This document constitutes part of
a prospectus covering securities
that have been registered under the Securities Act of
1933.
Deferred Compensation
Program
for Directors
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Deferred Compensation Program for
Directors
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1
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1
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1
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1
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1
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2
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3
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Time and Manner of Making Elective
Deferrals
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3
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Payment of Deferred Compensation
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4
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Election of Time of Payment
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4
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Changes in Election of Timing of
Payment
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4
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Payment Following Termination of
Service
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5
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5
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6
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6
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6
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6
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6
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Rights as to Common Stock
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7
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Adjustments to Avoid Dilution
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7
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Participant’s Rights Unsecured
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7
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8
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8
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8
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8
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Amendment and Termination
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8
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8
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Construction; Governing Law
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9
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10
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Administrative Procedures Regarding Transfer of
the Right to Payment of Deferred Compensation
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13
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Tax Consequences to Participants
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17
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Deferred Compensation
Program
for Directors
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1.
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General
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The
Deferred Compensation Program for Directors (the
“Program”) is provided to:
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(a)
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Provide compensation for directors
in the form of Company equity securities to align the interests of
directors with those of the Company’s shareholders;
and
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(b)
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Provide directors the opportunity to
defer compensation earned as a director.
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The
Program is provided under the Air Products and Chemicals, Inc.
Long-Term Incentive Plan and is subject to the terms
thereof.
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2.
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Effective Dates
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The
Air Products and Chemicals, Inc. Deferred Compensation Plan for
Directors was adopted effective as of 1 January 1980 and was
thereafter amended from time to time. Effective 23
January 2003, the Plan was combined with the Long-Term
Incentive Plan and offered as a program thereunder. This amended
and restated Program is effective as of 1
January 2005.
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3.
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Participants
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Any
director of the Company who is not an employee of the Company or of
a subsidiary of the Company is eligible to participate in the
Program.
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4.
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Mandatory Deferrals
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There shall be established for each
participant an Air Products Stock Account described under section
5(b) below to which shall be credited all compensation which is to
be paid by the Company in the form of deferred stock units in
accordance with the Compensation Program for Nonemployee Directors
applicable for calendar year 1997 and later periods; and, for each
participant who had not served as a director for at least six years
as of 1 January 1997, the actuarial present value of his or
her prorated accrued pension (the “Pension
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Amount”)
under the Pension Plan for Directors as determined in connection
with the termination of the Plan (collectively, “Mandatory
Deferrals”).
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Dollar amounts to be so credited
shall be converted into deferred stock units in the manner
described under Section 5(b) below on the quarterly or other
specified crediting date for 1997 and later compensation, and on 21
November 1996, as to the Pension Amount.
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5.
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Elective Deferrals
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Participants may elect to defer
receipt of all or a specified portion of the compensation
(exclusive of expense reimbursements) otherwise payable to him or
her in cash for serving on the Board of Directors of the Company,
attending meetings or committee meetings thereof or performing
other services in connection with the business of the Company and
its subsidiaries. Such electively deferred compensation
(“Elective Deferrals”) will be credited on the date the
compensation is otherwise payable, to one or both of the following
hypothetical investment accounts (“Accounts”) as
directed by the participant:
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(a)
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An
account deemed to earn interest at rates established on the first
business day of each calendar quarter based upon the published
average long-term yields of corporate bonds of “A”
rated Industrial Companies appearing in Moody’s Bond Survey
or an equivalent Bond Rating Service on such day (the
“Interest Account”); and
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(b)
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An
account (the “Air Products Stock Account”) deemed to be
invested in Air Products and Chemicals, Inc. common stock, par
value $1.00 (“common stock”). The Company shall credit
the Air Products Stock Account with that number of units (including
fractions) obtained by dividing the amount of such deferred
compensation by the Fair Market Value of a share of common stock
(i) on the second business day before the date credited to the
Air Products Stock Account for retainer and meeting fees, and
(ii) on the effective date specified in the Compensation
Program for Non-employee Directors for crediting Directors with
initial and annual deferred stock awards. For purposes of the Plan,
Fair Market Value of a share of common stock on any date (the
“valuation date”) shall be 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, or, if
no sales were quoted on such date, on the most recent preceding
date on which sales were quoted. The units thus calculated are
herein referred to as “deferred stock
units.”
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6.
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Earnings on Accounts
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Each participant’s Accounts
will be credited with interest on deferred compensation credited to
the Interest Account, and with dividend equivalents on deferred
compensation credited to the Air Products Stock Account, as
provided below, from the date credited until 31 December of the
year preceding payment, unless payment is made because of death or
a Change in Control, in which event interest will be credited until
the date of death or the date of termination of service as a
director following the Change in Control, respectively.
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(a)
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Earnings on Interest
Account .
Interest shall be compounded quarterly.
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(b)
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Earnings on Air Products Stock
Account .
Earnings shall be credited quarterly in an amount equal to the
dividends payable during the quarter just ended with respect to
that number of shares of Air Products Stock equal to the number of
deferred stock units credited to the Air Products Stock Account as
of the end of the prior quarter. The amount so credited shall then
be converted into deferred stock units in the manner described
under Section 5(b) above using the quarterly crediting date as the
valuation date for determining Fair Market Value.
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7.
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Time and Manner of Making Elective
Deferrals
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An
election to defer compensation must be made by a director prior to
the calendar year during which such compensation is earned;
provided that an initial election by a new director to defer
compensation for all future services may be up to 30 days
after commencing service as a director to the Company. An election
shall continue in effect until the end of the participant’s
service to the Company as a director or until the participant
modifies or revokes the election as described below, whichever
shall occur first.
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A
participant may elect, modify, or revoke a prior election to defer
compensation by completing Sections I and II of the Election
Form attached hereto as Exhibit A (the “Election
Form”) and returning it to the Corporate Secretary. Such
Election Form shall specify:
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(a)
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The
amount or percentage of compensation to be deferred beginning on a
future date specified in the notice until such notice is revoked or
modified as to future compensation; and
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(b)
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The
percentage of the Elective Deferrals to be credited to the Interest
Account and the percentage to be credited to the Air Products Stock
Account.
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Any
modification or revocation of a prior election described in Section
7(a) or 7(b) above shall relate only to future compensation, and
shall not apply to any amounts previously credited to the
participant’s account. Beginning 1 January 2006, a
participant’s election to defer described in 7(a) may not be
revoked or modified during the calendar year. Revocation or
modification of a prior election to defer must be made for a
calendar year no later than the close of the preceding calendar
year.
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8.
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Payment of Deferred
Compensation
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No
payment may be made from the participant’s Accounts in
respect of Elective Deferrals or Mandatory Deferrals (together,
“Deferred Compensation Amount”) except as provided
below.
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(a)
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Election of Time of
Payment .
Within 30 days of commencing service as a director to the
Company, a participant may make an election to receive distribution
of his or her Deferred Compensation Amount in either a lump sum or
in a specified number of consecutive annual installments (not to
exceed ten), and may elect the date of payment in the case of a
lump sum or the date payments commence in the case of installments.
All such elections may be made by completing Section III of
the Election Form and returning it to the Corporate Secretary. If a
participant does not complete an Election Form specifying the
timing of payment of his or her Deferred Compensation Amount within
the first 30 days of service, such Deferred Compensation
Amount will be paid as a lump sum in the first year after the year
in which the director’s service as a director ends, and the
director will be deemed, for purposes of the Program, to have so
elected.
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(b)
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Changes in Election of Timing of
Payment . A
participant may change his or her election in regard to the timing
of payment of his or her Deferred Compensation Amount by completing
a new Election Form and returning it to the Corporate Secretary.
Such a change in election of timing of payment will apply only to
Deferred Compensation Amounts earned in future years, except as
follows:
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(i)
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On
or before 31 December 2005, a director may elect to change the
timing of payment for all of his or her Deferred Compensation
Amounts by completing an Election Form specifying the change and
returning it to the Corporate Secretary’s Office.
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(ii)
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On
or after 1 January 2006, a director may change the timing of
payment for previously accrued Deferred Compensation Amounts only
as follows:
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(x)
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A
completed Election Form reflecting the desired change must be
received by the Corporate Secretary’s Office no later than
one year prior to the first scheduled payment of such Deferred
Compensation Amounts under his or her currently effective Election
Form(s);
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(y)
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The
change must delay the first payment by at least five years from the
date the first scheduled payment otherwise would have been made;
and
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(z)
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The
change will become effective one year from the date the Election
Form is received by the Company.
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(c)
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Payment Following Termination of
Service .
The value of each Deferred Compensation Amount credited to the
Interest Account of a participant’s Plan account is payable
in cash, and the value of each Deferred Compensation Amount
credited to the Air Products Stock Account is payable by delivery
of a share of common stock for each deferred stock unit credited to
the participant’s Account, in either case in a lump sum or in
annual installments, in accordance with the participant’s
election.
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All
payments from a participant’s Accounts must be completed by
the tenth year after the year in which service as a director
terminates. All payments will be made in January of the applicable
year or as soon thereafter as reasonably possible. If annual
installments are to be paid, the amount of the first payment shall
be a fraction of the value of the participant’s Accounts
attributable to the particular Deferred Compensation Amount as of
the 31 December preceding payment, the numerator of which is one
and the denominator of which is the total number of such
installments elected. The amount of each subsequent payment shall
be a fraction of the value as of the 31 December preceding each
subsequent payment, the numerator of which is one and the
denominator of which is the total number of installments elected
minus the number of installments previously paid as to such
Deferred Compensation Amount. The number of shares of common stock
to be delivered in payment from the Air Products Stock Account
shall be equal to the number of deferred stock units represented by
the payment owed, calculated as aforesaid, rounded up to the next
whole share of common stock.
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(d)
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Accelerated Payment
. Notwithstanding the
deferral period and timing of payment determined in accordance with
Sections 8(a) and (b) above, the participant’s Accounts
shall be paid on an accelerated basis as follows under the
circumstances described below:
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(i)
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Payment on Death
. In the event of a
participant’s death, the value of his or her Accounts
(including interest and dividend equivalents) determined as of the
date of death shall be paid in a single cash lump sum to the
participant’s estate or designated beneficiary on the earlier
of the 15 January or 15 July following such date or as soon
thereafter as reasonably possible. The amount of any cash payment
in respect of deferred stock units in the Air Products Stock
Account shall be determined by multiplying the number of such
units, including fractiona
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