-votes will not influence voting
results. Abstentions may not be specified as to election of directors.
2
<PAGE> 7
The appointment of independent auditors will be approved if a majority of the
votes cast are voted in favor. Abstentions will have the effect of a vote
against.
HOW WILL VOTING ON ANY OTHER BUSINESS BE CONDUCTED?
We do not know of any business or proposals to be considered at the 2000 Annual
Meeting other than the items described in this Proxy Statement. If any other
business is proposed and we decide to permit it to be presented at the Annual
Meeting, the signed proxies received from you and other shareholders give the
persons voting the proxies the authority to vote on the matter according to
their judgement.
WHEN ARE THE SHAREHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING DUE?
Proposal must be received by W. Douglas Brown, Secretary, Air Products and
Chemicals, Inc., 7201 Hamilton Boulevard, Allentown, PA 18195-1501, by October
29, 2000, and must comply with the requirements of our bylaws (described in the
next paragraph) to be presented at the 2001 annual meeting. The proxy for next
year's annual meeting will confer discretionary authority to vote on any
shareholder proposal that we do not know about before October 30, 2000.
Our bylaws require adequate written notice of the proposal by delivering it in
writing to Mr. Brown in person or by mail at the address stated above, on or
after September 29, 2000, but no later than October 29, 2000. To be considered
adequate, the notice must contain specified information about the matter to be
presented at the meeting and the shareholder proposing the matter. A proposal
received after October 29, 2000, will be considered untimely and will not be
entitled to be presented at the meeting. To be considered for inclusion in next
year's proxy statement, proposals must be delivered in writing to Mr. Brown at
the address stated above no later than August 17, 2000.
WHAT ARE THE COSTS OF THIS PROXY SOLICITATION?
We hired Morrow & Co. to help distribute materials and solicit votes for the
Annual Meeting. We will pay them a fee of $7,500, plus out-of-pocket costs and
expenses, and reimburse banks, brokers and other custodians, nominees, and
fiduciaries for their reasonable out-of-pocket expenses for forwarding Annual
Meeting materials to you because they own Company Stock for you. In addition to
using the mail, our directors, officers, and employees may solicit proxies by
personal interview, telephone, telegram, or otherwise, although they won't be
paid any additional compensation. The Company will bear all expenses of
solicitation.
MAY I INSPECT THE SHAREHOLDER LIST?
For a period of 10 days prior to the Annual Meeting and if you have a purpose
germane to the meeting , a list of shareholders registered on the books of our
Transfer Agent as of the Record Date will be available for your examination, as
a registered shareholder, during normal business hours at the Company's
principal offices.
HOW CAN I GET MATERIALS FOR THE ANNUAL MEETING?
PUBLIC SHAREHOLDERS. This Proxy Statement and the accompanying proxy card are
first being mailed to shareholders on or about December 15, 1999. Each
registered and beneficial owner of Company Stock on the Record Date should have
received a copy (or, if they have consented, notice of on-line availability) of
the Company's Annual Report to Shareholders including financial statements (the
"Annual Report") either with this Proxy Statement or prior to its receipt
(although only certain parts of the Annual Report are required to be part of the
proxy solicitation material for the Annual Meeting). When you receive this
package, if you have not yet received the Annual Report please contact us and a
copy will be sent at no expense to you.
3
<PAGE> 8
CURRENT EMPLOYEES. If you are an employee of the Company or an affiliate with
Intranet access as of the Record Date, you should have received E-mail notice of
electronic access to the Notice of Annual Meeting, the Proxy Statement, and the
Annual Report on or about December 15, 1999. You may request a paper copy of
this Notice of Annual Meeting and Proxy Statement and of the Annual Report by
contacting us. If you do not have Intranet access, copies of these materials
will be mailed to your home.
If you are a participant in the RSSOP, you will receive a voting direction form
from the Plan Trustee mailed to your home on or after December 15, 1999 for
directing the vote of shares in your RSSOP account. We've also arranged for the
Plan Trustee to receive your voting instructions by telephone or Internet as
described on the voting direction form.
If you have employee stock options awarded to you by the Company or an affiliate
but don't otherwise own any Company Stock on the Record Date, you will not
receive a proxy card for voting. You are being furnished this Proxy Statement
and the Annual Report for your information and as required by law.
CAN I RECEIVE ANNUAL REPORTS AND PROXY STATEMENTS ON-LINE?
YES. WE URGE YOU TO SAVE AIR PRODUCTS FUTURE POSTAGE AND PRINTING EXPENSES BY
CONSENTING TO RECEIVE FUTURE ANNUAL REPORTS AND PROXY STATEMENTS ON-LINE ON THE
INTERNET.
Most shareholders can elect to view future proxy statements and annual reports
over the Internet instead of receiving paper copies in the mail. Those
shareholders will be given the opportunity to consent to future Internet
delivery when they vote their proxy or give voting instructions.
If you are not a registered shareholder, this option may only be available if
you vote by Internet due to requirements set by the bank, broker or other
registered owner who owns your shares for you. If you are not given an
opportunity to consent to Internet delivery when you vote your proxy or give
your voting instructions, contact the registered owner of your shares and
inquire about the availability of such an option for you.
If you consent, your account will be so noted; when our proxy statement and
other solicitation materials for the 2001 annual meeting of shareholders become
available, you will be notified of how to access them on the Internet; and you
will always be able to request paper copies by contacting us.
HOW CAN I REACH THE COMPANY TO REQUEST MATERIALS OR
INFORMATION REFERRED TO IN THESE QUESTIONS AND ANSWERS?
You may reach us
- by mail addressed to the Corporate Secretary's Office
Air Products and Chemicals, Inc.
7201 Hamilton Boulevard
Allentown, PA 18195-1501
- by calling 888-AIR-INFO
- by leaving a message on our website at www.airproducts.com/comments
When you request material for the Annual Meeting, it will be provided to you at
no cost.
4
<PAGE> 9
PROPOSALS YOU MAY VOTE ON
1. ELECTION OF DIRECTORS
The Board of Directors currently has 14 positions. With the retirement of Mr.
Takeo Shiina under our retirement policy for directors and the election by
shareholders of the five nominees standing for election, the Board will have 13
members after the Annual Meeting. Our Board is divided into three classes for
purposes of election, with terms of office ending in successive years.
Messrs. Mario L. Baeza, L. Paul Bremer III, Edward E. Hagenlocker, and Terry R.
Lautenbach, four incumbent directors whose terms are currently scheduled to
expire at the Annual Meeting, have been nominated for re-election for three-year
terms; and in order to balance the number of directors in each class, Mr. Wagner
has been nominated for election to a one-year term. Other directors are not up
for election this year and will continue in office for the remainder of their
terms. If a nominee is unavailable for election at the time of the Annual
Meeting, proxy holders will vote for another nominee proposed by our Board or,
as an alternative, the Board may reduce the number of positions on the Board.
YOUR BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND A VOTE "FOR" THE ELECTION OF
MESSRS. BAEZA, BREMER, HAGENLOCKER, LAUTENBACH, AND WAGNER.
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
At its meetings held in November 1999, the Audit Committee of our Board of
Directors recommended and the Board approved for vote by shareholders
continuation of Arthur Andersen LLP of Philadelphia, Pennsylvania ("Arthur
Andersen") as independent auditors for 2000. Arthur Andersen has been our
independent auditor since 1948. If this proposal is defeated, the Board will
consider other auditors for next year. However, because of the difficulty in
substituting auditors so long after the beginning of the current year, the
appointment for fiscal year 2000 will stand unless the Board finds other good
reason for making a change.
Representatives of Arthur Andersen will be available at the Annual Meeting to
respond to questions.
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND A VOTE "FOR" THE RATIFICATION OF
THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS FOR FISCAL YEAR 2000.
5
<PAGE> 10
THE BOARD OF DIRECTORS
Information follows about the age and business experience, as of November 1,
1999, of the directors up for election and the directors continuing in office.
Each of them has consented to being nominated for director and agreed to serve
if elected. All of the nominees are currently directors and all have been
elected by shareholders at prior meetings, except for Mr. Baeza, who was
initially elected to our Board by the directors in July 1999.
- --------------------------------------------------------------------------------
DIRECTORS STANDING FOR ELECTION THIS YEAR FOR TERMS EXPIRING AT THE ANNUAL
MEETING IN 2003
- --------------------------------------------------------------------------------
[BAEZA PHOTO]
- --------------------------------------------------------------------------------
[BREMER PHOTO]
- --------------------------------------------------------------------------------
[HAGENLOCER PHOTO]
- --------------------------------------------------------------------------------
MARIO L. BAEZA, age 48. Chairman and Chief Executive Officer
of TCW/Latin America Partners, L.L.C. Director of the Company
since 1999.
Mr. Baeza formed TCW/Latin America Partners, L.L.C. in 1996.
TCW/Latin America Partners, L.L.C. is managing general
partner of TCW/Latin America Private Equity Partners, L.P., a
private equity fund with a controlling interest in a variety
of companies in Brazil, Argentina, and Mexico which is
jointly owned by Baeza & Company and Trust Company of the
West. Prior to forming TCW/Latin America Partners in 1996,
Mr. Baeza served as president of Wasserstein Parella
International Limited and Chairman and CEO of Grupo Wasserstein Parella, the
Latin American Division of the firm; and until 1994, was a partner at the law
firm of Debevoise & Plimpton where, among other practices, he founded and headed
the firm's Latin America Group. Mr. Baeza is a managing director of Trust
Company of the West and a director of Ariel Mutual Fund Group and the Council of
Foreign Relations.
L. PAUL BREMER III, age 58. Managing Director of Kissinger
Associates. Director of the Company since 1993.
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 Vivid
Technologies, Inc., Akzo Nobel N.V., and the Netherland-America Foundation.
EDWARD E. HAGENLOCKER, age 59. Former Vice Chairman of Ford
Motor Company and former Chairman of Visteon Automotive
Systems. Director of the Company since 1997.
Mr. Hagenlocker joined Ford Motor Company as a research
scientist in 1964 and later held engineering management
positions in Product Development, Chassis Division, Body and
Electrical Product Engineering, Climate Control Division, and
Truck Operations. In 1986, he was elected a Ford vice
president and named General Manager of Truck Operations. Mr.
Hagenlocker was appointed Vice President of General
Operations for Ford North American Automotive Operations ("NAAO") in 1992 and
Executive Vice President of NAAO in 1993. He was elected President of Ford
Automotive Operations in 1994 and Chairman, Ford of Europe in 1996. He served as
Vice Chairman of Ford Motor Company in 1996 and Chairman of Visteon Automotive
Systems from 1997 until his retirement in 1999. Mr. Hagenlocker is a director of
Boise Cascade Corporation, Nanophase Technologies Corporation, and AmeriSource
Corporation.
6
<PAGE> 11
[LAUTENBACH PHOTO]
TERRY R. LAUTENBACH, age 61. Former Senior Vice President of
International Business Machines Corporation. Director of the
Company since 1991.
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 CVS Corp., Varian Medical Systems, and Footstar Corp.
- --------------------------------------------------------------------------------
DIRECTOR STANDING FOR ELECTION THIS YEAR FOR A TERM EXPIRING AT THE ANNUAL
MEETING IN 2001
- --------------------------------------------------------------------------------
[WAGNER PHOTO]
- --------------------------------------------------------------------------------
DIRECTORS CONTINUING IN OFFICE UNTIL THE ANNUAL MEETING IN 2001
- --------------------------------------------------------------------------------
[BARRETT PHOTO]
- --------------------------------------------------------------------------------
HAROLD A. WAGNER, age 64. Chairman of the Board and Chief
Executive Officer of the Company. Director of the Company
since 1991.
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, President and
Chief Operating Officer in 1991, and Chairman of the Board
and Chief Executive Officer in 1992. Mr. Wagner is a director
of United Technologies Corporation, CIGNA Corporation, PACCAR, Daido Hoxan,
Inc., and the Chemical Manufacturers Association, and a trustee of Lehigh
University and the Eisenhower Exchange Fellowships, Inc.
TOM H. BARRETT, age 69. 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.
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, The Mony Group, Inc., and
Newell-Rubbermaid, Inc.
7
[HARDYMON PHOTO]
- --------------------------------------------------------------------------------
JAMES F. HARDYMON, age 65, Retired Chairman and Chief
Executive Officer of Textron Inc. Director of the Company
since 1997.
Mr. Hardymon joined Textron Inc., a global, multi-industry
company with core businesses of aircraft, automotive,
industrial, and finance, in 1989 as President and Chief
Operating Officer. He became Chief Executive Officer in 1992,
and assumed the title of Chairman in 1993. Mr. Hardymon
retired from Textron at the end of January 1999. Prior to
joining Textron, Mr. Hardymon was President, Chief Operating
Officer, and a director of Emerson Electric Co. He is a
director of Circuit City Stores, Inc., Fleet Financial Group,
Inc., American Standard, Inc., Lexmark International, Inc., Championship Auto
Racing Teams, Inc., and Schneider Electric S.A.
8
<PAGE> 12
[THOMAS PHOTO]
- --------------------------------------------------------------------------------
DIRECTORS CONTINUING IN OFFICE UNTIL THE ANNUAL MEETING IN 2002
- --------------------------------------------------------------------------------
[CIZIK PHOTO]
- --------------------------------------------------------------------------------
[FAIRBAIRN PHOTO]
- --------------------------------------------------------------------------------
[JONES PHOTO]
- --------------------------------------------------------------------------------
LAWRASON D. THOMAS, age 65. Former Vice Chairman of Amoco
Corporation. Director of the Company since 1994.
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 the position of Vice Chairman
in 1992. Mr. Thomas retired as Vice Chairman and from the Board of Directors of
Amoco Corporation effective January 1, 1996 and continued until April 1996 as
senior advisor to the Chairman and a senior representative to international
trade groups, partners, and governments.
ROBERT CIZIK, age 68. Former Chairman of the Board of Cooper
Industries, Inc. Director of the Company since 1992.
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 served as Chairman of the Board from 1983 until his
retirement in 1996. Mr. Cizik is a director of Harris
Corporation and Temple-Inland, Inc. and is a director and
serves as non-executive chairman of Stanadyne Automotive
Corp. and Koppers Industries, Inc.
URSULA F. FAIRBAIRN, age 56. Executive Vice President, Human
Resources and Quality of American Express Company. Director
of the Company since 1998.
Ms. Fairbairn joined American Express Company, a travel and
financial services company, in 1996 as Executive Vice
President, Human Resources and Quality. Prior to joining
American Express, Ms. Fairbairn was Senior Vice President,
Human Resources at Union Pacific Corporation, and had
previously held several marketing and human resources
positions at IBM Corporation. She is a director of VF
Corporation.
JOHN P. JONES III, age 49, President and Chief Operating
Officer of the Company. Director of the Company since 1998.
Mr. Jones joined the Company in 1972 and, following various
commercial assignments in Company joint ventures and
subsidiaries, was appointed Vice President and General
Manager of the Company's Environmental/Energy Division in
1988. He was appointed Group Vice President of the Company's
Process System Group in 1992 and in 1993 was transferred to
Air Products Europe, Inc. where he was named President. In
1996, Mr. Jones returned to the U.S. where he was elected
Executive Vice President -- Gases and Equipment. He was elected to his present
position effective October 1, 1998.
9
<PAGE> 13
[KAMINSKI PHOTO]
- --------------------------------------------------------------------------------
[LUBBERS PHOTO]
- --------------------------------------------------------------------------------
JOSEPH J. KAMINSKI, age 60. Corporate Executive Vice
President of the Company. Director of the Company since 1996.
Mr. Kaminski joined the Company in 1965 as a project engineer
and held various positions in Corporate Planning, Treasury,
and Controllership. He became Vice President -- Corporate
Planning in 1988, President -- Air Products Europe, Inc. in
1990, and Executive Vice President -- Gases and Equipment in
1993. Mr. Kaminski assumed his present position in 1996. He
is Past Chairman of the International Oxygen Manufacturers
Association, a director of the Pacific Basin Economic
Council, a trustee of the Manufacturers' Alliance for Productivity and
Innovation, a trustee of the Committee for Economic Development, and a member of
the Board of Directors of Baum School of Art.
RUUD F. M. LUBBERS, age 60. 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 and holds chair positions at Delft University of Technology and the
Tinbergen Institute. Mr. Lubbers serves as a director of Mercon and WWF for
Nature.
BOARD MEETINGS AND COMMITTEES
Our Board met eleven times during our fiscal year 1999, and Board and committee
attendance averaged 93% for the Board as a whole. Mr. Shiina, who resides in
Tokyo, Japan, attended less than 75% of the meetings of the Board and committees
on which he served. Unless otherwise stated, 1999 means our fiscal year ending
September 30, 1999.
The Board has six standing committees which operate under written charters
approved by the full Board. None of the directors who serve on the Audit,
Management Development and Compensation, and Nominating and Corporate Governance
Committees are or ever were employed by the Company.
The AUDIT COMMITTEE, which met three times in 1999, reviews significant internal
audit and control matters, and internal audit staff activities; reviews
independent audit results; and reviews and transmits to the Board the audited
financial statements of the Company after the close of each fiscal year. The
Committee also reviews the independence and fees of the Company's independent
auditors and recommends the appointment of the firm for approval by the Board
and ratification by the shareholders. Committee Members are Messrs. Hagenlocker,
Hardymon, and Thomas (Chairman).
The ENVIRONMENTAL, SAFETY AND PUBLIC POLICY COMMITTEE, which met once during
1999, monitors for and reports to the Board on issues and matters of concern in
areas such as environmental compliance,
9
<PAGE> 14
safety, government, politics and the economy, community relations, and corporate
and foundation philanthropic programs and charitable contributions. Members of
the Committee are Ms. Fairbairn and Messrs. Bremer, Kaminski, Lubbers
(Chairman), and Shiina.
The EXECUTIVE COMMITTEE, which met once this past year, has authority to act on
most matters concerning management of the business during intervals between
Board meetings. Members of the Committee are Messrs. Barrett, Cizik, and Wagner
(Chairman).
The FINANCE COMMITTEE, which met four times in 1999, reviews the Company's
financial policies; keeps informed of its operations and financial condition,
including requirements for funds; advises the Board about sources and uses of
Company funds; evaluates investment programs; and reviews the Company's
financial arrangements and methods of external financing. Members of the
Committee are Messrs. Barrett (Chairman), Cizik, Jones, Lubbers, Thomas, and
Wagner.
The MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE, which met four times in
1999, makes recommendations to the Board and provides advice to management about
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; reviews the actions of those responsible
for the administration of the Company's pension and savings plans; and approves
significant amendments to such incentive compensation, pension, and savings
plans on behalf of the Board. The Committee approves the individual salary,
bonus, and incentive plan awards of the chief executive officer, the other
executive officers, and certain other senior executives, and annually reviews
with the Board the performance of the chief executive officer. Members of the
Committee are Ms. Fairbairn and Messrs. Barrett, Cizik, Hardymon, and Lautenbach
(Chairman).
The NOMINATING AND CORPORATE GOVERNANCE COMMITTEE met twice during 1999. This
Committee makes recommendations to the Board about candidates to fill Board
vacancies during the year and the slate of nominees for election at annual
meetings; the functions and meeting schedules of the Board and the committees,
and the members of the committees; director compensation, tenure, retirement,
and performance assessment; and governance practices. Members of the Committee
are Messrs. Bremer (Chairman), Hagenlocker, Lautenbach, and Shiina.
This Committee will consider nominations for directors made by shareholders of
record entitled to vote for the election of directors if timely written notice,
in proper form, of the intent to make a nomination at a meeting of shareholders,
is received by the Company. To be timely for the 2001 annual meeting, the notice
must be received within the time frame discussed on page 3. To be in proper
form, the notice must include each nominee's written consent to be named as
nominee and to serve, if elected; and information about the shareholder making
the nomination and the person nominated for election. These requirements are
contained in provisions of our bylaws which will be provided upon written
request.
DIRECTOR COMPENSATION
Board members who are not employed by the Company receive the following
compensation for Board service:
<TABLE>
<S> <C>
Annual Retainer $48,000 ($51,000 for Committee Chairman)
Deferred Stock Units ("DSUs") 400 when first elected and 400 annually
Market Value Stock Options 2,000 shares annually
</TABLE>
Instead of paying the annual retainer quarterly in cash, we give each director
DSUs equivalent to $3,000 of the quarterly retainer and the opportunity to
"purchase" more DSUs with up to all of the rest of their annual retainer.
Retainer dollars are converted to DSUs by dividing by the market value of a
share of Company Stock on the date the dollars would have been paid to the
director. DSUs
11
<PAGE> 15
provide our directors with the financial equivalent of owning Company Stock
which they cannot give away or sell until after they leave our Board, except
that DSUs have no voting rights.
The stock options granted to our directors become exercisable in six months and
remain exercisable for nine and one-half years unless the director serves on our
Board for less than six years (other than because of disability or death). After
the options become exercisable, the directors may transfer them by gift to
certain family members.
Although we do not pay meeting fees for attending Board or committee meetings,
directors are reimbursed for expenses incurred in performing their duties as
directors. We also pay an annual fee of $15,000, plus expenses, to members of
our Japanese Advisory Council, including Mr. Shiina, and members of our European
Advisory Council, including Mr. Lubbers.
DIRECTOR TERM LIMITATION AND RETIREMENT POLICY
It is our policy to limit directors who have never been Company employees to
four three-year terms or 12 years of Board service. Also, these directors are
expected to tender their resignation for consideration by the Nominating and
Corporate Governance Committee when they have a change in principal position or
identity other than normal retirement, and are not to stand for election to a
term during which they turn age 71. Finally, directors who are Company
employees, including the chief executive officer, must retire from the Board
when they retire 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.
COMPENSATION OF EXECUTIVE OFFICERS
REPORT OF THE MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE (THE
"COMMITTEE")
COMPENSATING EXECUTIVE OFFICERS. The Committee is responsible for our
management compensation program, the primary elements of which are base salary,
cash bonus, and stock-based intermediate and long-term incentives. An executive
officer's pay reflects his performance and responsibility, both as an individual
and as a leader of or contributor to various team initiatives. A significant
amount of total pay is tied to the achievement of financial goals for the annual
and longer-term financial performance of the Company and the creation of
incremental shareholder value, and/or to the performance of our stock. In this
report we refer to this kind of compensation as "at risk" pay.
Each year we set target levels for salary, bonus, and incentive awards using
executive compensation survey data for industrial companies with annual revenues
of three to ten billion dollars. We focus on chemical and nondurable
manufacturing companies in particular. Our intent is for cash components of pay
to approximate the survey median, and stock-based incentive awards to be above
the median. Since a large portion of the compensation opportunity is determined
by performance-based variables, total compensation may be above or below the
median based on individual and/or Company performance.
Again in 1999, at risk pay represented a progressively larger portion of the
total pay for our executives in higher level positions in order to encourage our
leadership team to manage from the perspective of owners with an equity stake in
the Company. Approximately 70% of Mr. Wagner's intended total pay was at risk,
with a range of 60% to 70% for Messrs. Jones, Gadomski, Kaminski, and Sullam.
U.S. tax law does not let us deduct from the Company's corporate taxable income
pay to any one of these five executives which is not variable or at risk and
which exceeds $1,000,000. We will be able to deduct all payments to them for
fiscal year 1999.
12
<PAGE> 16
1999 ANNUAL CASH COMPENSATION -- BASE SALARY. Late in 1998, when we fixed the
fiscal year 1999 salaries for each of Mr. Wagner and the other executive
officers, we considered pay for comparable positions reported in the
compensation surveys; personal performance, position in salary range, and time
since last increase; and, most importantly, the Company's overall performance as
related to Mr. Wagner's leadership and the impact of the other executive
officers on the business. The salaries set for Messrs. Jones and Gadomski
reflect increased responsibilities they assumed in early 1999 as our succession
plan for Air Products leadership moved ahead and they assumed their current
positions in our top management team.
BONUS. At the beginning of 1999, we adopted performance objectives for the year
based on return on shareholders' equity and growth in net income, and
established an objective formula for computing the bonus for Mr. Wagner and the
other executive officers, based on the extent to which these objectives are
achieved. Following the end of the year, in addition to establishing the maximum
possible bonus payment by measuring performance against these two principal
objectives, we also considered growth in revenues, growth in earnings per share,
total return to shareholders, the overall economic environment, and the
performance of the other companies included in the Standard & Poor Chemicals
Index or the Dow Jones Specialty Chemicals Index. To set Mr. Wagner's bonus, we
also considered his 1999 CEO performance review in which we focused on criteria
used each year to evaluate his leadership to Air Products, our various
stakeholders, and our Board.
At our November 1999 meeting, we completed our assessment of the Company's and
Mr. Wagner's performance and set 80% of the 1999 target bonus guideline as the
overall bonus award level for fiscal year 1999, including for Mr. Wagner's
award.
1999 STOCK-BASED COMPENSATION. We think this compensation component is
particularly important since it reflects the Company's capital intensive
business portfolio which requires long-term commitments for success. There are
two main forms of awards -- stock options and performance-based deferred stock
units ("DSUs") -- granted in the three years covered by the Compensation Tables
in this Proxy Statement. Ten-year market-priced stock options have been granted
annually, complemented in fiscal years 1997 and 1999 by a two-year performance
program consisting of awards of five-year premium-priced options and DSUs. In
the fall of 1998, we granted our executive officers each type of award at a unit
level within the guideline award range for their salary grade level, reflecting
their position and responsibilities at the time of grant.
CONCLUSION. To drive management effort and results, we have a compensation
program that is competitive and appropriately linked to shareholder return and
the Company's financial goals.
Management Development and Compensation Committee
Terry R. Lautenbach, Chairman
Tom H. Barrett
Robert Cizik
Ursula F. Fairbairn
James F. Hardymon
13
<PAGE> 17
EXECUTIVE COMPENSATION TABLES
1999 SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------------- --------------------------
SECURITIES
OTHER ANNUAL UNDERLYING LTIP
FISCAL SALARY BONUS COMPENSATION STOCK OPTIONS PAYOUTS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(1) ($) (#) ($)(2) COMPENSATION(3)
- --------------------------- ------ -------- -------- ------------ ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Harold A. Wagner................... 1999 $902,885 $473,000 $ 0 220,000 $ 0 $32,586
Chairman and Chief 1998 $827,596 $986,965 $ 0 110,000 $1,501,950 $24,694
Executive Officer 1997 $777,443 $874,000 $ 0 220,000 $ 0 $23,211
John P. Jones III.................. 1999 $600,769 $311,000 $ 0 150,000 $ 0 $19,354
President and Chief 1998 $400,962 $363,300 $ 0 100,000 $ 750,975 $11,955
Operating Officer 1997 $351,346 $326,000 $44,222(4) 100,000 $ 0 $10,501
Robert E. Gadomski................. 1999 $501,154 $219,000 $ 0 100,000 $ 0 $17,905
Executive Vice President, 1998 $400,962 $363,300 $ 0 100,000 $ 750,975 $11,944
Gases and Equipment 1997 $351,346 $326,000 $ 0 100,000 $ 0 $10,480
Joseph J. Kaminski................. 1999 $434,535 $174,000 $ 0 100,000 $ 0 $15,696
Corporate Executive 1998 $417,415 $363,300 $ 0 50,000 $ 750,975 $12,463
Vice President 1997 $401,308 $326,000 $ 0 100,000 $ 0 $11,985
Ronaldo Sullam..................... 1999.. $319,515 $120,000 $ 0 40,000 $ 0 $ 0
President, Air Products 1998 $309,913 $250,216 $ 0 18,000 $ 161,500 $ 0
Europe, Inc. 1997 $283,840 $188,044 $ 0 28,800 $ 0 $ 0
</TABLE>
- -------------------------
(1) Cash compensation earned for services performed during each fiscal year,
including amounts deferred at the election of the executive.
(2) On September 30, 1999, Mr. Wagner owned 105,200 deferred stock units
("DSUs") worth $3,027,793; Mr. Jones owned 28,100 DSUs worth $808,755; Mr.
Gadomski owned 29,100 DSUs worth $837,536; Mr. Kaminski owned 44,400 DSUs
worth $1,277,890; and Mr. Sullam owned 8,400 DSUs worth $241,763. These
values are based on the 1999 fiscal year-end fair market value of a share of
Company Stock. DSUs which have earned out are the financial equivalent of
owning Company Stock which can't be transferred or sold until after the
executive retires, except that DSUs accrue dividend equivalents and have no
voting rights and are subject to forfeiture for engaging in specified
activities such as competing with the Company.
(3) Amounts shown for 1997 and 1998 are entirely, and for 1999 are principally,
Company matching contributions and/or accruals under the qualified 401(k)
and nonqualified savings plans for U.S. employees under which the Company
matches 50% of each participant's elective salary reduction up to 6% of base
salary. In addition for 1999, the following amounts are included for
interest accrued under the nonqualified savings plan and on certain deferred
bonus accounts: Mr. Wagner $4,633, Mr. Jones $891, Mr. Gadomski $2,441, and
Mr. Kaminski $2,225.
(4) Mobility incentive premium payment for employees who are U.S. citizens on
international assignments.
14
<PAGE> 18
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS NET POTENTIAL REALIZABLE
- --------------------------------------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENT(%) RATES OF STOCK PRICE
SECURITIES OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS OPTION TERM(2)
OPTIONS GRANTED TO EXERCISE ------------------------
GRANTED EMPLOYEES IN PRICE EXPIRATION 5% 10%
NAME (#)(1) FISCAL YEAR PER SHARE DATE ($) ($)
- ---- ---------- ------------ --------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Harold A. Wagner........... 110,000(3) 4.2% $29.47(3) October 2, 2008 $2,038,688 $5,166,435
110,000(4) 4.2% $40.00(4) October 2, 2003 $ 0 $ 820,790
John P. Jones III.......... 75,000(3) 2.8% $29.47(3) October 2, 2008 $1,390,014 $3,522,569
75,000(4) 2.8% $40.00(4) October 2, 2003 $ 0 $ 559,630
Robert E. Gadomski......... 50,000(3) 1.9% $29.47(3) October 2, 2008 $ 926,676 $2,348,380
50,000(4) 1.9% $40.00(4) October 2, 2003 $ 0 $ 373,086
Joseph J. Kaminski......... 50,000(3) 1.9% $29.47(3) October 2, 2008 $ 926,676 $2,348,380
50,000(4) 1.9% $40.00(4) October 2, 2003 $ 0 $ 373,086
Ronaldo Sullam............. 20,000(3) .8% $29.47(3) October 2, 2008 $ 370,670 $ 939,352
20,000(4) .8% $40.00(4) October 2, 2003 $ 0 $ 149,235
</TABLE>
- -------------------------
(1) Exercisable options may be transferred by gift to certain family members.
The exercise price and tax withholding obligations may be satisfied with
shares owned by the executive. Options are subject to forfeiture for
engaging in specified activities such as competing with the Company.
(2) Net pre-tax gains which would be recognized at the end of the option term if
an executive exercised all of his 1999 options on the last day of the option
term and our stock price had grown at the 5% and 10% assumed growth rates
set by the Securities and Exchange Commission. The amounts shown are not
intended to forecast future appreciation in the price of our stock.
(3) These options become exercisable in one-third increments on the first three
anniversaries of grant and were granted at fair market value on the October
1, 1998 grant date.
(4) These options become exercisable on October 1, 2000, and were granted at a
pre-established premium exercise price higher than fair market value on the
October 1, 1998 grant date.
OPTIONS EXERCISED IN 1999
AND 1999 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING NET VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT YEAR-END(#) AT YEAR-END ($)(1)
SHARES ACQUIRED VALUE REALIZED --------------------------- ---------------------------
NAME ON EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Harold A. Wagner............. 0 0 692,498 330,002 $3,701,212 $0
John P. Jones III............ 11,400 362,976 226,198 250,002 $ 991,022 $0
Robert E. Gadomski........... 22,800 720,982 259,078 200,002 $1,363,192 $0
Joseph J. Kaminski........... 18,440 587,130 286,638 150,002 $1,555,444 $0
Ronaldo Sullam............... 0 0 91,920 56,800 $ 568,185 $0
</TABLE>
- -------------------------
(1) Net before-tax amounts determined by subtracting the exercise price from the
fair market value at the exercise date or at year-end, as the case may be.
15
<PAGE> 19
1999 LONG-TERM INCENTIVE AWARDS
<TABLE>
<CAPTION>
PERFORMANCE OR OTHER
NUMBER OF SHARES PERIOD UNTIL
UNITS, OR MATURATION OR
OTHER RIGHTS(#) PAYOUT ESTIMATED FUTURE PAYOUTS
---------------- -------------------- ---------------------------------------
NAME THRESHOLD(#) TARGET(#) MAXIMUM(#)
- ---- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Harold A. Wagner.......... 30,000 10/1/98 - 9/30/00 7,500 30,000 67,500
John P. Jones III......... 25,000 10/1/98 - 9/30/00 6,250 25,000 56,250
Robert E. Gadomski........ 20,000 10/1/98 - 9/30/00 5,000 20,000 45,000
Joseph J. Kaminski........ 10,000 10/1/98 - 9/30/00 2,500 10,000 22,500
Ronaldo Sullam............ 10,000 10/1/98 - 9/30/00 2,500 10,000 22,500
</TABLE>
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------------------------------
REMUNERATION 15 20 25 30 35 40 45
- ------------ -------- -------- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 300,000 $ 66,024 $ 88,033 $110,041 $ 132,049 $ 154,057 $ 176,557 $ 199,057
400,000 $ 88,524 $118,033 $147,541 $ 177,049 $ 206,557 $ 236,557 $ 266,557
500,000 $111,024 $148,033 $185,041 $ 222,049 $ 259,057 $ 296,557 $ 334,057
600,000 $133,524 $178,033 $222,541 $ 267,049 $ 311,557 $ 356,557 $ 401,557
700,000 $156,024 $208,033 $260,041 $ 312,049 $ 364,057 $ 416,557 $ 469,057
800,000 $178,524 $238,033 $297,541 $ 357,049 $ 416,557 $ 476,557 $ 536,557
900,000 $201,024 $268,033 $335,041 $ 402,049 $ 469,057 $ 536,557 $ 604,057
1,000,000 $223,524 $298,033 $372,541 $ 447,049 $ 521,557 $ 596,557 $ 671,557
1,100,000 $246,024 $328,033 $410,041 $ 492,049 $ 574,057 $ 656,557 $ 739,057
1,200,000 $268,524 $358,033 $447,541 $ 537,049 $ 626,557 $ 716,557 $ 806,557
1,300,000 $291,024 $388,033 $485,041 $ 582,049 $ 679,057 $ 776,557 $ 874,057
1,400,000 $313,524 $418,033 $522,541 $ 627,049 $ 731,557 $ 836,557 $ 941,557
1,500,000 $336,024 $448,033 $560,041 $ 672,049 $ 784,057 $ 896,557 $1,009,057
1,600,000 $358,524 $478,033 $597,541 $ 717,049 $ 836,557 $ 956,557 $1,076,557
1,700,000 $381,024 $508,033 $635,041 $ 762,049 $ 889,057 $1,016,557 $1,144,057
1,800,000 $403,524 $538,033 $672,541 $ 807,049 $ 941,557 $1,076,557 $1,211,557
1,900,000 $426,024 $568,033 $710,041 $ 852,049 $ 994,057 $1,136,557 $1,279,057
2,000,000 $448,524 $598,033 $747,541 $ 897,049 $1,046,557 $1,196,557 $1,346,557
2,100,000 $471,024 $628,033 $785,041 $ 942,049 $1,099,057 $1,256,557 $1,414,057
2,200,000 $493,524 $658,033 $822,541 $ 987,049 $1,151,557 $1,316,557 $1,481,557
2,300,000 $516,024 $688,033 $860,041 $1,032,049 $1,204,057 $1,376,557 $1,549,057
2,400,000 $538,524 $718,033 $897,541 $1,077,049 $1,256,557 $1,436,557 $1,616,557
</TABLE>
The compensation covered by our qualified and nonqualified defined benefit
pension plans is the average of the salary and bonus for the highest three
consecutive years during the final ten years of service. The approximate years
of service as of September 30, 1999 for Mr. Wagner are 36 years; for Mr. Jones,
27 years; for Mr. Gadomski, 29 years; and for Mr. Kaminski, 34 years. The Table
shows approximate annual ordinary life annuity benefits payable to U.S. salaried
employees retiring at age
16
<PAGE> 20
65 in calendar year 1999, after selected periods of service with selected
amounts of covered compensation, without reduction for any survivor benefit or
for Social Security benefits or other offsets. A lump sum form of payment is
available under the nonqualified pension plan.
Mr. Sullam, who is age 58, is covered by a European qualified defined benefit
pension arrangement which is provided through an employer-funded insured annuity
contract. At age 60 he will qualify for a single life annuity of 60% of his
final annual base salary based on 40 years of service. In addition, a special
contribution made in 1983 will produce an additional annuity of $9,333 per year.
These benefits include certain social security benefits other than the United
Kingdom social security pension which is payable from age 65; and are subject to
a 2.5% reduction for each year that retirement precedes age 60. The benefits are
not increased for retirement later than age 60 other than to reflect increases
in salary.
SEVERANCE AND OTHER CHANGE IN CONTROL ARRANGEMENTS
To retain our leadership team and provide for continuity of management in the
event of any actual or threatened change in control of the Company, we utilize
individual severance agreements which provide explicit contractual protection
for our executive officers, including Messrs. Wagner, Jones, Gadomski, Kaminski,
and Sullam. Individuals receive no payments or benefits under the agreements
unless their employment ends during the three-year period following the change
in control. Also, certain components of our executive compensation program are
activated upon a change in control without regard to whether the individual's
employment ends. Specifically, incentive plan provisions automatically
accelerate payment of deferred bonuses and vest and provide a cash out
opportunity for executive stock options; and provide for Board discretion to pay
all executive deferred stock unit awards in cash on an accelerated basis. Also,
grantor trusts secured by an agreement to reserve Company Stock for contribution
to each trust, call for cash funding to pay benefits to employees under unfunded
nonqualified retirement plans (under which participants will have an immediate,
nonforfeitable right to their plan benefits and be entitled to elect an
immediate lump sum payment of such amounts); and to cash out deferred stock
units owed to nonemployee directors. In all of these agreements, plans, and
programs, a change in control means a 20% stock acquisition by a person not
controlled by the Company; a change in the Board majority during any two years
except if approved by two thirds of those who were directors at the beginning of
the period; or other events determined to constitute a change in control for
purposes of the particular agreement, plan, or program by a majority of
nonemployee directors in office when the event occurs.
The severance agreements give each executive specific rights and certain
benefits if, within three years after a change in control, his employment is
terminated by the Company without "cause" (as defined) or he terminates his
employment for "good reason" (as defined). In such circumstances the executive
would be entitled to:
- a cash payment equal to three(1) times the sum of his annual base salary,
the value for the most recent fiscal year of the Company's matching
contribution and/or accrual on his behalf under the qualified 401(k) and
nonqualified savings plans for U.S. employees, and his target bonus under
the annual bonus plan;
- a cash payment equal to the actuarial equivalent of the pension benefits
he would have been entitled to receive under the Company's U.S. pension
plans had he accumulated three(1) additional years of service credited
after his termination date, plus the early retirement subsidy on the
entire benefit should he be ineligible for early retirement as of the
date of termination; and
- -------------------------
(1) Subject to appropriate reduction in cases where an executive's mandatory
retirement would occur within three years from the date of a change in
control.
17
<PAGE> 21
- Continuation of medical, dental, and life insurance benefits for a period
of up to three years, and provision of outplacement services, financial
counseling benefits, and legal fees.
If any payment, distribution or acceleration of benefits, compensation or rights
that is made by the Company to the executive under the severance agreement or
otherwise, results in a liability to him for the excise tax imposed by Section
4999 of the U.S. Internal Revenue Code, the Company will pay him an amount equal
to such excise tax. Also, each severance agreement provides for indemnification
of the executive if he becomes involved in litigation because he is a party to
the agreement.
Mr. Sullam, a citizen of Italy who resides in the United Kingdom ("U.K."), is a
party to dual employment contracts with Air Products and an affiliate in the
U.K. The purpose of the contracts is to set forth the allocation of his
employment activities between those which take place within the U.K. and those
which are performed outside the U.K. Under each of these agreements, Mr. Sullam
is entitled to 180 days notice before his employment may be terminated (other
than for cause). Also, Mr. Sullam's change in control severance agreement, which
would override his dual employment contracts, varies from the severance
agreements for the U.S. executives in that the cash payment for his pension
benefit would reflect only assumed salary increases, not added service, and the
difference between the benefit with and without the 2.5% per year reduction if
termination occurs before age 60. Also, he would receive no dental or life
insurance benefits, but medical coverage to age 65; and coverage, on a
grossed-up basis, of any U.S. taxes withheld from payments to him under the
severance agreement and other Company plans and programs that are not able to be
used to reduce his U.K. tax liability.
INFORMATION ABOUT STOCK PERFORMANCE AND OWNERSHIP
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMPARISON OF FIVE-YEAR CUMULATIVE SHAREHOLDER RETURN
AIR PRODUCTS, S&P 500, S&P CHEMICALS, AND DOW JONES SPECIALTY CHEMICALS
COMPARATIVE GROWTH OF A $100 INVESTMENT
(ASSUMES REINVESTMENT OF ALL DIVIDENDS)
<TABLE>
<CAPTION>
DOW JONES SPECIALTY
AIR PRODUCTS S&P 500 S&P CHEMICALS CHEMICALS
------------ ------- ------------- -------------------
<S> <C> <C> <C> <C>
Sep 94 100.00 100.00 100.00 100.00
Sep 95 114.00 130.00 119.00 123.00
Sep 96 130.00 156.00 153.00 137.00
Sep 97 187.00 219.00 200.00 161.00
Sep 98 137.00 239.00 178.00 140.00
Sep 99 137.00 306.00 211.00 161.00
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
18
<PAGE> 22
PERSONS OWNING MORE THAN 5% OF AIR PRODUCTS STOCK
AS OF SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP PERCENT OF CLASS
- ------------------------------------ ----------------- ----------------
<S> <C> <C>
Mellon Bank (DE) National Association ("Mellon")....... 16,260,580 6.7%
Trustee of the Air Products and Chemicals, Inc.
Flexible Employee Benefits Trust (the "Trust")(1)
Mellon Bank Center
10th and Market Streets, 2nd Floor
Wilmington, DE 19801
State Farm Mutual Automobile Insurance Company......... 15,701,957 6.5%
One State Farm Plaza
Bloomington, IL 61710
State Street Bank and Trust Company ("State
Street")(2).......................................... 15,518,788 6.4%
P.O. Box 1389
Boston, MA 02104
</TABLE>
- -------------------------
(1) The Trust holds shares under a grantor trust agreement between the Company
and Mellon, as trustee. Trust shares are used to satisfy obligations of the
Company and its affiliates under various employee benefit and compensation
plans and programs as and where specified by the Company. Both the Trust and
Mellon, as trustee, have disclaimed beneficial ownership of all Trust
shares. Mellon has no discretion in the manner in which the shares will be
voted. The trust agreement requires the shares to be voted, tendered, and
exchanged in the same proportions and manner as the voting participants in
the Company's Retirement Savings and Stock Ownership Plan (the "RSSOP")
direct the RSSOP trustee.
(2) State Street holds 11,039,146 shares in trust as RSSOP trustee, which is
4.6% of outstanding shares. The RSSOP trust agreement provides, in general,
that the trustee will vote, tender, and exchange RSSOP shares as voting
RSSOP participants direct. State Street holds the remainder of the shares in
trust as trustee or discretionary advisor for various collective investment
funds for employee benefit plan and other index accounts. In the aggregate,
State Street has sole voting power over 4,069,358 shares, shared voting
power over 11,039,146 shares, sole investment power over 4,174,005 shares,
and shared investment power over 11,344,783 shares.
19
<PAGE> 23
AIR PRODUCTS STOCK BENEFICIALLY OWNED BY OFFICERS AND DIRECTORS
AS OF NOVEMBER 1, 1999
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AND OTHER
EQUITY
NAME OF BENEFICIAL OWNER INTERESTS(1) STOCK OPTIONS(2)
- ------------------------ ------------------- ----------------
<S> <C> <C>
Mario L. Baeza........................................ 504 0
Tom H. Barrett........................................ 26,076 12,000
L. Paul Bremer III.................................... 10,539 12,000
Robert Cizik.......................................... 16,408 12,000
Ursula F. Fairbairn................................... 2,188 2,000
Robert E. Gadomski.................................... 66,887 309,078
Edward E. Hagenlocker................................. 4,643 6,000
James F. Hardymon..................................... 2,088 4,000
John P. Jones III..................................... 49,616 284,532
Joseph J. Kaminski.................................... 107,248 336,638
Terry R. Lautenbach................................... 11,549 12,000
Ruud F. M. Lubbers.................................... 2,052 8,000
Takeo Shiina.......................................... 4,452 12,000
Ronaldo Sullam........................................ 9,600 109,386
Lawrason D. Thomas.................................... 8,326 10,000
Harold A. Wagner...................................... 172,592 802,498
Directors and Executive Officers as a group (19
persons)(3)......................................... 558,079 2,172,333
</TABLE>
- -------------------------
(1) Shares reported include 18,948 shares owned jointly by certain of the
directors and officers with their spouses with whom they share voting and
investment power; 28,571 shares held by, or for the benefit of, members of
the immediate families or other relatives of certain of the directors and
officers, of which such directors and officers disclaim beneficial ownership
of 28,571 shares; and for Mr. Wagner, 25,524 shares owned by a charitable
foundation, as to which Mr. Wagner has shared voting and investment power.
Equity interests reported are 71,470 deferred stock units ("DSUs") awarded
or purchased, and 248,258 DSUs awarded or earned out under Company plans for
nonemployee directors and for executives, respectively. The directors and
officers have no voting or investment power over these securities.
(2) The directors and officers have the right to acquire this number of shares
within 60 days by exercising outstanding options granted under Company
plans. In the case of Mr. Wagner, 91,664 of the shares reported are subject
to options transferred by gift to trusts for Mr. Wagner's children, as to
which Mr. Wagner has no voting or investment power.
(3) Not counting their DSUs, our directors and executive officers as a group
beneficially own just under 1% of our outstanding shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
We believe that all of our directors and officers subject to Section 16(a) have
complied with all Section 16 filing requirements.
20
<PAGE> 24
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
STATE STREET BANK AND TRUST COMPANY
CONTROL NUMBER:
RECORD DATE SHARES:
Please be sure to sign and date this Proxy. Date
Participant sign here
1. ELECTION OF DIRECTORS
The nominees for Directors for three-year terms are:
<TABLE>
<CAPTION>
FOR ALL WITH- FOR ALL
NOMINEES HOLD EXCEPT
<S> <C> <C> <C> <C>
(01) M. L. BAEZA (03) E. E. HAGENLOCKER
(02) L. P. BREMER III (04) T. R. LAUTENBACH [ ] [ ] [ ]
</TABLE>
The nominee for Director for a one-year term is:
(05) H. A. WAGNER
NOTE: If you do not wish your shares voted "For" a particular nominee, mark the
"For All Except" box and strike a line through that nominee(s) name. Your shares
will be voted for the remaining nominee(s).
<TABLE>
<CAPTION>
2. APPOINTMENT OF AUDITORS FOR AGAINST ABSTAIN
<S> <C> <C> <C>
Ratification of appointment of Arthur Andersen
LLP as independent certified public accountants [ ] [ ] [ ]
for fiscal year 2000.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR NOS. 1 AND 2.
DETACH CARD DETACH CARD
STATE STREET BANK AND TRUST COMPANY
December 15, 1999
TO: ALL PARTICIPANTS IN THE AIR PRODUCTS AND CHEMICALS, INC. RETIREMENT
SAVINGS AND STOCK OWNERSHIP PLAN
If you are an active employee with Intranet access, you should have received
E-mail notice of electronic access to the Notice of Annual Meeting, the Proxy
Statement, and the Annual Report on or about December 15, 1999. You may request
paper copies of these materials by calling 1-888-AIR-INFO. If you do not have
Intranet access, copies of these materials will be mailed to your home.
As a participant and named fiduciary of 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 your vote is received by us on or before January 21, 2000.
This year, you may vote your shares in one of three ways. You may vote over the
Internet, vote over the telephone, or vote by marking, signing, dating, and
returning the voting direction form in the postage paid envelope. Internet and
telephone voting instructions are on the reverse side.
Cordially yours,
STATE STREET BANK AND TRUST COMPANY, TRUSTEE
<PAGE> 25
2000 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 27 January 2000 as directed on the reverse side with respect to
Proposals 1 and 2.
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 and 2. 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.
ELECTRONIC VOTING
You can vote your shares electronically through the Internet or the telephone,
24 hours a day, 7 days a week. This eliminates the need to return the voting
direction form.
1. TO VOTE OVER THE INTERNET:
* Log on the Internet and go to the website
http://www.eproxyvote.com/apd1
2. TO VOTE OVER THE TELEPHONE:
* On a touch-tone telephone call 1-877-PRX-VOTE (1-877-779-8683)
* Outside of the U.S. and Canada call 1-201-536-8073
Your electronic vote authorizes the proxies in the same manner as if you marked,
signed, dated, and returned the voting direction form.
<PAGE> 26
[X] Please mark your votes
as in this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
PROPOSALS 1 AND 2.
<TABLE>
FOR WITHHELD
<S> <C> <C> <C>
1. To elect all Nominees are:
nominees [ ] [ ] 01. M. L. Baeza, 02. L. P. Bremer III, 03. E. E.
Hagenlocker, 04. T. R. Lautenbach
For all nominees except those named below: as directors for three-year terms; 05. H. A. Wagner as
director for a one-year term.
</TABLE>
<TABLE>
2. APPOINTMENT OF AUDITORS. FOR AGAINST ABSTAIN
<S> <C> <C> <C>
Ratification of appointment of
Arthur Andersen LLP, as independent [ ] [ ] [ ]
certified public accountants for fiscal
year 2000.
</TABLE>
The shares represented by this proxy will be voted as directed by the
shareholder on this proxy with respect to Proposals 1 and 2. If no direction is
given, such shares will be voted for Proposals 1 and 2. Such shares will be
voted in the proxies' discretion upon such other business as may properly come
before the meeting.
SIGNATURE(S) DATE
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee, or
guardian, please give full title as such.
- -------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
<PAGE> 27
CONTROL #
AIR PRODUCTS AND CHEMICALS, INC.
Dear Shareholder:
Air Products and Chemicals, Inc. encourages you to take advantage of new and
convenient ways to vote your shares. You can vote your shares electronically
through the Internet or the telephone, 24 hours a day, 7 days a week. This
eliminates the need to return the proxy card.
To vote your shares by these means, please use the control number printed in the
box above, just below the perforation. The series of numbers that appear in the
box above must be used to access the system. To ensure that your vote will be
counted, please cast your Internet or telephone vote before 12:00 a.m. on
January 26, 2000.
1. To vote over the Internet:
* Log on the Internet and go to the web site
HTTP://WWW.EPROXYVOTE.COM/APD
2. To vote by telephone:
* On a touch-tone telephone call 1-877-PRX-VOTE (1-877-779-8683)
* Outside of the U.S. and Canada call 201-536-8073
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated, and returned the proxy card.
If you choose to vote your shares electronically, there is no need for you to
mail back your proxy card.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
<PAGE> 28
[LOGO]
Air Products and Chemicals, Inc.
7201 Hamilton Boulevard
Allentown, PA 18195-1501
PROXY SOLICITED BY THE
BOARD OF DIRECTORS FOR ANNUAL MEETING OF SHAREHOLDERS--JANUARY 27, 2000
The undersigned hereby appoints Harold A. Wagner, W. Douglas Brown, and Leo J.
Daley, 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 27, 2000, 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.
SEE REVERSE
SIDE
- -------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
[Air Products logo appears here]
ANNUAL MEETING
OF
AIR PRODUCTS AND CHEMICALS, INC.
THURSDAY - JANUARY 27, 2000
2:00 P.M.
TOMPKINS COLLEGE CENTER THEATER
CEDAR CREST COLLEGE, ALLENTOWN, PA
