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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One) |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended September 30, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 1-4534
AIR PRODUCTS AND CHEMICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 23-1274455
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
7201 Hamilton Boulevard
Allentown, Pennsylvania 18195-1501
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610)481-4911
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
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Title of each class which registered
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Common Stock, par value $1.00 per share New York and Pacific
Preferred Stock Purchase Rights New York and Pacific
8 3/4% Debentures Due 2021 New York
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ X ]
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The aggregate market value of the voting stock held by non-affiliates of
the registrant on November 1, 1999 was $6.44 billion. For purposes of the
foregoing calculation (i) all directors and/or executive officers have been
deemed to be affiliates, but the registrant disclaims that any such director
and/or executive officer is an affiliate and (ii) registrant's Flexible Employee
Benefit Trust, described under Item 12 of this Report, is deemed a
non-affiliate.
The number of shares of Common Stock outstanding as of November 30, 1999
was 229,304,812.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Shareholders for the fiscal year ended September 30,
1999. With the exception of those portions which are incorporated by reference
into Parts I, II, and IV of this Form 10-K, the Annual Report is not deemed to
be filed.
Proxy Statement for Annual Meeting of Shareholders to be held
January 27, 2000 . . . Part III.
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FORWARD-LOOKING STATEMENTS
The forward-looking statements contained in this document are based on current
expectations regarding important risk factors. Actual results may differ
materially from those expressed. In addition to important risk factors and
uncertainties referred to in the Management's Discussion and Analysis, which is
included under Item 7 herein, such as those relating to the Year 2000, other
important risk factors and uncertainties include the impact of worldwide
economic growth, pricing of both the Company's products and raw materials such
as electricity, customer outages and customer demand, and other factors
resulting from fluctuations in interest rates and foreign currencies, the impact
of competitive products and pricing, success of cost control programs, and the
impact of tax and other legislation and other regulations in the jurisdictions
in which the Company and its affiliates operate.
Factors that might cause forward looking statements related to the BOC
transaction to differ materially from actual results include, among other
things, requirements or delays imposed by regulatory authorities to permit the
transaction to be consummated, unanticipated tax and other costs in separating
the ownership of BOC's businesses and assets, ability to amortize goodwill over
40 years, overall economic and business conditions, demand for the goods and
services of Air Products or BOC or their respective affiliates, competitive
factors in the industries in which each of them competes, changes in government
regulation, success of implementing synergies and other cost reduction programs,
the timing, impact, and other uncertainties of future acquisitions or
combinations within relevant industries, fluctuations in interest rates and
foreign currencies, and the price at which Air Products would issue additional
equity, as well as the impact of tax and other legislation and other regulations
in the jurisdictions in which Air Products and BOC and their respective
affiliates operate.
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<TABLE>
TABLE OF CONTENTS
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Page
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PART I. ITEM 1. Business........................................................................... 1
INDUSTRIAL GASES.................................................................. 1
Power Generation................................................................ 2
Pure Air........................................................................ 2
BOC Transaction................................................................. 3
CHEMICALS......................................................................... 3
Polymer Chemicals............................................................... 3
Performance Chemicals........................................................... 3
Chemical Intermediates.......................................................... 4
EQUIPMENT AND SERVICES............................................................. 5
GENERAL............................................................................ 5
Foreign Operations.............................................................. 5
Technology Development.......................................................... 5
Raw Materials and Energy........................................................ 6
Environmental Controls.......................................................... 7
Competition..................................................................... 8
Insurance....................................................................... 8
Employees....................................................................... 8
Year 2000....................................................................... 8
Executive Officers of the Company............................................... 9
ITEM 2. Properties......................................................................... 10
Industrial Gases................................................................. 10
Chemicals........................................................................ 10
Equipment and Services........................................................... 11
ITEM 3. Legal Proceedings.................................................................. 11
ITEM 4. Submission of Matters to a Vote of Security Holders................................ 11
PART II ITEM 5. Market for the Company's Common Stock and Related Stockholder Matters.............. 11
ITEM 6. Selected Financial Data............................................................ 11
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................................. 12
ITEM 7a. Quantitative and Qualitative Disclosures about Market Risk......................... 12
ITEM 8. Financial Statements............................................................... 12
ITEM 9. Disagreements on Accounting and Financial Disclosure............................... 12
PART III ITEM 10. Directors and Executive Officers of the Company.................................... 12
ITEM 11. Executive Compensation............................................................. 12
ITEM 12. Security Ownership of Certain Beneficial Owners and Management..................... 12
ITEM 13. Certain Relationships and Related Transactions..................................... 12
PART IV ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K................... 13
Signatures......................................................................... 16
</TABLE>
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PART I
ITEM 1. Business.
Through internal development and by acquisitions, Air Products and
Chemicals, Inc. has established an internationally recognized industrial gas and
related industrial process equipment business, and developed strong positions as
a producer of certain chemicals.
The industrial gases business segment recovers and distributes
industrial gases such as oxygen, nitrogen, argon, and hydrogen and a variety of
medical and specialty gases. This segment also includes the Company's power
generation and flue gas treatment businesses. The chemicals business segment
produces and markets polymer chemicals, performance chemicals, and chemical
intermediates. The equipment and services business segment supplies cryogenic
and other process equipment and related engineering services.
Financial information concerning the Company's business segments
appears in Note 20 to the Consolidated Financial Statements included under Item
8 herein, which information is incorporated herein by reference, as are all
other specific references herein to information appearing in such 1999 Financial
Review Section of the Annual Report.
As used in this Report, the term "Air Products" or "Company" includes
subsidiaries and predecessors of the registrant or its subsidiaries, unless the
context indicates otherwise.
INDUSTRIAL GASES
The principal industrial gases sold by the Company are oxygen,
nitrogen, argon (primarily recovered by the cryogenic distillation of air),
hydrogen, carbon monoxide, carbon dioxide (purchased, purified, or recovered
through the processing of natural gas or the by-product streams from process
plants), synthesis gas (combined streams of hydrogen and carbon monoxide), and
helium (purchased or refined from crude helium). Medical and specialty gases are
manufactured or blended by the Company or purchased for resale. The industrial
gas segment now also includes the Company's power generation and flue gas
treatment businesses. These businesses were formerly reported in the Equipment
and Services segment.
The Company's industrial gas business involves two principal modes of
supply:
"Tonnage" or "on-site" supply--For large volume or "tonnage" users of
industrial gases, a plant is built adjacent to or near the customer's
facility--hence the term "on-site". Alternatively, the gases are delivered
through a pipeline from nearby locations. Supply is generally made under
contracts having terms in excess of three years. In at least nine areas--the
Houston (Texas) Ship Channel including the Port Arthur, Texas, area; "Silicon
Valley", California; Los Angeles, California; Phoenix, Arizona; Decatur,
Alabama; Central Louisiana; Rotterdam, The Netherlands; Singapore; and Bahia,
Brazil--Air Products' hydrogen, oxygen, carbon monoxide, or nitrogen gas
pipelines serve multiple customers from one or more centrally located plants.
Industrial gas companies in which the Company has less than controlling
interests have pipelines in Korea, Thailand, Malaysia, Taiwan, and South Africa.
Merchant supply--Smaller volumes of industrial gas products are
delivered to thousands of customers in liquid or gaseous form by tanker trucks
or tube trailers. These merchant customers use equipment designed and installed
by Air Products to store the product near the point of use, normally in liquid
state, and vaporize the product into gaseous state for their use as needed.
Increasingly, some customers are being supplied by small on-site generators
using noncryogenic technology based on adsorption and membrane technology,
which, in certain circumstances, the Company sells to its customers. Merchant
customers' contract terms normally are from three to five years. Merchant gases
and various specialty gases are also delivered in cylinders, dewars, and lecture
bottle sizes.
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Oxygen, nitrogen, argon, and hydrogen sold to merchant customers are
usually recovered at large "stand-alone" facilities located near industrial
areas or high-tech centers, or at small noncryogenic generators, or are taken
from tonnage plants used primarily to supply tonnage users. Tonnage plants are
frequently designed to have more capacity than is required by their principal
customer to recover additional product that is liquefied for sale to a merchant
market. Air Products also designs and builds systems for recovering oxygen,
hydrogen, nitrogen, carbon monoxide, and low dew point gases using adsorption
technology.
Tonnage and merchant sales of atmospheric gases--oxygen, nitrogen, and
argon--constituted approximately 26% of Air Products' consolidated sales in
fiscal 1999 and were approximately 25% and 24% in fiscal years 1998 and 1997
respectively. Tonnage and merchant sales of industrial gases--principally
oxygen, nitrogen, and hydrogen--to the chemical process industry and the
electronics industry, the largest consuming industries, were approximately 14%
and 9% respectively, of Air Products' consolidated sales in fiscal 1999.
Other important consumers of Air Products' industrial and specialty
gases are the basic steel industry, the oil industry (which uses inert nitrogen
for oil well stimulation and field pressurization and hydrogen and oxygen for
refining), and the food industry (which uses liquid nitrogen for food freezing).
Air Products believes that it is the largest liquefier of hydrogen which it
supplies to many customers including the National Aeronautics and Space
Administration for its space shuttle program.
Helium is sold for use in magnetic resonance imaging equipment,
controlled atmospheres processes, and welding. Medical gases are sold in the
merchant market to hospitals and clinics, primarily for inhalation therapy.
Specialty gases include fluorine products, rare gases such as xenon,
krypton, and neon, and more common gases of high-purity or gases which are
precisely blended as mixtures. Specialty chemicals for use by the electronics
industry include silane, nitrogen trifluoride, carbon tetrafluoride,
hexaflouromethane, and tungsten hexafluoride. These gases and chemicals are used
in numerous industries and in electronic and laboratory applications. In certain
circumstances, the Company sells equipment related to the use, handling, and
storage of such specialty gases and specialty chemicals.
Sales of industrial gases to merchant customers and/or sales of
specialty products to the electronics industry are made principally through
field sales forces from 131 offices in 37 states in the United States and Puerto
Rico, and from 191 offices in 24 foreign countries. In addition, industrial gas
companies in which the Company has investments operate in more than 30 foreign
countries.
Electricity and hydrocarbons, including natural gas as a feedstock for
producing certain gases, are important to Air Products' industrial gas business.
See "Raw Materials and Energy". The Company's large truck fleet, which delivers
products to merchant customers, requires a readily available supply of gasoline
or diesel fuel. Also, environmental and health laws and regulations will
continue to affect the Company's industrial gas businesses. See "Environmental
Controls".
Power Generation
Air Products operates and has 50% interests in a 49-megawatt
fluidized-bed coal-fired power generation facility in Stockton, California; an
85-megawatt coal waste burning power generation facility in western
Pennsylvania; a 120-megawatt gas-fired combined cycle power generation facility
in Orlando, Florida; and a 24-megawatt gas-fired combined cycle power generation
facility near Rotterdam, The Netherlands. A 112-megawatt gas-fueled power
generation facility, in which the Company has a 48.9% interest, operates in
Thailand and supplies electricity to a state-owned electricity generating
authority and steam and electricity to an Air Products industrial gases
affiliate.
Pure Air
Air Products operates and owns a 50% interest in a facility utilizing
Mitsubishi Heavy Industries, Ltd. flue gas desulfurization (FGD) technology
systems for removing sulfur dioxide from the flue gas of a coal-fired power
generation plant in Indiana.
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Additional information with respect to the Company's power generation
and flue gas treatment businesses is included in Notes 8 and 16 to the
Consolidated Financial Statements included under Item 8 herein.
BOC Transaction
In July 1999, the Company and L'Air Liquide S.A. of France agreed to
the terms of a recommended offer under which they would acquire the BOC Group
plc, the leading British industrial gases company. The Company will contribute
approximately $5.9 billion in cash to the transaction, expected to be funded
initially with debt financing through or supported by a credit facility provided
by The Chase Manhattan Bank.
This transaction provides a unique opportunity for the Company to
acquire attractive, complementary assets that will increase its size and scale
to compete around the world and extend its presence in high growth areas,
advancing its strategy of building a leading global industrial gas company.
Additional information about the acquisition is included in Note 18 to the
Consolidated Financial Statements included under Item 8 herein.
CHEMICALS
The Company's chemicals businesses consist of polymer chemicals,
performance chemicals, and chemical intermediates where the Company is able to
differentiate itself by the performance of its products in the customer's
application, the technical service which the Company provides, and the scale of
production and the production technology employed by the Company.
Polymer Chemicals
Air Products' polymer chemicals are water-based and water-soluble
products derived primarily from vinyl acetate monomer. The principal products of
these businesses are polymer emulsions, pressure sensitive adhesives, and
polyvinyl alcohol. Total sales from these businesses constituted approximately
14% of Air Products' consolidated sales in fiscal year 1999, and 12% in each of
fiscal years 1998 and 1997.
Polymer Emulsions-The Company's major emulsion products are vinyl
acetate homopolymer emulsions and AIRFLEX(R) vinyl acetate-ethylene copolymer
emulsions. The Company also produces emulsions which incorporate vinyl chloride
and various acrylates in the polymer. These products are used in adhesives,
nonwoven fabric binders, paper coatings, paints, inks, and carpet backing binder
formulations.
Air Products owns 65% of a world-wide joint venture with Wacker-Chemie
GmbH that produces polymer emulsions and pressure sensitive adhesives. The
Company also owns 20% of a world-wide joint venture with Wacker-Chemie that
produces redispersible powders made from polymer emulsions.
Pressure Sensitive Adhesives-These products are water-based acrylic
emulsions which are used for both permanent and removable pressure sensitive
adhesives primarily for labels and tapes.
Polyvinyl Alcohol-These polymer products are water-soluble synthetic
resins which are used in textile warp sizes, surface sizes for paper, adhesives,
safety glass laminates, and as emulsifying agents in polymerization. As a
co-product of polyvinyl alcohol, acetic acid is a merchant product sold to a
variety of markets including textiles, pharmaceuticals, and electronics.
Performance Chemicals
Air Products' performance chemicals are differentiated from the
competition based on their performance when used in the customer's products and
the technical service which the Company provides. The principal products of
these businesses are specialty additives, polyurethane additives, and epoxy
additives. Total sales from these businesses constituted approximately 8% of Air
Products' consolidated sales in each of fiscal years 1999, 1998, and 1997.
3
<PAGE>
Specialty Additives-These products are primarily acetylenic alcohols
and amines which are used as performance additives in coatings, lubricants,
electro-deposition processes, agricultural formulations, and corrosion
inhibitors.
Polyurethane Additives-These products include catalysts and surfactants
which are used as performance control additives and processing aids in the
production of both flexible and rigid polyurethane foam around the world. The
principal end markets for polyurethane foams include furniture cushioning,
insulation, carpet underlay, bedding, and automobile seating.
Epoxy Additives-These products include polyamides, aromatic amines,
cycloaliphatic amines, reactive diluents, and specialty epoxy resins which are
used as performance additives in epoxy formulations by epoxy manufacturers
worldwide. The end markets for epoxies are coatings, flooring, adhesives,
reinforced composites, and electrical laminates.
Chemical Intermediates
The chemical intermediates businesses use the Company's proprietary
technology and scale of production to differentiate themselves from the
competition. The principal intermediates sold by the Company include amines and
polyurethane intermediates. The Company also produces certain industrial
chemicals (ammonia, methanol, and nitric acid) as raw materials for its
differentiated products. Total third-party sales from the chemical intermediates
businesses constituted 11% of Air Products' consolidated sales in each of fiscal
years 1999, 1998, and 1997.
Amines-The Company produces a broad range of amines using ammonia and
methanol, which are both manufactured by Air Products, and other alcohol
feedstocks purchased from various suppliers. Other, more specialized amines, are
produced by the hydrogenation of purchased intermediates. Substantial quantities
of these products are sold under long-term contracts to a small number of
customers. These products are used by the Company's customers as raw materials
in the manufacture of herbicides, pesticides, water treatment chemicals, animal
nutrients, polyurethane coatings, artificial sweeteners, rubber chemicals, and
pharmaceuticals. Ammonia is a feedstock for its alkylamines and the excess over
this requirement is marketed as ammonium nitrate prills and solutions which are
primarily used by customers as fertilizers or in other agricultural
applications. Methanol is principally used by Air Products as a feedstock in
methylamine production and the excess over this requirement is marketed to the
methanol market.
Polyurethane Intermediates-The Company produces dinitrotoluene ("DNT")
and toluene diamine ("TDA") for use as intermediates by the Company's customers
in the manufacture of a major precursor of flexible polyurethane foam. The
principal end markets for flexible polyurethane foams include furniture
cushioning, carpet underlay, bedding, and seating in automobiles. Virtually all
of the Company's production of DNT and TDA is sold under long-term contracts to
a small number of customers.
* * *
Chemical sales are supported from various locations in the United
States, England, Germany, Brazil, Mexico, The Netherlands, Japan, China,
Singapore, and South Africa, and through sales representatives or distributors
in most industrialized countries. Dry products are delivered in railcars,
trucks, drums, bags, and cartons. Liquid products are delivered by barge, rail
tank cars, tank-trailers, drums and pails, and, at one location, by pipeline.
The chemicals business depends on adequate energy sources, including
natural gas as a feedstock for the production of certain products (see "Raw
Materials and Energy"), and will continue to be affected by various
environmental and health laws and regulations (see "Environmental Controls").
4
<PAGE>
EQUIPMENT AND SERVICES
The Company designs and manufactures equipment for cryogenic air
separation, gas processing, natural gas liquefaction, and hydrogen purification.
Air Products also designs and builds systems for recovering hydrogen, nitrogen,
carbon monoxide, carbon dioxide, and low dew point gases using membrane
technology. Additionally, a broad range of plant design, engineering,
procurement, and construction management services is provided for the above
areas. Equipment is manufactured for use by the industrial gases segment and for
sale in industrial markets which include the Company's international industrial
gas affiliates.
The backlog of orders (including letters of intent) believed to be firm
from other companies and equity affiliates for equipment was approximately $175
million on September 30, 1999, approximately 27% of which relates to cryogenic
air separation, as compared with a total backlog of approximately $302 million
on September 30, 1998. It is expected that approximately $136 million of the
backlog on September 30, 1999, will be completed during fiscal 2000.
GENERAL
Foreign Operations
Air Products, through subsidiaries and affiliates, conducts business in
numerous countries outside the United States. The structure of the Air Products
industrial gas business in Europe mirrors the Company's United States operation.
Air Products' international business is subject to risks customarily encountered
in foreign operations, including fluctuations in foreign currency exchange rates
and controls, import and export controls, and other economic, political, and
regulatory policies of local governments.
Majority and wholly owned industrial gas subsidiaries operate in
Argentina, Brazil, Canada, Mexico, and throughout Europe and Asia in 14 and
eight countries respectively. Subsequent to fiscal year end, the Company
acquired the 51 percent of shares that it previously did not own in Korea
Industrial Gases Ltd., the largest industrial gas company in Korea. There are
50% industrial gas joint ventures in Africa, Canada, South Africa, four
countries in Europe, and two in Asia, and less than controlling interests in
Canada and Mexico, two countries in Europe, and five in Asia. The Company has a
50% interest in a power generation facility in The Netherlands and a 48.9%
interest in Thailand.
The principal geographic markets for the Company's chemical products
are North America, Europe, Asia, Brazil, and Mexico. Majority and wholly owned
subsidiaries operate in Germany, Italy, The Netherlands, the U.K., Australia,
Singapore, and Korea. The Company also has 50% joint ventures in Japan for
distribution of POLYCAT(R) and manufacture and sale of DABCO(R) amine catalysts.
The polymer emulsions and pressure sensitive adhesives joint venture with
Wacker-Chemie GmbH has headquarters in the United States and production
facilities in the U.S., Germany, Mexico, and Korea. Headquarters for the 20%
investment in the redispersible powder venture with Wacker-Chemie are in Germany
with manufacturing facilities in Germany and the United States.
Financial information about Air Products' foreign operations and
investments is included in Notes 8, 10, and 20 to the Consolidated Financial
Statements included under Item 8 herein. Information about foreign currency
translation is included in Note 1 to the Consolidated Financial Statements
included under Item 8 herein, under "Foreign Currency", and information on
Company exposure to currency fluctuations is included in Note 5 to the
Consolidated Financial Statements included under Item 8 herein, under "Foreign
Exchange Contracts". Export sales from operations in the United States to
unconsolidated customers amounted to $528 million, $650 million, and $571
million in 1999, 1998, and 1997 respectively. Total export sales in fiscal 1999
included $43 million in export sales to affiliated customers. The sales to
affiliated customers were primarily equipment sales.
Technology Development
Air Products conducts research and development principally in its
laboratories located in Trexlertown, Pennsylvania, as well as in Manchester and
Basingstoke, England; Utrecht, The Netherlands; and Barcelona, Spain. The
Company also funds and works closely on research and development programs with a
number of major universities and conducts a sizable amount of research work
funded by others, principally the United States Government.
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The Company's market-oriented approach to technology development
encompasses research and development and engineering, as well as commercial
development.
The amount expended by the Company on research and development during
fiscal 1999 was $123 million, and was $112 million and $114 during fiscal 1998
and 1997 respectively.
In the industrial gases and equipment and services segments, technology
development is directed primarily to developing new and improved processes and
equipment for the production and delivery of industrial gases and cryogenic
fluids, developing new products, and developing new and improved applications
for industrial gases. It is through such applications and improvements that the
Company has become a major supplier to the electronics, polymer, petroleum,
rubber, plastics, food processing, and paper industries. Through fundamental
research into sieve and polymer materials, advanced process engineering, and
integrated manufacturing methods, the Company discovers, develops, and improves
the economics of noncryogenic gas separation technologies. Additionally,
technology development for the equipment and services businesses is directed
primarily to reducing the capital and operating costs of its facilities and to
commercializing new technologies in gas production and separation and in power
production.
In the chemicals segment, technology development is primarily concerned
with new products and applications to strengthen and extend our present
positions in polymer and performance chemicals. In addition, a major continuing
effort supports the development of new and improved manufacturing technology for
chemical intermediates and various types of polymers.
A corporate research group supports the research efforts of the
Company's various businesses. This group includes the Company's Corporate
Science and Technology Center which conducts exploratory research in areas
important to the long-term growth of the Company's core businesses, e.g., gas
and fluid separations, polymer science, organic synthesis, and fluorine
chemicals.
As of November 1, 1999, Air Products owned 928 United States patents
and 1,694 foreign patents. The Company is also licensed to practice under
patents owned by others. While the patents and licenses are considered
important, Air Products does not consider its business as a whole to be
materially dependent upon any particular patent or patent license, or group of
patents or licenses.
Raw Materials and Energy
The Company manufactures hydrogen, carbon monoxide, synthesis gas,
anhydrous ammonia, carbon dioxide, and methanol principally from natural gas.
Such products accounted for approximately 8% of the Company's consolidated sales
in fiscal 1999. The Company's principal raw material purchases are chemical
intermediates produced by others from basic petrochemical feedstocks such as
olefins and aromatic hydrocarbons. These feedstocks are generally derived from
various crude oil fractions or from liquids extracted from natural gas. The
Company purchases its chemical intermediates from many sources and generally is
not dependent on one supplier. However, with respect to vinyl acetate monomer
which supports the polymer business, the Company is heavily dependent on a
single supplier under a long-term contract which produces vinyl acetate monomer
from several facilities. The Company characterizes the availability of these
chemical intermediates as generally being readily available. The Company uses
such raw materials in the production of emulsions, polyvinyl alcohol, amines,
polyurethane intermediates, specialty additives, polyurethane additives, and
epoxy additives. Such products accounted for approximately 34% of the Company's
consolidated sales in fiscal 1999. Natural gas is an energy source at a number
of the Company's facilities.
The Company's industrial gas facilities use substantial amounts of
electrical power. Any shortage of electrical power or interruption of its supply
or increase in its price which cannot be passed through to customers for
competitive reasons will adversely affect the merchant industrial gas business
of the Company.
In addition, the Company purchases finished and semi-finished materials
and chemical intermediates from many suppliers. During fiscal 1999 no
significant difficulties were encountered in obtaining adequate supplies of
energy or raw materials.
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Environmental Controls
The Company is subject to various environmental laws and regulations in
the United States and foreign countries where it has operations. Compliance with
these laws and regulations results in higher capital expenditures and costs.
Additionally, from time to time the Company is involved in proceedings under the
Comprehensive Environmental Response, Compensation, and Liability Act (the
federal Superfund law), similar state laws, and the Resource Conservation and
Recovery Act (RCRA) relating to the designation of certain sites for
investigation and possible cleanup. Additional information with respect to these
proceedings is included under Item 3, Legal Proceedings, below. The Company's
accounting policies on environmental expenditures are discussed in Note 1 to the
Consolidated Financial Statements included under Item 8 herein.
The amounts charged to earnings on an after-tax basis related to
environmental protection totaled $27 million in 1999, $24 million in 1998, and
$26 million in 1997. These amounts represent an estimate of expenses for
compliance with environmental laws, as well as remedial activities, and costs
incurred to meet internal Company standards. Such costs are estimated to be
approximately $28 million in 2000 and $29 million in 2001.
Although precise amounts are difficult to define, the Company estimates
that in fiscal 1999 it spent approximately $7 million on capital projects to
control pollution (including expenditures associated with new plants) versus $10
million in 1998. Capital expenditures to control pollution in future years are
estimated at $11 million in 2000 and $10 million in 2001.
The exact amount to be expended by the Company and its power generation
business joint ventures on equipment to control pollution will depend upon the
timing of the capital projects and timing and content of regulations promulgated
by environmental regulatory bodies during the life of any capital investment.
Efforts are made to pass these costs through to customers. To the extent
long-term contracts have been entered into for supply of product such as for the
industrial gas on-site business and for certain chemical products, the cost of
any environmental compliance generally is contractually passed through to the
customer.
It is the Company's policy to accrue environmental investigatory and
noncapital remediation costs for identified sites when it is probable that a
liability has been incurred and the amount of loss can be reasonably estimated.
The potential exposure for such costs is estimated to range from $10 million to
a reasonably possible upper exposure of $26 million. The balance sheet at
September 30, 1999 includes an accrual of $19 million. At September 30, 1998,
the balance sheet accrual was $23 million.
In addition to the environmental exposures discussed in the preceding
paragraph, there will be spending at a Company-owned manufacturing site where
the Company is undertaking RCRA remediation action. The Company estimates
capital costs to implement the anticipated remedial program will range from $23
to $30 million. Spending was $7.5 million through fiscal 1999 and is estimated
at $10 million for fiscal 2000 and $1 million for 2001. Operating and
maintenance expenses associated with continuing the remedial program are
estimated to be approximately $1 million per year beginning in fiscal 2000 and
continuing for an estimated period of up to 30 years. A former owner and
operator at the site has agreed to reimburse the Company approximately 20% of
the costs incurred in the remediation. In fiscal 1999 an insurance recovery
related to this environmental site was received in the amount of $7.7 million.
The cost estimates have not been reduced by the value of such reimbursement.
Actual costs to be incurred in future periods may vary from the
estimates given inherent uncertainties in evaluating environmental exposures.
Subject to the imprecision in estimating future environmental costs, the Company
does not expect that any sum it may have to pay in connection with environmental
matters in excess of the amounts recorded or disclosed above would have a
materially adverse effect on its financial condition or results of operations in
any one year.
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Competition
The Company's businesses face strong competition from others, some of
which are larger and have greater resources than Air Products.
Air Products' industrial gas business competes in the United States
with three major sellers and with several regional sellers. Competition in
industrial gas markets is based primarily on price, reliability of supply, and
furnishing or developing applications for use of such gases by customers, and in
some cases the provisions of other services or products such as power and steam
generation. A similar competitive situation exists in European industrial gas
markets in which the Company competes against one or more larger entrenched
competitors in most countries.
The number of the Company's principal competitors in the chemicals
business varies from product to product, and it is not practical to identify
such competitors because of the broad range of the Company's chemical products
and the markets served, although the Company believes it has a leading or strong
market position in most of its chemical products. For amines the competition is
principally from other large chemical companies that also have the ability to
provide competitive pricing, reliability of supply, technical service
assistance, and quality products and services. The possibility of back
integration by large customers is the major competitive factor for the sale of
polyurethane intermediates. In its other chemical products, the Company competes
with a large number of chemical companies, some of which are larger, possess
greater financial resources, and are more vertically integrated than the
Company. Competition in these products is principally on the basis of price,
quality, product performance, reliability of product supply, and technical
service assistance.
The Company's equipment and services businesses and its power
generation business compete in all aspects with a great number of firms, some of
which have greater financial resources than Air Products. Another important
factor in certain export sales is financing provided by governmental entities in
the United States and the United Kingdom as compared with financing offered by
their counterparts in other countries.
Competition is based primarily on technological performance, service,
technical know-how, price, and performance guarantees. Air Products believes
that its comprehensive project development capability, operating experience,
engineering and financing capabilities, and construction management experience
will enable it to compete effectively.
Insurance
The Company's policy is to obtain public liability and property
insurance coverage that is currently available at what management determines to
be a fair and reasonable price. The Company, for itself and its power generation
and flue gas treatment joint venture affiliates for which it assumes turnkey
construction or operating responsibility, maintains public liability and
property insurance coverage at amounts which management believes are sufficient,
after retention, to meet the Company's anticipated needs in light of historical
experience to cover future litigation and claims. There is no assurance,
however, that the Company will not incur losses beyond the limits of, or outside
the coverage of, its insurance.
Employees
On September 30, 1999, the Company (including majority-owned
subsidiaries) had approximately 17,400 full-time employees of whom approximately
7,200 were located outside the United States. The Company has collective
bargaining agreements with unions at numerous locations which expire on various
dates over the next three to four years. The Company considers relations with
its employees to be satisfactory. The Company does not believe that any
expiring collective bargaining agreements will result in a material adverse
impact on the Company.
Year 2000
Software failures due to processing efforts potentially arising from
calculations using the Year 2000 dates are a known risk. The Company is
currently evaluating and managing the financial and operating risks associated
with this problem. Additional information regarding the Company's Year 2000
efforts is included under Item 7 herein.
8
<PAGE>
Executive Officers of the Company
The Company's executive officers and their respective positions and
ages on December 15, 1999 follow. Except where indicated, each of the executive
officers listed below has been employed by the Company in the position indicated
during the past five fiscal years. Information with respect to offices held is
stated in fiscal years.
<TABLE>
<CAPTION>
Name Age Office
<S> <C> <C>
W. Douglas Brown 53 Vice President, General Counsel and Secretary
(D)(E) (became Vice President, General Counsel and Secretary in 1999;
Vice President-Administration, Gases and Equipment in 1997;
Senior Vice President-Law and Secretary of American
Ref-Fuel Company prior thereto)
Andrew E. Cummins 55 Group Vice President-Chemicals
(D)(E) (became Group Vice President-Chemicals in 1999;
Vice President-North America Gases in 1999; Vice
President-General Industries Group in 1996;
Vice President and General Manager-General
Industries Division prior thereto)
Leo J. Daley 53 Vice President-Finance
(D)(E) (became Vice President-Finance in 1998; Vice President and
Treasurer prior thereto)
Robert E. Gadomski 52 Executive Vice President-Gases and Equipment
(D)(E) (became Executive Vice President-Gases and Equipment in
1999; Executive Vice President-Chemicals, Asia,
and Latin America in 1998; Executive Vice
President-Chemicals in 1996; Group Vice
President-Chemicals Group prior thereto)
John P. Jones III 49 President and Chief Operating Officer
(A)(D)(E) (became President and Chief Operating Officer in 1998;
Executive Vice President-Gases and Equipment in 1996;
President-Air Products Europe, Inc. prior thereto)
Joseph J. Kaminski 60 Corporate Executive Vice President
(A)(D)(E) (became Corporate Executive Vice President in 1996;
Executive Vice President-Gases and Equipment prior thereto)
Ronaldo Sullam 58 President-Air Products Europe, Inc.
(D)(E) (became President-Air Products Europe, Inc. in 1996; Senior
Vice President-Strategic Marketing, Development, and
Southern Europe in 1995; Vice President-Marketing and
Development Europe and General Manager Southern Europe
Division prior thereto)
Harold A. Wagner 64 Chairman of the Board and Chief Executive Officer
(A)(B)(C)(D)(E)
</TABLE>
- ------------------
(A) Member, Board of Directors.
(B) Member, Executive Committee of the Board of Directors.
(C) Member, Finance Committee of the Board of Directors.
(D) Member, Management Committee.
(E) Member, Corporate Executive Committee.
9
<PAGE>
ITEM 2. Properties.
The principal executive offices of Air Products are located at its
headquarters in Trexlertown, near Allentown, Pennsylvania. Additional
administrative offices are located in owned facilities in Hersham, near London,
England, and Brampton, near Toronto, Canada, and in leased facilities in the
Allentown area, Pennsylvania; Tokyo, Japan; Hong Kong, the People's Republic of
China; Singapore; and Sao Paulo, Brazil. The management considers the Company's
facilities, described in more detail below, to be adequate to support the
business efficiently. The following information with respect to properties is as
of September 30, 1999.
Industrial Gases
The industrial gases segment has approximately 190 plant facilities in
38 states, the majority of which recover nitrogen, oxygen, and argon. The
Company has eight facilities which produce specialty gases and 31 facilities
which recover hydrogen throughout the United States. Helium is recovered at two
plants in Kansas and Texas, and acetylene is manufactured at six plants in six
states in the United States. There are 144 sales offices and/or cylinder
distribution centers located in 39 states.
The property on which the above plants are located is owned by Air
Products at approximately one-fourth of the locations, and leased by Air
Products at the remaining locations. However, in virtually all cases, the plant
itself is owned and operated by Air Products. Air Products owns approximately
half of its sales offices and cylinder distribution centers, including related
real estate, and leases the other half.
Air Products' European plant facilities total 64, and include eight
plants which recover hydrogen, seven plants which manufacture dissolved
acetylene, and one which recovers carbon monoxide. The majority of European
plants recover nitrogen, oxygen, and argon. In addition, there are four
specialty gas centers. There is a combined total of 123 sales offices and/or
cylinder distribution centers in Europe, and several additional facilities
located in Brazil, Canada, Japan, the People's Republic of China, Puerto Rico,
Singapore, Indonesia, Taiwan, Korea, Malaysia, and the Middle East.
Representative offices are located in Taiwan, and in Beijing and Shanghai in the
People's Republic of China.
Chemicals
The chemicals segment manufactures amines, nitric acid, methanol,
anhydrous ammonia, and ammonia products at its Pace, Florida facility;
alkylamines at its St. Gabriel, Louisiana facility; polyvinyl acetate emulsions
at its South Brunswick, New Jersey facility; styrene emulsions, styrene
acrylics, polyvinyl acetate acrylics, and polyvinyl acetate emulsions at its San
Juan del Rio facility in Mexico; polyvinyl acetate emulsions at its Cologne,
Germany facility; nitric acid, dinitrotoluene, toluene diamine, polyvinyl
alcohol, and acetic acid at its Pasadena, Texas facility; polyvinyl acetate
emulsions, polyvinyl alcohol, acetic acid, and acetylenic chemicals at its
Calvert City, Kentucky facility; specialty amines at its Wichita, Kansas
facility; methylamines, dimethyl formamide, choline chloride, and dimethyl amino
ethanol at its Teeside, England facility; and epoxy additives at its facilities
in Manchester, England, Los Angeles, California, and Cumberland, Rhode Island.
The chemicals segment manufactures polyurethane additives and polyurethane
specialty products (AIRTHANE(R)/VERSATHANE(R)) at its Paulsboro, New Jersey
facility which is leased in part and owned in part. The chemicals segment also
manufactures polyvinyl acetate emulsions at five smaller locations.
The chemicals segment has 15 plant facilities, four sales offices, and
two laboratories in the United States, and operates three plants, nine
sales/representative offices, and four laboratories in Europe, two laboratories
in Brazil, Korea, China, and Japan, one plant in Mexico, two plants in Korea,
one plant in Brazil, and sales offices in Australia, Brazil, Mexico, Japan,
Korea, and Singapore, and representative offices in Beijing, Shanghai, and Hong
Kong in the People's Republic of China. Substantially all of the chemicals
segment's plants and real estate are owned. Approximately 75% of the offices are
leased by the Company and 25% are owned.
10
<PAGE>
Equipment and Services
The principal facilities utilized by the equipment and services
segment include five plants and two sales offices in the United States, two
plants and two offices in Europe, one office in Japan, and one sales office in
the People's Republic of China. Air Products owns approximately 50% of the
facilities and real estate in this segment and leases the remaining 50%.
ITEM 3. Legal Proceedings.
In the normal course of business Air Products and its subsidiaries
are involved in legal proceedings including proceedings involving governmental
authorities. During April, 1999 the Kentucky Department of Environmental
Protection ("KDEP") forwarded a Notice of Violation alleging the Company's
Calvert City, Kentucky chemical manufacturing facility had exceeded the
significant net emission rate for ozone (measured as volatile organic compounds
("VOCs")) of Kentucky's Prevention of Significant Air Quality regulation with
respect to calendar years 1993, 1995, 1997, and related construction permits.
KDEP has also cited the facility for delayed installation of a device to control
VOCs. There are also other proceedings under the Comprehensive Environmental
Response, Compensation, and Liability Act (the federal Superfund law), the
Resource Conservation and Recovery Act (RCRA), and similar state environmental
laws relating to the designation of certain sites for investigation or
remediation. Presently there are approximately 45 sites on which a final
settlement has not been reached where the Company, along with others, has been
designated a Potentially Responsible Party by the Environmental Protection
Agency or is otherwise engaged in investigation or remediation. The Company does
not expect that any sums it may have to pay in connection with these matters
would have a materially adverse effect on its consolidated financial position,
nor is there any material additional exposure expected in any one year in excess
of the amounts the Company currently has accrued. Additional information on the
Company's environmental exposure is included under "Environmental Controls".
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
ITEM 5. Market for the Company's Common Stock and Related Stockholder Matters.
The Company's Common Stock, ticker symbol "APD", is listed on the
New York and Pacific Stock Exchanges. Market and dividend information for the
Company's Common Stock appear under "Eleven-Year Summary of Selected Financial
Data" on page 62 of the 1999 Financial Review Section of the Annual Report to
Shareholders which is incorporated herein by reference. In addition, the Company
has authority to issue 25,000,000 shares of preferred stock in series. The Board
of Directors is authorized to designate the series and to fix the relative
voting, dividend, conversion, liquidation, redemption and other rights,
preferences, and limitations as between series. When preferred stock is issued,
holders of Common Stock are subject to the dividend and liquidation preferences
and other prior rights of the preferred stock. There currently is no preferred
stock outstanding. The Company's Transfer Agent and Registrar is First Chicago
Trust Company, a Division of Equiserve, P.O. Box 2506, Jersey City, New Jersey
07303-2506, telephone (800) 519-3111, TDD (201) 222-4955, internet website
www.equiserve.com, and e-mail address [email protected].
As of November 30, 1999 there were 11,922 record holders of the
Company's Common Stock.
ITEM 6. Selected Financial Data.
The tabular information appearing under "Eleven-Year Summary of
Selected Financial Data" on page 62 of the 1999 Financial Review Section of the
Annual Report to Shareholders is incorporated herein by reference.
11
<PAGE>
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The textual information appearing under "Management's Discussion and
Analysis" on pages 23 through 30 of the 1999 Financial Review Section of the
Annual Report to Shareholders is incorporated herein by reference.
ITEM 7a. Quantitative and Qualitative Disclosures about Market Risk.
The textual information appearing under "Financial Instruments
Sensitivity Analysis" on pages 30 and 31 of the 1999 Financial Review Section of
the Annual Report to Shareholders is incorporated herein by reference.
ITEM 8. Financial Statements.
The consolidated financial statements and the related notes
thereto together with the report thereon of Arthur Andersen LLP dated
October 29, 1999 appearing on pages 33 through 62 of the 1999 Financial Review
Section of the Annual Report to Shareholders, are incorporated herein by
reference.
ITEM 9. Disagreements on Accounting and Financial Disclosure
Not applicable.
PART III
ITEM 10. Directors and Executive Officers of the Company.
The biographical information relating to the Company's directors
contained on pages 6 through 9 of the Proxy Statement relating to the Company's
2000 Annual Meeting of Shareholders is incorporated herein by reference.
Biographical information relating to the Company's executive officers is set
forth in Item 1 of Part I of this Report.
ITEM 11. Executive Compensation.
The information under "Director Compensation", "Report of the
Management Development and Compensation Committee", "Executive Compensation
Tables", "Severance and Other Change In Control Arrangements", and "Stock
Performance Graph", appearing on pages 10 through 17 of the Proxy Statement
relating to the Company's 2000 Annual Meeting of Shareholders is incorporated
herein by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
The information required for this Item is set forth in the
sections headed "Persons Owning More than 5% of Air Products Stock" and "Air
Products Stock Beneficially Owned by Officers and Directors" contained on
pages 18 and 19 of the Proxy Statement relating to the Company's 2000
Annual Meeting of Shareholders and such information is incorporated herein by
reference.
ITEM 13. Certain Relationships and Related Transactions.
Not applicable.
12
<PAGE>
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as a part of this Report:
1. The 1999 Financial Review Section of the Company's 1999 Annual Report
to Shareholders. Information contained therein is not deemed filed except as it
is incorporated by reference into this Report. The following financial
information is incorporated herein by reference:
<TABLE>
(Page references to 1999 Financial Review Section of the Annual Report)
<CAPTION>
<S> <C>
Management's Discussion and Analysis..................................................... 23
Report of Independent Public Accountants................................................. 32
Consolidated Income for the three years ended 30 September 1999.......................... 33
Consolidated Balance Sheets at 30 September 1999 and 1998................................ 34
Consolidated Cash Flows for the three years ended 30 September 1999...................... 35
Consolidated Shareholders' Equity for the three years ended 30 September 1999............ 36
Notes to Consolidated Financial Statements............................................... 37
Business Segment and Geographic Information.............................................. 58
Eleven-Year Summary of Selected Financial Data........................................... 62
</TABLE>
2. The following additional information should be read in conjunction
with the financial statements in the Company's 1999 Financial Review Section of
the Annual Report to Shareholders:
<TABLE>
(Page references to this report)
<CAPTION>
<S> <C>
Report of Independent Public Accountants on Schedule..................................... 18
Consent of Independent Public Accountants................................................ 18
Consolidated Schedule for the years ended 30 September 1999, 1998, and 1997 as follows:
Schedule
Number
------
VIII Valuation and Qualifying Accounts................................................. 19
</TABLE>
All other schedules are omitted because the required matter or conditions
are not present or because the information required by the Schedules is
submitted as part of the consolidated financial statements and notes thereto.
3. Exhibits.
Exhibit No. Description
(3) Articles of Incorporation and By-Laws.
3.1 By-Laws of the Company. (Filed as Exhibit 3.1 to the
Company's Form 8-K Report dated September 18, 1997.)*
3.2 Restated Certificate of Incorporation of the Company.
(Filed as Exhibit 3.2 to the Company's Form 10-K
Report for the fiscal year ended September 30, 1987.)*
3.3 Amendment to the Restated Certificate of Incorporation
of the Company dated January 25, 1996. (Filed as
Exhibit 3.3 to the Company's Form 10-K Report for
the fiscal year ended September 30, 1996.)*
(4) Instruments defining the rights of security holders,
including indentures. Upon request of the Securities
and Exchange Commission, the Company hereby
undertakes to furnish copies of the instruments with
respect to its long-term debt.
4.1 Rights Agreement, dated as of March 19, 1998, between
the Company and First Chicago Trust Company of New
York. (Filed as Exhibit 1 to the Company's Form 8-A
Registration Statement dated March 19, 1998, as
amended by Form 8-A/A dated July 16, 1998).*
13
<PAGE>
4.2 Amended and Restated Credit Agreement dated as of
September 16, 1999 among the Company, Additional
Borrowers parties thereto, Lenders parties thereto,
and The Chase Manhattan Bank (as amended).
(10) Material Contracts.
10.1 1990 Deferred Stock Plan of the Company, as amended
and restated effective October 1, 1989. (Filed as
Exhibit 10.1 to the Company's Form 10-K Report for
the fiscal year ended September 30, 1989.)*
10.2 1997 Long-Term Incentive Plan of the Company effective
October 1, 1996. (Filed as Exhibit 10.2(c) to the
Company's Form 10-K Report for the fiscal year ended
September 30, 1996.)*
10.3 Amended and Restated 1997 Annual Incentive Plan of the
Company effective April 1, 1998. (Filed as
Exhibit 10.3(a) to the Company's Form 10-K Report for
the fiscal year ended September 30, 1998.)*
10.4 Supplementary Pension Plan of the Company, as amended
effective October 1, 1988. (Filed as Exhibit 10.4
to the Company's Form 10-K Report for the fiscal year
ended September 30, 1989.)*
10.4(a) Amendment to the Pension Plan for Salaried Employees
and the Pension Plan for Hourly Rated Employees of
the Company, adopted September 20, 1995. (Filed as
Exhibit 10.4(d) to the Company's Form 10-K Report for
the fiscal year ended September 30, 1995.)*
10.4(b) Amendment to Supplementary Pension Plan of the Company,
adopted September 20, 1995. (Filed as Exhibit 10.4(e)
to the Company's Form 10-K Report for the fiscal year
ended September 30, 1995.)*
10.4(c) Amendment to Supplementary Pension Plan of the Company,
adopted November 2, 1995. (Filed as Exhibit 10.4(c)
to the Company's Form 10-K Report for the fiscal year
ended September 30, 1996.)*
10.5 Supplementary Savings Plan of the Company as amended
October 1, 1989. (Filed as Exhibit 1.5 to the
Company's Form 10-K Report for the fiscal year ended
September 30, 1989.)*
10.5(a) Amendment to Supplementary Savings Plan of the Company
effective April 1, 1998. (Filed as Exhibit 10.3(a)
to the Company's Form 10-K Report for the fiscal year
ended September 30, 1998.)*
10.6 Amended and Restated Deferred Compensation Plan for
Directors of the Company, effective May 19, 1998.
(Filed as Exhibit 10.6(a) to the Company's Form 10-K
Report for the fiscal year ended September 30, 1998.)*
10.7 Stock Option Plan for Directors of the Company,
effective January 27, 1994, as amended
October 21, 1999.
10.8 Letter dated July 1, 1997 concerning pension for an
executive officer. (Filed as Exhibit 10.7(b) to the
Company's Form 10-K Report for the fiscal year ended
September 30, 1998.)*
10.9 Letter dated July 7, 1997 concerning pension for an
executive officer. (Filed as Exhibit 10.7(c) to the
Company's Form 10-K Report for the fiscal year ended
September 30, 1998.)*
10.10 Letter dated July 1, 1997 concerning pension for an
executive officer.
14
<PAGE>
10.11 Air Products and Chemicals, Inc. Severance Plan
effective March 15, 1990. (Filed as Exhibit 10.8(a)
to the Company's Form 10-K Report for the fiscal year
ended September 30, 1992.)*
10.12 Air Products and Chemicals, Inc. Change of Control
Severance Plan effective March 15, 1990. (Filed as
Exhibit 10.8(b) to the Company's Form 10-K Report for
the fiscal year ended September 30, 1992.)*
10.13 Amended and Restated Trust Agreement by and between
the Company and PNC Bank, N.A. relating to the
Supplementary Pension Plan dated as of August 1, 1999.
10.14 Amended and Restated Trust Agreement by and between the
Company and PNC Bank, N.A. relating to the Supplementary
Savings Plan dated as of August 1, 1999.
10.15 Form of Split Employment Contracts for an executive
officer with the Company dated November 6, 1999 and
with an affiliate of the Company dated June 4, 1996,
and amended by letter dated November 6, 1999.
10.16 Form of Severance Agreements which the Company has with
each of its U.S. Executive Officers and European
Executive Officer.
10.17 Acquisition Agreement One by and between L'Air
Liquide S.A. and the Company dated June 14, 1999
regarding the BOC transaction.**
10.18 Agreement by and between L'Air Liquide S. A. and the
Company dated July 2, 1999 (and incorporating
amendments made July 7, 1999)regarding the BOC
transaction.**
10.19 Press Release regarding the BOC transaction dated
July 13, 1999. (Reported as Item 5 in the Form 8-K
filed on July 13, 1999.)*
(11) Earnings per share.
(12) Computation of Ratios of Earnings to Fixed Charges.
(13) 1999 Financial Review Section of the Annual Report to
Shareholders for the fiscal year ended September 30,
1999, which is furnished to the Commission for
information only, and not filed except as expressly
incorporated by reference in this Report.
(21) Subsidiaries of the registrant.
(24) Power of Attorney.
(27) Financial Data Schedule, which is submitted
electronically to the Securities and Exchange
Commission for information only, and not filed.
(b) Reports on Form 8-K filed during the quarter ended September 30,
1999:
Current Reports on Form 8-K dated July 13, 1999, July 16, 1999, and
July 23, 1999, were filed in which Item 5 of such Form was reported.
*Previously filed as indicated and incorporated herein by reference. Exhibits
incorporated by reference are located in SEC File No. 1-4534.
**Certain information in this Exhibit has been omitted pursuant to a Request for
Confidential Treatment and such information has been filed separately with the
Securities and Exchange Commission.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: December 16, 1999
AIR PRODUCTS AND CHEMICALS, INC.
(Registrant)
By: /s/ Leo J. Daley
----------------------------------------
Leo J. Daley, Vice President--Finance
Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Harold A. Wagner Director and Chairman of the Board December 16, 1999
- -------------------------------- (Principal Executive Officer)
(Harold A. Wagner)
/s/ Paul E. Huck Vice President and Corporate Controller December 16, 1999
- -------------------------------- (Principal Accounting Officer)
(Paul E. Huck)
* Director and President December 16, 1999
- -------------------------------- (Principal Operating Officer)
(John P. Jones III)
* Director and Corporate Executive Vice December 16, 1999
- -------------------------------- President
(Joseph J. Kaminski)
* Director December 16, 1999
- --------------------------------
(Mario L. Baeza)
* Director December 16, 1999
- --------------------------------
(Tom H. Barrett)
* Director December 16, 1999
- --------------------------------
(L. Paul Bremer III)
* Director December 16, 1999
- --------------------------------
(Robert Cizik)
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
* Director December 16, 1999
- --------------------------------
(Ursula F. Fairbairn)
* Director December 16, 1999
- --------------------------------
(Edward E. Hagenlocker)
* Director December 16, 1999
- --------------------------------
(James F. Hardymon)
* Director December 16, 1999
- --------------------------------
(Terry R. Lautenbach)
* Director December 16, 1999
- --------------------------------
(Ruud F. M. Lubbers)
Director December 16, 1999
- --------------------------------
(Takeo Shiina)
* Director December 16, 1999
- --------------------------------
(Lawrason D. Thomas)
</TABLE>
* W. Douglas Brown, Vice President, General Counsel and Secretary, by signing
his name hereto, does sign this document on behalf of the above noted
individuals, pursuant to a power of attorney duly executed by such
individuals which is filed with the Securities and Exchange Commission
herewith.
/s/ W. Douglas Brown
-------------------------------------------
W. Douglas Brown
Attorney-in-Fact
17
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To: Air Products and Chemicals, Inc.
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in Air Products and
Chemicals, Inc.'s Annual Report to Shareholders incorporated by reference in
this Form 10-K, and have issued our report thereon dated 29 October 1999. Our
audit was made for the purpose of forming an opinion on those statements taken
as a whole. The schedule referred to in Item 14(a)(2) in this Form 10-K is the
responsibility of the Company's management and is presented for the purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
29 October 1999
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To: Air Products and Chemicals, Inc.
As independent public accountants, we hereby consent to the
incorporation of our reports included or incorporated by reference in this Form
10-K, into the Company's previously filed Registration Statements on Form S-8
and Form S-3 (File Nos. 333-33851, 333-02461, 33-2068, 333-36231, 33-57023,
33-65117, 333-21145, 333-45239, 333-18955, 333-21147, 333-60147, 333-71405,
333-73105, and 333-90773).
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
15 December 1999
18
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VIII
CONSOLIDATED
AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended 30 September 1999, 1998, and 1997
Other Changes
Additions Increase(Decrease)
--------------------- ---------------------
Classification Balance at Charged to Charged to Cumulative Other Balance at
Beginning Expense Other Translation End of
of Period Accounts Adjustments Period
- -------------------------------------- ------------- ------------ -------------- --------------- --------------- ------------
(in millions of dollars)
Amounts deducted in the
consolidated balance sheet from
the asset to which it applies:
<S> <C> <C> <C> <C> <C> <C> <C>
Year Ended 30 September 1999 $ 17 $ 6 $ 1(1) $ (1) $ (11)(2) $ 12
==== === === ===== ====== ====
Allowance for doubtful accounts
Year Ended 30 September 1998 $ 20 $ 6 $ 3 (1) $ - $ (12) (2) $ 17
==== === === === ====== ====
Allowance for doubtful accounts
Year Ended 30 September 1997 $ 13 $ 6 $ 6 (1) $ (1) $ (4) (2) $ 20
==== === === ===== ===== ====
Allowance for doubtful accounts
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Other Changes
Additions Increase(Decrease)
--------------------- ---------------------
Classification Balance at Charged to Charged to Cumulative Other Balance at
Beginning Expense Other Translation End of
of Period Accounts Adjustments Period
- -------------------------------------- ------------- ------------ -------------- --------------- --------------- ------------
(in millions of dollars)
Amounts deducted in the
consolidated balance sheet from
the asset to which it applies:
<S> <C> <C> <C> <C> <C> <C> <C>
Year Ended 30 September 1999 $ - $ 34 $ - $ - $ (20) (3) $ 14
=== ==== === === ====== ====
Provision for global cost
reduction
Year Ended 30 September 1998 $ - $ - $ - $ - $ - (3) $ -
=== === === === === ===
Provision for global cost
reduction
Year Ended 30 September 1997 $ - $ - $ - $ - $ - (3) $ -
=== === === === === ===
Provision for global cost
reduction
</TABLE>
NOTES:
(1) Includes collections on accounts previously written off and additions
applicable to businesses acquired.
(2) Primarily includes write-offs of uncollectible accounts.
(3) Charges to the accrual for termination payments.
19
CONFORMED COPY
=====================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of
September 16, 1999
among
AIR PRODUCTS AND CHEMICALS, INC.,
as the Initial Borrower,
The Additional Borrowers Parties Hereto,
The Lenders Parties Hereto,
DEUTSCHE BANK AG,
BANC ONE CAPITAL MARKETS, INC. and
HSBC BANK USA,
as Co-Syndication Agents,
DEUTSCHE BANK AG,
BANC ONE CAPITAL MARKETS, INC.,
HSBC BANK USA,
MORGAN STANLEY SENIOR FUNDING, INC.,
GOLDMAN SACHS CREDIT PARTNERS L.P. and
ABN AMRO BANK N.V.,
as Co-Arrangers,
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
=====================================================================
CHASE SECURITIES INC.,
as Lead Arranger and Sole Book Manager
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ARTICLE I
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Definitions........................................................................................ 1
SECTION 1.01. Defined Terms................................................................... 1
SECTION 1.02. Classification of Loans and Borrowings.......................................... 20
SECTION 1.03. Terms Generally................................................................. 21
SECTION 1.04. Accounting Terms; GAAP.......................................................... 21
ARTICLE II
The Credits........................................................................................ 21
SECTION 2.01. 364-Day Revolving Commitments................................................... 21
SECTION 2.02. Five-Year Revolving Commitments................................................. 21
SECTION 2.03. Procedure for Revolving Loan Borrowing.......................................... 22
SECTION 2.04. Competitive Bid Procedure....................................................... 23
SECTION 2.05. Funding of Borrowings........................................................... 25
SECTION 2.06. Interest Elections.............................................................. 25
SECTION 2.07. Termination and Reduction of Commitments; Extension of Revolving Termination
Date............................................................................ 26
SECTION 2.08. Repayment of Loans; Evidence of Debt............................................ 28
SECTION 2.09. Optional Prepayment of Loans.................................................... 28
SECTION 2.10. Mandatory Prepayments and Commitment Reductions................................. 29
SECTION 2.11. Facility Fees; Other Fees....................................................... 30
SECTION 2.12. Interest........................................................................ 30
SECTION 2.13. Alternate Rate of Interest...................................................... 31
SECTION 2.14. Increased Costs................................................................. 31
SECTION 2.15. Break Funding Payments.......................................................... 32
SECTION 2.16. Taxes........................................................................... 33
SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of Set-offs..................... 34
SECTION 2.18. Mitigation Obligations; Replacement of Lenders.................................. 35
SECTION 2.19. Certain Funds Period............................................................ 36
ARTICLE III
Representations and Warranties..................................................................... 36
SECTION 3.01. Organization; Powers............................................................ 36
SECTION 3.02. Authorization; Enforceability................................................... 36
SECTION 3.03. Governmental Approvals; No Conflicts............................................ 36
SECTION 3.04. Financial Condition; No Material Adverse Change................................. 37
SECTION 3.05. Properties...................................................................... 37
SECTION 3.06. Litigation and Environmental Matters............................................ 37
SECTION 3.07. Compliance with Laws and Agreements............................................. 38
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SECTION 3.08. Investment and Holding Company Status........................................... 38
SECTION 3.09. Taxes........................................................................... 38
SECTION 3.10. ERISA........................................................................... 38
SECTION 3.11. Disclosure...................................................................... 38
SECTION 3.12. Federal Regulations............................................................. 38
SECTION 3.13. Subsidiaries.................................................................... 39
SECTION 3.14. Solvency........................................................................ 39
SECTION 3.15. Labor Matters................................................................... 39
SECTION 3.16. Year 2000 Matters............................................................... 39
SECTION 3.17. Mandatory Offers................................................................ 39
SECTION 3.18. Pari Passu Obligations.......................................................... 39
ARTICLE IV
Conditions......................................................................................... 39
SECTION 4.01. Effective Date.................................................................. 39
SECTION 4.02. Certain Funds Period............................................................ 41
SECTION 4.03. Initial Revolving Loans......................................................... 41
SECTION 4.04. Each Credit Event............................................................... 42
SECTION 4.05. Each Additional Borrower Credit Event........................................... 42
ARTICLE V
Affirmative Covenants.............................................................................. 43
SECTION 5.01. Financial Statements and Other Information...................................... 43
SECTION 5.02. Notices of Material Events...................................................... 44
SECTION 5.03. Existence; Conduct of Business.................................................. 44
SECTION 5.04. Payment of Obligations.......................................................... 44
SECTION 5.05. Maintenance of Properties; Insurance............................................ 45
SECTION 5.06. Books and Records; Inspection Rights............................................ 45
SECTION 5.07. Compliance with Laws............................................................ 45
SECTION 5.08. Use of Proceeds................................................................. 45
SECTION 5.09. Acquisition..................................................................... 46
SECTION 5.10. Proceeds from Sale of Shares.................................................... 47
SECTION 5.11. Acquisition-Related Guarantors.................................................. 47
SECTION 5.12. Loan Stock...................................................................... 47
SECTION 5.13. Additional Guarantors........................................................... 47
SECTION 5.14. Asset Divisions................................................................. 47
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ARTICLE VI
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Negative Covenants................................................................................. 47
SECTION 6.01. Interest Coverage............................................................... 47
SECTION 6.02. Maximum Leverage Ratio.......................................................... 48
SECTION 6.03. Indebtedness.................................................................... 48
SECTION 6.04. Liens........................................................................... 49
SECTION 6.05. Fundamental Changes............................................................. 50
SECTION 6.06. Investments, Loans, Advances, Guarantees and Acquisitions; Hedging Agreements .. 51
SECTION 6.07. Transactions with Affiliates.................................................... 52
SECTION 6.08. Restrictive Agreements.......................................................... 52
SECTION 6.09. Sales and Leasebacks............................................................ 53
SECTION 6.10. Changes in Fiscal Periods....................................................... 53
SECTION 6.11. Additional Borrowers............................................................ 53
SECTION 6.12. Bidco........................................................................... 53
SECTION 6.13. Acquisition Agreement........................................................... 53
ARTICLE VII
Events of Default.................................................................................. 53
SECTION 7.01. Events of Default............................................................... 53
SECTION 7.02. Target Group Exceptions......................................................... 55
ARTICLE VIII
The Agents......................................................................................... 56
ARTICLE IX
Miscellaneous...................................................................................... 57
SECTION 9.01. Notices......................................................................... 57
SECTION 9.02. Waivers; Amendments............................................................. 58
SECTION 9.03. Expenses; Indemnity; Damage Waiver.............................................. 58
SECTION 9.04. Successors and Assigns.......................................................... 59
SECTION 9.05. Survival........................................................................ 61
SECTION 9.06. Counterparts; Integration; Effectiveness........................................ 61
SECTION 9.07. Severability.................................................................... 61
SECTION 9.08. Right of Setoff................................................................. 61
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process...................... 62
SECTION 9.10. WAIVER OF JURY TRIAL............................................................ 62
SECTION 9.11. Headings........................................................................ 62
SECTION 9.12. Confidentiality................................................................. 62
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SECTION 9.13. Interest Rate Limitation........................................................ 63
SECTION 9.14. Additional Borrowers............................................................ 63
SECTION 9.15. Conversion of Currencies........................................................ 64
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SCHEDULES:
Schedule 1.01(a) -- Pricing Grid
Schedule 2.01 -- 364-Day Revolving Commitments
Schedule 2.02 -- Five-Year Revolving Commitments
Schedule 3.06 -- Disclosed Matters
Schedule 3.13 -- Material Subsidiaries
Schedule 6.03 -- Existing Indebtedness
Schedule 6.04 -- Existing Liens
Schedule 6.07 -- Transaction Affiliates
Schedule 6.08 -- Existing Restrictions
EXHIBITS:
Exhibit A -- Form of Assignment and Acceptance
Exhibit B-1 -- Form of Opinion of Cravath, Swaine & Moore
Exhibit B-2 -- Form of Opinion of Assistant General Counsel of the Parent
Exhibit C -- Form of Guarantee
Exhibit D -- Form of Additional Borrower Agreement
Exhibit E -- Form of Additional Borrower Termination
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AMENDED AND RESTATED CREDIT AGREEMENT dated as of September 16, 1999,
among AIR PRODUCTS AND CHEMICALS, INC., a Delaware corporation (the "Parent"),
the ADDITIONAL BORROWERS parties hereto, the LENDERS parties hereto, and THE
CHASE MANHATTAN BANK, as Administrative Agent.
W I T N E S S E T H:
WHEREAS, the Parent and Air Liquide SA ("Perrier") collectively
intend, through a company organized under the laws of England and Wales and
owned equally, directly or indirectly, by the Parent and Perrier ("Bidco"), to
acquire (the "Stock Acquisition") all of the issued and outstanding ordinary
shares, 25 pence par value (the "Shares"), of The BOC Group plc, a public
limited company organized under the laws of England and Wales ("Jaguar"), and,
thereafter, to divide the assets and businesses of Jaguar through a
reconstruction (the "Asset Divisions" and, together with the Stock Acquisition,
the "Acquisitions") (the assets and businesses to be owned by Parent pursuant to
the Asset Divisions are referred to as the "Apollo Businesses");
WHEREAS, the Parent and Perrier intend to effect the Stock Acquisition
through a process that will include a preconditional bid by Bidco (the
"Preconditional Bid"), recommended by Jaguar, for the shares of Jaguar and,
following receipt of necessary regulatory approvals for the Stock Acquisition, a
posted offer (the "Offer") for more than 50% of the Shares to which the Offer
relates for the purposes of the Companies Act 1985 of England and Wales as
amended (the "Companies Act"), which may be followed by a compulsory acquisition
pursuant to which the Shares not tendered in the Offer will be acquired by
Bidco;
WHEREAS, in order to finance the Stock Acquisition, to refinance
existing indebtedness, to pay fees and expenses in connection with the
Acquisitions and the financing thereof, to support commercial paper issued by
the Parent, and to provide for the working capital and general corporate needs
of the Parent and its subsidiaries prior to and following the Stock Acquisition,
the Parent entered into a Credit Agreement, dated as of July 6, 1999 (the
"Existing Credit Agreement"); and
WHEREAS, the Parent has requested that the Existing Credit Agreement
be amended and restated in its entirety as set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereto hereby agree that, subject to
the satisfaction of the conditions set forth in Section 4.01, the Existing
Credit Agreement is hereby amended and restated to read in its entirety as
follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.
"Acquisition Agreement" has the meaning set forth in Section 4.01(b).
"Acquisitions" has the meaning set forth in the recitals hereto.
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"Additional Borrower" means, at any time, any Subsidiary designated as
an Additional Borrower by the Parent (with the consent of the Administrative
Agent (such consent not to be unreasonably withheld)) pursuant to Section 9.14
that has not ceased to be an Additional Borrower pursuant to such Section or
Article VII; provided, that the Parent owns or Controls shares of Capital Stock
representing at least 80% of the aggregate ordinary voting power represented by
the issued and outstanding capital stock of such Subsidiary.
"Additional Borrower Agreement" means an Additional Borrower Agreement
substantially in the form of Exhibit D.
"Additional Borrower Termination" means an Additional Borrower
Termination substantially in the form of Exhibit E.
"Administrative Agent" means The Chase Manhattan Bank, in its capacity
as administrative agent for the Lenders hereunder.
"Administrative Questionnaire" means an Administrative Questionnaire
in a form supplied by the Administrative Agent.
"Affiliate" means, with respect to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Agents" means (a) the Administrative Agent, (b) Deutsche Bank AG,
Banc One Capital Markets, Inc. and HSBC Bank USA, as co-syndication agents (the
"Co-Syndication Agents"), and (c) Deutsche Bank AG, Banc One Capital Markets,
Inc., HSBC Bank USA, Morgan Stanley Senior Funding, Inc., Goldman Sachs Credit
Partners L.P. and ABN Amro Bank N.V., as co-arrangers.
"Agreement" means this Amended and Restated Credit Agreement, as
amended, supplemented or otherwise modified from time to time.
"Agreement Currency" has the meaning set forth in Section 9.15.
"Alternate Base Rate" means, for any day, a rate per annum equal to
the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate
in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect
on such day plus 0.50%. Any change in the Alternate Base Rate due to a change in
the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be
effective from and including the effective date of such change in the Prime
Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.
"Apollo Businesses" has the meaning set forth in the recitals hereto.
"Applicable Creditor" has the meaning set forth in Section 9.15.
"Applicable Percentage" means, with respect to any Lender, at any
time, the percentage which (a) the sum of (i) such Lender's 364-Day Revolving
Commitment (or, if the 364-Day Revolving Commitments have been terminated, the
aggregate principal amount of such Lender's 364-Day Revolving Loans and 364-Day
Competitive Loans outstanding) plus (ii) such Lender's Five-Year Revolving
Commitment (or, if the Five-Year Revolving Commitments have been terminated,
the aggregate principal amount of such Lender's Five-Year Revolving Loans and
Five-Year Competitive Loans outstanding) then
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constitutes of (b) the sum of (i) the 364-Day Revolving Commitments of all
the Lenders (or, if the 364-Day Revolving Commitments have been terminated, the
aggregate principal amount of all the 364-Day Revolving Loans and 364-Day
Competitive Loans outstanding) plus (ii) the Five-Year Revolving Commitments of
all the Lenders (or, if the Five-Year Revolving Commitments have been
terminated, the aggregate principal amount of all the Five-Year Revolving Loans
and Five-Year Competitive Loans outstanding).
"Applicable Rate" means, for any day, with respect to any Type of
Loan, the rate for such Type of Loan as is indicated for such day on the Pricing
Grid.
"Assessment Rate" means, for any day, the annual assessment rate in
effect on such day that is payable by a member of the Bank Insurance Fund
classified as "well-capitalized" and within supervisory subgroup "B" (or a
comparable successor risk classification) within the meaning of 12 C.F.R. Part
327 (or any successor provision) to the Federal Deposit Insurance Corporation
for insurance by such Corporation of time deposits made in Dollars at the
offices of such member in the United States; provided that if, as a result of
any change in any law, rule or regulation, it is no longer possible to determine
the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual
rate as shall be reasonably determined by the Administrative Agent to be
representative of the cost of such insurance to the Lenders.
"Asset Divisions" has the meaning set forth in the recitals hereto.
"Assignee" has the meaning set forth in Section 9.04(b).
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.04), and accepted by the Administrative Agent, in the form
of Exhibit A or any other form approved by the Administrative Agent.
"Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate
multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.
"Bidco" has the meaning set forth in the recitals hereto.
"Board" means the Board of Governors of the Federal Reserve System of
the United States of America, or any successor Governmental Authority.
"Borrowers" means the Parent and the Additional Borrowers.
"Borrowing" means (a) 364-Day Revolving Loans or Five-Year Revolving
Loans of the same Type, made, converted or continued on the same date and, in
the case of Eurocurrency Loans, as to which a single Interest Period is in
effect or (b) a Competitive Loan or group of Competitive Loans of the same Type
made on the same date and as to which a single Interest Period is in effect.
"Borrowing Date" means any Business Day specified in a notice pursuant
to Section 2.03 as a date on which a Borrower requests the Lenders to make Loans
hereunder.
"Borrowing Request" means a request by a Borrower for a Borrowing in
accordance with Section 2.03.
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"Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to remain closed; provided that, when used in connection with a Eurocurrency
Loan, the term "Business Day" shall also exclude any day on which banks are not
open for dealings in Dollar and Pound Sterling deposits in the London interbank
market.
"Capital Lease Obligations" of any Person means the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Capital Market Transaction" means (a) the issuance or sale in a
registered public offering, Rule 144A/Regulation S transaction or private
placement of Capital Stock (including equity-linked securities) or notes,
debentures, instruments or other debt securities with a maturity in excess of
one year or (b) the incurrence of loans with a maturity in excess of one year.
"Capital Market Transaction" does not include any incurrence of Indebtedness by
a Project Finance Company or JV Affiliate.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants, rights or options to purchase any of the foregoing.
"Certain Funds Commencement Date" has the meaning set forth in
Section 4.02.
"Certain Funds Period" means the period beginning on the Certain Funds
Commencement Date and ending on the earliest of:
(a) the later of (i) the date which falls 22 days after
the Offer is declared unconditional in all respects and (ii) the date
which is four months after the posting of the Offer, unless in either
case on such date Bidco has become entitled to implement the Compulsory
Acquisition procedures in respect of the Shares of Jaguar shareholders
who have not accepted the Offer, in which case such date shall be the
date falling nine weeks after the date on which it first became so
entitled under Section 429 of the Companies Act to implement those
procedures;
(b) the date of withdrawal of the Offer; and
(c) June 15, 2000.
"Certain Funds Termination Date" means the earliest of the dates
specified in paragraphs (a), (b) and (c) of the definition of "Certain Funds
Period" in this Section.
"Change in Control" means any of the following:
(a) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities and Exchange Act of 1934 of the United
States of America, as in effect on the date hereof (the "Exchange
Act")) or group of persons (as so used), other than the Parent, any
company a majority of whose outstanding stock entitled to vote is owned
directly or indirectly by the Parent (a "Controlled Subsidiary"), or a
trustee of an employee benefit plan sponsored solely by the Parent
and/or such a Controlled Subsidiary, is or becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Parent representing 20% or
more of the combined voting power of the Parent's then-outstanding
voting securities. Such a Change in Control will be deemed to have
occurred on the first to occur of (i) the date securities are first
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purchased by a tender or exchange offer, (ii) the date upon which the
Parent first learns of the acquisition of 20% or more of such
securities or (iii) the later of the effective date of an agreement for
the merger, consolidation or other reorganization of the Parent or the
date of approval thereof by a majority of the Parent's shareholders, as
the case may be;
(b) during any period of two consecutive years, individuals
who at the beginning of such period were members of the board of
directors of the Parent cease for any reason to constitute at least a
majority thereof, unless the election or nomination for election by the
Parent'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 will
be deemed to have occurred on the date upon which the requisite
majority of directors fails to be elected by the shareholders of the
Parent;
(c) any other event or series of events that, notwithstanding
any prior paragraph in this definition to the contrary, is determined
by a majority of the outside members of the board of directors of the
Parent serving in office at the time such event or events occur to
constitute a change in control of the Parent for the purposes of this
Agreement or any agreement or arrangement relating to Indebtedness
entered into by the Parent. Such a Change in Control will be deemed to
have occurred on the date of such determination or on such date as the
said majority of outside members of the board of directors of the
Parent shall specify;
(d) except as contemplated pursuant to the Acquisition
Agreement, Bidco shall cease to be, directly or indirectly,
wholly-owned and Controlled by the Parent and Perrier or the Parent
shall cease to own or Control, directly or indirectly, 50% of the
Capital Stock of Bidco; or
(e) except as contemplated pursuant to the Acquisition
Agreement, at any time after the last day of the Certain Funds Period,
Jaguar shall cease to be, directly or indirectly, wholly-owned and
Controlled by Bidco (or, if on the last day of the Certain Funds
Period, Jaguar is not, directly or indirectly, wholly-owned and
Controlled by Bidco, Bidco shall cease, directly or indirectly, to own
and Control Jaguar to at least the same extent it did as of the last
day of the Certain Funds Period).
"Change in Law" means (a) the adoption of any law, rule or regulation
after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by any Lender (or, for
purposes of Section 2.14(c), by any lending office of such Lender or by such
Lender's holding company, if any) with any request, guideline or directive
(whether or not having the force of law but with which institutions similarly
situated to such Lender customarily comply) of any Governmental Authority made
or issued after the date of this Agreement.
"Chase" means The Chase Manhattan Bank, a New York banking
corporation.
"Class", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are 364-Day Revolving
Loans, Five-Year Revolving Loans or Competitive Loans, and when used in
reference to any Lenders, refers to whether such Lenders are 364-Day Revolving
Lenders or Five-Year Revolving Lenders.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Commitment" means, with respect to each Lender, the 364-Day Revolving
Commitment or the Five-Year Revolving Commitment of such Lender, as the case may
be.
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"Companies Act" has the meaning set forth in the recitals hereto.
"Competitive Bid" means an offer by a Lender to make a Competitive
Loan in accordance with Section 2.04.
"Competitive Bid Rate" means, with respect to any Competitive Bid, the
Margin or the Fixed Rate, as applicable, offered by the Lender making such
Competitive Bid.
"Competitive Bid Request" means a request by the Parent for
Competitive Bids in accordance with Section 2.04.
"Competitive Loan" means a Loan made pursuant to Section 2.04.
"Compulsory Acquisition" means an acquisition by Bidco, pursuant to
Sections 428 to 430F of the Companies Act, of all of the issued and outstanding
Shares not then owned by Bidco.
"Consenting Lender" has the meaning set forth in Section 2.07(d).
"Consolidated EBITDA" means, for any period, Consolidated Net Income
for such period plus, without duplication and to the extent reflected as a
charge in the statement of such Consolidated Net Income for such period, the sum
of (including items related to the Parent's share of Bidco's net income which is
reflected in Consolidated Net Income even when such items are not reflected in
the consolidated income statement of the Parent on a line by line basis) (a)
income tax expense, (b) interest expense, amortization or writeoff of debt
discount and debt issuance costs and commissions, discounts and other fees and
charges associated with Indebtedness (including the Loans), (c) depreciation and
amortization expense, (d) amortization of intangibles (including, but not
limited to, goodwill) and organization costs, and (e) any extraordinary, unusual
or non-recurring expenses or losses (including, whether or not otherwise
includable as a separate item in the statement of such Consolidated Net Income
for such period, losses on sales of assets outside of the ordinary course of
business). For the purposes of calculating Consolidated EBITDA for any period of
four consecutive fiscal quarters, if the Initial Funding Date shall have
occurred, Consolidated EBITDA for such period shall be calculated after giving
pro forma effect to the Acquisitions as if the Acquisitions occurred on the
first day of such period.
"Consolidated Interest Coverage Ratio" means, for any period ending
with the last day of any fiscal quarter of the Parent, the ratio of (a)
Consolidated EBITDA for the four fiscal quarters then ended to (b) Consolidated
Interest Expense for such fiscal quarters (or if such period ends less than one
year after the Initial Funding Date, an annualization of the Consolidated
Interest Expense for the period of the completed fiscal quarters commencing on
or after the Initial Funding Date).
"Consolidated Interest Expense" means, for any period, total interest
expense (including that attributable to Capital Lease Obligations) of the Parent
and its Subsidiaries for such period plus capitalized interest for such period
less interest income for such period, all determined on a consolidated basis in
accordance with GAAP, except that Consolidated Interest Expense shall be
adjusted to include any interest expense, interest income and capitalized
interest of Bidco and its subsidiaries which is related to the Parent's share of
the net income of Bidco and its subsidiaries which is reflected in Consolidated
Net Income when such items have not been reflected in the consolidated financial
statements of the Parent on a line by line basis and that Consolidated Interest
Expense shall be further adjusted to exclude any non-recurring expenses
incurred in connection with the financing of the Acquisitions.
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"Consolidated Leverage Ratio" means, at any date, the ratio of
(a)Consolidated Total Debt on such date to (b) Consolidated Total Capitalization
on such date.
"Consolidated Net Equity" means, at any date, the amount which would
appear as shareholders' equity or preferred stock on a consolidated balance
sheet of the Parent and its Subsidiaries at such date in accordance with GAAP.
For purposes of calculating Consolidated Net Equity at any date after the
Initial Funding Date, Consolidated Net Equity shall be calculated after giving
pro forma effect (to the extent the same has not occurred) to the receipt by the
Parent from the issuance of Capital Stock after the date hereof of Net Cash
Proceeds equal to $1,000,000,000.
"Consolidated Net Income" means, for any period, the consolidated net
income (or loss) of the Parent and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded (a) the income (or deficit) of any Person accrued prior to the date it
becomes a Subsidiary of the Parent or is merged into or consolidated with the
Parent or any of its Subsidiaries and (b) the income (or deficit) of any Person
(other than a Subsidiary of the Parent and the Parent's proportional share of
Bidco and its subsidiaries) in which the Parent or any of its Subsidiaries has
an ownership interest, except to the extent that any such income is actually
received by the Parent or such Subsidiary in the form of dividends or similar
distributions.
"Consolidated Total Capitalization" means, at any date, the sum of
(a) Consolidated Total Debt at such date plus (b) Consolidated Net Equity at
such date.
"Consolidated Total Debt" means, at any date, the aggregate principal
amount of all Indebtedness of the Parent and its Subsidiaries at such date, to
the extent such Indebtedness would appear on a consolidated balance sheet of the
Parent (excluding the notes thereto) at such date in accordance with GAAP,
except that Consolidated Total Debt shall be adjusted to include any
Indebtedness of Bidco and its subsidiaries which is related to the Parent's
share of the interest expense of Bidco and its subsidiaries which is reflected
in Consolidated Net Income (excluding Indebtedness provided by a member of the
Group to Bidco) when such Indebtedness has not been reflected as Indebtedness on
the consolidated balance sheet of the Parent. For purposes of calculating
Consolidated Total Debt at any date after the Initial Funding Date, Consolidated
Total Debt shall be calculated after giving pro forma effect (to the extent the
same have not occurred) (a) to the receipt by the Parent from the issuance of
Capital Stock (including equity-linked securities) after the date hereof of Net
Cash Proceeds equal to $1,000,000,000, and (b) to the use of such Net Cash
Proceeds to reduce Consolidated Total Debt.
"Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
"Co-Syndication Agents" has the meaning set forth in the definition of
"Agents" contained in this Section 1.01.
"Currency" means Dollars or Pounds Sterling, as the case may be.
"Default" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Designated Lenders" has the meaning set forth in Section 4.01(a).
"Disclosed Matters" means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 3.06.
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8
"Disposition" means, with respect to any property, any sale, lease,
sale and leaseback, assignment, conveyance, transfer or other disposition
thereof.
"Dollar Equivalent" means, on any date of determination, with respect
to any amount in Pounds Sterling, the equivalent in Dollars of such amount,
determined by the Administrative Agent using the Exchange Rate with respect to
Pounds Sterling then in effect.
"Dollars" or "$" mean dollars in lawful currency of the United States
of America.
"Effective Date" has the meaning set forth in Section 4.01, subject to
the terms of the Escrow Letter dated September 16, 1999 from the Parent to the
Persons listed on Schedule 1 thereto.
"Environmental Laws" means all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, binding notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
"Environmental Liability" means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Parent or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with Parent, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived);
(b) the existence with respect to any Plan of an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Plan; (d) the incurrence by the Parent or any of
its ERISA Affiliates of any liability under Title IV of ERISA with respect to
the termination of any Plan; (e) the receipt by the Parent or any ERISA
Affiliate from the PBGC or a plan administrator of any notice relating to an
intention to terminate any Plan or Plans or to appoint a trustee to administer
any Plan; (f) the incurrence by the Parent or any of its ERISA Affiliates of
any liability with respect to the withdrawal or partial withdrawal from any
Plan or Multiemployer Plan; or (g) the receipt by the Parent or any ERISA
Affiliate of any notice, or the receipt by any Multiemployer Plan from the
Parent or any ERISA Affiliate of any notice, concerning the imposition of
Withdrawal Liability or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of
Title IV of ERISA.
"Eurocurrency", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are
bearing interest at a rate determined by reference to the LIBO Rate.
<PAGE>
9
"Event of Default" has the meaning assigned to such term in
Article VII.
"Exchange Rate" means, with respect to any Currency on any date, the
average of the bid and asked rates at which such Currency may be exchanged into
any other relevant Currency, as set forth on such date on the relevant Reuters
currency page at or about 11:00 A.M., London time, on such date. In the event
that such rates do not appear on any Reuters currency page, the "Exchange Rate"
with respect to such Currency shall be determined by reference to such other
publicly available service for displaying exchange rates as may be agreed upon
by the Administrative Agent and the Parent or, in the absence of such agreement,
such "Exchange Rate" shall instead be the Administrative Agent's spot rate of
exchange in the London interbank market, at or about 11:00 A.M., local time, on
such date for the purchase of the other relevant Currency with such Currency,
for delivery two Business Days later; provided, that if at the time of any such
determination, no such spot rate can reasonably be quoted, the Administrative
Agent may use any reasonable method as it deems applicable to determine such
rate, and such determination shall be conclusive absent manifest error.
"Excluded Foreign Subsidiary" means any Subsidiary organized under the
laws of any jurisdiction outside the United States of America (other than, to
the extent permitted by applicable Requirements of Law and contractual
obligations to become parties to the Guarantee, Material Subsidiaries of the
Parent acquired or created in connection with the Acquisitions which are
organized under the laws of the United Kingdom or Australia).
"Excluded Taxes" means, with respect to the Administrative Agent, any
Lender or any other recipient of any payment to be made by or on account of any
obligation of any Borrower hereunder, (a) income, corporation or franchise
taxes, in each case, imposed on (or measured by) its net income by the United
States of America, or by the jurisdiction under the laws of which such recipient
is organized or is resident for tax purposes or in which its principal office is
located or, in the case of any Lender, in which its applicable lending office is
located, (b) any branch profits taxes imposed by the United States of America or
any similar tax imposed by any other jurisdiction in which any Borrower is
located and (c) in the case of a Lender (other than an assignee pursuant to a
request by the Borrowers under Section 2.18(b)), any United States withholding
tax that (i) is imposed on amounts payable to the Lender as a result of such
Lender failing to be a Qualifying Lender, unless such failure results from any
change in any relevant law or double taxation treaty or in the interpretation or
application thereof after the date such Lender became a party to this Agreement
or (ii) is attributable to such Lender's failure to comply with Section 2.16(d),
except to the extent that such Lender's assignor (if any) was entitled, at the
time of assignment, to receive additional amounts from any Borrower with respect
to such withholding tax pursuant to Section 2.16(d).
"Existing Revolving Credit Facility" means the $600,000,000 Revolving
Credit Agreement dated January 31, 1996 (as amended), between the Parent, the
other Borrowers named therein, the Lenders named therein, The First National
Bank of Chicago, as Administrative Agent, Mellon Bank, N.A., as Documentation
Agent, and ABN AMRO Bank N.V., as Global Currency Agent and Global Currency
Lender.
"Extension Date" has the meaning set forth in Section 2.07(d).
"Federal Funds Effective Rate" means, for any day, the weighted
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
<PAGE>
10
"Financial Officer" means, as to any Borrower, any of the chief
financial officer, principal accounting officer or treasurer of such Borrower.
"First Amendment": the First Amendment, dated as of December 3, 1999,
to this Agreement.
"Five-Year Competitive Loan" means a Loan made pursuant to
Section 2.04 in a Five-Year Competitive Borrowing.
"Five-Year Revolving Commitment" means, with respect to any Lender,
the obligation of such Lender, if any, to make Five-Year Revolving Loans in an
aggregate principal amount not to exceed the amount set forth under the heading
"Five-Year Revolving Commitment" opposite such Lender's name on Schedule 2.02 or
in the Assignment and Acceptance pursuant to which such Lender became a party
hereto, as the same may be changed from time to time pursuant to the terms
hereof. The original aggregate amount of the Five-Year Revolving Commitments is
$800,000,000.
"Five-Year Revolving Commitment Period" means the period from and
including the Initial Funding Date to the Five-Year Revolving Termination Date.
"Five-Year Revolving Lender" means each Lender that has a Five-Year
Revolving Commitment or that holds Five-Year Revolving Loans.
"Five-Year Revolving Loans" has the meaning set forth in Section 2.02.
"Five-Year Revolving Percentage" means, as to any Five-Year Revolving
Lender at any time, the percentage which such Lender's Five-Year Revolving
Commitment then constitutes of the Total Five-Year Revolving Commitments (or, at
any time after the Five-Year Revolving Commitments shall have expired or
terminated, the percentage which the aggregate principal amount of such Lender's
Five-Year Revolving Loans then outstanding constitutes of the aggregate
principal amount of the Five-Year Revolving Loans of all the Lenders then
outstanding).
"Five-Year Revolving Termination Date" means the date which is the
fifth anniversary of the Effective Date.
"Fixed Rate" means, with respect to any Competitive Loan (other than a
Eurocurrency Competitive Loan), the fixed rate of interest per annum specified
by the Lender making such Competitive Loan in its related Competitive Bid.
"Fixed Rate Loan" means a Competitive Loan bearing interest at a Fixed
Rate.
"Funding Office" means the office of the Administrative Agent
specified in Section 9.02 or such other office as may be specified from time to
time by the Administrative Agent as its funding office or offices by written
notice to the Borrowers and the Lenders.
"GAAP" means generally accepted accounting principles in the United
States of America.
"Governmental Authority" means any nation or any political subdivision
thereof, whether state or local, and any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions
of or pertaining to government.
<PAGE>
11
"Group" means, at any time of determination, the Parent and all its
Subsidiaries (and "member of the Group" shall be construed accordingly).
"Guarantee" means the Guarantee to be executed and delivered by the
Parent and each Subsidiary Guarantor, substantially in the form of Exhibit C,
as the same may be amended, supplemented or otherwise modified from time to
time, including by any supplement adding any Subsidiary Guarantor thereto. Any
such supplement may be limited as required to comply with any contractual
obligation or requirement of law binding upon such Subsidiary Guarantor or
limiting its ability to guarantee the Loans and other obligations hereunder.
"Guaranteed Loan Notes" means loan notes of Bidco issued pursuant to
the Offer at the election of Jaguar Shareholders, having the terms described in
the Press Release and guaranteed by the Loan Notes Guarantor.
"Guarantee Obligation" of any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.
"Guarantors" means the Parent and the Subsidiary Guarantors, in their
capacities as guarantors under the Guarantee.
"Hazardous Materials" means all explosive or radioactive substances
or wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Hedging Agreement" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Indebtedness" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
under conditional sale or other title retention agreements relating to property
acquired by such Person, (d) all obligations of such Person in respect of the
deferred purchase price of property or services having the effect of a borrowing
(excluding accounts payable incurred in the ordinary course of business), (e)
all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such Person, whether or not the
Indebtedness secured thereby has been assumed but limited to the book value of
such property when recourse is limited to such property, (f) all Guarantee
Obligations of such Person in respect of Indebtedness of others, (g) all Capital
Lease Obligations of such Person, (h) all obligations, contingent or otherwise,
of such Person as an account party in respect of letters of credit and letters
of guaranty and (i) all obligations,
<PAGE>
12
contingent or otherwise, of such Person in respect of bankers' acceptances.
The Indebtedness of any Person shall include the Indebtedness of any other
entity (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result of such
Person's ownership interest in or other relationship with such entity,
except to the extent the terms of such Indebtedness provide that such
Person is not liable therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Initial Funding Date" has the meaning set forth in Section 4.03.
"Interest Election Request" means a request by a Borrower to convert
or continue a Borrowing in accordance with Section 2.06.
"Interest Payment Date" means (a) with respect to any ABR Loan, the
last day of each March, June, September and December, (b) with respect to any
Eurocurrency Loan, the last day of the Interest Period applicable to the
Borrowing of which such Loan is a part and, in the case of a Eurocurrency
Borrowing with an Interest Period of more than three months' duration, each day
prior to the last day of such Interest Period that occurs at intervals of three
months' duration after the first day of such Interest Period, and (c) with
respect to any Fixed Rate Loan, the last day of the Interest Period applicable
to the Borrowing of which such Loan is a part and, in the case of a Fixed Rate
Borrowing with an Interest Period of more than 90 days' duration (unless
otherwise specified in the applicable Competitive Bid Request), each day prior
to the last day of such Interest Period that occurs at intervals of 90 days'
duration after the first day of such Interest Period, and any other dates that
are specified in the applicable Competitive Bid Request as Interest Payment
Dates with respect to such Borrowing.
"Interest Period" means (a) with respect to any Eurocurrency
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the calendar month that is one, two, three or
six months thereafter, as the relevant Borrower may elect (or such other shorter
period available generally in the interbank market as the Parent may agree with
the Reference Lenders), and (b) with respect to any Fixed Rate Borrowing, the
period (which shall not be less than 7 days or more than 360 days) commencing on
the date of such Borrowing and ending on the date specified in the applicable
Competitive Bid Request; provided, that (i) if any Interest Period would end on
a day other than a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless, in the case of a Eurocurrency Borrowing
only, such next succeeding Business Day would fall in the next calendar month,
in which case such Interest Period shall end on the next preceding Business Day
and (ii) any Interest Period pertaining to a Eurocurrency Borrowing that
commences on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the last calendar month of such
Interest Period) shall end on the last Business Day of the last calendar month
of such Interest Period. For purposes hereof, the date of a Borrowing initially
shall be the date on which such Borrowing is made and, in the case of a
Revolving Borrowing, thereafter shall be the effective date of the most recent
conversion or continuation of such Borrowing.
"Jaguar" has the meaning set forth in the recitals hereto.
"Jaguar Shareholders" means the holders of the Shares from time to
time.
"Judgment Currency" has the meaning set forth in Section 9.15.
"JV Affiliate" means any corporation, limited liability company,
partnership, association or other entity (not itself being a member of the
Group) at least 20% of any class of the Capital Stock of which is beneficially
owned by a member of the Group.
<PAGE>
13
"Lenders" means the Persons listed on Schedule 2.01 or 2.02 and any
other Person that shall have become a party hereto pursuant to an Assignment and
Acceptance, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Acceptance.
"LIBO Rate" means, with respect to any Eurocurrency Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Dow Jones Markets screen
(or on any successor or substitute page of such service, or any successor to or
substitute for such service, providing rate quotations comparable to those
currently provided on such page of such service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to deposits in Dollars in the London interbank market
for Dollars) at approximately 11:00 a.m., London time, two Business Days prior
to the commencement of such Interest Period, as the rate for deposits in Dollars
with a maturity comparable to such Interest Period. In the event that such rate
is not available with respect to any Eurocurrency Borrowing at such time for any
reason, then the "LIBO Rate" with respect to such Eurocurrency Borrowing for
such Interest Period shall be the average rate (rounded upwards to five decimal
places) at which Dollar deposits of $5,000,000 and for a maturity comparable to
such Interest Period are offered by the principal London offices of the
Reference Lenders in immediately available funds in the London interbank market
at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"Loan Documents" means this Agreement, the Additional Borrower
Agreements, the Guarantee and the Notes.
"Loan Notes Guarantor" means a financial institution selected by Bidco
to guarantee the Guaranteed Loan Notes.
"Loan Parties" means the Parent and each Subsidiary of the Parent that
is a party to a Loan Document.
"Loans" means the loans made by the Lenders to the Borrowers pursuant
to this Agreement.
"Loan Stock" means Jaguar's (pound)100 million 12-1/4% Loan Stock due
2012/2017.
"Loan Stock Trust Deed" means the Trust Deed dated 15 October 1982
between, inter alia, Jaguar and Guardian Royal Exchange Assurance plc
constituting (pound)100,000,000 12-1/4% Unsecured Loan Stock 2012/2017 (as
from time to time amended, varied or waived).
"Major Default" shall mean and be deemed to have occurred if (a) the
Parent shall default in the due performance or observance by it of any term,
covenant or agreement contained in Section 5.09(e), (f), (i) or (j); or (b)
there shall exist a Default or an Event of Default under Section 7.01(a),
7.01(b), 7.01(h), 7.01(i) or 7.01(j) in respect of the Parent or any of its
Material Subsidiaries or Bidco or a Default or Event of Default under Section
7.01(n) in respect of the guarantee of the Parent pursuant to the Guarantee in
respect of Loans to an Additional Borrower or a Default or Event of Default
under Section 7.01(o).
"Margin" means, with respect to any Competitive Loan bearing interest
at a rate based on the LIBO Rate, the marginal rate of interest, if any, to be
added to or subtracted from the LIBO Rate to
<PAGE>
14
determine the rate of interest applicable to such Loan, as specified by the
Lender making such Loan in its related Competitive Bid.
"Margin Stock" has the meaning assigned to such term in Regulation U
of the Board (including, so long as the same constitute Margin Stock under
Regulation U, the Shares).
"Material Adverse Effect" means a material adverse effect on (a) the
business, property, operations, condition (financial or otherwise) or prospects
of the Parent and its Subsidiaries taken as a whole, (b) the ability of the
Parent to perform its payment obligations under this Agreement and the other
Loan Documents or (c) the validity or enforceability of this Agreement or any of
the other Loan Documents or the rights and remedies of the Administrative Agent
or the Lenders hereunder or thereunder.
"Material Obligations" means Indebtedness (other than the Loans), and
obligations in respect of one or more Hedging Agreements, of the Parent and its
Subsidiaries in an aggregate principal amount exceeding $50,000,000. For
purposes of determining Material Obligations, the "principal amount" of the
obligations of the Parent or any Subsidiary in respect of any Hedging Agreement
at any time shall be the maximum aggregate amount (giving effect to any netting
agreements) that the Parent or such Subsidiary would be required to pay if such
Hedging Agreement were terminated at such time.
"Material Subsidiary" means, at any time of determination, each of the
Subsidiaries of the Parent at such time listed on Schedule 3.13 and any other
Subsidiary at any time having operations generating at least 5% of the
Consolidated EBITDA for the most recent fiscal quarter.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Net Cash Proceeds" means, in connection with any Capital Markets
Transaction (but not including in "Net Cash Proceeds" any replacements,
refundings or refinancings of existing Indebtedness), the cash proceeds received
from such issuance or incurrence, net of attorneys' fees, investment banking
fees, accountants' fees, underwriting discounts and commissions and other
customary fees and expenses actually incurred in connection therewith. In
addition, no proceeds realized in a single transaction or series of related
transactions shall constitute Net Cash Proceeds unless such proceeds shall
exceed $5,000,000.
"Non-Consenting Lender" has the meaning set forth in Section 2.07(d).
"Non-Executing Person" has the meaning set forth in Section 4.01(a).
"Note" means any promissory note issued pursuant to Section 2.08(e).
"OECD Country" means any country which is a member of the Organization
for Economic Cooperation and Development.
"Offer" has the meaning set forth in the recitals hereto.
"Offer Documents" means the Press Release, any press release
announcing the Offer and the Offer documentation subsequently to be posted by
Bidco setting out the detailed terms of the Offer.
<PAGE>
15
"Other Taxes" means any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement.
"Panel" means the Panel on Takeovers and Mergers in the City of
London.
"Parent" has the meaning set forth in the preamble hereto.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet due or are being
contested in compliance with Section 5.04;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
and other like Liens imposed by law, arising in the ordinary course of
business;
(c) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other
social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature, in each case in the ordinary course
of business; and
(e) easements, zoning restrictions, rights-of-way, landlords'
liens on property held under lease, tenants' rights under leases and
similar encumbrances on real property imposed by law or arising in the
ordinary course of business that do not secure any monetary obligations
and do not materially detract from the value of the affected property
or interfere with the ordinary conduct of business of the Parent or any
Subsidiary;
provided that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.
"Permitted Investments" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America or the United Kingdom or, if such obligations are in the currency
of such country, any other OECD Country (or by any agency thereof to the
extent such obligations are backed by the full faith and credit of the
United States of America or the United Kingdom), in each case maturing
within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the
date of acquisition thereof and having, at such date of acquisition, the
highest credit rating obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts
issued or offered by, any office of any commercial bank organized under the
laws of the United States of America or any State thereof or the United
Kingdom or, if
<PAGE>
16
such obligations are in the currency of such country, any other OECD
Country which has a combined capital and surplus and undivided profits
of not less than $1,000,000,000;
(d) fully collateralized repurchase agreements with a term of not more
than 30 days for securities described in clause (a) above and entered into
with a financial institution satisfying the criteria described in
clause (c) above; and
(e) any money market fund that invests primarily in the foregoing
types of investments.
"Perrier" has the meaning set forth in the recitals hereto.
"Person" means any natural person, corporation, limited liability
company, trust, association, company, partnership, Governmental Authority or
other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or
Section 412 of the Code or Section 302 of ERISA, and in respect of which the
Parent or any ERISA Affiliate is (or, if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.
"Pounds Sterling" and ["pound sterling sign"] means pounds sterling
in lawful currency of the United Kingdom.
"Preconditional Bid" has the meaning set forth in the recitals hereto.
"Press Release" means the press announcement issued on July 13, 1999
by or on behalf of Bidco publicly announcing the Preconditional Bid and, subject
to the satisfaction of certain conditions, a firm intention to make the Offer.
"Pricing Grid" means Schedule 1.01(a).
"Prime Rate" means the rate of interest per annum publicly announced
from time to time by The Chase Manhattan Bank as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.
"Project Finance Company" means any Affiliate of the Parent (a) whose
principal assets and business are the ownership, acquisition, development or
operation of any asset or combination of assets whether directly or indirectly,
(b) none of whose Indebtedness in respect of the financing of the ownership,
acquisition development or operation of any such asset benefits from recourse to
any member of the Group (other than such Affiliate or another Project Finance
Company) in respect of any payment or repayment in respect thereof, except as
expressly referred to in paragraph (b)(iii) of the definition of "Project
Finance Indebtedness" and (c) which has been designated as such by the Parent by
written notice to the Administrative Agent, provided that the Parent may give
written notice to the Administrative Agent at any time that any Project Finance
Company is no longer a Project Finance Company, whereupon it shall cease to be a
Project Finance Company.
"Project Finance Indebtedness" means any Indebtedness which finances
or otherwise relates to the acquisition, development, ownership or operation of
an asset or combination of assets whether directly or indirectly:
(a) which is incurred by a Project Finance Company; or
(b) in respect of which the Person or Persons to whom such borrowing
is or may be owed by the relevant debtor (whether or not a member of the
Group) has or have no recourse whatsoever to any
<PAGE>
17
member of the Group (other than to a Project Finance Company) for any
payment or repayment in respect thereof other than:
(i) recourse to such debtor for amounts limited to
the cash flow or net cash flow (other than historic cash flow
or historic net cash flow) from such asset or assets; or
(ii) recourse to such debtor for the purpose only of
enabling amounts to be claimed in respect of such Indebtedness
in an enforcement of any Lien given by such debtor over such
asset or assets or the income, cash flow or other proceeds
deriving therefrom (or given by any shareholder or the like in
the debtor over the Capital Stock of the debtor if such debtor
is a Project Finance Company) to secure such Indebtedness or
to secure any recourse referred to in clause (iii) below
provided that (A) the extent of such recourse to such debtor
is limited solely to the amount of any recoveries made on any
such enforcement, and (B) such Person or Persons are not
entitled, by virtue of any right or claim arising out of or in
connection with such Indebtedness, to commence proceedings for
the winding up or dissolution of the debtor or to appoint or
procure the appointment of any receiver, trustee or similar
person or officer in respect of the debtor or any of its
assets (save only for the assets the subject of such
security); or
(iii) recourse (A) to such debtor generally, or
directly or indirectly to a member of the Group, under any
form of assurance, undertaking or support, which recourse is
limited to a claim for damages for breach of any obligation
(not being a Guarantee Obligation or other payment obligation
or any obligation to procure payment by another or an
indemnity in respect thereof or any obligation to comply or
procure compliance by another with any financial ratios or
other tests of financial condition) by the Person against whom
such recourse is available or (B) to the Capital Stock in or
loans to or the assets of such debtor (if such debtor is a
Project Finance Company) or any other Project Finance Company
owned by a member of the Group.
"Qualifying Lender" means any Lender that is (a) a "United States
person" (as defined in Section 7701(a)(30) of the Code) or (b) otherwise
entitled to complete exemption from United States withholding tax on interest
payable to it under this Agreement.
"Reference Lenders" means Chase and the Co-Syndication Agents.
"Register" has the meaning set forth in Section 9.04.
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Required Five-Year Revolving Lenders" means, at any time, Lenders
whose Five-Year Revolving Percentages aggregate at least 51%.
"Required Lenders" means, at any time, Lenders whose Applicable
Percentages aggregate at least 51%.
"Required 364-Day Revolving Lenders" means, at any time, Lenders whose
364-Day Revolving Percentages aggregate at least 51%.
"Requirement of Law" means, as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule (including the Takeover Code) or regulation or
determination of an arbitrator or a court or other Governmental Authority, in
each case
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18
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.
"Restricted Margin Stock" means Margin Stock owned by the Parent or
any Subsidiary which represents not more than 33-1/3% of the aggregate value
(determined in accordance with Regulation U), on a consolidated basis, of the
property and assets of the Parent and the Subsidiaries (other than any Margin
Stock) that is subject to the provisions of Article 6 (including Section 6.04).
"Revolving Loan" means a Five-Year Revolving Loan or a 364-Day
Revolving Loan.
"S&P" means Standard & Poor's Ratings Group.
"Sale/Leaseback Transaction" has the meaning set forth in
Section 6.09.
"Shares" has the meaning set forth in the recitals hereto.
"Solvent" means, when used with respect to any Person, that, as of any
date of determination, (a) the amount of the "present fair saleable value" of
the assets of such Person will, as of such date, exceed the expected amount of
all "liabilities of such Person, contingent or otherwise", after giving effect
to the expected value of rights of indemnity, contribution and subrogation, as
of such date, as such quoted terms are determined in accordance with applicable
federal and state laws governing determinations of the insolvency of debtors,
(b) the present fair saleable value of the assets of such Person will, as of
such date, be greater than the amount that will be required to pay the liability
of such Person on the expected amount of its debts as and to the extent expected
to such debts become absolute and matured, after giving effect to the expected
value of rights of indemnity, contribution and subrogation, (c) such Person will
not have, as of such date, an unreasonably small amount of capital with which to
conduct its business, and (d) such Person will be able to pay its debts as they
mature, after giving effect to the expected value of rights of indemnity,
contribution and subrogation. For purposes of this definition, (i) "debt" means
liability on a "claim", and (ii) "claim" means any (x) right to payment, whether
or not such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured
or unsecured or (y) right to an equitable remedy for breach of performance if
such breach gives rise to a right to payment, whether or not such right to an
equitable remedy is reduced to judgment, fixed, contingent, matured or
unmatured, disputed, undisputed, secured or unsecured.
"Statutory Reserve Rate" means a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject (a) with
respect to the Base CD Rate, for new negotiable nonpersonal time deposits in
Dollars of over $100,000 with maturities approximately equal to three months,
and (b) with respect to the LIBO Rate, for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such
reserve percentages shall include those imposed pursuant to such Regulation D.
Eurocurrency Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve Rate
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.
"Sterling Equivalent" means, on any date of determination, with
respect to any amount in Dollars, the equivalent in Pounds Sterling of such
amount, determined by the Administrative Agent using the Exchange Rate with
respect to Dollars then in effect.
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19
"Stock Acquisition" has the meaning set forth in the recitals hereto.
"subsidiary" means, with respect to any Person (the "parent") at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
"Subsidiary" means any subsidiary of the Parent, but excluding any
Project Finance Company the accounts of which would not be consolidated with
those of the Parent in the Parent's consolidated financial statements if such
financial statements were prepared in accordance with GAAP on the date of
determination.
"Subsidiary Guarantor" means, subject to Section 5.11, each Material
Subsidiary of the Parent that is wholly owned at any time on or after the date
hereof other than any Excluded Foreign Subsidiary.
"Takeover Code" shall mean the City Code on Takeovers and Mergers.
"Taxes" means any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Three-Month Secondary CD Rate" means, for any day, the secondary
market rate for three-month certificates of deposit reported as being in effect
on such day (or, if such day is not a Business Day, the next preceding Business
Day) by the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day) or, if such rate is not so reported on such day or such
next preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received at approximately 10:00 a.m., New York City time, on such day (or, if
such day is not a Business Day, on the next preceding Business Day) by the
Administrative Agent from three negotiable certificate of deposit dealers of
recognized standing selected by it.
"364-Day Competitive Loan" means a Loan made pursuant to Section 2.04
in a 364-Day Competitive Borrowing.
"364-Day Revolving Commitment" means, with respect to any Lender, the
obligation of such Lender, if any, to make 364-Day Revolving Loans in an
aggregate principal amount not to exceed the amount set forth under the heading
"364-Day Revolving Commitment" opposite such Lender's name on Schedule 2.01 or
in the Assignment and Acceptance pursuant to which such Lender became a party
hereto, as the same may be changed from time to time pursuant to the terms
hereof. The original aggregate amount of the 364-Day Revolving Commitments is
(pound)3,950,000,000. The 364-Day Revolving Commitments shall be converted to
364-Day Revolving Commitments denominated in Dollars on a date selected by the
Parent that is not less than seven Business Days prior to the Initial Funding
Date at the Exchange Rate then in effect. The Administrative Agent shall
promptly notify each 364-Day Revolving Lender of such conversion and the amount
of its 364-Day Revolving Commitment in Dollars after giving effect thereto.
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20
"364-Day Revolving Commitment Period" means the period from and
including the Initial Funding Date to the 364-Day Revolving Termination Date.
"364-Day Revolving Lender" means each Lender that has a 364-Day
Revolving Commitment or that holds 364-Day Revolving Loans.
"364-Day Revolving Loans" has the meaning set forth in Section 2.01.
"364-Day Revolving Percentage" means, as to any 364-Day Revolving
Lender at any time, the percentage which such Lender's 364-Day Revolving
Commitment then constitutes of the Total 364-Day Revolving Commitments (or, at
any time after the 364-Day Revolving Commitments shall have expired or
terminated, the percentage which the aggregate principal amount of such Lender's
364-Day Revolving Loans then outstanding constitutes of the aggregate principal
amount of the 364-Day Revolving Loans of all the Lenders then outstanding).
"364-Day Revolving Termination Date" means the date which is 364 days
after the Effective Date (subject to extension pursuant to Section 2.07).
"Total Five-Year Revolving Commitments" means, at any time, the
aggregate amount of the Five-Year Revolving Commitments in effect.
"Total 364-Day Revolving Commitments" means, at any time, the
aggregate amount of the 364-Day Revolving Commitments in effect.
"Transactions" means the execution, delivery and performance by the
Borrowers of this Agreement and the Additional Borrower Agreements, the
borrowing of Loans and the use of the proceeds thereof.
"Type", when used in reference to any Loan or Borrowing, refers to
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the LIBO Rate, the Alternate Base Rate
or, in the case of a Competitive Loan or Borrowing, the LIBO Rate or a Fixed
Rate.
"Unconditional Offer Date" shall mean the date upon which the Offer
has become or has been declared unconditional in all respects as permitted under
Section 5.09.
"Unrestricted Margin Stock" means any Margin Stock owned by the Parent
or any Subsidiary which is not Restricted Margin Stock.
"Whitewash Date" means, as to any Subsidiary organized in the United
Kingdom acquired in connection with the Acquisitions, the date on which such
Subsidiary is permitted to provide financial assistance in accordance with
Sections 151-158 of the Companies Act in respect of the Loans.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Classification of Loans and Borrowings. For purposes of
this Agreement, Loans may be classified and referred to by Class (e.g., a
"364-Day Revolving Loan"), by Type (e.g., a "Eurocurrency Loan") or currency
(e.g., a "Dollar Loan") or by a combination thereof (e.g., a "364-Day
Eurocurrency Revolving Loan" or a "Dollar Revolving Loan"). Borrowings also may
be classified and referred
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21
to by Class (e.g., a "364-Day Revolving Borrowing"), by Type (e.g., a
"Eurocurrency Borrowing") or currency (e.g., a "Dollar Borrowing") or by a
combination thereof (e.g., a "364-Day Eurocurrency Revolving Borrowing" or a
"Dollar Revolving Borrowing").
SECTION 1.03. Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement, (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights and (f) references to
amounts in Dollars shall refer, as appropriate, to the equivalent in Dollars of
amounts in other currencies.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided
that, if the Parent notifies the Administrative Agent that the Parent requests
an amendment to any provision hereof to eliminate the effect of any change
occurring after the date hereof in GAAP or in the application thereof on the
operation of such provision (or if the Administrative Agent notifies the Parent
that the Required Lenders request an amendment to any provision hereof for such
purpose), regardless of whether any such notice is given before or after such
change in GAAP or in the application thereof, then such provision shall be
interpreted on the basis of GAAP as in effect and applied immediately before
such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
ARTICLE II
The Credits
SECTION 2.01. 364-Day Revolving Commitments. Subject to the terms and
conditions hereof, each 364-Day Revolving Lender severally agrees to make
revolving credit loans ("364-Day Revolving Loans") to the Borrowers from time to
time during the 364-Day Revolving Commitment Period in an aggregate principal
amount at any one time outstanding which will not result in (a) the aggregate
principal amount of outstanding 364-Day Revolving Loans of such Lender exceeding
such Lender's 364-Day Revolving Commitment, (b) the sum of the aggregate
principal amount of outstanding 364-Day Revolving Loans plus the aggregate
principal amount of outstanding 364-Day Competitive Loans exceeding the Total
364-Day Revolving Commitments and (c) the aggregate outstanding principal amount
of Revolving Loans to the Additional Borrowers exceeding $200,000,000 at any
time. During the 364-Day Revolving Commitment Period, the Borrowers may use the
364-Day Revolving Commitments by borrowing, prepaying, and reborrowing the
364-Day Revolving Loans in whole or in part, all in accordance with the terms
and conditions hereof.
SECTION 2.02. Five-Year Revolving Commitments. Subject to the terms
and conditions hereof, each Five-Year Revolving Lender severally agrees to make
revolving credit loans ("Five-Year Revolving Loans")
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22
to the Borrowers from time to time during the Five-Year Revolving Commitment
Period in an aggregate principal amount at any one time outstanding which will
not result in (a) the aggregate principal amount of outstanding Five-Year
Revolving Loans of such Lender exceeding such Lender's Five-Year Revolving
Commitment, (b) the sum of the aggregate principal amount of outstanding
Five-Year Revolving Loans plus the aggregate principal amount of outstanding
Five-Year Competitive Loans exceeding the Total Five-Year Revolving Commitments
and (c) the aggregate outstanding principal amount of Revolving Loans to the
Additional Borrowers exceeding $200,000,000 at any time. During the Five-Year
Revolving Commitment Period, the Borrowers may use the Five-Year Revolving
Commitments by borrowing, prepaying, and reborrowing the Five-Year Revolving
Loans in whole or in part, all in accordance with the terms and conditions
hereof.
SECTION 2.03. Procedure for Revolving Loan Borrowing. (a) To request a
364-Day Revolving or Five-Year Revolving Borrowing, the relevant Borrower shall
notify the Administrative Agent of such request by telephone (a) in the case of
a Eurocurrency Borrowing, not later than 11:00 a.m., New York City time, three
Business Days before the date of the proposed Borrowing or (b) in the case of an
ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day
before the date of the proposed Borrowing. Each such telephonic Borrowing
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Borrowing Request in a form
approved by the Administrative Agent and signed by the relevant Borrower. Each
such telephonic and written Borrowing Request shall specify the following
information in compliance with this Section:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be an ABR Borrowing or a
Eurocurrency Borrowing, and whether such Borrowing is to be a 364-Day
Borrowing or a Five-Year Borrowing;
(iv) in the case of a Eurocurrency Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period"; and
(v) the location and number of the relevant Borrower's account to
which funds are to be disbursed, which shall comply with the requirements
of Section 2.05.
If no election as to the Type of Revolving Borrowing is specified, then the
requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period
is specified with respect to any requested Eurocurrency Revolving Borrowing,
then the relevant Borrower shall be deemed to have selected an Interest Period
of one month's duration. Promptly following receipt of a Borrowing Request in
accordance with this Section, the Administrative Agent shall advise in writing
each affected Lender of the details thereof and of the amount of such Lender's
Loan to be made as part of the requested Borrowing.
(b) Each 364-Day Revolving Loan or Five-Year Revolving Loan shall be
made as part of a Borrowing consisting of 364-Day Revolving Loans or Five-Year
Revolving Loans, as the case may be, made by the relevant Lenders ratably in
accordance with their respective 364-Day Revolving Commitments or Five-Year
Revolving Commitments, as the case may be. Each Competitive Loan shall be made
in accordance with the procedures set forth in Section 2.04. The failure of any
Lender to make any 364-Day Revolving Loan or Five-Year Revolving Loan required
to be made by it shall not relieve any other Lender of its obligations
hereunder; provided that the Commitments and Competitive Bids of the Lenders
are several and no Lender shall be responsible for any other Lender's failure
to make Loans as required.
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23
(c) Subject to Section 2.13, (i) each Revolving Borrowing shall be
comprised entirely of ABR Loans or Eurocurrency Loans as the relevant Borrower
may request in accordance herewith, and (ii) each Competitive Borrowing shall be
comprised entirely of Eurocurrency Loans or Fixed Rate Loans as the Parent may
request in accordance herewith. Each Lender at its option may make any
Eurocurrency Revolving Loan by causing any domestic or foreign branch or
Affiliate of such Lender to make such Revolving Loan; provided that any exercise
of such option shall not affect the obligation of the Borrowers to repay such
Revolving Loan in accordance with the terms of this Agreement.
(d) At the commencement of each Interest Period for any Eurocurrency
Revolving Borrowing, such Borrowing shall be in an aggregate amount that is an
integral multiple of $1,000,000 and not less than $10,000,000. At the time that
each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate
amount that is an integral multiple of $1,000,000 and not less than $10,000,000.
Borrowings of more than one Type and Class may be outstanding at the same time;
provided that there shall not at any time be more than a total of ten
Eurocurrency Revolving Borrowings outstanding.
SECTION 2.04. Competitive Bid Procedure. (a) Subject to the terms and
conditions set forth herein, (i) from time to time following the initial
Borrowing Date of Revolving Loans and during the 364-Day Revolving Commitment
Period the Parent may request Competitive Bids and may (but shall not have any
obligation to) accept Competitive Bids and borrow Competitive Loans in Dollars;
provided that the sum of the aggregate principal amount of outstanding 364-Day
Revolving Loans plus the aggregate principal amount of outstanding 364-Day
Competitive Loans at any time shall not exceed the 364-Day Total Revolving
Commitments, and (ii) from time to time following the initial Borrowing Date of
Revolving Loans and during the Five-Year Revolving Commitment Period the Parent
may request Competitive Bids and may (but shall not have any obligation to)
accept Competitive Bids and borrow Competitive Loans in Dollars; provided that
the sum of the aggregate principal amount of outstanding Five-Year Revolving
Loans plus the aggregate principal amount of outstanding Five-Year Competitive
Loans at any time shall not exceed the Five-Year Total Revolving Commitments. To
request Competitive Bids, the Parent shall notify the Administrative Agent of
such request by telephone, in the case of a Eurocurrency Borrowing, not later
than 11:00 a.m., New York City time, four Business Days before the date of the
proposed Borrowing and, in the case of a Fixed Rate Borrowing, not later than
10:00 a.m., New York City time, one Business Day before the date of the proposed
Borrowing; provided that the Parent may submit up to (but not more than) three
Competitive Bid Requests on the same day, but a Competitive Bid Request shall
not be made within five Business Days after the date of any previous Competitive
Bid Request, unless any and all such previous Competitive Bid Requests shall
have been withdrawn or all Competitive Bids received in response thereto
rejected. Each such telephonic Competitive Bid Request shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a written
Competitive Bid Request in a form approved by the Administrative Agent and
signed by the Parent. Each such telephonic and written Competitive Bid Request
shall specify the following information in compliance with Section 2.04:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be a Eurocurrency Borrowing or a
Fixed Rate Borrowing, and whether such Borrowing is a 364-Day Competitive
Borrowing or a Five-Year Competitive Borrowing;
(iv) the Interest Period to be applicable to such Borrowing, which
shall be a period contemplated by the definition of the term "Interest
Period"; and
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24
(v) the location and number of the Parent's account to which funds are
to be disbursed, which shall comply with the requirements of Section 2.05.
Promptly following receipt of a Competitive Bid Request in accordance with this
Section, the Administrative Agent shall notify the Lenders of the details
thereof by telecopy, inviting the Lenders to submit Competitive Bids.
(b) Each Lender may (but shall not have any obligation to) make one or
more Competitive Bids to the Parent in response to a Competitive Bid Request.
Each Competitive Bid by a Lender must be in a form approved by the
Administrative Agent and must be received by the Administrative Agent by
telecopy, in the case of a Eurocurrency Competitive Borrowing, not later than
9:30 a.m., New York City time, three Business Days before the proposed date of
such Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later
than 9:30 a.m., New York City time, on the proposed date of such Competitive
Borrowing. Competitive Bids that do not conform substantially to the form
approved by the Administrative Agent may be rejected by the Administrative
Agent, and the Administrative Agent shall notify the applicable Lender as
promptly as practicable. Each Competitive Bid shall specify (i) the principal
amount (which shall be a minimum of $5,000,000 and an integral multiple of
$1,000,000 and which may equal the entire principal amount of the Competitive
Borrowing requested by the Parent) of the Competitive Loan or Loans that the
relevant Lender is willing to make, (ii) the Competitive Bid Rate or Rates at
which the relevant Lender is prepared to make such Loan or Loans (expressed as a
percentage rate per annum in the form of a decimal to no more than four decimal
places) and (iii) the Interest Period applicable to each such Loan and the last
day thereof.
(c) The Administrative Agent shall promptly notify the Parent by
telecopy of the Competitive Bid Rate and the principal amount specified in each
Competitive Bid and the identity of the Lender that shall have made such
Competitive Bid.
(d) Subject only to the provisions of this paragraph, the Parent may
accept or reject any Competitive Bid. The Parent shall notify the Administrative
Agent by telephone, confirmed by telecopy in a form approved by the
Administrative Agent, whether and to what extent it has decided to accept or
reject each Competitive Bid, in the case of a Eurocurrency Competitive
Borrowing, not later than 10:30 a.m., New York City time, three Business Days
before the date of the proposed Competitive Borrowing, and in the case of a
Fixed Rate Borrowing, not later than 10:30 a.m., New York City time, on the
proposed date of the Competitive Borrowing; provided that (i) the failure of the
Parent to give such notice shall be deemed to be a rejection of each Competitive
Bid, (ii) the Parent shall not accept a Competitive Bid made at a particular
Competitive Bid Rate if the Parent rejects a Competitive Bid made at a lower
Competitive Bid Rate, (iii) the aggregate amount of the Competitive Bids
accepted by the Parent shall not exceed the aggregate amount of the requested
Competitive Borrowing specified in the related Competitive Bid Request, (iv) to
the extent necessary to comply with clause (iii) above, the Parent may accept
Competitive Bids at the same Competitive Bid Rate in part, which acceptance, in
the case of multiple Competitive Bids at such Competitive Bid Rate, shall be
made pro rata in accordance with the amount of each such Competitive Bid, and
(v) except pursuant to clause (iv) above, no Competitive Bid shall be accepted
for a Competitive Loan unless such Competitive Loan is in a minimum principal
amount of $5,000,000 and an integral multiple of $1,000,000; provided further
that if a Competitive Loan must be in an amount less than $5,000,000 because of
the provisions of clause (iv) above, such Competitive Loan may be for a minimum
of $1,000,000 or any integral multiple thereof, and in calculating the pro rata
allocation of acceptances of portions of multiple Competitive Bids at a
particular Competitive Bid Rate pursuant to clause (iv) the amounts shall be
rounded to integral multiples of $1,000,000 in a manner determined by the
Parent. A notice given by the Parent pursuant to this paragraph shall be
irrevocable.
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(e) The Administrative Agent shall promptly notify each bidding Lender
by telecopy whether or not its Competitive Bid has been accepted (and, if so,
the amount and Competitive Bid Rate so accepted), and each successful bidder
will thereupon become bound, subject to the terms and conditions hereof, to make
the Competitive Loan in respect of which its Competitive Bid has been accepted.
(f) If the Administrative Agent shall elect to submit a Competitive
Bid in its capacity as a Lender, it shall submit such Competitive Bid directly
to the Parent at least one quarter of an hour earlier than the time by which the
other Lenders are required to submit their Competitive Bids to the
Administrative Agent pursuant to paragraph (b) of this Section.
SECTION 2.05. Funding of Borrowings. (a) Each Lender shall make each
Loan to be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds in Dollars by 12:00 noon, New York City time, to the
account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders. The Administrative Agent will make such Loans
available to the Borrower by promptly crediting the amounts so received, in
Dollars, to an account of the Borrower maintained with the Administrative Agent
and designated by the Borrower in the applicable Borrowing Request or
Competitive Bid Request. All Revolving Loans shall be made in Dollars. All
Competitive Loans shall be made in Dollars.
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with this Agreement and may, in
reliance upon such assumption, make available to the applicable Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and Borrower severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to such
Borrower to but excluding the date of payment to the Administrative Agent, at
(i) in the case of such Lender, the Federal Funds Effective Rate or (ii) in the
case of such Borrower, the interest rate applicable to ABR Loans. If such Lender
pays such amount to the Administrative Agent, then such amount shall constitute
such Lender's Loan included in such Borrowing.
SECTION 2.06. Interest Elections. (a) Each Borrowing initially shall
be of the Type specified in the applicable Borrowing Request and, in the case of
a Eurocurrency Borrowing, shall have an initial Interest Period as specified in
such Borrowing Request. Thereafter, the applicable Borrower may elect to convert
any Revolving Borrowing to a different Type or to continue any Borrowing and, in
the case of a Eurocurrency Borrowing, may elect Interest Periods therefor, all
as provided in this Section. The relevant Borrower may elect different options
with respect to different portions of the affected Borrowing, in which case each
such portion shall be allocated ratably among the Lenders holding the Loans
comprising such Borrowing, and the Loans comprising each such portion shall be
considered a separate Borrowing. This Section shall not apply to Competitive
Borrowings, which may not be converted or continued.
(b) To make an election pursuant to this Section, the relevant
Borrower shall notify the Administrative Agent of such election by telephone by
the time that a Borrowing Request would be required under Section 2.03 if such
Borrower were requesting a Borrowing of the Type resulting from such election to
be made on the effective date of such election. Each such telephonic Interest
Election Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Interest Election
Request in a form approved by the Administrative Agent and signed by the
relevant Borrower.
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(c) Each telephonic and written Interest Election Request shall
specify the following information:
(i) the Borrowing to which such Interest Election Request applies and,
if different options are being elected with respect to different portions
thereof, the portions thereof to be allocated to each resulting Borrowing
(in which case the information to be specified pursuant to clauses (iii)
and (iv) below shall be specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such Interest
Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a
Eurocurrency Borrowing; and
(iv) if the resulting Borrowing is a Eurocurrency Borrowing the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
If any such Interest Election Request requests a Eurocurrency Borrowing but does
not specify an Interest Period, then the relevant Borrower shall be deemed to
have selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise in writing each affected Lender of the details
thereof and of such Lender's portion of each resulting Borrowing.
(e) If the relevant Borrower fails to deliver a timely Interest
Election Request with respect to a Eurocurrency Revolving Borrowing prior to the
end of the Interest Period applicable thereto, then, unless such Borrowing is
repaid as provided herein, at the end of such Interest Period such Borrowing
shall be converted to an ABR Borrowing. Notwithstanding any contrary provision
hereof, if an Event of Default has occurred and is continuing and the
Administrative Agent, at the request of the Required Lenders, so notifies the
Borrowers, then, so long as an Event of Default is continuing (i) no outstanding
Revolving Borrowing may be converted to or continued as a Eurocurrency Borrowing
and (ii) unless repaid, each Eurocurrency Revolving Borrowing shall be converted
to an ABR Borrowing at the end of the Interest Period applicable thereto.
SECTION 2.07. Termination and Reduction of Commitments; Extension of
Revolving Termination Date. (a) Unless previously terminated, (i) the 364-Day
Revolving Commitments shall terminate on the 364-Day Revolving Termination Date
and (ii) the Five-Year Revolving Commitments shall terminate on the Five-Year
Revolving Termination Date.
(b) The Parent may at any time terminate, or from time to time reduce,
the 364-Day Revolving Commitments or Five-Year Revolving Commitments; provided
that (i) each reduction shall be in an amount that is not less than
(pound)10,000,000 (or $10,000,000, in the case of any reduction after the
364-Day Revolving Commitments are converted to Dollars in accordance with the
terms hereof), in the case of the 364-Day Revolving Commitments, and
$10,000,000, in the case of the Five-Year Revolving Commitments, (ii) the Parent
shall not terminate or reduce the 364-Day Revolving Commitments if, after giving
effect to any concurrent prepayment of the 364-Day Revolving Loans in accordance
with Section 2.09, the sum of the aggregate principal amount of outstanding
364-Day Revolving Loans plus the aggregate principal amount of outstanding
364-Day Competitive Loans would exceed the Total 364-Day Revolving Commitments,
and (iii) the Parent shall not terminate or reduce the Five-Year Revolving
Commitments if, after giving effect to any
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27
concurrent prepayment of the Five-Year Revolving Loans in accordance with
Section 2.09, the sum of the aggregate principal amount of outstanding Five-Year
Revolving Loans plus the aggregate principal amount of outstanding Five-Year
Competitive Loans would exceed the Total Five-Year Revolving Commitments.
(c) The Parent shall notify the Administrative Agent of any election
to terminate or reduce the 364-Day Revolving Commitments or the Five-Year
Revolving Commitments under paragraph (b) of this Section at least three
Business Days prior to the effective date of such termination or reduction,
specifying such election and the effective date thereof. Promptly following
receipt of any notice, the Administrative Agent shall advise the affected
Lenders of the contents thereof. Each notice delivered by the Parent pursuant to
this Section shall be irrevocable; provided that a notice of termination of the
364-Day Revolving Commitments or the Five-Year Revolving Commitments delivered
by the Parent may state that such notice is conditioned upon the effectiveness
of other credit facilities, in which case such notice may be revoked by the
Parent (by notice to the Administrative Agent on or prior to the specified
effective date) if such condition is not satisfied. Any termination or reduction
of the 364-Day Revolving Commitments or the Five-Year Revolving Commitments
shall be permanent.
(d) At least 30 days but not more than 60 days prior to the 364-Day
Revolving Termination Date in effect at any time, the Parent, by written notice
to the Administrative Agent, may request an extension of the 364-Day Revolving
Termination Date in effect at such time for a period of 364 days from its then
scheduled expiration. The Administrative Agent shall promptly notify each
364-Day Revolving Lender of such request, and each 364-Day Revolving Lender
shall in turn, in its sole discretion, not earlier than 30 days but at least 20
days prior to such 364-Day Revolving Termination Date, notify the Parent and the
Administrative Agent in writing as to whether such 364-Day Revolving Lender will
consent to such extension. If any 364-Day Revolving Lender shall fail to notify
the Administrative Agent and the Parent in writing of its consent to any such
request for extension of the 364-Day Revolving Termination Date at least 20 days
prior to the scheduled occurrence thereof at such time, such 364-Day Revolving
Lender shall be deemed to be a Non-Consenting Lender with respect to such
request. The Administrative Agent shall notify the Parent not later than 15 days
prior to the scheduled 364-Day Revolving Termination Date in effect at such time
of the decision of the 364-Day Revolving Lenders regarding the Parent's request
for an extension of the 364-Day Revolving Termination Date. If all of the
364-Day Revolving Lenders consent in writing to any such request in accordance
with the foregoing, the 364-Day Revolving Termination Date shall, effective as
at the 364-Day Revolving Termination Date otherwise in effect at such time (the
"Extension Date"), be extended for a period of 364 days from such Extension
Date; provided that on each Extension Date, no Default shall have occurred and
be continuing, or shall occur as a consequence thereof and the giving of a
request for extension shall constitute a representation and warranty by the
Parent that the representations and warranties contained in Article III are
correct in all material respects on and as of the date of such notice and on
such Extension Date, as though made on and as of such dates. If the Required
364-Day Revolving Lenders at such time consent in writing to any such request,
the 364-Day Revolving Termination Date in effect at such time shall, effective
as at the applicable Extension Date, be extended as to those 364-Day Revolving
Lenders that so consented (each a "Consenting Lender") but shall not be extended
as to any other 364-Day Revolving Lender (each a "Non-Consenting Lender"). To
the extent that the 364-Day Revolving Termination Date is not extended as to
any 364-Day Revolving Lender pursuant to this Section, the 364-Day Revolving
Commitment of such Non-Consenting Lender shall automatically terminate in whole
on such unextended 364-Day Revolving Termination Date without any further notice
or other action by the Borrowers, such 364-Day Revolving Lender or any other
Person; provided that such Non-Consenting Lender's rights under Sections 2.14,
2.16 and 9.03, shall survive the payment of the Loans of such 364-Day Revolving
Lender as to matters occurring on or prior to such date and provided, further,
that until such Non-Consenting Lender's outstanding Loans are repaid in full,
all such Non-Consenting Lender's rights with respect to such Loans shall survive
the 364-Day Revolving Termination Date. It is understood and agreed that no
364-Day Revolving Lender shall have any obligation whatsoever to agree to any
request made by the Parent for any requested extension of the 364-Day Revolving
Termination Date.
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SECTION 2.08. Repayment of Loans; Evidence of Debt. (a) Each
applicable Borrower hereby unconditionally promises to pay (i) to the
Administrative Agent for the account of each 364-Day Revolving Lender one-half
of the then unpaid principal amount of each 364-Day Revolving Loan of such
364-Day Revolving Lender on the 364-Day Revolving Termination Date with respect
to such Lender and the remaining one-half of the unpaid principal amount of such
364-Day Revolving Loan as of such 364-Day Revolving Termination Date on the
first anniversary thereof, (ii) to the Administrative Agent for the account of
each Five-Year Revolving Lender the then unpaid principal amount of each
Five-Year Revolving Loan of such Five-Year Revolving Lender on the Five-Year
Revolving Termination Date and (iii) to the Administrative Agent for the account
of the applicable Lender the then unpaid principal amount of each Competitive
Loan on the last day of the Interest Period applicable to such Loan. Each
applicable Borrower agrees to pay interest on its Revolving Loans from time to
time in accordance with Section 2.12.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of each Borrower to such
Lender resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made hereunder, the Class and Type thereof
and the Interest Period applicable thereto, if any, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
applicable Borrower to each Lender hereunder and (iii) the amount of any sum
received by the Administrative Agent hereunder for the account of the Lenders
and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraph (b) or (c) of this Section shall be prima facie evidence of the
existence and amounts of the obligations recorded therein; provided that the
failure of any Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of any Borrower
to repay its Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans made by it be evidenced by a
promissory note. In such event, the applicable Borrower shall prepare, execute
and deliver to such Lender a promissory note payable to the order of such Lender
(or, if requested by such Lender, to such Lender and its registered assigns) and
in a form approved by the Administrative Agent. Thereafter, but without
prejudice to clause (c) above, the Loans evidenced by such promissory note and
interest thereon shall at all times (including after assignment pursuant to
Section 9.04) be represented by one or more promissory notes in such form
payable to the order of the payee named therein (or, if such promissory note is
a registered note, to such payee and its registered assigns).
SECTION 2.09. Optional Prepayment of Loans. (a) Any Borrower shall
have the right at any time and from time to time to prepay any Borrowing in
whole or in part, subject to prior notice in accordance with paragraph (b) of
this Section; provided that no Borrower shall have the right to prepay any
Competitive Loan without the prior consent of the Lender thereof.
(b) The applicable Borrower shall notify the Administrative Agent by
telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurocurrency Revolving Borrowing, not later than 11:00 a.m., New
York City time, three Business Days before the date of prepayment and (ii) in
the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York
City time, one Business Day before the date of prepayment. Each such notice
shall be irrevocable and shall specify the prepayment date and the principal
amount of each Borrowing or portion thereof to be prepaid; provided that, if a
notice of prepayment is given in connection with a conditional notice of
termination of the 364-Day Revolving Commitments or Five-Year
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29
Revolving Commitments as contemplated by Section 2.07, then such notice of
prepayment may be revoked if such notice of termination is revoked in accordance
with Section 2.07. Promptly following receipt of any such notice relating to a
Borrowing, the Administrative Agent shall advise each affected Lender of the
contents thereof. Partial prepayments of 364-Day Revolving Loans or Five-Year
Revolving Loans shall be in an aggregate principal amount of $10,000,000 or a
whole multiple of $1,000,000 in excess thereof. Each prepayment of a 364-Day
Revolving Borrowing or Five-Year Revolving Borrowing shall be applied ratably to
the 364-Day Revolving Loans or Five-Year Revolving Loans, respectively, included
in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest
to the extent required by Section 2.12.
SECTION 2.10. Mandatory Prepayments and Commitment Reductions. (a) If
any Net Cash Proceeds from Capital Markets Transactions are received (other than
from any Indebtedness permitted under Section 6.03 (other than paragraph (c)) by
the Parent or any of its Subsidiaries, an amount equal to 100% of the Net Cash
Proceeds thereof shall be applied on the date of such issuance or incurrence to
the reduction of the Commitments as set forth in Section 2.10(b); provided,
that, notwithstanding the foregoing, in the event of any such issuance or
incurrence by Subsidiaries of the Parent that are acquired or created in
connection with the Acquisitions prior to the Whitewash Date or, as applicable,
the date any other applicable Requirement of Law or contractual obligation that
may limit the portion of any such Net Cash Proceeds received by such Subsidiary
that may be distributed or advanced to the Parent is eliminated, except to the
extent that the Net Cash Proceeds therefrom may be lawfully distributed or
advanced to the Parent, such Net Cash Proceeds shall be maintained as cash or
invested in Permitted Investments and shall be applied to such prepayment or
reduction only upon the Whitewash Date or such other date.
(b) Amounts to be applied in connection with reductions of the
Commitments made pursuant to Section 2.10(a) shall be applied, without
duplication, first, to reduce permanently the 364-Day Revolving Commitments, and
second, to reduce permanently the Five-Year Revolving Commitments. To the extent
that, after giving effect to any reduction thereof pursuant to this Section
2.10(b), the 364-Day Revolving Commitments or the Five-Year Revolving
Commitments are less than the aggregate principal amount of the 364-Day
Revolving Loans or the Five-Year Revolving Loans, as the case may be, the Parent
shall prepay or cause to be prepaid such Loans. Each prepayment of the Loans
under Section 2.10 shall be accompanied by accrued interest to the date of such
prepayment on the amount prepaid. Amounts to be applied pursuant to this Section
shall be applied, first, to prepay ABR Borrowings, if applicable, and, second,
to prepay Eurocurrency Borrowings. At the option of the Parent, amounts to be
applied to prepay Eurocurrency Borrowings shall, if such prepayment would not
occur on the last day of the relevant Interest Period, be deposited in the
Prepayment Account (as defined below). The Administrative Agent shall apply any
cash deposited in the Prepayment Account to prepay the relevant Eurocurrency
Borrowings on the last day of the respective Interest Periods therefor (or, at
the direction of the Parent, on any earlier date). For purposes of this
Agreement, the term "Prepayment Account" shall mean an account established by
the Parent with the Administrative Agent. The Administrative Agent will, at the
request of the Parent, invest amounts on deposit in the Prepayment Account in
Permitted Investments that mature prior to the last day of the applicable
Interest Periods of the Eurocurrency Borrowings to be prepaid, provided that (i)
the Administrative Agent shall not be required to make any investment that, in
its sole judgment, would require or cause the Administrative Agent to be in, or
would result in any, violation of any Requirement of Law and (ii) the
Administrative Agent shall have no obligation to invest amounts on deposit in
the Prepayment Account if a Default or Event of Default shall have occurred and
be continuing. The Parent shall indemnify the Administrative Agent for any
losses relating to the investments so that the amount available to prepay
Eurocurrency Borrowings on the last day of the applicable Interest Periods
therefor is not less than the amount that would have been available had no
investments been made. Other than any interest earned on such investments, the
Prepayment Account shall not bear interest. Interest or profits, if any, on such
investments shall be deposited and reinvested and disbursed as described above.
If the maturity of the Loans
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has been accelerated pursuant to Article 7, the Administrative Agent shall apply
amounts on deposit in the Prepayment Account to prepay the Eurocurrency
Borrowings.
SECTION 2.11. Facility Fees; Other Fees. (a) The Parent agrees to pay
to the Administrative Agent for the account of each Lender a facility fee, which
shall accrue at the applicable rate per annum determined in accordance with the
Pricing Grid on the daily amount of the 364-Day Revolving Commitment and
Five-Year Revolving Commitment of such Lender (whether used or unused) during
the period from and including the Effective Date to but excluding the date on
which such 364-Day Revolving Commitment or Five-Year Revolving Commitment, as
the case may be, terminates; provided that, if such Lender continues to have any
Revolving Loans after its 364-Day Revolving Commitment or Five-Year Revolving
Commitment, as the case may be, terminates, then such facility fee shall
continue to accrue at the applicable rate per annum on the daily principal
amount of such Lender's Revolving Loans from and including the date on which its
364-Day Revolving Commitment or Five-Year Revolving Commitment, as the case may
be, terminates to but excluding the date on which such Lender ceases to have any
Revolving Loans outstanding. Accrued facility fees shall be payable in arrears
on the last day of March, June, September and December of each year and on the
date on which the Revolving Commitments terminate, commencing on the first such
date to occur after the date hereof; provided that any facility fees accruing
after the date on which the Revolving Commitments terminate shall be payable on
demand.
(b) The Parent agrees to pay to the Administrative Agent, for its own
account, fees payable in the amounts and at the times separately agreed upon
between the Parent and the Administrative Agent.
(c) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent for distribution, in
the case of facility fees, to the Lenders. Fees paid shall not be refundable
under any circumstances.
SECTION 2.12. Interest. (a) The Borrower of each Loan shall pay
interest thereon as provided in this Section. The Loans comprising each ABR
Borrowing shall bear interest at a rate per annum equal to the Alternate Base
Rate plus the Applicable Rate.
(b) The Loans comprising each Eurocurrency Borrowing shall bear
interest at a rate per annum equal to (i) in the case of a Eurocurrency Loan
(other than a Eurocurrency Competitive Loan), the LIBO Rate for the Interest
Period in effect for such Borrowing plus the Applicable Rate, or (ii) in the
case of a Eurocurrency Competitive Loan, the LIBO Rate for the Interest Period
in effect for such Borrowing plus (or minus, as applicable) the Margin
applicable to such Loan.
(c) Each Fixed Rate Loan shall bear interest at a rate per annum equal
to the Fixed Rate applicable to such Loan.
(d) Notwithstanding the foregoing, if any principal of or interest on
any Loan or any fee or other amount payable by any Borrower hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise applicable to such Loan as provided above or (ii) in the case of
any other amount, 2% plus the rate applicable to ABR Loans as provided above.
(e) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan; provided that (i) interest accrued pursuant
to paragraph (d) of this Section shall be payable on demand, (ii) in the event
of any repayment or prepayment of any Loan (other than a prepayment of an ABR
Revolving Loan prior to the end of the 364-Day Revolving Commitment Period or
Five-Year
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Revolving Commitment Period, as the case may be), accrued interest on
the principal amount repaid or prepaid shall be payable on the date of such
repayment or prepayment, (iii) in the event of any conversion of any
Eurocurrency Revolving Loan prior to the end of the current Interest Period
therefor, accrued interest on such Loan shall be payable on the effective date
of such conversion and (iv) all accrued interest shall be payable upon
termination of the Commitments.
(f) All interest and facility fees hereunder shall be computed on the
basis of a year of 365 days (or 366 days in a leap year), except that interest
computed by reference to the Eurocurrency Loans and facility fees shall be
computed on the basis of a year of 360 days and in each case shall be payable
for the actual number of days elapsed (including the first day but excluding the
last day). The applicable Alternate Base Rate or LIBO Rate shall be determined
by the Administrative Agent, and such determination shall be conclusive absent
manifest error.
SECTION 2.13. Alternate Rate of Interest. If prior to the commencement
of any Interest Period for a Eurocurrency Borrowing:
(a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the LIBO Rate for such Interest Period; or
(b) the Administrative Agent is advised by the Required 364-Day
Revolving Lenders or Required Five-Year Revolving Lenders, as applicable
(or, in the case of a Eurocurrency Competitive Loan, the Lender that is
required to make such Loan), that the LIBO Rate for such Interest Period
will not adequately and fairly reflect the cost to such Lenders (or Lender)
of making or maintaining their Loans (or its Loan) included in such
Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the affected
Borrowers and Lenders by telephone or telecopy as promptly as practicable
thereafter and, until the Administrative Agent notifies such Borrowers and
Lenders that the circumstances giving rise to such notice no longer exist, (i)
any Interest Election Request that requests the conversion of any Revolving
Borrowing to, or continuation of any Revolving Borrowing as, a Eurocurrency
Borrowing shall be ineffective, (ii) if any Borrowing Request requests a
Eurocurrency Revolving Borrowing, such Borrowing shall be made as an ABR
Borrowing and (iii) any request by a Borrower for a Eurocurrency Competitive
Borrowing shall be ineffective; provided that (A) if the circumstances giving
rise to such notice do not affect all the Lenders, then requests by the relevant
Borrower for Eurocurrency Competitive Borrowings may be made to Lenders that are
not affected thereby and (B) if the circumstances giving rise to such notice
affect only one Type of Borrowings, then the other Type of Borrowings shall be
permitted.
SECTION 2.14. Increased Costs. (a) If any Governmental Authority of
the jurisdiction of any currency (or any other jurisdiction in which the funding
operations of any Lender shall be conducted with respect to such currency) shall
have in effect any reserve, liquid asset or similar requirement with respect to
any category of deposits or liabilities customarily used to fund loans in such
currency, or by reference to which interest rates applicable to Loans in such
currency are determined (including any such additional cost as is contemplated
by the definition of "Statutory Reserve Rate" in Section 1.01), and the result
of such requirement shall be to increase the cost to such Lender of making or
maintaining any Loan in such currency (other than an ABR Loan) by an amount
deemed by such Lender to be material, and such Lender shall deliver to the
Parent a notice requesting compensation under this paragraph and setting forth
the applicable additional cost, then the Parent will pay or cause the applicable
Borrower to pay to such Lender on each Interest Payment Date with respect to
each affected Loan an amount that shall compensate such Lender for such
additional cost (which, in the case of any additional cost as is contemplated by
such definition of "Statutory Reserve Rate" shall be at the Statutory Reserve
Rate).
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(b) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of,
or credit extended by, any Lender; or
(ii) impose on any Lender or the London interbank market any other
condition affecting this Agreement, Eurocurrency Loans or Fixed Rate Loans
made by such Lender;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurocurrency Loan or Fixed Rate Loan (or of
maintaining its obligation to make any such Loan) or to increase the cost to
such Lender or to reduce the amount of any sum received or receivable by such
Lender hereunder (whether of principal, interest or otherwise), then the Parent
shall pay or shall cause the applicable Borrower to pay to such Lender such
additional amount or amounts as to compensate such Lender for such additional
costs incurred or reduction suffered.
(c) If any Lender determines that any Change in Law regarding capital
requirements has the effect of reducing the rate of return on such Lender's
capital or on the capital of such Lender's holding company, if any, as a
consequence of this Agreement or the Loans made by such Lender, to a level below
that which such Lender or such Lender's holding company could have achieved but
for such Change in Law (taking into consideration such Lender's policies and the
policies of such Lender's holding company with respect to capital adequacy),
then from time to time the Parent shall pay or shall cause the applicable
Borrower to pay to such Lender such additional amount or amounts as will
compensate such Lender or such Lender's holding company for any such reduction
suffered.
(d) A certificate of a Lender setting forth in reasonable detail the
amount or amounts necessary to compensate such Lender or its holding company, as
the case may be, as specified in paragraph (a), (b) or (c) of this Section shall
be delivered to the Parent and shall be conclusive absent manifest error. The
Parent shall pay or cause the applicable Borrower to pay to such Lender the
amount shown as due on any such certificate within 10 days after receipt
thereof.
(e) Failure or delay on the part of any Lender to demand compensation
pursuant to this Section shall not constitute a waiver of such Lender's right to
demand such compensation; provided that the Parent shall not be required to
compensate a Lender pursuant to this Section for any increased costs or
reductions incurred more than six months prior to the date that such Lender
notifies the Parent of the Change in Law giving rise to such increased costs or
reductions and of such Lender's intention to claim compensation therefor;
provided further that, if the Change in Law giving rise to such increased costs
or reductions is retroactive, then the six-month period referred to above shall
be extended to include the period of retroactive effect thereof.
(f) Notwithstanding the foregoing provisions of this Section, a Lender
shall not be entitled to compensation pursuant to this Section in respect of any
Competitive Loan if the Change in Law that would otherwise entitle it to such
compensation shall have been publicly announced prior to submission of the
Competitive Bid pursuant to which such Loan was made.
SECTION 2.15. Break Funding Payments. In the event of (a) the payment
of any principal of any Eurocurrency Loan or Fixed Rate Loan other than on the
last day of an Interest Period applicable thereto (including as a result of an
Event of Default), (b) the conversion of any Eurocurrency Loan other than
on the last day of the Interest Period applicable thereto, (c) the failure to
borrow, convert, continue or prepay any Loan on the date specified in any notice
delivered pursuant hereto (regardless of whether such notice is permitted to be
revocable under Section 2.07(b) and is revoked in accordance herewith), (d) the
failure to
<PAGE>
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borrow any Competitive Loan after accepting the Competitive Bid to
make such Loan, or (e) the assignment of any Eurocurrency Loan or Fixed Rate
Loan other than on the last day of the Interest Period applicable thereto as a
result of a request by the Parent pursuant to Section 2.18, then, in any such
event, the Parent shall compensate each Lender for the loss, cost and expense
attributable to such event. In the case of a Eurocurrency Loan, the loss to any
Lender attributable to any such event shall be deemed to include an amount
determined by such Lender to be equal to the excess, if any, of (i) the amount
of interest that such Lender would pay for a deposit equal to the principal
amount of such Loan for the period from the date of such payment, conversion,
failure or assignment to the last day of the then current Interest Period for
such Loan (or, in the case of a failure to borrow, convert or continue, the
duration of the Interest Period that would have resulted from such borrowing,
conversion or continuation) if the interest rate payable on such deposit were
equal to the LIBO Rate for such Interest Period, over (ii) the amount of
interest that such Lender would earn on such principal amount for such period if
such Lender were to invest such principal amount for such period at the interest
rate that would be bid by such Lender (or an affiliate of such Lender) for
dollar deposits from other banks in the eurodollar market at the commencement of
such period. A certificate of any Lender setting forth in reasonable detail any
amount or amounts that such Lender is entitled to receive pursuant to this
Section shall be delivered to the Parent and shall be conclusive absent manifest
error. The Parent shall or shall cause the applicable Borrower to pay to such
Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.
SECTION 2.16. Taxes. Any and all payments by or on account of any
obligation of the Borrowers hereunder shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes except as required by
applicable law. If any Borrower shall be required to deduct any Indemnified
Taxes or Other Taxes from such payments, then (i) the sum payable shall be
increased as necessary so that after making all required deductions of
Indemnified Taxes and Other Taxes (including deductions applicable to additional
sums payable under this Section) the Administrative Agent or the relevant
Lenders (as the case may be) receive an amount equal to the sum it would have
received had no such deductions been made, (ii) such Borrower shall make such
deductions and (iii) such Borrower shall pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law.
(a) In addition, the Borrowers shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(b) The Borrowers shall indemnify the Administrative Agent and each
Lender within 10 days after written demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section)
paid by the Administrative Agent or such Lender, as the case may be, and any
penalties, interest and reasonable expenses arising therefrom or with respect
thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority. A
certificate as to the amount of such payment or liability delivered to the
Borrowers by a Lender or by the Administrative Agent on its own behalf or on
behalf of a Lender shall be conclusive absent manifest error.
(c) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrowers to a Governmental Authority, the Borrowers shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
(d) Any Lender that is entitled to an exemption from or reduction of
withholding tax under the law of the jurisdiction in which the relevant Borrower
is located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall deliver to such Borrower (with a
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34
copy to the Administrative Agent), at the time or times prescribed by applicable
law or reasonably requested by such Borrower, such properly completed and
executed documentation prescribed by applicable law as will permit such payments
to be made without withholding or at a reduced rate.
(e) If the Administrative Agent or any Lender receives a refund in
respect of Indemnified Taxes or Other Taxes paid by the Borrowers, which in the
sole judgment of such Lender is allocable to such payment, it shall promptly pay
such refund, together with any other amounts paid by the relevant Borrower in
connection with such refunded Taxes or Other Taxes, to such Borrower, net of all
out-of-pocket expenses of such Lender incurred in obtaining such refund,
provided, however, that such Borrower agrees to promptly return such refund to
the Administrative Agent or the applicable Lender, as the case may be, if it
receives notice from the Administrative Agent or applicable Lender that such
Administrative Agent or Lender is required to repay such refund.
SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of
Set-offs. (a) Except as provided in Section 2.04, each borrowing by any Borrower
from the Lenders hereunder, each payment by any Borrower on account of any
facility fee and any reduction of the Commitments of the Lenders shall be made
pro rata according to the respective 364-Day Revolving Percentages or Five-Year
Revolving Percentages, as the case may be, of the relevant Lenders.
(b) Each payment (including each prepayment) by any Borrower on
account of principal of and interest on its 364-Day Revolving Loans shall be
made pro rata according to the respective outstanding amounts on account of the
364-Day Revolving Loans then due and payable to the 364-Day Revolving Lenders.
Each payment (including each prepayment) by any Borrower on account of principal
of and interest on its Five-Year Revolving Loans shall be made pro rata
according to the respective outstanding amounts on account of the Five-Year
Revolving Loans then due and payable to the Five-Year Revolving Lenders.
(c) Each Borrower shall make each payment required to be made by it
hereunder (whether of principal, interest or fees, or under Section 2.14, 2.15
or 2.16, or otherwise) prior to 12:00 noon, New York City time, on the date when
due, in immediately available funds, without set-off or counterclaim. Any
amounts received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices at 270 Park Avenue, New
York, New York and except that payments pursuant to Sections 2.14, 2.15, 2.16
and 9.03 shall be made directly to the Persons entitled thereto. The
Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following
receipt thereof. If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest
thereon shall be payable for the period of such extension. All payments
hereunder shall be made in Dollars (based, if appropriate, on the Dollar
Equivalent of the amount thereof).
(d) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Revolving Loans resulting in such Lender receiving
payment of a greater proportion of the aggregate amount of its Revolving Loans
and accrued interest thereon than the proportion received by any other relevant
Lender, then the Lender receiving such greater proportion shall purchase (for
cash at face value) participations in the Revolving Loans of other relevant
Lenders to the extent necessary so that the benefit of all such payments shall
be shared by the relevant Lenders ratably in accordance with the aggregate
amount of principal of and accrued interest on their relevant respective
Revolving Loans; provided that (i) if any such participations are purchased and
all or any portion of the payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price restored to the extent
of such recovery, without interest, and (ii) the provisions of this
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35
paragraph shall not be construed to apply to any payment made by any Borrower
pursuant to and in accordance with the express terms of this Agreement or any
payment obtained by a Lender as consideration for the assignment of or sale of a
participation in any of its Revolving Loans to any assignee or participant,
other than to such Borrower or any subsidiary or Affiliate thereof (as to which
the provisions of this paragraph shall apply). Each Borrower consents to the
foregoing and agrees, to the extent it may effectively do so under applicable
law, that any Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against such Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of such Borrower in the amount of such participation.
(e) Unless the Administrative Agent shall have received notice from
any Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders hereunder that such Borrower will not make
such payment, the Administrative Agent may assume that such Borrower has made
such payment on such date in accordance herewith and may, in reliance upon such
assumption, distribute to the Lenders the amount due. In such event, if such
Borrower has not in fact made such payment, then each of the relevant Lenders
severally agrees to repay to the Administrative Agent forthwith on demand the
amount so distributed to such Lender with interest thereon, for each day from
and including the date such amount is distributed to it to but excluding the
date of payment to the Administrative Agent, at the Federal Funds Effective
Rate.
(f) If any Lender shall fail to make any payment required to be made
by it pursuant to Section 2.05(b) or 2.17(e), then the Administrative Agent may,
in its discretion (notwithstanding any contrary provision hereof), apply any
amounts thereafter received by the Administrative Agent for the account of such
Lender to satisfy such Lender's obligations under such Sections until all such
unsatisfied obligations are fully paid.
SECTION 2.18. Mitigation Obligations; Replacement of Lenders. (a) If
any Lender requests compensation under Section 2.14, or if the Parent is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.16, then such
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 2.14 or 2.16, as the case may be, in the
future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Parent
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.14, or if the
Parent is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.16,
or if any Lender defaults in its obligation to fund Loans hereunder, or if any
Lender is a Non-Consenting Lender with respect to any request to extend the
364-Day Revolving Termination Date which is approved by the Required 364-Day
Revolving Lenders, as applicable, or if any Lender does not approve any
amendment, waiver or modification to this Agreement or any other Loan Document
which has been approved by the Required Lenders, then the Parent may, so long as
no Event of Default has occurred and is continuing, at its sole expense and
effort, upon notice to such Lender and the Administrative Agent, require such
Lender to assign and delegate, without recourse (in accordance with and subject
to the restrictions contained in Section 9.04), all its interests, rights and
obligations under this Agreement (other than any outstanding Competitive Loans
held by it) to an assignee that shall assume such obligations (which assignee
may be another Lender, if a Lender accepts such assignment); provided that
(i)the Parent shall have received the prior written consent of the
Administrative Agent, which consent shall not unreasonably be withheld, (ii)
such Lender shall have received payment of an amount equal to the outstanding
principal of its Loans (other than Competitive Loans), accrued interest thereon,
accrued fees and all other amounts payable
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36
to it hereunder, from the assignee (to the extent of such outstanding principal
and accrued interest and fees) or the Borrowers (in the case of all other
amounts) and (iii) in the case of any such assignment resulting from a claim for
compensation under Section 2.14 or payments required to be made pursuant to
Section 2.16, such assignment will result in a reduction in such compensation or
payments. A Lender shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Parent to require such assignment and
delegation cease to apply.
SECTION 2.19. Certain Funds Period. Notwithstanding any other
provision of any Loan Document to the contrary, prior to and during the Certain
Funds Period, unless a Major Default is continuing, no Lender shall (or shall be
entitled to instruct the Administrative Agent to) cancel any of the Commitments
(except at the request of the Parent or as expressly provided herein); refuse to
make any Loan hereunder in accordance with the terms hereof (to the extent of
any part of any of its relevant undrawn Commitments) or rescind, terminate or
cancel this Agreement; or require repayment of any Loan or exercise any right of
set-off or counterclaim in respect of any Loan. Immediately upon the expiry of
the Certain Funds Period, all such rights, remedies and entitlements shall be
available to the Administrative Agent and each of the Lenders, to the full
extent set forth in this Agreement, notwithstanding that they may not have been
exercised or been available for use during the Certain Funds Period.
ARTICLE III
Representations and Warranties
Each Borrower represents and warrants to the Lenders that:
SECTION 3.01. Organization; Powers. Such Borrower and each of its
Subsidiaries is duly organized, validly existing and, to the extent applicable,
in good standing under the laws of the jurisdiction of its organization, has all
requisite power and authority to carry on its business as now conducted and is
qualified to do business in, and is in good standing in, every jurisdiction
where such qualification is required, except where the failure to be so
organized, existing or qualified or to be in good standing, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
SECTION 3.02. Authorization; Enforceability. The Transactions are
within such Borrower's corporate powers and have been duly authorized by all
necessary corporate and, if required, stockholder action. This Agreement has
been duly executed and delivered by such Borrower. This Agreement constitutes,
and each other Loan Document upon execution will constitute, a legal, valid and
binding obligation of each Loan Party thereto, enforceable against each such
Loan Party in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law.
SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions
(which shall not include the Offer until the commencement of the Certain Funds
Period or include the consummation of the Offer until the Initial Funding Date)
(a) do not require any consent or approval of, registration or filing with, or
any other action by, any Governmental Authority, except such as have been
obtained or made and are in full force and effect, except where failure to
obtain or make the same (either individually or in the aggregate) could not be
reasonably expected to result in a Material Adverse Effect, (b) will not violate
any applicable law or regulation or order of any Governmental Authority, except
where any such violation (either individually or in the aggregate) could not be
reasonably expected to result in a Material Adverse Effect, (c) will not violate
any material provision of the charter, bylaws or other organizational document
of such Borrower or any of its Subsidiaries, (d) will not violate or result in a
default under any indenture, agreement
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37
or other instrument binding upon such Borrower or any of its Subsidiaries or its
assets, or give rise to a right thereunder to require any payment to be made by
such Borrower or any of its Subsidiaries, which could reasonably be expected to
have a Material Adverse Effect, and (e) will not result in the creation or
imposition of any Lien on any asset of any Borrower or any of its Subsidiaries.
SECTION 3.04 Financial Condition; No Material Adverse Change. (a) The
audited consolidated balance sheets of Parent as at September 30, 1996,
September 30, 1997 and September 30, 1998, and the related consolidated
statements of income, cash flows and shareholders' equity for the fiscal years
ended on such dates, reported on by and accompanied by an unqualified report
from Arthur Andersen LLP, present fairly in all material respects the
consolidated financial condition of Parent as at such date, and the consolidated
results of its operations and its consolidated cash flows for the respective
fiscal years then ended. The unaudited consolidated balance sheet of Parent as
at June 30, 1999, and the related unaudited consolidated statements of income
and cash flows for the nine-month period ended on such date, present fairly in
all material respects the consolidated financial condition of Parent as at such
date, and the consolidated results of its operations and its consolidated cash
flows for the nine-month period then ended (subject to normal year-end audit
adjustments). All such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by the aforementioned firm
of accountants and disclosed therein). Neither the Parent nor any of its
Subsidiaries has any material Guarantee Obligations, contingent liabilities and
liabilities for taxes, or any long-term leases or unusual forward or long-term
commitments, including any interest rate or foreign currency swap or exchange
transaction or other obligation in respect of derivatives, that are not
reflected in the most recent financial statements referred to in this paragraph
(or the notes that accompany them).
(b) Since September 30, 1998, there has been no material adverse
change in the business, assets, operations, prospects or condition, financial or
otherwise, of the Parent and its Subsidiaries, taken as a whole.
SECTION 3.05. Properties. (a) Such Borrower and each of its
Subsidiaries has good title to, or valid leasehold interests in, all its real
and personal property material to its business, except for any such defects
that, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect, and none of such property is subject to any
Lien except as permitted by Section 6.04.
(b) Such Borrower and each of its Subsidiaries owns, or is licensed to
use, all trademarks, tradenames, copyrights, patents and other intellectual
property material to its business, and the use thereof by such Borrower and its
Subsidiaries does not infringe upon the rights of any other Person, except for
any such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.06. Litigation and Environmental Matters. (a) There are no
actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of such Borrower, threatened
against or affecting such Borrower or any of its Subsidiaries (i) as to which
there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve this Agreement or the Transactions.
(b) Except for the Disclosed Matters and except with respect to any
other matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, neither such Borrower nor any
of its Subsidiaries (i) has failed to comply with any Environmental Law or to
obtain, maintain or comply with any permit, license or other approval required
under any Environmental Law,
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(ii) has become subject to any Environmental Liability, (iii) has received
notice of any claim with respect to any Environmental Liability or (iv) knows of
any basis for any Environmental Liability.
(c) Since the date of this Agreement, there has been no change in the
status of the Disclosed Matters that, individually or in the aggregate, has
resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
SECTION 3.07. Compliance with Laws and Agreements. Such Borrower and
each of its Subsidiaries is in compliance with all laws, regulations and orders
of any Governmental Authority applicable to it or its property and all
indentures, agreements and other instruments binding upon it or its property,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect. No Event of
Default has occurred and is continuing.
SECTION 3.08. Investment and Holding Company Status. Neither such
Borrower nor any of its Subsidiaries is (a) an "investment company" as defined
in, or subject to regulation under, the Investment Company Act of 1940 or (b) a
"holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935.
SECTION 3.09. Taxes. Such Borrower and each of its Subsidiaries has
timely filed or caused to be filed all Tax returns and reports required to have
been filed and has paid or caused to be paid all Taxes required to have been
paid by it, except (a) Taxes that are being contested in good faith by
appropriate proceedings and for which such Borrower or such Subsidiary, as
applicable, has set aside on its books adequate reserves, (b) Taxes for which
such Borrower or such Subsidiary has otherwise set aside on its books adequate
reserves or (c) to the extent that the failure to do so could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect.
SECTION 3.11. Disclosure. All of the reports, financial statements,
certificates or other information furnished by or on behalf of such Borrower to
the Administrative Agent or any Lender in connection with the negotiation of
this Agreement or delivered hereunder (as modified or supplemented by other
information so furnished) (or, in the case of any such reports, financial
statements, certificates or other information in respect of Jaguar and its
subsidiaries, to the best knowledge of the Parent), taken as a whole, are
complete and correct in all material respects and not misleading in any material
respect in light of the circumstances under which they were made or delivered;
provided that, with respect to projected financial information provided by the
Parent, the Parent represents only that such information was prepared in good
faith based upon assumptions believed to be reasonable at the time, it being
recognized by the Lenders that such projected financial information as to future
events is not to be viewed as facts and that actual results during the period or
periods covered by such projected financial information may differ from the
projected results.
SECTION 3.12. Federal Regulations. No part of the proceeds of any
Loans will be used for "buying" or "carrying" any "margin stock" within the
respective meanings of each of the quoted terms under Regulation U as now and
from time to time hereafter in effect to the extent such use would constitute a
violation of the provisions of the Regulations of the Board. If requested by any
Lender or the Administrative Agent, the applicable Borrower will furnish to the
Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form G-3 or FR Form U-1, as applicable,
referred to in Regulation U.
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39
SECTION 3.13. Subsidiaries. Schedule 3.13 sets forth the name and
jurisdiction of incorporation of each Material Subsidiary of each Borrower as of
the date hereof and, as to each such Subsidiary, the percentage of each class of
Capital Stock owned by any Loan Party, and as of the date hereof there are no
outstanding subscriptions, options, warrants, calls, rights or other agreements
or commitments (other than stock options granted to employees or directors and
directors' qualifying shares) of any nature relating to any Capital Stock of any
of the Borrower's Material Subsidiaries, except as created by the Loan
Documents.
SECTION 3.14. Solvency. Each Loan Party is, and after giving effect to
the Acquisitions and the incurrence of all Indebtedness and obligations being
incurred in connection herewith and therewith will be and will continue to be,
Solvent.
SECTION 3.15. Labor Matters. Except as, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect: (a) there are no
strikes against the Parent or any of its Subsidiaries pending or, to the
knowledge of such Borrower, threatened; (b) hours worked by and payment made to
employees of the Parent and its Subsidiaries have not been in violation of the
Fair Labor Standards Act or any other applicable Requirement of Law dealing with
such matters; and (c) all payments due from the Parent or any of its
Subsidiaries on account of employee health and welfare insurance have been paid
or accrued as a liability on the books of the Parent or the relevant Subsidiary.
SECTION 3.16. Year 2000 Matters. The disclosure set forth under the
heading "Year 2000 Readiness Disclosure" in the Parent's Form 10-Q filed with
the Securities and Exchange Commission for the quarterly period ended June 30,
1999 is true and correct in all material respects as of the date of this
Agreement. The costs to the Parent and its Subsidiaries that have not been
incurred as of the date hereof for such reprogramming and testing and for the
other reasonably foreseeable consequences to them of any improper functioning of
other computer systems and equipment containing embedded microchips due to the
occurrence of the year 2000 could not reasonably be expected to result in a
Default or Event of Default or to have a Material Adverse Effect. Except for any
reprogramming referred to above, the computer systems of the Parent and its
Subsidiaries are and, with ordinary course upgrading and maintenance, will
continue for the term of this Agreement to be, sufficient for the conduct of
their business as currently conducted.
SECTION 3.17. Mandatory Offers. No circumstances have arisen (whether
as a result of actions by the Parent or Bidco or otherwise) whereby a mandatory
offer is required to be made under the terms of Rule 9 of the Takeover Code in
respect of the Shares.
SECTION 3.18. Pari Passu Obligations. The Loans made to the Parent and
the payment obligations of the Parent under the Guarantee constitute obligations
of the Parent which are pari passu with all other unsecured Indebtedness of the
Parent.
ARTICLE IV
Conditions
SECTION 4.01. Effective Date. The Agreement shall become effective on
the date on which each of the following conditions is satisfied (or waived in
accordance with Section 9.02) (the date on which such conditions are satisfied
or waived, the "Effective Date"):
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(a) The Administrative Agent (or its counsel) shall have received (A)
from each party hereto either (i) a counterpart of this Agreement signed on
behalf of such party or (ii) written evidence reasonably satisfactory to the
Administrative Agent (which may include telecopy transmission of a signed
signature page of this Agreement) that such party has signed a counterpart of
this Agreement, provided, that, notwithstanding the foregoing, in the event that
this Agreement has not been executed and conditionally delivered by each party
listed on Schedule 2.01 or 2.02 on the date (which shall be no earlier than the
date hereof) on which (x) all of the other conditions to the occurrence of the
Effective Date shall have been satisfied or waived and (y) this Agreement shall
have been executed and unconditionally delivered by the Parent and the
Administrative Agent, then the condition set forth in this Section 4.01(a) shall
nonetheless be satisfied on such date with respect to those parties listed on
Schedule 2.01 or 2.02 which have executed and unconditionally delivered this
Agreement on or before such date if on such date the Borrower and the
Administrative Agent shall have designated one or more banks, financial
institutions or other entities ("Designated Lenders") to assume with the consent
of such Designated Lender, in the aggregate, all of the Commitments of the
parties listed on Schedule 2.01 or 2.02 (the "Non-Executing Persons") which have
not executed and unconditionally delivered this Agreement as of such date
(Schedules 2.01 and 2.02 shall automatically be deemed to be amended to reflect
the respective Commitments of the Designated Lenders and the omission of the
Non-Executing Persons as Lenders hereunder) and (B) from the Parent and each
Subsidiary Guarantor either (i) a counterpart of the Guarantee signed on behalf
of such party or (ii) written evidence reasonably satisfactory to the
Administrative Agent (which may include telecopy transmission of a signed
signature page of the Guarantee) that such party has signed a counterpart of the
Guarantee.
(b) The Agreement, dated July 2, 1999 (the "Acquisition Agreement"),
between the Parent and Perrier shall not have been amended or waived in any
material respect without the consent of the Administrative Agent.
(c) The Press Release shall not have been amended or waived in any
material respect without the consent of the Administrative Agent.
(d) The Administrative Agent shall have received all fees and other
amounts due and payable on or prior to the Effective Date, including, to the
extent invoiced, reimbursement or payment of all out-of-pocket expenses required
to be reimbursed or paid by the Borrowers hereunder.
(e) The Administrative Agent shall have received a favorable written
opinion (addressed to the Administrative Agent and the Lenders and dated the
Effective Date) of (i) Cravath Swaine & Moore, New York counsel for the Parent
and its Subsidiaries, substantially in the form of Exhibit B-1 and
(ii) Robert F. Gerkens, Assistant General Counsel of the Parent, substantially
in the form of Exhibit B-2, and covering such other matters relating to the
Parent and Bidco, this Agreement or the Transactions as the Required Lenders
shall reasonably request. The Parent hereby requests such counsel to deliver
such opinions.
(f) The Administrative Agent shall have received such documents and
certificates as the Administrative Agent or its counsel may reasonably request
relating to the organization, existence and good standing of the Parent, the
authorization of the Transactions and any other legal matters relating to the
Parent, this Agreement or the Transactions, all in form and substance reasonably
satisfactory to the Administrative Agent and its counsel.
(g) The Administrative Agent shall have received a certificate, dated
the Effective Date and signed by the President, a Vice President or a Financial
Officer of the Parent, confirming compliance with the conditions set forth in
paragraphs (a) and (b) of Section 4.04.
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(h) Moody's and S&P shall have issued indicative ratings with respect
to the Loans of at least Baa2 and BBB, respectively, and shall have issued
indicative ratings (after giving effect to the Acquisitions) with respect to
commercial paper of the Parent of at least A2 and P2, respectively.
The Administrative Agent shall notify the Parent and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, this Agreement shall not become effective unless each of the
foregoing conditions is satisfied (or waived pursuant to Section 9.02) at or
prior to 3:00 p.m., New York City time, on October 15, 1999 (and, in the event
such conditions are not so satisfied or waived, the Commitments shall terminate
at such time).
SECTION 4.02. Certain Funds Period. The Certain Funds Period shall
commence on the date on or after the Effective Date on which each of the
following conditions is satisfied (or waived in accordance with Section 9.02)
(the date on which such conditions are satisfied or waived, the "Certain Funds
Commencement Date"):
(a) All conditions in the Preconditional Bid to the making of the
Offer (including conditions with respect to required regulatory approvals)
shall have been satisfied (or waived with the consent of the Required
Lenders) in all material respects.
(b) The Offer shall have been posted to the Jaguar Shareholders as
soon as practicable (and in any event within 28 days) after all conditions
in the Preconditional Bid to the making of the Offer have been satisfied
(or waived with the consent of the Required Lenders).
(c) The Administrative Agent shall have received all fees and other
amounts due and payable on or prior to the Certain Funds Commencement Date,
including, to the extent invoiced, reimbursement or payment of all
out-of-pocket expenses required to be reimbursed or paid by the Borrowers
hereunder.
SECTION 4.03. Initial Revolving Loans. The obligation of each Lender
to make any Revolving Loan in respect of the financing of the Stock Acquisition
during the Certain Funds Period is subject to the satisfaction (or waiver
pursuant to Section 9.02) of the following conditions on the date of such Loan,
which date shall in any event be on or after the Effective Date and on or prior
to June 15, 2000 (the first date on which such conditions are satisfied or
waived, the "Initial Funding Date"):
(a) The representations and warranties of the Borrowers set forth in
Sections 3.01 (other than with respect to the corporate existence of Jaguar
and its subsidiaries), 3.02, 3.03 (other than with respect to Jaguar and
its subsidiaries), 3.07 (other than the last sentence thereof and other
than with respect to Jaguar and its subsidiaries), 3.08 and 3.12 of this
Agreement shall be true and correct in all material respects on and as of
the date of such Borrowing.
(b) There shall not be in effect any injunction or restraining order
of any Governmental Authority having jurisdiction to issue such injunction
or restraining order prohibiting the making of the Loans made on such date,
the use of the proceeds thereof or the consummation of the Offer or the
Acquisitions.
(c) No Major Default shall have occurred and be continuing.
(d) In the case of the Revolving Loans made on the Initial Funding
Date, the Offer shall have been declared unconditional in all respects on
behalf of Bidco and no Default or Event of Default shall have occurred in
respect of Section 5.09(j).
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(e) In the case of the Revolving Loans made on the Initial Funding
Date, the Administrative Agent shall have received copies of the Offer
Documents, and of all other documents and materials filed or released
publicly by the Parent or Bidco in connection with the Offer, certified as
true and correct copies thereof as of the Initial Funding Date by the
President, a Vice President or a Financial Officer of Bidco.
(f) In the case of the Revolving Loans made on the Initial Funding
Date, the Administrative Agent shall have received all fees and other
amounts due and payable on or prior to the Initial Funding Date, including,
to the extent invoiced, reimbursement or payment of all out-of-pocket
expenses required to be reimbursed or paid by the Borrowers hereunder.
(g) In the case of the Revolving Loans made on the Initial Funding
Date, the Parent shall have provided irrevocable notice of termination of
the Existing Revolving Credit Facility pursuant to the terms thereof and
all amounts due and payable thereunder shall have been paid in full (it
being agreed that no borrowings shall be made under the Existing Revolving
Credit Facility after the Initial Funding Date and each Lender which is a
lender under the Existing Revolving Credit Facility hereby waives any
requirement for the giving of such notice under the Existing Revolving
Credit Facility).
(h) Perrier shall have contributed (or shall simultaneously
contribute) to Bidco its share of the purchase price of the Shares being
acquired in the Offer in accordance with the Acquisition Agreement.
SECTION 4.04. Each Credit Event. The obligation of each Lender to make
any Revolving Loan requested to be made by it on any date (other than the
Revolving Loans made during the Certain Funds Period in connection with the
Stock Acquisition) is subject to the satisfaction of the following conditions
(in addition to the conditions otherwise applicable):
(a) The representations and warranties of the Borrowers set forth in
Article III (other than those set forth in Sections 3.04 and 3.06) shall be
true and correct in all material respects on and as of the date of such
Borrowing, except to the extent such representations and warranties
expressly relate to an earlier date.
(b) At the time of and immediately after giving effect to such
Borrowing no Default or Event of Default shall have occurred and be
continuing.
Each Borrowing shall be deemed to constitute a representation and warranty
by the Borrowers on the date thereof as to the matters specified in
paragraphs (a) and (b) of this Section.
SECTION 4.05. Each Additional Borrower Credit Event. The obligation of
each Lender to make Revolving Loans hereunder to any Additional Borrower is
subject to the satisfaction of the following conditions:
(a) The Administrative Agent (or its counsel) shall have received from
each party thereto either (i) a counterpart of such Additional Borrowers
Agreement or (ii) written evidence reasonably satisfactory to the
Administrative Agent (which may include telecopy transmission of a signed
signature page thereof) that such party has signed a counterpart of such
Additional Borrower Agreement.
(b) The Administrative Agent shall have received a favorable written
opinion of counsel for such Additional Borrower (which counsel shall be
reasonably acceptable to the Administrative Agent), in a form satisfactory
to the Administrative Agent, and covering such of the representations in
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43
Section 3.01, 3.02, 3.03 and 3.06(a) as may be reasonably requested by the
Administrative Agent and such other matters relating to such Additional
Borrower or its Additional Borrower Agreement as the Administrative Agent
or the Required Lenders shall reasonably request.
(c) The Administrative Agent shall have received such documents and
certificates as the Administrative Agent or its counsel may reasonably
request relating to the organization, existence and good standing of such
Additional Borrower, the authorization of the Transactions relating to such
Additional Borrower and any other legal or tax matters relating to such
Additional Borrower, its Additional Borrower Agreement or such
Transactions, all in form and substance reasonably satisfactory to the
Administrative Agent and its counsel.
ARTICLE V
Affirmative Covenants
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full, the Parent covenants and agrees with the Lenders that:
SECTION 5.01. Financial Statements and Other Information. The Parent
will furnish to the Administrative Agent:
(a) within 95 days after the end of each fiscal year of the Parent,
its audited consolidated balance sheet and related statements of income,
cash flows and stockholders' equity as of the end of and for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all reported on by Arthur Andersen LLP or other independent
public accountants of recognized national standing (without a "going
concern" or like qualification or exception and without any qualification
or exception as to the scope of such audit) to the effect that such
consolidated financial statements present fairly in all material respects
the financial condition and results of operations of the Parent and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied;
(b) within 50 days after the end of each of the first three fiscal
quarters of each fiscal year of the Parent, its consolidated balance sheet
and related statements of income, cash flows and stockholders' equity as of
the end of and for such fiscal quarter and the then elapsed portion of the
fiscal year, setting forth in each case in comparative form the figures for
the corresponding period or periods of (or, in the case of the balance
sheet, as of the end of) the previous fiscal year, all certified by one of
its Financial Officers as presenting fairly in all material respects the
financial condition and results of operations of the Parent and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes;
(c) concurrently with any delivery of financial statements under
clause (a) or (b) above, a certificate of a Financial Officer of the Parent
(i) certifying as to whether a Default has occurred and is continuing and,
if a Default has occurred, specifying the details thereof and any action
taken or proposed to be taken with respect thereto, (ii) setting forth
reasonably detailed calculations demonstrating compliance with Sections
6.01 and 6.02 and (iii) stating whether any change in GAAP or in the
application thereof has occurred since the date of the audited financial
statements referred to
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44
in Section 3.04 and, if any such change has occurred, specifying the
effect of such change on the financial statements accompanying such
certificate;
(d) concurrently with any delivery of financial statements under
clause (a) above, a certificate of the accounting firm that reported on
such financial statements stating whether they obtained knowledge during
the course of their examination of such financial statements of any Default
insofar as the same relates to any financial accounting matters covered by
their audit (which certificate may be limited to the extent required by
accounting rules or guidelines);
(e) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by
the Parent or any Subsidiary with the Securities and Exchange Commission,
or any Governmental Authority succeeding to any or all of the functions of
said Commission, or with any national securities exchange, or distributed
by the Parent to its shareholders generally, as the case may be; and
(f) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of the
Parent, or compliance with the terms of this Agreement, as the
Administrative Agent or any Lender may reasonably request.
SECTION 5.02. Notices of Material Events. The Parent will furnish to
the Administrative Agent and each Lender prompt written notice of the following,
promptly after a Financial Officer or other responsible officer of the Parent
obtains knowledge thereof:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting the
Parent or any Affiliate thereof that, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Parent and its Subsidiaries in an aggregate
amount exceeding $25,000,000;
(d) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect; and
(e) any formal notices delivered under the Acquisition Agreement.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Parent setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
SECTION 5.03. Existence; Conduct of Business. The Parent will, and
will cause each of its Subsidiaries to, do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises material
to the conduct of its business; provided that the foregoing shall not prohibit
any merger, consolidation, liquidation or dissolution permitted under
Section 6.05.
SECTION 5.04. Payment of Obligations. The Parent will, and will cause
each of its Subsidiaries to, pay its obligations, including Tax liabilities,
before the same shall become delinquent or in default, that, if not paid, could
result in a Material Adverse Effect, except where (a) the validity or amount
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45
thereof is being contested in good faith by appropriate proceedings, (b) the
Parent or such Subsidiary has set aside on its books adequate reserves with
respect thereto in accordance with GAAP and (c) the failure to make payment
pending such contest could not reasonably be expected to result in a Material
Adverse Effect.
SECTION 5.05. Maintenance of Properties; Insurance. The Parent will,
and will cause such of its Subsidiaries to, (a) keep and maintain all property
material to the conduct of its business in good working order and condition,
ordinary wear and tear excepted, and (b) maintain, with financially sound and
reputable insurance companies, insurance in such amounts and against such risks
as are customarily maintained by companies engaged in the same or similar
businesses operating in the same or similar locations (it being understood that,
to the extent consistent with prudent business practice of persons carrying on a
similar business in a similar location, a program of self-insurance for first or
other loss layers may be utilized).
SECTION 5.06. Books and Records; Inspection Rights. The Parent will,
and will cause each of its Subsidiaries to, keep proper books of record and
account in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities. The Parent will, and
will cause each of its Subsidiaries to, permit any representatives designated by
the Administrative Agent or any Lender, upon reasonable prior notice, to visit
and inspect its properties, to examine and make extracts from its books and
records, and to discuss its affairs, finances and condition with its officers
and independent accountants, all at such reasonable times and as often as
reasonably requested.
SECTION 5.07. Compliance with Laws. The Parent will, and will cause
each of its Subsidiaries to, comply with all laws, rules, regulations and orders
of any Governmental Authority applicable to it or its property (including,
without limitation, Environmental Laws), except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
SECTION 5.08. Use of Proceeds. The proceeds of the Loans will be used
for financing the Acquisitions (including capitalization of Bidco by means of
debt or equity in accordance with the Acquisition Agreement and, following the
Initial Funding Date, to fund an escrow account for use to purchase or otherwise
acquire Shares and including the funding of cash collateral provided by Bidco in
connection with any Guaranteed Loan Notes issued pursuant to the Offer), to
refinance existing Indebtedness, to pay fees and expenses in connection with the
Acquisitions and the financing thereof, supporting commercial paper issued by
the Parent, and providing for the working capital and general corporate needs of
the Parent and its Subsidiaries prior to and following the Acquisitions. No part
of the proceeds of any Loan will be used, whether directly or indirectly, for
any purpose that entails a violation of any of the Regulations of the Board,
including Regulations U and X. If requested by the Administrative Agent, the
Parent shall set forth in reasonable detail the use of the proceeds of each
Borrowing of the Revolving Loans.
SECTION 5.09. Acquisition. (a) The Parent will, and will cause Bidco
to, comply in all material respects with the Financial Services Act 1986 and the
Companies Act and all other applicable laws and regulations relevant in the
context of the Offer and use all reasonable endeavors to comply in all material
respects with the Takeover Code.
(b) Subject to the provisions of the Takeover Code, the Parent will
keep the Lenders and the Administrative Agent reasonably informed of, and will
promptly respond to reasonable inquiries of the Administrative Agent regarding,
the progress of the Offer and all material matters likely to affect the
interests of the Lenders in respect of the Offer and consult with the
Administrative Agent on all such matters.
(c) Subject to any requirements of the Takeover Code, the Parent will
not, and will not permit Bidco to, issue any press release or make any statement
during the course of the Offer which contains any information or statement
concerning the Loan Documents or the Lenders except to the extent set forth in
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46
the Loan Documents without first obtaining the prior approval of the information
or statement from the Required Lenders (such approval not to be unreasonably
withheld or delayed).
(d) Subject to this Section 5.09 and if Section 5.09(e) does not
apply, after the Unconditional Offer Date, the Parent will, and will cause Bidco
to, use all reasonable endeavors (which shall not include making any purchase in
the market) to acquire all the Shares as soon as practicable.
(e) (i) As soon as reasonably practicable (and in any event within
three Business Days) after it first becomes entitled to implement the Compulsory
Acquisition procedures in respect of the Shares of Jaguar shareholders who have
not accepted the Offer, the Parent shall notify the Administrative Agent thereof
and (ii) as soon as reasonably practicable (and in any event within the time
period prescribed by applicable law) after Bidco becomes entitled to apply the
provisions of Part XIIIA of the Companies Act in relation to the Shares, the
Parent shall cause Bidco to dispatch the appropriate notices under Section 429
of the Companies Act.
(f) The Parent will, and will cause Bidco to, ensure that at no time
shall circumstances arise whereby a mandatory offer is required to be made under
the terms of Rule 9 of the Takeover Code in respect of the Shares.
(g) The Parent will not, and will not permit Bidco to, acquire any
Shares in the market at a price above the price set forth in the Offer.
(h) The Parent will, and will cause Bidco to, procure that Jaguar is
(i) removed from the Official List of London Stock Exchange Limited and from the
listings of the New York Stock Exchange and (ii) re-registered as a private
company (in each case) as soon as legally and reasonably practicable after Bidco
has received acceptances from the holders of 90% of the Shares.
(i) The Parent will not, and will not permit Bidco to, declare the
Offer unconditional as to acceptances without the consent of the Required
Lenders (including the Agents) unless Bidco has acquired or has contracted to
acquire (through the receipt of acceptances or otherwise) more than 50% of the
Shares.
(j) The Parent will not, and will not permit Bidco to, amend,
supplement, waive or otherwise modify any substantive term or condition of the
Offer as described in the Press Release (including, without limitation, any
increase in the consideration to be paid but excluding any extension of the time
for acceptance of the Offer permitted under paragraph (k) below and excluding
any waiver of the minimum acceptance conditions to any amount which is greater
than 50% of the Shares) without the consent of the Required Lenders (including,
in the case of any such increase in the consideration to be paid, the Agents) if
such amendment, supplement, waiver or other modification could reasonably be
expected to materially adversely affect the Lenders, provided that the consent
of the Required Lenders (including the Agents) shall not be required in relation
to any waiver of the conditions contained in the Press Release, relating to
matters other than aggregate purchase price (including the terms of the
Guaranteed Loan Notes), minimum acceptance conditions (to the extent that, after
giving effect to such waiver, the minimum acceptance condition would be for 50%
or less of the Shares) and required regulatory approvals, that is required by
the Panel.
(k) The Parent will not, and will not permit Bidco to, extend the time
for the acceptance of the Offer without the prior written consent of the
Required Lenders if anything has occurred since the date of this Agreement or,
as the case may be, the last extension of the time for the acceptance of the
Offer that has had, or could reasonably be expected to have, a material adverse
effect on the assets, business, financial condition or prospects of Jaguar and
its subsidiaries and that could reasonably be expected to have a material
adverse effect on the ability of the Loan Parties to perform their obligations
under the Loan Documents when
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47
compared to the position that would have applied had the material adverse effect
in relation to Jaguar and its subsidiaries not occurred.
(l) The Parent will, and will cause Bidco to, give the Administrative
Agent not less than two Business Days prior written notice of any proposed
extension of the time for the acceptance of the Offer together with a
certificate signed by two officers of the Parent confirming that as at the date
of the certificate (which shall not be more than ten Business Days before the
current expiry date of the Offer) to the best of their knowledge and belief
(after reasonable enquiry) no material adverse effect in relation to Jaguar and
its subsidiaries of the kind described in paragraph (k) above has occurred.
SECTION 5.10. Proceeds from Sale of Shares. In the event that the
Parent or any of its Subsidiaries consummates any sale of any Unrestricted
Margin Stock, so long as any Loans are outstanding hereunder, the Parent will
either (a) hold the proceeds of such sale as cash or (b) invest such proceeds in
Permitted Investments.
SECTION 5.11. Acquisition-Related Guarantors. Promptly following any
applicable statutory waiting period, the Parent shall cause, to the extent
permitted by applicable Requirements of Law and contractual restrictions,
Material Subsidiaries acquired or created in connection with the Acquisitions to
become Subsidiary Guarantors.
SECTION 5.12. Loan Stock. The Parent shall use reasonable commercial
efforts to ensure that Clause 7 of the Loan Stock Trust Deed is amended, varied
or waived as and to the extent necessary to permit Jaguar and its subsidiaries
to make any Dispositions which are contemplated or required in connection with
the Asset Divisions.
SECTION 5.13. Additional Guarantors. With respect to any Subsidiary
which becomes a Subsidiary Guarantor after the Effective Date, the Parent shall
promptly (but in any case within 14 days) cause such new Subsidiary (a) to
become a party to the Guarantee and (b) to deliver to the Administrative Agent
such certificates and opinions with respect to such Guarantee as the
Administrative Agent shall reasonably request.
SECTION 5.14. Asset Divisions. The Parent shall, subject to
Section 5.12, use its reasonable best efforts to complete in accordance with the
Acquisition Agreement the Asset Divisions as soon as practicable after the Offer
is declared unconditional.
ARTICLE VI
Negative Covenants
Until the Commitments have expired or terminated and the principal of
and interest on each Loan and all fees payable hereunder have been paid in full,
the Parent covenants and agrees with the Lenders that:
SECTION 6.01. Interest Coverage. The Parent will not permit for any
period ending with the last day of any fiscal quarter commencing after the
Initial Funding Date the Consolidated Interest Coverage Ratio to be less than
2.25 to 1.00 for the first three fiscal quarters commencing after the Initial
Funding Date, 2.50 to 1.00 for the next succeeding four fiscal quarters and 3.00
to 1.00 for each fiscal quarter thereafter.
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SECTION 6.02. Maximum Leverage Ratio. The Parent will not permit the
Consolidated Leverage Ratio as of the last day of the first three fiscal
quarters commencing after the Initial Funding Date to be greater than 0.72 to
1.00, will not permit the Consolidated Leverage Ratio as of the last day of the
next succeeding four fiscal quarters to be greater than 0.69 to 1.00 and will
not permit the Consolidated Leverage Ratio as of the last day of any subsequent
fiscal quarter to be greater than 0.65 to 1.00.
SECTION 6.03. Indebtedness. The Parent will not, and will not permit
any Subsidiary to, create, incur, assume or permit to exist any Indebtedness,
except:
(a) Indebtedness created under the Loan Documents;
(b) Indebtedness existing on the date hereof and set forth in
Schedule 6.03 and extensions, renewals and replacements of any such
Indebtedness that do not increase the outstanding principal amount
thereof;
(c) Indebtedness of the Parent or any Subsidiary Guarantor issued
pursuant to Capital Markets Transactions the Net Cash Proceeds of which are
used to reduce the 364-Day Revolving Commitments and Five-Year Revolving
Commitments in accordance with Section 2.10;
(d) Indebtedness of the Parent in respect of commercial paper issued
by it, provided that the aggregate principal amount of such Indebtedness at
any one time outstanding does not exceed the unused portion of the 364-Day
Revolving Commitments and the Five-Year Revolving Commitments;
(e) Indebtedness of the Parent to any Subsidiary and of any Subsidiary
to the Parent or any other Subsidiary;
(f) Guarantee Obligations incurred by the Parent in respect of
Indebtedness of any Subsidiary and by any Subsidiary in respect of
Indebtedness of the Parent or any other Subsidiary;
(g) Indebtedness of the Parent or its Subsidiaries incurred to finance
the acquisition, construction or improvement of any fixed or capital
assets, including Capital Lease Obligations and any Indebtedness assumed in
connection with the acquisition of any such assets or secured by a Lien on
any such assets prior to the acquisition thereof, and refinancings,
extensions, renewals and replacements of any such Indebtedness that do not
increase the outstanding principal amount thereof; provided that (i) such
Indebtedness is incurred prior to or within 360 days after such acquisition
or the completion of such construction or improvement and (ii) the
aggregate principal amount of Indebtedness incurred after the date hereof
permitted by this clause (g) shall not exceed $25,000,000 at any time
outstanding;
(h) Indebtedness of (i) any Person (including a subsidiary of Jaguar)
that becomes a Subsidiary after the date hereof, provided that such
Indebtedness exists at the time such Person becomes a Subsidiary and is not
created in contemplation of or in connection with such Person becoming a
Subsidiary and (ii) the Parent (including Indebtedness issued pursuant to
Capital Markets Transactions) incurred to refinance or replace existing
Indebtedness of Jaguar and its subsidiaries;
(i) Indebtedness of the Parent or its Subsidiaries as an account party
in respect of trade and performance letters of credit, or in respect of
operating guarantees or warranties, in each case in the ordinary course
of business;
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(j) Project Finance Indebtedness of Project Finance Companies, and
Guarantee Obligations of the Parent or any of its other Subsidiaries in
respect of Project Finance Indebtedness and Indebtedness of JV Affiliates,
provided that the aggregate principal amount of the Project Finance
Indebtedness which is the subject of such Guarantee Obligations incurred
after the date hereof, together with the aggregate principal amount of
any Indebtedness of any JV Affiliate which is the subject of Guarantee
Obligations incurred after the date hereof by the Parent and its
Subsidiaries, does not exceed $175,000,000;
(k) to the extent Bidco becomes a Subsidiary of the Parent,
Indebtedness of Bidco in respect of the Guaranteed Loan Notes;
(l) Indebtedness of the Parent or its Subsidiaries as an account party
in respect of letters of credit required to satisfy financing conditions of
the Cantarell Nitrogen Project in Mexico, in which Jaguar or its
subsidiaries are participants, which are imposed or required as a result of
the Acquisitions; and
(m) Indebtedness of the Parent or its subsidiary to finance the
purchase of the outstanding shares of Capital Stock of Korea Industrial
Gases Ltd. not owned by the Parent and its Subsidiaries; and
(n) other unsecured Indebtedness in an aggregate principal amount not
exceeding at any time outstanding $200,000,000 from the date hereof to and
including the Initial Funding Date, $400,000,000 from immediately after the
Initial Funding Date to the first anniversary of the Initial Funding Date
and $600,000,000 thereafter; provided that the aggregate principal amount
of Indebtedness of the Parent's Subsidiaries permitted by this clause (n)
shall not exceed $100,000,000 at any time outstanding.
SECTION 6.04. Liens. The Parent will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter acquired by it (other than Unrestricted Margin
Stock), or assign or sell any income or revenues (including accounts receivable)
or rights in respect of any thereof, except:
(a) Permitted Encumbrances;
(b) (i) any Lien on any property or asset of the Parent or its
Subsidiary (other than any Project Finance Company) existing on the date
hereof and described in Schedule 6.04, or (ii) any Lien on any property or
asset of any Project Finance Company existing on the date hereof; provided
that, in any such case, such Lien shall secure only those obligations which
it secures on the date hereof and extensions, renewals and replacements
thereof that do not increase the outstanding principal amount thereof;
(c) any Lien existing on any property or asset prior to the
acquisition thereof by the Parent or any Subsidiary or existing on any
property or asset of any Person that becomes a Subsidiary after the date
hereof prior to the time such Person becomes a Subsidiary; provided that
(i) such Lien is not created in contemplation of or in connection with such
acquisition or such Person becoming a Subsidiary, as the case may be, (ii)
such Lien shall not apply to any other property or assets of the Parent or
any Subsidiary and (iii) such Lien shall secure only those obligations
which it secures on the date of such acquisition or the date such Person
becomes a Subsidiary, as the case may be and extensions, renewals and
replacements thereof that do not increase the outstanding principal amount
thereof;
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(d) Liens on fixed or capital assets acquired, constructed or improved
by the Parent or any Subsidiary; provided that (i) such security interests
secure Indebtedness permitted by clause (g) of Section 6.03, (ii) such
security interests and the Indebtedness secured thereby are incurred prior
to or within 360 days after such acquisition or the completion of such
construction or improvement, (iii) the Indebtedness secured thereby does
not exceed 100% of the cost of acquiring, constructing or improving such
fixed or capital assets, (iv) such security interests shall not apply to
any other property or assets of the Parent or any Subsidiary and
(v) extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof;
(e) Liens securing Indebtedness permitted under Section 6.03(e);
(f) Liens in favor of any Governmental Authority, or any department,
agency or political subdivision of any Governmental Authority, to secure
partial, progress, advance or other payments pursuant to any contract or
statute, including, without limitation, Liens to secure Indebtedness of
the pollution control or industrial revenue bond type, or to secure any
Indebtedness incurred for the purpose of financing all or any part of the
purchase price or the cost of constructing or improving the property
subject to such Liens;
(g) Liens in favor of any customer arising in respect of partial,
progress, advance or other payments made by or on behalf of such
customer for goods produced for or services rendered to such customer
in the ordinary course of business not excluding the amount of such
payments;
(h) Liens securing Hedging Agreements;
(i) Liens created by or resulting from any litigation or
proceedings which are being contested in good faith; Liens arising out
of judgments or awards against the Parent or any Subsidiary with respect
to which the Parent or such Subsidiary is in good faith prosecuting an
appeal or proceeding for review; or Liens incurred by the Parent or any
Subsidiary for the purpose of obtaining a stay or discharge in the course
of any legal proceeding to which the Parent or such Subsidiary is a party,
provided that, in each case, if the amount received thereby is more than
$50,000,000, such Lien has not existed for more than 45 days;
(j) to the extent Bidco becomes a Subsidiary of the Parent, Liens in
respect of cash collateral created by Bidco in favor of the Loan Notes
Guarantor to secure its obligations in respect of the Guaranteed Loan
Notes;
(k) Liens securing Indebtedness or other obligations not exceeding
$25,000,000 in the aggregate at any time outstanding; and
(l) Liens securing Project Finance Indebtedness of any Project Finance
Company.
SECTION 6.05. Fundamental Changes. (a) The Parent will not, and will
not permit any Subsidiary to, merge into or consolidate with any other Person,
or permit any other Person to merge into or consolidate with it, or sell,
transfer, lease or otherwise dispose of (in one transaction or in a series of
transactions) all or substantially all of its assets (other than Unrestricted
Margin Stock), or all or substantially all of the stock of any of its
Subsidiaries (other than Unrestricted Margin Stock) (in each case, whether now
owned or hereafter acquired), or liquidate or dissolve, except for transactions
contemplated by the Acquisition Agreement and except that, if at the time
thereof and immediately after giving effect thereto no Default shall have
occurred and be continuing (i) any Person may merge into a Borrower in a
transaction in which a Borrower is the surviving corporation, (ii) any Person
may merge into any Subsidiary in a transaction in which the surviving entity
is a
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51
Subsidiary, (iii) any Subsidiary may sell, transfer, lease or otherwise
dispose of its assets to any Borrower or to another Subsidiary and (iv) any
Subsidiary may liquidate or dissolve if the Parent determines in good faith that
such liquidation or dissolution is in the best interests of the Parent and is
not materially disadvantageous to the Lenders; provided that any such merger
involving a Person that is not a wholly owned Subsidiary immediately prior to
such merger shall not be permitted unless also permitted by Section 6.06.
(b) The Parent will not, and will not permit any of its Subsidiaries
to, engage to any material extent in any business other than businesses of the
type conducted by the Parent and its Subsidiaries or Jaguar and its subsidiaries
on the date of execution of this Agreement and businesses reasonably related
thereto.
SECTION 6.06. Investments, Loans, Advances, Guarantees and
Acquisitions; Hedging Agreements. (a) The Parent will not, and will not permit
any of its Subsidiaries to, purchase, hold or acquire (including pursuant to any
merger with any Person that was not a wholly owned Subsidiary prior to such
merger) any capital stock, evidences of indebtedness or other securities
(including any option, warrant or other right to acquire any of the foregoing
which can be exercised during the term of this Agreement) of, make or permit to
exist any loans or advances to, guarantee any obligations of, or make or permit
to exist any investment or any other interest in, any other Person, or purchase
or otherwise acquire (in one transaction or a series of transactions) any
assets of any other Person constituting a business unit, except for
transactions contemplated by the Acquisition Agreement and except the
following:
(i) Permitted Investments;
(ii) investments, loans and advances by the Parent or any of
its Subsidiaries in connection with the purchase of the outstanding shares
of Capital Stock of Korea Industrial Gases, Ltd. not owned by the Parent
and its Subsidiaries, provided that the aggregate amount of all such
investments, loans and advances permitted by this this Section 6.06(a)(ii)
shall not exceed Korean Won 250 billion;
(iii) investments, loans and advances by the Parent or any of
its Subsidiaries in the Parent or any of its Subsidiaries now or
hereafter existing, provided that (A) the aggregate amount of all
such investments, loans and advances and of Guarantee Obligations
in respect of Indebtedness made after the date hereof by the
Parent or any Subsidiary Guarantor in Subsidiaries which are not
Subsidiary Guarantors shall not exceed $200,000,000 from the date
hereof to the first anniversary of the date hereof, and
$400,000,000 thereafter, and (B) the aggregate principal amount
of such loans and advances made after the date hereof by any
Subsidiary which is not a Subsidiary Guarantor to the Parent or a
Subsidiary Guarantor on a basis that is not subordinated to the
Loans or the guarantee thereof under the Guarantee to a Borrower
or a Subsidiary Guarantor shall not exceed $100,000,000 at any
time;
(iv) Guarantee Obligations permitted by Section 6.03;
(v) investments, loans and advances by the Parent or any
Subsidiary in JV Affiliates or Project Finance Companies now or
hereafter existing; provided, that any investments, loans or advances
made after the date hereof to JV Affiliates or Project Finance Companies
shall not in the aggregate exceed, at any time, $200,000,000 from the
date hereof to the first anniversary of the date hereof, and
$400,000,000 thereafter; and
(vi) loans or advances to or investments in any Person other than
a Subsidiary or the Parent, JV Affiliates or Project Finance Companies in
the ordinary course of business in an aggregate principal amount not to
exceed $25,000,000 at any time; and
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52
(vii) loans and advances to employees of the Parent or its
Subsidiaries in the ordinary course of business (including, without
limitation, for travel, entertainment and relocation expenses).
(b) The Parent will not, and will not permit any of its Subsidiaries
to, enter into any Hedging Agreement, other than Hedging Agreements entered
into in the ordinary course of business to hedge or mitigate risks to which the
Parent or any Subsidiary is exposed in the conduct of its business or the
management of its liabilities or in connection with the Acquisitions.
SECTION 6.07. Transactions with Affiliates. The Parent will not, and
will not permit any of its Subsidiaries to, sell, lease or otherwise transfer
any property or assets to, or purchase, lease or otherwise acquire any property
or assets from, or otherwise engage in any other transactions with, any of its
Affiliates after the date hereof, except (a) in the ordinary course of business
at prices and on terms and conditions not less favorable to the Parent or such
Subsidiary than could be obtained on an arm's-length basis from unrelated third
parties, (b) transactions between or among the Borrowers or between or among the
Parent and its wholly owned Subsidiaries not involving any other Affiliate, (c)
any issuance of securities or other payments, awards or grants in cash,
securities or otherwise pursuant to, or the funding of, employment arrangements,
stock options and stock ownership plans approved by the Parent and any loans or
advances to employees of the Parent or its Subsidiaries in the ordinary course
of business and (d) transactions contemplated by the Acquisition Agreement;
provided, however, that the Parent and its Subsidiaries shall be permitted to
continue current practices and honor current long-term contracts with the
Affiliates identified on Schedule 6.07. The foregoing shall not apply to
customary benefits to officers, directors and employees of the Parent and its
Subsidiaries or to transactions with Project Finance Companies and JV Affiliates
expressly contemplated hereby.
SECTION 6.08. Restrictive Agreements. The Parent will not, and will
not permit any of its Subsidiaries to, directly or indirectly, enter into, incur
or permit to exist any agreement or other arrangement that prohibits, restricts
or imposes any condition upon (a) the ability of the Parent or any Subsidiary to
create, incur or permit to exist any Lien upon any of its property or assets
(other than Unrestricted Margin Stock), or (b) the ability of any Subsidiary to
pay dividends or other distributions with respect to any shares of its capital
stock or to make or repay loans or advances to the Parent or any other
Subsidiary or to guarantee Indebtedness of the Parent or any other Subsidiary;
provided that (i) the foregoing shall not apply to restrictions and conditions
imposed by law or by this Agreement, (ii) the foregoing shall not apply to
restrictions and conditions existing on the date hereof identified on
Schedule 6.08 or any extension or renewal of, or any amendment or modification
not expanding the scope of, any such restriction or condition, (iii) the
foregoing shall not apply to customary restrictions and conditions contained in
agreements relating to the sale of a Subsidiary or assets pending such sale,
provided such restrictions and conditions apply only to the Subsidiary or assets
that are to be sold and such sale is permitted hereunder, (iv) clause (a) of the
foregoing shall not apply to restrictions or conditions imposed by any agreement
relating to secured Indebtedness permitted by this Agreement if such
restrictions or conditions apply only to the property or assets securing such
Indebtedness, (v) clause (a) of the foregoing shall not apply to customary
provisions in leases and other contracts restricting the assignment thereof and
(vi) the foregoing shall not apply to transactions contemplated by the
Acquisition Agreement.
SECTION 6.09. Sales and Leasebacks. The Parent will not, and will not
permit any of its Subsidiaries to, enter into any arrangement after the date
hereof with any Person providing for the leasing by the Parent or any Subsidiary
of real or personal property that has been or is to be sold or transferred by
the Parent or such Subsidiary to such Person or to any other Person to whom
funds have been or are to be advanced by such Person on the security of such
property or rental obligations of the Parent or such Subsidiary (a
"Sale/Leaseback Transaction") unless, if the asset that is the subject of such
Sale/Leaseback Transaction was acquired or constructed in contemplation
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53
thereof, the transaction would be permitted as a financing under Section 6.04
(including all other Sale/Leaseback Transactions after the date hereof).
SECTION 6.10. Changes in Fiscal Periods. The Parent will not permit
the fiscal year of the Parent to end on a day other than September 30 or change
the Parent's method of determining fiscal quarters.
SECTION 6.11. Additional Borrowers. If the Parent ceases to own at
least 80% of an Additional Borrower, the Parent shall, within 10 days after an
officer of the Parent becomes aware of such cessation, cause such Subsidiary to
cease be an Additional Borrower pursuant to an Additional Borrower Termination
and to prepay all Loans made to it and outstanding at such time.
SECTION 6.12. Bidco. The Parent will not permit Bidco to engage in any
business or activity or enter into any transaction, contractual obligation or
other undertaking which is not expressly permitted by, or directly related or
incidental to the transactions contemplated by, the Offer Documents, this
Agreement or the Acquisition Agreement in connection with the consummation of
the Acquisitions.
SECTION 6.13. Acquisition Agreement. The Parent will not amend,
supplement, waive or otherwise modify in any material respect the Acquisition
Agreement without the prior written consent of the Administrative Agent.
ARTICLE VII
Events of Default
SECTION 7.01. Events of Default. If any of the following events
("Events of Default") shall occur:
(a) any Borrower shall fail to pay any principal of any Loan when and
as the same shall become due and payable, whether at the due date thereof
or at a date fixed for prepayment thereof or otherwise;
(b) any Borrower shall fail to pay any interest on any Loan or any
fee or any other amount (other than an amount referred to in clause (a)
of this Article) payable under this Agreement, when and as the same shall
become due and payable, and such failure shall continue unremedied for a
period of five days;
(c) any representation or warranty made or deemed made by or on
behalf of the Parent or any Subsidiary in or in connection with this
Agreement, the Guarantee, any Additional Borrower Agreement or any
amendment or modification hereof or thereof, or in any report, certificate,
financial statement or other document furnished pursuant to or in
connection with this Agreement, the Guarantee, any Additional Borrower
Agreement or any amendment or modification hereof or thereof, shall prove
to have been incorrect in any material respect when made or deemed made;
(d) any Borrower shall fail to observe or perform any covenant,
condition or agreement contained in Section 5.02(a), 5.03 (with respect
to the Parent's existence), 5.08, 5.09(e), 5.09(f), 5.09(i), 5.09(j) or in
Article VI;
(e) any Loan Party shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement (other than those
specified in clause (a), (b) or (d) of this Article) or the Guarantee, and
such failure shall continue unremedied for a period of 30 days after the
earlier to occur
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54
of (i) the date on which a Financial Officer shall have discovered such
default and (ii) the date on which written notice thereof has been given
to the Parent by the Administrative Agent (at the request of any Lender);
(f) the Parent or any Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of
any Material Obligations, when and as the same shall become due and payable
beyond the applicable grace period therefor;
(g) any event or condition occurs that results in any Material
Obligations (other than Project Finance Indebtedness which is not
guaranteed by the Parent or any Subsidiary (other than a Project Finance
Company)) becoming due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both)
the holder or holders of such Material Obligations or any trustee or agent
on its or their behalf to cause all of such Material Obligations to
become due, or to require the prepayment, repurchase, redemption or
defeasance thereof, prior to its scheduled maturity (unless waived);
provided that this clause (g) shall not apply to secured Indebtedness that
becomes due as a result of the voluntary sale or transfer of the property
or assets securing such Indebtedness;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other
relief in respect of the Parent or any Material Subsidiary or any
Additional Borrower or Bidco or its debts, or of a substantial part of its
assets, under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect or (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Parent or any Material Subsidiary or any
Additional Borrower or Bidco or for a substantial part of its assets, and,
in any such case, such proceeding or petition shall continue undismissed
for 60 days or an order or decree approving or ordering any of the
foregoing shall be entered;
(i) the Parent or any Material Subsidiary or any Additional Borrower
or Bidco shall (i) voluntarily commence any proceeding or file any petition
seeking liquidation, reorganization or other relief under any Federal,
state or foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect, (ii) consent to the institution of, or fail to contest
in a timely and appropriate manner, any proceeding or petition described in
clause (h) of this Article, (iii) apply for or consent to the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar
official for the Parent or any Material Subsidiary or any Additional
Borrower or Bidco or for a substantial part of its assets, (iv) file an
answer admitting the material allegations of a petition filed against it in
any such proceeding, (v) make a general assignment for the benefit of
creditors or (vi) take any action to authorize any of the foregoing;
(j) the Parent or any Material Subsidiary or any Additional Borrower
or Bidco shall become unable, admit in writing or fail generally to pay its
debts as they become due, including in respect of any Subsidiary organized
under the laws of the United Kingdom for the purposes of Section 123 of the
Insolvency Act 1986 (other than Section 123(1)(a), (b), (c) and (d),
provided that, for purposes of this paragraph, the words "to the
satisfaction of the court" shall be deemed to be omitted from Section
123(1)(e) and Section 123(2));
(k) one or more judgments for the payment of money in an aggregate
amount in excess of $50,000,000 shall be rendered against the Parent, any
Material Subsidiary, any Additional Borrower or any combination thereof and
the same shall remain undischarged for a period of 30 consecutive days
during which execution shall not be effectively stayed, or any action shall
be legally
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55
taken by a judgment creditor to attach or levy upon any assets
of the Parent or any Material Subsidiary to enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in a Material Adverse
Effect;
(m) a Change in Control shall occur;
(n) the guarantee contained in Section 2 of the Guarantee shall
cease, for any reason, to be in full force and effect in accordance
with its terms or any Loan Party or any Affiliate of any Loan Party
shall so assert; or
(o) the Acquisition Agreement ceases to be in full effect
in all material respects prior to the completion of the Asset
Divisions;
then, subject to Section 7.02, and in every such event (which, prior to the
Certain Funds Termination Date, must result in a Major Default) (A) (other than
an event with respect to a Borrower described in clause (h) or (i) of this
Article), and at any time thereafter during the continuance of such event, the
Administrative Agent may, and at the request of the Required Lenders shall, by
notice to the Borrowers, take either or both of the following actions, at the
same or different times: (i) terminate the Commitments, and thereupon the
Commitments shall terminate immediately, and (ii) declare the Loans then
outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to be
due and payable), and thereupon the principal of the Loans so declared to be due
and payable, together with accrued interest thereon and all fees and other
obligations of the Borrowers accrued hereunder, shall become due and payable
immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by each Borrower; (B) in case of any event with
respect to the Parent or Bidco described in clause (h) or (i) of this Article,
the Commitments shall automatically terminate and the principal of the Loans
then outstanding, together with accrued interest thereon and all fees and other
obligations of each Borrower accrued hereunder, shall automatically become due
and payable, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by such Borrower; and (C) in the case of any
event with respect to an Additional Borrower described in clause (h) or (i) of
this Article, (i) the eligibility of such Additional Borrower to borrow
hereunder shall terminate and (ii) the Loans of such Additional Borrower shall
become immediately due and payable, together with accrued interest thereon and
all fees and other obligations of such Additional Borrower accrued hereunder
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived.
SECTION 7.02. Target Group Exceptions. For a period of six months
after the Unconditional Offer Date, the Events of Default set out in
Section 7.01(c), (d) and (e) shall not apply to or in respect of any event with
respect to the Apollo Businesses which exists on, or is a direct result of the
occurrence of, the Unconditional Offer Date, provided that this exception shall
not apply in relation to matters (other than those which exist on the
Unconditional Offer Date) which the Parent (either directly or through control
over its Subsidiaries) could reasonably be expected to have exercised control to
prevent or cure in the time available since the Unconditional Offer Date.
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56
ARTICLE VIII
The Agents
Each of the Lenders hereby irrevocably appoints each Agent as its
agent and authorizes such Agent to take such actions on its behalf and to
exercise such powers as are delegated to such Agent by the terms hereof,
together with such actions and powers as are reasonably incidental thereto.
Each bank serving as an Agent hereunder shall have the same rights and
powers in its capacity as a Lender as any other Lender and may exercise the same
as though it were not an Agent, and such bank and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of business with
the Parent or any Subsidiary or other Affiliate thereof as if it were not an
Agent hereunder.
No Agent shall have any duties or obligations except those expressly
set forth herein. Without limiting the generality of the foregoing, (a) no Agent
shall be subject to any fiduciary or other implied duties, regardless of whether
a Default has occurred and is continuing, (b) no Agent shall have any duty to
take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated hereby that the
Administrative Agent is required to exercise in writing by the Required Lenders,
and (c) except as expressly set forth herein, no Agent shall have any duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to the Parent or any of its Subsidiaries that is communicated to or
obtained by the bank serving as an Agent or any of its Affiliates in any
capacity. No Agent shall be liable for any action taken or not taken by it with
the consent or at the request of the requisite Lenders or in the absence of its
own gross negligence or wilful misconduct. No Agent shall be deemed to have
knowledge of any Default unless and until written notice thereof is given to
such Agent by the Parent, a Borrower or a Lender, and no Agent shall be
responsible for or have any duty to ascertain or inquire into (i) any statement,
warranty or representation made in or in connection with this Agreement, (ii)
the contents of any certificate, report or other document delivered hereunder or
in connection herewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein, (iv) the
validity, enforceability, effectiveness or genuineness of this Agreement or any
other agreement, instrument or document, or (v) the satisfaction of any
condition set forth in Article IV or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the Agents.
Each Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. Each Agent also may rely
upon any statement made to it orally or by telephone and believed by it to be
made by the proper Person, and shall not incur any liability for relying
thereon. The Administrative Agent may consult with legal counsel (who may be
counsel for any of the Borrowers), independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.
The Administrative Agent may perform any and all its duties and
exercise its rights and powers by or through any one or more sub-agents
appointed by the Administrative Agent. The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties. The exculpatory provisions of the
preceding paragraphs shall apply to any such sub-agent and to the Related
Parties of the Administrative Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided in this paragraph, the Administrative Agent may
resign at any time by notifying the Lenders and the Parent. Upon any such
resignation, the Required Lenders shall have the right, with the prior written
consent of the
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57
Parent (such consent shall not be unreasonably withheld and shall
not be required if an Event of Default under clause (h) or (i) of Section 7.01
has occurred and is continuing with respect to the Parent), to appoint a
successor. If no successor shall have been so appointed by the Required Lenders
and shall have accepted such appointment within 30 days after the retiring
Administrative Agent gives notice of its resignation, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent which shall be a bank with an office in New York, New York,
or an Affiliate of any such bank. Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor, such successor shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. The fees payable by the
Parent to a successor Administrative Agent shall be the same as those payable to
its predecessor unless otherwise agreed between the Parent and such successor.
After the Administrative Agent's resignation hereunder, the provisions of this
Article and Section 9.03 shall continue in effect for its benefit in respect of
any actions taken or omitted to be taken by it while it was acting as
Administrative Agent.
Each Lender acknowledges that it has, independently and without
reliance upon the any Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon any Agent or any other Lender and
based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement, any related agreement or any document
furnished hereunder or thereunder.
Notwithstanding anything to the contrary contained herein, no Lender
identified as an "Agent", other than the Administrative Agent, shall have any
right, power, obligation, liability, responsibility or duty under this Agreement
other than those applicable to all Lenders as such. Without limiting the
foregoing, none of the Lenders so identified shall have or be deemed to have any
fiduciary relationship with any Lender. Each Lender acknowledges that it has not
relied, and will not rely, on any of the Lenders so identified in deciding to
enter into this Agreement or not taking action hereunder.
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to the Parent or any Borrower, c/o Air Products and
Chemicals, Inc., Attention of Corporate Secretary (Telecopy No.
610-481-8223);
(b) if to the Administrative Agent, to The Chase Manhattan Bank,
Agent Bank Services Group, One Chase Manhattan Plaza, New York, New
York 10081, Attention of Chris Gould (Telecopy No. (212) 552-5777),
with a copy to The Chase Manhattan Bank, 270 Park Avenue, New York
10017, Attention of Peter Dedousis (Telecopy No. (212) 270-7935).
(c) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.
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58
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the
Administrative Agent or any Lender in exercising any right or power hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
the exercise of any other right or power. The rights and remedies of the
Administrative Agent and the Lenders hereunder are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of this Agreement or consent to any departure by any Borrower
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
Without limiting the generality of the foregoing, the making of a Loan shall not
be construed as a waiver of any Default, regardless of whether the
Administrative Agent or any Lender may have had notice or knowledge of such
Default at the time.
(b) Neither this Agreement, the Guarantee nor any provision hereof or
thereof may be waived, amended or modified except pursuant to an agreement or
agreements in writing entered into by the Parent and the Required Lenders or by
the Parent and the Administrative Agent with the consent of the Required Lenders
(except that no consent is required to permit the termination of any Guarantee
of any Guarantor in accordance with the terms thereof); provided that no such
agreement shall (i) increase the Commitment of any Lender without the written
consent of such Lender, (ii) reduce the principal amount of any Loan or reduce
the rate or amount of interest thereon, or reduce any fees payable hereunder,
without the written consent of each Lender affected thereby, (iii) postpone the
scheduled date of any payment of any principal amount of any Loan, or any
interest thereon, or any fees payable hereunder, or reduce the amount of, waive
or excuse any such payment, or postpone the scheduled date of expiration of any
Commitment, without the written consent of each Lender affected thereby, (iv)
amend, modify or waive Section 2.17(a), (b), (c) or (e) in a manner that would
alter the pro rata sharing of payments required thereby without the consent of
the Lenders of the Class of Lenders (constituting Required 364-Day Revolving
Lenders or Required Five-Year Revolving Lenders, as the case may be) adversely
affected thereby, (v) amend, modify or waive any of the provisions of this
Section or the definition of "Required Lenders" or release the Parent or all or
substantially all of the other Guarantors from the Guarantee or the provisions
of the first sentence of Section 9.04(a) without the written consent of each
Lender, (vi) amend, modify or waive Section 5.09(i) without the written consent
of the Administrative Agent and the Co-Syndication Agents, (vii) amend, modify
or waive Section 2.10(b) without the written consent of the Required 364-Day
Revolving Lenders or amend, modify or waive the definition of Required 364-Day
Revolving Lenders without the written consent of all the 364-Day Revolving
Lenders or (viii) amend, modify or waive the definition of Required Five-Year
Revolving Lenders without the written consent of all the Five-Year Revolving
Lenders; provided further that no such agreement shall amend, modify or
otherwise affect the rights or duties of any Agent hereunder without the prior
written consent of such Agent.
SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Parent shall
pay (i) all reasonable out-of-pocket expenses incurred by the Administrative
Agent and its Affiliates, including the reasonable fees, charges and
disbursements of counsel for the Administrative Agent, in connection with the
syndication of the credit facilities provided for herein, the preparation and
administration of this Agreement or any amendments, modifications or waivers of
the provisions hereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), and (ii) all out-of-pocket expenses incurred by
the Administrative Agent or any Lender, including the fees, charges and
disbursements of any counsel for the Administrative Agent or any Lender, in
connection with the enforcement or reasonable protection of its rights in
connection with this Agreement, including its rights under this
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Section, or in connection with the Loans made hereunder, including in connection
with any workout, restructuring or negotiations in respect thereof.
(b) The Parent shall indemnify the Administrative Agent and each
Lender, and each Related Party of any of the foregoing Persons (each such Person
being called an "Indemnitee") against, and hold each Indemnitee harmless from,
any and all losses, claims, damages, liabilities and related expenses, including
the fees, charges and disbursements of any counsel for any Indemnitee, incurred
by or asserted against any Indemnitee arising out of, in connection with, or as
a result of (i) the execution or delivery of this Agreement or any agreement or
instrument contemplated hereby, the performance by the parties hereto of their
respective obligations hereunder or the consummation of the Transactions or any
other transactions contemplated hereby, (ii) any Loan or the use of the proceeds
therefrom, (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property owned or operated by the Parent or any of its
Subsidiaries, or any Environmental Liability related in any way to the Parent or
any of its Subsidiaries, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is a
party thereto; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses resulted from the gross negligence or wilful misconduct of such
Indemnitee. It is understood and agreed that, to the extent not precluded by a
conflict of interest, each Indemnitee shall endeavor to work cooperatively with
the Parent with a view toward minimizing the legal and other expenses associated
with any defense and any potential settlement or judgment. To the extent
reasonably practicable and not disadvantageous to any Indemnitee, it is
anticipated that a single counsel may be used. Settlement of any claim or
litigation involving any material indemnified amount will require the approval
of the Parent (not to be unreasonably withheld).
(c) To the extent that the Parent fails to pay any amount required to
be paid by it to the Administrative Agent under paragraph (a) or (b) of this
Section, each Lender severally agrees to pay to the Administrative Agent such
Lender's Applicable Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought and as if all the
Commitments of the Lenders had terminated at such time) of such unpaid amount;
provided that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as the case may be, was incurred by or asserted
against the Administrative Agent in its capacity as such.
(d) To the extent permitted by applicable law, the Borrowers shall not
assert, and hereby waive, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement or any agreement or instrument contemplated hereby, the
Transactions, any Loan or the use of the proceeds thereof.
(e) All amounts due under this Section shall be payable promptly after
written demand therefor.
SECTION 9.04. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby, except that no
Borrower may assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of each Lender (and any attempted
assignment or transfer by a Borrower without such consent shall be null and
void). Nothing in this Agreement, expressed or implied, shall be construed to
confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent and
the Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.
<PAGE>
60
(b) Any Lender may assign to one or more assignees (each, an
"Assignee") all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans at the time owing to
it); provided that (i) except in the case of an assignment to a Lender or an
Affiliate of a Lender, the Administrative Agent and the Parent must give their
prior written consent to such assignment (which consent, in each case, shall not
be unreasonably withheld or delayed), (ii) except in the case of an assignment
to a Lender or an Affiliate of a Lender or an assignment of the entire remaining
amount of the assigning Lender's Commitment, the amount of the Commitment of the
assigning Lender subject to each such assignment (determined as of the date the
Assignment and Acceptance with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 (or the Sterling
Equivalent thereof) unless the Parent and the Administrative Agent otherwise
consent, (iii) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Acceptance, together with a processing
and recordation fee of $3,500, and (iv) the assignee, if it shall not be a
Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire; provided further that any consent of the Parent otherwise
required under this paragraph shall not be required if an Event of Default under
clause (h) or (i) of Section 7.01 has occurred and is continuing. Upon
acceptance and recording pursuant to paragraph (d) of this Section, from and
after the effective date specified in each Assignment and Acceptance, the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of
a Lender under this Agreement, and the assigning Lender thereunder shall, to the
extent of the interest assigned by such Assignment and Acceptance, be released
from its obligations under this Agreement (and, in the case of an Assignment
and Acceptance covering all of the assigning Lender's rights and obligations
under this Agreement, such Lender shall cease to be a party hereto but shall
continue to be entitled to the benefits of Sections 2.14, 2.15, 2.16 and 9.03).
Any assignment or transfer by a Lender of rights or obligations under this
Agreement that does not comply with this paragraph shall be treated for purposes
of this Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an agent of
the Borrowers, shall maintain at one of its offices in The City of New York a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans owing to, each Lender pursuant to the terms
hereof from time to time (the "Register"). The entries in the Register shall be
conclusive, and the Borrowers, the Administrative Agent and the Lenders may
treat each Person whose name is recorded in the Register pursuant to the terms
hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding
notice to the contrary.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section and any written consent to such assignment required by paragraph
(b) of this Section, the Administrative Agent shall accept such Assignment and
Acceptance and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrowers or the
Administrative Agent, sell participations to one or more banks or other entities
(a "Participant") in all or a portion of such Lender's rights and obligations
under this Agreement (including all or a portion of its Commitment and the Loans
owing to it); provided that (i) such Lender's obligations under this Agreement
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations and (iii) the
Borrowers, the Administrative Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that such Lender will
<PAGE>
61
not, without the consent of each affected Participant, agree to any amendment,
modification or waiver described in clauses (i), (ii), (iii), (iv), (v), (vii)
and (viii) of the first proviso to Section 9.02(b) that affects such
Participant. Subject to paragraph (f) of this Section, the Borrowers agree that
each Participant shall be entitled to the benefits of Sections 2.14, 2.15 and
2.16 to the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to paragraph (b) of this Section.
(f) A Participant shall not be entitled to receive any greater payment
under Section 2.14 or 2.16 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the prior written
consent of the Parent.
(g) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including any such pledge or assignment to a Federal Reserve Bank,
and this Section shall not apply to any such pledge or assignment of a security
interest; provided that no such pledge or assignment of a security interest
shall release a Lender from any of its obligations hereunder or substitute any
such assignee for such Lender as a party hereto.
SECTION 9.05. Survival. All covenants, agreements, representations
and warranties made by the Borrowers herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any
Loans, regardless of any investigation made by any such other party or on its
behalf and notwithstanding that the Administrative Agent or any Lender may have
had notice or knowledge of any Default or incorrect representation or warranty
at the time any credit is extended hereunder, and shall continue in full force
and effect as long as the principal of or any accrued interest on any Loan or
any fee or any other amount payable under this Agreement is outstanding and
unpaid and so long as the Commitments have not expired or terminated. The
provisions of Sections 2.14, 2.15, 2.16 and 9.03 and Article VIII shall survive
and remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the repayment of the Loans, the expiration or
termination of the Commitments or the termination of this Agreement or any
provision hereof.
SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement
may be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement, any separate
letter agreements with respect to fees payable to the Administrative Agent and
the Escrow Letter dated September 16, 1999 from the Parent to the Persons listed
on Schedule 1 thereto constitute the entire contract among the parties relating
to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 4.01, this Agreement shall become effective when it shall
have been executed by the Administrative Agent and when the Administrative Agent
shall have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Delivery of an executed counterpart of a signature page
of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.
SECTION 9.07. Severability. Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 9.08. Right of Setoff. If an Event of Default shall have
occurred and be continuing, and the Loans have been accelerated pursuant to
Section 7.01, each Lender is hereby authorized at any time after the
<PAGE>
62
Certain Funds Termination Date and from time to time thereafter, to the fullest
extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Lender to or for the credit or the
account of a Borrower against any of and all the obligations of any other
Borrower now or hereafter existing under this Agreement held by such Lender. The
rights of each Lender under this Section are in addition to other rights and
remedies (including other rights of setoff) which such Lender may have.
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of
Process. (a) This Agreement shall be construed in accordance with and governed
by the law of the State of New York.
(b) Each Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of the State of New York sitting in New York County and of the United States
District Court of the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such
New York State or, to the extent permitted by law, in such Federal court. Each
of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that the Administrative Agent or any Lender may
otherwise have to bring any action or proceeding relating to this Agreement
against any Borrower or its properties in the courts of any jurisdiction.
(c) Each Borrower hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any court referred to
in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 9.11. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 9.12. Confidentiality. Each of the Administrative Agent and
the Lenders agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its and its
Affiliates' directors, officers, employees and agents, including accountants,
legal
<PAGE>
63
counsel and other advisors on a need-to-know basis (it being understood
that the Persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority, (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement, (e) in
connection with the exercise of any remedies hereunder or any suit, action or
proceeding relating to this Agreement or the enforcement of rights hereunder,
(f) subject to an agreement containing provisions substantially the same as
those of this Section, to any assignee of or Participant in, or any prospective
assignee of or Participant in, any of its rights or obligations under this
Agreement, (g) with the consent of the Parent or (h) to the extent such
Information (i) becomes publicly available other than as a result of a breach of
this Section or (ii) becomes available to the Administrative Agent or any Lender
on a nonconfidential basis from a source other than a Borrower. For the purposes
of this Section, "Information" means all information received from the Parent or
any of its Subsidiaries relating to its business, other than any such
information that is available to the Administrative Agent or any Lender on a
nonconfidential basis prior to disclosure by the Parent or any of its
Subsidiaries; provided that, (i) in the case of information received from the
Parent or any of its Subsidiaries after the date hereof, such information is
clearly identified at the time of delivery as confidential and (ii) with respect
to disclosures pursuant to clauses (b) and (c) of this Section, unless
prohibited by applicable law or court order, each Lender and the Administrative
Agent shall notify the Parent of any request by any governmental agency or
representative thereof or other Person (other than any such request in
connection with an examination of the financial condition of such Lender by such
governmental agency) for disclosure of any such confidential information
promptly after receipt of such request, and if practicable and permissible,
before disclosure of such information. Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such Person has exercised the
same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.
SECTION 9.13. Interest Rate Limitation. Notwithstanding anything
herein to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts which are treated as interest
on such Loan under applicable law (collectively the "Charges"), shall exceed the
maximum lawful rate (the "Maximum Rate") which may be contracted for, charged,
taken, received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.
SECTION 9.14. Additional Borrowers. On or after the Initial Funding
Date, the Parent may designate any Subsidiary of the Parent (of which the Parent
owns or Controls shares representing at least 80% of the ordinary voting power
of the issued and outstanding Capital Stock of such Subsidiary) as an Additional
Borrower by delivery to the Administrative Agent of an Additional Borrower
Agreement executed by such Subsidiary and the Parent, and upon such delivery
such Subsidiary shall for all purposes of this Agreement be an Additional
Borrower and a party to this Agreement until the Parent shall have executed and
delivered to the Administrative Agent an Additional Borrower Termination with
respect to such Subsidiary, whereupon such Subsidiary shall cease to be an
Additional Borrower and a party to this Agreement. Notwithstanding the preceding
sentence, no Additional Borrower Termination will become effective as to any
Additional Borrower at a time when any principal of or interest on any Loan to
such Additional Borrower shall be outstanding hereunder; provided that such
Additional Borrower Termination shall be effective to terminate such Additional
Borrower's right to make further Borrowings under this Agreement. As soon as
practicable upon receipt of an Additional Borrower Agreement, the Administrative
Agent shall send a copy thereof to each Lender. Each
<PAGE>
64
Additional Borrower hereby irrevocably appoints the Parent as its agent for
service of process in respect of this Agreement and any Additional Borrower
Agreement; provided that such appointment will not affect the right of any party
to this Agreement to serve process on any Additional Borrower in any other
manner permitted by law.
SECTION 9.15. Conversion of Currencies. (a) If, for the purpose of
obtaining judgment in any court, it is necessary to convert a sum owing
hereunder in one currency into another currency, each party hereto (including
any Additional Borrower) agrees, to the fullest extent that it may effectively
do so, that the rate of exchange used shall be that at which in accordance with
normal banking procedures in the relevant jurisdiction the first currency could
be purchased with such other currency on the Business Day immediately preceding
the day on which final judgment is given.
(b) The obligations of each Borrower in respect of any sum due to any
party hereto or any holder of the obligations owing hereunder (the "Applicable
Creditor") shall, notwithstanding any judgment in a currency (the "Judgment
Currency") other than the currency in which such sum is stated to be due
hereunder (the "Agreement Currency"), be discharged only to the extent that, on
the Business Day following receipt by the Applicable Creditor of any sum
adjudged to be so due in the Judgment Currency, the Applicable Creditor may in
accordance with normal banking procedures in the relevant jurisdiction purchase
the Agreement Currency with the Judgment Currency; if the amount of the
Agreement Currency so purchased is less than the sum originally due to the
Applicable Creditor in the Agreement Currency, such Borrower agrees, as a
separate obligation and notwithstanding any such judgment, to indemnify the
Applicable Creditor against such loss. The obligations of the Borrowers
contained in this Section 9.15 shall survive the termination of this Agreement
and the payment of all other amounts owing hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
AIR PRODUCTS AND CHEMICALS, INC.,
by /s/ Leo J. Daley
-------------------------
Name: Leo J. Daley
Title: Vice President
THE CHASE MANHATTAN BANK, individually
and as Administrative Agent,
by /s/ Peter Dedousis
-------------------------
Name: Peter Dedousis
Title: Managing Director
ABBEY NATIONAL TREASURY SERVICES PLC,
by /s/ T. Rigby
-------------------------
Name: T. Rigby
Title: Head of Structured Finance
ABN AMRO BANK N.V.,
by /s/ David A. Mandell
-------------------------
Name: David A. Mandell
Title: SVP
by /s/ Kimberly S. Logsdon
-------------------------
Name: Kimberly S. Logsdon
Title: VP
<TABLE>
BANCA COMMERCIALE ITALIANA --
NEW YORK BRANCH,
<CAPTION>
<S> <C> <C>
by /s/ Charles Dougherty /s/ Joseph Carlani
-------------------------
Name: C. Dougherty Joseph Carlani
Title: VP VP
BANCA DI ROMA -- NEW YORK BRANCH,
by /s/ Steven Paly /s/ Alessandro Paoli
-------------------------
Name: Steven Paly Alessandro Paoli
Title: VP Asst. Treasurer
</TABLE>
<PAGE>
<TABLE>
BANCA MONTE DEI PASCHI DI SIENA S.P.A.,
by /s/ G. Natalicchi
-------------------------
<S> <C>
Name: G. Natalicchi
Title: Senior Vice President & General
Manager
</TABLE>
by /s/ Brian R. Landy
-------------------------
Name: Brian R. Landy
Title: Vice President
BANCA NAZIONALE DEL LAVORO S.P.A.,
NEW YORK BRANCH
by /s/ Giulio Giovine
-------------------------
Name: Giulio Giovine
Title: Vice President
by /s/ Leonardo Valentini
-------------------------
Name: Leonardo Valentini
Title: First Vice President
BANCO BILBAO VIZCAYA,
by /s/ John Martini
-------------------------
Name: John Martini
Title: Vice President
by /s/ Alejandro Lorca
-------------------------
Name: Alejandro Lorca
Title: Vice President
BANCO ESPANOL DE CREDITO, S.A.,
NEW YORK BRANCH
by /s/ Luis Basagoiti
-------------------------
Name: Luis Basagoiti
Title: Executive Vice-President
by /s/ Juan Calan
-------------------------
Name: Juan Calan
Title: Senior Vice-President
<PAGE>
<TABLE>
<CAPTION>
BANK HAPOALIM B.M.,
<S> <C> <C>
by /s/ Laura Anne Raffa /s/ Shaun Bieidbort
-------------------------
Name: Laura Anne Raffa Shaun Bieidordbort
Title: FVP VP
</TABLE>
BANK OF AMERICA, N.A.,
by /s/ Donald J. Chin
-------------------------
Name: Donald J. Chin
Title: Managing Director
BANK OF CHINA,
by /s/ Luo Jiashu
-------------------------
Name: Luo Jiashu
Title: Deputy General Manager
THE BANK OF NOVA SCOTIA,
by /s/ J. Alan Edwards
-------------------------
Name: J. Alan Edwards
Title: Authorized Signatory
BANK OF TOKYO -- MITSUBISHI TRUST
COMPANY,
by /s/ Mark O'Connor
-------------------------
Name: Mark O'Connor
Title: Vice President
BANQUE NATIONALE DE PARIS,
NEW YORK BRANCH,
by /s/ Richard L. Sted
-------------------------
Name: Richard L. Sted
Title: Senior Vice President
by /s/ Thomas George
-------------------------
Name: Thomas George
Title: Vice President
Corporate Banking Division
<PAGE>
BARCLAYS BANK PLC,
by /s/ Terance Bullock
-------------------------
Name: Terance Bullock
Title: Vice President
BAYERISCHE HYPO-UND VEREINSBANK AG,
NEW YORK BRANCH,
by /s/ Alexander M. Blodi
-------------------------
Name: Alexander M. Blodi
Title: Director
by /s/ Imke Engelmann
-------------------------
Name: Imke Engelmann
Title: Associate Director
CAISSE DES DEPOTS ET CONSIGNATIONS,
by /s/ signed
-------------------------
Name:
Title:
CITIBANK, NA,
by /s/ Mary W. Corkran
-------------------------
Name: Mary W. Corkran
Title: Vice President
COMMERZBANK AG (NEW YORK BRANCH),
by /s/ Robert Donohue
-------------------------
Name: Robert Donohue
Title: Senior Vice President
by /s/ Andrew Lusk
-------------------------
Name: Andrew Lusk
Title: Assistant Treasurer
<PAGE>
<TABLE>
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE,
<CAPTION>
<S> <C> <C>
by /s/ D. J. Wilson /s/ A. de Gromard
-------------------------
Name: D. J. Wilson A. de Gromard
Title: Manager Senior Manager
CREDIT AGRICOLE INDOSUEZ,
by /s/ signed /s/ signed
-------------------------
Name:
Title: FVP VP
CREDIT COMMERCIAL DE FRANCE,
by /s/ Peter D. Campbell
-------------------------
Name: Peter D. Campbell
Title: Director Head of Corporate Banking
</TABLE>
by /s/ Yves Meynial
-------------------------
Name: Yves Meynial
Title: Executive Vice President
& General Manager - UK
CREDIT LYONNAIS, NEW YORK BRANCH
by /s/ Vladimir Labun
-------------------------
Name: Vladimir Labun
Title: First Vice President - Manager
THE DAI-ICHI KANGYO BANK, LTD.,
by /s/ Matthew G. Murphy
-------------------------
Name: Matthew G. Murphy
Title: Vice President
DEUTSCHE BANK AG LONDON
by /s/ M. G. W. Starmer-Smith
-------------------------
Name: M. G. W. Starmer-Smith
Title: Senior Associate Director
by /s/ B. D. Stevenson
-------------------------
Name: B. D. Stevenson
Title: Managing Director
<PAGE>
<TABLE>
<CAPTION>
DRESDNER BANK AG,
NEW YORK AND GRAND CAYMAN
BRANCHES,
<S> <C> <C>
by /s/ Deborah Slusarczyk /s/ A. Richard Morris
-------------------------
Name: Deborah Slusarczyk A. Richard Morris
Title: Vice President First Vice President
</TABLE>
FIRST COMMERCIAL BANK,
NEW YORK AGENCY,
by /s/ Vincent T. C. Chen
-------------------------
Name: Vincent T. C. Chen
Title: SVP & General Manager
FIRST UNION NATIONAL BANK,
by /s/ Constantin E. Chepurny
-------------------------
Name: Constantin E. Chepurny
Title: Senior Vice President
FLEET NATIONAL BANK, N.A.,
by /s/ Christopher W. Criswell
-------------------------
Name: Christopher W. Criswell
Title: Senior Vice President
THE FUJI BANK, LIMITED,
by /s/ Raymond Ventura
-------------------------
Name: Raymond Ventura
Title: Vice President & Manager
GOLDMAN SACHS CREDIT PARTNERS L.P.,
by /s/ signed
-------------------------
Name:
Title:
<PAGE>
HSBC BANK USA,
by /s/ D. M. Zieske
-------------------------
Name: D. M. Zieske
Title: Assistant Vice President
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
by /s/ John Dippo
-------------------------
Name: John Dippo
Title: Senior Vice President
LEHMAN COMMERCIAL PAPER INC.,
by /s/ Michele Swanson
-------------------------
Name: Michele Swanson
Title: Authorized Signatory
MELLON BANK, N.A.,
by /s/ William M. Feathers
-------------------------
Name: William M. Feathers
Title: Assistant Vice President
MORGAN STANLEY SENIOR FUNDING, INC.
by /s/ Todd Vannucci
-------------------------
Name: Todd Vannucci
Title: Vice President
NATIONAL CITY BANK,
by /s/ Michael A. Heinricher
-------------------------
Name: Michael A. Heinricher
Title: Assistant Vice President
<TABLE>
<CAPTION>
NORDDEUTSCHE LANDESBANK GIROZENTRALE,
<S> <C> <C>
by /s/ Stephanie Finnen /s/ Josef Haas
-------------------------
Name: Stephanie Finnen Josef Haas
Title: Vice President Vice President
</TABLE>
<PAGE>
PARIBAS,
/s/ Donald W. Maley, Jr. by /s/ Paul Nicholas
- ------------------------ -------------------------
Donald W. Maley, Jr Name: Paul Nicholas
Managing Director Title: Vice President
ROYAL BANK OF CANADA,
by /s/ Sheryl L. Greenbery
-------------------------
Name: Sheryl L. Greenbery
Title: Senior Manager
THE SANWA BANK, LIMITED,
NEW YORK BRANCH
<TABLE>
<CAPTION>
by /s/ Joseph E. Leo
-------------------------
Name: Joseph E. Leo
Title: Vice President and Area Manager
STANDARD CHARTERED BANK,
<S> <C> <C>
by /s/ David D. Cutting /s/ Andrew Y. Ng
-------------------------
Name: David D. Cutting Andrew Y. Ng
Title: Senior Vice President Vice President
& CDM
</TABLE>
THE SUMITOMO BANK, LIMITED,
by /s/ C. Michael Garrido
-------------------------
Name: C. Michael Garrido
Title: Senior Vice President
TORONTO DOMINION (TEXAS), INC.,
by /s/ Alva J. Jones
-------------------------
Name: Alva J. Jones
Title: Vice President
WACHOVIA BANK, N.A.
by /s/ James Barwis
-------------------------
Name: James Barwis
Title: Vice President
<PAGE>
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH,
by /s/ Alan S. Bookspan
-------------------------
Name: Alan S. Bookspan
Title: Director
by /s/ Barry S. Wadler
-------------------------
Name: Barry S. Wadler
Title: Associate
WESTPAC BANKING CORPORATION,
by /s/ Tony Smith
-------------------------
Name: Tony Smith
Title: Vice President
FORTIS (USA) FINANCE LLC,
by /s/ Andrea S. Kantor
-------------------------
Name: Andrea S. Kantor
Title: Vice President
<TABLE>
<CAPTION>
BANK ONE, NA (MAIN OFFICE CHICAGO),
<S> <C> <C>
by /s/ David Snyder /s/ Eddie Matthews
-------------------------
Name: David Snyder Eddie Matthews
Title: Senior Vice President Senior V.P.
</TABLE>
THE ROYAL BANK OF SCOTLAND PLC
by /s/ Derek Weir
-------------------------
Name: Derek Weir
Title: Vice President
<PAGE>
Schedule 1.01(a)
Pricing Grid
The Applicable Rate and facility fee applicable to the 364-Day Revolving
Loans and the 364-Day Revolving Commitments and the Applicable Rate and facility
fee applicable to the Five-Year Revolving Loans and Five-Year Revolving
Commitments are, at any time, the Applicable Rate or facility fee set forth
below opposite the then-applicable ratings by S&P and Moody's for the Loans:
<TABLE>
----------------------------------------------- -----------------------------------------------
Ratings 364-Day Revolving Facility Five-Year Revolving Facility
----------------------------------------------- -----------------------------------------------
<CAPTION>
Applicable Applicable Facility Applicable Applicable Facility
Rate Rate Fee Rate Rate Fee
ABR Loans Eurodollar ABR Loans Eurodollar
Loans Loans
- --------------- ---------------- ---------------- ------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
A/A2 0% 0.41% 0.09% 0% 0.375% 0.125%
- --------------- ---------------- ---------------- ------------- ---------------- --------------- --------------
A-/A3 0% 0.65% 0.10% 0% 0.60% 0.15%
- --------------- ---------------- ---------------- ------------- ---------------- --------------- --------------
BBB+/Baa1 0% 0.875% 0.125% 0% 0.825% 0.175%
- --------------- ---------------- ---------------- ------------- ---------------- --------------- --------------
BBB/Baa2 0.10% 1.10% 0.15% 0.05% 1.05% 0.20%
- --------------- ---------------- ---------------- ------------- ---------------- --------------- --------------
BBB-/Baa3 0.325% 1.325% 0.175% 0.275% 1.275% 0.225%
- --------------- ---------------- ---------------- ------------- ---------------- --------------- --------------
BB+/Ba1 0.80% 1.80% 0.20% 0.70% 1.70% 0.30%
- --------------- ---------------- ---------------- ------------- ---------------- --------------- --------------
</TABLE>
For purposes of the foregoing, (i) if either Moody's or S&P shall not have
in effect a rating for the Loans (after both Moody's and S&P shall have had
ratings in effect for the Loans, it being understood that until such time as
both Moody's and S&P have ratings in effect for the Loans, if either Moody's or
S&P shall have a rating in effect for the Loans, the Applicable Rates and
facility fees shall be determined based solely upon such rating), then such
rating agency shall be deemed to have established a rating for the Loans equal
to the applicable senior unsecured debt rating for the Parent then in effect;
(ii) if the ratings established or deemed to have been established by Moody's
and S&P for the Loans shall fall within different Categories, the Applicable
Rates and facility fees shall be based on the higher (or lower, if the Parent's
commercial paper is not rated at least P2 and A2 by Moody's and S&P,
respectively) of the two ratings unless (in the case of Applicable Rates or
facility fees based on the higher of two ratings) one of the two ratings is two
or more Categories lower than the other, in which case the Applicable Rates and
facility fees shall be determined by reference to the Category next above that
of the lower of the two ratings; and (iii) if the ratings established or deemed
to have been established by Moody's and S&P for the Loans shall be changed
(other than as a result of a change in the rating system of Moody's or S&P),
such change shall be effective as of the date on which it is first announced by
the applicable rating agency. Each change in the Applicable Rates and facility
fees shall apply during the period commencing on the effective date of such
change and ending on the date immediately preceding the effective date of the
next such change. Subject to the next succeeding sentence, if the rating system
of Moody's or S&P shall change, or if either such rating agency shall cease to
be in the business of rating corporate debt obligations, or if Moody's and S&P
shall not have in effect a rating for the Loans or senior unsecured debt ratings
for the Parent, the Parent and the Lenders shall negotiate in good faith to
amend this definition to reflect such changed rating system or the
unavailability of ratings from such rating agency and, pending the effectiveness
of any such amendment, the Applicable Rates and facility fees shall be
determined by reference to the rating most recently in effect prior to such
change or cessation. Notwithstanding the foregoing, until such time as Moody's
or S&P shall initially have in effect a rating for the Loans, the Applicable
Rates and facility fees shall be determined by reference to the indicative
ratings referred to in Section 4.01(h) as the same may be adjusted from time to
time.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
Stock Option Plan for Directors............................... 1
Purposes of the Plan........................................ 1
Eligibility................................................. 1
Awards...................................................... 1
Dilution Adjustments........................................ 2
Miscellaneous Provisions.................................... 3
Amendment and Discontinuance; No Discretion................. 5
Notice of Exercise of Stock Option............................ 6
Notice of Administrative Procedures Regarding Transfer of Stock
Option Awards............................................. 7
</TABLE>
<PAGE>
====================================================
AIR PRODUCTS AND CHEMICALS, INC.
Stock Option Plan for Directors (the "Plan")*
====================================================
1. Purposes of the Plan
The purposes of this Plan are (i) to assist Air Products and Chemicals,
Inc. (the "Company") in attracting and retaining individuals of superior talent,
experience, and achievement as directors of the Company and (ii) to associate
more closely the interests of such directors with those of the Company's
shareholders by encouraging and enabling directors to acquire a financial
interest in the Company through ownership in equity securities of the Company.
Certain capitalized terms used herein have the meanings set forth in
Section 6(i) hereof.
2. Eligibility
Participation in the Plan is limited to directors of the Company who have
not ever been employees of the Company or any of its subsidiaries or their
respective predecessors.
3. Awards
Two thousand (2,000) stock options ("Options" or "Stock Options") shall
automatically be granted to each eligible director who is serving as a director
of the Company immediately following the 1999 annual organizational meeting of
the Board of Directors and immediately following each annual organizational
meeting of the Board of Directors thereafter. Each such director shall receive
an option agreement dated as of the date of each such organizational meeting of
the Board of Directors, which shall be the date of grant of each such award,
evidencing the automatic annual award of such Stock Options pursuant to this
Plan. Stock Options are rights to purchase shares of common stock of the
Company, par value $1.00 ("Common Stock").1/
-
- --------------------
(*) Adopted by Board resolution on 21 October 1993; effective 27 January 1994;
amended effective 21 October 1999.
1/ Amended and approved by the Board of Directors on 15 October 1998; effective
- 15 October 1998.
1
<PAGE>
All Stock Options granted under the Plan shall be granted on the following
terms and conditions:
(a) Price. The purchase price per share of Common Stock covered by each
Stock Option shall be 100% of the Fair Market Value of a share of
Common Stock on the date of grant of such Option.
(b) Term and Exercisability. Stock Options shall become exercisable
six (6) months from date of grant, and shall remain exercisable
until the earlier of:
(i) ten (10) years and one (1) day from the date of grant, and
(ii) the date as of which the director ceases to serve as a
member of the Board of Directors.
Notwithstanding the foregoing, the director (in the case he or
she ceases to serve on the Board of Directors of the Company by
reason of retirement or disability) or, the director's
Designated Beneficiary or, if none, his or her legal
representative (in the case of the director's death before or
after retirement or disability), shall continue to have the same
rights to exercise any unexercised portion of the director's
Stock Option which is exercisable at the time of such
termination or death, as the director would have had if he or
she had continued to be an active director of the Company.
(c) Exercise. A director wishing to exercise his or her 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 and payment
shall be the "Exercise Date" for such Stock Option or portion
thereof.
(d) Payment. The purchase price of shares of Common Stock purchased
upon exercise of any Stock Option shall be paid in full in cash
at the time of exercise of the Option.
4. Dilution Adjustments
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 or other similar corporate change, an equitable adjustment shall be made,
as determined by the Board of Directors (but subject to the first paragraph of
Section 6), in (i) the kind of shares subject to Options under the Plan,
(ii)the number or kind of shares or purchase price per share subject to
outstanding Stock Options, (iii) any other
2
<PAGE>
aspect or aspects of the Plan or outstanding awards made thereunder as specified
by the Board of Directors, or (iv) any combination of the foregoing, as shall be
necessary to maintain the proportionate interest of the optionees and to
preserve, without increasing, the value of outstanding awards. Such adjustments
shall be made by the Board of Directors and shall be conclusive and binding for
all purposes of the Plan.
5. Miscellaneous Provisions
(a) The holder of a Stock Option 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) No Stock Option or any rights or interests therein of the recipient
thereof shall be assignable or transferable by such recipient except
by gift to his or her family member(s) or to trust(s) of which such
family member(s) are beneficiaries (but only on and after the date
upon which, and to the extent such Stock Options have become
exercisable in accordance with their terms, and subject to the
administrative procedures and conditions set forth in the
"Administrative Procedures Regarding Transfers of Stock Option Awards
dated 21 October 1999" attached as Exhibit A); to his or her
Designated Beneficiary; or by will or the laws of descent and
distribution.
(c) All Stock Options granted under the Plan shall be evidenced by
agreements in such form and containing and/or incorporating such
terms and conditions as are set forth in this Plan.
(d) No shares of Common Stock shall be issued, delivered or
transferred upon exercise of any Stock Options granted hereunder
unless and until all legal requirements applicable to the
issuance, delivery or transfer of such shares have been complied
with including, without limitation, compliance with the
provisions of the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, and the applicable
requirements of the exchanges on which the Company's Common
Stock may, at the time, be listed.
(e) The Company shall require, as a condition of delivery of shares
of Common Stock upon the exercise of a Stock Option, that the
director or other person receiving such Common Stock pay to the
Company at the time of distribution thereof the amount of any
taxes which the Company is required to withhold with respect to
such exercise. The obligation of the Company to make delivery of
Common Stock shall be subject to currency or other restrictions
imposed by any government.
3
<PAGE>
(f) 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, as from time to time
determined by the Board of Directors.
(g) The costs and expenses of administering this Plan shall be borne
by the Company and not charged to any award nor to any director
receiving an award.
(h) 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.
(i) In addition to the terms defined elsewhere herein, the following
terms as used in this Plan shall have the following meanings:
"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.
"Fair Market Value" of a share of Common Stock of the Company on
any date set forth herein 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, for such date.
"Retirement" shall mean (i) resigning from serving as a
director, failing to stand for re-election as a director or
failing to be re-elected as a director after being duly
nominated, and (ii) in any such case having the right to
immediate or deferred pension benefits under the Company's
Pension Plan for Directors as then in effect or, in the absence
of such Pension Plan or another pension plan being applicable to
any director, after at least six (6) full years of service as a
director of the Company. More than six (6) months' service
during any twelve (12) month period after a director's first
election by the shareholders to the Board shall be considered as
a full year's service for this purpose.
4
<PAGE>
(j) Notices. All notices to the Company under this Plan shall be in
writing and shall be given as follows:
Corporate Secretary
Air Products and Chemicals, Inc.
7201 Hamilton Boulevard
Allentown, PA 18195-1501
(k) Governing Law. This Plan shall be governed by the laws of the
Commonwealth of Pennsylvania and shall be construed for all
purposes in accordance with the laws of said Commonwealth except
as may be required by the General Corporation Law of Delaware or
by applicable federal law.
6. Amendment and Discontinuance; No Discretion
The Board of Directors of the Company may amend or modify this Plan;
provided, however, that no amendment may affect a director's rights under any
award of Stock Options under this Plan made prior to such amendment without such
director's consent. The Board of Directors of the Company may suspend or
discontinue this Plan in whole or in part at any time, but any such suspension
or discontinuance shall not affect awards of Stock Options granted under this
Plan prior thereto.
5
<PAGE>
NOTICE OF
EXERCISE OF STOCK OPTION
GRANTED UNDER THE AIR PRODUCTS AND CHEMICALS, INC. (the "Company")
STOCK OPTION PLAN FOR DIRECTORS (the "Plan")
To: The Corporate Secretary
Air Products and Chemicals, Inc.
On the Company granted me an option under the Plan to
------------------
purchase shares of its Common Stock at a price of $ per share.
----------
I hereby give notice of exercise of my option to purchase of such
--------
shares by payment to the Company of $ , the aggregate option
--------------
exercise price for such shares. My payment is made by a check enclosed herewith
and/or wire transfer of immediately available funds payable to the Company.
<TABLE>
<CAPTION>
DELIVERY INSTRUCTIONS
Please register the shares in the following manner: Delivery Instructions:
<S> <C>
Director's Name
----------------------------------- ----------------------------------
Address
----------------------------------- ----------------------------------
----------------------------------- ----------------------------------
----------------------------------- ----------------------------------
Soc Sec #
-----------------------------------
- --------------------------------- Acknowledgment and Receipt of
Signature of Director Completed Option Exercise Notice
Form and Payment of Option
Exercise Price:
----------------------------
Corporate Secretary's Office
----------------------------
Exercise Date
</TABLE>
6
<PAGE>
ADMINISTRATIVE PROCEDURES REGARDING TRANSFERS OF STOCK
OPTION AWARDS DATED 21 OCTOBER 1999 (THE "PROCEDURES")
------------------------------------------------------
Stock option awards granted under the Plan are transferable by the recipient of
the award (the "director") on and after the date upon which, and to the extent,
the option has become exercisable. Options may be transferred only in accordance
with these Procedures. Directors are encouraged to seek financial and tax
planning advice prior to transferring an option.
1. Exercisable options may be transferred by the director only by gift and
only to the director's family members or to trusts of which such family
members are beneficiaries. Family members include any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships.
2. Prior to making any transfer, the director and transferee must complete
and sign the attached Election to Transfer Stock Options form and return
it to the Corporate Secretary's Office. Transfers will not be effective
until the form is received, acknowledged and accepted by the Secretary or
an Assistant Corporate Secretary.
3. Following transfer, any Designation of Beneficiary previously filed by
the director relating to transferred options is void and of no further
force and effect as to the transferred options; and the transferred
options may not be subsequently transferred by the transferee except by
will or the laws of descent and distribution.
4. Except as otherwise provided in these Procedures, the transfer of options
to the transferee also transfers the ancillary rights associated with the
options under the applicable award agreement and the Plan (references
herein to "options" to include both the stock options and such ancillary
rights); and following transfer, the options will continue to be subject
to the same terms and conditions as were applicable immediately prior to
transfer under the applicable award agreement and the Plan.
7
<PAGE>
5. Certain U.S. Tax Considerations
U.S. Resident Directors
Upon Transfer:
o A director will incur gift taxes (including the generation skipping
transfer tax, if applicable) on the transfer on the value of the
option at the time of transfer unless the gift is incomplete, (e.g.
if the director retained the power to determine when the options were
exercised or to prevent sale of the optioned shares, the gift may not
be complete for gift tax purposes). The Internal Revenue Service will
respect the value placed on an option for gift tax purposes if the
value is determined using a generally recognized option pricing model
that takes into account exercise price, expected term, current trading
price, expected volatility, expected dividends, and risk-free interest
rates during the option's term. Neither the option nor the optioned
shares will be included in the director's estate.
Upon Exercise:
o When the transferee exercises, income is imputed to the director
and will be reflected on the director's Form 1099.
Nonresident Directors
o Nonresident directors will not be subject to gift tax on transfer of
stock options. Neither the option nor the optioned shares will be
included in the director's estate. Stock options will be subject to
U.S. income tax upon the transferee's exercise unless exempted by
treaty. [The Company is required to withhold U.S. income taxes upon
exercises by a nonresident where the income arising therefrom is not
exempt by treaty. In the Company's opinion, income realized upon
option exercises is not exempt from U.S. tax under the U.S.-
Netherlands treaty.] [In the Company's opinion, income realized upon
stock option exercises is exempt from U.S. income tax under the U.S.-
Japanese treaty.]
6. Certain U.S. Securities Laws Considerations for Active Directors.
o We strongly recommend that while engaged in service to the
Company, directors discuss in advance with the Corporate Secretary
or his or her designee the possible implications of transferring
options to enable the Company to assist the director in complying
with the securities laws, including preparing any required reports
for filing with the Securities and Exchange Commission and the New
York Stock Exchange. The transfer
8
<PAGE>
of an option must be reported as a gift transaction on the director's
Form 5 (or voluntarily on an earlier Form 4).
o If the transferee is a family member sharing the director's
household or for whom the director is financially responsible,
option exercise transactions by the transferee would also (a) need
to be reported by the director on a Form 4 or 5, and any sale of
the shares could be matched against non-exempt purchases made by
the director, resulting in short-swing profit liability to the
director; and (b) be limited to quarterly window periods for
trading in Company stock.
o With regard to transfer to trusts for family members, if the director
does not have the power to revoke the trust (without the consent of
another person) and does not have investment or voting power over the
options (or shares obtained upon exercise) held by the trust, neither
the trust nor the trustee will generally be subject to Section 16 nor
will trust transactions be attributed to the director or subject to
window periods. If the trustee is a Section 16 insider with regard
to the Company with no pecuniary interest in, but with investment
power over the trust assets, the trustee would be limited to selling
the shares obtained by exercising the options only during quarterly
window periods.
o A transferee of a director may be subject to certain limitations
under Rule 144 concerning, among other things, the number of
shares of Company stock which may be sold during any three-month
period and satisfaction of a holding period before shares
purchased by exercising an Option may be sold.
9
<PAGE>
Air Products and Chemicals, Inc.
(the "Company")
ELECTION TO TRANSFER STOCK OPTION
Granted Under The Stock Option Plan for Directors
Printed name of director or former director to whom options were granted (the
"director"):
-----------------------------------------------------------------
Social Security Number of director:
------------------------------------------
Address of director:
---------------------------------------------------------
- -----------------------------------------------------------------------------
Telephone number of director:
-----------------------------------------------
I, the director, hereby elect to make a transfer of a stock option granted to me
as follows:
Printed name of transferee:
-------------------------------------------------
Social Security Number or
Tax Identification Number of transferee:
-------------------------------------
Address of transferee:
------------------------------------------------------
- -----------------------------------------------------------------------------
Telephone number of transferee:
---------------------------------------------
Relationship of transferee to director:
-------------------------------------
If transferee is a trust, list names of trustee and beneficiary(s) and
relationship of beneficiary(s) to director:
----------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Number of shares covered by option to be transferred:
------------------------
Date option was awarded to director:
----------------------------------------
By signing below, I, the director, acknowledge receipt of a copy of the
"Administrative Procedures Regarding Transfers of Stock Option Awards" (the
"Procedures"). I further acknowledge that upon exercise of the option by the
transferee, taxable income will be imputed to me, the director, and reported to
the appropriate tax authorities. I understand that I am responsible for any
taxes payable as a result of the exercise.
- --------------------------------------- ------------------
Signature of director Date
10
<PAGE>
By signing below, the transferee acknowledges receipt of a copy of the
Procedures and agrees to comply with and be subject to the terms and conditions
pursuant to which the option was granted (as modified by the Procedures), and
agree not to further transfer the option.
- --------------------------------------- ------------------
Signature of transferee Date
Receipt of this executed Election form is hereby acknowledged and accepted, and
the requested transfer of stock option will be effective this
----------------
day of
---------------, -----------.
AIR PRODUCTS AND CHEMICALS, INC.
By:
----------------------------------
Name:
---------------------------
Title:
---------------------------
11
[AIR PRODUCTS LOGO]
Memorandum
---------------------------------------------------------------------------
To: R. SULLAM Location: PRESIDENT
From: L V BROESE VAN GROENOU Location/ VP HR & PROCUREMENT
Telephone: 9901/H3
Date: 01.07.97
Subject: THE MECHANICS OF YOUR PENSION
---------------------------------------------------------------------------
cc: R. Blamey
Further to our most recent discussions, I am writing to clarify the
mechanics of your pension arrangements. As indicated in the
correspondence of 09/06/97 your entitlement is based on:
o 40 years service at the age of 60
o Using your final year's salary as the base
o Plus the benefits earned by a special contribution made on your
behalf in 1983
o Less the French points pension
o In addition you will receive a UK "old age" pension from age 65
As your entitlement is therefore defined and agreed, what remains is to
describe the events leading up to your anticipated retirement date:
1. Every year Richard Blamey will inform the insurance company AG what the
amount is they need to accrue. In his calculation he will need to check
your latest salary as well as the French pension offset. On the basis
of this information AG will inform Air Products what contribution is
required.
2. In the year leading up to retirement we will assist you in establishing
your exact entitlement to French Social Security. In our experience the
domicile of the recipient is not an issue.
3. On the retirement date, all the components will be available to
determine the sources of your pension. As the total entitlement is
"fixed" your only decision will be to determine whether a lump sum or
an annuity from the Belgian plan is the optimum solution for you.
If you have further detailed questions, I will make arrangements with
Richard Blamey to discuss these with you.
Regards
/s/ L V Broese van Groenou
L V BORESE VAN GROENOU
-----------------------
AMENDED AND RESTATED
TRUST AGREEMENT
By and Between
AIR PRODUCTS AND CHEMICALS, INC.,
as Grantor
and
PNC BANK, N.A.
(formerly PROVIDENT NATIONAL BANK),
as Trustee
Dated as of August 1, 1999
---------------------------------------------------------------------
Defined Benefit Pension Plans
<PAGE>
<TABLE>
<CAPTION>
INDEX
Page
----
ARTICLE I
THE TRUST AND TRUST FUND
<S> <C> <C>
1.01 The Trust........................................................... 2
1.02 Investment of the Trust Fund........................................ 3
ARTICLE II
USE AND RELEASE OF THE TRUST FUND:
PAYMENTS AND RETURN OF SURPLUS
2.01 Use of Trust Fund; Benefit Calculation Schedule and
Participant Information............................................. 6
2.02 Payments to Participants............................................ 7
2.03 Payments to Creditors............................................... 10
2.04 Sufficiency of Trust Fund........................................... 11
2.05 Surplus Assets...................................................... 11
2.06 Trust Actuary Determinations, etc................................... 12
ARTICLE III
TRUSTEE
3.01 Duties and Responsibilities......................................... 12
3.02 Legal Counsel....................................................... 13
3.03 Trust Books and Records............................................. 13
3.04 Removal or Resignation of the Trustee and Designation of Successor
Trustee............................................................. 14
3.05 Reliance by Trustee; Third Parties.................................. 15
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
INDEX
Page
----
<S> <C> <C>
3.06 Inability of Company to Act......................................... 15
3.07 Indemnity........................................................... 15
ARTICLE IV
TRUST FUND TAXES; TRUSTEE FEES;
OTHER COSTS OF TRUST ADMINISTRATION
4.01 Trust Fund Taxes.................................................... 16
4.02 Trustee Fees; Other Trust Administration Expenses................... 16
ARTICLE V
CERTAIN DEFINITIONS
5.01 Change in Control or Change in Control of the Company............... 17
5.02 Company Stock....................................................... 19
5.03 Company Stock Agreement............................................. 19
5.04 Current Plan Termination Liability.................................. 19
5.05 Designated Beneficiary.............................................. 19
5.06 Determination of Taxability......................................... 19
5.07 Insolvent........................................................... 20
5.08 Letter of Credit.................................................... 20
5.09 Minimum Trust Amount................................................ 21
5.10 Participant Information............................................. 21
5.11 Participant Representatives......................................... 21
5.12 Savings Plan........................................................ 22
5.13 Trust Actuary....................................................... 22
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
INDEX
Page
----
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
<S> <C> <C>
6.01 Termination........................................................ 22
6.02 Amendment and Waiver............................................... 23
ARTICLE VII
GENERAL PROVISIONS
7.01 Further Assurances................................................. 24
7.02 Entire Agreement; Severability..................................... 24
7.03 Notices, etc....................................................... 24
7.04 Trust Beneficiaries................................................ 25
7.05 Necessary Parties in Actions Affecting the Trust................... 26
7.06 Successors; Non-Alienation......................................... 26
7.07 Parties Interested Herein.......................................... 27
7.08 No Personal Liability; Indemnification of Participant
Representatives.................................................... 27
7.09 Texts of Plans and Plan Amendments................................. 28
7.10 Titles............................................................. 28
7.11 Applicable Law..................................................... 28
7.12 Counterparts....................................................... 29
</TABLE>
(iii)
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT
AMENDED AND RESTATED TRUST AGREEMENT, by and between AIR PRODUCTS AND
CHEMICALS, INC., a Delaware corporation (the "Company"), and PNC BANK, N.A.
(formerly Provident National Bank), a national banking association, as trustee
(the "Trustee"), said trust agreement initially dated as of December 1, 1987,
and with the consent of the "Participant Representatives", as defined in
Article V hereof, amended and restated effective October 31, 1989 and further
amended by Amendment Nos. 1, 2, 3, and 4 as of April 25, 1991, April 30, 1993,
May 1, 1995 and May 1, 1997, which amendments reflected, among other things,
changes in the "Trust Amount" as defined in Article V hereof, and delivery to
the Trustee of amendments of the "Letter of Credit", as defined in Article V
hereof, extending the term and changing the amount of the Letter of Credit;
WHEREAS, the Company is obligated under the plan and agreements listed on
Exhibit A hereto (together, the "Plans") to provide benefits to certain
employees and past employees of the Company and certain of its subsidiaries
(together with their "Designated Beneficiaries", as defined and provided in
Article V hereof, the "Participants");
WHEREAS, the payment of benefits to be made and the obligations of the
Company under the Plans are not funded or otherwise secured and the Company
desires to assure that future payment of said benefits will not be improperly
withheld for any reason including in the event of a "Change in Control of the
Company", as defined in Article V hereof;
WHEREAS, for purposes of providing greater assurance that such benefits
will not be improperly withheld, the Company entered into the Amended and
Restated Trust Agreement with the Trustee and deposited with the Trustee the
cash and other property described in Subsection 1.01(a) below, and may deposit
with the Trustee, subject only to the claims of the Company's general creditors,
amounts of cash and other property sufficient to pay accrued benefits under the
Plans;
WHEREAS, the Company and the Trustee have determined to again amend and
restate the Amended and Restated Trust Agreement, again with the consent of the
Participant Representatives, effective August 1, 1999 as set forth herein (and
referred to hereinafter as the "Trust Agreement") to, among other things,
provide for increasing the Trust Amount and permit the contribution to and
investment of Trust assets prior to a Change in Control in the form of "Company
Stock", as defined in Article V hereof, in addition to Letters of Credit and
cash;
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NOW, THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE I
THE TRUST AND TRUST FUND
SECTION 1.01 The Trust.
(a) Establishment of Trust and Funding of Trust Amount. The Company
established with the Trustee a trust (the "Trust") to consist of such sums of
money and/or assets including Letters of Credit and "Company Stock Agreements",
as defined in Article V hereof, as shall from time to time be paid or delivered
to the Trustee (less such amounts distributed from the Trust pursuant to
Sections 2.02, 2.03, 2.05 and 4.02 hereof or otherwise pursuant to the terms of
this Trust Agreement), in whatever form held or invested as provided herein (the
"Trust Fund"). The Company, concurrently with the establishment of the Trust,
delivered to the Trustee to be held in the Trust $100.00 in cash and a Letter of
Credit in the amount of twenty-nine million dollars ($29,000,000.00); and most
recently, on May 1, 1999, delivered to the Trustee an amendment to the Letter of
Credit increasing the amount of the Letter of Credit to the amount of sixty
million dollars ($60,000,000.00) (the "Trust Amount") to cover the "Current Plan
Termination Liability", as defined in Article V hereof. The Trust Amount may be
increased at any time by written notice to the Trustee from the Company and
contribution of assets to the Trust sufficient to pay such increased Trust
Amount, such increase to be effective, and this Subsection 1.01 to be amended as
of, the date of written acceptance by the Trustee of such notice and
contribution of assets.
(b) Maintenance of Trust Amount. The Trust Fund shall at all times be
maintained at a level at least equal to the Trust Amount except as otherwise
provided in Subsection 1.01(c). Accordingly, the Company shall be obligated to
immediately reimburse the Trust for any Trust assets used to pay expenses of
Trust administration or Plan benefits and shall reimburse the Trust for amounts
paid in satisfaction of claims of the Company's general creditors as required by
and in accordance with Section 2.03 hereof, so that the Trust Fund is promptly
restored to at least the Trust Amount following any such payments from the
Trust. Furthermore, in the event that the Trustee receives notice at any time
from the issuing bank that, or with the effect that, the Letter of Credit will
terminate prior to the end of the then-current term thereof, or if the Trustee
has not received a replacement Letter of Credit on or before the eleventh (11th)
day prior to the scheduled expiration of the term of the existing Letter of
Credit, and the Company has not, by the eleventh (11th) day prior to the early
termination or scheduled expiration of the Letter of Credit contributed cash
and/or Company Stock to the Trust Fund equal to the Trust Amount, the Trustee
shall, in the event of receipt of such notice from the issuing bank,
immediately, and in the event of failure to replace the Letter of Credit prior
to its scheduled expiration, on the day next
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following such eleventh (11th) day (or on such later day which is the earliest
day upon which the Letter of Credit will permit) draw the entire amount covered
by such existing Letter of Credit.
(c) Ongoing Funding. The Company may, but shall have no obligation
to, make additional contributions to the Trust from time to time, except that
upon a Change in Control the Company shall be obligated to immediately, without
notice or demand, contribute cash to the Trust in an amount equal to the Trust
Amount. If the Trustee has not received payment of the Trust Amount in
immediately available funds by 10:30 a.m. Eastern Standard or Daylight Savings
Time (whichever is prevailing in Philadelphia, Pennsylvania) on the day on which
the Change in Control of the Company occurs, the Trustee shall immediately draw
the entire amount covered by any Letter of Credit and/or make a written demand
for contribution to the Trust of any Company Stock reserved under a Company
Stock Agreement addressed to the Board of Directors and chief executive officer
of the Company, with a copy thereof to the Participant Representatives and the
transfer agent and registrar for the Company Stock.
In addition, if at any time the Company calculates the Current Plan
Termination Liability and the amount equal to 200% of the Current Plan
Termination Liability as so calculated is certified by the "Trust Actuary," as
defined in Article V hereof, to be less than the Trust Amount, such amount shall
constitute the new Trust Amount thereafter required to be maintained in the
Trust Fund. Upon receipt, prior to a Change in Control of the Company, by the
Trustee of a written direction from the Company to reduce any Letter of Credit
then held in the Trust accompanied by the Trust Actuary's certification of the
new Trust Amount, the Trustee shall give notice to the issuing bank under the
Letter of Credit to reduce the amount payable under such Letter of Credit to the
amount of the new Trust Amount.
(d) Form of Contributions to and Reimbursements of the Trust. Any
contribution to or reimbursement of the Trust made by the Company as required or
permitted under Subsections 1.01(a), 1.01(b) or 1.01(c) may be made in whole or
in part in the form of cash, by delivery or amendment of a Letter of Credit,
and/or in the form of Company Stock except that the required contribution
provided for in the first sentence of Subsection 1.01(c) shall be made in cash.
SECTION 1.02 Investment of the Trust Fund.
(a) Prior to a Change in Control. The Trust Fund shall be received,
held, managed, disbursed and otherwise administered by the Trustee as provided
in this Trust Agreement, and shall be invested and reinvested by the Trustee
only in cash, cash equivalents, Letters of Credit and/or in Company Stock.
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The Trust is intended to be a grantor trust within the meaning of
Section 671 of the Internal Revenue Code (the "Code") and, except as
hereinafter permitted in this Subsection 1.02(a), all interest and dividends
earned on the investment of the Trust Fund shall be the property of the Company
and shall not constitute a part of the Trust Fund. The interest and dividends
earned in any calendar quarter shall be paid over to the Company by the Trustee
as promptly as practicable after the end of each quarter or, at the option of
the Company exercisable by delivering notice to the Trustee, shall be
contributed to the Trust Fund.
(b) On and After a Change in Control. Subject to the terms of this
Trust Agreement, the Trustee shall have complete and sole discretion and
responsibility for the investment and reinvestment of the Trust Fund. Following
receipt of any contribution of cash from the Company or the draw of proceeds
under any Letter of Credit, the proceeds thereof while held in the Trust Fund
shall be invested by the Trustee pending payment to Participants, taking into
account, among other things, the timing and amount of anticipated cash
requirements for payments required to be made from the Trust Fund, only in:
(i) government obligations, meaning direct obligations
of, or obligations the timely payment of the principal of and
the interest on which are unconditionally guaranteed by, the
United States of America;
(ii) government agency obligations, meaning direct
obligations (including bonds, notes or participation
certificates) of, or obligations the timely payment of the
principal of and the interest on which are unconditionally
guaranteed by, any of the following instrumentalities or
agencies of the United States of America: Federal Home Loan
Bank System; Export-Import Bank of the United States; Federal
Financing Bank; Government National Mortgage Association;
Farmers Home Administration; Federal Home Loan Mortgage
Corporation; Federal Housing Administration; Private Export
Funding Corporation; Tennessee Valley Authority; or Federal
National Mortgage Association;
(iii) state government obligations meaning direct and
general obligations of any state of the United States on which
the full faith and credit of the state is pledged and which are
rated in the highest rating category by Moody's Investors
Service, Inc. or Standard & Poors Corporation; and
(iv) interest-bearing demand or time deposits with,
negotiable certificates of deposit issued by, or any short term
investment in a common, collective or commingled trust fund or
pooled investment fund maintained by a national banking
association or a state bank or trust company which is a member
of the Federal Deposit Insurance
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Corporation or a savings and loan association which is a member of
the Federal Savings and Loan Insurance Corporation, in any case with a
combined capital and surplus of at least $100,000,000.
The Trustee shall not be liable for any loss of income due to liquidation
of any investment, including without limitation Company Stock, which the
Trustee, in its sole discretion, believes necessary to make payments or to
reimburse expenses under the terms of this Trust Agreement. All interest and
other amounts earned on the investment of the Trust Fund shall constitute a part
of the Trust Fund.
(c) Exercise of Rights Under Letters of Credit. Whether before or after a
Change in Control of the Company, the Trustee shall exercise its rights as
beneficiary of, and take all action reasonably necessary to enforce, the Letter
of Credit as required or permitted hereunder and in accordance with the terms
thereof, and will draw on the Letter of Credit whenever and to the fullest
extent permitted by the terms thereof, without regard to whether the Company has
directed the Trustee to take any such action or to refrain from taking any such
action, and shall, to the maximum extent permitted by applicable law, be fully
protected in doing so. The proceeds of any Letter of Credit shall be held,
invested and disbursed by the Trustee as provided in this Trust Agreement.
(d) Certain Rights Regarding Company Stock Registered in the Name of the
Trustee for the Benefit of the Trust.
(i) Voting Rights. The Trustee shall follow the directions of
participants in the "Savings Plan," as defined in Article V hereof,
with respect to the manner of voting of Company Stock held by the
Trust on each matter pending before an annual or special meeting of
stockholders of the Company or any action by written consent of
stockholders in lieu of a meeting. In connection with any such meeting
of stockholders or action by written consent in lieu of a meeting, the
Trustee shall obtain from the Savings Plan trustee certification of
the directions received from the Saving Plan participants (in the
aggregate and not identifying any individual direction)
directing the Savings Plan trustee whether and how to vote,
abstain or act by written consent with respect to the Company
Stock held by the Savings Plan. Upon receipt by the Trustee of
such certification, the Trustee shall, on each such matter,
vote, abstain or act by written consent with respect to the
shares of Company Stock held by the Trust in the same
proportion and manner as the Saving Plan participants directed
the Savings Plan trustee with respect to the Company Stock held
by the Savings Plan.
(ii) Tender or Exchange Offer. If a tender or exchange offer is
commenced for Company Stock, the Trustee shall obtain from the Savings
Plan trustee certification of the directions received from the
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Savings Plan participants directing the Savings Plan trustee whether
to tender or exchange the Company Stock held by the Savings Plan.
Upon receipt by the Trustee of such certification, the Company Stock
held by the Trustee shall be tendered or exchanged, or not tendered or
exchanged, by the Trustee in the same proportion and manner as the
Savings Plan participants directed the Savings Plan trustee with
respect to the Company Stock held by the Savings Plan.
(iii) Confidentiality. All voting and other actions taken pursuant to
the foregoing paragraphs (i) and (ii) of Subsection 1.02 (d), and the
contents of any certification of directions received by the Savings
Plan trustee as contemplated by such paragraphs (i) and (ii), shall be
held confidential by the Trustee and shall not be divulged or released
to any person, including officers and employees of the Company and its
affiliates (other than (x) agents of the Trustee who are not
affiliated with the Company or its affiliates or (y) by virtue
of the execution by the Trustee of any proxy, consent or letter
of transmittal for the shares of Company Stock held in the
Trust).
(iv) Trustee Action. The Trustee shall not make any
recommendations regarding the manner of exercising any rights
under this Subsection 1.02(d), including whether or not any
rights should be exercised.
ARTICLE II
USE AND RELEASE OF THE TRUST FUND:
PAYMENTS AND RETURN OF SURPLUS
SECTION 2.01 Use of Trust Fund; Benefit Calculation Schedule and
Participant Information.
(a) General. Except as provided in Subsection 2.02(a) and Section 2.05 as
to surplus assets, Section 2.03 as to Company creditors, and Section 4.02 as to
Trustee fees and other Trust administration expenses, the Trust Fund shall be
used solely to pay Plan benefits to Participants.
(b) Benefit Calculation Schedule and Participant Information. Attached
hereto as Exhibit B is a schedule (said schedule,, together with all documents
and materials attached thereto as annexes or referred to therein as having been
provided to the Trustee by the Company, being hereinafter referred to as the
current "Benefit Calculation Schedule") describing as of the date hereof how to
calculate the basic or primary form of benefit and all alternative or optional
forms of benefits payable under the applicable Plan. In addition, the Company
has provided to the Trustee the "Participant Information" as defined in
Article V hereof,
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which is complete and accurate as of December 31, 1998, or such later date as
indicated therein. During the first calendar quarter of each calendar year
beginning with calendar year 2000, the Company has and shall continue to provide
the Trustee with any revisions to the Benefit Calculation Schedule and updated
Participant Information, in each case as of the end of the immediately preceding
calendar year.
The Company may update the preceding annual Benefit Calculation Schedule
and/or Participant Information as of a date subsequent to the preceding calendar
year end at any time by providing an updated Benefit Calculation Schedule and/or
Participant Information to the Trustee, and shall do so promptly upon a Change
in Control. However, after a Change in Control, no additions to or deletions
from the list of Plans covered by this Trust Agreement or to or from the
Participant Information or any change in the description of how to calculate
benefits included in the Benefit Calculation Schedule shall be permitted without
the written consent of the Participant Representatives. If the Company should
fail to provide to the Trustee any Benefit Calculation Schedule or Participant
Information required hereby, the Participant Representatives may do so and the
Trustee shall provide a copy thereof to the Company.
SECTION 2.02 Payments to Participants.
It is expected that any amount payable to any Participant under a Plan will
be satisfied and paid by the Company, in whole or in part, from its general
funds.
(a) Prior to a Change in Control. However, Plan benefits which remain
unpaid for 30 days after receipt by the Company from the Trustee of a "Payment
Demand", as defined in this Subsection 2.02(a), shall be paid from the Trust
Fund, subject to reduction in the event of insufficiency of the Trust Fund as
provided in Section 2.04, and the Trustee shall liquidate assets of the Trust
Fund to make such payment or payments, including by drawing under any Letter of
Credit or selling Company Stock registered in the name of the Trustee for the
benefit of the Trust. As to Company Stock reserved under a Company Stock
Agreement, the Trustee shall make a written demand for contribution of such
Company Stock addressed to the Board of Directors and chief executive officer of
the Company, with a copy thereof to the Participant Representatives and the
transfer agent and registrar for the Company Stock.
For purposes hereof, a "Payment Demand" is a written demand for payment
executed by the Trustee stating that the Trustee has received
(i) a written notice from the Participant Representatives of
the Company's failure to make a benefit payment or payments
owing to a Participant under a Plan after the Participant's
written request to the Company's Plan Administrator for such
payment, and
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(ii) a written certification by the Trust Actuary, based
upon the Benefit Calculation Schedule and Participant
Information then applicable to the Plan, of the amount of and
time at which such payment or payments were due and that the
Trust Amount is sufficient (or the extent to which it is
insufficient) to make such payment or payments in accordance
with Section 2.04.
In addition, upon a "Determination of Taxability", as defined in Article V
hereof, except if this Trust Agreement is revoked as permitted by Section 6.01,
the Company shall either pay from its general funds or instruct the Trustee to
pay an amount from the Trust Fund to each Participant equivalent to the amount
previously included or which will be required to be included in the
Participant's gross income for federal income tax purposes with respect to the
Trust Fund, as well as an amount equivalent to the sum of all interest,
penalties, additions to tax and similar amounts which such Participant owes or
will owe with respect to the Trust Fund to all federal, state and local tax
authorities (together, "Tax Penalties"). After such payment has been made in
full, the Trustee shall return the remaining assets then comprising the Trust
Fund to the Company, whereupon the Trust shall be terminated.
Company Stock registered in the name of the Trustee for the benefit of the
Trust shall be transferred by the Trustee, and/or sold by the Trustee to obtain
cash for transfer, to pay Plan benefits. To facilitate any such sales of such
Company Stock, the Company shall register under the Securities Act of 1933, as
amended (the "1933 Act"), such Company Stock as the Trustee may direct. The
Trustee shall have no obligation to sell the Company Stock until such
registration is complete. If the Trustee is required to sell Company Stock, the
Trustee may engage agents to effect such sales and shall be reimbursed for the
reasonable fees and expenses of such agents in accordance with Section 4.02.
(b) On and After a Change in Control. Following the termination of
employment of any Participant and the delivery to the Trustee by the Company or
by the Participant of a written notice of such termination and, if applicable,
the election by the Participant of the form available under the Plan in which
his Plan benefit is to be paid, the Trustee shall within ten days after the
receipt thereof by the Trustee,
(i) provide a copy of such notice of termination and
election of form of benefit to the Participant or the Company,
as applicable, and to the Participant Representatives and the
Trust Actuary, and
(ii) direct the Trust Actuary to calculate or verify the
Plan benefit to which the Participant is entitled as soon as
possible, based upon the
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Benefit Calculation Schedule and Participant Information then
applicable to the Plan.
The Trustee shall thereafter pay such benefit to the Participant in the
form, amount or amounts and at the time or times specified by the Trust Actuary
in writing to the Trustee, to the extent not paid by the Company from its
general funds and subject to the sufficiency of the Trust Fund as provided in
Section 2.04 at the time said payment or payments are due.
In addition, upon a Determination of Taxability, the Trustee shall pay to
the Participants all of the assets comprising the Trust Fund in proportion to
the amounts previously included or which will be required to be included in each
respective Participant's gross income for federal income tax purposes with
respect to the Trust Fund as specified in writing by the Trust Actuary,
whereupon the Trust shall be terminated.
(c) Withholding Taxes. The Trustee, whether on its own behalf or on behalf
of the Company, has the right and duty and shall deduct from each payment under
this Section 2.02 any federal, state or local withholding or other taxes or
charges which the Trustee or the Company may from time to time be required to
deduct under applicable laws, and shall pay over to the appropriate government
authority the amounts so withheld. The Trustee will notify the Company of any
withholding it makes.
(d) Effect on Plan Rights. Distributions made from the Trust Fund to a
Participant in respect of Plan benefits shall satisfy the Company's contractual
obligation to pay benefits to such Participant under the respective Plan to the
extent of the sum of (i) any payments received by the Participant from the Trust
under Subsection 2.02(a) or 2.02(b) hereof and (ii) the amounts withheld by the
Trustee in accordance with Subsection 2.02(c) hereof; provided, however, that in
the event of a distribution upon a Determination of Taxability, the amount of
such distribution which is equivalent to the sum of (x) all Tax Penalties and
(y) all additional federal, state and local taxes which would be owed by the
Participant with respect to a reimbursement payment for such Tax Penalties,
shall not satisfy the Company's obligation to pay benefits to such Participant
under the Plans unless and until the Company pays to such Participant, in
addition to Plan benefits, the amounts described in clauses (x) and (y) above
from the Trust Fund or from its general assets. The payment of Plan benefits to
a Participant from the Trust Fund on a reduced basis because of the
insufficiency of the Trust Fund at the time of such payment or payments, as
provided in Section 2.04 hereof, shall not alter, affect or detract in any way
from the Participant's right to receive the remainder of his Plan benefits from,
and to enforce said right against, the Company. Except for payments made as a
result of a Determination of Taxability, the payment of benefits from this Trust
shall be as provided for in the Plans and payments from this Trust shall be
consistent with the Plans as to timing and maximum amount.
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SECTION 2.03 Payments to Creditors.
At all times during the continuance of this Trust, the principal and income
of the Trust shall be subject to claims of general creditors of the Company as
set forth in this Section 2.03, and at any time the Trustee has actual
knowledge, or has determined, that the Company is "Insolvent," as defined in
Article V hereof, the Trustee shall suspend any further payments from the Trust
Fund to Participants and will hold the Trust Fund for the benefit of the
Company's general creditors. The Board of Directors and the chief executive
officer of the Company shall each have the duty to inform the Trustee of the
Company's Insolvency. If the Company or a person claiming to be a creditor of
the Company alleges in writing to the Trustee that the Company has become
Insolvent, the Trustee shall independently determine, within 30 days after
receipt of such notice, whether the Company is Insolvent and, pending such
determination, the Trustee shall discontinue payments of Plan benefits to
Participants, shall hold the Trust assets for the benefit of the Company's
general creditors, and shall resume payments of Plan benefits to Participants in
accordance with this Trust Agreement only after the Trustee has determined that
the Company is not Insolvent (or is no longer Insolvent, if the Trustee
initially determined the Company to be Insolvent).
Unless the Trustee has actual knowledge of the Company's Insolvency or has
reason to believe that the Company is Insolvent, the Trustee shall have no duty
to inquire whether the Company is Insolvent. The Trustee may in all events rely
on such evidence concerning the Company's Insolvency as may be furnished to the
Trustee which will give the Trustee a reasonable basis for making a
determination concerning the Company's solvency. Nothing in this Trust Agreement
shall in any way diminish any rights of any Participant to pursue his rights as
a general creditor of the Company with respect to Plan benefits or otherwise.
If the Trustee discontinues payment of benefits from the Trust pursuant to
this Section 2.03 and subsequently resumes such payments, the first payment
following such discontinuance shall include the aggregate amount of all payments
which would have been made to any Participant during the period of such
discontinuance, less the aggregate amount of payments made to such Participant
by the Company from its general assets during any such period of discontinuance.
Such amount, if any, shall be paid together with interest thereon at the prime
rate as determined by the Trustee for the period.
Any assets of the Trust applied to the satisfaction of claims of general
creditors pursuant to this Section 2.03 shall, upon a determination by the
Trustee that the Company is no longer Insolvent, be immediately reimbursed to
the Trust by the Company, together with interest thereon at the rate specified
in the preceding paragraph of this Section 2.03.
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SECTION 2.04 Sufficiency of Trust Fund.
To the extent provided herein, the Trust Fund shall be used to pay Plan
benefits to Participants in accordance with and in such forms, including lump
sums, provided for under the respective Plan, all as such benefits may become
due and payable from time to time under the terms of the applicable Plan;
provided, however, that if at any time the fair market value of the Trust Fund
is less than the Minimum Trust Amount, the amount to be paid to each such
Participant from the Trust Fund at such time shall be reduced in proportion to
the ratio which the aggregate fair market value of the Trust Fund bears to the
applicable Minimum Trust Amount.
Such reduction of benefit payments shall continue until such time as the
Trust Fund is again at least equal to the applicable Minimum Trust Amount or
represents a larger ratio of the Current Plan Termination Liability. Thereupon,
after payment in full (or at the higher ratio) of any Plan benefit payments
which had previously been curtailed under this Section 2.04 and which have not
otherwise been paid by the Company, together with interest thereon at the prime
rate as determined by the Trustee for the period of nonpayment, the Trustee
shall resume making Plan benefit payments in full (or at a larger ratio
permitted under the terms of the preceding paragraph of this Section 2.04).
Following a Change in Control, the Trustee shall value the Trust Fund and
direct the Trust Actuary to calculate the Minimum Trust Amount as of the end of
each calendar quarter, promptly following the end of each calendar quarter. The
Trustee shall be entitled to apply the resulting ratio to Plan benefits which
may be paid from the Trust Fund to all benefit payments made until the next such
required valuation by the Trustee and calculation by the Trust Actuary.
Notwithstanding the foregoing provisions of this Section 2.04, the Trustee
shall have the right to pay all or an amount constituting a higher ratio of Plan
benefits from the Trust Fund pursuant to the written direction of the
Participant Representatives or if, upon the advice of the Trust Actuary, the
Trustee believes that such an increase in current Plan benefit payments will not
result in insufficient Trust assets to pay all remaining Plan benefits as and
when due, for instance, when some but not all of the Plans have been terminated
as defined in Section 5.07 hereof.
SECTION 2.0 Surplus Assets.
After payment in full of all Plan benefits in accordance with the Plans and
payment of all expenses of administration of the Trust, including any fees that
may be expected to be incurred in terminating the Trust, the Trustee shall
deliver to the Company any remaining surplus assets of the Trust Fund.
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SECTION 2.06 Trust Actuary Determinations, etc.
In connection with any certification, determination, calculation or
verification of Plan benefits required to be made by the Trust Actuary as
provided in Section 2.02 or of the Trust Amount or the "Minimum Trust Amount",
as defined in Article V hereof, required to be made by the Trust Actuary under
Subsection 1.01(c) or Section 2.04, respectively, the Trust Actuary shall be
permitted to apply and rely on any administrative procedures and assumptions as
to which the Trust Actuary and Participant Representatives agree, including
without limitation, assumptions updating any such calculation to the date of
payment from the date of the information contained in the most recent applicable
Benefit Calculation Schedule and Participant Information. In addition, the Trust
Actuary may require the Trustee to engage tax counsel acceptable to the
Participant Representatives and/or the Company's or its successor's independent
auditors to assist in the determination of the amounts payable to each
Participant upon a Determination of Taxability as provided in
Subsection 2.02(b) hereof.
ARTICLE III
TRUSTEE
SECTION 3.01 Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be limited to those
expressly set forth in this Trust Agreement and no implied covenants or
obligations shall be read into this Trust Agreement against the Trustee. The
Trustee shall not be liable for any act taken or omitted to be taken hereunder
if taken or omitted to be taken by it in good faith.
If, pursuant to Section 2.03 hereof or otherwise, all or any part of the
Trust Fund is at any time attached, garnished or levied upon by any court order,
or in case the payment, assignment, transfer, conveyance or delivery of any such
property shall be stayed or enjoined by any court order, or in case any order,
judgment or decree shall be made or entered by a court affecting such property
or any part thereof, then and in any of such events the Trustee shall give
notice thereof to the Company and is authorized, in its sole discretion, to rely
upon and comply with any such order, writ, judgment or decree, and it shall not
be liable to the Company (or any of its subsidiaries) or any Participant by
reason of such compliance even though such order, writ, judgment or decree
subsequently may be reversed, modified, annulled, set aside or vacated.
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SECTION 3.02 Legal Counsel.
The Trustee may engage legal counsel, including, prior to a Change in
Control, counsel to the Company, and consult with such counsel with respect to
the construction of this Trust Agreement, the duties of the Trustee hereunder,
the transactions contemplated by this Trust Agreement or any act which the
Trustee proposes to take or omit, and rely upon the advice of such counsel.
SECTION 3.03 Trust Books and Records.
(a) Maintenance; Inspection; Annual Statements. The Trustee shall maintain
such books, records and accounts as may be necessary for the proper
administration of the Trust Fund. During any period, whether before or after a
Change in Control, when the Trust Fund is comprised of assets other than the
$100.00 in cash initially contributed to the Trust, earnings thereon, a Letter
of Credit and/or Company Stock reserved under a Company Stock Agreement (a
"Funded Period"), the Trustee shall maintain accounts of all its receipts,
investments, disbursements, and other transactions and proceedings under this
Trust Agreement. Such person or persons as the Company shall designate shall be
allowed to inspect and audit such books of account of the Trustee relating to
the Trust Fund upon request at any reasonable time during business hours.
Within 30 days after the close of each fiscal year of the Company during
which any Funded Period occurred, the Trustee shall transmit to the Company and
certify to the accuracy of, a written statement of its accounts and proceedings
with respect to the Trust Fund for such year, which statement shall include a
statement of assets and liabilities aggregated by categories and valued at fair
market value as of the close of the year in question, and the net assets
available for Plan benefits, including a statement of receipts and disbursements
during the year, aggregated by general source and application.
(b) Additional Duties on and After a Change in Control. The Trustee shall
continue to be obligated to keep the books and records, permit audit and
inspection thereof, and to provide the annual written statements provided for in
Subsection 3.03(a) above, and shall in addition provide a copy of such annual
statements to, and shall permit audit and inspection of its books and records
by, such person or persons as are designated to the Trustee in writing by the
Participant Representatives.
(c) Settlement of Accounts. Notwithstanding any other provision of this
Trust Agreement, in the event of the termination of the Trust, or the
resignation or discharge of the Trustee, the Trustee shall have the right to a
settlement of its accounts, which accounting may be made, at the option of the
Trustee, either (i) by a judicial settlement in a court of competent
jurisdiction or (ii) by agreement of
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settlement, release and indemnity from the Company to the Trustee with the
written consent of the Participant Representatives.
(d) Valuation of Company Stock. The Trustee shall value Company Stock at
its fair market value for purposes of valuing the Trust Fund under any provision
of this Trust Agreement including without limitation for preparing the reports,
tax returns and filings contemplated by this Section 3.03 or Section 4.01. Fair
market value shall mean for this purpose the closing price of a share of Company
Stock on the trading day immediately preceding the date as of which said value
is to be presented in such report, tax return or filing, as reported in the Wall
Street Journal on the composite tape for issues listed on the New York Stock
Exchange.
SECTION 3.04 Removal or Resignation of the Trustee and Designation of
Successor Trustee.
(a) Removal. At any time prior to a Change in Control, the Company may
remove the Trustee with or without cause, upon at least 60 days' notice in
writing to the Trustee. The necessity for such prior notice may be waived by the
mutual agreement of the Trustee and the Company. Within 60 days after any such
notice of removal to the Trustee or prior to any earlier removal of the Trustee,
the Company shall designate a successor Trustee qualified to act hereunder. At
any time on or after a Change in Control, the Trustee may not be removed except
by order of a court having competent jurisdiction or by written direction of the
Participant Representatives.
(b) Resignation. The Trustee may resign at any time upon at least 60 days'
notice in writing to the Company and, if the Trustee resigns prior to a Change
in Control, the Company shall appoint a Successor Trustee qualified to act
hereunder within 60 days after such notice of resignation. If the Company is
unable to act or fails to appoint a Trustee, the Participant Representatives may
appoint the Trustee. If the Trustee resigns at any time on or after a Change in
Control, then the Trustee's resignation shall become effective only after the
Trustee has designated a successor Trustee qualified to act hereunder with the
written consent of the Participant Representatives. If the Trustee is unable to
obtain such consent, it shall be entitled to petition a court of competent
jurisdiction to appoint its successor, and the Trustee shall continue to serve
until its successor accepts the Trust and receives delivery of the Trust Fund.
(c) Final Statement of Accounts. In the event of such removal or
resignation, the Trustee shall duly file with the Company prior to a Change in
Control, or a person or persons designated in writing by the Participant
Representatives after a Change in Control, a written statement or statements of
accounts and proceedings as provided in Subsection 3.03(a) hereof for the period
since the last previous annual accounting for each Plan.
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(d) Powers of Successor; Assignment of Trust Fund. Each such successor
Trustee, during such period as it shall act as such, shall have the powers and
duties herein conferred upon the initial Trustee, and the word "Trustee"
wherever used herein, except where the context otherwise requires, shall be
deemed to include any successor Trustee. Upon designation of a successor Trustee
and delivery to the resigned or removed Trustee of written acceptance by the
successor Trustee of such designation, such resigned or removed Trustee shall
promptly assign, transfer, deliver and pay over to such Trustee, in conformity
with the requirements of applicable law, the funds and properties in its control
or possession then constituting the Trust Fund.
(e) Requirements as to Trustee. The Trustee and any successor thereto
appointed hereunder shall be a commercial bank which is not an affiliate of the
Company, but which is a national banking association or established under the
laws of one of the states of the United States, and which has a combined capital
and surplus of at least $100,000,000.
SECTION 3.05 Reliance by Trustee; Third Parties.
The Trustee shall be fully protected in acting or omitting to act in
reliance upon any instrument, certificate, letter or other document which it
believes to be genuine. A third party dealing with the Trustee shall not be
required to make inquiry as to the authority of the Trustee to take any action
nor be under any obligation to follow the proper application by the Trustee of
the proceeds of sale of any property sold by the Trustee or to inquire into the
validity or propriety of any act of the Trustee.
SECTION 3.06 Inability of Company to Act.
If at any time the Company shall be incapable for any reason of giving
instructions, directions or authorizations to the Trustee as herein provided,
the Trustee may act without such instructions, directions or authorizations as
it, in its discretion, shall deem appropriate or advisable under the
circumstances for carrying out the provisions of the Plans or this Trust
Agreement; provided, however, that the Trustee shall notify the Company in
writing of any such actions taken pursuant to this Section 3.06.
SECTION 3.07 Indemnity.
The Company shall pay and shall protect, indemnify and save harmless the
Trustee and its officers, employees and agents from and against any and all
losses, liabilities (including liabilities for penalties), actions, suits,
judgments, demands, damages, costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) of any nature arising from or relating
to any action by or any
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failure to act by the Trustee, its officers, employees or agents or the
transactions contemplated by this Trust Agreement, including, but not limited
to, any claim made by a Participant with respect to payments made or to be made
by the Trustee, and any claim made, whether before or after a Change in Control,
by the Company or its successor that this Trust Agreement is invalid, except to
the extent that any such loss, liability, action, suit, judgment, demand,
damage, cost or expense is caused by the gross negligence or willful misconduct
of the Trustee, its officers, employees or agents.
ARTICLE IV
TRUST FUND TAXES; TRUSTEE FEES;
OTHER COSTS OF TRUST ADMINISTRATION
SECTION 4.01 Trust Fund Taxes.
The Company shall from time to time pay taxes of any and all kinds
whatsoever which at any time are lawfully levied or assessed upon or become
payable in respect of its interests in the Trust Fund, the income ox any
property forming a part thereof. To the extent that any taxes lawfully levied
or assessed upon the Trust Fund are not paid by the Company, the Trustee shall
contest the validity of such taxes in any manner deemed appropriate by the
Company or its counsel, at Company expense, but only if it has received an
indemnity bond or other security satisfactory to it to pay any such expense.
The Company may itself contest the validity of any such taxes.
SECTION 4.02 Trustee Fees; Other Trust Administration Expenses.
The Trustee shall be entitled to compensation from the Company for its
services as Trustee of the Trust, during any Funded Period as custodian of the
assets of the Trust Fund and, following a Change in Control during any Funded
Period, as investment manager of the assets of the Trust Fund, at such
reasonable rates as may from time to time be agreed upon by the Trustee and the
Company; provided, however, that such rates of fees as are in effect for such
services on the effective date of this Trust Agreement shall not be increased
for at least two years following the effective date of this Trust Agreement. In
addition, the Company shall pay the expenses of administering the Trust. For
purposes hereof, the expenses of administering the Trust shall include but not
be limited to the following:
(i) the foregoing fees of the Trustee;
(ii) the reasonable fees and expenses of the Trustee's
legal counsel referred to in Section 3.02 hereof;
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(iii) the reasonable fees and expenses of the Trust
Actuary and of the tax counsel and auditors referred to in
Section 2.06 hereof;
(iv) the reasonable expenses of each of the Participant
Representatives and the reasonable fees and expenses of any
legal counsel to any or all of the Participant Representatives
which may from time to time be engaged by the Participant
Representatives to advise any or all of them with respect to
the construction of this Trust Agreement and their actions as
Representative Participants; and
(v) any losses, liabilities, damages, costs and expenses
(including without limitation for reasonable attorney's fees
and expenses) paid or incurred by the Trustee or the
Participant Representatives for which the Company is obligated
to provide indemnity pursuant to Section 3.07 or 7.08,
respectively, and any expenses of Participants referred to in
Section 7.04.
Regardless of the provisions of Section 2.04 or the sufficiency of the
Trust Fund to make future payments required hereunder, the Trustee shall
liquidate assets of the Trust Fund, including by drawing under any Letter of
Credit, to pay or to reimburse itself for any such compensation and expenses of
Trust administration not paid by the Company. Such payment or reimbursement
shall be made by the Trustee within 60 days after receipt by the Company of the
Trustee's invoice for, and supporting documentation evidencing the nature and
amount of, such compensation and expenses and, notwithstanding the foregoing,
within 20 days after written demand is made on the Company by an indemnitee for
advancement of expenses incurred by an indemnitee in defending any proceeding as
to which the Company is obligated to provide indemnity under this Trust
Agreement or, as to any Participant Representative, under the Company's
Certificate of Incorporation, and within 20 days after receipt of the expense
statement and direction of the Participant Representatives to reimburse
Participant expenses as provided in Section 7.04 hereof. If the Trust Fund does
not have sufficient funds to pay such amounts, the Company will pay them.
ARTICLE V
CERTAIN DEFINITIONS
As used in this Trust Agreement, in addition to other terms defined
elsewhere herein, the following terms shall have the following meanings, unless
the context clearly indicates otherwise:
SECTION 5.01 "Change in Control" or "Change in Control of the Company"
shall mean the first to occur of any one of the events described below:
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(a) Stock Acquisition. Any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (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 (a
"Subsidiary"), or a trustee of an employee benefit plan sponsored solely by the
Company and/or such a Subsidiary, is or becomes, other than by purchase from the
Company or such a Subsidiary, 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% or more 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's
shareholders, as the case may be.
(b) 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.
(c) 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 Trust Agreement. 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 the outside members of the Board shall
specify.
The Board of Directors and the chief executive officer of the Company shall
each have the duty to inform the Trustee of a Change in Control or of any event
or events which they believe might occur which would constitute a Change in
Control.
Notwithstanding the foregoing definition, a Change in Control shall be
deemed to have occurred for purposes of this Trust Agreement when the Trustee
has actual knowledge from a reliable source of such Change in Control. For this
purpose, notice from the Company or Participant Representatives or a report
filed with the Securities and Exchange Commission, a public statement issued by
the Company, or a periodical of general circulation, including but not limited
to The
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New York Times or The Wall Street Journal shall be deemed to be a reliable
source upon which the Trustee may rely. The Trustee has no affirmative
obligation or duty to inquire about, investigate or consult the foregoing
sources for purposes of determining whether a Change in Control has occurred.
SECTION 5.02 "Company Stock" shall mean the common stock, par value $1.00
per share, of and issued by the Company, or any successor securities thereto;
and shall be treated as having been contributed to the Trust for purposes of
Section 1.01 hereof if such Company Stock is
(a) owned by the Trust and is represented by stock certificates registered
in the name of and in the custody of the Trustee for the benefit of the Trust,
or is reflected by book entry registration in the name of the Trustee for the
benefit of the Trust on the books of the transfer agent and registrar for the
Company Stock; or
(b) reserved under a Company Stock Agreement.
SECTION 5.03 "Company Stock Agreement" shall mean a written agreement of
the Company with the Trustee under which the Company agrees to reserve Company
Stock for contribution to the Trust, receipt of a copy of which agreement has
been acknowledged by the transfer agent and registrar for the Company Stock.
SECTION 5.04 "Current Plan Termination Liability" shall mean that amount
which is or would have been sufficient to make all payments that are or would
have been due and payable under the Plans to all Participants, assuming the
Plans and the employment of all Participants had been terminated and all Plan
accrued benefits had vested (and using the Benefit Calculation Schedule and
Participant Information then applicable to the Plans and, as to all defined
benefit Plans, the assumptions set forth in Exhibit C hereto), as of the end of
the most recently concluded calendar quarter or other date as of which the
calculation of Current Plan Termination Liability is required or permitted to be
made in accordance with this Trust Agreement.
SECTION 5.05 "Designated Beneficiary" shall mean the person designated by
the Participant under each Plan as his or her beneficiary as indicated in the
applicable Participant Information. Such person shall succeed to all of the
rights of such Participant under this Trust Agreement upon such Participant's
death with respect to the amounts of benefits to which such person is entitled
under the terms of the Plan upon the Participant's death. The term "Participant"
as used in this Trust Agreement shall include the Designated Beneficiary from
and after the Participant's death.
SECTION 5.06 "Determination of Taxability" shall mean and shall be deemed
to have occurred on the earlier of (a) the Internal Revenue Service (the "IRS")
taking the written position, either through revenue rulings, letter rulings or
other similar pronouncements, or the Code being amended in such a manner that
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the Trust would not be a "grantor trust", if such position would result in the
principal and income of the Trust Fund being treated as income of the
Participants, or (b) a Participant's receipt of a statutory notice of deficiency
(90-day letter) from the IRS which notice assesses an additional income tax by
reason of the Participant's failure to include in his gross income any amounts
in respect of any assets of the Trust Fund because of the existence of the Trust
Fund prior to the date any amounts are payable to such Participant pursuant to
this Trust Agreement. The determination as to whether either of the foregoing
events has occurred shall be made by the Company or its successors with the
concurrence, in writing, in that determination by the independent auditors to
the Company, and in the event of a disagreement between the Company and those
auditors, the Trust Fund shall be distributed as provided for in Section 2.02;
provided, however, prior to a Change in Control, the Company may, in the event
of an occurrence specified in (b) above, elect to challenge such assessment of
additional tax on behalf of the affected Participant by whatever administrative
or judicial means it deems appropriate, in which case a Determination of
Taxability will not be deemed to have occurred until a final adverse
determination is made without further right of appeal or judicial challenge or
the Company determines to cease its challenge. If the Company elects to
challenge such a determination, it shall pay directly or reimburse the
Participant for all expenses of such challenge including any Tax Penalties
incurred during the period beginning with the issuance of such 90-day letter and
ending when the tax is paid or, if earlier, payment is made under Section 2.02
hereof, if the Participant does not unreasonably refuse to cooperate with the
Company in its challenge of such tax. The Company shall keep the Participant
informed of developments in the Company's challenge of such tax as is reasonably
required to enable the Participant to cooperate with the Company in such
challenge.
SECTION 5.07 "Insolvent" as to the Company shall mean
(i) the Company is unable to pay its debts as such debts become due,
or
(ii) the Company is subject to a pending proceeding as a
debtor under the Federal Bankruptcy Code, 11 U.S.C. Section 101
et seq., as amended, or any successor statute.
SECTION 5.08 "Letter of Credit" shall mean a standby irrevocable letter of
credit delivered to the Trustee by a bank satisfying the requirements of
Subsection 3.04(e) hereof (which bank may not be the Trustee) which has a fixed
term of at least one year and provides for the payment of at least the Trust
Amount. The Letter of Credit shall permit the Trustee to draw thereunder at any
time that the Company is not "Insolvent" (a) prior to a Change in Control,
amounts sufficient to pay any amount due and payable under Subsection 2.02(a) or
Section 4.02 of this Trust Agreement upon and after the Company's failure to
make any such payment required to be made by the Company under such Section
within the time required
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thereunder, and the entire Trust Amount upon and after the Company's failure to
maintain or obtain a replacement Letter of Credit and/or to contribute cash to
the Trust Fund in the amount of the Trust Amount as and by the time required by
Subsection 1.01(a) of this Trust Agreement, and (b) the entire Trust Amount upon
and after the Company's failure, as of 10:30 a.m. Eastern Standard or Daylight
Savings Time (whichever is prevailing in Philadelphia, Pennsylvania) on the day
on which the Change in Control of the Company occurs, to have made the payment
required to be made by the Company under Subsection 1.01(c) of this Trust
Agreement. The Letter of Credit shall be transferable to any successor Trustee.
The term "Letter of Credit" as used in this Trust Agreement shall include the
initial and all replacement and additional Letters of Credit conforming to the
requirements of this definition.
SECTION 5.09 "Minimum Trust Amount" shall mean (a) 140% of the Current Plan
Termination Liability or (b) at any time after the Plans have been terminated,
the Current Plan Termination Liability plus a reasonable reserve, in an amount
agreed to by the Trustee, Trust Actuary and Participant Representatives,
sufficient to provide for all expenses and other costs of maintaining,
administering and terminating the Trust and of paying all amounts required by
this Trust Agreement, including without limitation, all reasonable fees and
expenses of the Trustee, the Trust Actuary and the Participant Representatives.
For purposes of this definition, "termination of the Plans" means any action,
occurrence or event the effect or result of which is that no further benefits
shall accrue to or for any Participant under any Plan, disregarding for this
purpose any future vesting of benefits accrued under any Plan as of the date of
such action, occurrence or event and any additional benefits which may accrue
under any plan which is similar or succeeds any Plan.
SECTION 5.10 "Participant Information" shall mean (i) the name and date of
birth of each Participant and of such Participant's Designated Beneficiary under
the applicable Plan, (ii) the home address of each Participant and, if
different, of the Participant's Designated Beneficiary, (iii) the vesting
service and credited service and amount of compensation which would be the basis
for calculating each Participant's benefit under the applicable Plan, (iv) the
Participants (a) currently receiving Plan annuity benefit payments and (b) who
have elected but not yet received a lump sum benefit payment under a Plan and
the respective amounts of such annuity and lump sum benefits, and (v) such other
information as may be necessary or appropriate to enable the Plan Actuary to
calculate the Plan benefits to which each Participant is entitled.
SECTION 5.11 "Participant Representatives" shall mean initially those four
individual Participants named in Exhibit D attached hereto. Any such person may
elect at any time while he is a Participant not to continue as a Participant
Representative by giving written notice thereof to the Trustee, the Company and
the other Participant Representatives and appointing another Participant to
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replace himself as a Participant Representative by naming such Participant in
such notice. In the event that any such resigning Participant Representative
fails or is unable for any reason (including due to his death or mental
incapacity) to appoint an individual to replace himself as a Participant
Representative or ceases to be a Participant in a Plan, the remaining
Participant Representatives shall designate-another Participant as his
replacement by giving notice in writing to the Trustee of said replacement. Any
appointment of a replacement Participant Representative shall be deemed accepted
and effective if the written notice to the Trustee thereof is appropriately
countersigned by such newly appointed Participant Representative and, until such
time, actions taken by the remaining Participant Representatives shall be
effective for all purposes of this Trust Agreement. In case of the inability or
refusal of the Participant Representatives to act to appoint replacement
Participant Representatives, the Trustee shall be entitled to petition a court
of competent jurisdiction to appoint Participant Representatives.
SECTION 5.12 "Savings Plan" shall mean the Air Products and Chemicals, Inc.
Retirement Savings and Stock Ownership Plan or, if such plan ceases to exist,
any other broad-based employee benefit plan of the Company as designated by the
Company.
SECTION 5.13 "Trust Actuary" shall mean such consulting actuary or firm of
consulting actuaries (who is or are Enrolled Actuaries and Fellows in the
Society of Actuaries) as the Trustee shall from time to time select, with the
written consent of the Participant Representatives, to perform for and under
contract with the Trustee the functions required of the Trust Actuary as
provided in this Trust Agreement. The Participant Representatives shall have the
right to direct the Trustee at any time to remove the actuary or firm of
actuaries then serving as Trust Actuary, whereupon the Trustee shall select a
new Trust Actuary, again with the written consent of the Participant
Representatives. If the Trustee fails to appoint a Trust Actuary, the
Participant Representatives may select and appoint an actuary or firm of
actuaries to serve as Trust Actuary.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.01 Termination.
This Trust Agreement may be terminated by the Company only upon payment in
full of all Plan benefits to all Participants according to the provisions of the
Plans as to timing and amount of benefits, upon funding of the entire applicable
Trust Amount for the purpose of paying Plan benefits under a trust or trusts
qualified under Section 401 of the Code or with the written consent of the
Participant Representatives. In addition, this Trust Agreement shall terminate
following a Determination of Taxability as provided in Section 2.02 (except that
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prior to a Change in Control the Company may elect instead by action of its
Employee Benefit Plans Committee or a successor committee with oversight
responsibility for the administration of the Plans, to revoke this Trust
Agreement if doing so will avoid the Trust Fund being treated as income of the
Participants). Promptly upon any such termination or revocation of this Trust
Agreement, the Trustee shall so notify the issuing bank.
SECTION 6.02 Amendment and Waiver.
(a) Prior to a Change in Control. Except as set forth in this Subsection
6.02(a), this Trust Agreement may not be amended except by an instrument in
writing signed on behalf of the Company and the Trustee, with the written
consent of the Participant Representatives. Without limiting the generality of
the foregoing, this Trust Agreement may be amended, as aforesaid, to change or
add to the permitted forms of contributions to the Trust specified in
Subsection 1.01(d), the permitted forms of investments of the Trust Fund
specified in Subsection 1.02(a), the required terms and conditions of
replacement Letters of Credit as defined in Section 5.06, and the assumptions
for calculating the Current Plan Termination Liability set forth in Exhibit C
attached hereto. In addition, the Company and the Trustee, with the written
consent of the Participant Representatives, may at any time waive compliance
with any of the agreements or conditions contained herein. Any agreement on
the part of the Company, the Trustee or the Participant Representatives to any
such amendment or waiver shall be valid if set forth in an instrument in
writing signed on behalf of such party and all of the Participant
Representatives.
Notwithstanding the foregoing, any such amendment or waiver may be made by
written agreement of the Company and the Trustee without obtaining the consent
of any Participants including the Participant Representatives if such amendment
or waiver is necessary to prevent the assessment of income tax on any
Participants with respect to the Trust Fund prior to the date amounts are
payable to Participants from the Trust Fund, or does not operate to adversely
affect the rights of any Participant under this Trust Agreement with respect to
Plan rights and benefits existing, vested in or accrued with respect to such
Participant prior to the date of such amendment or waiver. Without limiting the
generality of the immediately preceding sentence, the Company and the Trustee
may amend this Trust Agreement without obtaining the consent of any Participants
to: increase the Trust Amount as provided in Subsection 1.01 (a) hereof; add to
the covenants and agreements of the Company contained in this Trust Agreement
other covenants and agreements thereafter to be observed; surrender any right or
power herein reserved to or conferred upon the Company; or cure any ambiguity or
omission or cure, correct or supplement any defect or inconsistent provision
contained in this Trust Agreement.
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No such amendment or waiver relating to this Trust Agreement may be made
with respect to a particular Participant unless such Participant has agreed in
writing to such amendment or waiver. Any amendment made in accordance with this
Subsection 6.02(a) may by its terms be retroactive. Any amendment to or waiver
under this Trust Agreement permitted by this Subsection 6.02(a) may be approved
on behalf of the Company by action of its Employee Benefit Plans Committee or
other committee with oversight authority to administer the Plans.
(b) On and After a Change in Control. This Trust Agreement may not be
amended by the Company or its successor or by the Trustee except as may be
required by applicable law or with the written consent of the Participant
Representatives.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01 Further Assurances.
The Company shall, at any time and from time to time, upon the reasonable
request of the Trustee, execute and deliver such further instruments and do such
further acts as may be necessary or proper to effectuate the purposes of this
Trust Agreement.
SECTION 7.02 Entire Agreement; Severability.
This Trust Agreement and the Plans and, while in effect, any Company Stock
Agreement, together set forth the entire understanding of the parties with
respect to the subject matter hereof and supersede any and all prior agreements,
arrangements and understandings relating thereto. In the event that any
provision of this Trust Agreement or the application thereof to any person or
circumstances shall be determined by a court of competent jurisdiction to be
invalid or unenforceable to any extent, the remainder of this Trust Agreement,
or the application of such provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby, and each provision of this Trust Agreement shall be valid and enforced
to the fullest extent permitted by law.
SECTION 7.03 Notices, etc.
Any notice, report, request, demand, waiver or consent requested, required
or permitted hereunder shall be in writing and shall be given personally or by
prepaid, registered or certified mail, return receipt requested, addressed as
follows:
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If to the Company:
Air Products and Chemicals, Inc.
7201 Hamilton Boulevard
Allentown, PA 18195-1501
Attention: Corporate Secretary
If to the Trustee:
PNC Bank, N.A.
Investment, Management and Trust Division
398 North Main Street
Doylestown, PA 18901-3447
Attention: Peter M. Van Dine, Vice President
If to a Participant, to the address of such person as listed next to
his or her name as shown on Exhibit B hereto or, if different or as
to future additional Participants, in the most recent Participant
Information.
If to the Participant Representatives, to the address indicated on
Exhibit D or hereafter specified by written notice from the Participant
Representatives, and if to a person designated by the Participant
Representatives, to the address of such person specified in such
designation.
A notice shall be deemed received upon the date of delivery if given
personally or, if given by mail, upon the receipt thereof.
Any action of the Company pursuant to this Trust Agreement, including all
orders, directions, instructions, approvals and objections of the Company to the
Trustee, shall be in writing signed on behalf of the Company by its Vice
President - Human Resources. Any information, request, certified Plan or Plan
amendment, Benefit Calculation Schedule or Participant Information or other
document or material delivered to the Trustee shall be in writing and may be
signed by the Company's Vice President - Human Resources or any other duly
authorized officer or employee of the Company or, to the extent applicable under
this Trust Agreement, by the Participant Representatives or a person designated
by the Participant Representatives.
SECTION 7.04 Trust Beneficiaries.
The Company shall have the right to enforce any provision of this Trust
Agreement prior to a Change in Control and, on or after a Change in Control,
any Participant shall have the right as a beneficiary of the Trust to enforce
all terms
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and provisions of this Trust Agreement with the same force and effect as
if such person were a party hereto, except to the extent actions are required to
be taken or consented to by the Participant Representatives. Notwithstanding the
foregoing, no Participant shall have any beneficial ownership interest in or
preferred claim as to any portion of the Trust Fund prior to receiving payment
therefrom, since the rights of Participants hereunder are unsecured contractual
rights only.
The Participants in each Plan as of the date hereof are listed in the
initial Participant Information delivered to the Trustee by the Company
concurrently herewith. As new persons become Participants in the Plans from time
to time, they shall be included in the next following update of the Participant
Information delivered to the Trustee by the Company.
It shall be the responsibility of the Company, without recourse to the
Trust Fund, to reimburse any expenses (including attorneys' fees) incurred by a
Participant after a Change in Control in connection with the enforcement of any
rights hereunder of such Participant. If the Company fails or refuses to make
such reimbursement, in whole or in part, within 20 days after receipt of demand
therefor accompanied by appropriate documentation of such fees or other
expenses, such Participant may, without prejudice to his right to receive full
reimbursement from the Company, demand payment of such amount from the Trust
Fund, in which case the Trustee, upon receipt from the Participant
Representatives of a written direction to pay, shall make such payment as soon
as practicable.
SECTION 7.05 Necessary Parties in Actions Affecting the Trust.
In any action, proceeding or judgment affecting the Trust the only
necessary parties shall be the Company and the Trustee prior to a Change in
Control and the Trustee and the affected Participants on and after a Change in
Control and, except as otherwise required by applicable law, no other person
shall be entitled to any notice or service of process. Any judgment entered
shall to the maximum extent permitted by applicable law be binding and
conclusive on all persons having or claiming to have any interest in the Trust.
SECTION 7.06 Successors; Non-Alienation.
(a) This Trust Agreement shall be binding upon and inure to the benefit of
the Company and the Trustee and their respective successors and assigns.
(b) Any corporation into which the Trustee or the Company may be merged or
with which it may be consolidated, or any corporation resulting from any merger,
reorganization or consolidation to which the Trustee or the Company may be a
party, or any corporation to which all or substantially all of the trust
business of the Trustee or the business of the Company may be transferred shall
be the successor of
26
<PAGE>
the Trustee or the Company hereunder without the execution or filing of any
instrument or the performance of any act.
(c) Except insofar as applicable law may otherwise require or as provided
in Section 2.03 hereof, (i) no amount payable to or in respect of any
Participant at any time under the Trust shall be subject in any manner to
alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge,
attachment, garnishment, charge, encumbrance, execution or levy of any kind, and
any attempt to so alienate, sell, transfer, assign, pledge, attach, garnish,
charge, execute, levy or otherwise encumber any such amount, whether presently
or thereafter payable, shall be void, and (ii) the Trust Fund shall in no manner
be liable for or subject to the debts, liabilities, contracts, engagements or
torts of any Participant.
SECTION 7.07 Parties Interested Herein.
Nothing in this Trust Agreement expressed or implied is intended or shall
be construed to confer upon, or to give to, any person, other than the Company,
the Trustee and the Participants, any right, remedy or claim under or by reason
of this Trust Agreement or any covenant, condition or stipulation, promise or
agreement contained herein.
SECTION 7.08 No Personal Liability; Indemnification of Participant
Representatives.
To the maximum extent permitted by applicable law as the same exists or may
hereinafter be amended to further eliminate or limit the personal liability of
such persons, no personal liability whatsoever shall attach to or be incurred by
any employee, officer or director of the Company, the Trustee or the Trust
Actuary, as such, or by any Participant Representative under or by reason of the
terms or conditions contained in or implied from this Trust Agreement.
In consideration of and to induce the services of the Participant
Representatives referred to in this Trust Agreement, the Company shall pay and
shall defend, indemnify and save harmless each person who is or was at any time
a Participant Representative, together with his respective heirs, executors and
administrators, from and against any and all losses, liabilities (including
liabilities for penalties), actions, suits, judgments, demands, damages, costs
and expenses (including, without limitation, reasonable attorneys' fees and
expenses incurred by the indemnitee in defending and investigating same) of any
nature arising because of his status or election to discontinue as a Participant
Representative or relating to any action by or any failure to act by the
Participant Representative in such capacity or the transactions contemplated by
this Trust Agreement, including, but not limited to, any claim made by a
Participant, the Trustee or Trust, or the Company and any claim made, whether
before or after a Change in Control, by the Company or its successor that this
Trust Agreement is invalid, except to the extent
27
<PAGE>
that any such loss, liability, action, suit, judgment, demand, damage, cost or
expense is caused by acts or omissions not in good faith, the intentional
misconduct or the knowing violation of law by the Participant Representative.
The rights of the Participant Representatives under this Section 7.08 are
not exclusive of any other right which the Participant Representatives may have
or hereafter acquire under any statute, the Company Certificate of
Incorporation, by-law, agreement, vote of Company stockholders or disinterested
directors of the Company, insurance policy or otherwise, and shall survive the
resignation of any Participant Representative from his position as such. No
modification to or deletion of this Section 7.08 by the Company shall adversely
affect any right or protection of a Participant Representative existing at the
time of such modification or deletion, without the written consent of such
Participant Representative. Each Participant Representative shall have the right
as a third party beneficiary of this Trust Agreement to enforce the terms and
provisions of this Section 7.08 and Section 4.02 of this Trust Agreement with
the same force and effect as if such person were a party hereto.
SECTION 7.09 Texts of Plans and Plan Amendments.
The Company has delivered true and complete copies of all Plan texts,
amendments and descriptions to the Trustee, as well as of a true and complete
copy of the Air Products and Chemicals, Inc. Pension Plan for Salaried Employees
(the "Pension Plan") and the summary plan description thereof. The Company shall
provide to the Trustee a copy of each amendment to any of the Plans and of the
Pension Plan, promptly following the effective date thereof, together with a
certification of the completeness and accuracy thereof and, following a Change
in Control should the Company fail to do so, the Participant Representatives may
supply and certify such amendments to the Trustee, whereupon the Trustee shall
supply a copy thereof to the Company.
SECTION 7.10 Titles.
Titles to the Articles and Sections of this Trust Agreement are included
for convenience only and shall not control the meaning or interpretation of any
provision of this Trust Agreement, except that the Subsection headings including
the language "Prior to a Change in Control." and "On and After a Change in
Control" shall control the interpretation and meaning of the respective
Subsections since the provisions thereof shall be applicable only as and when
indicated by such headings.
SECTION 7.11 Applicable Law.
This Trust is created and accepted in the Commonwealth of Pennsylvania. To
the maximum extent consistent with applicable law, this Trust Agreement and
28
<PAGE>
the Trust established hereunder and the acts and transactions of the parties
hereto and their respective successors, as well as of the Participant
Representatives, shall be governed and construed, enforced, administered, and
determined in accordance with the laws of the Commonwealth of Pennsylvania,
except to the extent preempted by applicable federal law, and the Trustee shall
be liable to account only in the courts of that state.
SECTION 7.12 Counterparts.
This Trust Agreement may be executed in any number of counterparts, each of
which shall be deemed to be the original although the others shall not be
produced.
29
<PAGE>
IN WITNESS WHEREOF, the parties have executed this TRUST AGREEMENT as of
the date first written above.
AIR PRODUCTS AND CHEMICALS, INC.
Attest: By: /s/ J. P. McAndrew
-----------------------------
J. P. McAndrew
Vice President -
Human Resources
/s/Karen G. Wright
- -------------------------------
Assistant Secretary
PNC BANK, N.A.
Attest: By: /s/ Peter M. Van Dine
-----------------------------
Vice President
IN WITNESS WHEREOF, the undersigned Participant Representatives have
executed this Trust Agreement in evidence of their consent to the amendments
made thereto as of August 1, 1999 which are incorporated herein.
/s/ W. D. Brown
----------------------------------------
W. D. Brown
Participant Representative
/s/ Leo J. Daley
----------------------------------------
L. J. Daley
Participant Representative
/s/ J. J. Kaminski
----------------------------------------
J. J. Kaminski
Participant Representative
/s/ J. P. McAndrew
----------------------------------------
J. P. McAndrew
Participant Representative
30
<PAGE>
COMPANY STOCK AGREEMENT
COMPANY STOCK AGREEMENT, (the "Agreement") by and between AIR PRODUCTS AND
CHEMICALS, INC., a Delaware corporation, and PNC BANK, N.A., a national banking
association, as trustee (the "Trustee"), under those certain Amended and
Restated Trust Agreements between said parties effective 1 August 1999
(collectively, the "Trust Agreements");
WHEREAS, capitalized words used in this Agreement shall have the meanings
set forth in the Trust Agreements except as otherwise provided herein;
WHEREAS, the Company (and SCWC Corp. as to the SCWC Corp. Retirement Plan
and, together Air Products and Chemicals, Inc., the "Company") is obligated
under the Plans to provide benefits to certain employees and past employees of
the Company and certain of its subsidiaries;
WHEREAS, since the payment of benefits to be made and the obligations of
the Company under the Plans are not funded or otherwise secured, the Company
entered into the Trust Agreements to assure that future payment of said benefits
will not be improperly withheld including in the event of a Change in Control of
the Company;
WHEREAS, each of the Trust Agreements permits the Company to amend the
Trust Agreement to increase the Trust Amount at which the Trust Fund under each
Trust is to be maintained, at any time by written notice to the Trustee from the
Company and contribution of assets to the Trust sufficient to pay such increased
Trust Amount, such increase and amendment to be effective upon written
acceptance by the Trustee of such notice and contribution of assets;
WHEREAS, the Trust Amounts under the Trust Agreements currently aggregate
$68,000,000, and the Trust Amounts as of 1 May 2001 are expected to aggregate
$96,600,000, specifically, as estimated by the Trust Actuary for the Pension
Plan, $87,000,000; by the Plan Administrator for the Savings Plan, $8,100,000;
and by the SCWC Corp. Retirement Plan Committee for the SCWC Pension Plan,
$1,500,000 (respectively, the "New Trust Amounts");
WHEREAS, upon execution of this Agreement the Trust Amounts under the Trust
Agreements will be increased to the New Trust Amounts, after which the Company
will be obligated under the Trust Agreements to maintain the Trust Funds at
levels at least equal to the New Trust Amounts;
WHEREAS, each of the Trust Agreements permits the contribution to and
investment of Trust assets prior to a Change in Control in the form of Company
Stock in addition to Letters of Credit and cash; and provides that Company Stock
shall be treated as having been contributed to the Trust if such Company Stock
is
31
<PAGE>
reserved for contribution to the Trust as evidenced by written agreement of the
Company with the Trustee under which the Company agrees to reserve Company Stock
for contribution to the Trust, receipt of a copy of which agreement has been
acknowledged by the transfer agent and registrar for the Company Stock; and
WHEREAS, it is the intention of the parties hereto that this Agreement
shall constitute such a Company Stock Agreement as defined in, and for all
purposes under, the Trust Agreements;
NOW THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration, the parties hereto, intending to
be legally bound, agree as follows:
1. The Company hereby gives notice to the Trustee that the Trust Amounts shall
be increased to the New Trust Amounts and, by this Agreement, contributes
assets to each Trust Fund within the meaning of and as permitted by the
Trust Agreement, sufficient to pay the respective New Trust Amount under
each Trust Agreement; and the Trustee hereby accepts such notice and
contribution of assets to each Trust.
2. The Company covenants and agrees with the Trustee that it will cause all
action to be taken which is necessary to maintain for prompt transfer to
the Trustee for holding in the Trust under each Trust Agreement Company
Stock with a fair market value (valued as provided in the Trust Agreement)
at least equal to the respective New Trust Amount for such Trust (subject
only to the claims of the Company's general creditors under federal and
state law in the event of the Company's "Insolvency" as defined in the
Trust Agreement).
3. Attached to this Agreement is a true and complete copy of the Certification
and Direction initially directing Company Stock to be reserved for future
contribution to the Trusts in accordance with this Agreement and the Trust
Agreements.
4. This Agreement shall be governed and construed, enforced, administered, and
determined in accordance with the laws of the Commonwealth of Pennsylvania.
5. This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be the original although the others shall not be
produced.
32
<PAGE>
IN WITNESS WHEREOF, the parties have executed this AGREEMENT as of the
date first written above.
AIR PRODUCTS AND CHEMICALS, INC.
Attest: By: /s/ Leo J. Daley
-----------------------------
Vice President - Finance
/s/ Karen G. Wright
- -------------------------------
Assistant Secretary
PNC BANK, N.A.
Attest: By: /s/ Peter M. Van Dine
-----------------------------
Vice President
ACKNOWLEDGEMENT OF RECEIPT
The undersigned, Fred T. Meyers, Assistant Vice President of First Chicago
Trust Company of New York ("First Chicago"), stock transfer agent and registrar
for the common stock of Air Products and Chemicals, Inc., hereby acknowledges
receipt of this Company Stock Agreement on behalf of First Chicago on this ____
day of ____, 1999.
First Chicago Trust Company of New York
By: /s/ Frederick T. Meyers
-----------------------------
Assistant Vice President
33
AMENDED AND RESTATED
TRUST AGREEMENT
By and Between
AIR PRODUCTS AND CHEMICALS, INC.,
as Grantor
and
PNC BANK, N.A.
(formerly PROVIDENT NATIONAL BANK),
as Trustee
Dated as of August 1, 1999
----------------------------------------------------------------------
Supplementary Savings Plan
<PAGE>
<TABLE>
<CAPTION>
INDEX
Page
----
ARTICLE I
THE TRUST AND TRUST FUND
<S> <C> <C>
1.01 The Trust & Trust Fund.................................................. 2
1.02 Investment of the Trust Fund............................................ 3
ARTICLE II
USE AND RELEASE OF THE TRUST FUND:
PAYMENTS AND RETURN OF SURPLUS
2.01 Use of Trust Fund; Benefit Calculation
Schedule and Participant Information.............................. 6
2.02 Payments to Participants................................................. 6
2.03 Payments to Creditors.................................................... 9
2.04 Sufficiency of Trust Fund................................................ 10
2.05 Surplus Assets........................................................... 10
2.06 Trust Actuary Determinations, etc........................................ 10
</TABLE>
i
<PAGE>
INDEX
<TABLE>
<CAPTION>
ARTICLE III
TRUSTEE
Page
----
<S> <C> <C>
3.01 Duties and Responsibilities.............................................. 11
3.02 Legal Counsel............................................................ 11
3.03 Trust Books and Records.................................................. 11
3.04 Removal or Resignation of the Trustee and
Designation of Successor Trustee.................................... 12
3.05 Reliance by Trustee; Third Parties....................................... 13
3.06 Inability of Company to Act.............................................. 13
3.07 Indemnity................................................................ 14
</TABLE>
ii
<PAGE>
INDEX
<TABLE>
<CAPTION>
Page
----
ARTICLE IV
TRUST FUND TAXES; TRUSTEE FEES;
OTHER COSTS OF TRUST ADMINISTRATION
<S> <C> <C>
4.01 Trust Fund Taxes........................................................ 14
4.02 Trustee Fees; Other Trust Administration................................ 14
ARTICLE V
CERTAIN DEFINITIONS
5.01 Change in Control....................................................... 15
5.02 Company Stock........................................................... 16
5.03 Company Stock Agreement................................................. 17
5.04 Current Plan Termination Liability...................................... 17
5.05 Designated Beneficiary.................................................. 17
5.06 Determination of Taxability............................................. 17
5.07 Insolvent............................................................... 18
5.08 Letter of Credit........................................................ 18
5.09 Minimum Trust Amount.................................................... 18
5.10 Participant Information................................................. 19
5.11 Participant Representatives............................................. 19
5.12 Savings Plan............................................................ 19
5.13 Trust Actuary........................................................... 19
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
INDEX
Page
----
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
<S> <C> <C>
6.01 Termination.............................................................. 20
6.02 Amendment and Waiver..................................................... 20
ARTICLE VII
GENERAL PROVISIONS
7.01 Further Assurances........................................................ 21
7.02 Entire Agreement; Severability........................................... 21
7.03 Notices, etc............................................................. 21
7.04 Trust Beneficiaries...................................................... 22
7.05 Necessary Parties in Actions Affecting the Trust......................... 23
7.06 Successors; Non-Alienation............................................... 23
7.07 Parties Interested Herein................................................ 24
7.08 No Personal Liability, Indemnification of Participant Representatives.... 24
7.09 Text of Plan and Plan Amendments......................................... 24
7.10 Titles................................................................... 25
7.11 Applicable Law........................................................... 25
7.12 Counterparts............................................................. 25
</TABLE>
iv
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT
------------------------------------
TRUST AGREEMENT, by and between AIR PRODUCTS AND CHEMICALS, INC., a
Delaware corporation (the "Company"), and PNC BANK, N.A. (formerly Provident
National Bank), a national banking association, as trustee (the "Trustee"),
initially dated as of October 31, 1989, and with the consent of the "Participant
Representatives", amended by Amendment Nos. 1, 2, 3, and 4 as of April 25, 1991,
April 30, 1993, May 1, 1995 and May 1, 1997, which amendments reflected, among
other things, changes in the "Trust Amount" as defined in Article V hereof, and
delivery to the Trustee of amendments of the "Letter of Credit", as defined in
Article V hereof, extending the term and changing the amount of the Letter of
Credit;
WHEREAS, the Company is obligated under the plan specified on Exhibit A
hereto (the "Plan") to provide benefits to certain employees and past employees
of the Company and certain of its subsidiaries (together with their "Designated
Beneficiaries", as defined and provided in Article V hereof, the
"Participants");
WHEREAS, the payment of benefits to be made and the obligations of the
Company under the Plan are not funded or otherwise secured and the Company
desires to assure that future payment of said benefits will not be improperly
withheld for any reason including in the event of a "Change in Control of the
Company", as defined in Article V hereof;
WHEREAS, for purposes of providing greater assurance that such benefits
will not be improperly withheld, the Company entered into the Trust Agreement,
as amended, with the Trustee and deposited with the Trustee the cash and other
property described in Subsection 1.01(a) below, and may deposit with the
Trustee, subject only to the claims of the Company's general creditors, amounts
of cash and other property sufficient to pay accrued benefits under the Plan;
and
WHEREAS, the Company and the Trustee have determined to amend and restate
the aforesaid trust agreement, as amended, again with the consent of the
Participant Representatives, effective August 1, 1999 as set forth herein (and
referred to hereinafter as the "Trust Agreement") to, among other things,
provide for increasing the Trust Amount and permit the contribution to and
investment of Trust assets prior to a Change in Control in the form of "Company
Stock", as defined in Article V hereof, in addition to Letters of Credit and
cash;
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration, the parties hereto, intending to
be legally bound, agree as follows:
1
<PAGE>
ARTICLE I
THE TRUST AND TRUST FUND
SECTION 1.01 The Trust.
(a) Establishment of Trust and Funding of Trust Amount. The Company
established with the Trustee a trust (the "Trust") to consist of such sums of
money and/or assets including Letters of Credit and "Company Stock Agreements",
as defined in Article V hereof, as shall from time to time be paid or delivered
to the Trustee (less such amounts distributed from the Trust pursuant to
Sections 2.02, 2.03, 2.05 and 4.02 hereof or otherwise pursuant to the terms of
this Trust Agreement), in whatever form held or invested as provided herein (the
"Trust Fund"). The Company, concurrently with the establishment of the Trust,
delivered to the Trustee to be held in the Trust $100.00 in cash and a Letter of
Credit in the amount of four million dollars ($4,000,000.00); and most recently,
on May 1, 1999, delivered to the Trustee an amendment to the Letter of Credit
increasing the amount of the Letter of Credit to six million five hundred
thousand dollars ($6,500,000.00) (the "Trust Amount") to cover the "Current Plan
Termination Liability", as defined in Article V hereof. The Trust Amount may be
increased at any time by written notice to the Trustee from the Company and
contribution of assets to the Trust sufficient to pay such increased Trust
Amount, such increase to be effective, and this Subsection 1.01 to be amended as
of, the date of written acceptance by the Trustee of such notice and
contribution of assets.
(b) Maintenance of Trust Amount. The Trust Fund shall at all times
be maintained at a level at least equal to the Trust Amount except as otherwise
provided in Subsection 1.01(c). Accordingly, the Company shall be obligated to
immediately reimburse the Trust for any Trust assets used to pay expenses of
Trust administration or Plan benefits and shall reimburse the Trust for amounts
paid in satisfaction of claims of the Company's general creditors as required by
and in accordance with Section 2.03 hereof, so that the Trust Fund is promptly
restored to at least the Trust Amount following any such payments from the
Trust. Furthermore, in the event that the Trustee receives notice at any time
from the issuing bank that, or with the effect that, the Letter of Credit will
terminate prior to the end of the then-current term thereof, or if the Trustee
has not received a replacement Letter of Credit on or before the eleventh (llth)
day prior to the scheduled expiration of the term of the existing Letter of
Credit, and the Company has not, by the eleventh (llth) day prior to the early
termination or scheduled expiration of the Letter of Credit contributed cash
and/or Company Stock to the Trust Fund equal to the Trust Amount, the Trustee
shall, in the event of receipt of such notice from the issuing bank,
immediately, and in the event of failure to replace the Letter of Credit prior
to its scheduled expiration, on the day next following such eleventh (llth) day
(or on such later day which is the earliest day upon which the Letter of Credit
will permit) draw the entire amount covered by such existing Letter of Credit.
(c) Ongoing Funding. The Company may, but shall have no obligation to,
make additional contributions to the Trust from time to time, except that
upon a Change in Control the Company shall be obligated to immediately, without
notice or demand, contribute
2
<PAGE>
cash to the Trust in an amount equal to the Trust Amount. If the Trustee has not
received payment of the Trust Amount in immediately available funds by 10:30
a.m. Eastern Standard or Daylight Savings Time (whichever is prevailing in
Philadelphia, Pennsylvania) on the day on which the Change in Control of the
Company occurs, the Trustee shall immediately draw the entire amount covered by
any Letter of Credit and/or make a written demand for contribution to the Trust
of any Company Stock reserved under a Company Stock Agreement addressed to the
Board of Directors and chief executive officer of the Company, with a copy
thereof to the Participant Representatives and the transfer agent and registrar
for the Company Stock.
In addition, if at any time the Company calculates the "Current Plan
Termination Liability" and the amount equal to 200% of the Current Plan
Termination Liability as so calculated is certified by the "Trust Actuary," as
defined in Article V hereof, to be less than the Trust Amount, such amount shall
constitute the new Trust Amount thereafter required to be maintained in the
Trust Fund. Upon receipt, prior to a Change in Control of the Company, by the
Trustee of a written direction from the Company to reduce any Letter of Credit
then held in the Trust accompanied by the Trust Actuary's certification of the
new Trust Amount, the Trustee shall give notice to the issuing bank under the
Letter of Credit to reduce the amount payable under such Letter of Credit to the
amount of the new Trust Amount.
(d) Form of Contributions to and Reimbursements of the Trust. Any
contribution to or reimbursement of the Trust made by the Company as required or
permitted under Subsections 1.01(a), 1.01(b) or 1.01(c) may be made in whole or
in part in the form of cash, by delivery or amendment of a Letter of Credit
and/or in the form of Company Stock, except that the required contribution
provided for in the first sentence of Subsection 1.01(c) shall be made in cash.
SECTION 1.02 Investment of the Trust Fund.
(a) Prior to a Change in Control. The Trust Fund shall be received, held,
managed, disbursed and otherwise administered by the Trustee as provided in
this Trust Agreement, and shall be invested and reinvested by the Trustee only
in cash, cash equivalents, Letters of Credit and/or in Company Stock.
The Trust is intended to be a grantor trust within the meaning of Section
671 of the Internal Revenue Code (the "Code") and, except as hereinafter
permitted in this Subsection 1.02(a), all interest and dividends earned on the
investment of the Trust Fund shall be the property of the Company and shall not
constitute a part of the Trust Fund. The interest and dividends earned in any
calendar quarter shall be paid over to the Company by the Trustee as promptly as
practicable after the end of each quarter or, at the option of the Company
exercisable by delivering notice to the Trustee, shall be contributed to the
Trust Fund.
(b) On and After a Change in Control. Subject to the terms of this
Trust Agreement, the Trustee shall have complete and sole discretion and
responsibility for the investment and reinvestment of the Trust Fund. Following
receipt of any contribution of cash from the Company or the draw of proceeds
under any Letter of Credit, the proceeds thereof while
3
<PAGE>
held in the Trust Fund shall be invested by the Trustee pending payment to
Participants, taking into account, among other things, the timing and amount of
anticipated cash requirements for payments required to be made from the Trust
Fund, only in:
(i) government obligations, meaning direct obligations of, or
obligations the timely payment of the principal of and the interest on
which are unconditionally guaranteed by, the United States of America;
(ii) government agency obligations, meaning direct obligations
(including bonds, notes or participation certificates) of, or obligations
the timely payment of the principal of and the interest on which are
unconditionally guaranteed by, any of the following instrumentalities or
agencies of the United States of America: Federal Home Loan Bank System;
Export-Import Bank of the United States; Federal Financing Bank; Government
National Mortgage Association; Farmers Home Administration; Federal Home
Loan Mortgage Corporation; Federal Housing Administration; Private Export
Funding Corporation; Tennessee Valley Authority; or Federal National
Mortgage Association;
(iii) state government obligations meaning direct and general
obligations of any state of the United States on which the full faith and
credit of the state is pledged and which are rated in the highest rating
category by Moody's Investors Service, Inc. or Standard & Poors
Corporation; and
(iv) interest-bearing demand or time deposits with, negotiable
certificates of deposit issued by, or any short term investment in a
common, collective or commingled trust fund or pooled investment fund
maintained by a national banking association or a state bank or trust
company which is a member of the Federal Deposit Insurance Corporation or
a savings and loan association which is a member of the Federal Savings
and Loan Insurance Corporation, in any case with a combined capital and
surplus of at least $100,000,000.
The Trustee shall not be liable for any loss of income due to liquidation of any
investment including without limitation Company Stock which the Trustee, in its
sole discretion, believes necessary to make payments or to reimburse expenses
under the terms of this Trust Agreement. All interest and other amounts earned
on the investment of the Trust Fund shall constitute a part of the Trust Fund.
(c) Exercise of Rights Under Letters of Credit. Whether before or after a
Change in Control of the Company, the Trustee shall exercise its rights as
beneficiary of, and take all action reasonably necessary to enforce, the Letter
of Credit as required or permitted hereunder and in accordance with the terms
thereof, and will draw on the Letter of Credit whenever and to the fullest
extent permitted by the terms thereof, without regard to whether the Company has
directed the Trustee to take any such action or to refrain from taking any such
action, and shall, to the maximum extent permitted by applicable law, be fully
protected in doing
4
<PAGE>
so. The proceeds of any Letter of Credit shall be held, invested and disbursed
by the Trustee as provided in this Trust Agreement.
(d) Certain Rights Regarding Company Stock Registered in the Name of the
Trustee for the Benefit of the Trust
(i) Voting Rights. The Trustee shall follow the directions of the
participants in the "Savings Plan," as defined in Article V hereof, with respect
to the manner of voting of Company Stock held by the Trust on each matter
pending before an annual or special meeting of stockholders of the Company or
any action by written consent of such stockholders in lieu of a meeting. In
connection with any such meeting of stockholders or action by written consent in
lieu of a meeting, the Trustee shall obtain from the Savings Plan trustee
certification of the directions received from the Saving Plan participants (in
the aggregate and not identifying any individual direction) directing the
Savings Plan trustee whether and how to vote, abstain or act by written consent
with respect to the Company Stock held by the Savings Plan. Upon receipt by the
Trustee of such certification, the Trustee shall, on each such matter, vote,
abstain or act by written consent with respect to the shares of Company Stock
held by the Trust in the same proportion and manner as the Savings Plan
participants directed the Savings Plan trustee with respect to the Company Stock
held by the Savings Plan.
(ii) Tender or Exchange Offer. If a tender or exchange offer is
commenced for Company Stock, the Trustee shall obtain from the Savings Plan
trustee certification of the directions received from the Savings Plan
participants directing the Savings Plan trustee whether to tender or exchange
the Company Stock held by the Savings Plan. Upon receipt by the Trustee of such
certification, the Company Stock held by the Trustee shall be tendered or
exchanged, or not tendered or exchanged, by the Trustee in the same proportion
and manner as the Savings Plan participants directed the Saving Plan trustee
with respect to the Company Stock held by the Savings Plan.
(iii) Confidentiality. All voting and other actions taken pursuant to
the foregoing paragraphs (i) and (ii) of Subsection 1.02 (d), and the contents
of any certification of directions received by the Savings Plan trustee as
contemplated by such paragraphs (i) and (ii), shall be held confidential by the
Trustee and shall not be divulged or released to any person, including officers
and employees of the Company and its affiliates (other than (x) agents of the
Trustee who are not affiliated with the Company or its affiliates or (y) by
virtue of the execution by the Trustee of any proxy, consent or letter of
transmittal for the shares of Company Stock held in the Trust).
(iv) Trustee Action. The Trustee shall not make any recommendations
regarding the manner of exercising any rights under this Subsection 1.02(d),
including whether or not any rights should be exercised.
5
<PAGE>
ARTICLE II
USE AND RELEASE OF THE TRUST FUND:
PAYMENTS AND RETURN OF SURPLUS
SECTION 2.01 Use of Trust Fund; Benefit Calculation Schedule and
Participant Information.
(a) General. Except as provided in Subsection 2.02(a) and Section 2.05 as
to surplus assets, Section 2.03 as to Company creditors, and Section 4.02 as to
Trustee fees and other Trust administration expenses, the Trust Fund shall be
used solely to pay Plan benefits to Participants.
(b) Benefit Calculation Schedule and Participant Information. Attached
hereto as Exhibit B is a schedule (said schedule, together with all documents
and materials attached thereto as annexes or referred to therein as having been
provided to the Trustee by the Company, being hereinafter referred to as the
current "Benefit Calculation Schedule") describing as of the date hereof how to
calculate the benefits payable under the Plan. In addition, the Company has
provided to the Trustee the "Participant Information" as defined in Article V
hereof, which is complete and accurate as of December 30, 1998, or such later
date as indicated therein. During the first calendar quarter of each calendar
year beginning with calendar year 2000, the Company has and shall continue to
provide the Trustee with any revisions to the Benefit Calculation Schedule and
updated Participant Information, in each case as of the end of the immediately
preceding calendar year.
The Company may update the preceding annual Benefit Calculation Schedule
and/or Participant Information as of a date subsequent to the preceding calendar
year end at any time by providing an updated Benefit Calculation Schedule and/or
Participant Information to the Trustee, and shall do so promptly upon a Change
in Control. However, after a Change in Control, no additions to or deletions
from the list of Plans covered by this Trust Agreement or to or from the
Participant Information or any change in the description of how to calculate
benefits included in the Benefit Calculation Schedule shall be permitted without
the written consent of the Participant Representatives. If the Company should
fail to provide to the Trustee any Benefit Calculation Schedule or Participant
Information required hereby, the Participant Representatives may do so and the
Trustee shall provide a copy thereof to the Company.
SECTION 2.02 Payments to Participants.
It is expected that any amount payable to any Participant under a Plan will
be satisfied and paid by the Company, in whole or in part, from its general
funds.
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(a) Prior to a Change in Control. However, Plan benefits which remain
unpaid for 30 days after receipt by the Company from the Trustee of a "Payment
Demand", as defined in this Subsection 2.02(a), shall be paid from the Trust
Fund, subject to reduction in the event of insufficiency of the Trust Fund as
provided in Section 2.04, and the Trustee shall liquidate assets of the Trust
Fund to make such payment or payments, including by drawing under any Letter of
Credit or selling Company Stock registered in the name of the Trustee for the
benefit of the Trust. As to Company Stock reserved under a Company Stock
Agreement, the Trustee shall make a written demand for contribution of such
Company Stock addressed to the Board of Directors and chief executive officer of
the Company, with a copy thereof to the Participant Representatives and the
transfer agent and registrar for the Company Stock.
For purposes hereof, a "Payment Demand" is a written demand for payment
executed by the Trustee stating that the Trustee has received
(i) a written notice from the Participant Representatives of
the Company's failure to make a benefit payment or payments owing to a
Participant under a Plan after the Participant's written request to the
Company's Plan Administrator for such payment, and
(ii) a written certification by the Trust Actuary, based upon the
Benefit Calculation Schedule and Participant Information then applicable
to the Plan, of the amount of and time at which such payment or payments
were due and that the Trust Amount is sufficient (or the extent to which
it is insufficient) to make such payment or payments in accordance with
Section 2.04.
In addition, upon a "Determination of Taxability", as defined in Article V
hereof, except if this Trust Agreement is revoked as permitted by Section 6.01,
the Company shall either pay from its general funds or instruct the Trustee to
pay an amount from the Trust Fund to each Participant equivalent to the amount
previously included or which will be required to be included in the
Participant's gross income for federal income tax purposes with respect to the
Trust Fund, as well as an amount equivalent to the sum of all interest,
penalties, additions to tax and similar amounts which such Participant owes or
will owe with respect to the Trust Fund to all federal, state and local tax
authorities (together, "Tax Penalties"). After such payment has been made in
full, the Trustee shall return the remaining assets then comprising the Trust
Fund to the Company, whereupon the Trust shall be terminated.
Company Stock registered in the name of the Trustee for the benefit of the
Trust shall be transferred by the Trustee, and/or sold by the Trustee to obtain
cash for transfer, to pay Plan benefits. To facilitate any such sales of such
Company Stock, the Company shall register under the Securities Act of 1933, as
amended (the "1933 Act"), such Company Stock as the Trustee may direct. The
Trustee shall have no obligation to sell the Company Stock until such
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registration is complete. If the Trustee is required to sell Company Stock, the
Trustee may engage agents to effect such sales and shall be reimbursed for the
reasonable fees and expenses of such agents in accordance with Section 4.02.
(b) On and After a Change in Control. Following the termination of
employment of any Participant and the delivery to the Trustee by the Company or
by the Participant of a written notice of such termination and, if applicable,
the election by the Participant of the form available under the Plan in which
his Plan benefit is to be paid, the Trustee shall within ten days after the
receipt thereof by the Trustee,
(i) provide a copy of such notice of termination and election of form
of benefit to the Participant or the Company, as applicable, and to the
Participant Representatives and the Trust Actuary, and
(ii) direct the Trust Actuary to calculate or verify the Plan benefit
to which the Participant is entitled as soon as possible, based upon the
Benefit Calculation Schedule and Participant Information then applicable
to the Plan.
The Trustee shall thereafter pay such benefit to the Participant in the
form, amount or amounts and at the time or times specified by the Trust Actuary
in writing to the Trustee, to the extent not paid by the Company from its
general funds and subject to the sufficiency of the Trust Fund as provided in
Section 2.04 at the time said payment or payments are due.
In addition, upon a Determination of Taxability, the Trustee shall pay to
the Participants all of the assets comprising the Trust Fund in proportion to
the amounts previously included or which will be required to be included in each
respective Participant's gross income for federal income tax purposes with
respect to the Trust Fund as specified in writing by the Trust Actuary,
whereupon the Trust shall be terminated.
(c) Withholding Taxes. The Trustee, whether on its own behalf or on behalf
of the Company, has the right and duty and shall deduct from each payment under
this Section 2.02 any federal, state or local withholding or other taxes or
charges which the Trustee or the Company may from time to time be required to
deduct under applicable laws, and shall pay over to the appropriate government
authority the amounts so withheld. The Trustee will notify the Company of any
withholding it makes.
(d) Effect on Plan Rights. Distributions made from the Trust Fund to a
Participant in respect of Plan benefits shall satisfy the Company's contractual
obligation to pay benefits to such Participant under the respective Plan to the
extent of the sum of (i) any payments received by the Participant from the Trust
under Subsection 2.02(a) or 2.02(b) hereof and (ii) the amounts withheld by the
Trustee in accordance with Subsection 2.02(c) hereof; provided, however, that in
the event of a distribution upon a Determination of Taxability, the amount of
such distribution which is equivalent to the sum of (x) all Tax Penalties and
(y) all additional federal, state and local taxes which would be owed by the
Participant with respect to a
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reimbursement payment for such Tax Penalties, shall not satisfy the Company's
obligation to pay benefits to such-Participant under the Plan unless and until
the Company pays to such Participant, in addition to Plan benefits, the amounts
described in clauses (x) and (y) above from the Trust Fund or from its general
assets. The payment of Plan benefits to a Participant from the Trust Fund on a
reduced basis because of the insufficiency of the Trust Fund at the time of such
payment or payments, as provided in Section 2.04 hereof, shall not alter, affect
or detract in any way from the Participant's right to receive the remainder of
his Plan benefits from, and to enforce said right against, the Company. Except
for payments made as a result of a Determination of Taxability, the payment of
benefits from this Trust shall be as provided for in the Plan and payments from
this Trust shall be consistent with the Plan as to timing and maximum amount.
SECTION 2.03 Payments to Creditors. At all times during the continuance of
this Trust, the principal and income of the Trust shall be subject to claims of
general creditors of the Company as set forth in this Section 2.03, and at any
time the Trustee has actual knowledge, or has determined, that the Company is
"Insolvent," as defined in Article V hereof, the Trustee shall suspend any
further payments from the Trust Fund to Participants and will hold the Trust
Fund for the benefit of the Company's general creditors. The Board of Directors
and the chief executive officer of the Company shall each have the duty to
inform the Trustee of the Company's Insolvency. If the Company or a person
claiming to be a creditor of the Company alleges in writing to the Trustee that
the Company has become Insolvent, the Trustee shall independently determine,
within 30 days after receipt of such notice, whether the Company is Insolvent
and pending such determination, the Trustee shall discontinue payments of Plan
benefits to Participants, shall hold the Trust assets for the benefit of the
Company's general creditors, and shall resume payments of Plan benefits to
Participants in accordance with this Trust Agreement only after the Trustee has
determined that the Company is not Insolvent (or is no longer Insolvent, if the
Trustee initially determined the Company to be Insolvent).
Unless the Trustee has actual knowledge of the Company's Insolvency or has
reason to believe that the Company is Insolvent, the Trustee shall have no duty
to inquire whether the Company is Insolvent. The Trustee may in all events rely
on such evidence concerning the Company's Insolvency as may be furnished to the
Trustee which will give the Trustee a reasonable basis for making a
determination concerning the Company's solvency. Nothing in this Trust Agreement
shall in any way diminish any rights of any Participant to pursue his rights as
a general creditor of the Company with respect to Plan benefits or otherwise.
If the Trustee discontinues payment of benefits from the Trust pursuant to
this Section 2.03 and subsequently resumes such payments, the first payment
following such discontinuance shall include the aggregate amount of all payments
which would have been made to any Participant during the period of such
discontinuance, less the aggregate amount of payments made to such Participant
by the Company from its general assets during any such period of discontinuance.
Such amount, if any, shall be paid together with interest thereon at the prime
rate as determined by the Trustee for the period.
Any assets of the Trust applied to the satisfaction of claims of general
creditors pursuant to this Section 2.03 shall, upon a determination by the
Trustee that the Company is no longer
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Insolvent, be immediately reimbursed to the Trust by the Company, together with
interest thereon at the rate specified in the preceding paragraph of this
Section 2.03.
SECTION 2.04 Sufficiency of Trust Fund. To the extent provided herein, the
Trust Fund shall be used to pay Plan benefits to Participants in accordance with
and in such forms, including lump sums, provided for under the respective Plan,
all as such benefits may become due and payable from time to time under the
terms of the applicable Plan; provided, however, that if at any time the fair
market value of the Trust Fund is less than the Minimum Trust Amount, the amount
to be paid to each such Participant from the Trust Fund at such time shall be
reduced in proportion to the ratio which the aggregate fair market value of the
Trust Fund bears to the applicable Minimum Trust Amount.
Such reduction of benefit payments shall continue until such time as the
Trust Fund is again at least equal to the applicable Minimum Trust Amount or
represents a larger ratio of the Current Plan Termination Liability. Thereupon,
after payment in full (or at the higher ratio) of any Plan benefit payments
which had previously been curtailed under this Section 2.04 and which have not
otherwise been paid by the Company, together with interest thereon at the prime
rate as determined by the Trustee for the period of nonpayment, the Trustee
shall resume making Plan benefit payments in full (or at a larger ratio
permitted under the terms of the preceding paragraph of this Section 2.04).
Following a Change in Control, the Trustee shall value the Trust Fund and
direct the Trust Actuary to calculate the Minimum Trust Amount as of the end of
each calendar quarter, promptly following the end of each calendar quarter. The
Trustee shall be entitled to apply the resulting ratio to Plan benefits which
may be paid from the Trust Fund to all benefit payments made until the next such
required valuation by the Trustee and calculation by the Trust Actuary.
Notwithstanding the foregoing provisions of this Section 2.04, the Trustee
shall have the right to pay all or an amount constituting a higher ratio of Plan
benefits from the Trust Fund pursuant to the written direction of the
Participant Representatives or if, upon the advice of the Trust Actuary, the
Trustee believes that such an increase in current Plan benefit payments will not
result in insufficient Trust assets to pay all remaining Plan benefits as and
when due, for instance, when some but not all of the Plan have been terminated
as defined in Section 5.07 hereof.
SECTION 2.05 Surplus Assets. After payment in full of all Plan benefits in
accordance with the Plan and payment of all expenses of administration of the
Trust, including any fees that may be expected to be incurred in terminating the
Trust, the Trustee shall deliver to the Company any remaining surplus assets of
the Trust Fund.
SECTION 2.06 Trust Actuary Determinations, etc. In connection with any
certification, determination, calculation or verification of Plan benefits
required to be made by the Trust Actuary as provided in Section 2.02 or of the
Trust Amount or the "Minimum Trust Amount", as defined in Article V hereof,
required to be made by the Trust Actuary under Subsection 1.01(c) or
Section 2.04, respectively, the Trust Actuary shall be permitted to apply and
rely on any
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administrative procedures and assumptions as to which the Trust Actuary and
Participant Representatives agree, including without limitation, assumptions
updating any such calculation to the date of payment from the date of the
information contained in the most recent applicable Benefit Calculation Schedule
and Participant Information. In addition, the Trust Actuary may require the
Trustee to engage tax counsel acceptable to the Participant Representatives
and/or the Company's or its successor's independent auditors to assist in the
determination of the amounts payable to each Participant upon a Determination of
Taxability as provided in Subsection 2.02(b) hereof.
ARTICLE III
TRUSTEE
SECTION 3.01 Duties and Responsibilities. The duties and responsibilities
of the Trustee shall be limited to those expressly set forth in this Trust
Agreement and no implied covenants or obligations shall be read into this Trust
Agreement against the Trustee. The Trustee shall not be liable for any act taken
or omitted to be taken hereunder if taken or omitted to be taken by it in good
faith.
If, pursuant to Section 2.03 hereof or otherwise, all or any part of the
Trust Fund is at any time attached, garnished or levied upon by any court order,
or in case the payment, assignment, transfer, conveyance or delivery of any such
property shall be stayed or enjoined by any court order, or in case any order,
judgment or decree shall be made or entered by a court affecting such property
or any part thereof, then and in any of such events the Trustee shall give
notice thereof to the Company and is authorized, in its sole discretion, to rely
upon and comply with any such order, writ, judgment or decree, and it shall not
be liable to the Company (or any of its subsidiaries) or any Participant by
reason of such compliance even though such order, writ, judgment or decree
subsequently may be reversed, modified, annulled, set aside or vacated.
SECTION 3.02 Legal Counsel. The Trustee may engage legal counsel,
including, prior to a Change in Control, counsel to the Company, and consult
with such counsel with respect to the construction of this Trust Agreement, the
duties of the Trustee hereunder, the transactions contemplated by this Trust
Agreement or any act which the Trustee proposes to take or omit, and rely upon
the advice of such counsel.
SECTION 3.03 Trust Books and Records.
(a) Maintenance; Inspection; Annual Statements. The Trustee shall maintain
such books, records and accounts as may be necessary for the proper
administration of the Trust Fund. During any period, whether before or after a
Change in Control, when the Trust Fund is comprised of assets other than the
$100.00 in cash initially contributed to the Trust, earnings thereon, a Letter
of Credit and/or Company Stock reserved under a Company Stock Agreement (a
"Funded Period"), the Trustee shall maintain accounts of all its receipts,
investments, disbursements, and other transactions and proceedings under this
Trust Agreement. Such person or persons as the Company shall designate shall be
allowed to inspect and audit such books of
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account of the Trustee relating to the Trust Fund upon request at any reasonable
time during business hours.
Within 30 days after the close of each fiscal year of the Company during
which any Funded Period occurred, the Trustee shall transmit to the Company and
certify to the accuracy of, a written statement of its accounts and proceedings
with respect to the Trust Fund for such year, which statement shall include a
statement of assets and liabilities aggregated by categories and valued at fair
market value as of the close of the year in question, and the net assets
available for Plan benefits, including a statement of receipts and disbursements
during the year, aggregated by general source and application.
(b) Additional Duties On and After a Change in Control. The Trustee shall
continue to be obligated to keep the books and records, permit audit and
inspection thereof, and to provide the annual written statements provided for in
Subsection 3.03(a) above, and shall in addition provide a copy of such annual
statements to, and shall permit audit and inspection of its books and records
by, such person or persons as are designated to the Trustee in writing by the
Participant Representatives.
(c) Settlement of Accounts. Notwithstanding any other provision of
this Trust Agreement, in the event of the termination of the Trust, or the
resignation or discharge of the Trustee, the Trustee shall have the right to a
settlement of its accounts, which accounting may be made, at the option of the
Trustee, either (i) by a judicial settlement in a court of competent
jurisdiction or (ii) by agreement of settlement, release and indemnity from the
Company to the Trustee with the written consent of the Participant
Representatives.
(d) Valuation of Company Stock. The Trustee shall value Company Stock at
its fair market value for purposes of valuing the Trust Fund under any provision
of this Trust Agreement including without limitation for preparing the reports,
tax returns and filings contemplated by this Section 3.03 or Section 4.01. Fair
market value shall mean for this purpose the closing price of a share of Company
Stock on the trading day immediately preceding the date as of which said value
is to be presented in such report, tax return or filing, as reported in the Wall
Street Journal on the composite tape for issues listed on the New York Stock
Exchange.
SECTION 3.04 Removal or Resignation of the Trustee and Designation of
Successor Trustee.
(a) Removal. At any time prior to a Change in Control, the Company may
remove the Trustee with or without cause, upon at least 60 days' notice in
writing to the Trustee. The necessity for such prior notice may be waived by the
mutual agreement of the Trustee and the Company. Within 60 days after any such
notice of removal to the Trustee or prior to any earlier removal of the Trustee,
the Company shall designate a successor Trustee qualified to act hereunder. At
any time on or after a Change in Control, the Trustee may not be removed except
by order of a court having competent jurisdiction or by written direction of the
Participant Representatives.
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(b) Resignation. The Trustee may resign at any time upon at least 60 days'
notice in writing to the Company and, if the Trustee resigns prior to a Change
in Control, the Company shall appoint a Successor Trustee qualified to act
hereunder within 60 days after such notice of resignation. If the Company is
unable to act or fails to appoint a Trustee, the Participant Representatives may
appoint the Trustee. If the Trustee resigns at any time on or after a Change in
Control, then the Trustee's resignation shall become effective only after the
Trustee has designated a successor Trustee qualified to act hereunder with the
written consent of the Participant Representatives. If the Trustee is unable to
obtain such consent, it shall be entitled to petition a court of competent
jurisdiction to appoint its successor, and the Trustee shall continue to serve
until its successor accepts the Trust and receives delivery of the Trust Fund.
(c) Final Statement of Accounts. In the event of such removal or
resignation, the Trustee shall duly file with the Company prior to a Change in
Control, or a person or persons designated in writing by the Participant
Representatives after a Change in Control, a written statement or statements of
accounts and proceedings as provided in Subsection 3.03(a) hereof for the period
since the last previous annual accounting for each Plan.
(d) Powers of Successor; Assignment of Trust Fund. Each such successor
Trustee, during such period as it shall act as such, shall have the powers and
duties herein conferred upon the initial Trustee, and the word "Trustee"
wherever used herein, except where the context otherwise requires, shall be
deemed to include any successor Trustee. Upon designation of a successor Trustee
and delivery to the resigned or removed Trustee of written acceptance by the
successor Trustee of such designation, such resigned or removed Trustee shall
promptly assign, transfer, deliver and pay over to such Trustee, in conformity
with the requirements of applicable law, the funds and properties in its control
or possession then constituting the Trust Fund.
(e) Requirements as to Trustee. The Trustee and any successor thereto
appointed hereunder shall be a commercial bank which is not an affiliate of the
Company, but which is a national banking association or established under the
laws of one of the states of the United States, and which has a combined capital
and surplus of at least $100,000,000.
SECTION 3.05 Reliance by Trustee; Third Parties. The Trustee shall be fully
protected in acting or omitting to act in reliance upon any instrument,
certificate, letter or other document which it believes to be genuine. A third
party dealing with the Trustee shall not be required to make inquiry as to the
authority of the Trustee to take any action nor be under any obligation to
follow the proper application by the Trustee of the proceeds of sale of any
property sold by the Trustee or to inquire into the validity or propriety of any
act of the Trustee.
SECTION 3.06 Inability of Company to Act. If at any time the Company shall
be incapable for any reason of giving instructions, directions or authorizations
to the Trustee as herein provided, the Trustee may act without such
instructions, directions or authorizations as it, in its discretion, shall deem
appropriate or advisable under the circumstances for carrying out the provisions
of the Plan or this Trust Agreement; provided, however, that the Trustee shall
notify the Company in writing of any such actions taken pursuant to this
Section 3.06.
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SECTION 3.07 Indemnity. The Company shall pay and shall protect, indemnify
and save harmless the Trustee and its officers, employees and agents from and
against any and all losses, liabilities (including liabilities for penalties),
actions, suits, judgments, demands, damages, costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses) of any nature
arising from or relating to any action by or any failure to act by the Trustee,
its officers, employees or agents or the transactions contemplated by this Trust
Agreement, including, but not limited to., any claim made by a Participant with
respect to payments made or to be made by the Trustee, and any claim made,
whether before or after a Change in Control, by the Company or its successor
that this Trust Agreement is invalid, except to the extent that any such loss,
liability, action, suit, judgment, demand, damage, cost or expense is caused by
the gross negligence or willful misconduct of the Trustee, its officers,
employees or agents.
ARTICLE IV
TRUST FUND TAXES; TRUSTEE FEES;
OTHER COSTS OF TRUST ADMINISTRATION
SECTION 4.01 Trust Fund Taxes. The Company shall from time to time pay
taxes of any and all kinds whatsoever which at any time are lawfully levied or
assessed upon or become payable in respect of its interests in the Trust Fund,
the income or any property forming a part thereof. To the extent that any taxes
lawfully levied or assessed upon the Trust Fund are not paid by the Company, the
Trustee shall contest the validity of such taxes in any manner deemed
appropriate by the Company or its counsel, at Company expense, but only if it
has received an indemnity bond or other security satisfactory to it to pay any
such expense. The Company may itself contest the validity of any such taxes.
SECTION 4.02 Trustee Fees: Other Trust Administration.
The Trustee shall be entitled to compensation from the Company for its
services as Trustee of the Trust, during any Funded Period as custodian of the
assets of the Trust Fund and, following a Change in Control during any Funded
Period, as investment manager of the assets of the Trust Fund, at such
reasonable rates as may from time to time be agreed upon by the Trustee and the
Company; provided, however, that such rates of fees as are in effect for such
services on the effective date of this Trust Agreement shall not be increased
for at least two years following the effective date of this Trust Agreement. In
addition, the Company shall pay the expenses of administering the Trust. For
purposes hereof, the expenses of administering the Trust shall include but not
be limited to the following:
(i) the foregoing fees of the Trustee;
(ii) the reasonable fees and expenses of the Trustee's legal counsel
referred to in Section 3.02 hereof;
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(iii) the reasonable fees and expenses of the Trust Actuary and of the tax
counsel and auditors referred to in Section 2.06 hereof;
(iv) the reasonable expenses of each of the Participant Representatives
and the reasonable fees and expenses of any legal counsel to any or all of the
Participant Representatives which may from time to time be engaged by the
Participant Representatives to advise any or all of them with respect to the
construction of this Trust Agreement and their actions as Representative
Participants; and
(v) any losses, liabilities, damages, costs and expenses (including
without limitation for reasonable attorney's fees and expenses) paid or
incurred by the Trustee or the Participant Representatives for which the Company
is obligated to provide indemnity pursuant to Section 3.07 or 7.08,
respectively, and any expenses of Participants referred to in Section 7.04.
Regardless of the provisions of Section 2.04 or the sufficiency of the
Trust Fund to make future payments required hereunder, the Trustee shall
liquidate assets of the Trust Fund, including by drawing under any Letter of
Credit, to pay or to reimburse itself for any such compensation and expenses of
Trust administration not paid by the Company. Such payment or reimbursement
shall be made by the Trustee within 60 days after receipt by the Company of the
Trustee's invoice for, and supporting documentation evidencing the nature and
amount of, such compensation and expenses and, notwithstanding the foregoing,
within 20 days after written demand is made on the Company by an indemnitee for
advancement of expenses incurred by an indemnitee in defending any proceeding as
to which the Company is obligated to provide indemnity under this Trust
Agreement or, as to any Participant Representative, under the Company's
Certificate of Incorporation, and within 20 days after receipt of the expense
statement and direction of the Participant Representatives to reimburse
Participant expenses as provided in Section 7.04 hereof. If the Trust Fund does
not have sufficient funds to pay such amounts, the Company will pay them.
ARTICLE V
CERTAIN DEFINITIONS
As used in this Trust Agreement, in addition to other terms defined
elsewhere herein, the following terms shall have the following meanings, unless
the context clearly indicates otherwise:
SECTION 5.01 "Change in Control" or "Change in Control of the Company"
shall mean the first to occur of any one of the events described below:
(a) Stock Acquisition. Any "person" (as such term is used in Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934 (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 (a "Subsidiary"), or a trustee
of an employee benefit plan sponsored
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solely by the Company and/or such a Subsidiary, is or becomes, other than by
purchase from the Company or such a Subsidiary, 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% or more 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's shareholders, as the case may be.
(b) 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.
(c) 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 Trust Agreement. 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 the outside members of the Board shall
specify.
The Board of Directors and the chief executive officer of the Company shall
each have the duty to inform the Trustee of a Change in Control or of any event
or events which they believe might occur which would constitute a Change in
Control.
Notwithstanding the foregoing definition, a Change in Control shall be
deemed to have occurred for purposes of this Trust Agreement when the Trustee
has actual knowledge from a reliable source of such Change in Control. For this
purpose, notice from the Company or Participant Representatives or a report
filed with the Securities and Exchange Commission, a public statement issued by
the Company, or a periodical of general circulation, including but not limited
to The New York Times or The Wall Street Journal shall be deemed to be a
reliable source upon which the Trustee may rely. The Trustee has no affirmative
obligation or duty to inquire about, investigate or consult the foregoing
sources for purposes of determining whether a Change in Control has occurred.
SECTION 5.02 "Company Stock" shall mean the common stock, par value $1.00
per share, of and issued by the Company, or any successor securities thereto;
and shall be treated as having been contributed to the Trust for purposes of
Section 1.01 hereof if such Company Stock is
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(a) owned by the Trust and is represented by stock certificates registered
in the name of and in the custody of the Trustee for the benefit of the Trust,
or is reflected by book entry registration in the name of the Trustee for the
benefit of the Trust on the books of the transfer agent and registrar for the
Company Stock; or
(b) reserved under a Company Stock Agreement.
SECTION 5.03 "Company Stock Agreement" shall mean a written agreement of
the Company with the Trustee under which the Company agrees to reserve Company
Stock for contribution to the Trust, receipt of a copy of which agreement has
been acknowledged by the transfer agent and registrar for the Company Stock.
SECTION 5.04 "Current Plan Termination Liability" shall mean that amount
which is or would have been sufficient to make all payments that are or would
have been due and payable under the Plan to all Participants, assuming the Plan
and the employment of all Participants had been terminated and all Plan accrued
benefits had vested (and using the Benefit Calculation Schedule and Participant
Information then applicable to the Plan), as of the end of the most recently
concluded calendar quarter or other date as of which the calculation of Current
Plan Termination-Liability is required or permitted to be made in accordance
with this Trust Agreement.
SECTION 5.05 "Designated Beneficiary" shall mean the person designated by
the Participant under each Plan as his or her beneficiary as indicated in the
applicable Participant Information. Such person shall succeed to all of the
rights of such Participant under this Trust Agreement upon such Participant's
death with respect to the amounts of benefits to which such person is entitled
under the terms of the Plan upon the Participant's death. The term "Participant"
as used in this Trust Agreement shall include the Designated Beneficiary from
and after the Participant's death.
SECTION 5.06 "Determination of Taxability" shall mean and shall be deemed
to have occurred on the earlier of (a) the Internal Revenue Service (the "IRS")
taking the written position, either through revenue rulings, letter rulings or
other similar pronouncements, or the Code being amended in such a manner that
the Trust would not be a "grantor trust", if such position would result in the
principal and income of the Trust Fund being treated as income of the
Participants, or (b) a Participant's receipt of a statutory notice of deficiency
(90-day letter) from the IRS which notice assesses an additional income tax by
reason of the Participant's failure to include in his gross income any amounts
in respect of any assets of the Trust Fund because of the existence of the Trust
Fund prior to the date any amounts are payable to such Participant pursuant to
this Trust Agreement. The determination as to whether either of the foregoing
events has occurred shall be made by the Company or its successors with the
concurrence, in writing, in that determination by the independent auditors to
the Company, and in the event of a disagreement between the Company and those
auditors, the Trust Fund shall be distributed as provided for in Section 2.02;
provided, however, prior to a Change in Control, the Company may, in the event
of an occurrence specified in (b) above, elect to challenge such assessment of
additional tax on behalf of the affected Participant by whatever administrative
or judicial means
17
<PAGE>
it deems appropriate, in which case a Determination of Taxability will not be
deemed to have occurred until a final adverse determination is made without
further right of appeal or judicial challenge or the Company determines to cease
its challenge. If the Company elects to challenge such a determination, it shall
pay directly or reimburse the Participant for all expenses of such challenge
including any Tax Penalties incurred during the period beginning with the
issuance of such 90-day letter and ending when the tax is paid or, if earlier,
payment is made under Section 2.02 hereof, if the Participant does not
unreasonably refuse to cooperate with the Company in its challenge of such tax.
The Company shall keep the Participant informed of developments in the Company's
challenge of such tax as is reasonably required to enable the Participant to
cooperate with the Company in such challenge.
SECTION 5.07 "Insolvent" as to the Company shall mean
(i) the Company is unable to pay its debts as such debts become due,
or
(ii) the Company is subject to a pending proceeding as a debtor under
the Federal Bankruptcy Code, 11 U.S.C. S 101 et seq., as amended, or any
successor statute.
SECTION 5.08 "Letter of Credit" shall mean a standby irrevocable letter of
credit delivered to the Trustee by a bank satisfying the requirements of
Subsection 3.04(e) hereof (which bank may not be the Trustee) which has a fixed
term of at least one year and provides for the payment of at least the Trust
Amount. The Letter of Credit shall permit the Trustee to draw thereunder at any
time that the Company is not "Insolvent" (a) prior to a Change in Control,
amounts sufficient to pay any amount due and payable under Subsection 2.02(a) or
Section 4.02 of this Trust Agreement upon and after the Company's failure to
make any such payment required to be made by the Company under such Section
within the time required thereunder, and the entire Trust Amount upon and after
the Company's failure to maintain or obtain a replacement Letter of Credit
and/or to contribute cash to the Trust Fund in the amount of the Trust Amount as
and by the time required by Subsection 1.01(a) of this Trust Agreement, and (b)
the entire Trust Amount upon and after the Company's failure, as of 10:30 a.m.
Eastern Standard or Daylight Savings Time (whichever is prevailing in
Philadelphia, Pennsylvania) on the day on which the Change in Control of the
Company occurs, to have made the payment required to be made by the Company
under Subsection 1.01(c) of this Trust Agreement. The Letter of Credit shall be
transferrable to any successor Trustee. The term "Letter of Credit" as used in
this Trust Agreement shall include the initial and all replacement and
additional Letters of Credit conforming to the requirements of this definition.
SECTION 5.09 "Minimum Trust Amount" shall mean (a) 140% of the Current Plan
Termination Liability or (b) at any time after the Plan have been terminated,
the Current Plan Termination Liability plus a reasonable reserve, in an amount
agreed to by the Trustee, Trust Actuary and Participant Representatives,
sufficient to provide for all expenses and other costs of maintaining,
administering and terminating the Trust and of paying all amounts required by
this Trust Agreement, including without limitation, all reasonable fees and
expenses of the Trustee, the Trust Actuary and the Participant Representatives.
For purposes of this definition, "termination of the Plan" means any action,
occurrence or event the effect or result of which is
18
<PAGE>
that no further benefits shall accrue to or for any Participant under any Plan,
disregarding for this purpose any future vesting of benefits accrued under any
Plan as of the date of such action, occurrence or event and any additional
benefits which may accrue under any plan which is similar or succeeds any Plan.
SECTION 5.10 "Participant Information" shall mean (i) the name of each
Participant and of such Participant's Designated Beneficiary under the Plan,
(ii) the home address of each Participant and, if different, of the
Participant's Designated Beneficiary, (iii) the account balances reflecting each
Participant's benefit under the Plan, (iv) form of payment elected by each
Participant, (v) the Annual Salary, applicable Elective Deferral and interest
rate accruing on Supplementary Savings Account balances (as all of such terms
are defined in the Plan) and (vi) such other information as may be necessary or
appropriate to enable the Plan Actuary to calculate the Plan benefits to which
each Participant is entitled.
SECTION 5.11 "Participant Representatives" shall mean initially those four
individual Participants named in Exhibit D attached hereto. Any such person may
elect at any time while he is a Participant not to continue as a Participant
Representative by giving written notice thereof to the Trustee, the Company and
the other Participant Representatives and appointing another Participant to
replace himself as a Participant Representative by naming such Participant in
such notice. In the event that any such resigning Participant Representative
fails or is unable for any reason (including due to his death or mental
incapacity) to appoint an individual to replace himself as a Participant
Representative or ceases to be a Participant in a Plan, the remaining
Participant Representatives shall designate another Participant as his
replacement by giving notice in writing to the Trustee of said replacement. Any
appointment of a replacement Participant Representative shall be deemed accepted
and effective if the written notice to the Trustee thereof is appropriately
countersigned by such newly appointed Participant Representative and, until such
time, actions taken by the remaining Participant Representatives shall be
effective for all purposes of this Trust Agreement. In case of the inability or
refusal of the Participant Representatives to act to appoint replacement
Participant Representatives, the Trustee shall be entitled to petition a court
of competent jurisdiction to appoint Participant Representatives.
SECTION 5.12 "Savings Plan" shall mean the Air Products and Chemicals, Inc.
Retirement Savings and Stock Ownership Plan or, if such plan ceases to exist,
any other broad-based employee benefit plan of the Company as designated by the
Company.
SECTION 5.13 "Trust Actuary" shall mean such consulting actuary or firm of
consulting actuaries (who is or are Enrolled Actuaries and Fellows in the
Society of Actuaries) as the Trustee shall from time to time select, with the
written consent of the Participant Representatives, to perform for and under
contract with the Trustee the functions required of the Trust Actuary as
provided in this Trust Agreement. The Participant Representatives shall have the
right to direct the Trustee at any time to remove the actuary or firm of
actuaries then serving as Trust Actuary, whereupon the Trustee shall select a
new Trust Actuary, again with the written consent of the Participant
Representatives. If the Trustee fails to appoint a Trust Actuary, the
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<PAGE>
Participant Representatives may select and appoint an actuary or firm of
actuaries to serve as Trust Actuary.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.01 Termination. This Trust Agreement may be terminated by the
Company only upon payment in full of all Plan benefits to all Participants
according to the provisions of the Plan as to timing and amount of benefits,
upon funding of the entire applicable Trust Amount for the purpose of paying
Plan benefits under a trust or trusts qualified under Section 401 of the Code or
with the written consent of the Participant Representatives. In addition, this
Trust Agreement shall terminate following a Determination of Taxability as
provided in Section 2.02 (except that prior to a Change in Control the Company
may elect instead by action of its Employee Benefit Plans Committee or a
successor committee with oversight responsibility for the administration of the
Plan, to revoke this Trust Agreement if doing so will avoid the Trust Fund being
treated as income of the Participants). Promptly upon any such termination or
revocation of this Trust Agreement, the Trustee shall so notify the issuing
bank.
SECTION 6.02 Amendment and Waiver.
(a) Prior to a Change in Control. Except as set forth in this Subsection
6.02(a), this Trust Agreement may not be amended except by an instrument in
writing signed on behalf of the Company and the Trustee, with the written
consent of the Participant Representatives. Without limiting the generality of
the foregoing, this Trust Agreement may be amended, as aforesaid, to change or
add to the permitted forms of contributions to the Trust specified in Subsection
1.01(d), the permitted forms of investments of the Trust Fund specified in
Subsection 1.02(a), the required terms and conditions of replacement Letters of
Credit as defined in Section 5.06, and the assumptions for calculating the
Current Plan Termination Liability set forth in Exhibit C attached hereto. In
addition, the Company and the Trustee, with the written consent of the
Participant Representatives, may at any time waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of the
Company, the Trustee or the Participant Representatives to any such amendment or
waiver shall be valid if set forth in an instrument in writing signed on behalf
of such party and all of the Participant Representatives.
Notwithstanding the foregoing, any such amendment or waiver may be made by
written agreement of the Company and the Trustee without obtaining the consent
of any Participants including the Participant Representatives if such amendment
or waiver is necessary to prevent the assessment of income tax on any
Participants with respect to the Trust Fund prior to the date amounts are
payable to Participants from the Trust Fund, or does not operate to adversely
affect the rights of any Participant under this Trust Agreement with respect to
Plan rights and benefits existing, vested in or accrued with respect to such
Participant prior to the date of such amendment or waiver. Without limiting the
generality of the immediately preceding sentence, the Company and the Trustee
may amend this Trust Agreement without obtaining the consent of any Participants
to: increase the Trust Amount as provided in Subsection 1.01(a) hereof; add to
20
<PAGE>
the covenants and agreements of the Company contained in this Trust Agreement
other covenants and agreements thereafter to be observed; surrender any right or
power herein reserved to or conferred upon the Company; or cure any ambiguity or
omission or cure, correct or supplement any defect or inconsistent provision
contained in this Trust Agreement.
No such amendment or waiver relating to this Trust Agreement may be made
with respect to a particular Participant unless such Participant has agreed in
writing to such amendment or waiver. Any amendment made in accordance with this
Subsection 6..02(a) may by its terms be retroactive. Any amendment to or waiver
under this Trust Agreement permitted by this Subsection 6.02(a) may be approved
on behalf of the Company by action of its Employee Benefit Plans Committee or
other committee with oversight authority to administer the Plan.
(b) On and After a Change in Control. This Trust Agreement may not be
amended by the Company or its successor or by the Trustee except as may be
required by applicable law or with the written consent of the Participant
Representatives.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01 Further Assurances. The Company shall, at any time and from
time to time, upon the reasonable request of the Trustee, execute and deliver
such further instruments and do such further acts as may be necessary or proper
to effectuate the purposes of this Trust Agreement.
SECTION 7.02 Entire Agreement; Severability. This Trust Agreement and the
Plan and, while in effect, any Company Stock Agreement, together set forth the
entire understanding of the parties with respect to the subject matter hereof
and supersede any and all prior agreements, arrangements and understandings
relating thereto. In the event that any provision of this Trust Agreement or the
application thereof to any person or circumstances shall be determined by a
court of competent jurisdiction to be invalid or unenforceable to any extent,
the remainder of this Trust Agreement, or the application of such provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each provision of this Trust
Agreement shall be valid and enforced to the fullest extent permitted by law.
SECTION 7.03 Notices. etc. Any notice, report, request, demand, waiver or
consent requested, required or permitted hereunder shall be in writing and shall
be given personally or by prepaid, registered or certified mail, return receipt
requested, addressed as follows:
If to the Company:
Air Products and Chemicals, Inc.
7201 Hamilton Boulevard
Allentown, PA 18195-1501
21
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Attention: Corporate Secretary
If to the Trustee: PNC Bank, N.A.
Investment, Management and Trust Division
398 North Main Street
Doylestown, PA 18901-3447
Attention: Peter M. Van Dine, Vice President
If to a Participant, to the address of such person as listed next to
his or her name as shown on Exhibit B hereto or, if different or as to
future additional Participants, in the most recent Participant
Information.
If to the Participant Representatives, to the address indicated on
Exhibit D or hereafter specified by written notice from the Participant
Representatives, and if to a person designated by the Participant
Representatives, to the address of such person specified in such
designation.
A notice shall be deemed received upon the date of delivery if given
personally or, if given by mail, upon the receipt thereof.
Any action of the Company pursuant to this Trust Agreement, including all
orders, directions, instructions, approvals and objections of the Company to the
Trustee shall be in writing signed on behalf of the Company by its Vice
President - Human Resources. Any information, request, certified Plan or Plan
amendment, Benefit Calculation Schedule or Participant Information or other
document or material delivered to the Trustee shall be in writing and may be
signed by the Company's Vice President Human Resources or any other duly
authorized officer or employee of the Company or, to the extent applicable under
this Trust Agreement, by the Participant Representatives or a person designated
by the Participant Representatives.
SECTION 7.04 Trust Beneficiaries. The Company shall have the right to
enforce any provision of this Trust Agreement prior to a Change in Control and,
on or after a Change in Control, any Participant shall have the right as a
beneficiary of the Trust to enforce all terms and provisions of this Trust
Agreement with the same force and effect as if such person were a party hereto,
except to the extent actions are required to be taken or consented to by the
Participant Representatives. Notwithstanding the foregoing, no Participant shall
have any beneficial ownership interest in or preferred claim as to any portion
of the Trust Fund prior to receiving payment therefrom, since the rights of
Participants hereunder are unsecured contractual rights only.
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<PAGE>
The Participants in the Plan as of the date hereof are listed in the
initial Participant Information delivered to the Trustee by the Company
concurrently herewith. As new persons become Participants in the Plan from time
to time, they shall be included in the next following update of the Participant
Information delivered to the Trustee by the Company.
It shall be the responsibility of the Company, without recourse to the
Trust Fund, to reimburse any expenses (including attorneys' fees) incurred by a
Participant after a Change in Control in connection with the enforcement of any
rights hereunder of such Participant. If the Company fails or refuses to make
such reimbursement, in whole or in part, within 20 days after receipt of demand
therefor accompanied by appropriate documentation of such fees or other
expenses, such Participant may, without prejudice to his right to receive full
reimbursement from the Company, demand payment of such amount from the Trust
Fund, in which case the Trustee, upon receipt from the Participant
Representatives of a written direction to pay, shall make such payment as soon
as practicable.
SECTION 7.05 Necessary Parties In Actions Affecting the Trust. In any
action, proceeding or judgment affecting the Trust the only necessary parties
shall be the Company and the Trustee prior to a Change in Control and the
Trustee and the affected Participants on and after a Change in Control and,
except as otherwise required by applicable law, no other person shall be
entitled to any notice or service of process. Any judgment entered shall to the
maximum extent permitted by applicable law be binding and conclusive on all
persons having or claiming to have any interest in the Trust.
SECTION 7.06 Successors; Non-Alienation.
(a) This Trust Agreement shall be binding upon and inure to the benefit of
the Company and the Trustee and their respective successors and assigns.
(b) Any corporation into which the Trustee or the Company may be merged or
with which it may be consolidated, or any corporation resulting from any merger,
reorganization or consolidation to which the Trustee or the Company may be a
party, or any corporation to which all or substantially all of the trust
business of the Trustee or the business of the Company may be transferred shall
be the successor of the Trustee or the Company hereunder without the execution
or filing of any instrument or the performance of any act.
(c) Except insofar as applicable law may otherwise require or as provided
in Section 2.03 hereof, (i) no amount payable to or in respect of any
Participant at any time under the Trust shall be subject in any manner to
alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge,
attachment, garnishment, charge, encumbrance, execution or levy of any kind,
and any attempt to so alienate, sell, transfer, assign, pledge, attach,
garnish, charge, execute, levy or otherwise encumber any such amount, whether
presently or thereafter payable, shall be void, and (ii) the Trust Fund shall
in no manner be liable for or subject to the debts, liabilities, contracts,
engagements or torts of any Participant.
23
<PAGE>
SECTION 7.07 Parties Interested Herein. Nothing in this Trust Agreement
expressed or implied is intended or shall be construed to confer, upon, or to
give to, any person, other than the Company, the Trustee and the Participants,
any right, remedy or claim under or by reason of this Trust Agreement or any
covenant, condition or stipulation, promise or agreement contained herein.
SECTION 7.08 No Personal Liability; Indemnification of Participant
Representatives-. To the maximum extent permitted by applicable law as the same
exists or may hereinafter be amended to further eliminate or limit the personal
liability of such persons, no personal liability whatsoever shall attach to or
be incurred by any employee, officer or director of the Company, the Trustee or
the Trust Actuary, as such, or by any Participant Representative under or by
reason of the terms or conditions contained in or implied from this Trust
Agreement.
In consideration of and to induce the services of the Participant
Representatives referred to in this Trust Agreement, the Company shall pay and
shall defend, indemnify and save harmless each person who is or was at any time
a Participant Representative, together with his respective heirs, executors and
administrators, from and against any and all losses, liabilities (including
liabilities for penalties), actions, suits, judgments, demands, damages, costs
and expenses (including, without limitation, reasonable attorneys, fees and
expenses incurred by the indemnitee in defending and investigating same) of any
nature arising because of his status or election to discontinue as a Participant
Representative or relating to any action by or any failure to act by the
Participant Representative in such capacity or the transactions contemplated by
this Trust Agreement, including, but not limited to, any claim made by a
Participant, the Trustee or Trust, or the Company and any claim made, whether
before or after a Change in Control, by the Company or its successor that this
Trust Agreement is invalid, except to the extent that any such loss, liability,
action, suit, judgment, demand, damage, cost or expense is caused by acts or
omissions not in good faith, the intentional misconduct or the knowing violation
of law by the Participant Representative.
The rights of the Participant Representatives under this Section 7.08 are
not exclusive of any other right which the Participant Representatives may have
or hereafter acquire under any statute, the Company Certificate of
Incorporation, by-law, agreement, vote of Company stockholders or disinterested
directors of the Company, insurance policy or otherwise and shall survive the
resignation of any Participant Representative from his position as such. No
modification to or deletion of this Section 7.08 by the Company shall adversely
affect any right or protection of a Participant Representative existing at the
time of such modification or deletion, without the written consent of such
Participant Representative. Each Participant Representative shall have the right
as a third party beneficiary of this Trust Agreement to enforce the terms and
provisions of this Section 7.08 and Section 4.02 of this Trust Agreement with
the same force and effect as if such person were a party hereto.
SECTION 7.09 Texts of Plan and Plan Amendments. The Company has delivered
true and complete copies of the Plan text, amendments and descriptions to the
Trustee, as well as of a true and complete copy of the Air Products and
Chemicals, Inc. Retirement Savings and Stock Ownership Plan (the "Savings Plan")
and the summary plan description thereof. The Company
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<PAGE>
shall provide to the Trustee a copy of each amendment to the Plan and of the
Savings Plan, promptly following the effective date thereof, together with a
certification of the completeness and accuracy thereof and, following a Change
in Control should the Company fail to do so, the Participant Representatives may
supply and certify such amendments to the Trustee, whereupon the Trustee shall
supply a copy thereof to the Company.
SECTION 7.10 Titles. Titles to the Articles and Sections of this Trust
Agreement are included for convenience only and shall not control the meaning or
.interpretation of any provision of this Trust Agreement, except that the
Subsection headings including the language "Prior to a Change in Control" and
"On and After a Change in Control" shall control the interpretation and meaning
of the respective Subsections since the provisions thereof shall be applicable
only as and when indicated by such headings.
SECTION 7.11 Applicable Law. This Trust is created and accepted in the
Commonwealth of Pennsylvania. To the maximum extent consistent with applicable
law, this Trust Agreement and the Trust established hereunder and the acts and
transactions of the parties hereto and their respective successors, as well as
of the Participant Representatives, shall be governed and construed, enforced,
administered, and determined in accordance with the laws of the Commonwealth of
Pennsylvania, except to the extent preempted by applicable federal law, and the
Trustee shall be liable to account only in the courts of that state.
SECTION 7.12 Counterparts. This Trust Agreement may be executed in any
number of counterparts, each of which shall be deemed to be the original
although the others shall not be produced.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this AMENDED AND RESTATED
TRUST AGREEMENT as of the date first written above.
AIR PRODUCTS AND CHEMICALS, INC.
Attest:
By: /s/ J. P. McAndrew
----------------------------
J. P. McAndrew
Vice President
Human Resources
/s/ Karen G. Wright
- ------------------------
Assistant Secretary
PNB BANK, N.A.
By: /s/ Peter M. Van Dine
----------------------------
Attest: Vice President
26
<PAGE>
IN WITNESS WHEREOF, the undersigned Participant Representatives have
executed this Trust Agreement in evidence of their consent to the amendments
made thereto as of August 1, 1999 which are incorporated herein.
/s/ W. D. Brown
-----------------------------------
W. D. Brown
Participant Representative
/s/ Leo J. Daley
-----------------------------------
L. J. Daley
Participant Representative
/s/ J. J. Kaminski
-----------------------------------
J. J. Kaminski
Participant Representative
/s/ J. P. McAndrew
-----------------------------------
J. P. McAndrew
Participant Representative
27
<PAGE>
COMPANY STOCK AGREEMENT
COMPANY STOCK AGREEMENT, (the "Agreement") by and between AIR PRODUCTS AND
CHEMICALS, INC., a Delaware corporation, and PNC BANK, N.A., a national banking
association, as trustee (the "Trustee"), under those certain Amended and
Restated Trust Agreements between said parties effective 1 August 1999
(collectively, the "Trust Agreements");
WHEREAS, capitalized words used in this Agreement shall have the meanings
set forth in the Trust Agreements except as otherwise provided herein;
WHEREAS, the Company (and SCWC Corp. as to the SCWC Corp. Retirement Plan
and, together Air Products and Chemicals, Inc., the "Company") is obligated
under the Plans to provide benefits to certain employees and past employees of
the Company and certain of its subsidiaries;
WHEREAS, since the payment of benefits to be made and the obligations of
the Company under the Plans are not funded or otherwise secured, the Company
entered into the Trust Agreements to assure that future payment of said benefits
will not be improperly withheld including in the event of a Change in Control of
the Company;
WHEREAS, each of the Trust Agreements permits the Company to amend the
Trust Agreement to increase the Trust Amount at which the Trust Fund under each
Trust is to be maintained, at any time by written notice to the Trustee from the
Company and contribution of assets to the Trust sufficient to pay such increased
Trust Amount, such increase and amendment to be effective upon written
acceptance by the Trustee of such notice and contribution of assets;
WHEREAS, the Trust Amounts under the Trust Agreements currently aggregate
$68,000,000, and the Trust Amounts as of 1 May 2001 are expected to aggregate
$96,600,000, specifically, as estimated by the Trust Actuary for the Pension
Plan, $87,000,000; by the Plan Administrator for the Savings Plan, $8,100,000;
and by the SCWC Corp. Retirement Plan Committee for the SCWC Pension Plan,
$1,500,000 (respectively, the "New Trust Amounts");
WHEREAS, upon execution of this Agreement the Trust Amounts under the Trust
Agreements will be increased to the New Trust Amounts, after which the Company
will be obligated under the Trust Agreements to maintain the Trust Funds at
levels at least equal to the New Trust Amounts;
WHEREAS, each of the Trust Agreements permits the contribution to and
investment of Trust assets prior to a Change in Control in the form of Company
Stock in addition to Letters of Credit and cash; and provides that Company Stock
shall be treated as having been contributed to the Trust if such Company Stock
is reserved for contribution to the Trust as evidenced by written agreement of
the Company with the Trustee under which the Company agrees to reserve Company
Stock for contribution to the Trust, receipt of a copy of which agreement has
been acknowledged by the transfer agent and registrar for the Company Stock;
and
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WHEREAS, it is the intention of the parties hereto that this Agreement
shall constitute such a Company Stock Agreement as defined in, and for all
purposes under, the Trust Agreements;
NOW THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration, the parties hereto, intending to
be legally bound, agree as follows:
1. The Company hereby gives notice to the Trustee that the Trust Amounts shall
be increased to the New Trust Amounts and, by this Agreement, contributes
assets to each Trust Fund within the meaning of and as permitted by the
Trust Agreement, sufficient to pay the respective New Trust Amount under
each Trust Agreement; and the Trustee hereby accepts such notice and
contribution of assets to each Trust.
2. The Company covenants and agrees with the Trustee that it will cause all
action to be taken which is necessary to maintain for prompt transfer to
the Trustee for holding in the Trust under each Trust Agreement Company
Stock with a fair market value (valued as provided in the Trust Agreement)
at least equal to the respective New Trust Amount for such Trust (subject
only to the claims of the Company's general creditors under federal and
state law in the event of the Company's "Insolvency" as defined in the
Trust Agreement).
3. Attached to this Agreement is a true and complete copy of the Certification
and Direction initially directing Company Stock to be reserved for future
contribution to the Trusts in accordance with this Agreement and the Trust
Agreements.
4. This Agreement shall be governed and construed, enforced, administered, and
determined in accordance with the laws of the Commonwealth of Pennsylvania.
5. This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be the original although the others shall not be
produced.
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IN WITNESS WHEREOF, the parties have executed this AGREEMENT as of the date
first written above.
AIR PRODUCTS AND CHEMICALS, INC.
Attest: By: /s/Leo J. Daley
-----------------------------------
Vice President - Finance
/s/ Karen G. Wright
- -----------------------------------
Assistant Secretary
PNC BANK, N.A.
Attest: By: /s/ Peter M. Van Dine
-----------------------------------
Vice President
ACKNOWLEDGEMENT OF RECEIPT
The undersigned, Fred T. Meyers, Assistant Vice President of First Chicago
Trust Company of New York ("First Chicago"), stock transfer agent and registrar
for the common stock of Air Products and Chemicals, Inc., hereby acknowledges
receipt of this Company Stock Agreement on behalf of First Chicago on this ____
day of ____, 1999.
First Chicago Trust Company of New York
By: /s/ Frederick T. Meyers
-------------------------------
Assistant Vice President
30
[AIR PRODUCTS STYLIZED "A" LOGO]
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Air Products PLC
Hersham Place
Molesey Road
Walton on Thames
Surrey KT12 4RZ
England
Telephone: (44)(1932)249200
6 November 1998
Ronaldo Sullam
8 Woodlands Road
Barnes, London 5W13
England
Re: Employment Agreement between Air Products PLC and
Ronaldo Sullam Dated 1 June 1996 ("Agreement")
Dear Ron:
By the referenced Agreement, you have agreed to certain terms and
conditions of your employment by Air Products PLC. Such terms and
conditions include that performance of your duties under a second
employment agreement entered into between AIRPROCHEM INC. and yourself
shall take precedence over performance of your duties under the
Agreement. As the employment agreement between AIRPROCHEM INC. and
yourself has been superseded, it is necessary to amend paragraph 15 of
the Agreement to read as follows:
15. ENTIRE AGREEMENT
----------------
This Agreement constitutes the entire agreement of the parties with
respect to Employee's employment with Company and his compensation
therefor and supersedes any prior agreement between the parties, except:
(a) that Air Products and Chemicals, Inc., the parent of Company, and
Employee have entered into a separate, distinct and independent
employment agreement dated 6 November 1998 relating to Employee's
part-time services for Air Products and Chemicals, Inc. outside the
United Kingdom and that, in the case of conflict, the performance of
Employee's duties under that employment agreement shall take precedence
over the performance of Employee's duties under this Agreement, and
(b) that the Employment period set forth in paragraph 3 of this
Agreement shall not be terminated or affected in any way, and Employee's
remuneration under this Agreement shall not be changed, by the
termination for any reason whatsoever of Employee's employment with Air
Products and Chemicals, Inc., the express intention being that the two
employments should, at
<PAGE>
- 2 -
all times and under all circumstances, be separate and distinct from,
and independent of, the other. The parties hereto expressly agree that
the agreement dated 1 October 1992 between them is hereby superseded
and other parties waive any right to prior notice to terminate or amend
that agreement.
Please indicate your agreement to this amendment by signing one copy of
this letter and returning it to me; whereupon the Agreement shall be
deemed to be dated as of 6 November 1998.
Very truly yours,
/s/ L V Broese van Groenou
-----------------------------
L V Broese van Groenou
Vice President
Human Resources & Procurement
on Behalf of Air Products PLC
Acknowledged and Agreed:
/s/ Ronaldo Sullam
------------------------
Ronaldo Sullam
khk
Attach.
<PAGE>
AIR PRODUCTS Europe Inc. [AIR PRODUCTS STYLIZED "A" LOGO]
Hersham Place
Molesey Road
Walton-on-Thames
Surrey KT12 4RZ
Direct line telephone: 01932 249901
Our reference Your reference Date
12 April 1999
Mr. Ronaldo Sullam
8 Woodlands Road
Barnes, London 5W13
England
Dear Ron,
The purpose of this letter is to confirm the intent of the dual employment
contracts that you have executed with Air Products PLC and Air Products and
Chemicals, Inc. These contracts supersede prior employment agreements that you
executed with Air Products PLC and Airprochem Inc. dated 1 June 1996 and 1
October 1992. The purpose of these contracts is to set forth the split of your
employment activities between those activities which take place within the
United Kingdom and those which are performed off-shore and to satisfy the
requirements of Inland Revenue regarding off-shore activities of non-domiciled
individuals, which we understand to be your tax filing status. This letter will
confirm that neither the most recent employment agreements nor those which they
have replaced are intended to reduce or minimise any legal rights you may have
as an employee either under your employment relationship with Air Products PLC
and any of its affiliated companies prior to the execution of your employment
contracts dated 1 October 1992 or under any applicable statutory law which
pertains to your employment relationship with the company.
Very truly yours,
/s/ L. V. Broese van Groenou
L. V. Broese van Groenou
Vice President
Human Resources & Procurement
Telephone switchboard 01932 249200
Telefax 01932 249565
Telex 917243
Cables/Telegrams Lowtemp Walton-on Thames
Registered in England Number 103881
<PAGE>
DATED 6 November 1998
---------------------
AIR PRODUCTS AND CHEMICALS, INC.
--------------------------------
and
---
RONALDO SULLAM
--------------
E M P L O Y M E N T A G R E E M E N T
---------------------------------------
<PAGE>
- 2 -
THIS AGREEMENT is made as of the 6th day of November 1998 (hereinafter called
the "Effective Date") by and between AIR PRODUCTS AND CHEMICALS, INC., a
corporation which is organized and existing under the laws of the State of
Delaware in the United States of America (hereinafter called "Company"), which
has its principal office at 7201 Hamilton Boulevard, Allentown, PA 19185, U.S.A.
and RONALDO SULLAM, a citizen of the Republic of Italy who resides at 8,
Woodlands Road, Barnes, London, SW13, England (hereinafter called "Employee");
WHEREAS, Company wishes to assure itself of the availability of the advice and
services of Employee in providing commercial and other services of various kinds
to the "Operating Companies" (which are subsidiaries or affiliates of Company
that are engaged principally in the manufacture and sale of industrial specialty
and diving gases and related equipment) relating to their operations in
continental Europe and certain other countries of the world outside of the
United Kingdom of Great Britain and Northern Ireland, and participating in the
Company's internal management committee, the Corporate Executive Committee, to
provide advice on major capital projects, acquisitions and divestitures,
commercial transactions, strategies of our major businesses, capital and
operating plans, and significant policies for human resources, technology,
information technology, quality, health, safety, environmental, public affairs,
and other company-wide initiatives; and
WHEREAS, Company desires to enter into a contract of employment with Employee
and Employee is willing to enter into such contract of employment;
NOW, THEREFORE, in consideration of the premises and the mutual covenants as set
forth herein the parties hereto agree as follows:
1. SERVICES OF EMPLOYEE
--------------------
Company hereby employs Employee during the Employment Period, as
hereinafter defined, to perform the duties specified in the Schedule to
this Agreement and Employee hereby accepts such employment by Company,
all on and subject to the terms and conditions contained in this
Agreement and to Company's corporate policies and practices that are in
effect from time to time.
<PAGE>
- 3 -
2. HOURS AND PLACES OF EMPLOYMENT
------------------------------
2.1 Employee's services, because of their nature and close
connection to the places of business of the Company and
Operating Companies, will be rendered almost entirely in the
countries of continental Europe and the United States, but
Employee will be required to travel on Company's business to
other areas of the world (e.g., North and South America,
Africa and Asia) and Employee shall not have to perform any
services or duties whatsoever under this Agreement in the
United Kingdom of Great Britain and Northern Ireland. Company
shall have the right to require Employee to render services
from time to time under this Agreement for at least 100
working days in the aggregate during each year of the
Employment Period. Subject to the provisions of this paragraph
2 and paragraph 14 of this Agreement, Employee shall devote
such time and attention to his duties under this Agreement,
both within and outside normal working hours, as shall
reasonably be required by Company for the provision of
services to Operating Companies and in serving on the
Corporate Executive Committee of the Company.
2.2 It is recognized by both parties that Employee is a citizen of
Italy who is residing in the United Kingdom for the time being
in connection with the performance of his employment and that
the Company may at any time reasonably request Employee to
remove to a country on the European Continent, the United
States of America or elsewhere.
3. EMPLOYMENT PERIOD
-----------------
The term of Employee's employment under this Agreement ("Employment
Period") shall begin on the Effective Date and shall continue for an
indefinite period after that date; provided however, that this
Agreement and the employment may be terminated by either party by
written notice thereof received by the other party not less that 180
days prior to the date of termination specified in such notice,
provided that advance notice by Company to Employee shall not be
required in the event of termination of Employee for cause.
<PAGE>
- 4 -
4. REMUNERATION OF EMPLOYEE
------------------------
For his services under this Agreement, Employee shall be entitled to
such annual salary as may be determined from time to time during the
Employment Period by Company. Such salary shall be paid in monthly
instalments net of any appropriate deductions that may be required by
applicable law, or by participatory employee benefit plans. The initial
salary is set forth on Exhibit I. Employee will be considered from time
to time for various incentive compensation awards under the Company's
Long-Term Incentive Plan and Annual Incentive Plan. As a result of
executing this Agreement and the performance of services hereunder,
Employee does not obtain any right to receive any such incentive
compensation award. Such awards as may be granted will be on the basis
of Employee's performance and in the sole discretion of the Management
Development and Compensation Committee of the Board of Directors of the
Company. Any awards under the Company's Long-Term Incentive Plan, which
have been granted to Employee prior to the commencement of this
Agreement but which have not been fully earned shall, if earned during
the course of the Agreement, be allocated to this Agreement on the
basis of 50% of the total of any such award reduced by that
time-apportioned amount deemed earned prior to commencement of this
Agreement.
5. EXPENSES
--------
Employee shall be entitled to be reimbursed for reasonable expenses
that are incurred by him in connection with his duties under this
Agreement and on a basis that conforms with Company's policy, including
expenses for travel, entertainment and other usual business activities.
Such reimbursement will be predicated upon prior presentation of an
itemized account of such expenses, together with such vouchers or
receipts for individual expense items as may from time to time be
required under Company's established policies and procedures.
6. CONFIDENTIAL INFORMATION
------------------------
Employee hereby ratifies and affirms and agrees to be bound by the
employee confidentiality and patent agreement previously executed
between Employee and Air Products PLC; provided that, Employee has
executed contemporaneously herewith, attached as Exhibit II, an
Employee Patent and Confidentiality agreement with the Company. The
obligations therein shall apply during the Employment Period and
thereafter, and shall supersede the prior agreement in the event of a
conflict.
<PAGE>
- 5 -
7. NOTICES
-------
All notices, demands or other communications hereunder shall be
effective if in writing and delivered personally or sent by pre-paid
certified or registered airmail, addressed to the other party at the
address set forth at the head of this Agreement or at such other
address as may have been furnished by such other party in writing, and
shall be deemed to have been received no later than seven (7) days
after the date of mailing.
8. TAXES
-----
It is understood and agreed that the Employee will not participate in
the Company's tax equalization programs, as they exist from time to
time, relative to expatriate and Third Country National employees. The
parties acknowledge that the compensation and benefits provided for
herein are provided on the basis that the Employee shall be responsible
for his own tax affairs. No adjustment in compensation or benefits
shall be made due to any changes in the tax laws of any country which
have an impact upon the Employee in a manner different than that
otherwise assumed or actually applying on the effective date hereof.
9. ADDITIONAL ACTION
-----------------
Each of the parties to this Agreement shall execute and deliver such
other documents and do such other acts and things as may be necessary
or desirable to carry out the terms, provisions and purposes of this
Agreement.
10. GOVERNING LAW
-------------
This Agreement and the relationships of the parties in connection with
the subject matter of this Agreement shall be governed by and
interpreted in accordance with the laws of the Commonwealth of
Pennsylvania.
11. ENFORCEMENT
------------
The failure to enforce at any time any of the provisions of this
Agreement or to require at any time performance by the other party of
any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this
Agreement (or any part hereof), or the right of either party thereafter
to enforce each and every provision in accordance with the terms of
this Agreement.
<PAGE>
- 6 -
12. AMENDMENTS
----------
No modification, amendment or waiver of any of the provisions of this
Agreement shall be effective unless made in writing and signed by both
parties.
13. SEVERABILITY
-------------
If any severable provision of this Agreement is held to be invalid or
unenforceable by any judgment of a tribunal of competent jurisdiction,
the remainder of this Agreement shall not be affected by such judgment
and the Agreement shall be carried out as nearly as possible according
to its original terms and intent.
14. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement of the parties with
respect to Employee's employment with Company and his compensation
therefor and supersedes, with respect to periods occurring on or after
the Effective Date, any prior agreement between the parties, except for
the agreements described in paragraph 6 hereof.
The rights and responsibilities of Employee and Company with respect to
Employee's employment with Company or any of its branches and his
compensation therefore prior to the Effective Date shall be governed by
the agreements between the parties as were then in effect. The parties
hereto expressly agree that the agreement dated 1 June 1996 between
Employee and Airprochem, a wholly-owned subsidiary of Company, is
hereby superseded and Employee waives, and Company on behalf of
Airprochem waives any right to prior notice to terminate or amend that
agreement.
The parties acknowledge that the Employee and Air Products PLC
("APPLC") have entered into a separate, distinct and independent
employment agreement relating to Employee's services for APPLC in the
United Kingdom. APPLC has agreed with Employee that, in the case of
conflict, the performance of Employee's duties under this Agreement
shall take precedence over the performance of Employee's duties for
APPLC. The parties hereto expressly agree that the Employment Period
set forth in paragraph 3 of this Agreement shall not be terminated or
affected in any way and Employee's remuneration under this Agreement
shall not be changed, by the termination for any reason whatsoever of
Employee's employment with APPLC, the
<PAGE>
- 7 -
express intention being that the two employments shall be separate and
distinct from, and independent of, the other.
15. COUNTERPARTS
------------
This Employment Agreement may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of
which when so executed shall be an original, but all counterparts shall
together constitute one and the same instrument.
IN WITNESS WHEREOF, Company has caused this Agreement to be signed by a duly
authorized officer and Employee has hereunto set his hand effective as of the
day and year above written.
AIR PRODUCTS AND CHEMICALS, INC. RONALDO SULLAM
By: /s/ Joseph P. McAndrew By: /s/ Ronaldo Sullam
------------------------------- ------------------------
Joseph P. McAndrew
-------------------------------
<PAGE>
- 8 -
THE SCHEDULE
------------
The Employee duties shall be to:
1. Represent the Company and its affiliates within Europe and elsewhere
outside of the United Kingdom as President of Air Products Europe, Inc.
2. Assist the management of the Operating Companies in their negotiations
with major (especially multinational) customers of or suppliers to the
business for the sale or purchase of industrial and specialty gases and
related services;
3. Assist the Operating Companies in respect of their appointment ,
remuneration, promotion, retirement or release of operating personnel
connected with the businesses;
4. Serve, if and so long as duly elected by the shareholders of the
respective Operating Companies, on the Board of Directors or equivalent
body of selected major Operating Companies organised and doing business
in the countries of Continental Europe.
5. Serve, so long as elected by the shareholding affiliate or affiliates,
as a director of Carburos Metalicos and Sapio and to attend, in Spain
and Italy, respectively, on behalf of the affiliate or affiliates, all
Board meetings and to act on behalf of the affiliate or affiliates in
representing them within Spain and Italy, respectively, with respect to
those companies.
6. Serve, so long as elected by the shareholding affiliate or affiliates,
as a director of any other companies affiliated with the Company and to
attend, in the countries of operation of such companies, on behalf of
the affiliate or affiliates, all Board meetings and to act on behalf of
the affiliate or affiliates in representing them within the countries
of operation of such companies, with respect to such companies.
7. Attend in the United States or elsewhere outside of the United Kingdom,
to serve, if and so long as duly elected by the representative
shareholders, as a member or alternate member of the board of directors
or equivalent body of selected major Companies organised and doing
business outside the countries of Continental Europe.
<PAGE>
- 9 -
8. Represent the Company at professional meetings and conferences within
Europe and elsewhere outside of the United Kingdom as President of Air
Products Europe, Inc.
9. Report periodically to Company, at its offices in Allentown,
Pennsylvania, U.S.A., regarding the investments of the Company and its
affiliates within Europe and elsewhere outside of the United Kingdom.
10. Serve, so long as appointed by the Chairman of the Company, as a member
of the Company's Management Committee and Corporate Executive Committee
or any successor internal management committee, and any other
committees of the Company to which he may be elected from time to time.
<PAGE>
- 10 -
Exhibit I
---------
The initial salary hereunder shall be FF 951,500, per annum. This salary shall
be paid to the employee in French Francs. The salary will adjusted from time to
time as provided herein and in the practices of the Company.
<PAGE>
EMPLOYEE PATENT, COPYRIGHT AND CONFIDENTIAL INFORMATION AGREEMENT
In consideration of my employment by Air Products and Chemicals, Inc., its
divisions, affiliates and subsidiaries (all, collectively, referred to
hereinafter as the Company), I agree that I will:
A. Communicate to the Company promptly and fully in writing, in such
format as the Company may deem appropriate, all inventions made or
conceived by me whether alone or jointly with others from my time of
entering the Company's employ until I leave, and as requested, to
assign to the Company those of such inventions which (1) relate to a
field of business, research or investigation in which the Company has
an interest, or (2) result from, or are suggested by, any work which I
may do for or on behalf of the Company;
B. Make and maintain adequate permanent records of all such inventions, in
the form of memoranda, notebook entries, drawings, print-outs or
reports relating thereto, in keeping with then current Company
procedures. I agree that these records, as well as the inventions
themselves, shall be and remain the property of the Company at all
times;
C. Cooperate with and assist the Company and its nominees, at their sole
expense, during my employment and thereafter, in securing and
protecting patent rights in which I am a named inventor or other
similar rights in the United States and foreign countries. In this
connection, I specifically agree to execute all papers which the
Company deems necessary to protect its interests including the
execution of assignments of invention and to give evidence and
testimony, as may be necessary, to secure and enforce the Company's
rights;
D. Except as the Company may otherwise authorize in writing, not use or
disclose to others, reproduce or copy at any time, except as my Company
duties may require, either during or subsequent to my employment, any
private information of the Company or of others as to whom the Company
has an obligation of confidentiality which may come to my attention or
be developed by me during the course of my employment other than
information which is or becomes public knowledge in a lawful manner;
E. Upon termination of my employment with the Company, deliver to it all
records, data and memoranda of any nature which are in my possession or
control and which relate to my employment or the activities of the
Company, including, for example, notebooks, diaries, reports,
photographs, films, manuals and computer software media.
F. Following termination of my employment, honor and abide by my
continuing obligation of confidentiality. I agree that, in any
situation which arises and involves a question of my freedom to
disclose particular information to a subsequent employer or anyone
else, I will contact the Company in writing and elicit its opinion on
my freedom to make such a disclosure.
It is also agreed that:
G. All creative works which I produce during my employment and which
relate to the Company's business or technology shall be considered to
have been prepared for the Company as a part of and in the course of my
employment. Any such work shall be owned by the Company regardless of
whether it would otherwise be considered a work made for hire. Such
works shall include, among other things, computer programs and
documentation, non-dramatic literary works (e.g. professional papers
and journal articles), visual arts (e.g. pictorial, graphic and three
dimensional), sound recordings, motion pictures and other audiovisual
works.
H. Nothing in this agreement shall bind me or the Company to any specific
period of service or employment, nor shall the termination of such
employment in any way affect the obligations assumed by me herein.
Further, this agreement replaces any and all prior agreements or
understandings between me and the Company concerning these subjects;
I. This agreement shall bind my heirs, executors, and administrators, and
shall inure to the benefit of the successors and assigns of the
Company.
J. I will not disclose to any other employee of the Company any
information as to which I owe a continuing obligation of
confidentiality to a previous employer or client. Any inventions,
patented or unpatented, which were made or conceived by me prior to my
employment are excluded from the operation of this agreement, and I
warrant that there are no such inventions, other than those listed by
me in the space provided on the back of this document.
WITNESS: (L.S.)
-------------------------- ------------------------
Signature of Employee
DATED:
(List invention information on the back of this agreement.)
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Description Patent Nos. or Assignment or Disposition
of Application Nos. Employee Has Made or Will
Invention (if any) Make of Invention
- ------------------- -------------------- ----------------------------
- ------------------- -------------------- ----------------------------
- ------------------- -------------------- ----------------------------
- ------------------- -------------------- ----------------------------
- ------------------- -------------------- ----------------------------
- ------------------- -------------------- ----------------------------
- ------------------- -------------------- ----------------------------
- ------------------- -------------------- ----------------------------
- ------------------- -------------------- ----------------------------
- ------------------- -------------------- ----------------------------
- ------------------- -------------------- ----------------------------
- ------------------- -------------------- ----------------------------
</TABLE>
<PAGE>
Memorandum [Air Products Stylized "A" Logo]
---------------------------------------------------------------------------
To: J. P. McAndrew Dept./Loc.:
From: K. R. Petrini Dept./Ext.: Tax/14462
Date: 4 June 1996
Subject: R. Sullam Contract
As a result of his new responsibilities, Ron Sullam has
executed new employment contracts. Attached is his Airprochem
contract as prepared by Leonard and me. This replaces the
existing Airprochem contract and is identical in all respects
other than as to his duties and salary split. Please execute
and return to me. I will arrange for copies to be made in
Hersham due to the paper size used and will return a copy to
you for your records.
/s/ K. R. Petrini
------------------------------
K. R. Petrini
<PAGE>
DATED 1st JUNE 1996
-------------------
AIRPROCHEM INC.
---------------
and
---
RONALDO SULLAM
--------------
EMPLOYMENT AGREEMENT
--------------------
<PAGE>
2
THIS AGREEMENT is made this 1st day of JUNE 1996 (hereinafter called the
"Effective Date") by and between AIRPROCHEM INC., a corporation which is
organized and existing under the laws of the State of Delaware in the United
States of America (hereinafter called "Company"), which has its registered
office at 1209 Orange Street, Wilmington, Delaware 19801, U.S.A. and which is a
wholly-owned subsidiary of Air Products and Chemicals, Inc. (hereinafter called
"Parent Company") and RONALDO SULLAM, a citizen of the Republic of Italy who
resides at 8, Woodlands Road, Barnes, London, SW13, England (hereinafter called
"Employee");
WHEREAS, Parent Company has requested Company to provide commercial and other
services of various kinds to the "Operating Companies" (which are subsidiaries
or affiliates of Parent Company that are engaged principally in the manufacture
and sale of industrial specialty and diving gases and related equipment)
relating to their operations in continental Europe and certain other countries
of the world outside of the United Kingdom of Great Britain and Northern
Ireland;
WHEREAS, Company desires to provide such services and wishes to assure itself of
the availability of the advice and services of Employee among others in
providing such services;
WHEREAS, Company desires to enter into a contract of employment with employee;
and
WHEREAS, Employee is willing to enter into such contract of employment;
NOW, THEREFORE, in consideration of the premises and the mutual covenants as set
forth herein the parties hereto agree as follows:
1. SERVICES OF EMPLOYEE
--------------------
Company hereby employs Employee during the Employment Period, as
hereinafter defined, to perform the duties specified in the Schedule to
this Agreement and Employee hereby accepts such employment by Company,
all on and subject to the terms and conditions contained in this
Agreement and to Parent Company's corporate policies and practices that
are in effect from time to time.
<PAGE>
3
2. HOURS AND PLACES OF EMPLOYMENT
------------------------------
2.1 Employee's services, because of their nature and close
connection to the places of business of the Parent Company and
Operating Companies, will be rendered almost entirely in the
countries of continental Europe, but Employee will be required
to travel on Company's business to other areas of the world
(e.g., North and South America, Africa and Asia) and Employee
shall not have to perform any services or duties whatsoever
under this Agreement in the United Kingdom of Great Britain
and Northern Ireland. Company shall have the right to require
Employee to render services from time to time under this
Agreement for at least 100 working days in the aggregate
during each year of the Employment Period. Subject to the
provisions of this paragraph 2 and paragraph 14 of this
Agreement, Employee shall devote such time and attention to
his duties under this Agreement, both within and outside
normal working hours, as shall reasonably be required by
Company for the provision of services to Operating Companies
and in serving on the committees of the Parent Company.
2.2 It is recognized by both parties that Employee is a citizen of
Italy who is residing in the United Kingdom for the time being
in connection with the performance of his employment and that
the Company may at any time reasonably request Employee to
remove to a country on the European Continent, the United
States of America or elsewhere.
3. EMPLOYMENT PERIOD
-----------------
The term of Employee's employment under this Agreement ("Employment
Period") shall begin on the Effective Date and shall continue for an
indefinite period after that date, provided however, that this
Agreement and the employment may be terminated by either party by
written notice thereof received by the other party not less that 180
days prior to the date of termination specified in such notice,
provided that advance notice by Company to Employee shall not be
required in the event of termination of Employee for cause.
4. REMUNERATION OF EMPLOYEE
------------------------
For his services under this Agreement, Employee shall be entitled to
such annual salary as may be determined from time to time during the
Employment Period by Company. Such salary shall be paid in monthly
instalments net of any appropriate deductions that may be required by
applicable law, or by participatory employee benefit plans. The
<PAGE>
4
initial salary is set forth on the Exhibit. Employee shall be entitled to
the provision of a Pension and Life Insurance on a level and on a scale
generally available to employees employed in capacities and with job
classifications similar to Employee's. Employee will be considered from
time to time for various incentive compensation awards under the Parent
Company Long-Term Incentive Plan and Annual Incentive Plan. As a result
of executing this Agreement and the performance of services hereunder,
Employee does not obtain any right to receive any such incentive
compensation award. Such awards as may be granted will be on the basis
of Employee's performance and in the sole discretion of the Parent
Company Management Development and Compensation Committee. Any awards
under the Parent Company Long-Term Incentive Plan, which have been
granted to Employee prior to the commencement of this Agreement but
which have not been fully earned shall, if earned during the course of
the Agreement, be allocated to this Agreement on the basis of 50% of
the total of any such award reduced by that time-apportioned amount
deemed earned prior to commencement of this Agreement.
The employee shall also receive an annual home leave trip to France for
himself, his spouse and children. The Company shall reimburse the
Employee the cost of travel to France and reasonable incidental
expenses, but shall not pay for actual living expenses within France.
5. EXPENSES
--------
Employee shall be entitled to be reimbursed for reasonable expenses
that are incurred by him in connection with his duties under this
Agreement and on a basis that conforms with Company's policy, including
expenses for travel, entertainment and other usual business activities.
Such reimbursement will be predicated upon prior presentation of an
itemized account of such expenses, together with such vouchers or
receipts for individual expense items as may from time to time be
required under Company's established policies and procedures.
6. CONFIDENTIAL INFORMATION
------------------------
Except as otherwise specifically agreed between the parties, Employee
shall not, at any time during the Employment Period or thereafter,
communicate or disclose to any unauthorised person or improperly use
for his own account or business any Parent Company owned confidential
information concerning the business or affairs of the Company, the
Parent Company or of any Operating Companies or other related
companies. The obligations contained in this paragraph 6 shall no apply
in the event and to the extent that the information referred to in this
paragraph 6 has become generally known to or available for use by the
public, other than by an act or omission
<PAGE>
5
of Employee in violation of the terms of this Agreement.
7. NOTICES
-------
All notices, demands or other communications hereunder shall be
effective if in writing and delivered personally or sent by pre-paid
certified or registered airmail, addressed to the other party at the
address set forth at the head of this Agreement or at such other
address as may have been furnished by such other party in writing, and
shall be deemed to have been received no later than seven (7) days
after the date of mailing.
8. TAXES
-----
It is understood and agreed that the Employee will not participate in
the Company's tax equalization programs, as they exist from time to
time, relative to expatriate and Third Country National employees. The
parties acknowledge that the compensation and benefits provided for
herein are provided on the basis that the Employee shall be responsible
for his own tax affairs. No adjustment in compensation or benefits
shall be made due to any changes in the tax laws of any country which
have an impact upon the Employee in a manner different than that
otherwise assumed or actually applying on the effective date hereof.
9. ADDITIONAL ACTION
-----------------
Each of the parties to this Agreement shall execute and deliver such
other documents and do such other acts and things as may be necessary
or desirable to carry out the terms, provisions and purposes of this
Agreement.
10. GOVERNING LAW
-------------
This Agreement and the relationships of the parties in connection with
the subject matter of this Agreement shall be governed by and
interpreted in accordance with the laws of Pennsylvania.
<PAGE>
6
11. ENFORCEMENT
-----------
The failure to enforce at any time any of the provisions of this
Agreement or to require at any time performance by the other party of
any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this
Agreement (or any part hereof), or the right of either party thereafter
to enforce each and every provision in accordance with the terms of
this Agreement.
12. AMENDMENTS
----------
No modification, amendment or waiver of any of the provisions of this
Agreement shall be effective unless made in writing and signed by both
parties.
13. SEVERABILITY
------------
If any severable provisions of this Agreement is held to be invalid or
unenforceable by any judgment of a tribunal of competent jurisdiction,
the remainder of this Agreement shall not be affected by such judgment
and the Agreement shall be carried out as nearly as possible according
to its original terms and intent.
14. ENTIRE AGREEMENT
----------------
This Agreement constitutes the entire agreement of the parties with
respect to Employee's employment with Company and his compensation
therefore and supersedes with respect to periods occurring on or after
the effective date any prior agreement between the parties. The rights
and responsibilities of Employee and Company with respect to Employee's
employment with Company or any of its branches and his compensation
therefore prior to the effective date shall be governed by the
agreements between the parties as were then in effect. The parties
acknowledge that the Air Products Plc ("APPLC") have entered into a
separate, distinct and independent employment agreement relating to
Employee's services for APPLC in the United Kingdom. The parties hereto
expressly agree that the agreement dated 1 October 1992 between them is
hereby superseded and both parties waive any right to prior notice to
terminate or amed that agreement.
APPLC has agreed with Employee that, in the case of conflict, the
performance of Employee's duties under this Agreement shall take
precedence over the performance of Employee's duties for APPLC. The
parties hereto expressly agree that the Employment Period set forth in
paragraph 3 of this Agreement shall not be terminated or affected in
any way and Employee's remuneration under this Agreement shall not be
changed, by the termination for any reason whatsoever of Employee's
employment with APPLC,
<PAGE>
7
the express intention being that the two employments shall be separate and
distinct from, and independent of, the other.
15. COUNTERPARTS
------------
This Employment Agreement may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of
which when so executed shall be an original, but all counterparts shall
together constitute one and the same instrument.
IN WITNESS WHEREOF, Company has caused this Agreement to be signed by a duly
authorized officer and Employee has hereunto set his hand the day and year above
written.
AIRPROCHEM INC. RONALDO SULLAM
By: /s/Joseph P. McAndrew By: /s/ Ronaldo Sullam
---------------------- ------------------------
Joseph P. McAndrew
<PAGE>
8
THE SCHEDULE
------------
The Employee duties shall be to:
1. To represent the Parent Company and its affiliates within Europe and
elsewhere outside of the United Kingdom as President of Air Products
Europe, Inc.
2. Assist the management of the Operating Companies in their negotiations
with major (especially multinational) customers of or suppliers to the
business for the sale or purchase of industrial and specialty gases and
related services;
3. Assist the Operating Companies in respect of their appointment ,
remuneration, promotion, retirement or release of operating personnel
connected with the businesses;
4. Serve, if and so long as duly elected by the shareholders of the
respective operating companies, on the Board of Directors or equivalent
body of selected major Operating Companies organised and doing business
in the countries of Continental Europe.
5. Serve, so long as elected by the shareholding affiliate or affiliates,
as a director of Carburos Metalicos and Sapio and to attend, in Spain
and Italy, respectively, on behalf of the affiliate or affiliates, all
Board meetings and to act on behalf of the affiliate or affiliates in
representing them within Spain and Italy, respectively, with respect to
those companies.
6. Serve, so long as elected by the shareholding affiliate or affiliates,
as a director of the Parent Company's direct or indirect investments in
India and to attend, in India on behalf of the affiliate or affiliates,
all Board meetings and to act on behalf of the affiliate or affiliates
in representing them within India with respect to those companies.
7. Attend in the United States or elsewhere outside of the United Kingdom,
to serve, if and so long as duly elected by the representative
shareholders, as a member or alternate member of the Board of Directors
or equivalent body of selected major Companies organised and doing
business outside the countries of Continental Europe.
8. Represent the Parent Company at professionsal meetings and conferences
within Europe and elsewhere outside of the United Kingdom as President
of Air Products Europe, Inc.
<PAGE>
9
9. To report periodically to the parent Company, at its offices in
Allentown, Pennsylvania, U.S.A., regarding the investments of the
Parent Company and its affiliates within Europe and elsewhere outside
of the United Kingdom.
10. To attend periodically at the Parent Company's offices in Allentown,
Pennsylvania, U.S.A. meetings of any committees to which he may be
elected to serve from time to time.
<PAGE>
10
The Exhibit
-----------
The initial salary hereunder shall be FF 800.000, per annum. This salary shall
be paid to the employee in French Francs. The salary will adjusted from time to
time as provided herein and in the practices of the Company.
[Company]
Date:
Name
Address
Dear Name:
Air Products and Chemicals, Inc. ("Air Products") considers a sound and
vital management to be essential to protecting and enhancing its best interests
and those of its shareholders. In this connection, Air Products recognizes that,
as is the case with any publicly held corporation, the possibility of a change
in control of Air Products may develop, although no such change is now expected
or contemplated.
The Management Development and Compensation Committee of the Air Products
Board of Directors and the Board believe it imperative that the Company and the
Board be able to rely upon key members of the Company's management to continue
in their positions and to act in the best financial interests of Air Products
shareholders in the event of a bid, offer or proposal to take control of Air
Products and following any change in control of Air Products. Therefore, the
Committee and the Board have determined that appropriate steps should be taken
to protect key members of the Company's management against significant negative
personal financial consequences that might result from a change in control, and
to reinforce and
<PAGE>
encourage the continued attention and dedication of such key members of
management to their duties without distraction should the possibility of a
change in control of Air Products ever arise.
In order to induce you to remain in the employ of the Company and to assure
your continued dedication and the availability of your advice and counsel during
the possibility and pendency of, and following, a change in the control of Air
Products, Air Products agrees that it will provide you, or cause you to be
provided the severance benefits set forth in this severance agreement ("the
Agreement") in the event your employment with the Company is terminated
subsequent to a Change in Control under the circumstances described herein.
1. DEFINITIONS
-----------
"Act" means the Securities Exchange Act of 1934.
"Annual Incentive Plan" shall mean the Air Products and Chemicals, Inc.
1997 Annual Incentive Plan and/or any similar, successor or substitute
short-term bonus plan, program or pay practice.
"Base Salary" shall mean your total annual salary payable by the Company in
accordance with its normal compensation practices, including any amounts
deferred pursuant to the Savings Plans or Code Section 125.
"Board" shall mean the Board of Directors of Air Products.
2
<PAGE>
"Cause" shall mean either of the following:
(A) The willful and continued failure by you to substantially perform
your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness
or injury or any such actual or anticipated failure after the
issuance by you of a Termination Notice for Good Reason), over a
period of not less than sixty days after a demand for substantial
performance is delivered to you by the Board which specifically
identifies the manner in which the Board believes that you have
not substantially performed your duties; or
(B) The willful engaging by you in gross misconduct materially and
demonstrably injurious to the Company; provided that no act or
failure to act on your part will be considered willful if done, or
omitted to be done, by you in good faith and with reasonable
belief that your action or omission was in the best interest of
the Company, or if any member of the Board who was not a party to
such act or omission had actual knowledge of it for at least
twelve months.
"Change in Control" shall mean the first to occur of:
A. Stock Acquisition. Any "person", as such term is used in Sections
13(d) and 14(d) (2) of the Act, other than Air Products, or any
corporation a majority of whose outstanding stock entitled to vote is
owned, directly or indirectly, by Air Products (a
3
<PAGE>
"Subsidiary"), or a trustee of an employee benefit plan sponsored
solely by Air Products and/or such a Subsidiary, is or becomes, other
than by purchase from Air Products or such a Subsidiary, the
"beneficial owner", as such term is defined in Rule 13d-3 under the
Act, directly or indirectly, of securities of Air Products
representing 20% or more of the combined voting power of Air Products'
then outstanding voting securities. Such a Change in Control will 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 upon
which Air Products first learns of the acquisition of 20% or more of
such securities, or the later of the effective date of an agreement
for the merger, consolidation or other reorganization of Air Products,
or the date of approval thereof by a majority of Air Products'
shareholders.
B. Change in Board. During any period of two consecutive years,
individuals who at the beginning of such period were members of the
Board cease for any reason to constitute at least a majority thereof,
unless the election or nomination for election by Air Products'
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 will be deemed
to have occurred on the date upon which the requisite majority of
directors fails to be elected by the shareholders of Air Products.
C. Other Events. Any other event or series of events which,
notwithstanding any other provision of this definition to the
contrary, is determined, by a majority of the outside
4
<PAGE>
members of the Board serving in office at the time such event or events
occur, to constitute a Change in Control of Air Products for purposes of
this Agreement. Such a Change in Control will be deemed to have occurred on
the date of such determination or on such other date as said majority of
outside members of the Board shall specify.
Notwithstanding the foregoing, there shall not be a Change in Control if, in
advance of such event, you agree in writing that such event shall not constitute
a Change in Control.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the Management Development and Compensation Committee of
the Board or a successor Committee of the Board.
"Common Stock" means the common stock, $1 par value, of Air Products.
"Company" means Air Products and any successor in interest thereto, and any
affiliate of Air Products in which it holds, directly or indirectly, a
controlling interest and to whom your employment has been transferred with your
consent.
"Contract Period" shall mean the period commencing on a Change in Control
and ending three years following the Change in Control.
5
<PAGE>
"Disability" shall exist where, as a result of your incapacity due to
physical or mental illness or injury you have been absent from the performance
of your duties with the Company for at least six consecutive months.
"Fiscal Year" shall mean the fiscal year of the Company which commences on
October 1 of each calendar year and ends on September 30 of the following
calendar year, or such other fiscal year as the Company may adopt for keeping
its financial records.
"Good Reason" shall mean the occurrence of any of the following without
your consent:
A. An adverse change, during the Contract Period, in your position or
office with the Company, or a diminution in the duties, reporting
responsibilities and authority with the Company which you held and
performed during the ninety-day period immediately preceding the
beginning of the Contract Period, or an assignment to you of duties or
responsibilities, which, in your reasonable judgment, are not
consistent with your status or position with the Company immediately
prior to the Change in Control; provided that, any of the foregoing in
connection with termination of your employment for Cause, Retirement
or Disability shall not constitute Good Reason.
B. The failure by the Company to pay you a Base Salary, in substantially
equal installments conforming with the Company's normal pay practices,
at a rate at least equal to your Base Salary rate in effect
immediately before the beginning of the
6
<PAGE>
Contract Period or a failure to increase such Base Salary each
year, beginning one year after the last increase in your Base Salary
occurring before the beginning of the Contract Period, by an amount
which at least equals, on a percentage basis, the average annual
percentage increase in your Base Salary during the three full Fiscal
Years immediately preceding the beginning of the Contract Period;
provided, however, that the Company may reduce your Base Salary or
adjust your Base Salary on a smaller percentage basis if such
reduction or adjustment is no less favorable to you on a percentage
basis than the average annual percentage reduction or adjustment
during the applicable Fiscal Year for all Highly Compensated
Employees.
C. The failure by the Company to continue the Annual Incentive Plan
and/or initiate and maintain other plans, programs or practices
providing you with benefits substantially similar in type and amount
to those under the Annual Incentive Plan, or a failure to pay you
bonus awards each year during the Contract Period under the Annual
Incentive Plan or such similar bonus plan (together, the "Bonus
Plans"), beginning no later than one year after the date of your last
grant under the Annual Incentive Plan before the beginning of the
Contract Period, at least equal in amount to the average of the bonus
awards granted to you under the Annual Incentive Plan during and/or
for each of the three full Fiscal Years immediately preceding the
beginning of the Contract Period; provided, however, that the Company
may reduce or adjust your bonus awards paid each year to a lower
amount if such reduction or adjustment is on a basis no less favorable
to you than the basis upon which it reduces or adjusts
7
<PAGE>
awards under the Bonus Plans or comparable plans for all Highly
Compensated Employees during the applicable Fiscal Year;
D. The failure by the Company to continue the Long-Term Incentive Plan
and/or initiate and maintain other plans, programs or practices
providing you with benefits substantially similar in type and amount
to those under the Long Term Incentive Plan or a failure to grant you
awards each year under the Long Term Incentive Plan and/or such
similar incentive plans (together, the "Incentive Plans"), beginning
one year after your last grant under the Long Term Incentive Plan
before the beginning of the Contract Period, at a level at least equal
in the aggregate to the average value, determined based on valuation
models normatively used by publicly held corporations of similar size
to the Company in setting long term incentive compensation levels, of
your aggregate annual awards granted each year under the Long Term
Incentive Plan during and/or for the last three Fiscal Years preceding
the beginning of the Contract Period; provided, however, that if the
Company provides the Incentive Plans or comparable plans for Highly
Compensated Employees, the Company may maintain the level of awards
granted to you each year under the Incentive Plans at a lower value if
such benefits are determined on a basis no less favorable to you than
for all Highly Compensated Employees during the applicable Fiscal
Year.
8
<PAGE>
E. The failure by the Company to pay you in respect of any of your
deferred or other awards under the Bonus Plans or the Incentive Plans
when due and payable under the terms of said Plans;
F. The failure by the Company to pay (or reimburse you for) all
reasonable moving expenses incurred by you relating to a change of
your principal residence in connection with an employment related
relocation required by the Company and indemnify you against any
"loss" realized in the sale of your principal residence in connection
with such relocation, defined as the difference between the actual
sale price of such residence (net of all commissions, fees, taxes and
other closing costs borne by seller) and the higher of (a) your
aggregate investment in such residence or (b) the fair market value of
such residence as determined by a real estate appraiser designated by
you and reasonably satisfactory to the Company (who shall be either a
member of the Society of Real Estate Appraisers, the American
Institute of Real Estate Appraisers or the National Association of
Independent Fee Appraisers);
G. The failure by the Company to reimburse you for reasonable travel and
other business expenses in accordance with the Company's applicable
policies, procedures and practices provided that you properly account
for such expenses in accordance with then applicable Company policy;
and
9
<PAGE>
H. A material reduction in your aggregate benefits, such as the failure
by the Company to either continue in effect any employee pension
benefit or welfare benefit plan, program or practice in which you are
eligible to participate immediately before the beginning of the
Contract Period, including but not limited to, the Pension Plans, the
Savings Plans, and the Company's life insurance, medical, dental,
health and accident, disability, severance and paid vacation plans,
programs and practices (such plans, programs and practices herein
together referred to as the "APCI Benefit Plans"), or, in lieu
thereof, to initiate and maintain other plans, programs or practices
providing you with benefits substantially similar in type and amount
to those under the APCI Benefit Plans, with your aggregate benefits
under the APCI Benefit Plans and such similar benefit plans (together,
the "Benefit Plans") comparable in type and amount to your benefits
under the APCI Benefit Plans immediately before the beginning of the
Contract Period, or the Company's failure to maintain for you any
other material fringe benefit or perquisite enjoyed by you immediately
before the beginning of the Contract Period.
I. Any purported termination of your employment for Disability or for
Cause which is not effected in accordance with the procedures required
in Section 4.
J. The failure of the Company to obtain the written assumption of this
Agreement by any successor of the Company prior to the effectiveness
of any such succession.
10
<PAGE>
"Highly Compensated Employees" shall mean the highest paid one percent of
employees of the Company together with all corporations, partnerships, trusts,
or other entities controlling, controlled by, or under common control with, the
Company.
"Long Term Incentive Plan" shall mean the Air Products and Chemicals, Inc.
1997 Long Term Incentive Plan and/or any similar, successor or substitute
long-term incentive compensation plan or program.
"Notice Date" shall mean the date a Termination Notice prepared by the
Company or you is received by you or the Company, respectively.
"Pension Plans" shall mean, the Air Products and Chemicals, Inc. Pension
Plan for Salaried Employees, as amended from time to time together with any
similar, succeeding or substitute plan, and the Supplementary Pension Plan of
Air Products and Chemicals, Inc. as amended from time to time, together with any
similar, succeeding or substitute plan, and any private annuity or pension
agreement between you and the Company.
"Retirement" shall mean (1) your voluntary retirement before attaining the
normal retirement age under the Pension Plans, with an immediate non-actuarially
reduced pension under the Pension Plans, provided that Termination for Good
Reason before such normal retirement age shall not be deemed a Retirement for
purposes of this Agreement even though you are eligible for and elect to
receive, an immediate non-actuarially reduced pension under the Pension Plans,
or (2) Termination of Employment in accordance with any retirement
11
<PAGE>
arrangement other than under the Pension Plans which is established with your
consent with respect to you, provided that Termination for Good Reason
shall not be deemed a Retirement for purposes of this Agreement even though
you are eligible to retire, and receive benefits under, any such retirement
arrangement, or (3) mandatory retirement as set forth under a policy of the
Company as it existed prior to the Change in Control or as agreed to by you
following a Change in Control.
"Savings Plans" shall mean the Air Products and Chemicals, Inc. Retirement
Savings and Stock Ownership Plan, as amended from time to time, together with
any similar, succeeding or substitute plan, and the Air Products and Chemicals,
Inc. Supplementary Savings Plan, as amended from time to time, together with any
similar, succeeding or substitute plan.
"Target Annual Bonus" shall mean the target bonus under the Annual
Incentive Plan which is approved by the Committee for the applicable Fiscal Year
for Highly Compensated Employees at your grade level or other comparable
compensation level, or, if no such target bonus has been determined for such
Fiscal Year, such target bonus for the most recent Fiscal Year for which one was
determined;
"Termination Date" means the effective date of a Termination of Employment
for any reason, including death, Disability, or Retirement, whether by the
Company or you.
12
<PAGE>
"Termination", "Termination of Employment" or "Termination of your
Employment" shall mean the termination of your employment with the Company,
whether by you or the Company.
"Termination Notice" shall mean the notice required by Subsection 3A.
2. TERM OF AGREEMENT
-----------------
This Agreement will commence on the date of your signing hereof and will
continue while you are in the active employment of the Company until 30
September 2001 and, beginning on 1 October 2001 and each one year anniversary
thereof, the term of this Agreement will automatically be extended for one
additional year unless, at least (90) ninety days prior to such date, either
party gives written notice to the other that it does not wish to extend this
Agreement. Notwithstanding any such written notice, if a Change in Control shall
have occurred prior to receipt of the notice or does occur within (90) ninety
days of receipt of the notice, the attempted termination of the Agreement by the
Company shall be ineffective and the Agreement shall continue until the end of
your Contract Period. If a Change in Control otherwise occurs during the term of
this Agreement, this Agreement will continue in effect until the end of the
Contract Period.
3. TERMINATION PROCEDURES
----------------------
A. Termination Notice. During the Contract Period, any Termination of
Employment by the Company or by you must be communicated by a written
Termination Notice
13
<PAGE>
to the other party hereto. The "Termination Notice" must (i) specify the
Termination Date; (ii) indicate the specific provisions in this Agreement,
if any, applicable to the Termination and set forth in reasonable detail
the facts and circumstances, if any, claimed to provide a basis for
application of the provision so indicated; (iii) if given by the Company to
you for other than Disability or Cause, specify, with supporting
calculations, the amount the Company believes to be payable to you under
this Agreement as a result of such Termination; and (iv) contain a copy of
any other notice, resolution, demand or other document required to effect a
Termination under provisions of the Agreement identified in (ii) above.
B. Additional Termination Procedures.
(i) During the Contract Period the Company may not Terminate your
Employment for Cause unless and until: (a) there has been delivered to you a
copy of a resolution Terminating your Employment for Cause duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Board; (b) such resolution was adopted at a meeting of the Board called and held
for the purpose of considering such resolution; (c) you were provided reasonable
notice of the Board's intent to consider the resolution and a reasonable
opportunity, together with your counsel, to be heard by the Board at such
meeting; and (d) the resolution finds, in the good faith opinion of the Board,
that you have engaged in conduct constituting Cause and specifies the
particulars thereof in detail, which particulars must be consistent with those
specified in the notice of the Board meeting given to you.
14
<PAGE>
(ii) During the Contract Period, the Company may not Terminate your
Employment for Disability if you return to the performance of your duties on a
substantially full-time basis within forty-five days of receiving the
Termination Notice specifying Disability as the basis for Termination.
C. Termination Date. "Termination Date" shall be: (i) if your employment is
terminated due to your death, the date of your death, (ii) if your employment is
terminated for Disability, at least forty-five days after the Termination Notice
is given (provided that you have not returned to the full-time performance of
your duties during such period) and, (iii) if your employment is terminated for
any other reason, the date specified in the Termination Notice by the party
giving the Notice, which date must be at least forty-five days after the
Termination Notice if given by you for Good Reason or by the Company for any
reason other than Cause; provided, however, that if within forty-five days after
any Termination Notice is given, the party receiving such Termination Notice
notifies the other party that a dispute exists, the Termination Date will be the
date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award or by a final judgment,
order or decree of a court of competent jurisdiction (which is not appealable or
with respect to which the time for appeal therefrom has expired and no appeal
has been perfected); and provided further, however, that your Termination Date
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence, and your Termination Date shall in no event be
extended beyond the end of the Contract Period.
15
<PAGE>
D. Continuation of Salary and Benefits During Pendency of Dispute. Until
any dispute or controversy referred to in Subsection 3C above is finally
resolved in accordance with such Subsection, the Company will (i) continue to
pay you your full Base Salary at the higher of the rates in effect on the date
your Termination Notice is received or immediately before any purported
reduction in your Base Salary constituting Good Reason, and (ii) continue your
participation in all Benefit Plans in which you were participating before such
notice date provided that your continued participation in such Plans is possible
under the general terms and conditions thereof. If your continued participation
in any such Benefit Plan is barred by the terms thereof, the carrier or
otherwise, the Company will arrange to provide you with benefits substantially
similar to those which you would receive under such Plan. You will be entitled
to seek specific performance of your rights under this Subsection 3D until your
Termination Date during the dependency of any dispute or controversy arising
under or in connection with this Agreement.
4. COMPENSATION UPON TERMINATION OF EMPLOYMENT.
--------------------------------------------
A. Termination for Cause, Death, Disability, or Retirement. If during the
Contract Period the Company terminates your employment for Cause, or your
employment terminates due to death, Disability or Retirement, the Company shall
pay to you on the Termination Date your full Base Salary and accrued vacation
pay through the Termination Date, plus any benefits or awards which have been
earned by you or become payable to you under any policy or employee compensation
or benefit plan of the Company. The benefits payable to you, or due to your
death, Disability, Retirement or other Termination of Employment under all
Benefit
16
<PAGE>
Plans, Bonus Plans and Incentive Plans in which you are participating
before such Termination of Employment, will be paid as provided under such Plans
and the Company will have no further obligation.
B. Termination Without Cause, Death, Retirement or Disability or for Good
Reason. If during the Contract Period the Company Terminates your Employment
other than for death, Retirement, Disability or Cause (it being understood that
a purported termination for Disability or Cause which is disputed and finally
determined not to have been proper or which is not effected in accordance with
the procedures required in Section 3 will be a Termination other than for Cause
or Disability), or you Terminate your Employment for Good Reason, then Air
Products will provide you or cause you to be provided the payments and benefits
described below in this Subsection 4B.
(i) Cash Payment. The Company will pay to you on or before the fifth day
following your Termination Date, a lump sum cash payment equal to the sum of the
following amounts:
(a) Your Base Salary through your Termination Date at the higher of
the rate in effect on the Termination Date or the rate in effect immediately
before any purported reduction in your Base Salary constituting Good Reason
(such amount to be reduced by the amount of any Base Salary payments previously
paid by the Company to you for the same period or any portion thereof under
Subsection 3D above or otherwise);
17
<PAGE>
(b) The product of (I) the amount of the Target Annual Bonus for
which you would have been eligible if you had been employed by the Company on
the last day of the Fiscal Year or other bonus performance cycle that includes
your Termination Date, multiplied by (II) a fraction of which the numerator is
the number of days which have elapsed in such Fiscal Year through the
Termination Date and the denominator is 365.
(c) Three times the sum of (I) your Base Salary at the rate
required by subparagraph (i)(a) above and (II) the Company matching
contributions made and/or accrued in respect of your contributions to or
deferrals under the Savings Plans during and/or for the last full Fiscal Year
of the Company preceding your Termination Date;
(d) Three times the Target Annual Bonus for the Fiscal Year or
other bonus performance cycle in which your Termination Date occurs; and
(e) A pension payment equal to the sum of (I) the difference
between the actuarial present values as of the Termination Date of your accrued
vested pension benefits under the Pension Plans and those pension benefits
calculated by adding three years of service to the actual service credited
under such plans for benefit accrual and vesting purposes, and (II) the
present value as of the Termination Date of any early retirement subsidy
available under the Pension Plans, for which you are not eligible due to
Termination before satisfying age and service requirements for such subsidy,
the value of such subsidy to be calculated on your benefit with the three
additional years of credited service described in (I). For purposes of
determining present values in calculating the pension payment, it shall be
assumed that your
18
<PAGE>
benefit will commence in the form of a straight life annuity on the later
of the Termination Date or the date on which you could retire and commence
a benefit under the Pension Plans without reduction for commencement before
the normal retirement date under such Plans were you employed by the
Company on such date. The interest rate used for such purposes shall be the
average of the average monthly yields for municipal bonds published monthly
by Moodys Investors' Service Inc. for the three months immediately
preceding your Termination Date. For purposes of determining actuarial
present values in calculating the pension payment, life expectancy
assumptions most frequently used by the Plan's actuaries for other purposes
shall be used. The calculation of the pension payment described in this
subparagraph shall be made by a nationally recognized firm of enrolled
actuaries acceptable to you and the Company. The Company shall pay the
reasonable fees and expenses of such actuarial firm. The calculation made
by such actuarial firm shall be binding on you and the Company.
(f) For purposes of subparagraphs (i)(c), (i)(d) and (i)(e) of this
Subsection 4B, in the event you have attained age 62 on or before your
Termination Date, the amounts payable shall be reduced to an amount which bears
the same proportion to the unreduced amount as the number of months preceding
your sixty-fifth birthday bears to thirty six.
(g) The amount of the payment described in (a)-(f) shall be
reduced to the extent of any severance or redundancy benefit or payment
sponsored by the Company and/or provided or required by applicable law or
regulation, which is received by you on account of your Termination of
Employment.
19
<PAGE>
(h) If the amount of the payment described in (a)-(g) above cannot
be finally determined on or before the fifth day following the Termination Date,
the Company will pay to you on such day an estimate, as determined in good faith
by the Company, of the minimum amount of such payment and will pay the remainder
of such payment as soon as the amount thereof can be determined but in no event
later than the thirtieth day after your Termination Date.
(ii) Insurance and Welfare Benefit Plans. The Company will provide for
you and your dependents following your Termination Date until the earlier of
three years following your Termination Date or your death, benefits equivalent
to those provided by the Company under all life insurance, medical, dental,
health and accident, long term disability, long term care plans or programs in
which you were participating on your Termination Date or, in the event of a
reduction in such benefits constituting Good Reason, equivalent to those
provided immediately before such reduction; provided that, such benefits will
not be provided beyond the period of time during which they would have been
provided to you under such plans or programs, as in effect on your Termination
Date or immediately before a reduction constituting Good Cause, had you not been
Terminated other than for death, Retirement, Disability or Cause or Terminated
for Good Reason, and such benefits will be provided for at least the period
during which they would have been provided to you were this Agreement not in
effect. In the event of your death during such three-year period, benefits in
respect of you or to your beneficiaries will be provided in accordance with the
terms of such plans or programs applicable to active employees of the Company.
Any continuation of benefits pursuant to this subparagraph shall not run
concurrent with any continuation rights provided pursuant to the Consolidated
Omnibus
20
<PAGE>
Budget Reconciliation Act of 1985, as amended ("COBRA"), and for purposes of
applying COBRA with respect to your coverage under any group health plan, the
end of coverage under this subparagraph shall be deemed to be the date of a
qualifying event resulting from the termination of a covered employee.
(iii) Legal Fees and Expenses. The Company will reimburse you for all
legal and other fees and expenses incurred by you as a result of Termination of
Employment, including without limitation all such fees and expenses, if any,
reasonably incurred in verifying the amount of the benefits owed by the Company
under this Agreement, in contesting or disputing the fact or nature of any such
Termination, in seeking to obtain or enforce any right or benefit provided by
this Agreement and/or in connection with any tax audit or proceeding with
respect to payments made or to be made hereunder. The Company will pay, to the
fullest extent permitted by law, all legal fees and expenses which you may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company of the validity or enforceability of, or liability under or as a
result of, any provision of this Agreement or any guarantee of performance
thereof.
(iv) Outplacement and Financial Counseling. The Company shall, within
30 days of the Termination Date, make available to you at the Company's expense,
individual financial counseling and outplacement counseling at times and
locations that are convenient to you, with a nationally recognized outplacement
and financial counseling firm, respectively. The financial counseling firm may
also provide you with tax counseling and tax preparation services. You may
select the organizations that will provide the outplacement, financial and tax
counseling;
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<PAGE>
however, the Company's obligation to provide you benefits under this
paragraph (iv) shall be limited to $10,000.
(v) Excise Tax. If any payment, distribution or acceleration of
benefits, compensation or rights that is made by the Company to you or for your
benefit, pursuant to this Agreement or otherwise, results in a liability to you
for the excise tax imposed by Section 4999 of the Code, including any payment
under this paragraph, the Company shall pay you an amount equal to such excise
tax within ten days of the determination of such excise tax liability. The
amount of such excise tax liability, including whether any such tax is properly
applied, shall be determined by a nationally recognized public accounting firm
acceptable to you and the Company, which firm shall provide you with a written
opinion of the amount of the excise tax liability, if any. The Company shall pay
the reasonable fees and expenses of such accounting firm. The determination of
the firm shall be binding on you and the Company.
(vii) Interest on Unpaid Amounts. The Company shall pay you interest,
compounded quarterly, on any unpaid amount determined to be payable by the
Company to you under this Agreement from the date such amount would first have
been payable to you during the Contract Period in accordance with the provisions
of this Agreement until paid, such interest to be calculated on the basis of
120% of the applicable federal funds rate, as provided for in Section 1274(c) of
the Code, in effect from time to time during the period of such nonpayment.
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<PAGE>
(viii) Mitigation. You shall not be obligated to seek other employment
or take any other action to mitigate the amounts payable to you under any of the
provisions of this Agreement, nor shall the amount of any payment hereunder be
reduced by any compensation earned as result of your employment by another
employer, except that any continued insurance and welfare benefits provided for
by paragraph (ii) shall not duplicate any benefits that are provided to you and
your family by such other employer and shall be secondary to any coverage
provided by such other employer.
(ix) Waiver. You will have the right to waive in writing prior to the
date of payment or receipt any payment, benefit or portion thereof selected by
you, which would otherwise be due to you from the Company under this Agreement
or any other plan, arrangement or agreement with the Company, any person or
entity whose actions result in the Change in Control or any person or entity
affiliated with the Company or such person or entity.
C. Tax Withholding: Survival of Obligations. Any payments provided for
under this Agreement shall be paid net of any applicable withholding required
under federal, state or local law. The obligations of the Company set forth in
this Section 4 shall survive your Termination of Employment and the end of the
Contract Period to the extent not previously performed in full.
5. INDEMNIFICATION
---------------
If you are made a party or threatened to be made a party to or are
otherwise involved at any time before or during the Contract Period in any
action, suit or proceeding, other than one
23
<PAGE>
instituted by you or by the Internal Revenue Service, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding") by
reason of the fact that you are a party to this Agreement, you will be
indemnified and held harmless by the Company, to the fullest extent
permitted by applicable law (regardless of the outcome of the proceeding),
against all expense, liability and loss (including attorney's fees,
judgments, fines and amounts paid in settlement) reasonably incurred or
suffered by you in connection therewith. You will notify the Company in the
event of the commencement or threat of commencement of any proceeding in
respect of which indemnity may be sought under this Section.
The Company will at its expense participate in and assume the defense of
any such proceeding, including the employment of counsel chosen by it (and as to
whom you have no reasonable objection) and the payment of the fees and
disbursements of such counsel. You will cooperate with the Company in respect of
such defense and may retain separate counsel at your expense to participate in
such defense. In the event that, in the opinion of your counsel, you and the
Company or any other executive represented by the Company's counsel in such
proceeding have a conflict of interest in respect of the proceeding, then you
may employ counsel as separate counsel to represent or defend you in the
proceeding and the Company will pay for the reasonable fees and disbursements of
such counsel. The provisions of this paragraph shall be inapplicable to any
proceeding instituted by the Company during the Contract Period which shall, as
to your defense and fees and expenses thereof, be governed by paragraph (iii) of
Subsection 4B hereof.
24
<PAGE>
Your rights under this Section 5 are not exclusive of any other right which
you may have or hereafter acquire under any statute, certificate of
incorporation, by-law, agreement, insurance policy or otherwise, and shall
survive your Termination of Employment and the end of the Contract Period.
6. SUCCESSORS; BINDING AGREEMENT
-----------------------------
Air Products will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of Air Products, to expressly, by written agreement in
form and substance satisfactory to you, assume and agree to perform this
Agreement in the same manner and to the same extent that Air Products would be
required to perform it if no such succession had taken place. As used in this
Agreement, during the Contract Period "Air Products" means Air Products as
herein before defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this Section
6 or which becomes bound by all the terms and provisions of this Agreement by
operation of law or otherwise.
This Agreement will inure to the benefit of and be enforceable by your
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devises and legatees, but neither this Agreement nor any of your
rights or obligations hereunder may be assigned or pledged by you. If you should
die while any amounts would still be payable to you under Subsection 4B hereof
if you had continued to live, all such amounts, unless otherwise
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<PAGE>
provided herein, will be paid in accordance with the terms of this Agreement to
your devisee, legatee or other designee or, if there be no such designee, to
your estate.
7. NOTICE
------
For purposes of this Agreement, notices and all other communications
provided for in this Agreement must be in writing and will be deemed to have
been duly given when delivered or mailed by United States certified mail, return
receipt requested, postage prepaid, as to you, addressed to your address set
forth on the first page of this Agreement, and as to Air Products, addressed to
the address printed on the first page of this Agreement or such other location
as you know to be the chief executive offices of Air Products directed to the
attention of the chief executive officer of Air Products with a copy to the
secretary of Air Products. You and Air Products may change your respective
notice addresses hereunder by furnishing such new address to the other in
writing in accordance herewith, except that notices of change of address will be
effective only upon receipt.
8. MISCELLANEOUS
--------------
A. Amendment; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by you and, an officer of the Company may be specifically
designated by the Board (which will in any event include the Company's chief
executive officer). No waiver by either party hereto at any time of any breach
by the other party hereto of, or compliance with, any condition or
26
<PAGE>
provision of this Agreement to be performed by such other party will be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time.
Notwithstanding the foregoing, prior to a Change in Control the Company may
unilaterally amend this Agreement as may from time to time be required to assure
that this Agreement does not violate or cause the Company to be in violation of
applicable law or that any payment provided for hereunder would not be
prohibited by applicable law; provided that all other employment or other
agreements between the Company and other key members of its management
substantially similar to this Agreement are similarly amended at such time.
B. Nondisclosure. You hereby ratify and affirm, and agree to be bound by,
the terms and provisions of your Employee Patent and Confidential Information
Agreement with the Company dated ______________ (your "Employee Agreement")
during the Contract Period and thereafter in accordance with the terms of your
Employee Agreement, which Agreement is incorporated by reference herein and made
a part hereof as if set forth in full herein.
C. Exclusive Agreement. Except for your Employee Agreement and any similar,
succeeding or substitute agreement between you and the Company, no agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. Notwithstanding any other provision of this
Agreement, this Agreement does not affect the Company's right to terminate your
employment or to alter your compensation, benefits, position or other terms and
conditions of employment with the Company prior to a Change in Control, or
27
<PAGE>
your right to resign from employment with the Company prior to a Change in
Control, and any such termination, resignation or other action with respect to
your terms and conditions of employment prior to a Change in Control will give
rise to no rights or obligations in either of the parties hereto under this
Agreement.
D. Other Plans and Programs. Nothing in this Agreement shall prevent or
limit your continuing or future participation in any benefit, bonus, incentive
or other plan or program provided by the Company and for which you may qualify,
nor shall anything herein limit or otherwise affect such rights as you may have
under any such plan or program. Except as expressly provided herein, amounts
which are vested benefits or which you are otherwise entitled to receive under
any plan or program of the Company at or subsequent to your Termination Date
shall be payable in accordance with such plan or program, unless you should
expressly waive your rights thereto in writing.
E. Governing Law; Validity; References to Law. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the Commonwealth of Pennsylvania. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision or provisions of this
Agreement, which shall remain in full force and effect. All references herein to
sections of the Act or the Code shall be deemed also to refer to any successor
provisions to such sections.
28
<PAGE>
F. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
SincereIy,
AIR PRODUCTS AND CHEMICALS, INC.
By:
-----------------------------------------
Title: Vice President - Human Resources
AGREED TO THIS DAY OF 1999
--- ---------
- -------------------------------------
Enclosure
29
<PAGE>
[Company]
Date:
Address
Dear Name:
Air Products and Chemicals, Inc. ("Air Products") considers a sound and
vital management to be essential to protecting and enhancing its best interests
and those of its shareholders. In this connection, Air Products recognizes that,
as is the case with any publicly held corporation, the possibility of a change
in control of Air Products may develop, although no such change is now expected
or contemplated.
The Management Development and Compensation Committee of the Air Products
Board of Directors and the Board believe it imperative that the Company and the
Board be able to rely upon key members of the Company's management to continue
in their positions and to act in the best financial interests of Air Products
shareholders in the event of a bid, offer or proposal to take control of Air
Products and following any change in control of Air Products. Therefore, the
Committee and the Board have determined that appropriate steps should be taken
to protect key members of the Company's management against significant negative
personal financial consequences that might result from a change in control, and
to reinforce and encourage the continued attention and dedication of such key
members of management to their duties without distraction should the possibility
of a change in control of Air Products ever arise.
<PAGE>
In order to induce you to remain in the employ of Air Products and Air
Products PLC, an indirect, wholly owned subsidiary of Air Products organized and
existing under the laws of the United Kingdom ("APPLC"), pursuant to those
certain respective Employment Agreements with Air Products and with APPLC each
dated November 6, 1998 (as such agreements may be amended from time to time and
including any similar, succeeding, or substitute employment agreements between
you and the Company and APPLC, referred to herein together as your "Dual
Employment Contracts"); to assure your continued dedication and the availability
of your advice and counsel during the possibility and pendency of, and
following, a change in the control of Air Products, Air Products agrees that it
will provide you, or cause you to be provided the severance benefits set forth
in this severance agreement ("the Agreement") in the event your employment with
the Company is terminated subsequent to a Change in Control under the
circumstances described herein.
1. DEFINITIONS
-----------
"Act" means the Securities Exchange Act of 1934.
"Annual Incentive Plan" shall mean the Air Products and Chemicals, Inc.
1997 Annual Incentive Plan and/or any similar, successor or substitute
short-term bonus plans, program or pay practice.
"Base Salary" shall mean your total annual salary payable by the Company in
accordance with its normal compensation practices.
2
<PAGE>
"Board" shall mean the Board of Directors of Air Products.
"Cause" shall mean either of the following:
(A) The willful and continued failure by you to substantially perform
your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness
or injury or any such actual or anticipated failure after the
issuance by you of a Termination Notice for Good Reason), over a
period of not less than sixty days after a demand for substantial
performance is delivered to you by the Board which specifically
identifies the manner in which the Board believes that you have
not substantially performed your duties; or
(B) The willful engaging by you in gross misconduct materially and
demonstrably injurious to the Company; provided that no act or
failure to act on your part will be considered willful if done, or
omitted to be done, by you in good faith and with reasonable
belief that your action or omission was in the best interest of
the Company, or if any member of the Board who was not a party to
such act or omission had actual knowledge of it for at least
twelve months.
"Change in Control" shall mean the first to occur of:
3
<PAGE>
A. Stock Acquisition. Any "person", as such term is used in
Sections 13(d) and 14(d) (2) of the Act, other than Air Products, or
any corporation a majority of whose outstanding stock entitled to
vote is owned, directly or indirectly, by Air Products (a
"Subsidiary"), or a trustee of an employee benefit plans sponsored
solely by Air Products and/or such a Subsidiary, is or becomes, other
than by purchase from Air Products or such a Subsidiary, the
"beneficial owner", as such term is defined in Rule 13d-3 under the
Act, directly or indirectly, of securities of Air Products
representing 20% or more of the combined voting power of Air
Products' then outstanding voting securities. Such a Change in
Control will 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 upon which Air Products first learns of the acquisition of
20% or more of such securities, or the later of the effective date of
an agreement for the merger, consolidation or other reorganization of
Air Products, or the date of approval thereof by a majority of
Air Products' shareholders.
B. Change in Board. During any period of two consecutive years,
individuals who at the beginning of such period were members of
the Board cease for any reason to constitute at least a majority
thereof, unless the election or nomination for election by Air
Products' 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 will be deemed to have occurred on the date upon which the
requisite majority of directors fails to be elected by the
shareholders of Air Products.
4
<PAGE>
C. Other Events. Any other event or series of events which,
notwithstanding any other provision of this definition to the
contrary, is determined, by a majority of the outside members of
the Board serving in office at the time such event or events
occur, to constitute a Change in Control of Air Products for
purposes of this Agreement. Such a Change in Control will be
deemed to have occurred on the date of such determination or on
such other date as said majority of outside members of the Board
shall specify.
Notwithstanding the foregoing, there shall not be a Change in Control if, in
advance of such event, you agree in writing that such event shall not constitute
a Change in Control.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the Management Development and Compensation Committee of
the Board or a successor Committee of the Board.
"Common Stock" means the common stock, $1 par value, of Air Products.
"Company" means Air Products and any successor in interest thereto, and any
affiliate of Air Products in which it holds, directly or indirectly, a
controlling interest and to whom your employment has been transferred with your
consent, and shall mean Air Products and APPLC
5
<PAGE>
jointly or severally, as the context requires, during any period of time in
which your Dual Employment Contracts are in effect.
"Contract Period" shall mean the period commencing on a Change in
Control and ending three years following the Change in Control.
"Disability" shall exist where, as a result of your incapacity due to
physical or mental illness or injury you have been absent from the performance
of your duties with the Company for at least six consecutive months.
"Fiscal Year" shall mean the fiscal year of the Company which commences
on October 1 of each calendar year and ends on September 30 of the following
calendar year, or such other fiscal year as the Company may adopt for keeping
its financial records.
"Good Reason" shall mean the occurrence of any of the following without
your consent:
A. An adverse change, during the Contract Period, in your aggregate
positions or offices with the Company, or a diminution in the
aggregate duties, reporting responsibilities and authority with the
Company which you held and performed during the ninety-day period
immediately preceding the beginning of the Contract Period, or an
assignment to you of duties or responsibilities, which, in your
reasonable judgment, are not consistent with your status or positions
with the Company immediately prior to the Change in Control; provided
that, any of the
6
<PAGE>
foregoing in connection with Termination of your Employment for Cause,
Retirement or Disability shall not constitute Good Reason.
Notwithstanding the above, it is understood that should you be asked
to perform duties and to devote your full-time services in a position
wholly within the Company but not within APPLC, that elimination of
your employment with and duties specific to APPLC will not be
considered a termination of your employment under, or of, this
Agreement.
B. The failure by the Company to pay you a Base Salary, in
substantially equal installments conforming with the Company's normal
pay practices, at a rate at least equal to your Base Salary rate in
effect immediately before the beginning of the Contract Period or a
failure to increase such Base Salary each year, beginning one year
after the last increase in your Base Salary occurring before the
beginning of the Contract Period, by an amount which at least equals,
on a percentage basis, the average annual percentage increase in your
Base Salary during the three full Fiscal Years immediately preceding
the beginning of the Contract Period; provided, however, that the
Company may reduce your Base Salary or adjust your Base Salary on a
smaller percentage basis if such reduction or adjustment is no less
favorable to you on a percentage basis than the average annual
percentage reduction or adjustment during the applicable Fiscal Year
for all Highly Compensated Employees.
C. The failure by the Company to continue the Annual Incentive Plan
and/or initiate and maintain other plans, programs or practices
providing you with benefits substantially
7
<PAGE>
similar in type and amount to those under the Annual Incentive Plan,
or a failure to pay you bonus awards each year during the Contract
Period under the Annual Incentive Plan or such similar bonus plans
(together, the "Bonus Plans"), beginning no later than one year after
the date of your last grant under the Annual Incentive Plan before the
beginning of the Contract Period, at least equal in amount to the
average of the bonus awards granted to you under the Annual Incentive
Plan during and/or for each of the three full Fiscal Years immediately
preceding the beginning of the Contract Period; provided, however,
that the Company may reduce or adjust your bonus awards paid each year
to a lower amount if such reduction or adjustment is on a basis no
less favorable to you than the basis upon which it reduces or adjusts
awards under the Bonus Plans or comparable plans for all Highly
Compensated Employees during the applicable Fiscal Year;
D. The failure by the Company to continue the Long Term Incentive Plan
and/or initiate and maintain other plans, programs or practices
providing you with benefits substantially similar in type and amount
to those under the Long Term Incentive Plan or a failure to grant you
awards each year under the Long Term Incentive Plan and/or such
similar incentive plans (together, the "Incentive Plans"), beginning
one year after your last grant under the Long Term Incentive Plan
before the beginning of the Contract Period, at a level at least equal
in the aggregate to the average value, determined based on valuation
models normatively used by publicly held corporations of similar size
to the Company in setting long term incentive compensation levels, of
your aggregate annual awards granted each year under the
8
<PAGE>
Long Term Incentive Plan during and/or for the last three Fiscal Years
preceding the beginning of the Contract Period; provided, however,
that if the Company provides the Incentive Plans or comparable plans
for Highly Compensated Employees, the Company may maintain the level
of awards granted to you each year under the Incentive Plans at a
lower value if such benefits are determined on a basis no less
favorable to you than for all Highly Compensated Employees during the
applicable Fiscal Year.
E. The failure by the Company to pay you in respect of any of your
deferred or other awards under the Bonus Plans or the Incentive
Plans when due and payable under the terms of said Plans;
F. The failure by the Company to pay (or reimburse you for) all
reasonable moving expenses incurred by you relating to a change of
your principal residence in connection with an employment related
relocation required by the Company and indemnify you against any
"loss" realized in the sale of your principal residence in connection
with such relocation, defined as the difference between the actual
sale price of such residence (net of all commissions, fees, taxes and
other closing costs borne by seller) and the higher of (a) your
aggregate investment in such residence or (b) the fair market value of
such residence as determined by a real estate appraiser designated by
you and reasonably satisfactory to the Company.
9
<PAGE>
G. The failure by the Company to reimburse you for reasonable travel
and other business expenses in accordance with the Company's
applicable policies, procedures and practices provided that you
properly account for such expenses in accordance with then applicable
Company policy; and
H. A material reduction in your aggregate benefits, such as the
failure by the Company to either continue in effect any employee
pension benefit or welfare benefit plans, program or practice in which
you are eligible to participate immediately before the beginning of
the Contract Period, including but not limited to, the Pension Plans,
and APPLC's life insurance, medical, dental, health and accident,
disability, severance and paid vacation plans, programs and practices
(such plans, programs and practices herein together referred to as the
"APCI Benefit Plans"), or, in lieu thereof, to initiate and maintain
other plans, programs or practices providing you with benefits
substantially similar in type and amount to those under the APCI
Benefit Plans, with your aggregate benefits under the APCI Benefit
Plans and such similar benefit plans (together, the "Benefit Plans")
comparable in type and amount to your benefits under the APCI Benefit
Plans immediately before the beginning of the Contract Period, or the
Company's failure to maintain for you any other material fringe
benefit or perquisite enjoyed by you immediately before the beginning
of the Contract Period.
I. The failure by the Company to continue in effect the tax
equalization arrangements described in Exhibit B to this Agreement
and, to the extent a United Kingdom tax
10
<PAGE>
liability arises with respect to compensation arising from services
performed outside of the United Kingdom during the Contract Period,
bear the cost of such tax, limited to 50% of your compensation,
(collectively, "Tax Equalization Arrangements").
J. Any purported termination of your employment for Disability or for
Cause which is not effected in accordance with the procedures required
in Section 4.
K. The failure of the Company to obtain the written assumption of
this Agreement by any successor of the Company prior to the
effectiveness of any such succession.
"Highly Compensated Employees" shall mean the highest paid one percent
of employees of the Company together with all corporations, partnerships,
trusts, or other entities controlling, controlled by, or under common control
with, the Company.
"Long Term Incentive Plan" shall mean the Air Products and Chemicals,
Inc. 1997 Long Term Incentive Plan and/or any similar, successor or substitute
long-term incentive compensation plans or program.
"Notice Date" shall mean the date a Termination Notice prepared by the
Company or you is received by you or the Company, respectively.
11
<PAGE>
"Pension Plan" shall mean, the pension arrangements referred to in
Exhibit A to this Agreement (said arrangements, as amended from time to time
together with any similar, succeeding or substitute plan, contract or program).
"Retirement" shall mean (1) your voluntary retirement before attaining
the normal retirement age under the Pension Plans, with an immediate
non-actuarially reduced pension under the Pension Plans, provided that
Termination for Good Reason before such normal retirement age shall not be
deemed a Retirement for purposes of this Agreement even though you are eligible
for and elect to receive, an immediate non-actuarially reduced pension under the
Pension Plans, or (2) Termination of Employment in accordance with any
retirement arrangement other than under the Pension Plans which is established
with your consent with respect to you, provided that Termination for Good Reason
shall not be deemed a Retirement for purposes of this Agreement even though you
are eligible to retire, and receive benefits under, any such retirement
arrangement, or (3) mandatory retirement as set forth under a policy of the
Company as it existed prior to the Change in Control or as agreed to by you
following a Change in Control.
"Target Annual Bonus" shall mean the target bonus under the Annual
Incentive Plan which is approved by the Committee for the applicable Fiscal Year
for Highly Compensated Employees at your grade level or other comparable
compensation level, or, if no such target bonus has been determined for such
Fiscal Year, such target bonus for the most recent Fiscal Year for which one was
determined;
12
<PAGE>
"Termination Date" means the effective date of a Termination of
Employment for any reason, including death, Disability, or Retirement, whether
by the Company or you.
"Termination", "Termination of Employment" or "Termination of your
Employment" shall mean the termination of your employment with the Company,
whether by you or the Company. It is understood, however, that should you
be asked to perform duties and to devote your full-time services in a
position wholly within the Company but not within APPLC, that elimination
of your employment with and duties specific to APPLC will not be considered
a termination of your employment under this Agreement.
"Termination Notice" shall mean the notice required by Subsection 3A.
2. TERM OF AGREEMENT
-----------------
This Agreement will commence on the date of your signing hereof and
will continue while you are in the active employment of the Company until
30 September 2001 and, beginning on 1 October 2001 and each one year anniversary
thereof, the term of this Agreement will automatically be extended for one
additional year unless, at least (90) ninety days prior to such date, either
party gives written notice to the other that it does not wish to extend this
Agreement. Notwithstanding any such written notice, if a Change in Control
shall have occurred prior to receipt of the notice or does occur within (90)
ninety days of receipt of the notice, the attempted termination of the Agreement
by Air Products shall be ineffective and the Agreement shall continue until the
end of your Contract Period. If a Change in Control
13
<PAGE>
otherwise occurs during the term of this Agreement, this Agreement will
continue in effect until the end of the Contract Period.
3. TERMINATION PROCEDURES
----------------------
A. Termination Notice. During the Contract Period, any Termination of
Employment by the Company or by you must be communicated by a written
Termination Notice to the other party hereto. The "Termination Notice" must (i)
specify the Termination Date; (ii) indicate the specific provisions in this
Agreement, if any, applicable to the Termination and set forth in reasonable
detail the facts and circumstances, if any, claimed to provide a basis for
application of the provision so indicated; (iii) if given by the Company to you
for other than Disability or Cause, specify, with supporting calculations, the
amount the Company believes to be payable to you under this Agreement as a
result of such Termination; and (iv) contain a copy of any other notice,
resolution, demand or other document required to effect a Termination under
provisions of the Agreement identified in (ii) above.
B. Additional Termination Procedures.
(i) During the Contract Period the Company may not Terminate your
Employment for Cause unless and until: (a) there has been delivered to you a
copy of a resolution Terminating your Employment for Cause duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Board; (b) such resolution was adopted at a meeting of the Board called and held
for the purpose of considering such resolution; (c) you
14
<PAGE>
were provided reasonable notice of the Board's intent to consider the resolution
and a reasonable opportunity, together with your counsel, to be heard by the
Board at such meeting; and (d) the resolution finds, in the good faith opinion
of the Board, that you have engaged in conduct constituting Cause and specifies
the particulars thereof in detail, which particulars must be consistent with
those specified in the notice of the Board meeting given to you.
(ii) During the Contract Period, the Company may not Terminate your
Employment for Disability if you return to the performance of your duties on a
substantially full-time basis within forty-five days of receiving the
Termination Notice specifying Disability as the basis for Termination.
C. Termination Date. "Termination Date" shall be: (i) if your employment
is terminated due to your death, the date of your death, (ii) if your
employment is terminated for Disability, at least forty-five days after the
Termination Notice is given (provided that you have not returned to the
full-time performance of your duties during such period) and, (iii) if your
employment is terminated for any other reason, the date specified in the
Termination Notice by the party giving the Notice, which date must be at least
forty-five days after the Termination Notice if given by you for Good Reason or
by the Company for any reason other than Cause; provided, however, that if
within forty-five days after any Termination Notice is given, the party
receiving such Termination Notice notifies the other party that a dispute
exists, the Termination Date will be the date on which the dispute is finally
determined, either by mutual written agreement of the parties, by a binding
arbitration award or by a final judgment, order or decree of a court of
competent jurisdiction (which is not appealable or with respect to which the
time for
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<PAGE>
appeal therefrom has expired and no appeal has been perfected); and
provided further, however, that your Termination Date shall be extended by a
notice of dispute only if such notice is given in good faith and the party
giving such notice pursues the resolution of such dispute with reasonable
diligence, and your Termination Date shall in no event be extended beyond the
end of the Contract Period.
D. Continuation of Salary and Benefits During Pendency of Dispute. Until
any dispute or controversy referred to in Subsection 3C above is finally
resolved in accordance with such Subsection, the Company will (i) continue to
pay you your full Base Salary at the higher of the rates in effect on the date
your Termination Notice is received or immediately before any purported
reduction in your Base Salary constituting Good Reason, and (ii) continue your
participation in all Benefit Plans in which you were participating berfore
such notice date provided that your continued participation in such Plans
is possible under the general terms and conditions thereof. If your continued
participation in any such Benefit Plans is barred by the terms thereof, the
carrier or otherwise, the Company will arrange to provide you with benefits
substantially similar to those which you would receive under such Plans. You
will be entitled to seek specific performance of your rights under this
Subsection 3D until your Termination Date during the dependency of any dispute
or controversy arising under or in connection with this Agreement.
16
<PAGE>
4. COMPENSATION UPON TERMINATION OF EMPLOYMENT.
-------------------------------------------
A. Termination for Cause, Death, Disability, or Retirement. If during
the Contract Period the Company terminates your employment for Cause, or your
employment is terminated due to your death, Disability or Retirement, the
Company shall pay to you or your representative in the event of death as of the
Termination Date your full Base Salary and accrued vacation pay through the
Termination Date, plus any benefits or awards which have been earned by you or
become payable to you under any policy or employee compensation or benefit plans
of the Company. The benefits payable to you, or due to your death, Disability,
Retirement or other Termination of Employment under all Benefit Plans, Bonus
Plans and Incentive Plans in which you are participating before such Termination
of Employment, will be paid as provided under such Plans and the Company will
have no further obligation, other than to continue Tax Equalization
Arrangements.
B. Termination Without Cause, Death, Retirement or Disability or for
Good Reason. If during the Contract Period the Company Terminates your
Employment other than for death, Retirement, Disability or Cause (it being
understood that a purported termination for Disability or Cause which is
disputed and finally determined not to have been proper or which is not effected
in accordance with the procedures required in Section 3 will be a Termination
other than for Cause or Disability), or you Terminate your Employment for Good
Reason, then Air Products will provide you or cause you to be provided the
payments and benefits described below in this Subsection 4B.
17
<PAGE>
(i) Cash Payment. The Company will pay to you on or before the fifth
day following your Termination Date, a lump sum cash payment equal to the
sum of the following amounts:
(a) Your Base Salary through your Termination Date at the higher of
the rate in effect on the Termination Date or the rate in effect immediately
before any purported reduction in your Base Salary constituting Good Reason
(such amount to be reduced by the amount of any Base Salary payments
previously paid by the Company to you for the same period or any portion
thereof under Subsection 3D above or otherwise);
(b) The product of (I) the amount of the Target Annual Bonus for which
you would have been eligible if you had been employed by the Company on the last
day of the Fiscal Year or other bonus performance cycle that includes your
Termination Date, multiplied by (II) a fraction of which the numerator is the
number of days which have elapsed in such Fiscal Year through the Termination
Date and the denominator is 365.
(c) Three times your Base Salary at the rate required
by subparagraph (i)(a) above and;
(d) Three times the Target Annual Bonus for the Fiscal Year or other
bonus performance cycle in which your Termination Date occurs; and
18
<PAGE>
(e) A pension payment equal to the difference between the actuarial
present values as of the Termination Date of the pension benefits you will
receive under the Pension Plan and the pension benefits you would receive by
adding three years of service to the actual service credited under such Plans
for benefit accrual and vesting purposes. For purposes of determining present
values in calculating this pension payment, it shall be assumed that your
benefits will commence in the form of a straight life annuity as of the later of
the Termination Date or the date on which you could retire and commence a
benefit under the Pension Plan without reduction for commencement before the
normal retirement date under such Plan were you employed by the Company on such
date. The interest rate used for such purposes shall be the average of the
average monthly yields for municipal bonds published monthly by Moodys
Investors' Service Inc. for the three months immediately preceding your
Termination Date. For purposes of determining actuarial present values in
calculating the pension payment, life expectancy assumptions used by the Plans's
actuaries for other purposes shall be used. The calculation of the pension
payment described in this subparagraph shall be made by a nationally recognized
firm of enrolled actuaries acceptable to you and the Company. The Company shall
pay the reasonable fees and expenses of such actuarial firm. The calculation
made by such actuarial firm shall be binding on you and the Company.
(f) For purposes of subparagraphs (i)(c), (i)(d) and (i)(e) of this
Subsection 4B, in the event you have attained age 62 on or before your
Termination Date, the amounts payable shall be reduced to an amount which bears
the same proportion to the unreduced amount as the number of months preceding
your sixty-fifth birthday bears to thirty six.
19
<PAGE>
(g) The amount of the payment described in (a)-(f) shall be reduced to
the extent of any severance or redundancy benefit or payment sponsored by the
Company and/or provided or required by applicable law or regulation, which is
received by you on account of your Termination of Employment.
(h) If the amount of the payment described in (a)-(g) above cannot be
finally determined on or before the fifth day following the Termination Date,
the Company will pay to you on such day an estimate, as determined in good faith
by the Company, of the minimum amount of such payment and will pay the remainder
of such payment as soon as the amount thereof can be determined but in no event
later than the thirtieth day after your Termination Date.
(ii) Insurance and Welfare Benefit Plans. The Company will provide for
you and your dependents following your Termination Date until the earlier
of three years following your Termination Date or your death, benefits
equivalent to those provided by the Company under all life insurance,
medical, dental, health and accident, long term disability, long term care
plans or programs in which you were participating on your Termination Date
or, in the event of a reduction in such benefits constituting Good Reason,
equivalent to those provided immediately before such reduction; provided
that, such benefits will not be provided beyond the period of time during
which they would have been provided to you under such plans or programs, as
in effect on your Termination Date or immediately before a reduction
constituting Good Cause, had you not been Terminated other than for death,
Retirement, Disability or Cause or
20
<PAGE>
Terminated for Good Reason, and such benefits will be provided for at least the
period during which they would have been provided to you were this Agreement not
in effect. In the event of your death during such three-year period, benefits in
respect of you or to your beneficiaries will be provided in accordance with the
terms of such plans or programs applicable to active employees of the Company.
Any continuation of benefits pursuant to this subparagraph shall not run
concurrent with any continuation rights provided pursuant to the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), and for
purposes of applying COBRA with respect to your coverage under any group health
plans, the end of coverage under this subparagraph shall be deemed to be the
date of a qualifying event resulting from the termination of a covered employee.
(iii) Legal Fees and Expenses. The Company will reimburse you for all
legal and other fees and expenses incurred by you as a result of Termination of
Employment, including without limitation all such fees and expenses, if any,
reasonably incurred in verifying the amount of the benefits owed by the Company
under this Agreement, in contesting or disputing the fact or nature of any such
Termination, in seeking to obtain or enforce any right or benefit provided by
this Agreement and/or in connection with any tax audit or proceeding with
respect to payments made or to be made hereunder. The Company will pay, to the
fullest extent permitted by law, all legal fees and expenses which you may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company of the validity or enforceability of, or liability under or as a
result of, any provision of this Agreement or any guarantee of performance
thereof.
21
<PAGE>
(iv) Outplacement and Financial Counseling. The Company shall, within
30 days of the Termination Date, make available to you at the Company's
expense, individual financial counseling and outplacement counseling at times
and locations that are convenient to you, with a nationally recognized
outplacement and financial counseling firm, respectively. The financial
counseling firm may also provide you with tax counseling and tax preparation
services. You may select the organizations that will provide the outplacement,
financial and tax counseling; however, the Company's obligation to provide you
benefits under this paragraph (iv) shall be limited to $10,000.
(v) Excise Tax. If any payment, distribution or acceleration of
benefits, compensation or rights that is made by the Company to you or for your
benefit, pursuant to this Agreement or otherwise, results in a liability to you
for the excise tax imposed by Section 4999 of the Code, including any payment
under this paragraph, the Company shall pay you an amount equal to such excise
tax within ten days of the determination of such excise tax liability. The
amount of such excise tax liability, including whether any such tax is properly
applied, shall be determined by a nationally recognized public accounting firm
acceptable to you and the Company, which firm shall provide you with a written
opinion of the amount of the excise tax liability, if any. The Company shall pay
the reasonable fees and expenses of such accounting firm. The determination of
the firm shall be binding on you and the Company.
(vii) Interest on Unpaid Amounts. The Company shall pay you interest,
compounded quarterly, on any unpaid amount determined to be payable by the
Company to you under this Agreement from the date such amount would first have
been payable to you
22
<PAGE>
during the Contract Period in accordance with the provisions of this Agreement
until paid, such interest to be calculated on the basis of 120% of the
applicable federal funds rate, as provided for in Section 1274(c) of the Code,
in effect from time to time during the period of such nonpayment.
(viii) Mitigation. You shall not be obligated to seek other employment
or take any other action to mitigate the amounts payable to you under any of the
provisions of this Agreement, nor shall the amount of any payment hereunder be
reduced by any compensation earned as result of your employment by another
employer, except that any continued insurance and welfare benefits provided for
by paragraph (ii) shall not duplicate any benefits that are provided to you and
your family by such other employer and shall be secondary to any coverage
provided by such other employer.
(ix) Waiver. You will have the right to waive in writing prior to the
date of payment or receipt any payment, benefit or portion thereof selected by
you, which would otherwise be due to you from the Company under this Agreement
or any other plans, arrangement or agreement with the Company, any person or
entity whose actions result in the Change in Control or any person or entity
affiliated with the Company or such person or entity.
C. Tax Withholding: Survival of Obligations. Any payments provided for
under this Agreement shall be paid net of any applicable withholding required
under federal, state, or local law of the United States or the United Kingdom
or other applicable taxing jurisdiction, provided the Company's tax
equalization obligations to you shall include reimbursement to you, on a
23
<PAGE>
grossed-up basis, of any United States taxes withheld from you that
are not otherwise creditable against your U.K. tax liability and which do not
actually reduce your U.K. tax, unless you have agreed to relocate and have
relocated to the U.S. The obligations of the Company set forth in this Section 4
shall survive your Termination of Employment and the end of the Contract Period
to the extent not previously performed in full.
5. INDEMNIFICATION
---------------
If you are made a party or threatened to be made a party to or are
otherwise involved at any time before or during the Contract Period in any
action, suit or proceeding, other than one instituted by you or by the Internal
Revenue Service, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding") by reason of the fact that you are a party to this
Agreement, you will be indemnified and held harmless by the Company, to the
fullest extent permitted by applicable law (regardless of the outcome of the
proceeding), against all expense, liability and loss (including attorney's fees,
judgments, fines and amounts paid in settlement) reasonably incurred or suffered
by you in connection therewith. You will notify the Company in the event of the
commencement or threat of commencement of any proceeding in respect of which
indemnity may be sought under this Section.
The Company will at its expense participate in and assume the defense
of any such proceeding, including the employment of counsel chosen by it (and
as to whom you have no reasonable objection) and the payment of the fees and
disbursements of such counsel. You will cooperate with the Company in respect
of such defense and may retain separate counsel at
24
<PAGE>
your expense to participate in such defense. In the event that, in the opinion
of your counsel, you and the Company or any other executive represented by the
Company's counsel in such proceeding have a conflict of interest in respect of
the proceeding, then you may employ counsel as separate counsel to represent or
defend you in the proceeding and the Company will pay for the reasonable fees
and disbursements of such counsel. The provisions of this Section shall be
inapplicable to any proceeding instituted by the Company during the Contract
Period which shall, as to your defense and fees and expenses thereof, be
governed by paragraph (iii) of Subsection 4B hereof.
Your rights under this Section 5 are not exclusive of any other right
which you may have or hereafter acquire under any statute, certificate of
incorporation, by-law, agreement, insurance policy or otherwise, and shall
survive your Termination of Employment and the end of the Contract Period.
6. SUCCESSORS; BINDING AGREEMENT
-----------------------------
Air Products will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of Air Products, to expressly, by written agreement in
form and substance satisfactory to you, assume and agree to perform this
Agreement in the same manner and to the same extent that Air Products would be
required to perform it if no such succession had taken place. As used in this
Agreement, during the Contract Period "Air Products" and "Company" mean Air
Products and the Company as hereinbefore defined and any successor to the
business and/or assets of Air
25
<PAGE>
Products and the Company as aforesaid which executes and delivers the agreement
provided for in this Section 6 or which becomes bound by all the terms and
provisions of this Agreement by operation of law or otherwise.
This Agreement will inure to the benefit of and be enforceable by your
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devises and legatees, but neither this Agreement nor any of your
rights or obligations hereunder may be assigned or pledged by you. If you should
die while any amounts would still be payable to you under Subsection 4B hereof
if you had continued to live, all such amounts, unless otherwise provided
herein, will be paid in accordance with the terms of this Agreement to your
devisee, legatee or other designee or, if there be no such designee, to your
estate.
7. NOTICE
------
For purposes of this Agreement, notices and all other communications
provided for in this Agreement must be in writing and will be deemed to have
been duly given when delivered or mailed by certified mail, return receipt
requested, postage prepaid, as to you, addressed to your address set forth on
the first page of this Agreement, and as to Air Products, addressed to the
address printed on the first page of this Agreement or such other location as
you know to be the chief executive offices of Air Products directed to the
attention of the chief executive officer of Air Products with a copy to the
secretary of Air Products. You and Air Products may change your respective
notice addresses hereunder by furnishing such new address to the other in
26
<PAGE>
writing in accordance herewith, except that notices of change of address will
be effective only upon receipt.
8. MISCELLANEOUS
-------------
A. Amendment; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by you and an officer of Air Products specifically
designated by the Board (which will in any event include Air Products chief
executive officer). No waiver by either party hereto at any time of any breach
by the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party will be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
Notwithstanding the foregoing, prior to a Change in Control Air Products may
unilaterally amend this Agreement as may from time to time be required to assure
that this Agreement does not violate or cause the Company to be in violation of
applicable law or that any payment provided for hereunder would not be
prohibited by applicable law; provided that all other employment or other
agreements between the Company and other key members of its management
substantially similar to this Agreement are similarly amended at such time.
B. Nondisclosure. You hereby ratify and affirm, and agree to be
bound by, the terms and provisions of your Employee Patent and Confidential
Information Agreements with the Company dated November 6, 1998 (your "Employee
Agreement") during the Contract Period and
27
<PAGE>
thereafter in accordance with the terms of your Employee Agreement, which
Agreement is incorporated by reference herein and made a part hereof as if set
forth in full herein.
C. Exclusive Agreement. Except for your Dual Employment Contracts,
Employee Agreement and any similar, succeeding or substitute agreement between
you and the Company, no agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. Effective with
the commencement of your Contract Period, your Dual Employment Contracts shall
be superseded by this Agreement to the extent inconsistent with this Agreement.
Notwithstanding any other provision of this Agreement, this Agreement does not
affect the Company's right to terminate your employment or to alter your
compensation, benefits, position or other terms and conditions of employment
under your Dual Employment Contracts prior to a Change in Control, or your right
to resign from employment under your Dual Employment Contracts prior to a Change
in Control, and any such termination, resignation or other action with respect
to your terms and conditions of employment prior to a Change in Control will
give rise to no rights or obligations in either of the parties hereto under this
Agreement.
D. Other Plans and Programs. Nothing in this Agreement shall prevent or
limit your continuing or future participation in any benefit, bonus, incentive
or other plans or program provided by the Company and for which you may qualify,
nor shall anything herein limit or otherwise affect such rights as you may have
under any such plans or program. Except as expressly provided herein, amounts
which are vested benefits or which you are otherwise
28
<PAGE>
entitled to receive under any plans or program of the Company at or subsequent
to your Termination Date shall be payable in accordance with such plans or
program, unless you should expressly waive your rights thereto in writing.
E. Governing Law; Validity; References to Law. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the Commonwealth of Pennsylvania. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision or provisions of this
Agreement, which shall remain in full force and effect. All references herein to
sections of the Act or the Code shall be deemed also to refer to any successor
provisions to such sections.
F. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
29
<PAGE>
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
SincereIy,
AIR PRODUCTS AND CHEMICALS, INC.
By:
-------------------------------------
Title: Vice President - Human Resources
AGREED TO THIS DAY OF 1999
---- --------
- -------------------------------------
30
Enclosure
ACQUISITION AGREEMENT ONE
This Agreement made this 14th day of June, 1999 by and between L'AIR
LIQUIDE, SA a limited liability corporation organized under the laws of France
(hereinafter referred to as "A") and AIR PRODUCTS AND CHEMICALS, INC, a
corporation organized under the laws of Delaware, USA (hereinafter referred to
as "B").
WHEREAS, A and B have separately been invited by the Board of Directors of
THE BOC GROUP PLC (hereinafter referred to as "Target") to submit bids or
proposals for the purchase of all the outstanding shares of Target; and
WHEREAS, A has separately submitted to the Board of Directors of Target
[*] successive bids to purchase the shares of Target, and each such bid has
been rejected; and
WHEREAS, B has separately submitted to the Board of Directors of Target
[*] successive bids to purchase the shares of Target, and each such bid has
been rejected; and
WHEREAS, the Board of Directors of Target has encouraged A and B to make
another bid, also advising each of A and B that another party has submitted a
bid but not disclosing the price; and
WHEREAS, A and B have independently determined that each of them cannot
justify raising their last rejected bid any further, for financial and other
business reasons, including the raising of the funds necessary and the risks
attendant thereto; and
WHEREAS, A and B believe that the only way in which they may be in a
position to raise the bid price for the shares of Target, as desired by the
Board of Directors of Target, is by making a joint proposal to the Board of
Directors of Target, since, based on the current
- -------------------
*This information has been omitted pursuant to a Request for Confidential
Treatment and such information has been filed separately with the Securities
and Exchange Commission.
1
<PAGE>
respective operation of each of A and B, various portions of the businesses of
C are more valuable to one party than to the other;
Now, therefore, A and B agree as follows:
1. From and after the date of this Agreement to termination hereof, neither
A nor B will separately submit (or express or imply an intention to submit) a
proposal to the Board of Directors of Target or any other party to purchase (or
agree to purchase or actually purchase) (a) all or some of the shares of Target
or (b) any business or assets of the Target group (other than in the ordinary
course of business). Provided however that each of A and B may (having giving
notice to the other) confirm to Target that its latest proposal as rejected by
the Target Board meeting held on 9 June 1999 remains open and unchanged, except
to the extent necessary to make such proposal consistent with this Agreement.
Subject thereto, neither party will amend the terms of such latest proposal (nor
express or imply any intention so to do), which proposal may be implemented in
accordance with clause 3.
2. Subject to clause 3, A and B will work together to formulate, agree upon
and submit a joint proposal to the Board of Directors of Target to offer to
acquire all the share capital of Target, exchanging between themselves such
information as may be necessary, but not including the details of their previous
proposals to Target, or any confidential information which would cause either A
or B to be in breach of any confidentiality obligation to Target. Therefore, A
and B will have present whenever the joint proposal is discussed between them or
with Target their respective counsel to verify that this provision is complied
with and that no competitively sensitive information about one of them is
disclosed to the other.
3. A and B intend that the business of the Target group will be shared
equally between them. If for any reason the latest proposal, as referred to in
clause 1 above, of either A or B is accepted by the Board of Directors of
Target, then the party whose proposal is accepted will in good faith enter into
put and call options with the other over shares and assets
2
<PAGE>
of the Target group so that the principles for the sharing of the assets of the
Target group contained in the attached draft agreement of the parties (under
which they propose to submit the joint proposal to the Board of Directors of
Target) will be substantially fulfilled, except that the equal sharing ratio
will change to [*] for the party whose proposal is accepted and [*] for the
other party (or such other proportion as may be agreed by the parties). Those
clauses indicated with a tick on, and the schedules to, the attached draft will
be deemed to be incorporated in this Agreement mutatis mutandis.
4. In the circumstances set out in clause 3, the parties shall share in the
said [*] proportion the costs and expenses incurred by each of them in
relation to (a) the offer for Target (to the extent that such costs and expenses
are of the type and at a rate customarily incurred in, and payable following
announcement of, a public takeover offer in the UK) and (b) the sharing of the
assets/shares of Target group (including any related costs, including taxation,
incurred in the Target group).
5. This Agreement shall terminate on [*], unless any offer for
Target as contemplated by this Agreement is announced, in which event this
Agreement shall not be so terminated but shall continue until such offer lapses
or is withdrawn or until [*] (if later).
6. This Agreement is governed by and shall be construed in accordance with
English law. References to A or B shall include persons (other than the other
party) acting in concert with the relevant party.
7. Neither party shall assign this Agreement to any other person, except
affiliates controlled by a party, without the consent of the other party in
writing.
8. Each party recognizes the irreparable harm that would occur to the other
party if either party breaches its obligations under this Agreement.
Accordingly, if either party
- -------------------
*This information has been omitted pursuant to a Request for Confidential
Treatment and such information has been filed separately with the Securities
and Exchange Commission.
3
<PAGE>
shall breach any of its obligations hereunder, the other party shall, in
addition to any claim for damages incurred or any other legal remedies available
to it, be entitled to injunctive relief and/or specific performance with respect
to any such breach.
9. Each clause shall represent a separate obligation of the parties and
shall not be affected by the invalidity of any clause.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day first above written.
A B
By GERARD LEVY By JOHN PAUL JONES
Witnessed by Mike Dominianni Witnessed by Doug Brown
4
<PAGE>
APPENDIX I
ACQUISITION AGREEMENT TWO
This Agreement is made this ___ day of June 1999 by and between A and B.
WHEREAS, A and B, at the invitation of the Board of Directors of C, have
separately submitted several bids or proposals to acquire all of the outstanding
shares of C, which proposals have been rejected, and A and B have independently
determined that each of them cannot justify further increasing their respective
last rejected bids, for financial and other business reasons, including the
raising of necessary funds and the risks attendant thereto.
WHEREAS, A and B believe that the only way in which they may be in a
position to raise the price bid for the shares of C, as desired by the Board of
Directors of C, is by making a joint bid to the Board of Directors of C, since
various portions of the businesses of C are more valuable to one party than to
the other.
WHEREAS, A and B intend to jointly develop a proposal for the possible
acquisition of C (the "Proposed Acquisition") and desire to set forth the
general terms and conditions upon which they will jointly negotiate the Proposed
Acquisition, as well as the terms and principles upon which the Proposed
Acquisition will be implemented and the assets and businesses of C will be
allocated to each of the parties or jointly operated by them, recognizing that
various asset divestitures will be required by the antitrust authorities of
certain jurisdictions in order for the parties to consummate the Proposed
Acquisition.
WHEREAS, in connection with the foregoing, A and B have entered into
acquisition Agreement One, [dated the date hereof,] covering certain matters
relating to the joint proposal.
NOW, THEREFORE, the parties agree as follows:
5
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X 1. Formation and Functions of Special Committee.
--------------------------------------------
(a) A and B each hereby designate the following representatives who
shall constitute a ___ member special committee (the "Committee") that will be
responsible for all negotiations, meetings and other contacts with C on behalf
of the parties in connection with the Proposed Acquisition.
A B
- -
(b) The Committee (or such of its individual members or other
representatives as shall be designated by the Committee from time to time) shall
be the contact group for all communications between A and B, on the one hand,
and C, on the other. The Committee shall be authorized to act upon the consent
or approval of at least two representatives, which consent or approval includes
at least one of the representatives appointed by each party. In the event the
Committee cannot agree upon any matter, such matter shall be referred to the
Chairman of A, ___, in the case of A, and the Chairman of B, _____, in the case
of B, who shall confer together in order to mutually agree on an appropriate
resolution of the matter. The Committee shall be responsible for supervising all
negotiations with C and all other matters relating to the Proposed Acquisition
and the implementation of all other provisions of this Agreement, provided that
each party may form such working groups to report to that party's Committee
members as it may determine and may rely on such representatives, advisors and
other experts as it may deem appropriate. Each party may appoint successor
representatives so that the total number of Committee representatives always
totals _____. The Committee shall continue in existence throughout the
consummation of the Proposed Acquisition and the implementation of the other
matters provided for in this Agreement, including the period during which the
parties are jointly operating any assets or businesses of C acquired in the
Proposed Acquisition. The Committee shall in all matters
6
<PAGE>
observe the preeminent principle that the parties could not anticipate all of
the issues that will arise in making the Proposed Acquisition and implementing
the allocation between the parties of the assets and businesses of C in
accordance with the terms of this Agreement, and, therefore, the Committee is
intended to resolve all questions with a spirit of fairness and understanding of
each party's needs, attempting to avoid minor matters, in order to enable the
parties to acquire their respective portions of such assets and businesses in
accordance with the principles of this Agreement. Without attempting to limit
the functions of the Committee, it shall have the following duties:
(i) settling the terms and conditions of the Proposed Acquisition,
including price and other offer terms, and any agreements entered into with C
or other parties relating thereto;
(ii) supervising the allocation of the assets and businesses of C
between the parties in accordance with the principles set forth herein and
the process of determining the final allocations of such assets and businesses;
(iii) settling the terms and conditions of appropriate joint venture or
other agreements between A and B covering the conduct of those portions of the
assets and businesses of C that will be owned and operated on a joint ownership
basis by the parties following consummation of the Proposed Acquisition, as well
as of appropriate arrangements to ensure the independent operation, following
the consummation of the Proposed Acquisition, of assets and businesses required
to be divested by the antitrust authorities of relevant jurisdictions;
(iv) supervising the various filings and submissions with governmental
bodies and agencies, in order to obtain all necessary statutory, governmental
and regulatory approvals for the Proposed Acquisition; and
7
<PAGE>
(v) considering and resolving any concerns which may be raised by
either party or its representatives relating to the transactions contemplated
by this Agreement, including the Proposed Acquisition and the subsequent asset
and business allocations and joint operation of certain businesses of C, in
order to enable the parties to proceed in accordance with the general principles
expressed herein.
X 2. Proposal Letter and Presentation of Proposal.
--------------------------------------------
(a) A and B will agree upon the form of a proposal letter to be
delivered to C (the "Proposal Letter"), the final form of which shall be
approved by the Committee.
(b) The Committee shall be responsible for determining the manner,
timing and method by which the Proposal Letter will be presented to and
negotiated with C and for establishing and coordinating the procedures for
responding to any requests for information or comment from, or otherwise
communicating with, the press or other media, as well as determining the content
of any such responses or communications.
\ 3. Financing.
---------
Each party covenants and agrees that it has or will have sufficient
funds available, whether in the form of borrowings, equity or any combination
thereof, so as to enable it to proceed with the terms of the Proposal Letter and
to conclude the Proposed Acquisition in accordance with the obligations
undertaken herein and therein.
X 4. Structure of Proposed Acquisition.
---------------------------------
The parties intend that the Proposed Acquisition would be effected
through an offer for all of the outstanding shares of C under the relevant laws
of England and the United States (the "Offer") followed by a compulsory
acquisition of any shares not acquired in the offer if permitted by English law
(the "Compulsory Acquisition"). The
8
<PAGE>
Offer and the Compulsory Acquisition would be made by a new company incorporated
by the parties under the laws of [England], with each party owning, directly or
indirectly through wholly-owned subsidiaries, 50% of the outstanding share
capital of the new company. Following the Offer and the Compulsory Acquisition,
the parties intend to allocate the assets and businesses acquired through the
Proposed Acquisition as provided in this Agreement.
X 5. Offer Price and Allocation of Assets and Businesses.
---------------------------------------------------
X (a) Offer Price
(i) The price to be offered by the parties in the Proposed
Acquisition shall be as mutually agreed and set forth in the Proposal Letter or
as otherwise determined by the Committee.
(ii) A and B shall each be responsible to fund 50% of the
aggregate cash purchase price to be paid in the Proposed Acquisition.
\ (b) Actual Aggregate Purchase Price.
For purposes of this Section 5, the "actual aggregate purchase
price" shall mean the sum of (i) the purchase price paid to acquire outstanding
ordinary shares of C pursuant to the Offer and any Compulsory Acquisition or
otherwise within the period of _____ months following the making of the Offer,
(ii) any funds expended to acquire or cancel outstanding options to purchase
ordinary shares of C to the extent not included in (i) above, and (iii) the
aggregate amount of outstanding indebtedness for borrowed money of C group at
the date the Proposed Acquisition is consummated. For purposes of this
Agreement, the Proposed Acquisition shall be deemed to have been consummated
upon the acquisition of more than [*] of the ordinary shares of C in the Offer.
- -------------------
*This information has been omitted pursuant to a Request for Confidential
Treatment and such information has been filed separately with the Securities
and Exchange Commission.
9
<PAGE>
\ (c) [*].
The parties agree that, as soon as practicable following the
consummation of the Proposed Acquisition, the [*] of C will be sold (whether to
unaffiliated third parties, to A or to B) in accordance with such procedures
and utilizing such advisors as the parties may mutually agree. The net proceeds
of such sales shall be shared between the parties equally. For purposes of
this Section 5, the "modified aggregate purchase price" for the Proposed
Acquisition shall be the actual aggregate purchase price less the deemed fair
market values of the [*] as set forth on Schedules I and II hereto.
\ (d) Schedules I and II.
Schedules I and II hereto have been prepared by A and B,
respectively, to reflect the initial values which each party attributes to each
country or region set forth thereon, which Schedules reflect allocations of all
of the assets and businesses of C in approximately equal shares between the
parties, and to designate the party which will have the primary right to be
allocated such country or region (or, in those cases indicated in such Schedule,
the proportionate asset sharing in such countries between the parties) in
accordance with the procedures hereinafter set forth. The parties agree that
the assets and businesses of C located in England shall have an agreed value
equal to __% of the modified aggregate purchase price as set forth on
Schedules I and II and that the aggregate values of the assets and businesses
of C located in England and the United States shall equal approximately [ *]
of the modified aggregate purchase price. The actual allocation of the specific
assets and businesses of C located in England and the United States between the
parties will be finally agreed upon prior to the consummation of the Proposed
Acquisition. The parties acknowledge that the percentages of the modified
aggregate purchase price allocated to England on Schedules I and II are based
on the parties' agreed upon estimate of the recurring EBIT of the English
- -------------------
*This information has been omitted pursuant to a Request for Confidential
Treatment and such information has been filed separately with the Securities
and Exchange Commission.
10
<PAGE>
operations of C for C's fiscal year ended September 30, 1998. Accordingly,
should the parties, based upon their review of the recurring EBIT or EBITDA of
the English operations of C for the twelve month period ending June 30, 1999
when the underlying financial information become available to the parties,
determine (using the same methodology as used in the estimate above) that the
EBIT or EBITDA of the English operations has changed, whether positive or
negative, more than ___% from the fiscal 1998 estimate, the above percentage to
be attributed to such operations shall be revised to reflect the EBIT or EBITDA
for the twelve month period ending June 30, 1999 and appropriate corresponding
adjustments shall be made to the Schedule I and Schedule II values for countries
or regions other than England.
\ (e) Allocation Process for Countries and Regions other than England.
---------------------------------------------------------------
(i) As soon as practicable following the consummation of the
Proposed Acquisition, the parties will determine the allocation between them of
the assets and businesses located outside of England on the country or region
basis as set forth on Schedules I and II, in accordance with the procedure
hereinafter set forth.
(ii) With respect to each country or region other than England
set forth on Schedules I and II, the party having the primary right to be
allocated that country or region (or portion thereof) as indicated on
Schedules I and II (the "primary party") shall give written notice to the other
party of the value which the primary party is willing to allocate to such
country or region, which value may be more or less than the values referred to
in Schedules I and II.
(iii) The party receiving such written notice of the primary
party's value for a country or region (or portion thereof) shall be entitled to
give written notice to the primary party setting forth an increased value for
such country or region (or portion thereof), provided
11
<PAGE>
that such increased value exceeds the primary party's value by at least [*]. If
no such notice of an increased value is provided, the assets and business of C
located in such country or region (or portion thereof) shall be allocated to the
primary party. If such notice of an increased value is provided, the primary
party may elect to accept such increased value, in which case the assets and
business of C located in such country or region (or portion thereof) will be
allocated to the primary party at such increased value, or to reject such
increased value, in which case such assets and business (or portion thereof)
will be allocated to the other party at such increased value.
\ (f) It is intended that the aggregate values ultimately allocated
between the parties pursuant to clauses (d) and (e) above will, as nearly as
possible, result in equal 50% shares in such values for each party. Since the
allocation of the assets and businesses of C located in England will result in
an allocation of __ % to A and __ % to B, it is intended that the allocations to
be made under clause (e) above should result in an allocation of ___ % to A and
__% to B, based on the aggregate of the values allocated to countries or regions
other than England determined in accordance with the procedure set forth in
clause (e). If the procedure provided for in this clause (f) results in an
aggregate allocation to either party under clauses (d) and (e) of less than 50%
but more than [*], the difference shall be made up by a cash payment from the
party with the allocation greater than 50% based on the values as finally
determined in accordance with clauses (d) and (e). If such procedure results in
such allocation to either party being [*] or less, the parties shall agree on
such adjustments to the apportionment of the assets and businesses of C located
in those countries or regions apportioned to one to the parties as are necessary
to meet the above [*] test, provided that such adjustments shall be made in the
order of the countries and/or regions having the highest values.
- -------------------
*This information has been omitted pursuant to a Request for Confidential
Treatment and such information has been filed separately with the Securities
and Exchange Commission.
12
<PAGE>
X (g) In connection with any asset dispositions (other than of the [*]
of C) required to be made in connection with securing regulatory approvals of
the Proposed Acquisition in any jurisdiction, the parties agree that the party
making the disposition shall be solely responsible for such disposition and
such disposition shall be for the sole account of such party; provided, however,
that the parties agree that assets so required to be divested shall be placed
under independent management following the consummation of the Proposed
Acquisition, with the party for whose account the assets are being divested
retaining the economic interest therein. Each party shall have a 60-day right
of first refusal in respect of any asset disposition to be made by the other
party, so long as the sale of the relevant assets to the first party is
permitted by the relevant antitrust authorities, which right shall be to
acquire the relevant assets on terms not less favorable to the first party than
those contained in any offer for such assets which the other party has
determined to accept.
\ 6. Government Approvals.
--------------------
(a) The parties acknowledge that the Proposed Acquisition will be
subject to review by regulatory authorities in certain jurisdictions. In this
connection, among other filings, A and B will be making filings under [Europe]
and under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act")
in the United States.
(b) A and B each agrees to use all reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary or advisable to consummate as promptly as practicable the Proposed
Acquisition and to cooperate with each other in connection with the foregoing.
In furtherance of the foregoing, A and B shall use all reasonable efforts to
resolve such objections, if any, as may be asserted with respect to the Proposed
Acquisition under any applicable law or regulation to enable the Proposed
Acquisition to be completed in an expeditious manner.
- -------------------
*This information has been omitted pursuant to a Request for Confidential
Treatment and such information has been filed separately with the Securities
and Exchange Commission.
13
<PAGE>
(c) Each of the parties shall promptly inform the other of any
communication from any government or governmental or multinational authority
regarding the Proposed Acquisition. If either party or any affiliate thereof
receives a request for additional information or documentary material from any
such government or authority with respect to the Proposed Acquisition, then such
party will endeavor in good faith to make, or cause to be made, as soon as
reasonably practicable, an appropriate response in compliance with such request.
(d) Without limiting the general nature of the parties' obligations
set forth in clause (b) above, the following rules shall apply with respect
to divestitures, if any, requested by the competent authorities. Each of the
parties will make such divestitures, or agree to make such divestitures, as
may be reasonably requested or required by any antitrust authorities to enable
the Proposed Acquisition to be completed in an expeditious manner. [Any such
divestitures shall be for the account of the party making the same, and] any
divested assets may be sold to either A or B if allowed by the relevant
antitrust authorities.
(e) Following the consummation of the Proposed Acquisition, the
parties agree that they will exhaust all legal remedies in an effort to obtain
all necessary approvals, including but not limited to appeals to the highest
appellate court, tribunal or other body having jurisdiction over the matter in
dispute, will seek rehearings where necessary and will continue with the
approval processes until final determinations have been received.
(f) It is the parties' intent, to the extent practicable, to proceed
with the consummation of the Proposed Acquisition at such time as all
regulatory approvals have been received from the antitrust regulatory
authorities of [the European Economic Community, the United States, Canada and
Australia], notwithstanding the fact that final approvals have not been received
in one or more of the other jurisdictions involved.
14
<PAGE>
\ 7. Intellectual Property.
---------------------
The parties agree that the continued use of the patents, patent
applications, technology, know-how (including operational know-how), trademarks,
tradenames and other intellectual property ("Intellectual Property") of C
after the consummation of the Proposed Acquisition is vital to the successful
operation of the assets and businesses of C to be separately allocated to each
party in accordance with the terms hereof. Because of the varying nature of the
rights and obligations running with Intellectual Property in each of the several
jurisdictions involved, it will be necessary, to insure the continued validity
of these rights worldwide, for the parties to develop ownership structures that
enable each party to obtain the benefits of the rights worldwide and in the
jurisdictions in which each party has acquired the assets and businesses. In
this connection, the parties will, prior to or as soon as practicable following
the consummation of the Proposed Acquisition, enter into supplementary
agreements establishing appropriate mechanisms, whether through direct joint
ownership of the Intellectual Property, ownership through a separate entity,
direct ownership with licensing or otherwise, to appropriately enable each party
to continue to fully and independently use in its own worldwide gases business
(including the businesses acquired from C) such Intellectual Property for
mutually agreed upon periods of time following such consummation, adopting the
most suitable mechanism to avoid the possibility of the abandonment of any such
Intellectual Property. In those jurisdictions where ownership of the
Intellectual Property can be legally transferred to and held by the party
acquiring assets and business located there without risk of loss of the benefits
of the Intellectual Property to the other party in other jurisdictions, it is
the intention of the parties that direct ownership will follow the assets and
businesses so acquired. In those jurisdictions where ownership of the
Intellectual Property cannot be legally transferred without risk of loss, or
where the ownership of the assets and business is held jointly by the parties,
the ownership will be held in such a manner to benefit both parties. To make
certain that the rights in and to the Intellectual Property so acquired are
shared as
15
<PAGE>
equally as possible, license and other agreements will be given to the
parties to enable each to conduct its business in the jurisdictions and areas
where they hold or will hold such assets or businesses. Any royalties, license
fees or other charges for use of the Intellectual Property will be agreed by the
parties. All rights shall be allocated equally. In addition, the parties will
agree upon such standards as may be appropriate in order to avoid confusion from
the use by the parties of the trademarks and tradenames (such as a requirement,
in connection with any such use, to identify such trademark or tradename with
the A name or the B name, as the case may be). The agreement shall also cover
the basis upon which the parties may use such Intellectual Property on a
long-term basis. Each party agrees that, for a reasonable period of time
following the consummation of the Proposed Acquisition, it shall provide the
other party with reasonable access to those facilities acquired from C and to
relevant personnel in order to enable the other party to become knowledgeable
concerning the technology and know-how (including operational know-how) included
in the Intellectual Property. The parties acknowledge that the provisions of
this section 7 are intended to apply only to the Intellectual Property of C
acquired by the parties as such Intellectual Property exists at the date of
consummation of the Proposed Acquisition and that any intellectual property
developed by A or B after such consummation, whether or not based on the
Intellectual Property acquired from C, shall be the sole property of the party
which develops the same.
\ 8. No Unauthorized Disclosure or Use of Confidential Information.
-------------------------------------------------------------
(a) A may provide B with confidential or proprietary information
relating to the Proposed Acquisition from time to time (the "A Confidential
Information"). B shall not, without the prior written consent of A, disclose or
use any A Confidential Information for any purpose, other than with A in
connection with the evaluation and negotiation of the Proposed Acquisition and
the making of the proposal to make the Proposed Acquisition.
16
<PAGE>
(b) B may also provide A with confidential or proprietary information
relating to the Proposed Acquisition from time to time (the "B Confidential
Information"). A shall not, without the prior written consent of B, disclose
or use any B Confidential Information for any purpose, other than with B
in connection with the evaluation and negotiation of the Proposed Acquisition
and the making of the proposal to make the Proposed Acquisition.
(c) Any information and analyses concerning C and the businesses
of C contained in this Agreement or heretofore provided by the parties shall be
deemed to be included within the A Confidential Information or the B
Confidential Information, as the case may be, it being acknowledged by the
parties, however, that all such information and analyses are subject to
confirmation by the parties through their own review and examinations and that
neither party is making any representation or warranty to the other party as to
the completeness or accuracy of such information or analyses.
(d) The foregoing restrictions shall not apply to any information
(i) which was in the public domain prior to disclosure to A or B, as the case
may be, (ii) which becomes public knowledge after such disclosure other than
through breach of this Agreement by A or B, as the case may be, (iii) which
A or B, as the case may be, can show to have been in its possession
independently prior to such disclosure, (iv) which A or B, as the case may be,
can show that it received after such disclosure in a legal way from other
sources, (v) to the use by A or its affiliates or B or its affiliates, as the
case may be, of such party's Confidential Information internally in such party's
or its affiliates' industrial gases business, or (vi) to the use by either party
or its affiliates of the Confidential Information concerning C referred to in
clause (c) above internally in their respective industrial gas businesses.
(e) A and B agree to preserve the confidentiality of the B Confidential
Information or the A Confidential Information, as the case may be, as
required by this Agreement for a period of three years from the date of the
termination of this Agreement, the
17
<PAGE>
consummation of the Proposed Acquisition or the final allocation between the
parties of the assets and businesses of C in accordance with the terms of this
Agreement, whichever is later.
(f) All written materials, schedules, documents and other writings
which are made available by or supplied by one party to the other as A
Confidential Information or B Confidential Information, as the case may be, and
all copies and reproductions thereof, shall at the request of the supplying
party, after the later of the date of the termination of this Agreement, the
consummation of the Proposed Acquisition or the final allocation between the
parties of the assets and businesses of C in accordance with the terms of this
Agreement, be returned to the supplying party or certified in writing by the
other party to having been destroyed.
X 9. Transfers of Products and Administrative and Other Services in the
------------------------------------------------------------------
United States After the U.S Asset Allocations.
----------------------------------------------
As previously indicated, it is the intention of the parties to achieve
an allocation of the assets and businesses of C located in the United States in
equal shares between the parties. Schedule III hereto sets forth the current
view of the parties as to the possible allocation of such assets and businesses,
by plant location, based on the initial review by the parties of information
concerning C's industrial gases operations in the United States available to
them. The parties further recognize that the industrial gases business of C in
the United States has been operated as a single integrated business.
Accordingly, the parties agree that, prior to or immediately after the
consummation of the Proposed Acquisition, they will negotiate in good faith with
each other and with other parties such separate contracts as are customary in
the industry and permitted by law, to be generally in effect for a period of six
months, in order to secure needed administrative services and covering other
matters such as trade product exchanges and purchases and the sources of other
products, in order to fulfill the intention of the parties that each of them be
placed in a position by such contracts to successfully operate
18
<PAGE>
the assets and businesses allocated to that party in the United States in the
manner intended by this Agreement. The parties agree that all of the foregoing
arrangements shall be on a direct cost basis. If such initial agreements are
required for a term of longer than six months, the parties will, after
expiration of the initial agreements, negotiate new agreements on such terms as
may be mutually agreed.
X 10. General Principle
-----------------
As indicated herein, it is the intention of the parties that the
Proposed Acquisition and the ultimate allocation of the assets and businesses
of C will be shared on an equal basis. It is further understood that this
principle shall be generally applicable in all areas relating to the Proposed
Acquisition, including the sharing on an equal basis of (i) liabilities
attributable to the assets and businesses of C or arising in connection with
the Proposed Acquisition, such as, in particular, any undisclosed liabilities
which become known subsequent to the consummation of the Proposed Acquisition
or liabilities resulting from any actions or proceedings which may be commenced
by shareholders of C or other parties relating to the Proposed Acquisition, and
(ii) net benefits obtained as a result of the Proposed Acquisition, including
reductions in expenses such as headquarters, research and other common expenses
of C.
\ 11. Governing Law and Jurisdiction
------------------------------
This Agreement shall be governed by the laws of [England], the place
where this Agreement has been negotiated, executed and delivered, without, to
the extent permitted by such laws, giving effect to the conflicts of law rules
thereof. In connection with any action, suit or proceeding arising in connection
with this Agreement or any transaction contemplated hereby, A and B each:
(i) agree that either party may bring a suit, action or other legal proceeding
against the other party only in a court of record of [England]; (ii) consent to
the exclusive jurisdiction over it of any such court in any such suit, action or
proceeding, (iii)
19
<PAGE>
waive any objections it may have to the venue of any such court in any such
suit, action or proceeding, and (iv) consent to service of process upon it by
any appropriate method under the laws or rules of the jurisdiction in which such
suit, action or proceeding is commenced.
\ 12. Assignment
----------
Neither party shall have the right to assign its rights or obligations
under this Agreement to any other person, except majority-owned subsidiaries,
without the prior written consent of the other party, which consent shall not be
unreasonably withheld in the case where a party desires to use a less than
majority-owned entity to take title to the assets and businesses located in a
particular country.
\ 13. Notices
-------
All notices, requests or other communications hereunder shall be in
writing, clearly marked "Confidential", and shall be deemed to have been duly
delivered if delivered personally or by telecopier or sent by registered or
certified mail, postage prepaid, return receipt requested, to the parties at
their respective addresses, as follows:
If to A
If to B
20
<PAGE>
\ 14. Non-Disclosure of Agreement
---------------------------
Each of the parties hereto agrees that, except as may be otherwise
mutually agreed in writing or as may be required by law, it will keep
confidential and will not disclose to any other person the existence of this
Agreement, the contents hereof or the fact that the parties are making a
proposal to effect the Proposed Acquisition or the terms of any such possible
proposal.
X 15. Expenses
--------
Each party agrees to bear and be responsible for its own costs and
expenses, including without limitation those incurred by it or its
representatives in respect of such party's participation on the Committee,
incurred in connection with the Proposed Acquisition.
X 16. Termination
-----------
[to be provided]
X 17. Indemnification
---------------
Each of A and B agree to indemnify and hold harmless the other party
(including, in each case, the directors, officers, employees and representatives
of the other party) from and against any and all losses, claims, liabilities,
damages and expenses (including reasonable fees and disbursements of counsel)
relating to or arising out of any action taken by such party, or its
representatives, in contravention of this Agreement or of any decision, policy
or directive of the Committee or any action taken which has not been authorized
by the Committee or this Agreement.
21
<PAGE>
\ 18. Injunction for Breach
---------------------
If either party shall breach any of its obligations hereunder,
including without limitation those relating to maintaining the confidentiality
of, or the use of, the A Confidential Information or the B Confidential
Information, as the case may be, in recognition of the irreparable harm that
would be incurred by the other party, such other party shall, in addition to its
claim for damages incurred or any other legal remedies available to it, be
entitled to an injunction and/or specific performance with respect to any such
breach.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
A
By:
------------------------------------
Name:
Title:
B
By:
------------------------------------
Name:
Title:
22
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
[*] are sold at market value.
This is deducted from the total price and the remainder is applicable to [*].
Example
<S> <C>
Total business value at [*] [ * ]
other incl options [ * ]
debt [ * ]
----
[ * ]
[*] [ * ]
-----
[*] [ * ]
----
A B
<S> <C> <C> <C> <C> <C>
England [ * ] [ * ] [ * ] [ * ]
US [ * ] [ * ] [ * ] [ * ]
----- ----- ----- -----
[ * ] [ * ] [ * ] [ * ]
Subject to bidding contest
Most likely will be
Canada/Sth America [ * ] [ * ] [ * ]
Australia [ * ] [ * ] [ * ]
J.V. [ * ] [ * ] [ * ]
EU Cont. [ * ] [ * ] [ * ]
Japan [ * ] [ * ] [ * ]
Africa [ * ] [ * ]
India others [ * ] [ * ]
---
[ * ] [ * ] [ * ]
England and USA excl. [ * ] [ * ] [ * ] [ * ]
---- ---- ----
[ * ] [ * ] [ * ]
[ * ]
</TABLE>
or give B more [ * ] and [ * ] but have 50% vote.
OPEN QUESTION
- -------------------
*This information has been omitted pursuant to a Request for Confidential
Treatment and such information has been filed separately with the Securities
and Exchange Commission.
23
<PAGE>
SCHEDULE II 1/2
Total business value at [ * ] [ * ]
other incl options [ * ]
debt [ * ]
[ * ]
[ * ] [ * ]
[ * ] [ * ]
<TABLE>
<CAPTION>
% Pounds Valuation pounds
A B
<S> <C> <C> <C> <C>
UK [*] [*] [*] [*]
US [*] [*] [*] [*]
subtotal [*] [*] [*] [*]
Canada [*] [*] [*] [*]
Australia [*] [*] [*] [*]
JV's [*] [*] [*] [*]
EU Cont [*] [*] [*] [*]
Japan [*] [*] [*] [*]
subtotal [*] [*] [*] [*]
Africa [*] [*] [*] [*]
India [*] [*] [*] [*]
Others [*] [*] [*] [*]
subtotal [*] [*] [*] [*]
TOTAL [*] [*] [*] [*]
used [*]
OPEN QUESTION
</TABLE>
- -------------------
*This information has been omitted pursuant to a Request for Confidential
Treatment and such information has been filed separately with the Securities
and Exchange Commission.
24
<PAGE>
SCHEDULE II 2/2
Country Preferences
US - [ * ]
UK - AL gets Jag business [ * ]
Poland - [ * ]
Canada - [ * ]
Mexico - [ * ]
Columbia - [ * ]
Brazil - [ * ]
Venezuela - [ * ]
Japan - [ * ]
Aust. NZ - AP acquires [ * ]
Singapore - [ * ]
Malaysia - [ * ]
Hong Kong - [ * ]
Taiwan - [ * ]
[ * ]
South Africa - [ * ]
India - [ * ]
Thailand - [ * ]
China - [ * ]
Korea - [ * ]
[ * ]
- -------------------
*This information has been omitted pursuant to a Request for Confidential
Treatment and such information has been filed separately with the Securities
and Exchange Commission.
25
AGREEMENT
This Agreement is made the 2nd day of July 1999 and incorporates amendments made
this 7th day of July 1999 by and between:
(1) L'Air Liquide, S.A., a limited liability corporation organised under
the laws of France (hereinafter referred to as "A"); and
(2) Air Products and Chemicals, Inc., a corporation organised under the
laws of Delaware, USA (hereinafter referred to as "B").
(A) WHEREAS, A and B, at the invitation of the Board of Directors of C,
have separately submitted several proposals to acquire all of the
outstanding shares of C, which proposals have been rejected, and A and
B have independently determined that each of them cannot justify
further increasing their respective last rejected proposals, for
financial and other business reasons, including the raising of
necessary funds and the risks attendant thereto.
(B) WHEREAS, A and B believe that the only way in which they may be in a
position to raise the price proposed for the shares of C, as desired by
the Board of Directors of C, is by jointly developing a proposal to the
Board of Directors of C, since various portions of the businesses of C
are more valuable to one party than to the other, and that such a
jointly developed proposal will reduce regulatory concerns (e.g., on a
"fix it first" basis), since most adjustments likely to be required by
Regulatory Authorities will have been provided for between the parties.
(C) WHEREAS, A and B intend jointly to develop a proposal for the Proposed
Acquisition and desire to set forth the general terms and conditions
upon which they will jointly negotiate the Proposed Acquisition, as
well as the terms and principles upon which the Proposed Acquisition
would be implemented and the assets and businesses of C would be
allocated to each of A and B, recognising that various asset
divestitures may be required by the antitrust authorities of certain
jurisdictions in order for the parties to consummate the Proposed
Acquisition.
(D) WHEREAS, given the timetable mandated by applicable takeover
requirements, the parties wish to have as much of a proposed divestment
programme in place and ready for administrative review as is possible
in order to achieve required regulatory approvals as expeditiously as
possible and have determined that this Agreement will enable the
parties to develop such a programme.
(E) WHEREAS, in connection with the foregoing, A and B have entered into
Acquisition Agreement One.
NOW, THEREFORE, the parties agree as follows:
- -------------------
*This information has been omitted pursuant to a Request for Confidential
Treatment and such information has been filed separately with the Securities
and Exchange Commission.
1
<PAGE>
1. PURPOSE AND INTERPRETATION
1.1 The purpose of this Agreement is solely to set forth the basis agreed to by
the parties upon which an Offer may be made and C Shares acquired
thereunder and, in such event, the intentions of the parties concerning the
manner in which the Reconstruction would be effected by the parties in
order to give effect to an appropriate allocation of the assets and
businesses of C as between A and B, together with such dispositions to
third parties as may be commercially desirable or reasonably required by
applicable Regulatory Authorities.
1.2 In this Agreement:
"A Business" means the assets and businesses of C to be allocated to A
pursuant to the Reconstruction as set out in schedules 1 and 2 as such
schedules may be amended by the Committee pursuant to clause 7, and shall
include A's interest in such assets and businesses of C to be jointly
owned by A and B as determined by the Committee;
"Acquisition Agreement One" means the agreement entered into between the
parties dated 14 June 1999;
"Actual Aggregate Purchase Price" means the sum of:
(a) the purchase price paid to acquire the C Shares pursuant to the Offer
and any Compulsory Acquisition or otherwise;
(b) any funds expended to acquire or cancel outstanding options to
acquire C Shares to the extent not included in (a) above; and
(c) the aggregate amount of outstanding consolidated indebtedness for
borrowed money of the C Group taken as a whole on the Control Date;
"Affiliate" means, with respect to any person, any other person directly or
indirectly controlling, controlled by, or under common control with such
other person;
"A Liabilities" means all of the liabilities (including in respect of
intra-group loans and Tax on trading and other activities ) arising out of
or referable to the A Business whether prior to or after the Control Date
but, for the avoidance of doubt, shall exclude any liability referred to in
clause 14, including for Tax;
"B Business" means the assets and businesses of C to be allocated to B
pursuant to the Reconstruction as set out in schedules 1 and 2 as such
schedules may be amended by the Committee pursuant to clause 7, and shall
include B's interest in such assets and businesses of C to be jointly owned
by A and B as determined by the Committee;
"Bidco" means a new company to be organised in the UK for the purpose of
making the Offer;
2
<PAGE>
"B Liabilities" means all of the liabilities (including in respect of
intra-group loans and Tax on trading and other activities ) arising out of
or referable to the B Business whether prior to or after the Control Date
but, for the avoidance of doubt, shall exclude any liability referred to in
clause 14, including for Tax;
"C" means The BOC Group plc;
"C Group" means C and its Affiliates;
"City Code" means The City Code on Takeovers and Mergers;
"Committee" means the special committee to be formed by A and B in
accordance with clause 2.1;
"Companies Act" means the Companies Act 1985, as amended;
"Completion" means completion of the Reconstruction;
"Completion Date" means the day on which Completion takes place;
"Compulsory Acquisition" means the compulsory acquisition of any C Shares
not acquired in the Offer, in accordance with sections 428 to 430F of the
Companies Act;
"Control Date" means the date on which the Offer becomes or is declared
unconditional in all respects or such later date on which Bidco obtains
control of the board of directors of C;
"C Share" means an ordinary share of 25p in C now in issue and any ordinary
share of 25p in C which is unconditionally allotted or issued whilst the
Offer remains open for acceptance (or such earlier date as the parties may
determine) and "C Shares" means all of them;
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, in the United States;
"ICC" means the Geneva, Switzerland office of the International Chamber of
Commerce;
"Intellectual Property" means the patents, patent applications, technology,
know-how (including operational know-how), trade secrets, copyrights,
software, trademarks, tradenames and other intellectual property owned by C
or its Affiliates;
"London Stock Exchange" means the London Stock Exchange Limited;
"Modified Aggregate Purchase Price" means the Actual Aggregate Purchase
Price less the value of the [ * ] of C as set forth in schedule 1;
"Offer" means (unless the context requires otherwise) any of an
announcement of an intention to make an offer (whether or not subject to
any pre-conditions) or the making of
- -------------------
*This information has been omitted pursuant to a Request for Confidential
Treatment and such information has been filed separately with the Securities
and Exchange Commission.
3
<PAGE>
an offer for all of the C Shares under the relevant laws and regulations of
England and, if the Committee so determines, the United States and any
variation thereof and any new offer made following the lapse or withdrawal
of an initial offer;
"Panel" means The Panel on Takeovers and Mergers;
"Proposal Letter" means the letter referred to in clause 3.1;
"Proposed Acquisition" means the possible acquisition of all the
outstanding C Shares by Bidco;
"Regulatory Authorities" means applicable anti-trust regulatory authorities
and "Regulatory Authority" means any one of them;
"Reconstruction" means the reconstruction of the C Group to give effect to
the allocation of the assets and businesses of C between A and B in
accordance with clause 7 by separating the business of the C Group into the
A Business and the B Business and any subsequent transfers necessary to
effect ownership (whether directly or indirectly) of the A Business by A
and the B Business by B;
"SEC" means the U.S. Securities and Exchange Commission;
"Tax" means any form of taxation, levy, duty, charge, contribution or
impost of whatever nature (including any related fine, penalty, surcharge
or interest) imposed by a Tax Authority; and
"Tax Authority" means any local, municipal, governmental, state, federal or
other fiscal, revenue, customs or excise authority, body or official
anywhere in the world.
1.3 In this Agreement, a reference to:
1.3.1 a document in the "agreed form" is a reference to a document in
a form approved and for the purposes of identification signed by
or on behalf of each party;
1.3.2 a statutory provision includes a reference to the statutory
provision as modified or re-enacted or both from time to time
before the date of this Agreement and any subordinate
legislation made under the statutory provision before the date
of this Agreement;
1.3.3 a person includes a reference to a body corporate,
association, limited liability company or partnership;
1.3.4 a person includes a reference to that person's legal personal
representatives, successors and assigns;
1.3.5 a clause or schedule, unless the context otherwise requires,
is a reference to a clause of or schedule to this Agreement;
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<PAGE>
1.3.6 a document is a reference to that document as from time to time
supplemented or varied;
1.3.7 sharing or allocating equally (or any similar such phrase) is
a reference to the ratio of sharing between the parties, in
each case as applied in the context in which such term is
used, being sharing or allocating in equal proportions between
the parties; and
1.3.8 "including" is a reference to "including without limitation."
1.4 The headings in this Agreement do not affect its interpretation.
2. FORMATION AND FUNCTIONS OF SPECIAL COMMITTEE
2.1 A and B each hereby designate the following representatives who shall
constitute the Committee that will be responsible for supervising and
directing all negotiations, meetings and other contacts with C by
either party in connection with the Proposed Acquisition and the
Reconstruction and shall have the rights and duties set out below. A
and B agree that they shall each implement the decisions of the
Committee promptly and in full.
<TABLE>
<CAPTION>
A B
- -
<S> <C>
Gerard Levy John P. Jones, III
Benoit Potier Joseph J. Kaminski
Jean-Claude Buono Leo J. Daley
E. A. Dominianni or Laurent Blamoutier) W. Douglas Brown (or attorney designee)
</TABLE>
Each party may replace its own representatives and appoint successor
representatives so that the total number of Committee representatives
always totals eight (8). Any member of the Committee may appoint an
alternate to act for him generally or specifically in relation to any
meeting of the Committee. The alternate shall have the same powers and
discretions that he would have if he were a member of the Committee. An
appointment of an alternate shall be in writing and shall be valid if
notice of it is given to any member of the Committee appointed by B (in
the case of the appointment of an alternate to act for a member of the
Committee appointed by A) and vice versa.
2.2 The Committee shall at all times conduct itself in accordance with
applicable requirements of Regulatory Authorities and to that end shall
have counsel available as may be required for the purpose of ensuring
compliance therewith. The Committee's objective and overall purpose is
solely to effect the transactions contemplated by this Agreement and to
that end it shall not engage in the day-to-day business or commercial
operations of the assets and businesses covered by this Agreement and
shall employ or utilise independent third parties to review and analyse
any competitively sensitive information or data should such review or
analysis be required to effect its assigned responsibilities hereunder.
5
<PAGE>
2.3 The Committee shall be authorised to act upon the unanimous consent or
approval of the members of the Committee or their alternates deciding
such issue provided that any consent or approval shall be given by two
or more representatives (whether in writing or orally), which consent
or approval includes at least one of the representatives appointed by
each party. In the event the Committee cannot agree upon any matter,
such matter shall be referred to the Chairman of A, Alain Joly, in the
case of A, and the Chairman of B, Harold A. Wagner, in the case of B,
who shall confer together and shall mutually agree on an appropriate
resolution of the matter. In the event that the Chairmen are unable to
resolve within ten (10) days of referral to them any matter which
relates to the transfer of the assets and businesses of C to be
effected pursuant to the terms of this Agreement (whensoever the
dispute arises), or any matter which arises after the Offer becomes or
is declared unconditional in all respects, such matter shall be
resolved as provided below:
2.3.1 the parties shall submit the matter for resolution in
accordance with clause 2.3.3 by an Expert (the "Expert")
selected in accordance with clause 2.3.2;
2.3.2 the Expert shall be selected by mutual agreement of the
parties. If, within twenty (20) days of referral of the matter
to the Chairmen, the parties are unable to agree upon the
Expert, the parties shall request the ICC to select a person
with experience in international business matters to act as
the Expert;
2.3.3 upon selection of the Expert, A and B shall each present
promptly to the Expert a statement of their final position on
the matter in dispute and the Expert, acting as an expert and
not as an arbitrator, shall choose either A's statement or B's
statement as the resolution to the dispute in question, such
statement, in the absence of fraud or manifest error, being
final and binding on each party.
2.4 The Committee shall be responsible for making all decisions in respect
of, and supervising all other matters relating to, the Proposed
Acquisition (including the conduct of the Offer), the Reconstruction
and the implementation of all other provisions of this Agreement. The
Committee shall form a tax working group to be responsible for ensuring
that the Reconstruction and all other provisions of this Agreement are
planned and implemented in a tax efficient manner and the Committee may
form such other working groups to report to it as it may determine and
may rely on such representatives, advisors and other experts as it may
deem appropriate.
2.5 The Committee shall continue in existence throughout the implementation
of the matters provided for in this Agreement, including the period
during which the parties are jointly operating any assets or businesses
of C acquired in the Proposed Acquisition and the Reconstruction. The
Committee shall in all matters observe the pre-eminent principle that
the parties cannot anticipate all of the issues that will arise in
making the Proposed Acquisition and implementing the Reconstruction in
accordance with the terms of this Agreement, and, therefore, the
Committee is intended to resolve all questions with a spirit of
fairness and understanding of each party's needs, attempting to avoid
minor matters, in order to enable the parties to acquire their
respective portions of such assets and businesses in accordance with
the principles of this Agreement.
6
<PAGE>
2.6 Without attempting to limit the functions of the Committee, it shall
have the following duties:
2.6.1 settling (a) whether any person other than A or B should have
any equity or debt investment in Bidco, (b) the terms and
conditions, including any preconditions, of the Offer,
including price and other offer terms, (c) the conduct of the
Offer and any agreements entered into with C or other parties
relating thereto, including any market purchases of C Shares,
and (d) in the event of the Offer lapsing, all such matters as
are required to make one or more further offers for the C Shares;
2.6.2 ensuring that in connection with the Offer the parties comply
with all applicable legal and regulatory provisions (in all
applicable jurisdictions) including, without limitation, the
Companies Act, the Financial Services Act 1986, the City Code,
the Rules Governing Substantial Acquisitions of Shares, the
Listing Rules of the London Stock Exchange, the U.S.
Securities Exchange Act of 1934, the rules and regulations of
the SEC and applicable requirements of Regulatory Authorities;
2.6.3 approving the press announcement, the offer document and any
other documents to be issued in accordance with the City Code,
the U.S. Securities Exchange Act of 1934 or any other
applicable rules or legislation in connection with the Offer;
2.6.4 approving any revision, amendment, modification or waiver of
any precondition, term or condition of the Offer (including an
increase in price) or the withdrawal or lapsing of the Offer;
2.6.5 approving the declaration of the Offer going unconditional as to
acceptances;
2.6.6 approving the declaration of the Offer going unconditional in all
respects;
2.6.7 supervising and controlling the Compulsory Acquisition;
2.6.8 determining, implementing and supervising the Reconstruction
and the allocation of the assets and businesses of C between
the parties in accordance with the principles set forth herein
and the process of determining the final ownership of such
assets and businesses;
2.6.9 settling the terms and conditions of appropriate joint venture or
other agreements between A and B covering the conduct of those
portions of the assets and businesses of C in those limited
situations where, pursuant to the allocation procedures set forth
in clause 7.5 and subject to any restrictions imposed by any
relevant Regulatory Authority, they may be owned and operated on
a joint ownership basis by the parties following consummation of
the Proposed Acquisition, as well as settling the terms and
conditions of appropriate arrangements to ensure the independent
operation, following the consummation of the Proposed Acquisition
and the Reconstruction, of any assets and businesses of C which
may be required to be divested by the Regulatory Authorities;
7
<PAGE>
2.6.10 supervising and controlling the various filings and submissions
with governmental bodies and agencies (including the filings
referred to in clauses 6.1 and 7.4.5), in order to obtain all
necessary statutory, governmental and regulatory approvals
for the Proposed Acquisition and the Reconstruction;
2.6.11 determining the basis upon which, following the Control Date, the
parties will supervise the management of the C Group, including
assigning between the parties the principal responsibility for
such supervision of the component assets and businesses of the
C Group based on the likely allocation thereof into the
A Business and the B Business as the Committee shall determine,
giving appropriate recognition to regulatory considerations
affecting the allocation, timing or nature of such management
responsibility (it being understood that upon any final
allocation to a party then not managing the assets so allocated,
such party shall immediately assume management of such assets);
and
2.6.12 developing and implementing appropriate procedures, activities,
financial informational reviews and valuations, operational
transitions and/or allocations of operational or transitional
responsibility, with respect to such matters as may be
commercially desirable or legally advisable in order to maintain
the A Business and the B Business as viable business operations,
to effect the Reconstruction contemplated hereby and to achieve
the transition and full integration of the operations of C into A
or B, as the case may be, at the earliest possible time,
consistent with the principles set forth in this Agreement and
such requirements as may be applicable or reasonably required by
the Regulatory Authorities.
3. PROPOSAL LETTER AND PRESENTATION OF PROPOSAL
3.1 A and B will agree upon the form of the Proposal Letter to be delivered
to C, the final form of which shall be approved by the Committee.
3.2 The Committee shall be responsible for determining the manner, timing
and method by which the Proposal Letter will be presented to and
negotiated with C and for establishing and co-ordinating the procedures
for responding to any requests for information or comment from, or
otherwise communicating with, the press or other media, the Panel and
the SEC, as well as determining the content of any such responses or
communications.
3.3 For the avoidance of doubt, the parties shall, for so long as this
Agreement remains in place, work together in good faith to acquire the
C Shares on the basis set out in this Agreement, including by meeting
their obligations under clause 6 and by making further offers in such
form as may be approved by the Committee following the lapsing or
withdrawal of an offer.
4. FINANCING.
4.1 Each party covenants and agrees that it has or will have sufficient
funds available, whether in the form of borrowings, equity or any
combination thereof, so as to enable it
8
<PAGE>
to proceed with the terms of the Proposal Letter on the basis set out in
this Agreement and to conclude its portion of the Proposed Acquisition
and the Reconstruction in accordance with the obligations undertaken
herein and therein.
4.2 The parties shall jointly organise and finance Bidco and shall provide
equity and/or debt financing to Bidco in equal shares in an amount
equal in the aggregate to the cash portion of the Actual Aggregate
Purchase Price. For the avoidance of doubt, upon the provision of the
equity and/or debt financing to Bidco in equal shares as described
hereunder, A and B shall each own an equal share of the capital of
Bidco. Save as agreed by the Committee, neither party shall transfer,
dispose of or otherwise deal in its equity or debt interest in Bidco.
All decisions at the board and shareholder levels shall be taken by the
unanimous consent of all the directors and shareholders (as the case
may be) unless the parties determine otherwise.
4.3 The parties recognise that the financing arrangements which each of
them may enter into to provide finance for Bidco will contain
restrictions and obligations. Certain of those restrictions and
obligations may extend to or affect:
4.3.1 the conduct and terms of the Offer;
4.3.2 the operations, following the Control Date, of C and the C Group;
4.3.3 the disposal of assets by the C Group to the parties or to third
parties; and
4.3.4 the provision of credit support by the C Group or parts
thereof to such financiers.
While the parties shall each remain responsible for their own financing
arrangements, and their respective costs and expenses in relation
thereto, the parties undertake and agree to inform one another, to the
extent that confidentiality agreements are not thereby breached, of the
terms and conditions of such financing arrangements and to consult with
one another with respect thereto. Each party further undertakes and
agrees that it will use its commercially reasonable efforts to ensure
that such party, Bidco and, following the Control Date, the C Group
will take all such actions as are necessary to ensure compliance with
the terms of such financings.
4.4 The parties shall ensure that Bidco does not incur any indebtedness or
grant any security interests without the prior approval of the
Committee.
5. STRUCTURE OF PROPOSED ACQUISITION
5.1 The parties intend that the Proposed Acquisition would be effected
(following the satisfaction of any preconditions) through the Offer
followed by the Compulsory Acquisition, to the extent permitted by the
Companies Act. The Offer would be made, and the Compulsory Acquisition
implemented, by Bidco. Following the Offer and the Compulsory
Acquisition, the parties intend to allocate the assets and businesses
acquired through the Proposed Acquisition as provided in this
Agreement.
9
<PAGE>
5.2 The parties acknowledge that the effect of this Agreement may be that A
and B may be "associates" and/or "acting in concert" for the purpose of
the City Code and the U.S. Securities Exchange Act of 1934, and which
may lead to Companies Act or other disclosure obligations. Accordingly
A and B shall individually each supply promptly to the other any
information which the other may require in order to comply with the
provisions of the City Code, the U.S. Securities Exchange Act of 1934,
the Companies Act or the requirements of the Panel or the SEC
applicable to persons having such a relationship.
5.3 The parties agree that they shall not, and shall use all reasonable
endeavours to procure that the persons acting in concert with them
shall not, acquire any C Shares (or any interest therein) otherwise
than through Bidco. Save as disclosed to each other prior to the date
hereof, neither party owns, directly or indirectly, any interest in any
C Shares.
6. REGULATORY APPROVALS
6.1 The parties acknowledge that the Proposed Acquisition, the
Reconstruction and matters related thereto will be subject to review by
the Regulatory Authorities. In this connection, the parties and/or
Bidco will be making such filings as may be required under the EC
Merger Regulation and the HSR Act, as well as taking appropriate action
in other applicable jurisdictions.
6.2 A and B each agrees to use all reasonable efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things
necessary or advisable (taking into account the tax effects of such
efforts, actions and things as determined by the tax working group) to
complete as promptly as reasonably practicable the Proposed
Acquisition, the Reconstruction and the matters related thereto and to
co-operate with each other in connection with the foregoing. In
furtherance of the foregoing, A and B shall use all reasonable efforts
to resolve such objections, if any, as may be asserted with respect to
the Proposed Acquisition, the Reconstruction or matters related thereto
under any applicable law or regulation to enable the Proposed
Acquisition, the Reconstruction and the matters related thereto to be
completed in an expeditious manner.
6.3 Each of the parties shall promptly inform the other of any material
communication (written or oral) to or from any Regulatory Authority
regarding the Proposed Acquisition, the Reconstruction or matters
related thereto to the fullest extent permitted by law and applicable
regulations and having due regard for the need to maintain their
competitive independence. If either party or any Affiliate thereof
receives a request for additional information or documentary material
from any such Regulatory Authority with respect to the Proposed
Acquisition, the Reconstruction or matters related thereto, then such
party will endeavour in good faith to make, or cause to be made, as
soon as reasonably practicable, an appropriate response in compliance
with such request.
6.4 Without limiting the general nature of the parties' obligations set
forth in clause 6.2, the parties will make such divestitures or other
commitments as approved by the Committee, if any, as may be reasonably
required by the Regulatory Authorities to enable the Proposed
Acquisition, the Reconstruction and the matters related thereto to be
completed
10
<PAGE>
in an expeditious manner. Any divested assets may be sold to either A or
B, if allowed by the relevant antitrust Regulatory Authority, in
accordance with clause 7.7.
6.5 It is the parties' intent, to the extent reasonably practicable (taking
into account the tax implications of all relevant matters), to complete
the Proposed Acquisition, the Reconstruction and the matters related
thereto at such time as all regulatory approvals have been received
from the Regulatory Authorities of the European Union, the United
States and such other jurisdictions as the Committee may determine
appropriate.
6.6 The parties agree that they will use all reasonable efforts to exhaust
all legal remedies in an effort to obtain any necessary approvals not
previously obtained, including but not limited to appeals to the
highest appellate court, tribunal or other body having jurisdiction
over the matter in dispute, seeking rehearings where necessary and
continuing with the approval processes until final determinations have
been received, in each case to enable the Proposed Acquisition, the
Reconstruction and the matters related thereto to be effected.
7. OFFER PRICE AND ALLOCATION OF ASSETS AND BUSINESSES
7.1 Offer Price
The price to be offered by Bidco in the Proposed Acquisition shall be
determined by the Committee and set forth in the Proposal Letter.
7.2 General Allocation Principles
Schedule 1 has been prepared by A and B to reflect the initial values
which the parties attribute to the assets and business of C in each
country or region set forth thereon. Schedule 2 designates the party
which will have the primary right (a "primary party") to be allocated
the assets and businesses of C in certain countries or regions outside
the UK, Ireland, the United States, Australia and New Zealand (or, in
those cases indicated in such schedule, the asset sharing in such
countries or regions between the parties) in accordance with the
procedures hereinafter set forth.
7.3 Allocation for UK, Ireland,the United States, Australia and New Zealand
7.3.1 The parties agree that the assets and businesses of C located in
the UK and Ireland shall have an agreed value equal to
approximately [*] of the Modified Aggregate Purchase Price and
that the aggregate values of the assets and businesses of C
located in the UK and Ireland and the United States shall equal
approximately [*] of the Modified Aggregate Purchase Price, and
[*] of the Modified Aggregate Purchase Price when the agreed
values of Australia and New Zealand are added. The actual
allocation of the specific assets and businesses of C located in
the United States between the parties will be finally determined
by the Committee prior to the Control Date, having taken into
account any requirements of Regulatory Authorities (it being the
intention of the parties to obtain the approval of the relevant
Regulatory Authorities in a manner which will
- -------------------
*This information has been omitted pursuant to a Request for Confidential
Treatment and such information has been filed separately with the Securities
and Exchange Commission.
11
<PAGE>
prevent the Offer from lapsing under Rule 12 of the City Code
and in a manner which will allow the Offer to become
unconditional in all respects in time to effect the Compulsory
Acquisition under the Companies Act, to the extent
practicable) and shall, if necessary, be adjusted immediately
prior to effecting the Reconstruction in such manner as is
determined by the Committee to reflect the principles
contained herein in the light of the facts and circumstances
(including as to divestments required by Regulatory
Authorities and the information referred to in clause 7.3.2)
known to the parties immediately prior to effecting the
Reconstruction.
7.3.2 The parties acknowledge that the percentages of value of the
Modified Aggregate Purchase Price allocated to (i) the UK
and Ireland, (ii) the United States and (iii) Australia and
New Zealand in schedule 1 are based on the parties' agreed
upon estimates of the recurring EBITs of the UK and Irish
operations, the United States operations and the Australian
and New Zealand operations of C for C's fiscal year ended
September 30, 1998. Accordingly, should the Committee, based
upon its review of the recurring EBITs of the UK and Irish
operations, the United States operations and the Australian
and New Zealand operations of C for the twelve month period
ending June 30, 1999 (or such later period as may be
appropriate) when the underlying financial information becomes
available to the parties, determine (using the same
methodology as used in the estimates above) that the EBITs of
any of (i) the UK and Irish operations, (ii) the United States
operations and/or (iii) the Australian and New Zealand
operations have changed in a sustainable manner, whether
positive or negative, by more than [*] from the applicable
fiscal 1998 estimate, the above percentage of value to be
attributed to the relevant operations in any such case shall
be revised to reflect the EBIT for the twelve month period
ending June 30, 1999 (or such later period as may be
appropriate), any such revision in no event to exceed [*],
whether positive or negative, and appropriate corresponding
adjustments shall be made to the schedule 1 values for
countries or regions other than the UK and Ireland, the
United States and/or Australia and New Zealand, as applicable.
In the event that the Committee determines that actual EBIT
for the twelve month period ending June 30, 1999 (or such
later period as may be appropriate) is not comparable to that
for the fiscal year ended September 30, 1998 due to the
effect of new investments made, variations in intercompany
charges or other non-recurring causes during either of such
periods, the Committee will make appropriate adjustments to
the relevant EBIT to appropriately mitigate such effect. In
the event more than a [*] adjustment, positive or negative,
is indicated, the Committee shall in good faith meet to review
the amount in excess of the [*] adjustment and the asset
allocations to each in such country with a view to making an
agreement (which may take effect after Completion) which
with regulatory consent will appropriately adjust the amount
in excess of [*] to the other party.
- -------------------
*This information has been omitted pursuant to a Request for Confidential
Treatment and such information has been filed separately with the Securities
and Exchange Commission.
12
<PAGE>
7.4 Process for Allocating Countries and Regions other than the UK and
Ireland, the United States and Australia and New Zealand following the
Control Date
7.4.1 As soon as practicable following the Control Date, the Committee
will determine the allocation between the parties of the assets
and businesses located outside of the UK and Ireland, the United
States and Australia and New Zealand on the country or region
basis as set out in schedule 1 in accordance with the procedure
hereinafter set forth taking into account any requirements of
Regulatory Authorities in accordance with the intention expressed
in clause 7.2. Such allocation shall, if necessary, be adjusted
immediately prior to effecting the Reconstruction in such manner
as is determined by the Committee to reflect the principles
contained herein in the light of the facts and circumstances
(including as to divestments required by Regulatory Authorities
and financial information about the C Group then available to
them) known to the parties immediately prior to effecting the
Reconstruction.
7.4.2 With respect to each country or region other than the UK and
Ireland, the United States and Australia and New Zealand set out
in schedule 1, the primary party (pursuant to clause 7.2 and as
shown on schedule 2) shall give written notice to the other party
within 30 days after the Control Date of the value which the
primary party is willing to allocate to its proposed ownership of
the assets and business of C in such country or region, which
value may be more or less than the values referred to in schedule
1. In the case of any country or region other than the UK and
Ireland, the United States and Australia and New Zealand for
which no primary party is agreed, either party may become the
primary party for such country or region by providing to the
other party written notice within 30 days after the Control Date
of the value which such party is willing to allocate to such
country or region, which value may be more or less than the value
referred to in schedule 1; and in the event there is competition
between the parties, the party whose initial valuation is the
highest shall become the primary party.
7.4.3 The party receiving such written notice of the primary party's
value for the assets and business of C in a country or region
shall be entitled to give written notice to the primary party
within 10 days of receiving notice from the primary party in
accordance with clause 7.4.2 setting forth an increased value for
the assets and business of C in such country or region, provided
that such increased value exceeds the primary party's value by at
least [*]. If no such notice of an increased value is provided,
the primary party shall be the acquiror of the assets and
business of C located in such country or region at the value
notified by the primary party. If such notice of an increased
value is provided, the primary party may elect to accept such
increased value within ten (10) days of receipt of such notice,
in which case the primary party shall be the acquiror of the
assets and business of C located in such country or region at
such increased value, or to reject such increased value, in which
case the other party shall be the acquiror of such assets and
business at such increased value.
- -------------------
*This information has been omitted pursuant to a Request for Confidential
Treatment and such information has been filed separately with the Securities
and Exchange Commission.
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7.4.4 All countries or regions, other than the UK and Ireland, the
United States and Australia and New Zealand and other than
those countries or regions allocated between the parties
pursuant to clause 7.4.3, shall be divested in accordance with
clause 7.7.1 or 7.7.2 or shared between the parties on an
equal basis.
7.4.5 Notwithstanding the foregoing, in any jurisdiction covered by
clause 7.3 or this clause 7.4 where a Regulatory Authority may
require filing before the Control Date or other filing in advance
of the allocation process contemplated hereby, such filings
shall, unless otherwise determined by the Committee, reflect the
designations of primary party and/or asset allocation set forth
in Schedules 1, and 2 , which schedules reflect the parties'
current view of the ultimate ownership of the assets of C, with
the parties to co-operate and use their reasonable efforts to
preserve the flexibility to adjust or make any supplemental or
further filings as may be required to accomplish the ultimate
allocation contemplated by clause 7.3 or this clause 7.4.
7.5 Joint Operations
In certain limited situations the commercially desirable and most
efficient allocation of the businesses of C may require that certain
facilities or assets be owned or operated by the parties on a joint
basis. Pursuant to clause 2.6.9 the Committee shall be responsible for
settling the terms and conditions of appropriate agreements covering
such matters. In performing such function, the Committee is instructed
that the parties are strictly committed to the principle that any such
ownership or operation shall be conducted in accordance with all
applicable laws and such requirements as may be imposed by Regulatory
Authorities. To that end, in all cases, the Committee shall timely
confer with counsel to structure any proposed joint venture and secure
any necessary regulatory approvals prior to effecting any joint
ownership or operation arrangement.
7.6 Final Adjustment
It is intended that the allocation of the assets and businesses of C
ultimately attributed to each party pursuant to clause 7, and the equal
sharing of proceeds of any divestments under clauses 7.7.1 and 7.7.2,
will, as nearly as possible, result in each party obtaining equal
shares in the value of the assets and businesses of C and sharing
equally in the obligation to pay the Actual Aggregate Purchase Price.
If the procedure provided for in clauses 7.3 and 7.4 or the next
sentence results in an aggregate allocation to either party under
clause 7 of less than 50% but more than [*] of the value of the assets
and businesses of C, the difference shall be made up by an appropriate
adjustment for the benefit of the lower party as determined by the
Committee based on the values as finally determined in accordance with
clause 7. If such procedure results in such allocation to either party
being [*] or less, the Committee shall determine such adjustments as
are necessary to meet the above [*] test. Such adjustments shall be
made by giving the party having [*] or less the right to select one or
more countries or regions for which it was the primary party, and which
was allocated to the other party under the procedures set forth in
clause 7.4, at the value at which the selected countries or regions
were allocated to the other party in accordance with clause 7.4. Such
selection shall first be
- -------------------
*This information has been omitted pursuant to a Request for Confidential
Treatment and such information has been filed separately with the Securities
and Exchange Commission.
14
<PAGE>
made from available entire countries or regions and, if unavailable,
from portions of other countries, consistent with applicable regulatory
requirements. The parties agree that the United Kingdom, Ireland, the
United States, Australia, New Zealand, Canada and Japan shall be
excluded for purposes of the foregoing selection process. Following
completion of the process set forth in this clause 7.6, the Committee
shall prepare a final schedule reflecting the allocation process in
accordance with clause 8.15. Schedule 3 provides an outline of the
allocation process timetable and schedule 4 provides, for illustrative
purposes only, an example of the bidding process contemplated by
clause 7.4.
7.7 Divestitures
7.7.1 As soon as practicable following the Control Date (or after the
Compulsory Acquisition, to the extent available), and as
economically justified in the opinion of the Committee, the
[*] of C (as such businesses are defined by the Committee),
together with such other assets of C as the Committee may
determine, will be either sold to unaffiliated third parties or
sold to or retained by A or B in accordance with such procedures
and utilising such advisors as the Committee may determine. The
net proceeds of such sales shall be shared equally between the
parties by such means as may be agreed by the Committee.
7.7.2 Other assets of C which must be sold to persons other than A
or B as required by Regulatory Authorities shall also be sold
in accordance with such procedures and utilising such advisors
as the Committee may determine, and the net proceeds of such
sales shall be shared equally between the parties by such
means as may be agreed by the Committee.
7.7.3 Notwithstanding the foregoing provisions of this clause 7.7, (i)
any sales of assets of C required by Regulatory Authorities to be
sold by A or B after the completion of the Reconstruction (and
which were not identified by the Committee prior to the
Reconstruction to be included under clause 7.7.2), (ii) any asset
dispositions required to be made by a party from its existing
business to secure the approval of a Regulatory Authority in any
jurisdiction, and (iii) any related consequences, including Tax,
shall be made solely for the account of A in respect of those
assets owned by A or its Affiliates, or by B in respect of those
assets owned by B or its Affiliates, in accordance with such
procedures as the party making such sale shall determine;
provided, however, that, so long as the sale of any such assets
to the other party (the "non-selling party") is permitted by the
relevant Regulatory Authorities, the non-selling party shall have
a right of first refusal, exercisable within 30 days following
the non-selling party's receipt of notice (which notice shall
identify the person offering to purchase such assets and shall
set forth the terms of such offer) from the party making any such
sale (the "selling party"), to acquire the relevant assets on the
terms set forth in such notice in respect of any offer for such
assets which the selling party has determined to accept. If the
non-selling party exercises its right of first refusal, the
parties shall consummate the purchase and sale of such assets as
soon as practicable following such acceptance.
- -------------------
*This information has been omitted pursuant to a Request for Confidential
Treatment and such information has been filed separately with the Securities
and Exchange Commission.
15
<PAGE>
If such right of first refusal is not exercised, the selling party
may consummate such sale on the terms set forth in such notice.
7.7.4 The parties agree that, if required by the relevant Regulatory
Authority, any assets of C required to be divested shall be
placed under independent management following the Control Date.
8. RECONSTRUCTION
8.1 The Reconstruction shall be effected in accordance with the principles
set out below unless the parties otherwise agree.
8.2 The parties shall co-operate and work together in good faith to
implement the Reconstruction as soon as reasonably practicable
following the Control Date (or after the Compulsory Acquisition, to the
extent available). If assets are used in or liabilities affect both the
A Business and the B Business, the parties shall negotiate in good
faith the division of such assets and liabilities between them, having
due regard to the extent of usage and the tax consequences of a
division or transfer.
8.3 Indebtedness for borrowed money of the C Group shall, to the extent
identifiable with and employed in connection with the A Business, be
included in the A Liabilities and, to the extent identifiable with and
employed in connection with the B Business, be included in the B
Liabilities. Such indebtedness shall include any intra-group loans,
which shall remain outstanding in accordance with their terms or as
otherwise determined by the Committee in the case of intra-group
indebtedness payable on demand. Any such indebtedness not so
identifiable or employed in connection with the A Business or the B
Business shall be borne by the parties on an equal basis. Any costs
associated with the replacement or continued maintenance of any such
indebtedness incurred as a result of the Offer or the Reconstruction,
including, without limitation, due to acceleration based on
change-of-control provisions or the like, shall be allocated to or
shared by the parties in accordance with the principles set forth in
this clause 8.3.
8.4 Other than as set forth in clause 8.3 or in clause 14, it is agreed
that the Reconstruction will be carried out so that all of the A
Liabilities will be liabilities which transfer with the A Business and
that all of the B Liabilities will be liabilities which transfer with
the B Business. Except to the extent caused by the negligent or willful
and wrongful acts or omissions of B, A undertakes to B (for itself and
as trustee and agent for each of its Affiliates) to indemnify and
defend B and its Affiliates and hold them harmless against any actions,
proceedings, losses, costs, claims, damages, liabilities and expenses
which any of them may suffer or incur in respect of any A Liability.
Except to the extent caused by the negligent or willful and wrongful
acts or omissions of A, B undertakes to A (for itself and as trustee
and agent for each of its Affiliates) to indemnify and defend A and its
Affiliates and hold them harmless against any actions, proceedings,
losses, costs, claims, damages, liabilities and expenses which any of
them may suffer or incur in respect of any B Liability.
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<PAGE>
8.5 A and B hereby agree to negotiate in good faith to enter into
satisfactory arrangements to enable the Reconstruction to be properly
effected as soon as reasonably possible such that by the Completion
Date the A Business owns all of the assets (including employees) and
rights and liabilities of the A Business and the B Business owns all of
the assets (including employees) and rights and liabilities of the B
Business and neither owns any material assets or liabilities not
forming part of such business carried on as at that date.
8.6 If after the Completion Date an A Business shall receive or be obliged
to make any payment which relates, in whole or in part, to the carrying
on of the B Business then (i) A shall procure that so much of that
payment as so relates shall be promptly paid to the relevant B Business
or to B, or (ii) B shall procure that so much of that payment as A was
obliged to make shall be paid to A.
8.7 If after the Completion Date any B Business shall receive or be obliged
to make any payment which relates, in whole or in part, to the carrying
on of the A Business then (i) B shall procure that so much of that
payment as so relates shall be promptly paid to the relevant A Business
or to A, or (ii) A shall procure that so much of that payment as B was
obliged to make shall be paid to B.
8.8 In the event that following Completion any assets forming part of and
used exclusively by the A Business remain legally owned by the B
Business, B shall transfer or procure to be transferred such assets to
A (or as it shall direct) for no net consideration and pending such
transfer shall, so far as legally possible, procure that such assets
are held on trust for A absolutely.
8.9 In the event that following Completion any assets forming part of and
used exclusively by the B Business remain legally owned by the A
Business, A shall transfer or procure to be transferred such assets to
B (or as it shall direct) for no net consideration and pending such
transfer shall, so far as legally possible, procure that such assets
are held on trust for B absolutely.
8.10 The adjustments provided for in clauses 8.6 to 8.9 shall be
appropriately modified to take account of any tax effects thereof and
of any adjustments which were included in the valuation by the parties
of the relevant portion of the A Business or the B Business, as the
case may be, and such adjustments shall be reflected in the final
accounting required pursuant to clause 8.15.
8.11 The parties agree that, prior to or immediately after Completion, they
will negotiate in good faith such separate contracts as are customary
in the industry and permitted by law, to be generally in effect for a
period of six months, in order to secure needed administrative services
and covering other matters such as trade product exchanges and
purchases and the sources of other products, in order to fulfil the
intention of the parties that each of them be placed in a position by
such contracts to successfully operate the assets and businesses
allocated to that party. The parties agree that all of the foregoing
arrangements shall be on a direct cost basis, which shall be subject to
verification by such party's outside auditors. If such initial
agreements are required for a term of longer than
17
<PAGE>
six months, the parties will, after expiration of the initial
agreements, negotiate new agreements on such terms as may be mutually
agreed.
8.12 Following Completion, the parties shall use their reasonable endeavours
to afford to each other and their respective counsel and accountants,
during normal business hours, reasonable access to all books and
records held by them with respect to the A Business or the B Business
(as appropriate) prior to Completion to the extent that such access may
be reasonably required by such parties, in connection with:
8.12.1 the preparation of tax returns or in connection with any
audit, amended return, claim for refund or any proceeding with
respect thereto;
8.12.2 the preparation of financial statements;
8.12.3 the preparation of any regulatory filings; and
8.12.4 for any other reasonable purpose.
8.13 Provided, however, that to the extent a party (the "reviewing party")
pursuant to clause 8.12 may for such purposes request access to
information which properly should not be disclosed to it for regulatory
or competitive reasons, the reviewing party's access shall be
restricted with access to be allowed only by an appropriate and
competent independent third party designated by the reviewing party,
with such independent third party to maintain the details of such
information as confidential, disclosing to the reviewing party only
such general conclusions and verification as counsel to the parties may
advise is appropriate.
8.14 If a party which has the benefit of an indemnity under clause 8.4 (the
"Indemnified Party") becomes aware of a matter which would be likely to
give rise to a claim thereunder:
8.14.1 the Indemnified Party shall notify the indemnifying party (the
"Indemnifier") as soon as practicable of the matter (stating
in reasonable detail the nature of the matter and, if
practicable, the amount claimed) and consult with the
Indemnifier with respect to the matter and if the matter has
become the subject of proceedings the Indemnified Party shall,
so far as practicable, notify the Indemnifier within
sufficient time to enable the Indemnifier time to select
counsel and contest the proceedings before final judgement;
8.14.2 the Indemnified Party shall, subject to it being so indemnified:
(a) take any action, institute any proceedings, give any
information, and make available any persons and
documents as the Indemnifier may reasonably request
to:
(i) dispute, resist, appeal, compromise, defend, remedy or
mitigate the matter; or
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(ii) enforce against a person (other than the
Indemnifier) the Indemnified Party's rights in
relation to the matter;
(b) only admit liability in respect of or settle the
matter if it has first obtained the Indemnifier's
written consent (not to be unreasonably withheld or
delayed).
8.15 The parties agree that, as soon as practicable following the Completion
(including the implementation of the provisions of clause 7.6), the
Committee shall prepare a final accounting in respect of the matters
covered by this Agreement in order to enable the parties to effect a
final reconciliation of the allocation process including the equal
sharing of any overfunding or underfunding of the Actual Aggregate
Purchase Price (including taking into consideration allocations,
disproportionate or otherwise, of liabilities and other items as the
Committee may deem appropriate) and the other provisions hereof
relating to the equal sharing of costs, benefits and other items
contemplated hereunder. The Committee shall have the responsibility to
develop, prior to the Control Date, the specific procedures to be
followed in the preparation and adoption of such final accounting by
the parties, including procedures for settling any final amounts and
resolving any disputes which may arise between the parties relating
thereto, failing which clause 2.3 shall apply.
9. INTELLECTUAL PROPERTY
9.1 The parties agree that the continued use of the Intellectual Property
after the Completion Date is vital to the successful operation of the A
Business and the B Business and that it is desirable that each party,
to the fullest extent permitted by law, have equal and independent
access to such Intellectual Property in order to maximise the benefits
and efficiencies of the transactions contemplated hereby and promote
competition to the fullest extent possible.
9.2 Because of the varying nature of the rights and obligations running
with Intellectual Property in each of the several jurisdictions
involved, it will be necessary, to insure the continued validity of
these rights worldwide, for the parties to develop ownership structures
that enable each party to obtain the benefits of the rights worldwide
and, with respect to trademarks and tradenames, in the jurisdictions in
which each party has acquired the assets and businesses.
9.3 In this connection, the parties will, prior to or as soon as
practicable following the Completion Date, enter into supplementary
agreements establishing appropriate mechanisms, whether through direct
joint ownership of the Intellectual Property, ownership through a
separate entity, direct ownership with licensing or otherwise, to
enable each party to continue fully and independently to use in its own
worldwide gases business (including the businesses acquired from C)
such Intellectual Property perpetually, subject to clause 9.6
concerning trademarks and tradenames, adopting the most suitable
mechanism to avoid the possibility of the abandonment of any such
Intellectual Property.
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9.4 In those jurisdictions where ownership of the Intellectual Property can
be legally transferred in a tax efficient manner to and held by the
party (or its subsidiaries) acquiring assets and businesses located
there without risk of loss of the benefits of the Intellectual Property
to the other party (or its subsidiaries) in other jurisdictions, it is
the current intention of the parties that direct ownership will follow
the assets and businesses so acquired. In those jurisdictions where
ownership of the Intellectual Property cannot be legally transferred
without risk of loss, or where the ownership of the assets and
businesses is held jointly by the parties, the ownership will be held
in such a manner to benefit both parties.
9.5 To make certain that the rights in and to the Intellectual Property so
acquired are equally available to the parties, license and other
agreements will be given to the parties to enable each to conduct its
business on a worldwide basis. Any royalties, license fees or other
charges for use of the Intellectual Property will be agreed by the
parties. All rights shall be equally available to the parties.
9.6 In addition, the parties will agree upon such standards as may be
appropriate in order to avoid confusion from the use by the parties of
the trademarks and tradenames (including the possible definitive
transfer of ownership of certain trademarks or tradenames to A or B
without license to the other or such as a requirement, in connection
with any such use, to identify such trademark or tradename with the A
name or the B name, as the case may be). The agreement shall also cover
the basis upon which the parties may use such trademarks and
tradenames, including the C name, on a long-term basis.
9.7 Each party agrees that, for a reasonable period of time following the
Completion Date, it shall provide the other party with reasonable
access to those facilities owned by C and its Affiliates prior to
Completion and to relevant personnel in order to enable the other party
to become knowledgeable concerning the technology, copyrights, trade
secrets, software and know-how (including operational know-how)
included in the Intellectual Property. The parties acknowledge that the
provisions of this clause 9 are intended to apply only to the
Intellectual Property owned by C and its Affiliates prior to Completion
as such Intellectual Property exists at the Completion Date and that
any intellectual property developed by A or B after Completion, whether
or not based on the Intellectual Property owned by C and its Affiliates
prior to Completion, shall be the sole property of the party which
develops the same and without any obligation to grant a license to the
other party.
10. NO UNAUTHORISED DISCLOSURE OR USE OF CONFIDENTIAL INFORMATION
10.1 A may provide (or has, prior to the date hereof, provided) B with
confidential or proprietary information relating to itself and to the
Proposed Acquisition and the Reconstruction from time to time (the "A
Confidential Information"). B warrants that it has not, and undertakes
that it shall not, without the prior written consent of A, disclose
(other than to its directors, officers, agents, employees and advisers
who are directly concerned with its assessment of the Proposed
Acquisition and whose knowledge of the A Confidential Information is
essential for that purpose and who are bound (by acknowledgement or
otherwise) by confidentiality obligations as least as stringent as
20
<PAGE>
those set forth herein) or use any A Confidential Information for any
purpose, other than with A in connection with the evaluation and
negotiation of the Proposed Acquisition and the making of the Offer.
10.2 B may also provide (or has, prior to the date hereof, provided) A with
confidential or proprietary information relating to itself and to the
Proposed Acquisition and the Reconstruction from time to time (the "B
Confidential Information"). A warrants that it has not, and undertakes
that it shall not, without the prior written consent of B, disclose
(other than to its directors, officers, agents, employees and advisers
who are directly concerned with its assessment of the Proposed
Acquisition and whose knowledge of the B Confidential Information is
essential for that purpose and who are bound (by acknowledgement or
otherwise) by confidentiality obligations as least as stringent as
those set forth herein) or use any B Confidential Information for any
purpose, other than with B in connection with the evaluation and
negotiation of the Proposed Acquisition and the making of the Offer.
10.3 Any information and analyses concerning C and the businesses of C
contained in this Agreement or provided by the parties shall be deemed
to be included within the A Confidential Information or the B
Confidential Information, as the case may be, it being acknowledged by
the parties, however, that all such information and analyses are
subject to confirmation by the parties through their own review and
examinations and that neither party is making any representation or
warranty to the other party as to the completeness or accuracy of such
information or analyses.
10.4 The foregoing restrictions shall not apply (i) to any information which
was in the public domain prior to disclosure to A or B, as the case may
be, (ii) to any information which becomes public knowledge after such
disclosure other than through breach of this Agreement by A or B, as
the case may be, (iii) to any information which A or B, as the case may
be, can show to have been in its possession independently prior to or
is developed independently after such disclosure, (iv) to any
information which A or B, as the case may be, can show that it received
after such disclosure in a legal way from other sources, (v) to the use
by A or its Affiliates or B or its Affiliates, as the case may be, of
its own Confidential Information internally in such party's or its
Affiliates' industrial gases business, or (vi) to the use by either
party or its Affiliates of the Confidential Information concerning C
referred to in clause 10.3 internally in their respective industrial
gas businesses.
10.5 A and B agree to preserve the confidentiality of the B Confidential
Information or the A Confidential Information, as the case may be, as
required by this Agreement for a period of three years from the date of
the termination of this Agreement, the Control Date or the final
transfer to either party of the assets and businesses of C in
accordance with the terms of this Agreement, whichever is later.
10.6 All written materials, schedules, documents and other writings which
are made available by or supplied by one party to the other as A
Confidential Information or B Confidential Information, as the case may
be, and all copies and reproductions thereof, shall at the request of
the supplying party, after the later of the date of the termination of
this
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Agreement, the Control Date or the final transfer to either party of the
assets and businesses of C in accordance with the terms of this Agreement,
be returned to the supplying party or certified in writing by the other
party to having been destroyed unless required to be retained by the
relevant party for legal or regulatory purposes, in which case they may
be retained subject to such party's confidentiality obligations
hereunder. The foregoing shall not apply to any Confidential
Information concerning C which does not include analyses prepared by
the party to which the same would otherwise be delivered hereunder.
10.7 Save as provided in this clause 10.7, neither party shall make any
disclosure or public announcement concerning the Proposed Acquisition
or the existence of this Agreement without the prior written consent of
the other party. Where a party reasonably determines that an
announcement or disclosure concerning the Proposed Acquisition or A
Confidential Information or B Confidential Information is required by
law, by a rule of a stock exchange on which its shares are listed or
traded or by a governmental authority or other authority with relevant
powers, the announcement or disclosure shall be made after consultation
with the other party after taking into account the other party's
reasonable requirements as to its timing, consent and manner of making
or dispatch.
11. ASSIGNMENT
Neither party shall have the right to assign its rights or obligations
under this Agreement to any other person, except majority-owned
subsidiaries, without the prior written consent of the other party.
Such consent shall not be unreasonably withheld in the case where a
party desires to use a less than majority-owned entity to take title to
the assets and businesses located in a particular country.
Notwithstanding any assignment permitted under this clause 11, the
assigning party shall continue to be responsible for any obligations
under this Agreement so assigned by such party.
12. NOTICES
All notices, requests or other communications hereunder shall be in
writing, clearly marked "Confidential", and shall be deemed to have
been duly delivered if delivered personally or by telecopier or sent by
registered or certified mail, postage prepaid, return receipt
requested, to the parties at their respective addresses, as follows:
If to A: Mr. Alain Joly
Chairman and Chief Executive Officer
L'Air Liquide, S.A.
75, Quai d'Orsay
75321 Paris Cedex 07
France
With a copy to: Mr. Laurent Blamoutier
Legal Manager
L'Air Liquide, S.A.
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<PAGE>
75 Quai d'Orsay
75321 Paris Cedex 07
France
If to B Mr. Harold A. Wagner
Chairman and Chief Executive Officer
Air Products and Chemicals, Inc.
7201 Hamilton Boulevard
Allentown, Pennsylvania 18195-1501
U.S.A.
With a copy to: Mr. W. Douglas Brown
Vice President and General Counsel
Air Products and Chemicals, Inc.
7201 Hamilton Boulevard
Allentown, Pennsylvania 18195-1501
U.S.A.
13. NO PARTNERSHIP OR AGENCY
Nothing in this Agreement shall be deemed to constitute a partnership
between the parties to it nor constitute any party the agent of another
party for any purpose.
14. EXPENSES
The parties agree to share equally between them the costs and expenses
incurred by each of them in relation to:
14.1 the Offer (to the extent that such costs and expenses are of the type
and at a rate customarily incurred in, and payable following
announcement of, a public takeover in the UK, including break fees
payable to C, if any), but excluding the costs and expenses referred to
in clause 4.3 and the fees of any external financial, legal or other
advisors and any internal costs or expenses incurred by the parties;
14.2 any costs or expenses resulting from any actions or proceedings by
third parties which may be threatened or commenced relating to the
Proposed Acquisition or the Reconstruction;
14.3 the process of allocating the assets and businesses of the C Group
(including any related costs, including Tax, incurred in the C Group or
Bidco as the result thereof); and
14.4 the Tax costs (net of any Tax benefits) arising directly or indirectly
in respect of, by reference to or in consequence of (i) the
Reconstruction and the transactions contemplated thereby (and for the
avoidance of doubt such costs and benefits shall not include any
arising to A or B individually), and (ii) any asset disposition
referred to in clauses 7.7.1 or 7.7.2.
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15. TERMINATION
15.1 Except as provided in clause 15.2, this Agreement shall terminate on
[*] unless:
15.1.1 the Offer has become or been declared unconditional in all
respects on or before [*], in which case it shall not
terminate; or
15.1.2 the Offer has not lapsed or been withdrawn by such date in
which case this Agreement will terminate on such Offer lapsing
or being withdrawn after that date but shall not terminate if
the Offer becomes or is declared unconditional in all respects
after such date.
15.2 If, prior to [*] the Offer in any form has lapsed pursuant to
Rule 12 of the City Code (or as a result of any condition of the Offer
being invoked where there has been an occurrence falling within the
provisions of Rule 12) and at [*] the parties are awaiting any
decision of a Regulatory Authority in respect thereof before making a
new offer, this Agreement shall not terminate until the later of:
15.2.1 the expiry of the period allowed by the City Code for the
making of the new offer without such new offer being made; and
15.2.2 the date the new offer lapses or is withdrawn.
For the avoidance of any doubt, if the new offer becomes or is declared
unconditional in all respects this Agreement shall not terminate.
15.3 Termination of this Agreement shall not affect the parties' accrued
rights and obligations at the date of termination.
15.4 The provisions of clauses 1, 10, 12, 14, 15, 17, 18, 19 and 20 shall
survive any termination of this Agreement as shall the provisions of
Acquisition Agreement One.
16. FURTHER ASSURANCES
16.1 Subject to the provisions of the Agreement, A and B shall use their
reasonable endeavours (and taking into account the relevant tax
implications) to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary or desirable under any
applicable law of a relevant jurisdiction to consummate the Proposed
Acquisition, the Reconstruction and the matters related thereto.
16.2 A and B agree to execute and deliver such other documents,
certificates, agreements and other writings and to take such other
actions as may be reasonably necessary or desirable in order to
consummate or implement expeditiously the Proposed Acquisition, the
Reconstruction and the matters related thereto and further agree to
discuss in good faith any matters arising in connection therewith.
16.3 With respect to A or B's home country Tax treatment of Bidco, C and any
C Group member, and the transactions contemplated hereunder (but, in
the case of each party, with
- -------------------
*This information has been omitted pursuant to a Request for Confidential
Treatment and such information has been filed separately with the Securities
and Exchange Commission.
24
<PAGE>
respect to the assets and businesses of C only to the extent that those
assets and businesses were allocated to such party), A shall be
entitled to make any and all necessary or appropriate Tax filings and
Tax elections in France, and B shall be entitled to make any and all
necessary or appropriate Tax filings and Tax elections in the United
States; and both parties will reasonably cooperate with each other in
making any such Tax filings or elections and neither party shall
unreasonably withhold any consents with respect thereto, it being the
intent hereunder that neither party will suffer any Tax costs due to
the Tax filings or elections made by the other in its home country or
if any such Tax costs are identified the parties shall reach a mutually
satisfactory agreement on how to proceed.
17. NO THIRD PARTY RIGHTS
This Agreement is intended solely for the benefit of A and B and their
respective Affiliates and is not intended to confer any benefits upon,
or create any rights in favour of, any other entity or person.
18. ENTIRE AGREEMENT; AMENDMENT
18.1 With the exception of Acquisition Agreement One, which shall remain in
full force and effect, and any agreement between the parties expressed
to be supplemental to this Agreement, this Agreement constitutes the
entire agreement between the parties with respect to the subject matter
of this Agreement and supersedes all prior agreements and
understandings, both oral and written, between the parties with respect
to the subject matter of this Agreement.
18.2 This Agreement shall not be amended or modified unless such amendment
or modification is set forth in a writing duly executed by the parties'
respective authorised representatives.
19. GOVERNING LAW AND JURISDICTION
This Agreement shall be governed by the laws of England. In connection
with any action, suit or proceeding arising in connection with this
Agreement or any transaction contemplated hereby, A and B each: (i)
agree that either party may bring a suit, action or other legal
proceeding against the other party only in a court of record of
England; (ii) consent to the exclusive jurisdiction over it of any such
court in any such suit, action or proceeding, (iii) waive any
objections it may have to the venue of any such court in any such suit,
action or proceeding, and (iv) consent to service of process upon it by
any appropriate method under the laws or rules of the jurisdiction in
which such suit, action or proceeding is commenced.
25
<PAGE>
20. INJUNCTION FOR BREACH
If either party shall breach any of its obligations hereunder,
including without limitation those relating to maintaining the
confidentiality of, or the use of, the A Confidential Information or
the B Confidential Information, as the case may be, in recognition of
the irreparable harm that would be incurred by the other party, such
other party shall, in addition to its claim for damages incurred or any
other legal remedies available to it, be entitled to an injunction
and/or specific performance with respect to any such breach.
IN WITNESS WHEREOF, the parties hereto by their duly authorised
representatives have executed this Agreement on the day and year first
above written.
L'AIR LIQUIDE, S.A.
By: /s/ Alain Joly
--------------------------------
Name: Alain Joly
Title: Chairman and Chief Executive Officer
AIR PRODUCTS AND CHEMICALS, INC.
By: /s/ Harold A. Wagner
--------------------------------
Name: Harold A. Wagner
Title: Chairman and Chief Executive Officer
26
<PAGE>
SCHEDULE 1
----------
[ * ] are sold at market value
This is deducted from the total price and the remainder is applicable to gases
business.
EXAMPLE
Total business value at [ * ] [ * ]
other incl options [ * ]
Debt [ * ]
[ * ]
[ * ] [ * ]
[ * ] [ * ]
<TABLE>
<CAPTION>
- --------------------- ---------------- -------------- ----------------- ----------------------
GBPMM C% Estimated EBIT Value
Ownership EBIT Multiple
- --------------------- ---------------- -------------- ----------------- ----------------------
<S> <C> <C> <C> <C>
UK [ * ] [ * ]
- --------------------- ---------------- ----------------- ----------------------
Ireland [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
Subtotal [ * ] [ * ] [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
US [ * ] [ * ] [ * ] [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
Australia Gases [ * ] [ * ] [ * ] [ * ]
- --------------------- ---------------- ----------------- ----------------------
New Zealand [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
BP Project [ * ] [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
Subtotal [ * ] [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
TOTAL [ * ] [ * ] [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
Canada [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
Other Americas:
Chile [ * ]
Colombia [ * ]
Venezuela [ * ]
Brazil [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
Subtotal [ * ] [ * ] [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
Other Europe:
Poland [ * ]
Russia [ * ]
Cyrostar [ * ]
Turkey [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
Subtotal [ * ] [ * ] [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
Africa [ * ] [ * ] [ * ] [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
Japan [ * ] [ * ] [ * ] [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
Asia & JV's
Singapore [ * ]
Hong Kong [ * ]
Malaysia [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
Subtotal [ * ] [ * ] [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
Taiwan [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
Philippines [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
Indonesia [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
Korea [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
Thailand [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
China 100%
- --------------------- ---------------- -------------- ----------------- ----------------------
China 50%
- --------------------- ---------------- -------------- ----------------- ----------------------
Subtotal [ * ] [ * ] [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
Elgas [ * ] [ * ] [ * ] [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
India [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
Pakistan [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
Bangladesh [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
Subtotal [ * ] [ * ] [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
TOTAL 2 [ * ] [ * ] [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
Unallocated 3 [ * ] [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
GRAND TOTAL (1 + 2 + 3) [ * ] [ * ] [ * ]
- --------------------- ---------------- -------------- ----------------- ----------------------
</TABLE>
- -------------------
*This information has been omitted pursuant to a Request for Confidential
Treatment and such information has been filed separately with the Securities
and Exchange Commission.
27
<PAGE>
Schedule 2
----------
Designation of Primary Party
----------------------------
Businesses Primary party
---------- -------------
[*] [*]
[*] [*]
[*]
ELGAS Business [*]
Cryostar Business [*]
[*] [*]
[*] [*]
Geographies
-----------
UK & Ireland Allocated to A
United States [*]
Australia/N. Zealand
(including BP Project) Allocated to B
Canada [*]
S. America (excluding Brazil) [*]
Brazil [*]
Africa [*]
Poland, Russia & Turkey [*]
Singapore, Hong Kong,
Malaysia, JV's [*]
Pakistan/Bangladesh [*]
India [*]
Other Asia JV's, excluding
Thailand + China + Taiwan [*]
Taiwan [*]
Thailand [*]
China [*]
Japan [*]
The following projects are scheduled to be split 50/50: [*]
- -------------------
*This information has been omitted pursuant to a Request for Confidential
Treatment and such information has been filed separately with the Securities
and Exchange Commission.
28
<PAGE>
Schedule 3
<TABLE>
<CAPTION>
Allocation Process Timetable
(clause 7 of Agreement)
Date Event
---- -----
<S> <C>
1. Control Date ("CD") Process commenced to develop the
parties' respective valuations for
those countries or regions referred to
in clause 7.3
2. By: CD + 30 The primary party designated on
schedule 2 in respect of each country
or region delivers its value of each
such country or region to the other
party.
[Note 1] With respect to countries or regions
for which no primary party is agreed,
either party may become the primary
party by delivering its value for any
such country or region to the other
party by CD + 30 (if both parties
deliver a value in respect of the same
country or region, the party delivering
the highest value will be deemed the
primary party in respect thereof).
3. By: CD + 40* [Note 2] The other party may deliver to the
primary party a value primary party in
respect of any country or region.
4. By: CD + 50* [Note 3] If any notices are delivered under 3
above, the primary party in respect of
each country or region covered by such
notice has the right to accept or reject
the increased value set forth therein
for such country or region.
</TABLE>
Note 1. If no values are provided for a country or region in respect
of which no primary party is agreed, such country or region
is divested or shared between the parties on an equal basis.
Note 2. If no notice of increased value is delivered, the country or
is allocated to the primary party at such party's valuation
delivered under paragraph 2.
Note 3. If a notice of increased value is delivered and the primary party
(i) accepts the increased value, the country or region is allocated
to the primary party at such increased value or (ii) rejects such
increased value, the country or region is allocated to the other
party at such increased value.
- --------
* In each case, the additional 10 day notice period commences upon delivery
of the relevant notice referred to in the previous clause.
29
<PAGE>
Schedule 4
Bidding Example
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Primary
Party [ * ] Bid/Match [ * ] Bid/Match Total
----- ----- --------- ----- --------- -----
US & UK (1) [ * ] [ * ] [ * ] [ * ]
Australia, New Zealand (1) [ * ] [ * ] [ * ] [ * ]
Canada, South America (2) [ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
JV's (3) [ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
Poland, Russia, Turkey (3) [ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
Japan (4) [ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
Africa, India, Others (5) [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
</TABLE>
(1) Not subject to bid process; reflects only a hypothetical allocation for
purposes of this schedule.
(2) [ * ] Bids [*]; [ * ] outbids by more than [*]; allocated to [ * ] because
[ * ] does not match.
(3) [ * ] Bids; [ * ] does not bid; allocated to [ * ].
(4) [ * ] Bids [*]; [ * ] outbids by more than [*]; [ * ] matches;
allocated to [ * ].
(5) purchase price [ * ] - US, UK & Group II Countries [ * ] = Africa,
India & Others [ * ].
(6) value is equalized in accordance with clause 7.6 at this stage.
- -------------------
*This information has been omitted pursuant to a Request for Confidential
Treatment and such information has been filed separately with the Securities
and Exchange Commission.
30
<TABLE>
<CAPTION>
COMPUTATION OF EARNINGS PER SHARE
(Millions of dollars, except per share)
Year Ended 30 September
----------------------------------------------------
1999 1998 1997
<S> <C> <C> <C>
Earnings
Income before cumulative effect of accounting changes $451 $547 $429
Cumulative effect of accounting changes 0 0 0
----------- ------------- ------------
Net Income $451 $547 $429
=========== ============= ============
Basic shares
Average common shares outstanding during the year 212 216 220
=========== ============= ===========
Basic earnings per share
Income before cumulative effect of accounting changes $2.12 $2.54 $1.95
Cumulative effect of accounting changes 0 0 0
----------- ------------- ------------
Net Income $2.12 $2.54 $1.95
============ ============= ============
Diluted shares
Average common shares outstanding during the year 212 216 220
Shares issuable from stock option and award plans 4 4 5
----------- ------------- -----------
Adjusted average common shares outstanding 216 220 225
=========== ============= ===========
Diluted earings per share
Income before cumulative effect of accounting changes $2.09 $2.48 $1.95
Cumulative effect of accounting changes 0 0 0
----------- ------------- -----------
Net income $2.09 $2.48 $1.95
=========== ============= ===========
</TABLE>
Exhibit (a)(12)
<TABLE>
<CAPTION>
AIR PRODUCTS AND CHEMICALS, INC., AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Unaudited)
Year Ended 30 September
---------------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- ------- -------- --------
(Millions of dollars)
<S> <C> <C> <C> <C> <C>
Earnings:
Income before extraordinary item and
the cumulative effect of accounting
changes:
$368.2 $416.4 $429.3 $546.8 $450.5
Add (deduct):
Provision for income taxes 186.2 195.5 203.4 280.9 209.5
Fixed charges, excluding capitalized
interest 148.8 184.0 233.0 202.8 194.4
Capitalized interest amortized during
the period 9.1 9.4 8.3 7.4 6.1
Undistributed earnings of less-than-
fifty-percent-owned affiliates (25.4) (40.6) (31.1) (25.3) (44.5)
------ ------ ------ -------- ------
Earnings, as adjusted $686.9 $764.7 $842.9 $1,012.6 $816.0
====== ====== ====== ======== ======
Fixed Charges:
Interest on indebtedness, including
capital lease obligations $139.4 $171.7 $217.8 $186.7 $175.4
Capitalized interest 18.5 20.0 20.9 18.4 24.7
Amortization of debt discount premium
and expense .2 1.5 1.8 1.9 1.3
Portion of rents under operating leases
representative of the interest factor 9.2 10.8 13.4 14.2 17.7
------ ------ ------ -------- ------
Fixed charges $167.3 $167.3 $204.0 $221.2 $219.1
====== ====== ====== ======== ======
Ratio of Earnings to Fixed Charges: 4.1 4.1 3.7 4.6 3.7
====== ====== ====== ======== ======
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
MAJOR FACTORS AFFECTING EARNINGS
Major factors affecting comparison of earnings per share between 1999 and 1998
were:
o Lower equipment segment activity
o Increased equity affiliates' income
o Productivity gains continue to enhance operating results
o Chemicals margins decline due to Asian economy secondary impacts, higher
raw material prices, and customer outage
o Continued pricing pressure in gases
o Prior year gain of $.26 per share from American Ref-Fuel sale and contract
settlements
RESULTS OF OPERATIONS
Consolidated
(millions of dollars, except per share) 1999 1998 1997
- ---------------------------------------------------------------------------
Sales $5,020.1 $4,919.0 $4,637.8
- ---------------------------------------------------------------------------
Operating income 724.7 845.7 726.1
- ---------------------------------------------------------------------------
Equity affiliates' income 61.5 38.0 66.3
- ---------------------------------------------------------------------------
Net income 450.5 546.8 429.3
- ---------------------------------------------------------------------------
Basic earnings per share 2.12 2.54 1.95
- ---------------------------------------------------------------------------
Diluted earnings per share 2.09 2.48 1.91
- ---------------------------------------------------------------------------
The results of 1999, 1998, and 1997 included the effects of special items.
These items should be considered in the comparison of the annual results.
TWO GRAPHS APPEAR HERE SIDE-BY-SIDE INDICATING SALES (IN BILLIONS OF
DOLLARS) AND OPERATING INCOME (IN MILLIONS OF DOLLARS), RESPECTIVELY
FOR FISCAL YEARS 95, 96, 97, 98 AND 99.
Fiscal 1999 results included several special items which essentially offset at
the net income and earnings per share level. The components of special items on
a before- and after-tax basis were: a gain of $34.9 million ($23.6 million
after-tax, or $.11 per share) on the partial sale of assets related to the
formation of Air Products Polymers (a 65% majority-owned venture with
Wacker-Chemie GmbH); expense of $34.2 million ($21.9 million after-tax, or $.10
per share) related to the global cost reduction programs; expense of $10.3
million ($6.4 million after-tax, or $.03 per share) related to chemicals
facility closure costs; and a gain of $7.0 million ($4.4 million after-tax, or
$.02 per share) from a gain on foreign currency options from the expected BOC
acquisition, net of preacquisition expenses. Additional details on the formation
of Air Products Polymers and The BOC Group plc ("BOC") acquisition are included
in Notes 17 and 18 to the consolidated financial statements, respectively.
Fiscal 1998 results were increased by net after-tax income of $58.1 million, or
$.26 per share, for special items. The components of special items on a before-
and after-tax basis were: a gain of $62.6 million ($35.1 million after-tax, or
$.16 per share) on the sale of substantially all of the company's 50% interest
in the American Ref-Fuel Company; a gain of $28.3 million ($15.4 million
after-tax, or $.07 per share) from a power contract restructuring related to an
American Ref-Fuel project; and a gain of $12.6 million ($7.6 million after-tax,
or $.03 per share) from a cogeneration project contract settlement. Additional
details of the divestiture of the American Ref-Fuel Company are included in Note
17 to the consolidated financial statements.
Fiscal 1997 results were increased by net after-tax income of $1.6 million, or
$.01 per share, for special items. The components of special items on a before-
and after-tax basis were: a gain of $9.5 million ($5.9 million after-tax, or
$.03 per share) on the sale of the landfill gas recovery business; a gain of
$7.3 million ($4.5 million after-tax, or $.02 per share) on the partial sale of
the cost basis Daido Hoxan investment; an impairment loss of $9.3 million ($6.0
million after-tax, or $.03 per share) in the chemicals release agent business;
and a loss of $4.8 million ($2.8 million after-tax, or $.01 per share) from debt
refinancing by an equity affiliate.
Exclusive of Special Items
(millions of dollars, except per share) 1999 1998 1997
- ----------------------------------------------------------------------------
Sales $5,020.1 $4,919.0 $4,637.8
- ----------------------------------------------------------------------------
Operating income 769.2 845.7 718.6
- ----------------------------------------------------------------------------
Equity affiliates' income 61.5 38.0 71.1
- ----------------------------------------------------------------------------
Net income 450.8 488.7 427.7
- ----------------------------------------------------------------------------
Basic earnings per share 2.12 2.28 1.94
- ----------------------------------------------------------------------------
Diluted earnings per share 2.09 2.22 1.90
- ----------------------------------------------------------------------------
The company achieved record sales of $5,020.1 million in fiscal 1999, while net
income and diluted earnings per share declined. Sales increased 2%, or $101.1
million over the $4,919.0 million reported in fiscal 1998. Operating income,
excluding special items, was down $76.5 million, a 9% decrease. Equity
affiliates' income increased to $61.5 million from $38.0 million in fiscal 1998.
The resulting diluted earnings per share was $2.09, a $.13 decline, or 6%.
Consolidated sales grew 2%, primarily as a result of growth in chemicals and
gases outside North America. Chemicals businesses experienced volume gains as a
result of the new emulsions venture with Wacker-Chemie GmbH and prior year
acquisitions. Lower prices in
23
<PAGE>
both gases and chemicals had an unfavorable impact on sales growth. The
equipment segment sales were lower than the strong prior year sales. The impact
of foreign currency changes was not significant.
Operating income, excluding special items, decreased $76.5 million, or 9%, from
the prior year. Lower project activity in the equipment segment was a major
contributor to the decline. Operating income was also unfavorably impacted by
the margin decline in the chemicals segment, as prices declined in several key
markets while raw material costs increased. There were additional costs
associated with new capacity brought onstream, and some major customers
experienced facility outages and operating problems. Weakened gases sales in the
electronics and metals markets combined with ongoing pricing declines
unfavorably impacted operating income.
Equity affiliates' income increased due to the addition of the redispersible
powders venture formed with Wacker-Chemie GmbH, unfavorable foreign exchange
impacts in the prior year, and improved performance at several affiliates.
Sales of $4,919.0 million in fiscal 1998 were 6% above the $4,637.8 million
reported in fiscal 1997. Operating income, excluding special items, of $845.7
million was up $127.1 million, an 18% increase. Equity affiliates' income,
excluding special items, declined to $38.0 million from $71.1 million in 1997.
The resulting diluted earnings per share, excluding special items, was $2.22, a
$.32 increase or 17%. The record diluted earnings per share, excluding special
items, was obtained in spite of an unfavorable year-to-year currency and
exchange impact of $.10. The results also overcame a $.06 per share impact from
the loss of earnings of the divested American Ref-Fuel business.
Total sales in fiscal 1998 increased 6%, net of a 1% unfavorable currency
impact. Sales growth in the gases and chemicals segments was due to broad-based
volume growth that was tempered by pricing pressure. Sales in the equipment
segment declined 8% from fiscal 1997. Volume growth in industrial gases and
chemicals coupled with continuing productivity gains and a favorable product mix
in the equipment business produced an 18% improvement in consolidated operating
income, exclusive of special items. Equity affiliates' income declined primarily
due to the divestiture of the American Ref-Fuel Company and the unfavorable
business environment in Asia.
Segment Analysis
A description of the products and services and markets for each of the business
segments is included in Note 20 to the consolidated financial statements.
The company adopted Statement of Financial Accounting Standards (SFAS) No. 131,
"Disclosure about Segments of an Enterprise and Related Information," effective
as of the end of fiscal year 1999. The primary change is that the power
generation and Pure Air(TM) businesses moved to the gases segment from the
equipment segment. The segment results for fiscal years 1998 and 1997 have been
restated to reflect these changes.
<TABLE>
<CAPTION>
Gases
(millions of dollars) 1999 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $2,996.4 $2,950.1 $2,719.4
- -----------------------------------------------------------------------------
Operating income 521.9 565.0 500.1
- -----------------------------------------------------------------------------
Operating income - excluding special items 548.9 565.0 492.8
- -----------------------------------------------------------------------------
Equity affiliates' income 46.8 33.3 41.8
- -----------------------------------------------------------------------------
</TABLE>
Sales of $2,996.4 million in fiscal 1999 increased 2%, or $46.3 million over
fiscal 1998. Newly consolidated Asian entities contributed $27.0 million of the
sales growth. Unfavorable currency impacts reduced year-to-year growth by
slightly less than 1%.
Overall gases volumes grew modestly, reflecting weak manufacturing activity in
North America and Northern Europe. LOX/LIN volumes including non-cryo were up
approximately 2% in North America and 8% in Europe. In the United States,
depressed conditions in the metals and electronics markets offset growth in
several other end use markets. Packaged gases volumes grew 6% in the United
States, with a 3% increase in same-store sales and 3% growth from acquisitions.
In Europe, packaged gases sales growth was 3%. Pricing in the LOX/LIN component
of merchant gases was down about 2% in both North America and Europe, with
overall pricing experiencing continued competitive pressure. Tonnage gases
volume remained flat in North America due to weak steel demand. Tonnage gases
volume in Europe increased 4% as a result of loading at the Rotterdam complex.
Operating income decreased $43.1 million to $521.9 million, or 8%. Excluding the
$27.0 million charge for the global cost reduction, operating income declined
$16.l million to $548.9 million, or 3%, down from the prior year. Operating
margin for the fiscal year, excluding the special item, was 18.3%, down from
19.2% in the prior year. The operating margin decline is mainly due to
geographic mix, lower volumes to steel customers, a weak electronics market, and
competitive pricing pressure, partially offset by cost reduction efforts.
Equity affiliates' income increased $13.5 million to $46.8 million, or 41%. This
increase is due to unfavorable foreign exchange effects in the prior year
combined with improving performance at several affiliates, particularly Korea
and Mexico.
Sales of $2,950.1 million in fiscal 1998 increased 8%, or $230.7 million from
fiscal 1997 reported sales. Unfavorable currency impacts reduced year-to-year
growth by 2%.
Merchant gases volumes grew 7% in both the United States and Europe. The volume
growth impact on sales was tempered by lower pricing for merchant products in
the United States and Europe of 3% and 2%, respectively. Tonnage gases volume
increased 18% in Europe, driven by loading of new facilities serving the
chemicals process industry. Domestic tonnage gases were essentially flat
year-to-year. Asset management efforts and continuing productivity gains
combined with the favorable volume growth to increase both total operating
income and the operating margin. Operating income, excluding special items, of
$565.0 million was up $72.2 million, or 15%. The operating margin increased from
18.1% in fiscal 1997 to 19.2% in fiscal 1998.
24
<PAGE>
Equity affiliates' income of $33.3 million declined $8.5 million in fiscal 1998,
primarily due to unfavorable business conditions in Asia. Total currency and
exchange effects reduced equity affiliates' income approximately $10.5 million.
Favorable performance and lower overheads in the power generation business
resulted in a $2.7 million increase in equity affiliates' income for 1998.
Chemicals
(millions of dollars) 1999 1998 1997
- -----------------------------------------------------------------------------
Sales $1,657.4 $1,539.2 $1,448.1
- -----------------------------------------------------------------------------
Operating income 193.7 247.2 198.3
- -----------------------------------------------------------------------------
Operating income - excluding special items 208.0 247.2 207.6
- -----------------------------------------------------------------------------
Equity affiliates' income 12.4 .6 .4
- ------------------------------------------------------------------------------
Sales in fiscal 1999 increased 8%, or $118.2 million, to $1,657.4 million.
Operating income declined $53.5 million to $193.7 million. Excluding the impact
of global cost reduction efforts and a facility closure expense, operating
income was $208.0 million, down 16% or $39.2 million. Overall volume grew 10%,
with 7% of the growth primarily from a new emulsions venture with Wacker-Chemie
GmbH. Amines and polyvinyl alcohol volumes declined from the strong levels of
fiscal 1998. The impact of the Imperial Chemicals Industries (ICI) methylamines
acquisition in the prior year also contributed to sales growth. Prices in the
emulsions business declined in fiscal 1999, while raw material costs increased
over the year, resulting in a declining margin. Pricing declines in
methylamines and polyvinyl alcohol resulted largely from impacts of the Asian
economy. Currency and exchange-related effects were not significant to the
change in sales or operating income in fiscal 1999. The operating income
decrease was due to price declines combined with raw material cost increases,
increased costs of new capacity additions, and customer facility outages and
operating difficulties. Operating margin in fiscal 1999, excluding special
items, was 12.5% compared to 16.1% in the prior year.
Equity affiliates' income increased $11.8 million to $12.4 million. This
increase reflects the company's 20% interest in the redispersible powders
venture formed with Wacker-Chemie GmbH in October 1998.
Sales in 1998 increased 6%, or $91.1 million, to $1,539.2 million. Operating
income increased 25%, or $48.9 million, to $247.2 million. Fiscal 1997 results
included a $9.3 million asset impairment loss in the release agents business
(sold in the second quarter of fiscal 1997). Excluding this loss, operating
income increased $39.6 million, to $247.2 million, or 19%. The sales increase
was due to volume gains in most businesses, with overall volume up 10%. Growth
in amines led the overall volume growth due to strong base customer demand and
the impact of the ICI methyl and higher amines acquisitions. The volume growth
was tempered by lower polyvinyl alcohol margins and lower methanol and ammonia
product prices and margins. Operating income was favorably impacted by
productivity gains. Currency and exchange effects reduced sales growth by 1%
and operating income growth by 3% in fiscal 1998. Operating margin in fiscal
1998 was 16.1%, compared with 14.3% in fiscal 1997, excluding the asset
impairment charge. Equity affiliates' income increased $.2 million in
fiscal 1998.
<TABLE>
<CAPTION>
Equipment
(millions of dollars) 1999 1998 1997
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $366.3 $429.7 $469.1
- ----------------------------------------------------------------------------
Operating income 34.7 59.2 30.0
- ----------------------------------------------------------------------------
Operating income - excluding special items 37.4 59.2 30.0
- ----------------------------------------------------------------------------
Equity affiliates' income 1.6 1.9 .8
- ----------------------------------------------------------------------------
</TABLE>
Sales declined $63.4 million to $366.3 million from $429.7 million in fiscal
1998. Operating income decreased $24.5 million to $34.7 million. Excluding the
impact of the global cost reduction effort, operating income declined $21.8
million, or 37%, to $37.4 million. The decrease in sales and operating income
was due to lower project activity in most areas, particularly natural gas
liquefaction equipment. Sales backlog for the equipment segment declined to
$175 million at 30 September 1999, compared to $302 million at 30 September
1998. It is expected that $136 million of the backlog will be completed
during fiscal 2000.
During fiscal year 1998, sales decreased $39.4 million due to lower project
activity, primarily in the company's gas separation business. Operating income
increased $29.2 million to $59.2 million. The increase in operating income was a
result of improved project performance and a more profitable project mix,
including higher natural gas liquefaction equipment sales. Sales backlog for the
equipment segment declined slightly to $302 million at 30 September 1998,
compared with $310 million at 30 September 1997.
Other Businesses
Other businesses includes the equity investment in the American Ref-Fuel
business sold in December 1997 and the landfill gas business sold in November
1996.
<TABLE>
<CAPTION>
(millions of dollars) 1999 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $-- $-- $1.2
- -----------------------------------------------------------------------------
Operating income .5 .7 9.7
- -----------------------------------------------------------------------------
Operating income - excluding special items .5 .7 .2
- -----------------------------------------------------------------------------
Equity affiliates' income .7 2.2 23.3
- -----------------------------------------------------------------------------
Equity affiliates' income - excluding special items .7 2.2 28.1
- -----------------------------------------------------------------------------
</TABLE>
Sales in fiscal 1997 were related to the landfill gas business sold in November
1996. Operating income in fiscal year 1997 included a gain of $9.5 million,
related to the sale of the landfill gas business. Equity affiliates' income
declined significantly following the sale of American Ref-Fuel in December 1997.
Equity affiliates' income in 1997 included an expense of $4.8 million related to
a joint venture debt refinancing.
BOC Transaction
In July 1999, the company and L'Air Liquide S.A. ("Air Liquide") of France
agreed to the terms of a recommended offer under which they would acquire BOC,
the leading British industrial gases company, for UK(pound)14.60 per share in
cash, or a total of approximately
25
<PAGE>
UK(pound)7.2 billion. Air Products has a UK(pound)3,950.0 million credit
agreement to provide backup for commercial paper or direct funding for its 50%
share of the offer price. Fees incurred to secure this credit agreement have
been deferred and will be amortized on a straight-line basis over the term of
the arrangement. The offer will formally commence in the United Kingdom and the
United States upon receipt of the necessary regulatory clearances, which are
expected in the first quarter of calendar year 2000.
The company expects the transaction will be included in the company's financial
results for approximately six months of fiscal 2000. Due to the joint control
with Air Liquide, the operations will initially be accounted for under the
equity method. As the company gains control and ownership of approximately
one-half of the BOC assets expected to be allocated to it, the operations will
be accounted for as consolidated entities. Excluding transaction and integration
charges, the impact of the transaction is expected to be modestly accretive to
earnings per share before goodwill amortization and approximately 10% dilutive
to reported earnings per share after goodwill amortization.
As of 30 September 1999, the company entered into purchased currency options
contracts for approximately UK(pound)1.7 billion. These options expire in fiscal
year 2000. Subsequent to 30 September 1999, the company entered into additional
purchased options and option combination contracts with a gross notional value
of approximately UK(pound)4.0 billion to further hedge the proposed acquisition.
The net impact of the option contracts entered to date (after adjusting for the
tax impact of the hedge placed) is a hedge of approximately UK(pound)2.2 billion
of the company's UK(pound)3.6 billion share of the purchase price. The company
will record gains and losses associated with changes in the market value of
these options and purchased option combination contracts currently in earnings
since hedge accounting may not be applied to instruments which are used to hedge
the cost of a business combination. The results for the twelve months ended 30
September 1999 include a net gain of $7.0 million ($4.4 million after-tax, or
$.02 per share) from these currency options, net of preacquisition expenses.
<TABLE>
<CAPTION>
Interest Expense
(millions of dollars) 1999 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Interest incurred $181.2 $178.5 $180.4
Less: Interest capitalized 22.1 15.7 19.1
- -----------------------------------------------------------------------------
Interest expense $159.1 $162.8 $161.3
- -----------------------------------------------------------------------------
</TABLE>
Interest expense in fiscal 1999 decreased $3.7 million. Higher capitalized
interest and lower rates more than offset the unfavorable impact of higher
average debt. Fiscal 1998 interest increased a nominal $1.5 million over the
prior year. A lower level of capitalized interest was partially offset by a
slightly lower interest rate. Average debt outstanding in fiscal year 1998 was
essentially the same as the prior year.
Income Taxes
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Effective tax rate 31.1% 33.6% 31.9%
- -------------------------------------------------------------------------------
Effective tax rate - excluding special items 31.3% 32.2% 31.9%
- -------------------------------------------------------------------------------
</TABLE>
The effective tax rate in fiscal 1999 was 31.1%, after minority interest. The
rate excluding special items was 31.3%. The adjusted rate in 1999 decreased .9%
from the rate in 1998, excluding the higher tax rate impact on the sale of the
American Ref-Fuel Company and two power contract gains. The decrease was
essentially due to higher after-tax equity affiliates' income. The effective
reported tax rate in 1998 was 33.6%. Excluding the higher tax rate on the sale
of the American Ref-Fuel Company and two power contract gains, the rate was
32.2%, or .3% over fiscal 1997.
Environmental Matters
The company is subject to various environmental laws and regulations in the
United States and foreign countries where it has operations. Compliance with
these laws and regulations results in higher capital expenditures and costs.
Additionally, from time to time the company is involved in proceedings under
the Comprehensive Environmental Response, Compensation, and Liability Act (the
federal Superfund law), similar state laws, and the Resource Conservation and
Recovery Act (RCRA) relating to the designation of certain sites for
investigation and possible cleanup. The company's accounting policies for
environmental expenditures are discussed in Note 1 to the consolidated financial
statements.
The amounts charged to earnings on an after-tax basis related to environmental
protection totaled $27.2 million, $23.5 million, and $25.7 million for 1999,
1998, and 1997, respectively. These amounts represent an estimate of expenses
for compliance with environmental laws, as well as remedial activities, and
costs incurred to meet internal company standards. Such costs are estimated to
be approximately $28 million in 2000 and $29 million in 2001.
Although precise amounts are difficult to define, the company estimates that in
fiscal 1999 it spent approximately $7 million on capital projects to control
pollution (including expenditures associated with new plants) versus $10 million
in 1998. Capital expenditures to control pollution in future years are estimated
at $11 million in 2000 and $10 million in 2001.
It is the company's policy to accrue environmental investigatory and noncapital
remediation costs for identified sites when it is probable that a liability has
been incurred and the amount of loss can be reasonably estimated. The potential
exposure for such costs is estimated to range from $10 million to a reasonably
possible upper exposure of $26 million. The balance sheet at 30 September 1999
included an accrual of $19.4 million. At 30 September 1998, the balance sheet
accrual was $23.4 million.
In addition to the environmental exposures discussed in the preceding
paragraph, there will be spending at a company-owned manufacturing site where
the company is undertaking RCRA corrective action remediation. The company
estimates capital costs to implement the anticipated remedial program will range
from $23-$30 million. Spending was $7.5 million through fiscal 1999 and
26
<PAGE>
is estimated at $10 million for fiscal 2000 and $1 million for fiscal 2001.
Operating and maintenance expenses associated with continuing the remedial
program were minimal in fiscal 1999 and are estimated at $1 million a year
beginning in fiscal 2000 and will continue for an estimated period of up to
30 years. A former owner and operator at the site has agreed to reimburse the
company 20% of the costs incurred in the remediation. Reimbursement of
$2.2 million was received in fiscal 1999 and is estimated at $2 million for
fiscal 2000 and $1 million for fiscal 2001. In fiscal 1999, an insurance
recovery related to this environmental site was received in the amount of
$7.7 million. The cost estimates have not been reduced by the value of such
reimbursements.
Actual costs to be incurred at identified sites in future periods may vary from
the estimates, given inherent uncertainties in evaluating environmental
exposures. Subject to the imprecision in estimating future environmental costs,
the company does not expect that any sum it may have to pay in connection with
environmental matters in excess of the amounts recorded or disclosed above would
have a materially adverse effect on its financial condition or results of
operations in any one year.
Liquidity, Capital Resources, and Other Financial Data
Air Products maintained a solid financial condition throughout fiscal 1999. Cash
flow from operations, supplemented with proceeds from a modest amount of debt
financing, provided funding for the company's capital spending program. Cash
flow from operations and financing activities will meet liquidity needs for the
foreseeable future. The company's long-term debt and commercial paper are rated
A/A3 and A-1/P-2, respectively. Moody's lowered their ratings from A2/P-1 to
A3/P-2 in anticipation of the BOC acquisition.
Cash Flow Graph
Total Capital Graph
Capital Expenditures
Capital expenditures in fiscal 1999 totaled $1,114.6 million, an 11% increase
over the 1998 level. Additions to plant and equipment and acquisitions in fiscal
1999 were largely in support of worldwide expansion of the gas business.
Acquisitions in 1998 included $108.4 million for the ICI methylamines and
derivatives businesses in the chemicals group. Acquisitions in 1997 included
$288.4 million for the third stage of the acquisition of Carburos Metalicos.
Investments in equity affiliates in fiscal 1999 included $52.0 million in INOX,
an Indian industrial gases company, and $53.0 million in a joint venture with
Wacker-Chemie.
<TABLE>
<CAPTION>
(millions of dollars) 1999 1998 1997
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Additions to plant and equipment $ 888.9 $ 770.9 $ 870.2
- ----------------------------------------------------------------------------
Investments in and advances to
unconsolidated affiliates 116.8 31.9 47.2
- ----------------------------------------------------------------------------
Acquisitions 90.4 192.2 301.2
- ----------------------------------------------------------------------------
Capital leases 18.5 5.7 3.0
- ----------------------------------------------------------------------------
Total $1,114.6 $1,000.7 $1,221.6
</TABLE>
The joint acquisition of BOC by Air Products and Air Liquide is expected to
close in mid-fiscal 2000 at a cost of approximately $6 billion to Air Products.
Other capital expenditures are expected to be approximately $1.2 billion in
fiscal 2000. Bridge financing for the acquisition will be in the form of
commercial paper backed by a committed bank facility that has been executed or
direct borrowings against the facility. It is anticipated the permanent
financing will be accomplished by a combination of debt and equity. The other
expenditures will be funded with cash from operations supplemented with proceeds
from financing activities.
Financing and Capital Structure
Capital needs in fiscal 1999 were satisfied with cash from operations and
additional borrowings. At year end, total debt as a percentage of debt plus
equity was 49% as compared to 50% at the end of fiscal 1998.
Long-term debt financings in fiscal 1999 totaled $119.5 million and included
three separate borrowings in different currencies (U.S. dollar, British Pound
Sterling, and Euros). All are floating rate and terms range from five to
thirty-five years.
At year end, $363.0 million of commercial paper was outstanding compared to
$320.7 million at the end of fiscal 1998.
Substantial credit facilities are maintained to provide backup funding for
commercial paper and to ensure availability of adequate resources for corporate
liquidity. At 30 September 1999, the company's revolving credit commitments
amounted to $600 million, with funding available in 13 currencies. No borrowings
were outstanding at the end of fiscal 1999. Additional commitments totaling
$94.4 million are maintained by the company's foreign subsidiaries, of which
$17.8 million was outstanding at year end. Subsequent to the end of fiscal 1999,
the company added an additional $300 million revolving credit commitment.
27
<PAGE>
During 1999, a bank credit facility was executed to ensure the availability of
funding to finance the anticipated acquisition of BOC. The facility consists of
two tranches: a 364-day (subject to an additional 364-day term out option under
certain circumstances) UK (pound)3,950.0 million tranche to fund the acquisition
and a five-year $800 million tranche to replace the company's existing revolving
credit facilities. Interest rates are based on LIBOR plus a spread which is a
function of the company's long-term credit ratings. The agreement includes
certain financial covenants and other restrictions, including restrictions
pertaining to the ability to create property liens and enter into certain sale
and leaseback transactions. Funds are not available under this credit facility
until the offer for BOC shares is declared unconditional.
During fiscal 1999, the company purchased 620,000 of its outstanding shares at a
cost of $24.6 million. In fiscal 1999, the share repurchase program was
suspended due to the proposed acquisition of BOC.
Financial Instruments
The company enters into contractual agreements in the ordinary course of
business to hedge its exposure to interest rate and foreign currency risks.
Counterparties to these agreements are major financial institutions. Management
believes the risk of incurring losses related to credit risk is remote and any
losses would be immaterial.
Interest rate swap agreements are used to reduce interest rate risks and costs
inherent in the company's debt portfolio. The company enters into these
agreements to change the fixed/variable interest rate mix of the debt portfolio
in order to maintain the percentage of fixed and variable debt within certain
parameters set by management. Accordingly, the company enters into agreements to
both effectively convert variable-rate debt to fixed-rate debt and to
effectively convert its fixed-rate debt into variable-rate debt which is
principally indexed to LIBOR rates. The company has also entered into interest
rate swap contracts to effectively convert the stated variable rates to interest
rates based on LIBOR.
The company is also party to interest rate and currency swap contracts. These
contracts entail both the exchange of fixed- and floating-rate interest payments
periodically over the life of the agreement and the exchange of one currency for
another at inception and a specified future date. These contracts effectively
convert the currency denomination of a debt instrument into another currency in
which the company has a net equity position while changing the interest rate
characteristics of the instrument. The contracts are used to hedge intercompany
lending activities and the value of investments in certain foreign subsidiaries
and affiliates.
The company, in management of its exposure to fluctuations in foreign currency
exchange rates, has entered into a variety of foreign exchange contracts,
including forward, option combination, and purchased option contracts. These
agreements generally involve the exchange of one currency for a second currency
at some future date. The company enters into forward exchange and option
combination contracts to reduce the exposure to foreign currency fluctuations
associated with certain monetary assets and liabilities, as well as certain firm
commitments and highly anticipated cash flows. Forward exchange contracts are
also used to hedge the value of investments in certain foreign subsidiaries and
affiliates by creating a liability in a currency in which the company has a net
equity position. The company is also party to purchased option contracts which,
if exercised, involve the sale or purchase of foreign currency at a fixed
exchange rate for a specified period of time. These contracts are used to hedge
firm commitments and certain highly anticipated cash flows, including export
sales transactions. Additionally, certain currency option contracts have been
executed to hedge the proposed acquisition of BOC.
Additional details on these and other financial instruments are set forth in
Notes 3, 5, 6, and 18 to the consolidated financial statements and in the
Financial Instrument Sensitivity Analysis.
Working Capital
Working capital at 30 September 1999 (excluding cash and cash items, short-term
borrowings, and current portion of long-term debt) was $743.6 million, up
$5.8 million over the prior year. Excluding the impact of the currency options
related to the BOC transaction and deferred financing expenses, working capital
was down slightly, or $28.3 million.
Working capital at 30 September 1998 was $737.8 million, up $114.2 million over
the $623.6 million at the end of fiscal 1997. The increase was driven by a $70.9
million lower accounts payable and a $42.1 million increase in inventories that
included the impact of several small acquisitions.
Dividends and Stock Split
The Board of Directors in May 1999 also increased the quarterly cash dividend
6%, from 17.0 cents per share to 18.0 cents per share. Dividends are declared by
the Board of Directors and, when declared, usually will be paid during the sixth
week after the close of the fiscal quarter.
In May 1998, the Board of Directors approved a two-for-one stock split. The
additional shares were issued on 15 June 1998 to shareholders of record on
15 May 1998.
Shareholder Rights Plan
In March 1998, the company's Board of Directors approved a stockholder rights
plan to replace the previous plan, adopted in 1988, which expired in March 1998.
See Note 9 to the consolidated financial statements.
Cost Reduction Plan
The company began a global cost reduction plan ("1999 Plan") in the first fiscal
quarter ending 31 December 1998. The 1999 Plan results in a staffing reduction
of 206 employees in the areas of manufacturing, distribution, and overhead. The
1999 Plan will be
28
<PAGE>
completed by 31 December 1999. An amount of $20.3 million ($12.9 million
after-tax, or $.06 per share) related to employee termination benefits was
charged to expense in the fiscal quarter ended 31 December 1998. As of the end
of fiscal year 1999, $15.1 million has been charged to the accrual and $5.2
million remains in accrued liabilities. Annualized benefits of approximately
$15.0 million will occur from this plan.
The company expanded the 1999 Plan in the quarter ended 30 June 1999. The plan
expansion in the third quarter results in an additional staffing reduction of
142 employees when completed in the third quarter of fiscal year 2000, and
resulted in a charge to expense of $13.9 million ($9.0 million after-tax, or
$.04 per share). Additional benefits of the plan expansion reach an annualized
savings of about $14.0 million in late fiscal year 2000. As of 30 September
1999, the balance in accrued liabilities was $9.2 million.
For the fiscal year ended 30 September 1999, the combined cost reduction plan
resulted in a charge to expense of $34.2 million ($21.9 million after-tax, or
$.10 per share). The charges to cost of sales, selling and administrative, and
research and development were $15.3 million, $17.8 million, and $1.1 million,
respectively. The charges to segments were to gases ($27.0 million), chemicals
($4.0 million), equipment ($2.7 million), and ($.5 million) in corporate.
New Accounting Standards
In June 1999, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of SFAS No.
133." This Statement defers the effective date of SFAS No. 133 for one year. The
company expects to adopt this standard in the first quarter of fiscal year 2001.
SFAS No. 133 establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or a
liability measured at its fair value. The Statement requires that changes in the
derivative's fair value be recognized currently in earnings unless special
accounting criteria are met. Special accounting for qualifying hedges allows a
derivative's gains and losses to offset related results on the hedged item in
the income statement and requires that a company must formally document,
designate, and assess the effectiveness of transactions that receive hedge
treatment. The transition adjustments resulting from adopting this statement
shall be reported in net income or other comprehensive income, as appropriate,
as the effect of a change in accounting principle and presented in a manner
similar to the cumulative effect of a change in accounting principle. The
company is continuing to evaluate the impacts of adopting the Statement on the
financial statements and the risk management processes.
Pension Plan Funding
The funding policy for pension plans is to accumulate plan assets that, over the
long run, will approximate the present value of projected benefits payable. In
fiscal 1999, the company contributed $8.2 million compared to $15.1 million in
fiscal 1998. The company expects to make contributions of approximately $2.6
million in fiscal 2000.
Exchange Rate Fluctuations
Exchange rate fluctuations can be a significant variable for international
operations, especially fluctuations in local currencies where hedging
opportunities are unreasonably expensive or unavailable. Beginning in the fourth
quarter of fiscal 1997, several Asian currencies deteriorated against the dollar
and continue to be an uncertainty.
Inflation
The financial statements are presented on a historical cost basis and do not
fully reflect the impact of prior years' inflation. While the U.S. inflation
rate has been modest for several years, the company operates in many
international areas with both inflation and currency issues. The ability to pass
on inflation costs is an uncertainty due to general economic conditions and
competitive situations. It is estimated that the cost of replacing the company's
plant and equipment today is greater than its historical cost. Accordingly,
depreciation expense would be greater if the expense were stated on a current
cost basis.
YEAR 2000 READINESS DISCLOSURE
Year 2000 Preparation
Software failures due to calculations using Year 2000 dates are a known risk.
The company is currently evaluating and managing the financial and operating
risks associated with this problem. The company has expended approximately $33
million to date on its Year 2000 program. The company continues to believe that
the previously disclosed $40 million cost estimate remains sufficient to cover
the cost of the company's Year 2000 program, and includes funds budgeted to
absorb program contingencies as they may arise. The company's Year 2000 efforts
are addressed by area below.
Information Technology
All of the mission-critical information technology infrastructure and
applications portfolio have been tested and certified as Year 2000 ready. An
organization is in place to support information technology contingency plans.
Normal operating plans have been reviewed against potential Year 2000 risks.
Year 2000 contingency plans are ready. These contingency plans include controls
to limit changes to information technology infrastructure and applications over
Year 2000 critical dates and the implementation of a change management process
to assure that newly purchased or modified information technology software and
hardware is Year 2000 ready before introduction into the computing environment.
The company continues to believe that the combination of readiness certification
and contingency planning will result in no material adverse Year 2000 impact on
the company's operations or financial condition due to the company's information
technology systems.
29
<PAGE>
Process Control and Embedded Chip Systems
Essentially all of the company-owned or operated mission-critical
non-information technology systems have been tested and certified as Year 2000
ready. The company has prepared Year 2000 contingency plan templates for each of
its types of operations. Existing individual plant site contingency plans have
been reviewed against these templates. This testing, remediation, and
contingency planning has relied in part on vendor information and replacement
software components or other equipment from third parties and the
interrelationship and dependency of company processes on the Year 2000 readiness
of third-party equipment and infrastructure. The company cannot reasonably
assess the impact of that dependency and whether there could be a material
adverse impact on the company's operations and financial condition as a result
of that dependency. Final contingency plans are in place to address this
uncertainty.
Third Parties
Assessment of the company's 1,400 key suppliers for Year 2000 readiness has been
completed as planned. Greater than 98% of these suppliers continue to
demonstrate acceptable readiness programs and have met the company's Year 2000
readiness expectations. Contingency plans have been developed for key suppliers
not meeting the company's expectations. In certain instances, such as electric
supply, water, and certain chemical feedstocks, supply is not easily
substitutable and contingency planning is difficult. If there is an extended
material failure by several third parties or supporting infrastructures
resulting from Year 2000 events (utilities, transportation, government, etc.)
there could be material adverse impacts on the company's operations and
financial condition.
Business Contingency Planning
A cross-functional management team is in place to coordinate the company's
various Year 2000 contingency planning efforts, guide the company's Year 2000
business contingency planning, and address customers' Year 2000 issues and
concerns. Existing operating contingency plans have been updated specifically
for Year 2000 issues, centralized Year 2000 crisis centers are being created in
conjunction with existing customer service centers, and product deployment plans
have been developed to address product demands. Final contingency plans are in
place now, with detailed implementation well under way.
Illustrative Year 2000 contingency measures include:
o increasing on-site and standby staffing
o implementing additional methods of communication
o testing emergency responsiveness
o testing raw material and product backup systems
o providing backup fuel supplies for existing backup generators
o enhancing utility supply contingency plans
o topping off fuel tanks in tractors and product in company distribution
trailers
o printing and distributing hard copies of critical schedules, shipping
documents, and emergency contact lists
o understanding customers' operating and contingency plans that impact the
company
o enhancing crisis training and communication
o deploying Year 2000-specific senior crisis coordinators and business
managers
Euro Impact
The Euro became legal currency as of 1 January 1999. The company has
administrative operations in 9 of the 11 countries which have adopted the Euro
and is well positioned to comply with the legislation applicable to its
introduction.
Forward-Looking Statements
The forward-looking statements contained in this document are based on current
expectations regarding important risk factors. Actual results may differ
materially from those expressed. In addition to important risk factors and
uncertainties referred to in the Management's Discussion and Analysis such as
those relating to the Year 2000, other important risk factors and uncertainties
include the impact of worldwide economic growth; pricing of both the company's
products and raw materials such as electricity; customer outages and customer
demand, and other factors resulting from fluctuations in interest rates and
foreign currencies; the impact of competitive products and pricing; success of
cost control programs; and the impact of tax and other legislation and other
regulations in the jurisdictions in which the company and its affiliates
operate.
Factors that might cause forward-looking statements related to the BOC
transaction to differ materially from actual results include, among other
things, requirements or delays imposed by regulatory authorities to permit the
transaction to be consummated; unanticipated tax and other costs in separating
the ownership of BOC's businesses and assets; ability to amortize goodwill over
40 years; overall economic and business conditions; demand for the goods and
services of Air Products or BOC or their respective affiliates; competitive
factors in the industries in which each of them competes; changes in government
regulation; success of implementing synergies and other cost reduction programs;
the timing, impact, and other uncertainties of future acquisitions or
combinations within relevant industries; fluctuations in interest rates and
foreign currencies; and the price at which Air Products would issue additional
equity, as well as the impact of tax and other legislation and other regulations
in the jurisdictions in which Air Products and BOC and their respective
affiliates operate.
Financial Instruments Sensitivity Analysis
The analysis below presents the sensitivity of the market value of the company's
financial instruments to selected changes in market rates and prices. The range
of changes chosen reflects the company's
30
<PAGE>
view of changes which are reasonably possible over a one-year period. Market
values are the present value of projected future cash flows based on the market
rates and prices chosen. The market values for interest rate risk and foreign
currency risk (other than the currency options related to the BOC transaction)
are calculated by the company utilizing a third-party software model which
utilizes standard pricing models to determine the present value of the
instruments based on the market conditions (interest rates, spot and forward
exchange rates, and implied volatilities) as of the valuation date. The market
values for the currency options related to the BOC transaction are calculated by
the financial institution with whom the options were executed. All instruments
are entered into for other than trading purposes. The utilization of these
instruments is described more fully in the financial instruments section of the
Management's Discussion and Analysis and Notes 3, 5, and 6 to the consolidated
financial statements. The major accounting policies for these instruments are
described in Note 1 to the consolidated financial statements.
The company's derivative and other financial instruments consist of long-term
debt (including current portion), interest rate swaps, interest rate and
currency swaps, foreign exchange-forward contracts, and foreign exchange-option
contracts. The net market value of these financial instruments combined is
referred to below as the net financial instrument position. The net financial
instrument position does not include other investments of $38.4 million at 30
September 1999 and $18.4 million at 30 September 1998 as disclosed in Note 3 to
the consolidated financial statements. These amounts principally represent an
investment in a publicly traded foreign company accounted for by the cost
method. The company assessed the materiality of the market risk exposure on
these financial instruments and determined this exposure to be immaterial.
At 30 September 1999, the net financial instrument position before the impact of
the currency options executed to hedge the BOC transaction was a liability of
$2,504.2 million. When the currency options related to the BOC transaction are
included, the net financial instrument position at 30 September 1999 falls to a
liability of $2,433.8 million. At 30 September 1998, the net financial
instrument position was a liability of $2,713.6 million. The decrease in the net
financial instrument position from fiscal 1998 is due mainly to the increase in
market interest rates in the current year and the execution of the currency
options related to the BOC transaction.
Interest Rate Risk
The company's debt portfolio, including interest rate swap agreements, as of 30
September 1999 is composed primarily of debt denominated in U.S. dollars (60%).
The primary currencies of non-U.S. dollar debt are British Pound Sterling and
the Euro currencies. The company has both fixed- and variable-rate debt. Changes
in interest rates have different impacts on the fixed- and variable-rate
portions of the company's debt portfolio. A change in interest rates on the
fixed portion of the debt portfolio impacts the net financial instrument
position but has no impact on interest incurred or cash flows. A change in
interest rates on the variable portion of the debt portfolio impacts the
interest incurred and cash flows but does not impact the net financial
instrument position.
The sensitivity analysis related to the fixed portion of the company's debt
portfolio assumes an instantaneous 100 basis point move in interest rates from
their levels of 30 September 1999 and 1998, with all other variables (including
foreign exchange rates) held constant. A 100 basis point increase in market
interest rates would result in a decrease in the net financial instrument
position of $95 million and $119 million at 30 September 1999 and 1998,
respectively. A 100 basis point decrease in market interest rates would result
in an increase in the net financial instrument position of $117 million and $141
million at 30 September 1999 and 1998, respectively.
Based on the variable-rate debt included in the company's debt portfolio,
including interest rate swap agreements, as of 30 September 1999 and 1998, a 100
basis point increase in interest rates would result in an additional $12 million
in interest incurred per year at both 30 September 1999 and 1998. A 100 basis
point decline would lower interest incurred by $12 million per year at both 30
September 1999 and 1998.
Foreign Currency Exchange Rate Risk
The sensitivity analysis assumes an instantaneous 10% change in the foreign
currency exchange rates from their levels of 30 September 1999 and 1998, with
all other variables (including interest rates) held constant. A 10%
strengthening of the functional currency of an entity versus all other
currencies would result in a decrease in the net financial position of $103
million at 30 September 1999, excluding the impact of the currency options
related to the BOC transaction, a decrease of $38 million at 30 September 1999
when the currency options related to the BOC transaction are included, and a
decrease of $113 million at 30 September 1998. A 10% weakening of the functional
currency of an entity versus all other currencies would result in an increase in
the net financial position of $103 million at 30 September 1999, excluding the
impact of the currency options related to the BOC transaction, a decrease of
$115 million at 30 September 1999 when the currency options related to the BOC
transaction are included, and an increase of $109 million at 30 September 1998.
The primary currencies for which the company has exchange rate exposure are the
U.S. dollar versus the British Pound Sterling and the Euro currencies. Foreign
currency debt, interest rate and currency swaps, and foreign exchange forward
contracts are used in countries where it does business, thereby reducing the
company's net asset exposure. Foreign exchange forward contracts are also used
to hedge the company's firm and highly anticipated foreign currency cash flows,
along with foreign exchange option contracts. Thus, there is either an asset or
cash flow exposure related to all the financial instruments in the above
sensitivity analysis for which the impact of a movement in exchange rates would
be in the opposite direction and materially equal (or more favorable in the case
of purchased foreign exchange option contracts) to the impact on the instruments
in the analysis.
31
<PAGE>
COMPANY RESPONSIBILITY FOR FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared by the
company. They conform with generally accepted accounting principles and reflect
judgments and estimates as to the expected effects of incomplete transactions
and events being accounted for currently. The company believes that the
accounting systems and related controls that it maintains are sufficient to
provide reasonable assurance that assets are safeguarded, transactions are
appropriately authorized and recorded, and the financial records are reliable
for preparing such financial statements. The concept of reasonable assurance is
based on the recognition that the cost of a system of internal accounting
controls must be related to the benefits derived. The company maintains an
internal audit function which is responsible for evaluating the adequacy and
application of financial and operating controls and for testing compliance with
company policies and procedures.
The independent public accountants are engaged to perform an audit of the
consolidated financial statements in accordance with generally accepted auditing
standards. Their report follows.
The Audit Committee of the Board of Directors is comprised entirely of
individuals who are not employees of the company. This Committee meets
periodically with the independent public accountants, the internal auditors, and
management to consider audit results and to discuss significant internal
accounting control, auditing, and financial reporting matters. The Audit
Committee recommends the selection of the independent public accountants who are
then appointed by the Board of Directors subject to ratification by the
shareholders.
/s/ Harold A. Wagner /s/ Leo J. Daley
Harold A. Wagner Leo J. Daley
Chairman and Vice President-Finance
Chief Executive Officer and Chief Financial Officer
29 October 1999 29 October 1999
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors, Air Products and Chemicals, Inc.:
We have audited the accompanying consolidated balance sheets of Air Products and
Chemicals, Inc. (a Delaware corporation) and subsidiaries as of 30 September
1999 and 1998, and the related consolidated statements of income, comprehensive
income, cash flows, and shareholders' equity for each of the three years in the
period ended 30 September 1999. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Air Products and Chemicals,
Inc. and subsidiaries as of 30 September 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
30 September 1999, in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Philadelphia, Pennsylvania
29 October 1999
32
<PAGE>
<TABLE>
The Financial Statements
<CAPTION>
Consolidated Income
Air Products and Chemicals, Inc. and Subsidiaries
Year Ended 30 September (millions of dollars, except per share) 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------
Sales and Other Income
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales o note 1 $5,020.1 $4,919.0 $4,637.8
- --------------------------------------------------------------------------------------------------------
Other income, net o notes 1 and 19 19.7 15.5 24.9
- --------------------------------------------------------------------------------------------------------
5,039.8 4,934.5 4,662.7
- --------------------------------------------------------------------------------------------------------
Costs and Expenses
- --------------------------------------------------------------------------------------------------------
Cost of sales o note 1 3,501.4 3,317.0 3,195.3
- --------------------------------------------------------------------------------------------------------
Selling and administrative o note 1 690.6 659.8 627.6
- --------------------------------------------------------------------------------------------------------
Research and development 123.1 112.0 113.7
- --------------------------------------------------------------------------------------------------------
Operating Income o note 1 724.7 845.7 726.1
- --------------------------------------------------------------------------------------------------------
Income from equity affiliates, net of related expenses o note 8 61.5 38.0 66.3
- --------------------------------------------------------------------------------------------------------
Gain on American Ref-Fuel sale and contract settlements o note 19 -- 103.5 --
- --------------------------------------------------------------------------------------------------------
Net gain on formation of polymer venture o note 19 34.9 -- --
- --------------------------------------------------------------------------------------------------------
Gain on currency options related to BOC transaction, net of
preacquisition expenses o notes 1 and 19 7.0 -- --
- --------------------------------------------------------------------------------------------------------
Interest expense o note 1 159.1 162.8 161.3
- --------------------------------------------------------------------------------------------------------
Income Before Taxes and Minority Interest 669.0 824.4 631.1
- --------------------------------------------------------------------------------------------------------
Income taxes o notes 1 and 10 203.4 276.9 201.1
- --------------------------------------------------------------------------------------------------------
Minority interest in earnings of subsidiary companies o note 1 15.1 .7 .7
- --------------------------------------------------------------------------------------------------------
Net Income $450.5 $546.8 $429.3
- --------------------------------------------------------------------------------------------------------
Monthly Average of Common Shares Outstanding (in millions) o note 13 212.2 215.5 220.1
- --------------------------------------------------------------------------------------------------------
Monthly Average of Common and Common Equivalent Shares
Outstanding (in millions) o note 13 216.0 220.1 224.9
- ---------------------------------------------------------------------------------------------------------
Basic Earnings per Common Share o note 13 $2.12 $2.54 $1.95
- ---------------------------------------------------------------------------------------------------------
Diluted Earnings per Common Share o note 13 $2.09 $2.48 $1.91
Comprehensive Income
Air Products and Chemicals, Inc. and Subsidiaries
Year Ended 30 September (millions of dollars) 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------
Net Income $450.5 $546.8 $429.3
- ---------------------------------------------------------------------------------------------------------
Other Comprehensive Income, net of tax
- ---------------------------------------------------------------------------------------------------------
Foreign currency translation adjustments (61.3) (36.1) (115.9)
- ---------------------------------------------------------------------------------------------------------
Unrealized gains (losses) on investments:
- ---------------------------------------------------------------------------------------------------------
Unrealized holding gains (losses) arising during the period 8.9 (1.9) (38.0)
- ---------------------------------------------------------------------------------------------------------
Less: reclassification adjustment for gains included in net income -- -- 4.5
- ---------------------------------------------------------------------------------------------------------
Net unrealized gains (losses) on investments 8.9 (1.9) (33.5)
- ---------------------------------------------------------------------------------------------------------
Minimum pension liability adjustments 9.5 (14.3) --
- ---------------------------------------------------------------------------------------------------------
Total Other Comprehensive Income (42.9) (52.3) (149.4)
- ---------------------------------------------------------------------------------------------------------
Comprehensive Income $407.6 $494.5 $279.9
</TABLE>
The accompanying notes are an integral part of these statements.
33
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
Air Products and Chemicals, Inc. and Subsidiaries
30 September (millions of dollars, except per share) 1999 1998
- ------------------------------------------------------------------------------------------------------------
Assets
- ------------------------------------------------------------------------------------------------------------
Current Assets
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash items o note 1 $ 61.6 $ 61.5
- ------------------------------------------------------------------------------------------------------------
Fair value of currency options related to BOC transaction o notes 3, 5, and 18 70.4 --
- ------------------------------------------------------------------------------------------------------------
Trade receivables, less allowances for doubtful accounts of $11.6 in 1999 and 894.7 881.1
$17.2 in 1998
- ------------------------------------------------------------------------------------------------------------
Inventories o notes 1 and 7 424.9 428.6
- ------------------------------------------------------------------------------------------------------------
Contracts in progress, less progress billings 79.8 94.1
- ------------------------------------------------------------------------------------------------------------
Other current assets 251.0 176.4
- ------------------------------------------------------------------------------------------------------------
Total Current Assets 1,782.4 1,641.7
- ------------------------------------------------------------------------------------------------------------
Investments o notes 1, 3, and 8
- ------------------------------------------------------------------------------------------------------------
Investment in net assets of and advances to equity affiliates 521.4 362.0
- ------------------------------------------------------------------------------------------------------------
Other investments and advances 38.4 18.4
- ------------------------------------------------------------------------------------------------------------
Total Investments 559.8 380.4
- ------------------------------------------------------------------------------------------------------------
Plant and Equipment o notes 1, 4, 11, and 15
- ------------------------------------------------------------------------------------------------------------
Plant and equipment, at cost 10,187.9 9,489.5
- ------------------------------------------------------------------------------------------------------------
Less--Accumulated depreciation 4,995.0 4,703.4
- ------------------------------------------------------------------------------------------------------------
Plant and Equipment, net 5,192.9 4,786.1
- ------------------------------------------------------------------------------------------------------------
Goodwill, net o note 1 350.4 324.9
- ------------------------------------------------------------------------------------------------------------
Other Noncurrent Assets 350.0 356.5
- ------------------------------------------------------------------------------------------------------------
Total Assets $ 8,235.5 $7,489.6
Liabilities and Shareholders' Equity
- ------------------------------------------------------------------------------------------------------------
Current Liabilities
- ------------------------------------------------------------------------------------------------------------
Payables, trade and other o note 19 $ 505.8 $ 478.7
- ------------------------------------------------------------------------------------------------------------
Accrued liabilities o note 19 407.0 332.8
- ------------------------------------------------------------------------------------------------------------
Accrued income taxes 64.4 30.9
- ------------------------------------------------------------------------------------------------------------
Short-term borrowings o note 19 407.6 270.1
- ------------------------------------------------------------------------------------------------------------
Current portion of long-term debt o note 4 473.0 153.1
- ------------------------------------------------------------------------------------------------------------
Total Current Liabilities 1,857.8 1,265.6
- ------------------------------------------------------------------------------------------------------------
Long-Term Debt o notes 4 and 15 1,961.6 2,274.3
- ------------------------------------------------------------------------------------------------------------
Deferred Income and Other Noncurrent Liabilities o note 1 596.1 570.9
- ------------------------------------------------------------------------------------------------------------
Deferred Income Taxes o notes 1 and 10 731.1 703.0
- ------------------------------------------------------------------------------------------------------------
Total Liabilities 5,146.6 4,813.8
- ------------------------------------------------------------------------------------------------------------
Minority Interest in Subsidiary Companies o note 1 127.3 8.5
- ------------------------------------------------------------------------------------------------------------
Shareholders' Equity o notes 1, 9, and 12
- ------------------------------------------------------------------------------------------------------------
Common Stock (par value $1 per share; issued 1999 and 1998 - 249,455,584 shares) 249.4 249.4
- ------------------------------------------------------------------------------------------------------------
Capital in excess of par value 341.5 329.2
- ------------------------------------------------------------------------------------------------------------
Retained earnings 3,701.8 3,400.0
- ------------------------------------------------------------------------------------------------------------
Unrealized gain on investments 13.9 5.0
- ------------------------------------------------------------------------------------------------------------
Minimum pension liability adjustments (4.8) (14.3)
- ------------------------------------------------------------------------------------------------------------
Cumulative translation adjustments (283.5) (222.2)
- ------------------------------------------------------------------------------------------------------------
Treasury Stock, at cost (1999 - 20,150,722 shares; 1998 - 19,531,143 shares) (681.6) (657.0)
- ------------------------------------------------------------------------------------------------------------
Shares in trust (1999 - 16,260,580 shares; 1998 - 18,454,673 shares) (375.1) (422.8)
- ------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 2,961.6 2,667.3
- ------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $8,235.5 $7,489.6
</TABLE>
The accompanying notes are an integral part of these statements.
34
<PAGE>
<TABLE>
<CAPTION>
Consolidated Cash Flows
Air Products and Chemicals, Inc. and Subsidiaries
Year Ended 30 September (millions of dollars) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
Operating Activities
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $ 450.5 $ 546.8 $ 429.3
- ----------------------------------------------------------------------------------------------------------
Adjustments to reconcile income to cash provided by
operating activities:
- ----------------------------------------------------------------------------------------------------------
Depreciation o note 1 527.2 489.4 459.1
- ----------------------------------------------------------------------------------------------------------
Deferred income taxes o note 10 58.8 62.3 94.1
- ----------------------------------------------------------------------------------------------------------
American Ref-Fuel divestiture deferred income taxes o note 17 -- (80.3) --
- ----------------------------------------------------------------------------------------------------------
Gain on formation of polymer venture o note 17 (34.9) -- --
- ----------------------------------------------------------------------------------------------------------
Gain on currency options related to BOC transaction o note 18 (12.5) -- --
- ----------------------------------------------------------------------------------------------------------
Other 65.5 42.0 8.9
- ----------------------------------------------------------------------------------------------------------
Working capital changes that provided (used)
cash, net of effects of acquisitions:
- ----------------------------------------------------------------------------------------------------------
Trade receivables (26.3) 11.2 (151.8)
- ----------------------------------------------------------------------------------------------------------
Inventories and contracts in progress 37.0 (2.7) (13.3)
- ----------------------------------------------------------------------------------------------------------
Payables, trade and other 26.3 (144.4) 84.2
- ----------------------------------------------------------------------------------------------------------
Other (2.7) 49.4 122.8
- ----------------------------------------------------------------------------------------------------------
Cash Provided by Operating Activities 1,088.9 973.7 1,033.3
- ----------------------------------------------------------------------------------------------------------
Investing Activities
- ----------------------------------------------------------------------------------------------------------
Additions to plant and equipment(a) (888.9) (770.9) (870.2)
- ----------------------------------------------------------------------------------------------------------
Acquisitions, less cash acquired(b) (83.0) (182.2) (300.1)
- ----------------------------------------------------------------------------------------------------------
Investment in and advances to unconsolidated affiliates (116.8) (31.9) (47.2)
- ----------------------------------------------------------------------------------------------------------
Proceeds from sale of assets and investments 45.6 328.3 97.6
- ----------------------------------------------------------------------------------------------------------
Other 4.5 (27.6) 17.0
- ----------------------------------------------------------------------------------------------------------
Cash Used for Investing Activities (1,038.6) (684.3) (1,102.9)
- ----------------------------------------------------------------------------------------------------------
Financing Activities
- ----------------------------------------------------------------------------------------------------------
Long-term debt proceeds(b) 119.5 102.2 667.5
- ----------------------------------------------------------------------------------------------------------
Payments on long-term debt (82.9) (70.7) (168.3)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in commercial paper 42.3 185.7 (235.0)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in other short-term borrowings 15.2 (11.3) 6.7
- ----------------------------------------------------------------------------------------------------------
Dividends paid to shareholders (146.2) (134.0) (123.8)
- ----------------------------------------------------------------------------------------------------------
Purchase of Treasury Stock o note 9 (24.6) (365.0) (135.0)
- ----------------------------------------------------------------------------------------------------------
Other 25.1 13.2 31.4
- ----------------------------------------------------------------------------------------------------------
Cash Provided by (Used for) Financing Activities (51.6) (279.9) 43.5
- ----------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash 1.4 (.5) (.1)
- ----------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Items .1 9.0 (26.2)
- ----------------------------------------------------------------------------------------------------------
Cash and Cash Items--Beginning of Year 61.5 52.5 78.7
- ----------------------------------------------------------------------------------------------------------
Cash and Cash Items--End of Year o note 1 $ 61.6 $ 61.5 $ 52.5
</TABLE>
The accompanying notes are an integral part of these statements.
(a) Excludes capital leases of $18.5 million, $5.7 million, and $3.0 million in
1999, 1998, and 1997, respectively.
(b) Excludes a $19.5 million noncash exchange of assets in the formation
of a polymer venture in fiscal 1999 and excludes assumption of $7.4
million of former shareholder liability of company acquired in fiscal
1999. Excludes debt of $10.0 million and $1.1 million to former
shareholders of company acquired in fiscal 1998 and fiscal 1997,
respectively.
35
<PAGE>
<TABLE>
<CAPTION>
Consolidated Shareholders' Equity
Air Products and Chemicals, Inc. and Subsidiaries
Year Ended 30 September (millions of dollars) 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock
- ---------------------------------------------------------------------------------------------------------
Balance, Beginning of Year $ 249.4 $ 124.7 $ 124.7
- ---------------------------------------------------------------------------------------------------------
Two-for-one stock split -- 124.7 --
- ---------------------------------------------------------------------------------------------------------
Balance, End of Year 249.4 249.4 124.7
- ---------------------------------------------------------------------------------------------------------
Capital in Excess of Par Value
- ---------------------------------------------------------------------------------------------------------
Balance, Beginning of Year 329.2 453.0 461.2
- ---------------------------------------------------------------------------------------------------------
Issuance of Treasury Shares and Shares in Trust for benefit and
stock option and award plans, 2,194,464 shares in 1999,
677,844 shares in 1998, and 1,254,990 shares in 1997 (1.0) (11.2) (26.8)
- ---------------------------------------------------------------------------------------------------------
Tax benefit of stock option and award plans 13.3 12.1 18.6
- ---------------------------------------------------------------------------------------------------------
Two-for-one stock split -- (124.7) --
- ---------------------------------------------------------------------------------------------------------
Balance, End of Year 341.5 329.2 453.0
- ---------------------------------------------------------------------------------------------------------
Retained Earnings
- ---------------------------------------------------------------------------------------------------------
Balance, Beginning of Year 3,400.0 2,990.2 2,687.2
- ---------------------------------------------------------------------------------------------------------
Net income 450.5 546.8 429.3
- ---------------------------------------------------------------------------------------------------------
Cash dividends--Common Stock, $.70 per share in 1999,
$.64 per share in 1998, and $.58 per share in 1997, restated (148.7) (137.0) (126.3)
- ---------------------------------------------------------------------------------------------------------
Balance, End of Year 3,701.8 3,400.0 2,990.2
- ---------------------------------------------------------------------------------------------------------
Unrealized Gain on Investments
- ---------------------------------------------------------------------------------------------------------
Balance, Beginning of Year 5.0 6.9 40.4
- ---------------------------------------------------------------------------------------------------------
Change in unrealized gain, net of income tax expense of
$4.9 in 1999 and income tax benefits of $1.0 in 1998,
and $18.4 in 1997 8.9 (1.9) (33.5)
- ---------------------------------------------------------------------------------------------------------
Balance, End of Year 13.9 5.0 6.9
- ---------------------------------------------------------------------------------------------------------
Minimum Pension Liability Adjustments
- ---------------------------------------------------------------------------------------------------------
Balance, Beginning of Year (14.3) -- --
- ---------------------------------------------------------------------------------------------------------
Adjustments during year, net of income tax expense of 9.5 (14.3) --
$5.7 in 1999 and income tax benefit of $8.6 in 1998
- ---------------------------------------------------------------------------------------------------------
Balance, End of Year (4.8) (14.3) --
- ---------------------------------------------------------------------------------------------------------
Cumulative Translation Adjustments
- ---------------------------------------------------------------------------------------------------------
Balance, Beginning of Year (222.2) (186.1) (70.2)
- ---------------------------------------------------------------------------------------------------------
Translation adjustments, net of income tax expense of $2.2 in 1999
and income tax benefits of $13.8 in 1998 and $8.7 in 1997 (61.3) (36.1) (115.9)
- ---------------------------------------------------------------------------------------------------------
Balance, End of Year (283.5) (222.2) (186.1)
- ---------------------------------------------------------------------------------------------------------
Treasury Stock
- ---------------------------------------------------------------------------------------------------------
Balance, Beginning of Year (657.0) (297.3) (211.2)
- ---------------------------------------------------------------------------------------------------------
Issuance of Treasury Shares for benefit and stock option
and award plans, 371 shares in 1999, 108,975 shares in 1998,
and 942,550 shares in 1997 -- 5.3 48.9
- ---------------------------------------------------------------------------------------------------------
Purchase of Treasury Shares, 620,000 in 1999, 6,835,394 in 1998,
and 1,918,465 in 1997 o note 9 (24.6) (365.0) (135.0)
- ---------------------------------------------------------------------------------------------------------
Balance, End of Year (681.6) (657.0) (297.3)
- ---------------------------------------------------------------------------------------------------------
Shares in Trust o note 1
- ---------------------------------------------------------------------------------------------------------
Balance, Beginning of Year (422.8) (443.3) (457.5)
- ---------------------------------------------------------------------------------------------------------
Issuance of Shares in Trust for benefit and stock option and
award plans, 2,194,093 shares in 1999, 568,869 shares in 1998,
and 312,440 shares in 1997 47.7 20.5 14.2
- ---------------------------------------------------------------------------------------------------------
Balance, End of Year (375.1) (422.8) (443.3)
- ---------------------------------------------------------------------------------------------------------
Total Shareholders' Equity $2,961.6 $2,667.3 $2,648.1
</TABLE>
The accompanying notes are an integral part of these statements.
36
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
1) Major Accounting Policies
Consolidation Principles
The consolidated financial statements include the accounts of Air Products and
Chemicals, Inc. and its majority-owned subsidiary companies (the company). The
equity method of accounting is used when the company has a 20% to 50% interest
in other companies. Under the equity method, original investments are recorded
at cost and adjusted by the company's share of undistributed earnings or losses
of these companies.
Reclassification
In 1999, minority interest in earnings of subsidiary companies has been
displayed as a separate line between income taxes and net income, and
distribution expense has been included in cost of sales. Certain amounts in
1998 and 1997 have been reclassified to conform to current year presentation.
Long-Term Equipment and Construction Revenue
Revenues from equipment sale contracts are recorded primarily using the
percentage-of-completion method. Under this method, revenues for sale of major
equipment, such as Liquid Natural Gas and Air Separation units, are recognized
primarily based on labor hours incurred to date compared with total estimated
labor hours. Changes to total estimated labor hours and anticipated losses, if
any, are recognized in the period determined.
Depreciation
In the financial statements, the straight-line method of depreciation is used
which deducts equal amounts of the cost of each asset from earnings every year
over its expected useful life. The following table shows the estimated useful
lives of different types of assets:
Classification Expected Useful Lives
- -------------------------------------------------------------------------
Buildings and components 5 to 45 years
(principally 30 years)
- -------------------------------------------------------------------------
Gas generating and chemical 3 to 25 years
facilities, machinery and equipment (principally 14 to 20 years)
- -------------------------------------------------------------------------
Capitalized Interest
As the company builds new plant and equipment or invests in equity affiliates in
the development stage, it includes in the cost of these assets a portion of the
interest payments it makes during the year. In 1999, the amount of capitalized
interest was $22.1 million. In 1998, it was $15.7 million, and in 1997,
$19.1 million.
Interest Rate Swap Agreements
The company enters into interest rate swap agreements to reduce interest rate
risks and to modify the interest rate characteristics of its outstanding debt.
These agreements involve the exchange of fixed- and floating-rate interest
payments periodically over the life of the agreement without the exchange of the
underlying principal amounts. The net amount to be paid or received is accrued
as interest rates change and recognized over the life of the agreements as an
adjustment to interest expense. The fair value of these swap agreements is not
recognized in the financial statements. The notional amount of these agreements
is equal to or less than the designated debt instrument being hedged. The
variable rate bases of the swap instruments and the debt to which they are
designated are the same. The company will not enter into any future interest
rate swap contracts which lever a move in interest rates on a greater than
one-to-one basis.
The company is also party to interest rate and currency swap contracts. These
contracts entail both the exchange of fixed- and floating-rate interest payments
periodically over the life of the agreement and the exchange of one currency for
another currency at inception and a specified future date. The contracts are
used to hedge intercompany lending transactions and the value of investments in
certain foreign subsidiaries and affiliates. Gains and losses on the currency
component of these contracts, which hedge intercompany lending transactions, are
recognized in income and offset the foreign exchange gains and losses of the
related transaction. Gains and losses on the currency component of these
contracts which hedge investments in certain foreign subsidiaries and foreign
equity affiliates are not included in the income statement but are shown in the
cumulative translation adjustments account. The interest component of these
contracts is accounted for similarly to other interest rate swap agreements.
Gains and losses on terminated interest rate swap agreements are amortized into
income over the remaining life of the underlying debt obligation or the
remaining life of the original swap, if shorter.
37
<PAGE>
Foreign Currency
The value of the U.S. dollar rises and falls day to day on foreign currency
exchanges. Since the company does business in many foreign countries, these
fluctuations affect the company's financial position and results of operations.
Generally, foreign subsidiaries translate their assets and liabilities into U.S.
dollars at current exchange rates--that is, the rates in effect at the end of
the fiscal period. The gains or losses that result from this process are shown
in the cumulative translation adjustment account in the shareholders' equity
section of the balance sheet. Certain forward exchange contracts are used to
hedge the value of investments in certain subsidiaries and equity affiliates.
Gains and losses on these contracts are not included in the income statement but
are shown in the cumulative translation adjustment account.
The revenue and expense accounts of foreign subsidiaries are translated into
U.S. dollars at the average exchange rates that prevailed during the period.
Therefore, the U.S. dollar value of these items on the income statement
fluctuates from period to period depending on the value of the dollar against
foreign currencies.
Some transactions of the company and its subsidiaries are made in currencies
different from their own. Gains and losses from these foreign currency
transactions are generally included in income as they occur. The company enters
into forward exchange and option combination contracts to manage the exposure to
foreign currency fluctuations associated with certain monetary assets and
liabilities denominated in a foreign currency as well as certain highly
anticipated cash flows. Gains and losses on these contracts are recognized in
income and offset the foreign exchange gains and losses of the related
transaction.
Forward exchange and option combination contracts are sometimes used to hedge
firm commitments, such as the purchase of plant and equipment. Additionally,
purchased foreign currency options are sometimes used to hedge firm commitments
and certain highly anticipated cash flows, including export sales transactions.
The contracts are designated as, and effective as, hedges. The significant
characteristics and expected terms of the highly anticipated cash flows are
identified. Gains and losses resulting from these agreements are deferred and
reflected as adjustments of the related foreign currency transactions. Gains and
losses on terminated contracts, for which hedge criteria are met, are deferred
and recognized as an adjustment of the related foreign currency transaction.
The company entered into purchased currency options for the proposed acquisition
of The BOC Group plc ("BOC"). The company records gains and losses associated
with changes in the market value of these options currently in income since
hedge accounting may not be applied to instruments which hedge the cost of a
business combination.
Environmental Expenditures
Accruals for investigatory and noncapital remediation costs are recorded when it
is probable that a liability has been incurred and the amount of loss can be
reasonably estimated. Remediation costs are capitalized if the costs improve the
company's property as compared with the condition of the property when
originally constructed or acquired or if the costs prevent environmental
contamination from future operations. Costs to operate and maintain the
capitalized facilities are expensed as incurred.
The measurement of environmental liabilities is based on an evaluation of
currently available facts with respect to each individual site and considers
factors such as existing technology, presently enacted laws and regulations, and
prior experience in remediation of contaminated sites. While the current law
potentially imposes joint and several liability upon each party at any Superfund
site, the company's contribution to clean up these sites is expected to be
limited, given the number of other companies which have also been named as
potentially responsible parties and the volumes of waste involved. A reasonable
basis for apportionment of costs among responsible parties is determined and the
likelihood of contribution by other parties is established. If it is considered
probable that the company will only have to pay its expected share of the total
site cleanup, the liability reflects the company's expected share. In
determining the probability of contribution, the company considers the solvency
of the parties, whether responsibility is being disputed, the terms of any
existing agreements, and experience to date regarding similar matters. These
liabilities do not take into account any claims for recoveries from insurance or
third parties and are not discounted. As assessments and remediation progress at
individual sites, these liabilities are reviewed periodically and adjusted to
reflect additional technical and legal information which becomes available.
Actual costs to be incurred at identified sites in future periods may vary from
the estimates, given inherent uncertainties in evaluating environmental
exposures. The accruals for environmental liabilities are reflected in the
balance sheet primarily as part of other noncurrent liabilities.
Income Taxes
The company accounts for income taxes under the liability method. Under this
method, deferred tax liabilities and assets are recognized for the tax effects
of temporary differences between the financial reporting and tax bases of assets
and liabilities using enacted tax rates. A principal temporary difference
results from the excess of tax depreciation over book depreciation because
accelerated methods of depreciation and shorter useful lives are used for income
tax purposes. The cumulative impact of a change in tax rates or regulations is
included in income tax expense in the period that includes the enactment date.
38
<PAGE>
Cash and Cash Items
Cash and cash items include cash, time deposits, and certificates of deposit
acquired with an original maturity of three months or less.
Inventories
To determine the cost of chemical inventories and some gas and equipment
inventories in the United States, the company uses the last-in, first-out (LIFO)
method. This method assumes the most recent cost is closer to the cost of
replacing an item that has been sold. During periods of rising prices, LIFO
maximizes the cost of goods sold and minimizes the profit reported on the
company's income statement.
All other inventory values are determined using the first-in, first-out (FIFO)
method. Cost of an item sold is based on the first item produced or on the
current market value, whichever is lower.
Goodwill
When a company is acquired, the difference between the fair value of its net
assets and the purchase price is goodwill. Goodwill is recorded as an asset on
the balance sheet and is amortized into income over periods not exceeding 40
years. The company assesses the impairment of goodwill related to consolidated
subsidiaries in accordance with Statement of Financial Accounting Standards
(SFAS) No. 121. This statement requires the recognition of an impairment loss
for an asset held for use when the estimate of undiscounted future cash flows
expected to be generated by the asset is less than its carrying amount.
Measurement of the impairment loss is based on the fair value of the asset,
which is determined using valuation techniques such as the present value of
expected future cash flows. The measurement of an impairment loss of goodwill
related to equity affiliates, however, is based on expected undiscounted future
cash flows and is excluded from the scope of SFAS No. 121.
Shares in Trust
The company has established a trust, funded with Treasury Stock, to provide for
a portion of future payments to employees under the company's existing
compensation and benefit programs. Shares issued to the trust were valued at
market price on the date of contribution and reflected as a reduction of
shareholders' equity in the balance sheet. As shares are transferred from the
trust to fund compensation and benefit obligations, this equity account is
reduced based on the original cost of shares to the trust; the satisfaction of
liabilities is based on the fair value of shares transferred; and the difference
between the fair value of shares transferred and the original cost of shares to
the trust is charged or credited to capital in excess of par value.
Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2) Accounting and Disclosure Changes
In the first quarter of fiscal 1999, the company adopted SFAS No. 130,
"Reporting Comprehensive Income." This standard establishes additional
disclosure for the elements of comprehensive income and a total comprehensive
income calculation for all periods presented.
For the fiscal year ended 30 September 1999, the company adopted SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information." This
standard defines the disclosure requirements for operating segments. Operating
segments are defined as components of an enterprise for which separate financial
information is available that is evaluated regularly by the chief operating
decision maker. See Note 20.
Effective fiscal 1999, the company adopted the American Institute of Certified
Public Accountants' Statement of Position No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" (SOP 98-1). SOP 98-1
requires that software developed or obtained for internal use and meeting
certain specific criteria be capitalized. Implementation of this standard had no
material impact on the financial statements.
In June 1999, the Financial Accounting Standards Board (FASB) issued SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities--Deferral of
the Effective Date of SFAS No. 133" which defers the effective date of SFAS No.
133 for one year. The company expects to adopt this standard in the first
quarter of fiscal
39
<PAGE>
2001. SFAS No. 133 establishes accounting and reporting standards requiring that
every derivative instrument (including certain derivative instruments embedded
in other contracts) be recorded in the balance sheet as either an asset or a
liability measured at its fair value. The Statement requires that changes in the
derivative's fair value be recognized currently in earnings unless special
accounting criteria are met. Special accounting for qualifying hedges allows a
derivative's gains and losses to offset related results on the hedged item in
the income statement and requires that a company must formally document,
designate, and assess the effectiveness of transactions that receive hedge
treatment. The transition adjustments resulting from adopting this statement
shall be reported in net income or other comprehensive income, as appropriate,
as the effect of a change in accounting principle and presented in a manner
similar to the cumulative effect of a change in accounting principle. Also, the
company is continuing to evaluate the impacts of adopting the Statement on the
financial statements and the risk management processes.
3) Fair Value of Financial Instruments
Summarized below are the carrying values and fair values of the company's
financial instruments as of 30 September 1999 and 1998.
The fair value of the company's debt, interest rate swap agreements, forward
exchange contracts, option combination contracts, and purchased foreign currency
options is based on estimates using standard pricing models that take into
account the present value of future cash flows as of the balance sheet date. The
computation of fair values of these instruments is generally performed by the
company.
The fair value of the currency option contracts related to the BOC transaction
is computed by the financial institution with whom the options were executed.
The fair value of other investments is based principally on quoted market
prices. The carrying amounts reported in the balance sheet for cash and cash
items, accrued liabilities, accrued income taxes, and short-term borrowings
approximate fair value due to the short-term nature of these instruments.
Accordingly, these items have been excluded from the table below.
<TABLE>
<CAPTION>
1999 1999 1998 1998
Carrying Fair Carrying Fair
30 September (millions of dollars) Value Value Value Value
- ----------------------------------------------------------------------------------------------------------
Assets
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Other investments $38.4 $38.4 $18.4 $18.4
- ----------------------------------------------------------------------------------------------------------
Currency option contracts o notes 5 and 18 70.6 70.5 1.2 1.2
- ----------------------------------------------------------------------------------------------------------
Interest rate swap agreements o note 6 85.4 136.9 75.6 125.8
- ----------------------------------------------------------------------------------------------------------
Forward exchange contracts o note 5 .9 1.7 (25.8) (18.4)
- ----------------------------------------------------------------------------------------------------------
Liabilities
Long-term debt, including current portion o note 4 $2,434.6 $2,642.9 $2,427.4 $2,822.2
- ----------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE>
4) Long-Term Debt
The following table shows the company's outstanding debt at the end of fiscal
1999 and 1998, excluding any portion of the debt required to be repaid within a
year:
<TABLE>
<CAPTION>
30 September (millions of dollars) 1999 1998
- ----------------------------------------------------------------------------------------
Payable in U.S. dollars:
- ----------------------------------------------------------------------------------------
<S> <C> <C>
8 7/8% notes, due 2001 $ 100.0 $ 100.0
- ----------------------------------------------------------------------------------------
Medium-term notes, Series C, due through 2001,
weighted average interest rate 19.4% 10.0 101.0
- ----------------------------------------------------------------------------------------
8.35% debentures, due 2002, effective interest rate 8.4% 100.0 100.0
- ----------------------------------------------------------------------------------------
6 1/4% notes, due 2003 100.0 100.0
- ----------------------------------------------------------------------------------------
Medium-term notes, Series B, due through 2003, weighted
average interest rate 6.1% 16.0 16.0
- ----------------------------------------------------------------------------------------
Commercial paper -- 80.5
- ----------------------------------------------------------------------------------------
7 3/8% notes, due 2005, effective interest rate 7.5% 150.0 150.0
- ----------------------------------------------------------------------------------------
8 1/2% debentures, due 2006, callable by company in 2004,
effective interest rate 8.6% 100.0 100.0
- ----------------------------------------------------------------------------------------
7.578% notes, due 2006 72.5 72.5
- ----------------------------------------------------------------------------------------
Medium-term notes, Series F, due through 2016,
weighted average interest rate 5.8% 215.0 475.0
- ----------------------------------------------------------------------------------------
Medium-term notes, Series D, due through 2016,
weighted average interest rate 6.8% 400.0 400.0
- ----------------------------------------------------------------------------------------
8 3/4% debentures, due 2021, effective interest rate 9.0% 100.0 100.0
- ----------------------------------------------------------------------------------------
Medium-term notes, Series E, due through 2026,
interest rate 7.6% 250.0 300.0
- ----------------------------------------------------------------------------------------
California Pollution Control bonds,
weighted average interest rate 3.4% 57.0 --
- ----------------------------------------------------------------------------------------
Other, due through 2016, weighted average interest rate 5.0% 69.4 28.1
- ----------------------------------------------------------------------------------------
Payable in foreign currency:
- ----------------------------------------------------------------------------------------
8.27% British Pound loan -- 37.3
- ----------------------------------------------------------------------------------------
9.2% Deutsche Mark loan, due through 2002 4.1 6.4
- ----------------------------------------------------------------------------------------
5.81% British Pound loan, due 2004 36.2 --
- ----------------------------------------------------------------------------------------
2.9% Euro loan, due 2006 49.1 --
- ----------------------------------------------------------------------------------------
5.97% Dutch Guilder loan, due through 2006 43.4 55.6
- ----------------------------------------------------------------------------------------
Belgian Franc loans, due through 2006,
weighted average interest rate 4.2% 15.2 22.3
- ----------------------------------------------------------------------------------------
Malaysian Ringgit loan, weighted average interest rate 7.6% 41.9 --
- ----------------------------------------------------------------------------------------
Other, due through 2003, weighted average interest rate 3.0% 6.2 8.7
- ----------------------------------------------------------------------------------------
Less: Unamortized discount (4.1) (4.5)
- ----------------------------------------------------------------------------------------
1,931.9 2,248.9
Capital lease obligations:
- ----------------------------------------------------------------------------------------
United States, due through 2003, weighted average
interest rate 6.7% 6.2 5.1
- ----------------------------------------------------------------------------------------
Foreign, due through 2004, weighted average interest rate 7.6% 23.5 20.3
- ----------------------------------------------------------------------------------------
29.7 25.4
- ----------------------------------------------------------------------------------------
$1,961.6 $2,274.3
</TABLE>
41
<PAGE>
Various debt agreements to which the company is a party include certain
financial covenants and other restrictions, including restrictions pertaining to
the ability to create property liens and enter into certain sale and leaseback
transactions.
The company has obtained the commitment of a number of commercial banks to lend
money at market rates whenever needed by the company. These committed lines of
credit also are used to support the issuance of commercial paper. In January
1996, the company entered into a $600.0 million committed, multi-currency,
syndicated credit facility which matures in January 2003. No borrowings were
outstanding under this facility at 30 September 1999. At 30 September 1999,
foreign subsidiaries had additional committed credit lines of $94.4 million,
$17.8 million of which was borrowed and outstanding. Subsequent to the end of
fiscal 1999, the company added an additional $300 million revolving credit
commitment.
During 1999, a bank credit facility was executed to ensure the availability of
funding to finance the anticipated acquisition of BOC. The facility consists of
two tranches: a 364-day (subject to an additional 364-day term out option under
certain circumstances) UK(pound)3,950.0 million tranche to fund the acquisition
and a five-year $800 million tranche to replace the company's existing revolving
credit facilities. Interest rates are based on LIBOR plus a spread which is a
function of the company's long-term credit ratings. The agreement includes
certain financial covenants and other restrictions, including restrictions
pertaining to the ability to create property liens and enter into certain sale
and leaseback transactions. Funds are not available under this credit facility
until the offer for BOC shares is declared unconditional.
Maturities of long-term debt in each of the next five years are as follows:
$473.0 million in 2000; $139.2 million in 2001; $177.0 million in 2002; $140.2
million in 2003; and $142.0 million in 2004.
Included in the medium-term notes, Series E, is a $100.0 million note, due in
2026, with a one-time put option exercisable by the investor in 2008. Included
in current portion of long-term debt is a Series F $100.0 million note, due in
2009, with a one-time put option exercisable by the investor in 2000, and a
$100.0 million note, due in 2014, with a one-time put option exercisable by the
investor in 2000. Also included in Series F is a $50.0 million note, due in
2016, with a one-time put option exercisable by the investor in 2002.
5) Foreign Exchange Contracts
The company, in management of its exposure to fluctuations in foreign currency
exchange rates, has entered into a variety of foreign exchange contracts,
including forward, option combination, and purchased option contracts. These
agreements generally involve the exchange of one currency for a second currency
at some future date. Counterparties to these agreements are major international
financial institutions. The company's counterparty credit guidelines and
management's position regarding possible exposure to losses related to credit
risk is comparable to that for interest rate swap agreements as discussed in
Note 6.
The company enters into forward exchange and option combination contracts to
reduce the exposure to foreign currency fluctuations associated with certain
monetary assets and liabilities, as well as certain firm commitments and highly
anticipated cash flows. Forward exchange contracts are also used to hedge the
value of investments in certain foreign subsidiaries and affiliates by creating
a liability in a currency in which the company has a net equity position. The
company is also party to purchased option contracts which, if exercised, involve
the sale or purchase of foreign currency at a fixed exchange rate for a
specified period of time. Purchased option contracts are used to hedge firm
commitments and certain highly anticipated cash flows, including export sales
transactions, through fiscal 2000. The company has also entered into certain
purchased option contracts to hedge the proposed acquisition of BOC. Information
regarding these contracts is disclosed in Note 18.
The following table illustrates the U.S. dollar equivalent, including offsetting
positions, of foreign exchange contracts at 30 September 1999 and 1998 along
with maturity dates, net unrealized gain (loss), and net unrealized gain (loss)
deferred. As of 30 September 1999, the company has entered into purchased option
contracts for approximately UK(pound)1.7 billion for the proposed acquisition of
BOC.
42
<PAGE>
<TABLE>
<CAPTION>
Net
Latest Unrealized Unrealized Net Unrealized
Contract Amount Maturity Gross Gross Unrealized Gain (Loss)
(millions of dollars) ($U.S. Equivalent) Date Gain (Loss) Gain (Loss) Deferred
- ----------------------------------------------------------------------------------------------------------------------------------
30 September 1999
- ----------------------------------------------------------------------------------------------------------------------------------
Forward exchange contracts:
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$U.S./Euro $ 417.4 2003 $ 4.7 $(1.6) $ 3.1 $--
- ----------------------------------------------------------------------------------------------------------------------------------
$U.S./U.K. Pound Sterling 230.9 2000 .9 (3.4) (2.5) .9
- ----------------------------------------------------------------------------------------------------------------------------------
Euro/Canadian Dollar 96.3 2000 1.3 -- 1.3 --
- ----------------------------------------------------------------------------------------------------------------------------------
Euro/U.K. Pound Sterling 56.8 2000 1.1 -- 1.1 1.1
- ----------------------------------------------------------------------------------------------------------------------------------
Other 75.7 2000 .1 (1.4) (1.3) (1.2)
- ----------------------------------------------------------------------------------------------------------------------------------
877.1 8.1 (6.4) 1.7 .8
Option contracts:
- ----------------------------------------------------------------------------------------------------------------------------------
$U.S./U.K. Pound Sterling 2,748.3 2000 12.5 -- 12.5 --
- ----------------------------------------------------------------------------------------------------------------------------------
$U.S./Japanese Yen 7.2 2000 -- (.1) (.1) (.1)
- ----------------------------------------------------------------------------------------------------------------------------------
2,755.5 12.5 (.1) 12.4 (.1)
- ----------------------------------------------------------------------------------------------------------------------------------
$3,632.6 $20.6 $(6.5) $14.1 $ .7
30 September 1998
- ----------------------------------------------------------------------------------------------------------------------------------
Forward exchange contracts:
- ----------------------------------------------------------------------------------------------------------------------------------
$U.S./Spanish Peseta $ 332.2 2003 $-- $(19.4) $(19.4) $--
- ----------------------------------------------------------------------------------------------------------------------------------
$U.S./U.K. Pound Sterling 285.5 1999 5.2 (2.0) 3.2 4.5
- ----------------------------------------------------------------------------------------------------------------------------------
Spanish Peseta/U.K. Pound Sterling 71.5 1999 1.1 -- 1.1 1.1
- ----------------------------------------------------------------------------------------------------------------------------------
$U.S./Netherland DG 65.8 1999 .4 (3.2) (2.8) .4
- ----------------------------------------------------------------------------------------------------------------------------------
Other 236.6 2000 2.2 (2.7) (.5) 1.4
- ----------------------------------------------------------------------------------------------------------------------------------
991.6 8.9 (27.3) (18.4) 7.4
Option contracts:
- ----------------------------------------------------------------------------------------------------------------------------------
$U.S./German DM 50.5 1999 -- (.4) (.4) (.4)
- ----------------------------------------------------------------------------------------------------------------------------------
$U.S./U.K. Pound Sterling 22.5 1999 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
$U.S./Japanese Yen 15.6 1999 .4 -- .4 .4
- ----------------------------------------------------------------------------------------------------------------------------------
Other 19.7 1999 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
108.3 .4 (.4) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
$1,099.9 $9.3 $(27.7) $(18.4) $7.4
</TABLE>
The company's net equity position in its principal foreign subsidiaries at 30
September 1999 was $1,511.0 million. These subsidiaries have operations in the
United Kingdom, Germany, Spain, France, Netherlands, Belgium, Brazil, Japan,
Singapore, Indonesia, and Canada.
In addition to its foreign subsidiaries, the company has an equity position in
foreign equity affiliates as disclosed in Note 8.
43
<PAGE>
6) Interest Rate Swap Agreements
The company enters into interest rate swap agreements to change the
fixed/variable interest rate mix of the debt portfolio in order to maintain the
percentage of fixed- and variable-rate debt within certain parameters set by
management. In accordance with these parameters, the agreements are used to
reduce interest rate risks and costs inherent in the company's debt portfolio.
Accordingly, the company enters into agreements to both effectively convert
variable-rate debt to fixed-rate debt and to effectively convert fixed-rate debt
to variable-rate debt, which is principally indexed to LIBOR rates. The company
has also entered into variable to variable interest rate swap contracts to
effectively convert the stated variable interest rates on $60.0 million of the
medium-term notes, Series C, to an average interest rate slightly above the
three-month U.S. dollar LIBOR rate. The fair value gain (loss) on the variable
to variable swaps is equally offset by a fair value loss (gain) on the related
debt agreements.
The company is also party to interest rate and currency swap contracts. These
contracts effectively convert the currency denomination of a debt instrument
into another currency in which the company has a net equity position while
changing the interest rate characteristics of the instrument.
Counterparties to interest rate swap agreements are major financial
institutions. The company has established counterparty credit guidelines and
only enters into transactions with financial institutions of investment grade or
better. Minimum credit standards become more stringent as the duration of the
swap agreement increases. The company has provisions to require collateral in
certain instances. The market value of such collateral posted in the company's
favor as of 30 September 1999 is $107.0 million and is a result of the fair
value exposure to an investment grade counter-party exceeding the company's
policy maximum. Management believes the risk of incurring losses related to
credit risk is remote.
The table below illustrates the contract or notional (face) amounts outstanding,
maturity dates, weighted average receive and pay rates as of the end of the
fiscal year, and the net unrealized gain of interest rate swap agreements by
type at 30 September 1999 and 1998. The notional amounts are used to calculate
contractual payments to be exchanged and are not generally actually paid or
received, except for the currency swap component of the contracts. The net
unrealized gain on these agreements, which equals their fair value, is based on
the relevant yield curve at the end of the fiscal year.
<TABLE>
<CAPTION>
Weighted Weighted
Average Average Unrealized Unrealized Net
Notional Rate Rate Gross Gross Unrealized
30 September 1999 (millions of dollars) Amount Maturities Receive Pay Gain (Loss) Gain
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed to Variable $311.0 2000-2007 6.9% 5.2% $ 5.6 $ -- $ 5.6
- ----------------------------------------------------------------------------------------------------------------------------------
Variable to Variable 60.0 2000-2001 20.0% 5.4% 121.1 -- 121.1
- ----------------------------------------------------------------------------------------------------------------------------------
Interest Rate/Currency 270.8 2002-2006 5.3% 7.9% 13.5 (3.3) 10.2
- ----------------------------------------------------------------------------------------------------------------------------------
$641.8 $140.2 $ (3.3) $136.9
30 September 1998
- ----------------------------------------------------------------------------------------------------------------------------------
Fixed to Variable $461.0 1999-2007 7.0% 5.7% $ 37.6 $ -- $ 37.6
- ----------------------------------------------------------------------------------------------------------------------------------
Variable to Variable 60.0 2000-2001 16.4% 5.8% 86.4 -- 86.4
- ----------------------------------------------------------------------------------------------------------------------------------
Interest Rate/Currency 419.3 1999-2006 6.0% 8.4% 18.4 (16.6) 1.8
- ----------------------------------------------------------------------------------------------------------------------------------
$940.3 $142.4 $(16.6) $125.8
</TABLE>
44
<PAGE>
Of the net unrealized gain as of 30 September 1999 and 1998, a net gain of
$51.5 million and $50.2 million, respectively, has not been recognized in the
financial statements. At the end of fiscal 1999 and 1998, a deferred gain of
$1.1 million and a deferred loss of $7.1 million, respectively, resulted from
terminated contracts.
After the effects of interest rate swap agreements, the company's total debt,
including current portion, is composed of 57% fixed-rate debt and 43%
variable-rate debt as of 30 September 1999.
7) Inventories
The components of inventories are as follows:
<TABLE>
<CAPTION>
30 September (millions of dollars) 1999 1998
- ---------------------------------------------------------------------------
Inventories at FIFO cost:
- ---------------------------------------------------------------------------
<S> <C> <C>
Finished goods $278.2 $286.3
- ---------------------------------------------------------------------------
Work in process 36.0 38.4
- ---------------------------------------------------------------------------
Raw materials and supplies 134.7 136.6
- ---------------------------------------------------------------------------
448.9 461.3
Less excess of FIFO cost over LIFO cost (24.0) (32.7)
- ---------------------------------------------------------------------------
$424.9 $428.6
</TABLE>
Inventories valued using the LIFO method comprised 49.4% and 49.3% of
consolidated inventories before LIFO adjustment at 30 September 1999 and 1998,
respectively. Liquidation of prior years' LIFO inventory layers in 1999, 1998,
and 1997 did not materially affect cost of sales in any of these years.
8) Summarized Financial Information of Equity Affiliates
The following table presents summarized financial information on a combined 100%
basis of the principal companies accounted for by the equity method. Amounts
presented include the accounts of the following equity affiliates: Cambria CoGen
Company (50%); Stockton CoGen Company (50%); Orlando CoGen Limited, L.P. (50%);
Pure Air on the Lake, L.P. (50%); Bangkok Cogeneration Company Limited (48.9%);
Sankyo Air Products Co., Ltd. (50%); San-Apro Ltd. (50%); Sapio Produzione
Idrogeno Ossigeno S.r.L. (49%); INFRA Group (40%); San Fu Chemicals (48.1%);
ProCal (50%); Korea Industrial Gases (48.9%); Air Products South Africa (50%);
Bangkok Industrial Gases Company Ltd. (49%); INOX Air Products Limited (48.9%);
APP GmbH in WPS GmbH & CoKG (20%); and principally other industrial gas
producers.
<TABLE>
<CAPTION>
(millions of dollars) 1999 1998
- ---------------------------------------------------------------------------
<S> <C> <C>
Current assets $ 648.3 $ 458.8
- ---------------------------------------------------------------------------
Noncurrent assets 1,659.4 1,416.8
- ---------------------------------------------------------------------------
Current liabilities 483.5 372.4
- ---------------------------------------------------------------------------
Noncurrent liabilities 790.5 813.0
- ---------------------------------------------------------------------------
Net sales 1,436.0 1,168.1
- ---------------------------------------------------------------------------
Sales less cost of sales 487.8 416.7
- ---------------------------------------------------------------------------
Net income 221.3 110.0
- ---------------------------------------------------------------------------
</TABLE>
45
<PAGE>
The company's share of income of all equity affiliates for 1999, 1998, and 1997
was $83.7 million, $48.4 million, and $84.3 million, respectively. These amounts
exclude $22.2 million, $10.4 million, and $18.0 million of related net expenses
incurred by the company. Dividends received from equity affiliates were $36.1
million, $44.6 million, and $61.5 million in 1999, 1998, and 1997, respectively.
The investment in net assets of and advances to equity affiliates at
30 September 1999 and 1998 included investment in foreign affiliates of
$478.9 million and $315.3 million, respectively.
As of 30 September 1999 and 1998, the amount of investment in companies
accounted for by the equity method included goodwill in the amount of $75.4
million and $45.7 million, respectively. The goodwill is being amortized into
income over periods not exceeding 40 years.
9) Capital Stock
The authorized capital stock consists of 25 million preferred shares with a par
value of $1 per share, none of which was outstanding at 30 September 1999, and
300 million shares of Common Stock with a par value of $1 per share. In May
1998, the Board of Directors authorized a two-for-one stock split. On 15 June
1998, each shareholder was issued one additional share of Common Stock for each
share owned as of 15 May 1998. The consolidated financial statements have been
adjusted, where appropriate, to reflect the effects of the stock split for all
periods presented. At 30 September 1999, the number of shares of Common Stock
outstanding was 213,044,282.
During fiscal 1999 and 1998, the company spent $24.6 million and $365.0 million
to purchase .6 million and 9.4 million (post-split basis) Treasury Shares,
respectively. In fiscal 1999, the share repurchase program was suspended due to
the proposed acquisition of BOC.
The company established a trust to fund a portion of future payments to
employees under existing compensation and benefit programs in fiscal 1994. The
trust, which is administered by an independent trustee, was funded with 20
million shares of Treasury Stock. It will not increase or alter the amount of
benefits or compensation which will be paid under existing plans. The
establishment of the trust will not have an effect on earnings per share or
return on average shareholders' equity. As of 30 September 1999, the balance of
Treasury Stock remaining in the trust is 16.3 million shares.
On 19 March 1998, the Board of Directors unanimously approved a shareholder
rights plan to replace the company's previous rights plan, which expired 16
March 1998. Under the plan, the Board of Directors declared a dividend of one
Right for each share of Common Stock outstanding at the close of business on 19
March 1998 and with respect to Common Shares issued thereafter until the
Distribution Date (as defined below). Each Right, when it becomes exercisable as
described below, will entitle its holder to purchase one one-thousandth
(1/1,000) of a share of Series A Participating Cumulative Preferred Stock, par
value $1 per share, of the company (the "Preferred Shares") at a price of
$345.00 (the "Purchase Price").
Until the earlier of (i) such time as the company learns that a person or group
has acquired, or obtained the right to acquire, beneficial ownership of more
than 15% of the outstanding Common Shares (such person or group being called an
"Acquiring Person"), and (ii) such date, if any, as may be designated by the
Board of Directors following the commencement of, or first public disclosure of
an intention to commence, a tender or exchange offer for outstanding Common
Shares which could result in such person or group becoming the beneficial owner
of more than 15% of the outstanding Common Shares, (the earlier of such dates
being called the "Distribution Date"), the Rights will be evidenced by
certificates for Common Shares and not by separate Right certificates.
Therefore, until the Distribution Date, the Rights will be transferred with and
only with the Common Shares. The Rights are not exercisable until the
Distribution Date and will expire on 19 March 2008 (the "Expiration Date"),
unless earlier redeemed by the company as described on the following page.
46
<PAGE>
Subject to the right of the Board of Directors to redeem the Rights, at such
time as there is an Acquiring Person, each Right (other than Rights held by an
Acquiring Person) will thereafter have the right to receive, upon exercise
thereof, for the Purchase Price, that number of one one-thousandth of a
Preferred Share equal to the number of Common Shares which at the time of such
transaction would have a market value of twice the Purchase Price. If the
company is acquired in a merger or other business combination by an Acquiring
Person or 50% or more of the company's assets or assets representing 50% or more
of the company's earning power are sold, leased, exchanged or otherwise
transferred (in one or more transactions) to an Acquiring Person, each Right
(other than Rights held by an Acquiring Person) will entitle its holder to
purchase, for the Purchase Price, that number of common shares of such
corporation (or, if such corporation is not publicly traded, common shares of
any publicly traded affiliate of such corporation) which at the time of the
transaction would have a market value (or, if the Acquiring Person is not a
publicly traded corporation, having a book value) of twice the Purchase Price.
The Rights are redeemable by the Board of Directors at a redemption price of
$.01 per Right any time prior to the earlier of such time as there is an
Acquiring Person and Expiration Date.
10) Income Taxes
The following table shows the components of the provision for income taxes:
<TABLE>
<CAPTION>
(millions of dollars) 1999 1998 1997
- -----------------------------------------------------------------------
Federal:
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Current $117.5 $238.7 $ 61.3
- -----------------------------------------------------------------------
Deferred 38.8 (32.5) 90.6
- -----------------------------------------------------------------------
156.3 206.2 151.9
State:
- -----------------------------------------------------------------------
Current 6.3 22.7 3.6
- -----------------------------------------------------------------------
Deferred 1.6 (10.8) 6.5
- -----------------------------------------------------------------------
Impact of law/rate change (1.9) -- --
- -----------------------------------------------------------------------
6.0 11.9 10.1
Foreign:
- -----------------------------------------------------------------------
Current 20.8 33.5 42.1
- -----------------------------------------------------------------------
Deferred 20.3 24.7 4.2
- -----------------------------------------------------------------------
Impact of law/rate change -- .6 (7.2)
- -----------------------------------------------------------------------
41.1 58.8 39.1
- -----------------------------------------------------------------------
$203.4 $276.9 $201.1
</TABLE>
The significant components of deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
30 September (millions of dollars) 1999 1998
- ---------------------------------------------------------------------------
Gross deferred tax assets:
- ---------------------------------------------------------------------------
<S> <C> <C>
Pension and other compensation accruals $121.1 $118.5
- ---------------------------------------------------------------------------
Tax loss and investment tax credit carryforwards 29.2 26.7
- ---------------------------------------------------------------------------
Reserves and accruals 27.6 26.0
- ---------------------------------------------------------------------------
Postretirement benefits 28.8 29.5
- ---------------------------------------------------------------------------
Inventory 18.6 18.2
- ---------------------------------------------------------------------------
Foreign currency translation adjustment 12.8 1.1
- ---------------------------------------------------------------------------
Other 56.4 44.9
- ---------------------------------------------------------------------------
Valuation allowance (3.5) (14.6)
- ---------------------------------------------------------------------------
Deferred tax assets 291.0 250.3
Gross deferred tax liabilities:
- ---------------------------------------------------------------------------
Plant and equipment 789.8 706.4
- ---------------------------------------------------------------------------
Investment in partnerships 52.1 81.7
- ---------------------------------------------------------------------------
Employee benefit plans 45.6 50.1
- ---------------------------------------------------------------------------
Currency gains 11.3 27.7
- ---------------------------------------------------------------------------
Construction contract accounting methods 10.7 3.0
- ---------------------------------------------------------------------------
Unrealized gain on cost investment 7.7 2.8
- ---------------------------------------------------------------------------
Other 60.9 49.1
- ---------------------------------------------------------------------------
Deferred tax liabilities 978.1 920.8
- ---------------------------------------------------------------------------
Net deferred income tax liability $687.1 $670.5
</TABLE>
47
<PAGE>
Net current deferred tax assets of $35.1 million and net noncurrent deferred tax
assets of $8.9 million are included in other current assets and other noncurrent
assets at 30 September 1999, respectively. Net current deferred tax assets of
$32.5 million are included in other current assets at 30 September 1998.
Foreign and state operating loss carryforwards on 30 September 1999 were
$54.0 million and $64.6 million, respectively. Foreign losses of $6.7 million
are available to offset future foreign income through 2008. The balance of these
losses have an unlimited carryover period. State operating loss carryforwards
are available through 2012. Foreign capital loss carryforwards were $2.1 million
on 30 September 1999 and have an unlimited carryover period.
The valuation allowance as of 30 September 1999 primarily relates to the tax
loss carryforwards referenced above. If events warrant the reversal of the $3.5
million valuation allowance, it would result in a reduction of tax expense. The
$11.1 million reduction in the valuation allowance in fiscal 1999 included a
$6.8 million reduction of intangible assets with the balance principally
reducing income tax expense.
Major differences between the federal statutory rate and the effective tax rate
are:
<TABLE>
<CAPTION>
(percent of income before taxes) 1999 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
United States federal statutory rate 35.0% 35.0% 35.0%
- ------------------------------------------------------------------------------
State taxes, net of federal tax benefit 2.1 1.9 2.2
- ------------------------------------------------------------------------------
Income from equity affiliates (3.0) (1.9) (2.5)
- ------------------------------------------------------------------------------
Foreign tax credits and refunds
on dividends received from foreign affiliates .6 (1.0) .1
- ------------------------------------------------------------------------------
Nonconventional fuel credits -- -- (.8)
- ------------------------------------------------------------------------------
Export tax benefits (1.4) (.9) (.6)
- ------------------------------------------------------------------------------
Investment tax credits (.1) (.3) (1.1)
- ------------------------------------------------------------------------------
American Ref-Fuel sale and contract settlements -- 1.4 --
- ------------------------------------------------------------------------------
Other (2.1) (.6) (.4)
- ------------------------------------------------------------------------------
Effective tax rate after minority interest 31.1% 33.6% 31.9%
- ------------------------------------------------------------------------------
Minority interest (.7) -- --
- ------------------------------------------------------------------------------
Effective tax rate 30.4% 33.6% 31.9%
</TABLE>
The following table summarizes the income of U.S. and foreign operations,
before taxes and minority interest:
<TABLE>
<CAPTION>
(millions of dollars) 1999 1998 1997
- ------------------------------------------------------------------------------
Income from consolidated operations:
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $433.8 $626.8 $426.6
- ------------------------------------------------------------------------------
Foreign 151.5 149.2 120.2
- ------------------------------------------------------------------------------
Income from equity affiliates 83.7 48.4 84.3
- ------------------------------------------------------------------------------
$669.0 $824.4 $631.1
</TABLE>
The company does not pay or record U.S. income taxes on the undistributed
earnings of its foreign subsidiaries and its 20% to 50% owned corporate joint
ventures as long as those earnings are permanently reinvested in the companies
that produced them. These cumulative undistributed earnings are included in
consolidated retained earnings on the balance sheet and amounted to $739.8
million at the end of fiscal 1999. An estimated $167.9 million in U.S. income
and foreign withholding taxes would be due if these earnings were remitted as
dividends, after payment of all deferred taxes.
11) Plant and Equipment
The major classes of plant and equipment, at cost, are as follows:
<TABLE>
<CAPTION>
30 September (millions of dollars) 1999 1998
- ---------------------------------------------------------------------------
<S> <C> <C>
Land $ 139.3 $ 127.3
- ---------------------------------------------------------------------------
Buildings 651.2 599.9
- ---------------------------------------------------------------------------
Gas generating and chemical facilities,
machinery and equipment 8,713.7 8,208.7
- ---------------------------------------------------------------------------
Construction in progress 683.7 553.6
- ---------------------------------------------------------------------------
$10,187.9 $9,489.5
</TABLE>
48
<PAGE>
12) Stock Option and Award Plans
Long-Term Incentive Plan
The Long-Term Incentive Plan (the "Plan") provides for three principal types of
awards to executives and key employees: stock options, performance units, and
deferred stock units. The award type most frequently used is the non-qualified
stock option with an exercise price fixed at 100% of the fair market value of a
share of Air Products common stock ("stock") on the date of grant. Non-qualified
stock options standardly become exercisable in cumulative installments of
33 1/3% one year after the date of grant and annually thereafter, and must be
exercised no later than ten years and one day from the date of grant.
In October 1996 and 1998, the company granted 639,800 and 697,300 premium priced
stock options, respectively, in addition to the fair market value stock options.
These stock options have an exercise price above market on the date of grant
($36 and $40, respectively). The awards are 100% vested after two years and are
exercisable over an additional three-year period. As of 30 September 1999, a
total of 13,257,506 options including both fair market value and premium priced
stock options were outstanding.
In fiscal 1997 and 1999, the company also granted deferred stock units
identified as performance shares to executive officers and other key employees.
These awards provide for the issuance of common stock based on certain
management objectives achieved by the performance period ending 30 September
1998 and 30 September 2000, respectively. The number of shares to be paid out
for the 1999 grant can vary from 0% to 225% of the 570,500 base performance
share units granted. The number of shares to be paid out for the fiscal 1997
grant is 367,578 share units. Compensation expense is recognized over a period
ranging from two to ten years.
Prior to the issuance of performance shares, the company granted deferred stock
units as career share awards in fiscal years 1992 through 1997 to certain
executive officers and other key employees. Career shares are deferred stock
units payable in shares of stock after retirement. Career share awards
equivalent to 803,743 and 862,874 shares of stock were outstanding at the end of
fiscal years 1999 and 1998, respectively. Compensation expense was computed by
multiplying the number of units granted by the market price of the stock on the
date of grant. The cost is recognized over a ten-year period.
The following table summarizes stock option transactions (fair market value
stock options and premium priced stock options) as follows:
<TABLE>
<CAPTION>
Number of Average
Shares Price
- -----------------------------------------------------------------------------
<S> <C> <C>
Outstanding at 30 September 1996 10,677,544 17.72
- -----------------------------------------------------------------------------
Granted 2,437,300 31.00
- -----------------------------------------------------------------------------
Exercised (2,243,956) 12.62
- -----------------------------------------------------------------------------
Forfeited (11,002) 25.94
- -----------------------------------------------------------------------------
Outstanding at 30 September 1997 10,859,886 21.73
- -----------------------------------------------------------------------------
Granted 2,014,500 41.31
- -----------------------------------------------------------------------------
Exercised (1,021,169) 13.56
- -----------------------------------------------------------------------------
Forfeited (40,075) 32.32
- -----------------------------------------------------------------------------
Outstanding at 30 September 1998 11,813,142 25.73
- -----------------------------------------------------------------------------
Granted 2,644,400 32.25
- -----------------------------------------------------------------------------
Exercised (1,050,803) 14.67
- -----------------------------------------------------------------------------
Forfeited (149,233) 33.98
- -----------------------------------------------------------------------------
Outstanding at 30 September 1999 13,257,506 27.81
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Exercisable at end of year 8,775,971
- -----------------------------------------------------------------------------
Participants at end of year 536
- -----------------------------------------------------------------------------
Available for future grant at end of year 3,982,599
- -----------------------------------------------------------------------------
</TABLE>
49
<PAGE>
The following table summarizes information about options outstanding at 30
September 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Range of Exercise Prices Outstanding Life (Years) Price Exercisable Price
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$11.41-16.92 1,747,352 2.54 $14.51 1,747,352 $14.51
- -------------------------------------------------------------------------------------------------------------
19.56-23.13 3,207,148 5.13 21.69 3,207,148 21.69
- -------------------------------------------------------------------------------------------------------------
26.03-29.06 3,116,982 7.54 27.67 2,549,867 27.36
- -------------------------------------------------------------------------------------------------------------
36.00-41.69 5,186,024 9.37 36.16 1,271,604 38.67
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Other Stock-Based Incentives
In addition to the Long-Term Incentive Plan, there is a Directors' Stock Option
Plan. Options awarded to nonemployee directors are exercisable six months after
grant date and must be exercised no later than ten years and one day from the
date of grant. Under this plan, there were 104,000 and 84,000 options
outstanding and exercisable at the end of fiscal years 1999 and 1998,
respectively. Option prices were $34.53 and $39.37 per share for options issued
in fiscal 1999 and 1998, respectively.
The company grants deferred stock unit awards to certain key employees below the
executive level. Deferred stock units equivalent to 853,081 and 798,160 shares
of stock were outstanding at the end of fiscal years 1999 and 1998,
respectively. Compensation expense is computed by multiplying the number of
units granted by the market value of the stock on the date of grant. The cost is
recognized over the four-year deferral period applicable to the awards.
In October 1995 and 1997, the company awarded 200 stock options to virtually all
employees. These options vest three years after date of grant and are
exercisable over an additional seven-year period. The following table summarizes
these global stock option transactions as follows:
<TABLE>
<CAPTION>
Number of Average
Shares Price
- ------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at 30 September 1998 5,669,600 $34.59
- ------------------------------------------------------------------------------
Granted -- --
- ------------------------------------------------------------------------------
Exercised (722,200) 26.03
- ------------------------------------------------------------------------------
Forfeited (115,200) 37.38
- ------------------------------------------------------------------------------
Outstanding at 30 September 1999 4,832,200 35.82
- ------------------------------------------------------------------------------
</TABLE>
In October 1999, the company disclosed its intention to award 100 stock options
with an exercise price of $28.78 per share to virtually all employees.
Approximately 1,812,000 options will be granted.
Pro Forma Information
The company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for its stock option
plans. SFAS No. 123 requires the company to disclose pro forma net income and
pro forma earnings per share amounts as if compensation expense were recognized
for options granted after fiscal year 1995. Using this approach, net income and
earnings per share would have been reduced to the pro forma amounts indicated in
the table:
<TABLE>
<CAPTION>
(millions of dollars, except per share) 1999 1998 1997
- ------------------------------------------------------------------------------
Net earnings
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
As reported $450.5 $546.8 $429.3
- ------------------------------------------------------------------------------
Pro forma 428.7 522.0 415.5
- ------------------------------------------------------------------------------
Basic earnings per share
- ------------------------------------------------------------------------------
As reported $2.12 $2.54 $1.95
- ------------------------------------------------------------------------------
Pro forma 2.02 2.42 1.89
- ------------------------------------------------------------------------------
Diluted earnings per share
- ------------------------------------------------------------------------------
As reported $2.09 $2.48 $1.91
- ------------------------------------------------------------------------------
Pro forma 1.98 2.36 1.84
- ------------------------------------------------------------------------------
</TABLE>
50
<PAGE>
For disclosure purposes, the fair value of each stock option granted is
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted average of assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend yield 2.0% 2.0% 2.3%
- ----------------------------------------------------------------------------
Expected volatility 21.1% 20.1% 25.3%
- ----------------------------------------------------------------------------
Risk-free interest rate 4.4% 6.0% 6.6%
- ----------------------------------------------------------------------------
Expected life (years) 7.2 6.2 7.2
- ----------------------------------------------------------------------------
</TABLE>
The Black-Scholes option-pricing model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option-pricing models require the input of subjective
assumptions, including the expected stock price volatility. Because the
company's options have characteristics different from those of traded options,
in the opinion of management, the existing models do not necessarily provide a
reliable single measure of the fair value of its options.
13) Earnings Per Share
The calculation of basic and diluted earnings per share is as follows:
<TABLE>
<CAPTION>
30 September (in millions, except per share) 1999 1998 1997
- ----------------------------------------------------------------------------
Numerator:
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Income available to common shareholders used
in basic and diluted earnings per share $450.5 $546.8 $429.3
- ----------------------------------------------------------------------------
Denominator:
- ----------------------------------------------------------------------------
Weighted average number of common shares used
in basic earnings per share 212.2 215.5 220.1
- ----------------------------------------------------------------------------
Effect of dilutive securities:
- ----------------------------------------------------------------------------
Employee stock options 2.8 3.6 3.8
- ----------------------------------------------------------------------------
Other award plans 1.0 1.0 1.0
- ----------------------------------------------------------------------------
3.8 4.6 4.8
Weighted average number of common shares and
dilutive potential common shares used in diluted
earnings per share 216.0 220.1 224.9
- ----------------------------------------------------------------------------
Basic earnings per share $2.12 $2.54 $1.95
- ----------------------------------------------------------------------------
Diluted earnings per share $2.09 $2.48 $1.91
- -----------------------------------------------------------------------------
</TABLE>
Dividends Graph
Market Price Range per Shares Graph
51
<PAGE>
14) Pension and Other Postretirement Benefits
The following table shows reconciliations of the domestic pension plan and other
postretirement plan benefits as of 30 September 1999 and 1998. The foreign
pension plan information is as of 30 June 1999 and 1998:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
(millions of dollars) 1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------
Change in benefit obligation
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Benefit obligation on 1 October $1,307.2 $ 979.4 $64.6 $56.4
- ----------------------------------------------------------------------------------------------------------
Service cost 49.2 38.1 4.9 4.1
- ----------------------------------------------------------------------------------------------------------
Interest cost 84.7 74.6 4.3 4.3
- ----------------------------------------------------------------------------------------------------------
Amendments 6.2 8.0 -- --
- ----------------------------------------------------------------------------------------------------------
Actuarial loss (gain) (140.6) 230.2 (6.9) 4.5
- ----------------------------------------------------------------------------------------------------------
Plan participant contributions 3.4 3.0 -- --
- ----------------------------------------------------------------------------------------------------------
Benefits paid (45.5) (38.5) (4.9) (4.7)
- ----------------------------------------------------------------------------------------------------------
Currency translation (14.2) 12.4 -- --
- ----------------------------------------------------------------------------------------------------------
Benefit obligation on 30 September $1,250.4 $1,307.2 $62.0 $64.6
Change in plan assets
- -----------------------------------------------------------------------------------------------------------
Fair value of plan assets on 1 October $1,044.7 $ 943.4 $-- $--
- -----------------------------------------------------------------------------------------------------------
Actual return on plan assets 182.8 80.8 -- --
- ----------------------------------------------------------------------------------------------------------
Company contributions 8.2 15.1 -- --
- ----------------------------------------------------------------------------------------------------------
Plan participant contributions 3.4 3.0 -- --
- ----------------------------------------------------------------------------------------------------------
Benefits paid (41.0) (34.7) -- --
- ----------------------------------------------------------------------------------------------------------
Acquisition -- 18.7 -- --
- ----------------------------------------------------------------------------------------------------------
Currency translation/Other (14.5) 18.4 -- --
- ----------------------------------------------------------------------------------------------------------
Fair value of plan assets on 1 October $1,183.6 $1,044.7 $-- $--
Funded status of the plan $(66.8) $(262.5) $(62.0) $(64.6)
- ----------------------------------------------------------------------------------------------------------
Unrecognized actuarial loss (gain) (30.7) 214.9 (10.1) (3.1)
- ----------------------------------------------------------------------------------------------------------
Unrecognized prior service cost 17.0 16.5 (1.0) (1.2)
- ----------------------------------------------------------------------------------------------------------
Unrecognized net transition asset (14.5) (19.1) -- --
- -----------------------------------------------------------------------------------------------------------
Net amount recognized $(95.0) $ (50.2) $(73.1) $(68.9)
Total recognized amounts in the balance sheet consist of:
- -----------------------------------------------------------------------------------------------------------
Prepaid benefit cost $ 111.8 $ 109.8 $-- $--
- -----------------------------------------------------------------------------------------------------------
Accrued benefit liability (221.4) (196.4) (73.1) (68.9)
- -----------------------------------------------------------------------------------------------------------
Intangible asset 6.8 13.5 -- --
- -----------------------------------------------------------------------------------------------------------
Shareholders' equity 7.8 22.9 -- --
- -----------------------------------------------------------------------------------------------------------
Net amount recognized $ (95.0) $ (50.2) $(73.1) $(68.9)
Weighted average assumptions as of 30 September
- -----------------------------------------------------------------------------------------------------------
Discount rate 7.2% 6.6% 7.75% 6.5%
- -----------------------------------------------------------------------------------------------------------
Expected return on plan assets 9.5% 9.5% -- --
- -----------------------------------------------------------------------------------------------------------
Rate of compensation increase 4.6% 4.7% 5.0% 5.0%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
For measurement purposes, an 8.5% annual rate of increase in the per capita cost
of covered health care benefits was assumed for fiscal 2000. The rate was
assumed to decrease gradually to 5.5% for fiscal 2006 and thereafter.
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
(millions of dollars) 1999 1998 1997 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------
Components of net periodic benefit cost
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 49.2 $ 38.1 $ 32.8 $4.9 $4.1 $3.5
- -----------------------------------------------------------------------------------------------------------------
Interest cost 84.7 74.6 68.2 4.3 4.3 4.2
- -----------------------------------------------------------------------------------------------------------------
Expected return on plan assets (125.1) (80.8) (73.0) -- -- --
- -----------------------------------------------------------------------------------------------------------------
Prior service cost amortization 2.3 1.9 1.8 (.1) (.1) (.1)
- -----------------------------------------------------------------------------------------------------------------
Actuarial (gain)/loss amortization 46.4 2.8 .5 -- (.1) (.2)
- -----------------------------------------------------------------------------------------------------------------
Transition amount amortization (3.8) (3.8) (3.7) -- -- --
- -----------------------------------------------------------------------------------------------------------------
Net periodic benefit cost $ 53.7 $ 32.8 $ 26.6 $9.1 $8.2 $7.4
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for the pension plan with accumulated benefit obligations in
excess of plan assets were $167.4 million, $146.7 million, and $70.6 million,
respectively, as of 30 September 1999, and $983.0 million, $763.1 million, and
$626.5 million, respectively, as of 30 September 1998.
The company has two nonpension postretirement benefit plans. Health care
benefits are contributory with contributions adjusted periodically; the life
insurance plan is noncontributory. The effect of a change in the health care
trend rate is slightly tempered by a cap on average retiree medical cost. A one
percentage point change in the assumed health care cost trend rate would have
the following effects:
<TABLE>
<CAPTION>
1 Percentage Point 1 Percentage Point
(millions of dollars) Increase Decrease
- -------------------------------------------------------------------------------
<S> <C> <C>
Effect on total of service
and interest cost $.4 $(.5)
- -------------------------------------------------------------------------------
Effect on the postretirement
benefit obligation $2.7 $(3.1)
- -------------------------------------------------------------------------------
</TABLE>
In addition to the above plans, U.S. employees are eligible to contribute to a
401(k) plan. The company matches a portion of these contributions. Contributions
charged to income for this plan for 1999, 1998, and 1997 were $13.8 million,
$12.9 million, and $12.1 million, respectively.
15) Leases
Capital leases, primarily for machinery and equipment, are included with owned
plant and equipment on the balance sheet in the amount of $63.9 million and
$46.5 million at the end of fiscal 1999 and 1998, respectively. Related amounts
of accumulated depreciation are $26.6 million and $25.4 million, respectively.
Operating leases, including month-to-month agreements, cost the company $83.4
million in 1999, $66.8 million in 1998, and $60.6 million in 1997.
At 30 September 1999, minimum payments due under leases are as follows:
Capital Operating
(millions of dollars) Leases Leases
- ---------------------------------------------------------------------
2000 $28.9 $ 29.8
- ---------------------------------------------------------------------
2001 11.8 23.4
- ---------------------------------------------------------------------
2002 10.0 16.8
- ---------------------------------------------------------------------
2003 6.5 12.3
- ---------------------------------------------------------------------
2004 5.1 10.6
- ---------------------------------------------------------------------
2005 and thereafter -- 82.7
- ---------------------------------------------------------------------
$62.3 $175.6
The present value of the above future capital lease payments is included in the
liability section of the balance sheet. At the end of fiscal 1999, $25.5 million
was classified as current and $29.7 million as long-term.
53
<PAGE>
16) Other Commitments and Contingencies
General partnerships, in which subsidiaries of Air Products have a 50% interest,
own facilities in Stockton, California and Cambria County, Pennsylvania that
burn coal and coal waste, respectively, and produce electricity and steam. Air
Products is also operator of these projects. In the aggregate for both
facilities, specific performance guarantees obligate Air Products to pay damages
of $3 million annually up to a cumulative total of $23 million under certain
circumstances and if the general partnership is unable to service its debt.
Other completed cogeneration projects, in which Air Products, through equity
affiliates, beneficially owns 48.9% (Map Ta Phut, Thailand) and 50% (Rotterdam,
the Netherlands) burn natural gas to produce electricity and steam. Specific
equity support agreements related to the financings of the two projects obligate
Air Products to contribute equity up to a cumulative total for the two projects
of $17 million under certain circumstances.
Additionally, Air Products and a subsidiary have a 50% interest in a limited
partnership that owns a natural gas-fired cogeneration facility in Orlando,
Florida. Under agreements with the partnership, Air Products provides financial
support relating to the facility's natural gas supply. In the event the
partnership's municipal utility district customer (one of the project's two
power purchasers) terminates its contract due to a partnership default, Air
Products will make available up to $15 million (escalates from February 1992) to
compensate the utility district for the higher cost of power procured from other
sources over a period of up to five years.
In connection with the financing of the domestic cogeneration projects, Air
Products has contracted to provide financial support in the event of a title
problem at the plant site.
In addition, the company has guaranteed repayment of borrowings of certain
domestic and foreign equity affiliates. At year end, these guarantees totaled
approximately $52 million.
The company has accrued for certain environmental investigatory and noncapital
remediation costs consistent with the policy set forth in Note 1. The potential
exposure for such costs is estimated to range from $10 million to a reasonably
possible upper exposure of $26 million. The balance sheet at 30 September 1999
includes an accrual of $19.4 million. The company does not expect that any sums
it may have to pay in connection with these environmental matters would have a
materially adverse effect on its consolidated financial position or results of
operations in any one year.
The company in the normal course of business has commitments, lawsuits,
contingent liabilities, and claims. However, the company does not expect that
any sum it may have to pay in connection with these matters will have a
materially adverse effect on its consolidated financial position or results of
operations. The company also has contingencies related to the BOC acquisition.
See Note 18.
At the end of fiscal 1999, the company had purchase commitments to spend
approximately $237 million for additional plant and equipment.
17) Acquisitions and Divestitures
Wacker-Chemie Joint Venture
On 1 October 1998, Air Products and Chemicals, Inc. and Wacker-Chemie GmbH
formed two joint ventures to consolidate their respective positions in polymer
emulsions and redispersible powder polymers businesses. The combined annual
sales of the ventures were approximately $800 million in fiscal 1999. The
ventures extend the company's strategy to continue globalization of the
chemicals segment by establishing manufacturing and support facilities in key
regions.
The polymer emulsions joint venture, Air Products Polymers, L.P. (APP),
is headquartered in the United States and has facilities in Germany, Mexico,
Korea, and several locations in the United States. Air Products has a 65%
interest in the venture and Wacker-Chemie has a 35% interest. This venture is
consolidated into Air Products' financial statements and the Wacker-Chemie
interest accounted for as a minority interest. The accounting for this
transaction as a business combination resulted in the partial sale of assets,
with a gain of $34.9 million ($23.6 million after-tax, or $.11 per share).
The redispersible powders venture, Wacker Polymer Systems (WPS), is
headquartered in Germany, with manufacturing facilities in Germany and the
United States. Air Products has a 20% interest in this venture and reports the
results by the equity accounting method.
Air Products' fiscal 1999 sales were approximately $110 million higher than
would have occurred without the ventures. After the Wacker-Chemie minority
interest eliminations, net income in the initial year of operation was
approximately the same as before the ventures.
American Ref-Fuel Company
In December 1997, the company sold substantially all of its 50% interest
in the American Ref-Fuel Company, its former waste-to-energy joint venture with
Browning-Ferris Industries, Inc. (BFI), to a limited liability company formed by
Duke Energy Power Services and United American Energy Corporation. This
transaction provided for the sale of Air Products' interest in American
Ref-Fuel's five waste-to-energy facilities for $237 million, and Duke Energy
Capital Corporation, the parent company of Duke Energy Power Services,
54
<PAGE>
assumed various parental support agreements. The income statement for the year
ended 30 September 1998 includes a gain of $62.6 million from this sale ($35.1
million after-tax, or $.16 per share).
Carburos Metalicos S.A.
In November 1994, the company published a tender offer to acquire 74.2% of the
outstanding shares (9.7 million) of Carburos Metalicos S.A. (Carburos),
representing all of the shares in Carburos not owned by the company. The company
made a second tender offer in September 1995 and a third tender offer in
September 1996. The company acquired less than 1% of the outstanding shares in
the initial tender offer while the second tender offer resulted in the
acquisition of an additional 21.5% (2.8 million) of the outstanding shares at a
cost of $120.0 million. On 22 October 1996, the company obtained control of
Carburos through the acquisition of an additional 49.1% (6.4 million) of the
outstanding shares at a cost of $288.4 million. The acquisition was funded
through the issuance of U.S. dollar debt effectively converted to Spanish Peseta
liabilities through the use of interest rate and currency swap contracts and
foreign exchange contracts.
Carburos is a leading supplier of industrial gases in Spain. This transaction
was accounted for as a step acquisition purchase, and the results for the year
ended 30 September 1997 contained approximately forty-five weeks of consolidated
operating results for Carburos. Previously, the company accounted for its
investment using the equity method. The company has recorded a total of $212.2
million as cumulative goodwill related to the shares acquired in the three
tender offers. The goodwill is amortized on a straight-line basis over forty
years.
In fiscal 1998, the company purchased most of the remaining minority interest in
Carburos. The company now owns 99.7% of the outstanding shares of Carburos.
18) BOC Transaction
In July 1999, the company and L'Air Liquide S.A. ("Air Liquide") of France
agreed to the terms of a recommended offer under which they would acquire BOC,
the leading British industrial gases company, for UK(pound)14.60 per share in
cash, or a total of approximately UK(pound)7.2 billion. Air Products has a
UK(pound)3,950.0 million credit agreement to provide backup for commercial paper
or direct funding for its 50% share of the offer price. Fees incurred to secure
this credit agreement have been deferred and will be amortized on a
straight-line basis over the term of the arrangement. The offer will formally
commence in the United Kingdom and the United States upon receipt of the
necessary regulatory clearances, which are expected in the first quarter of
calendar year 2000. The company expects the transaction will be included in the
company's financial results for approximately six months of fiscal 2000. Due to
the joint control with Air Liquide, the operations will initially be accounted
for under the equity method. As the company gains control and ownership of
approximately one-half of the BOC assets expected to be allocated to it, the
operations will be accounted for as consolidated entities.
If the BOC acquisition transaction does not occur, the deferred costs that would
be capitalized as part of the purchase price would be expensed. In addition,
under certain circumstances, if the offer to BOC is not made or lapses, Air
Products and Air Liquide have agreed to pay BOC a fee of $100 million, which
would be split equally between Air Products and Air Liquide.
As of 30 September 1999, the company entered into purchased currency options
contracts for approximately UK(pound)1.7 billion. These options expire in fiscal
year 2000. Subsequent to 30 September 1999, the company entered into additional
purchased options and option combination contracts with a gross notional value
of approximately UK(pound)4.0 billion to further hedge the proposed acquisition.
The net impact of the option contracts entered to date (after adjusting for the
tax impact of the hedge placed) is a hedge of approximately UK(pound)2.2 billion
of the company's UK(pound)3.6 billion share of the purchase price. The company
will record gains and losses associated with changes in the market value of
these options currently in earnings since hedge accounting may not be applied to
instruments which are used to hedge the cost of a business combination. The
results for the twelve months ended 30 September 1999 include a net gain of $7.0
million ($4.4 million after-tax, or $.02 per share), from these currency
options, net of preacquisition expenses.
55
<PAGE>
19) Supplementary Information
<TABLE>
<CAPTION>
Payables, Trade and Other
30 September (millions of dollars) 1999 1998
- ----------------------------------------------------------------------------
<S> <C> <C>
Accounts payable, trade $441.5 $398.0
- ----------------------------------------------------------------------------
Outstanding checks payable in excess
of certain cash balances 13.8 23.3
- ----------------------------------------------------------------------------
Customer advances 50.5 57.4
- ----------------------------------------------------------------------------
$505.8 $478.7
Accrued Liabilities
30 September (millions of dollars) 1999 1998
- ----------------------------------------------------------------------------
Accrued payroll and employee benefits $ 83.0 $109.0
- ----------------------------------------------------------------------------
Accrued interest expense 44.9 45.8
- ----------------------------------------------------------------------------
Other accrued liabilities 279.1 178.0
- ----------------------------------------------------------------------------
$407.0 $332.8
Short-Term Borrowings
30 September (millions of dollars) 1999 1998
- ----------------------------------------------------------------------------
Bank obligations $ 41.8 $ 28.4
- ----------------------------------------------------------------------------
Commercial paper 363.0 240.2
Notes payable--other 2.8 1.5
- ----------------------------------------------------------------------------
$407.6 $270.1
</TABLE>
The weighted average interest rate of short-term commercial paper outstanding as
of 30 September 1999 and 1998 was 5.3% and 5.5%, respectively.
<TABLE>
<CAPTION>
Other Income (Expense), Net
(millions of dollars) 1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income $ 6.4 $ 5.3 $ 6.7
- -------------------------------------------------------------------------------
Foreign exchange (3.0) (8.3) (5.8)
- -------------------------------------------------------------------------------
Gain (loss) on sale of assets and investments (3.7) 18.6 25.1
- -------------------------------------------------------------------------------
Impairment loss of long-lived assets (.5) (2.2) (9.9)
- -------------------------------------------------------------------------------
Royalty and technology income 3.5 2.6 2.7
- -------------------------------------------------------------------------------
Amortization of intangibles (18.6) (16.4) (14.6)
- -------------------------------------------------------------------------------
Technical aid fees 11.9 11.4 12.8
- -------------------------------------------------------------------------------
Insurance recoveries 6.2 -- --
- -------------------------------------------------------------------------------
Miscellaneous 17.5 4.5 7.9
- -------------------------------------------------------------------------------
$ 19.7 $ 15.5 $ 24.9
</TABLE>
Additional Cash Flow Information
Cash paid for interest and taxes is as follows:
<TABLE>
<CAPTION>
(millions of dollars) 1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest (net of amounts capitalized) $156.0 $163.1 $161.5
- -------------------------------------------------------------------------------
Taxes (net of refunds) 148.3 246.2 89.1
- -------------------------------------------------------------------------------
</TABLE>
Significant noncash transactions are as follows:
<TABLE>
<CAPTION>
(millions of dollars) 1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital lease additions $18.5 $5.7 $3.0
- -------------------------------------------------------------------------------
Liabilities associated with acquisitions 7.4 10.0 1.1
Exchange of assets 19.5 -- --
- -------------------------------------------------------------------------------
</TABLE>
Additional Income Statement Information
Fiscal 1999 results included several special items which essentially offset at
the net income and earnings per share level. The components of special items on
a before- and after-tax basis were: a gain of $34.9 million ($23.6 million
after-tax, or $.11 per share) on the partial sale of assets related to the
formation of Air Products Polymers (a 65% majority-owned venture with
Wacker-Chemie GmbH); expense of $34.2 million ($21.9 million after-tax, or $.10
per share) related to the global cost reduction programs; expense of $10.3
million ($6.4 million after-tax, or $.03 per share) related to chemicals
facility closure costs; and a gain of $7.0 million ($4.4 million after-tax, or
$.02 per share) from a gain on foreign currency options from the expected BOC
acquisition, net of preacquisition expenses.
Fiscal 1998 results were increased by net after-tax income of $58.1 million, or
$.26 per share, for special items. The components of special items on a before-
and after-tax basis were: a gain of $62.6 million ($35.1 million after-tax, or
$.16 per share) on the sale of substantially all of the company's 50% interest
in the American Ref-Fuel Company; a gain of $28.3 million ($15.4 million
after-tax, or $.07 per share) from a power contract restructuring related to an
American Ref-Fuel project; and a gain of $12.6 million ($7.6 million after-tax,
or $.03 per share) from a cogeneration project contract settlement.
Fiscal 1997 results were increased by net after-tax income of $1.6 million, or
$.01 per share, for special items. The components of special items on a before-
and after-tax basis were: a gain of $9.5 million ($5.9 million after-tax, or
$.03 per share) on the sale of the landfill gas recovery business; a gain of
$7.3 million ($4.5 million after-tax, or $.02 per share) on the partial sale of
the cost basis Daido Hoxan investment; an impairment loss of $9.3 million ($6.0
million after-tax, or $.03 per share) in the chemicals release agent business;
and a loss of $4.8 million ($2.8 million after-tax, or $.01 per share) from debt
refinancing by an equity affiliate.
56
<PAGE>
Summary by Quarter
This table summarizes the unaudited results of operations for each quarter of
1999 and 1998:
<TABLE>
<CAPTION>
(millions of dollars, except per share) First Second Third Fourth
- -----------------------------------------------------------------------------------------------------------------
1999
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $1,274.6 $1,253.3 $1,237.8 $1,254.4
- -----------------------------------------------------------------------------------------------------------------
Operating income 189.0(a) 182.7(c) 167.7(d) 185.3
- -----------------------------------------------------------------------------------------------------------------
Net income 126.4(a)(b) 106.9(c) 94.6(d) 122.6(e)(f)
- -----------------------------------------------------------------------------------------------------------------
Basic earnings per common share .60(a)(b) .51(c) .45(d) .58(e)(f)
- -----------------------------------------------------------------------------------------------------------------
Diluted earnings per common share .59(a)(b) .50(c) .44(d) .57(e)(f)
- -----------------------------------------------------------------------------------------------------------------
Dividends per common share .17 .17 .18 .18
- -----------------------------------------------------------------------------------------------------------------
Price per common share: high 40 15/16 41 49 1/8 43
low 29 7/8 30 5/8 33 13/16 27 15/16
- -----------------------------------------------------------------------------------------------------------------
1998
- ------------------------------------------------------------------------------------------------------------------
Sales $1,234.8 $1,208.6 $1,225.3 $1,250.3
- ------------------------------------------------------------------------------------------------------------------
Operating income 213.0 206.4 211.5 214.8
- -----------------------------------------------------------------------------------------------------------------
Net income 160.5(g)(h) 120.5 138.1(i) 127.7
- -----------------------------------------------------------------------------------------------------------------
Basic earnings per common share .74(g)(h) .56 .64(i) .60
- -----------------------------------------------------------------------------------------------------------------
Diluted earnings per common share .72(g)(h) .54 .63(i) .59
- -----------------------------------------------------------------------------------------------------------------
Dividends per common share .15 .15 .17 .17
- -----------------------------------------------------------------------------------------------------------------
Price per common share: high 41 21/32 43 7/8 45 11/32 40 1/8
low 36 3/32 37 27/32 38 9/16 29 3/4
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes a charge to operating income of $20.3 million ($12.9 million
after-tax, or $.06 per share) for the global cost reduction program.
(b) Includes a gain of $31.2 million ($21.4 million after-tax, or $.10 per
share) on the formation of the polymers venture.
(c) Includes expense of $10.3 million ($6.4 million after-tax, or $.03 per
share) related to the closure of a chemicals facility.
(d) Includes a charge of $13.9 million ($9.0 million after-tax, or $.04 per
share) for the global cost reduction program.
(e) Includes a gain of $3.8 million ($2.3 million after-tax, or $.01 per share)
on the formation of the polymers venture.
(f) Includes a gain of $7.0 million ($4.4 million after-tax, or $.02 per
share) related to the gain on currency options, net of preacquisition
expenses for BOC.
(g) Includes a gain of $62.6 million ($35.1 million after-tax, or $.16 per
share) from the sale of American Ref-Fuel.
(h) Includes a gain of $12.6 million ($7.6 million after-tax, or $.03 per
share) related to a project settlement.
(i) Includes a gain of $28.3 million ($15.4 million after-tax, or $.07 per
share) related to a power contract restructuring.
57
<PAGE>
20) Business Segment and Geographic Information
Effective in 1999, the company adopted Statement of Financial Accounting
Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and
Related Information." This Statement defines the disclosure requirements for
operating segments. Operating segments are defined as components of an
enterprise for which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. The Statement also establishes
standards for related disclosure requirements about products and services,
geographic areas, and major customers. Prior year amounts have been restated to
conform with the current year presentation.
The company's segments are organized based on differences in products. The
company has three operating segments consisting of gases, chemicals, and
equipment. The company's divested environmental and energy systems (American
Ref-Fuel and landfill gas) businesses are included in other.
The company's gases segment includes its industrial gases, power generation, and
flue gas treatment businesses. The company is a leading international supplier
of industrial and specialty gas products. Principal products of the industrial
gases business are oxygen, nitrogen, argon, hydrogen, carbon monoxide, synthesis
gas, and helium. The largest market segments are chemical processing, refining,
metal production, electronics, food processing, and medical gases. The company
has its strongest industrial gas market positions in the United States and
Europe.
The gases segment also includes the company's power generation and flue gas
treatment businesses. The company constructed, operates, and has a 50% interest
in power generation facilities in California, Pennsylvania, Florida, Rotterdam,
and Thailand. The company also markets, develops, designs, and builds flue gas
treatment systems.
The chemical businesses consist of polymer chemicals, performance chemicals,
and chemical intermediates. Polymer chemicals include polymer emulsions,
redispersible powders, and polyvinyl alcohol.
Principal products of performance chemicals are specialty additives,
polyurethane additives, and epoxy additives. Principal chemical intermediates
are amines and polyurethane intermediates. The company also produces certain
industrial chemicals. The end markets for the company's chemical products are
extensive, including adhesive, textile, paper, building products, agriculture,
and furniture. Principal geographic markets for the company's chemical products
are North America, Europe, Asia, Brazil, and Mexico.
The equipment segment designs and manufactures cryogenic and gas processing
equipment for air separation, gas processing, natural gas liquefaction, and
hydrogen purification. The segment also designs and builds systems for
recovering gases using membrane technology. Equipment is sold worldwide to
companies involved in chemical and petrochemical manufacturing, oil and gas
recovery and processing, power generation, and steel and primary metal
production. Equipment is also manufactured for the company's industrial gas
business. Another important market, particularly for air separation equipment,
is the company's international industrial gas joint ventures.
The accounting policies of the segments are the same as those described in Note
1. The company allocates resources to segments and evaluates the performance of
segments based upon reported segment operating income. Operating income of the
business segments includes general corporate expenses. Corporate expenses not
allocated to the segments (primarily long-term research and development and
interest expense) are included in the reconciliation of the reportable segments'
operating income to the company's consolidated income before income taxes.
Intersegment sales are not material and are recorded at selling prices that
approximate market prices. Equipment manufactured for the company's industrial
gas business is generally transferred at cost and not reflected as an
intersegment sale. Corporate assets are primarily cash, corporate facilities,
fair value of currency options related to the BOC transaction, deferred
financial expense, and other nonallocated assets. Long-lived assets include
investment in net assets of and advances to equity affiliates, net plant and
equipment and goodwill.
1999 Sales by Business Segment Graph
1999 Sales by Geography Graph
58
<PAGE>
Business segment information is shown below:
<TABLE>
<CAPTION>
All Segment Consolidated
(millions of dollars) Gases Chemicals Equipment Other Totals Totals
- ----------------------------------------------------------------------------------------------------------------------------------
1999
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues from external customers $2,996.4 $1,657.4 $366.3 $-- $5,020.1 $5,020.1
- ----------------------------------------------------------------------------------------------------------------------------------
Operating income 521.9 193.7 34.7 .5 750.8 724.7
- ----------------------------------------------------------------------------------------------------------------------------------
Operating income - excluding special items 548.9 208.0 37.4 .5 794.8 769.2
- ----------------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization 405.4 125.2 9.4 -- 540.0 540.0
- ----------------------------------------------------------------------------------------------------------------------------------
Equity affiliates' income 46.8 12.4 1.6 .7 61.5 61.5
- ----------------------------------------------------------------------------------------------------------------------------------
Net gain on formation of polymer venture -- 34.9 -- -- 34.9 34.9
- ----------------------------------------------------------------------------------------------------------------------------------
Segment assets:
- ----------------------------------------------------------------------------------------------------------------------------------
Identifiable assets 5,436.1 1,626.2 265.0 -- 7,327.3 7,714.1
- ----------------------------------------------------------------------------------------------------------------------------------
Investment in and advances to equity 458.6 61.3 .8 -- 520.7 521.4
affiliates
- ----------------------------------------------------------------------------------------------------------------------------------
Total segment assets 5,894.7 1,687.5 265.8 -- 7,848.0 8,235.5
- ----------------------------------------------------------------------------------------------------------------------------------
Expenditures for long-lived assets 913.8 158.8 14.6 -- 1,087.2 1,114.6
- ----------------------------------------------------------------------------------------------------------------------------------
1998
- ----------------------------------------------------------------------------------------------------------------------------------
Revenues from external customers $2,950.1 $1,539.2 $429.7 $-- $4,919.0 $4,919.0
- ----------------------------------------------------------------------------------------------------------------------------------
Operating income 565.0 247.2 59.2 .7 872.1 845.7
- ----------------------------------------------------------------------------------------------------------------------------------
Operating income - excluding special items 565.0 247.2 59.2 .7 872.1 845.7
- ----------------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization 382.4 107.7 7.8 -- 497.9 499.3
- ----------------------------------------------------------------------------------------------------------------------------------
Equity affiliates' income 33.3 .6 1.9 2.2 38.0 38.0
- ----------------------------------------------------------------------------------------------------------------------------------
Gain on American Ref-Fuel sale and 12.6 -- -- 90.9 103.5 103.5
contract settlements
- ----------------------------------------------------------------------------------------------------------------------------------
Segment assets:
- ----------------------------------------------------------------------------------------------------------------------------------
Identifiable assets 5,108.1 1,527.3 279.3 -- 6,914.7 7,127.6
- ----------------------------------------------------------------------------------------------------------------------------------
Investment in and advances to equity 354.0 2.4 .2 -- 356.6 362.0
affiliates
- ----------------------------------------------------------------------------------------------------------------------------------
Total segment assets 5,462.1 1,529.7 279.5 -- 7,271.3 7,489.6
- ----------------------------------------------------------------------------------------------------------------------------------
Expenditures for long-lived assets 639.3 329.3 16.5 -- 985.1 1,000.7
1997
- ----------------------------------------------------------------------------------------------------------------------------------
Revenues from external customers $2,719.4 $1,448.1 $469.1 $1.2 $4,637.8 $4,637.8
- ----------------------------------------------------------------------------------------------------------------------------------
Operating income 500.1 198.3 30.0 9.7 738.1 726.1
- ----------------------------------------------------------------------------------------------------------------------------------
Operating income - excluding special items 492.8 207.6 30.0 .2 730.6 718.6
- ----------------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization 353.2 104.5 7.4 -- 465.1 467.3
- ----------------------------------------------------------------------------------------------------------------------------------
Equity affiliates' income 41.8 .4 .8 23.3 66.3 66.3
- ----------------------------------------------------------------------------------------------------------------------------------
Segment assets:
- ----------------------------------------------------------------------------------------------------------------------------------
Identifiable assets 4,833.0 1,267.7 330.3 .8 6,431.8 6,688.4
- ----------------------------------------------------------------------------------------------------------------------------------
Investment in and advances to equity affiliates 339.7 2.4 -- 212.7 554.8 555.7
- ----------------------------------------------------------------------------------------------------------------------------------
Total segment assets 5,172.7 1,270.1 330.3 213.5 6,986.6 7,244.1
- ----------------------------------------------------------------------------------------------------------------------------------
Expenditures for long-lived assets 1,024.0 165.6 1.7 -- 1,191.3 1,221.6
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
59
<PAGE>
A reconciliation of the totals reported for the operating segments to the
applicable line items on the consolidated financial statements is as follows:
<TABLE>
<CAPTION>
(millions of dollars) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Income to Consolidated Income Before Income Taxes and Minority Interest
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total segment operating income $ 750.8 $ 872.1 $ 738.1
- ----------------------------------------------------------------------------------------------------------------------------------
Corporate research and development (29.4) (25.8) (22.3)
- ----------------------------------------------------------------------------------------------------------------------------------
Other corporate income (expense) 3.3 (.6) 10.3
- ----------------------------------------------------------------------------------------------------------------------------------
Consolidated operating income 724.7 845.7 726.1
Equity affiliates' income 61.5 38.0 66.3
- ----------------------------------------------------------------------------------------------------------------------------------
Gain on American Ref-Fuel sale and contract settlements -- 103.5 --
- ----------------------------------------------------------------------------------------------------------------------------------
Gain on formation of polymer venture 34.9 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Gain on currency options related to BOC transaction, net of preacquisition expenses 7.0 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Interest expense (159.1) (162.8) (161.3)
- ----------------------------------------------------------------------------------------------------------------------------------
Consolidated income before income taxes and minority interest $ 669.0 $ 824.4 $ 631.1
Segment Assets to Total Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Total segment assets $7,848.0 $7,271.3 $6,986.6
- ----------------------------------------------------------------------------------------------------------------------------------
Corporate assets 387.5 218.3 257.5
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $8,235.5 $7,489.6 $7,244.1
</TABLE>
60
<PAGE>
Geographic information is presented below:
<TABLE>
<CAPTION>
(millions of dollars) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
Revenues from External Customers
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $3,226.9 $3,381.5 $3,269.7
- ----------------------------------------------------------------------------------------------------------------------------------
United Kingdom 620.4 583.6 547.7
- ----------------------------------------------------------------------------------------------------------------------------------
Spain 319.0 322.0 241.8
- ----------------------------------------------------------------------------------------------------------------------------------
Other Europe 564.3 387.7 388.8
- ----------------------------------------------------------------------------------------------------------------------------------
Total Europe 1,503.7 1,293.3 1,178.3
Canada/Latin America 202.4 216.6 171.7
- ----------------------------------------------------------------------------------------------------------------------------------
Asia 86.8 27.3 17.7
- ----------------------------------------------------------------------------------------------------------------------------------
All Other .3 .3 .4
- ----------------------------------------------------------------------------------------------------------------------------------
Total $5,020.1 $4,919.0 $4,637.8
Long-lived Assets
- ----------------------------------------------------------------------------------------------------------------------------------
United States $3,482.1 $3,160.2 $3,188.2
- ----------------------------------------------------------------------------------------------------------------------------------
United Kingdom 513.1 466.4 376.4
- ----------------------------------------------------------------------------------------------------------------------------------
Spain 412.2 455.9 439.6
- ----------------------------------------------------------------------------------------------------------------------------------
Other Europe 873.4 796.2 692.8
- ----------------------------------------------------------------------------------------------------------------------------------
Total Europe 1,798.7 1,718.5 1,508.8
Canada/Latin America 327.0 342.4 308.5
- ----------------------------------------------------------------------------------------------------------------------------------
Asia 442.6 243.3 231.5
- ----------------------------------------------------------------------------------------------------------------------------------
All Other 14.3 8.6 8.4
- ----------------------------------------------------------------------------------------------------------------------------------
Total $6,064.7 $5,473.0 $5,245.4
</TABLE>
Note: Geographic information is based on country of origin. Included in United
States revenues are export sales to unconsolidated customers of $528.4 million
in 1999, $649.6 million in 1998, and $570.7 million in 1997. The other Europe
segment operates principally in France, Germany, Netherlands, and Belgium.
61
<PAGE>
Eleven-Year Summary of Selected Financial Data
<TABLE>
AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
<CAPTION>
(millions of dollars, except per share) 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------------------------------------------
Operating Results
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $5,020 $4,919 $4,638 $4,008 $3,865 $3,485 $3,328 $3,217 $2,931 $2,895 $2,642
- ----------------------------------------------------------------------------------------------------------------------------------
Cost of sales(a) 3,501 3,317 3,195 2,780 2,678 2,455 2,340 2,233 2,030 2,042 1,843
- ----------------------------------------------------------------------------------------------------------------------------------
Selling and administrative(a) 691 660 628 548 508 446 434 428 411 392 368
- ----------------------------------------------------------------------------------------------------------------------------------
Research and development 123 112 114 114 103 97 92 85 80 72 71
- ----------------------------------------------------------------------------------------------------------------------------------
Workforce reduction and asset write-downs -- -- -- -- -- -- 120 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Operating income 725 846(b) 726(b) 591 602 486 369 481 435 399 382
- ----------------------------------------------------------------------------------------------------------------------------------
Equity affiliates' income(c) 62 38 66 80 51 28 13 16 13 17 9
- ----------------------------------------------------------------------------------------------------------------------------------
(Settlement)/Loss on leveraged interest -- -- -- (67) -- 107 -- -- -- -- --
rate swaps
- ----------------------------------------------------------------------------------------------------------------------------------
Interest expense 159 163 161 129 100 81 81 90 86 83 73
- ----------------------------------------------------------------------------------------------------------------------------------
Income taxes 203 277 201 193 185 92 100 130 113 103 96
- ----------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 451 547(d) 429 416(e) 368 234(f) 201(g) 277 249 230 222
- ----------------------------------------------------------------------------------------------------------------------------------
Net income 451 547(d) 429 416(e) 368 248(h) 201(g) 271(i) 249 230 222
- ----------------------------------------------------------------------------------------------------------------------------------
Basic earnings per common share(j)
Continuing operations 2.12 2.54(d) 1.95 1.86(e) 1.64 1.03 (f) .88(g) 1.23 1.11 1.04 1.01
- ----------------------------------------------------------------------------------------------------------------------------------
Net income 2.12 2.54(d) 1.95 1.86(e) 1.64 1.09(h) .88(g) 1.20(i)1.11 1.04 1.01
- ----------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per common share(j)
Continuing operations 2.09 2.48(d) 1.91 1.83(e) 1.62 1.01(f) .87 1.20 1.09 1.02 .99
- ----------------------------------------------------------------------------------------------------------------------------------
Net income 2.09 2.48(d) 1.91 1.83(e) 1.62 1.07(h) .87 1.17 1.09 1.02 .99
- ----------------------------------------------------------------------------------------------------------------------------------
Year-End Financial Position
- ----------------------------------------------------------------------------------------------------------------------------------
Plant and equipment, at cost $10,188 $9,490 $8,727 $8,103 $7,350 $6,520 $5,953 $5,785 $5,332 $5,010 $4,442
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets 8,236 7,490 7,244 6,522 5,816 5,036 4,761 4,492 4,228 3,900 3,366
- ----------------------------------------------------------------------------------------------------------------------------------
Working capital (75) 376 500 111 21 101 322 279 117 214 262
- ----------------------------------------------------------------------------------------------------------------------------------
Long-term debt 1,962 2,274 2,292 1,739 1,194 923 1,016 956 945 954 854
- ----------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity 2,962 2,667 2,648 2,574 2,398 2,206 2,102 2,098 1,841 1,688 1,445
- ----------------------------------------------------------------------------------------------------------------------------------
Financial Ratios
- ----------------------------------------------------------------------------------------------------------------------------------
Return on sales(k) 9.0% 11.1% 9.3% 10.4% 9.5% 6.7% 6.0% 8.6% 8.5% 7.9% 8.4%
- ----------------------------------------------------------------------------------------------------------------------------------
Return on average shareholders' equity(k) 16.1% 20.8% 16.6% 16.6% 16.1% 10.9% 9.6% 14.0% 14.1% 14.7% 16.4%
- ----------------------------------------------------------------------------------------------------------------------------------
Total debt to sum of total debt and
shareholders' equity(l) 49.0% 50.3% 48.2% 46.0% 41.2% 36.0% 37.3% 33.9% 38.1% 38.5% 38.4%
- ----------------------------------------------------------------------------------------------------------------------------------
Cash provided by operations to average
total debt(l) 39.5% 38.6% 40.9% 38.5% 48.6% 59.5% 50.3% 52.7% 57.7% 52.7% 53.7%
- ----------------------------------------------------------------------------------------------------------------------------------
Interest coverage ratio 4.6 5.5 4.4 5.1 5.5 4.5 4.4 5.4 4.2 4.2 4.6
- ----------------------------------------------------------------------------------------------------------------------------------
Other Data
- ----------------------------------------------------------------------------------------------------------------------------------
For the year:
Depreciation $527 $489 $459 $412 $382 $353 $346(m) $340 $319 $303 $281
- ----------------------------------------------------------------------------------------------------------------------------------
Capital expenditures(n) 1,115 1,001 1,222 1,164 969 655 666 485 657 621 562
- ----------------------------------------------------------------------------------------------------------------------------------
Cash dividends per common share(j) .70 .64 .58 .53 .51 .47 .45 .41 .38 .35 .32
- ----------------------------------------------------------------------------------------------------------------------------------
Market price range per common share(j) 49-28 45-29 44-29 30-24 29-21 25-19 25-18 25-15 18-10 15-11 12-9
- ----------------------------------------------------------------------------------------------------------------------------------
Average common shares outstanding (millions) 212 216 220 223 224 227 228 226 224 222 220
- ----------------------------------------------------------------------------------------------------------------------------------
Average common shares and common stock
equivalent shares outstanding (millions) 216 220 225 227 228 231 232 231 228 226 224
- ----------------------------------------------------------------------------------------------------------------------------------
At year end:
Book value per common share(j) 13.90 12.61 12.05 11.65 10.74 9.73 9.21 9.25 8.20 7.58 6.56
- ----------------------------------------------------------------------------------------------------------------------------------
Shareholders 11,900 11,500 11,200 11,700 1,800 11,900 11,800 11,100 10,900 11,100 11,400
- ----------------------------------------------------------------------------------------------------------------------------------
Employees 17,400 16,700 16,400 15,200 14,800 14,100 15,300 14,500 14,600 14,000 14,100
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The results have been restated to reflect the presentation of
distribution expense in cost of sales.
(b) The results have been restated to reflect the presentation of minority
interest in a separate line item between income taxes and net income.
(c) Includes related expenses and gain on sale of investment in equity
affiliates. Excludes the gain on the sale of the American Ref-Fuel
Company and contract settlements in 1998.
(d) Includes an after-tax gain of $58 million, or $.26 per share from the
sale of American Ref-Fuel and contract settlements.
(e) Includes an after-tax gain of $41 million, or $.18 per share,
from a settlement associated with leveraged interest rate swap contracts.
(f) Includes a charge of $75 million, or $.33 per share, for a loss on certain
derivative contracts.
(g) Includes a charge of $76 million, or $.34 per share, for workforce
reduction and asset write-downs.
(h) Includes a charge of $75 million, or $.33 per share, for a loss on certain
derivative contracts and a net gain of $14 million, or $.06 per share, for
the cumulative effect of accounting changes.
(i) Net income for fiscal 1992 includes an extraordinary charge of
$6 million, or $.03 per share, for the early retirement of debt.
(j) Data per common share are based on the average number of shares outstanding
during each year retroactively restated to reflect a two-for-one stock
split in 1998 and 1992, except for book value per common share, which is
based on the number of shares outstanding at the end of each year
retroactively restated.
(k) Financial ratios were calculated using income from continuing operations.
(l) Total debt includes long-term debt, current portion of long-term debt
and short-term borrowings as of the end of the year.
(m) Depreciation expense in 1993 excludes $56 million associated with asset
write-downs.
(n) Capital expenditures include additions to plant and equipment, investment
in and advances to equity affiliates, acquisitions, and capital lease
additions.
62
Exhibit 21
Subsidiaries of Air Products and Chemicals, Inc.
The following is a list of the Company's subsidiaries, all of which are wholly
owned as of 30 September 1999, except for certain subsidiaries of the Registrant
which do not in the aggregate constitute a significant subsidiary as that term
is defined in Rule 12b-2 under the Securities Exchange Act of 1934.
UNITED STATES
All companies are incorporated in the State of Delaware with the exception of
Air Products World Trade, Inc. which is incorporated in the U.S. Virgin Islands.
Registrant -- Air Products and Chemicals, Inc.
Air Products (Didcot), Inc.
Air Products Helium, Inc.
Air Products Hydrogen Company, Inc.
Air Products, Incorporated
Air Products International Corporation
Air Products Manufacturing Corporation
Air Products of Oklahoma, Inc.
Air Products Polymers Holdings, L.P.
Air Products Polymers, L.P.
Air Products Powders, Inc.
Air Products World Trade, Inc.
APCI (U.K.), Inc.
Middletown Oxygen Company, Inc.
Prodair Corporation
BELGIUM
Air Products S.A.
Air Products Management S.A.
BRAZIL
Air Products Gases Industriais Ltda. (The organization of this affiliate more
closely resembles a partnership with limited liability than a corporation.)
CANADA
Air products Canada Ltd.
CHINA
Chun Wang Industrial Gases, Limited
Northern Air Products (Tianjin) Limited
Southern Air Products (Guangzhou) Limited
FRANCE
Air Products Industrie
Air Products S.A.
Prodair et Cie S.C.S.
Prodair S.A.
GERMANY
Air Products GmbH
Air Products Polymers GmbH & Co KG
Air Products Powders GmbH
IRELAND
Air Products Ireland Limited
THE NETHERLANDS
Air Products Holdings B.V. (formerly Air Products Nederland B.V.)
Air Products Leasing B.V.
Air Products (Pernis) B.V.
Air Products (Rozenburg), Inc.
<PAGE>
MALAYSIA
Sitt Tatt Industrial Gases Sdn. Bhd.
SPAIN
Air Products Iberica, S.A.
Gases Industriais, S.A.
S.E. de Carburos Metalicos S.A.
SINGAPORE
Air Products Singapore Pte. Ltd.
UNITED KINGDOM
Air Products PLC
Air Products Group Limited
Air Products (BR) Limited
Air Products (Chemicals) PLC
Air Products (Chemicals) Teeside Limited
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints HAROLD A. WAGNER or LEO J. DALEY or W. DOUGLAS
BROWN, acting severally, his/her true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him/her and in his/her
name, place and stead, in any and all capacities, to sign the Form 10-K Annual
Report for the fiscal year ended September 30, 1999 and all amendments thereto
and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this Power of Attorney has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/Harold A. Wagner Director and Chairman of the Board November 18, 1999
---------------------------- (Principal Executive Officer)
Harold A. Wagner
/s/John P. Jones III Director November 18, 1999
----------------------------
John P. Jones III
/s/Joseph J. Kaminski Director November 18, 1999
----------------------------
Joseph J. Kaminski
/s/Mario L. Baeza Director November 18, 1999
----------------------------
Mario L. Baeza
/s/Tom H. Barrett Director November 18, 1999
----------------------------
Tom H. Barrett
/s/L. Paul Bremer III Director November 18, 1999
----------------------------
L. Paul Bremer III
<PAGE>
/s/Robert Cizik Director November 18, 1999
----------------------------
Robert Cizik
/s/Ursula F. Fairbairn Director November 18, 1999
----------------------------
Ursula F. Fairbairn
/s/Edward E. Hagenlocker Director November 18, 1999
----------------------------
Edward E. Hagenlocker
/s/James F. Hardymon Director November 18, 1999
----------------------------
James F. Hardymon
/s/Terry R. Lautenbach Director November 18, 1999
----------------------------
Terry R. Lautenbach
/s/Ruud F. M. Lubbers Director November 18, 1999
----------------------------
Ruud F. M. Lubbers
Director November 18, 1999
----------------------------
Takeo Shiina
/s/Lawrason D. Thomas Director November 18, 1999
----------------------------
Lawrason D. Thomas
2
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This Schedule contains summary financial information
extracted from the consolidated balance sheet and the
consolidated statement of income filed as part of
Form 10-K and is qualified in its entirety by reference
to such Form 10-K .
</LEGEND>
<MULTIPLIER> 1,000,000
<CURRENCY> U S Dollar
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 62
<SECURITIES> 0
<RECEIVABLES> 907
<ALLOWANCES> 12
<INVENTORY> 425
<CURRENT-ASSETS> 1782
<PP&E> 10188
<DEPRECIATION> 4995
<TOTAL-ASSETS> 8236
<CURRENT-LIABILITIES> 1858
<BONDS> 1962
0
0
<COMMON> 249
<OTHER-SE> 2713
<TOTAL-LIABILITY-AND-EQUITY> 8236
<SALES> 5020
<TOTAL-REVENUES> 5020
<CGS> 3501
<TOTAL-COSTS> 3501
<OTHER-EXPENSES> 123
<LOSS-PROVISION> 6
<INTEREST-EXPENSE> 159
<INCOME-PRETAX> 669
<INCOME-TAX> 203
<INCOME-CONTINUING> 451
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 451
<EPS-BASIC> 2.12
<EPS-DILUTED> 2.09
</TABLE>
