def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO.
)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2)) |
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[X] |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to
Section 240.14a-12. |
PRAXAIR, INC.
(Name of Registrant as Specified In Its
Charter)
(Name of Person(s) Filing Proxy Statement, if
other than Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11. |
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(1) |
Title of each class of securities to which transaction applies: |
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(2) |
Aggregate number of securities to which transaction applies: |
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(3) |
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): |
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(4) |
Proposed maximum aggregate value of transaction: |
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing. |
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(1) |
Amount Previously Paid: |
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(2) |
Form, Schedule or Registration Statement No.: |
39 Old Ridgebury Road
Danbury, Connecticut 06810-5113
Dear Praxair Shareholder,
I am pleased to invite you to attend Praxairs 2010 Annual
Meeting of Shareholders on Tuesday, April 27, 2010. The
meeting will be held at 9:30 a.m. in the Grand Ballroom of
the Danbury Plaza Hotel, 18 Old Ridgebury Road, Danbury,
Connecticut.
This proxy statement provides information on Praxairs
governance framework, the Companys executive compensation
program, and the backgrounds of candidates for the Board of
Directors. These disclosures reflect Praxairs commitment
to strong governance processes, including independent and active
Board oversight, transparent reporting, and accountability to
shareholders.
With respect to oversight, I am pleased to report that
Praxairs Board continues to play a key role in shaping the
Companys strategic vision, and in guiding its approach to
assessing and managing risk. The Board has provided valuable
counsel on leadership development and succession planning, and
has emphasized performance-based executive compensation. The
Boards leadership has reinforced the Companys
culture of compliance and integrity. In these and other ways,
the Board is dedicated to serving shareholder interests through
sound corporate governance.
For more information on our governance practices, please visit
our website, www.praxair.com. I look forward to sharing
further information about Praxair at the Annual Meeting. Whether
or not you plan to attend, I encourage you to vote your proxy as
soon as possible so that your shares will be represented at the
meeting.
Sincerely,
Stephen F. Angel
Chairman, President &
Chief Executive Officer
March 16, 2010
39 Old Ridgebury Road
Danbury, Connecticut
06810-5113
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD APRIL 27,
2010
Dear Praxair Shareholder:
The Annual Meeting of Shareholders of Praxair, Inc. will be held
at 9:30 a.m. on Tuesday, April 27, 2010 in the Grand
Ballroom of the Danbury Plaza Hotel, 18 Old Ridgebury Road,
Danbury, Connecticut, for the following purposes:
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1.
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To elect nine directors to the Board of Directors.
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2.
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To ratify the appointment of the independent auditor.
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3.
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To conduct such other business as may properly come before the
meeting.
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Only holders of Common Stock of Praxair, Inc. of record at the
close of business on March 1, 2010 will be entitled to
notice of, and to vote at, the meeting or any adjournment or
postponement thereof.
It is important that your shares be represented and voted at the
meeting. You may vote your shares by means of a proxy form as
described in the accompanying Proxy Statement. The giving of
such proxy does not affect your right to vote in person if you
attend the meeting.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN
PERSON, PLEASE PROMPTLY SUBMIT A PROXY OR VOTING INSTRUCTION.
Most shareholders have a choice of voting over the Internet, by
telephone or by using a traditional proxy card. Please refer to
the enclosed proxy materials or the information forwarded by
your bank, broker or other holder of record to see which voting
methods are available to you. We urge you to complete and submit
your proxy electronically or by telephone (if those options are
available to you) as a means of reducing Praxairs expenses
related to the meeting.
If you own shares in a brokerage account, your vote is even
more important this year because of recent New York Stock
Exchange rule changes. Unlike in previous years, your broker
cannot vote your shares on the proposal to elect Praxairs
directors unless you provide voting instructions to your broker.
Therefore, it is very important that you exercise your right as
a shareholder and vote on all proposals, including the election
of directors.
BY ORDER OF THE BOARD OF DIRECTORS
JAMES T. BREEDLOVE,
Senior Vice President, General Counsel &
Secretary
March 16, 2010
PROXY
STATEMENT
TABLE OF CONTENTS
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39 Old Ridgebury Road
Danbury, Connecticut
06810-5113
PROXY
STATEMENT
Annual Meeting of
Shareholders
Tuesday, April 27,
2010
This Proxy Statement is furnished to shareholders of Praxair,
Inc. (Praxair or the Company) in
connection with the solicitation of proxies for the Annual
Meeting of Shareholders to be held at the Danbury Plaza Hotel,
18 Old Ridgebury Road, Danbury, Connecticut on April 27,
2010, at 9:30 a.m. or any adjournment or postponement
thereof (the Annual Meeting). This Proxy Statement
and a form of proxy are first being sent to shareholders on or
about March 16, 2010. Proxies are being solicited on behalf
of the Board of Directors of Praxair.
Matters
to be Considered at the Annual Meeting
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Item 1:
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Election
of Directors
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Nine directors will be elected to serve until the 2011 annual
meeting of shareholders, and until their successors are elected
and qualify. Nine incumbent directors have been nominated for
re-election for a one-year term, and one director,
H. Mitchell Watson, Jr., has retired from the Board
pursuant to the Boards director retirement policy.
Mr. Watson had served on the Board since the Company first
became a public company in 1992, and the Company thanks him for
his valuable and dedicated service. The Board recommends that
Stephen F. Angel, Nance K. Dicciani, Edward G. Galante, Claire
W. Gargalli, Ira D. Hall, Raymond W. LeBoeuf, Larry D. McVay,
Wayne T. Smith, and Robert L. Wood, each be elected to serve
for a one-year term, until the 2011 annual meeting of
shareholders, and until their successors are elected and
qualify. Each nominee has agreed to be named in this Proxy
Statement and to serve if elected. Qualifications and
biographical data for each of these nominees is presented
beginning at page 22 of this Proxy Statement under the
caption The Board of Directors. If one or more of
the nominees becomes unavailable for election or service as a
director, the proxy holders will vote your shares for one or
more substitutes designated by the Board of Directors, or the
size of the Board of Directors will be reduced.
To be elected, a nominee must receive a majority of the votes
cast at the Annual Meeting in person or by proxy by the
shareholders entitled to vote (meaning the number of shares
voted for a nominee must exceed the number of shares
voted against such nominee). See the vote counting
rules on page 5 of this Proxy Statement.
Item 2:
Proposal to Ratify the Appointment of the Independent
Auditor
Under New York Stock Exchange (NYSE) and Securities
and Exchange Commission (SEC) rules, selection of
the Companys independent auditor is the direct
responsibility of the Audit Committee. The Board has determined,
however, to seek shareholder ratification of that selection as a
good practice in
1
order to provide shareholders an avenue to express their views
on this important matter. If shareholders fail to ratify the
selection, the Audit Committee may reconsider the appointment.
Even if the current selection is ratified by shareholders, the
Audit Committee reserves the right to appoint a different
independent auditor at any time during the year if the Audit
Committee determines that such change would be in the best
interests of the Company and its shareholders.
Information concerning the independent auditor may be found
beginning on page 17 of this Proxy Statement under the
caption The Independent Auditor.
The Board recommends that you vote FOR this Item 2, the
proposal to ratify the Audit Committees selection of the
independent auditor.
In order for this proposal to be adopted by the shareholders, at
least a majority of the votes cast at the Annual Meeting in
person or by proxy by the shareholders entitled to vote on the
matter must be voted in its favor. See the vote counting rules
on page 5 of this Proxy Statement.
Item 3:
Other Business
Praxair knows of no other business that will be considered for
action at the Annual Meeting. If any other business calling for
a vote of shareholders is properly presented at the meeting, the
proxy holders will have the discretion to vote your shares in
accordance with their best judgment.
2
Availability
of Annual Report and
Proxy Statement On-Line
Important
Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting to be Held on April 27, 2010:
This Proxy Statement and the 2009
Form 10-K
and Annual Report are now available for viewing and downloading
on the Internet at:
2009
Form 10-K
and Annual Report: www.praxair.com/annualreport.
2010 Notice of Meeting and Proxy Statement:
www.praxair.com/proxy.
As allowed by SEC and NYSE rules, Praxair is sending to most
shareholders by mail a notice informing them that they can
access and download this 2010 Proxy Statement and the 2009
Form 10-K
and Annual Report on the Internet at the websites noted above,
rather than sending printed copies. If you have received printed
copies in the mail, rather than the notice of Internet
availability, it is likely that this occurred because either:
(1) you have specifically requested printed copies this
year or previously, or (2) Praxair has voluntarily sent you
printed copies.
If you are receiving printed copies you can save Praxair
future postage and printing expense by consenting to receive
future annual reports, meeting notices, and proxy statements
on-line on the Internet. Most shareholders can elect to view
future proxy statements and annual reports over the Internet
instead of receiving paper copies in the mail. This will help
with Praxairs overall sustainability efforts by reducing
paper usage. Shareholders will be given the opportunity to
consent to future Internet delivery when they vote their proxy.
For some shareholders, this option is only available if they
vote by Internet. If you are not given an opportunity to consent
to Internet delivery when you vote your proxy, contact the bank,
broker or other holder of record through which you hold your
shares and inquire about the availability of such an option for
you.
If you consent, your account will be so noted and, when
Praxairs 2010 Annual Report, meeting notice, and the proxy
statement for the 2011 annual meeting of shareholders become
available, you will be notified on how to access them on the
Internet. Any prior consent you have given will remain in effect
until specifically revoked by you in the manner specified by the
bank or broker that manages your account. If you do elect to
receive your Praxair materials via the Internet, you can still
request paper copies by contacting the bank or broker that
manages your account or, if you are a shareholder of record, you
may contact us through our stock transfer agent, Registrar and
Transfer Company, 10 Commerce Drive, Cranford, NJ 07106. They
can also be reached by telephone at
(800) 368-5948
or via
e-mail at
info@rtco.com.
Shareholders
Sharing An Address
If you share an address with another shareholder, you may
receive only one notice of Internet availability, or one set of
printed proxy materials (including this Proxy Statement and the
2009
Form 10-K
and Annual Report to shareholders) unless you have provided
contrary instructions. If you wish to receive a separate notice
of Internet availability or set of proxy materials now or in the
future, you may contact the bank or broker that manages your
account or, if you are a shareholder of record, you may contact
us at the address cited above. Similarly, if you share an
address with another shareholder and have received multiple
copies of the notice of Internet availability or proxy
materials, you may contact the bank or broker that manages your
account or, if you are a shareholder of record, you may contact
us at the above address to request delivery of only a single
copy of these materials to your household.
3
Proxy
and Voting Procedures
Who
are the Shareholders Entitled to Vote at this
Meeting?
Common Stock shareholders of record at the close of business on
March 1, 2010 will be entitled to vote at the Annual
Meeting. As of that date, a total of 306,188,969 shares of
Praxairs Common Stock were outstanding and entitled to
vote. Each share of Common Stock is entitled to one vote.
How do
I Submit My Vote by Means of a Proxy?
Your vote is important. Because many shareholders cannot attend
the Annual Meeting in person, it is necessary that a large
number be represented by proxy. Most shareholders have a choice
of voting over the Internet, by using a toll-free telephone
number or by completing a proxy card or voting instruction card,
as described below.
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Vote on the Internet. If you have Internet
access, you may access the Proxy Statement and 2009
Form 10-K
and Annual Report and submit your proxy or voting instructions
by following the instructions provided in the notice of Internet
availability, or if you received printed proxy materials, by
following the instructions provided with your proxy materials
and on your proxy card or voting instruction card. If you vote
on the Internet, you can also request electronic delivery of
future proxy materials.
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2.
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Vote by telephone. You can also vote by
telephone by following the instructions provided on the Internet
voting site, or if you received printed proxy materials, by
following the instructions provided with your proxy materials
and on your proxy card or voting instruction card.
Easy-to-follow
voice prompts allow you to vote your shares and confirm that
your instructions have been properly recorded.
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3.
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Vote by Mail. If you received printed proxy
materials by mail, you may choose to vote by mail by marking
your proxy card or voting instruction card, dating and signing
it, and returning it in the postage-paid envelope provided.
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How
are the Proxies Voted?
All shares entitled to vote and represented by a properly
completed proxy (either by Internet, telephone or mail) will be
voted at the Annual Meeting as indicated on the proxy unless
earlier revoked by you. If no instructions are indicated for a
matter on an otherwise properly completed proxy from a
shareholder of record, the shares represented by that proxy will
be voted on that matter as recommended by the Board of
Directors. See also the vote counting rules on page 5 of
this Proxy Statement. Execution of the proxy also confers
discretionary authority on the proxy holders to vote your shares
on other matters that may properly come before the Annual
Meeting.
How
Can I Revoke my Proxy?
You may revoke your proxy at any time before it is voted by
filing with Praxairs Corporate Secretary a written
revocation, by timely delivery of a properly completed,
later-dated proxy (including by Internet or telephone), or by
voting in person at the Annual Meeting.
May I
Still Vote at the Annual Meeting Even if I Have Submitted a
Proxy?
The method by which you vote will in no way limit your right to
vote at the Annual Meeting if you later decide to attend in
person. If your shares are held in the name of a bank, broker or
other holder of record, you must obtain a proxy, executed in
your favor, from the holder of record, to be able to vote at the
Annual Meeting. See Attending the Annual Meeting on
page 5 for attendance requirements and directions to the
Annual Meeting.
4
What
is the Necessary Quorum to Transact Business at the Annual
Meeting?
The presence, in person or by proxy, of the holders of a
majority of the shares entitled to vote shall constitute a
quorum. The shares represented by withhold votes, abstentions
and broker non-votes on filed proxies and ballots will be
considered present for quorum purposes (for an explanation of
broker non-votes, see the vote counting rules below).
How
are the Votes Counted for Each Item of Business?
If you are a shareholder of record and submit a proxy (whether
by Internet, telephone or mail) without specifying a choice on
any given matter to be considered at this Annual Meeting, the
proxy holders will vote your shares according to the
Boards recommendation on that matter.
If you hold your shares in a brokerage account, then, under NYSE
rules and Delaware corporation law:
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With respect to Item #1 (Election of Directors), your
broker is not entitled to vote your shares on this matter if no
instructions are received from you. If your broker does not vote
(a broker non-vote), this is not considered a vote
cast and, therefore, will have no effect on the election of
directors. Abstentions may not be specified as to the election
of directors.
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2.
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With respect to Item #2 (Ratification of the Appointment of
the Independent Auditor), your broker is entitled to vote your
shares on this matter if no instructions are received from you.
Broker non-votes and abstentions are not considered votes cast
and, therefore, will be counted neither for nor against this
matter.
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If you hold your shares in the Praxair, Inc., Praxair
Distribution, Inc., Praxair Healthcare Services, Inc., Praxair
Puerto Rico, LLC, or the Dow Chemical Company Employees
savings plan, and if the plan trustee receives no voting
instructions from you, then, under the applicable plan trust
agreement, the plan trustee must vote your shares in the same
proportion on each matter as it votes the shares for which it
has received instructions.
Attending
the Annual Meeting
Admission
Requirements
You may attend the Annual Meeting whether or not you want to
vote your shares at the Annual Meeting or by proxy. However,
only shareholders and the invited guests of Praxair will be
granted admission to the Annual Meeting. To assure admittance:
- If you hold shares of Praxair, Inc. common stock
through a broker, bank or other nominee, please bring a copy of
your broker, bank or nominee statement evidencing your ownership
of Praxair common stock as of the March 1, 2010 record date;
- Please bring a photo ID, if you hold shares of
record as of March 1, 2010, including shares in certificate
or book form or in the Praxair, Inc. Dividend Reinvestment and
Stock Purchase Plan;
- Please bring your Praxair ID if you are an employee
shareholder.
Directions
From Points West of Danbury, CT: Take
I-84 East to Exit 2 (Mill Plain Road) in Danbury. After exit,
stay left and go to the bottom of the ramp and turn left. Go to
the second light and turn right (Mill Plain Road). Go to the
next light and turn right (Old Ridgebury Road). Go up the hill
and the Danbury Plaza Hotel is on your left.
From Points East of Danbury, CT: Take
I-84 West to Exit 2A (Old Ridgebury Road) in Danbury. The
exit ramp circles around and up over the highway. The Danbury
Plaza Hotel is on your left.
5
Share
Ownership
Principal
Holders
The only person known by Praxair to be a beneficial owner of
more than five percent of Praxairs Common Stock is the
following:
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Number of Shares
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Percent of Shares
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Name and Address of Beneficial Owner
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Beneficially Owned
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Outstanding(a)
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BlackRock, Inc 40 East 52nd Street New York, NY 10022
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17,765,001
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(b)
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5.80
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(a) Based on 306,188,969 total shares outstanding on
March 1, 2010 excluding shares held for the account of
Praxair.
(b) Holdings as of December 31, 2009 as reported in
SEC Schedule 13G by BlackRock, Inc. According to this
report, BlackRock, Inc. and certain of its subsidiaries had sole
voting power and sole investment power as to all of the reported
shares.
Directors
and Executive Officers
The table below sets forth the beneficial ownership of
Praxairs Common Stock as of March 1, 2010 by each
director and certain executive officers. No director or
executive officer of Praxair beneficially owned more than 1% of
Praxairs common stock, and directors and executive
officers of Praxair as a group (18 persons) beneficially
owned approximately 1.0% of the outstanding shares as of that
date.
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SHARES BENEFICIALLY OWNED AND OTHER
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EQUITY INTERESTS
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Common
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Deferred
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Stock
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Stock(1)
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Stock(2)
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Total
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Options(3)
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Stephen F. Angel
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Chairman, President & Chief Executive Officer
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89,878
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62,908
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152,786
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1,185,969
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Ricardo S. Malfitano
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Executive Vice President
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35,432
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10,737
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46,169
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497,499
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James S. Sawyer
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Executive Vice President & Chief Financial Officer
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24,307
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4,567
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28,874
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180,153
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James J. Fuchs
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Senior Vice President
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13,419
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1,208
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14,627
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178,519
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James T. Breedlove
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Senior Vice President, General Counsel & Secretary
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35,301
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830
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36,131
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206,240
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Nance K. Dicciani
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Director
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2,283
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1,874
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4,157
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2,048
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Edward G. Galante
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Director
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3,000
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3,379
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6,379
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4,483
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Claire W. Gargalli
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Director
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3,474
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10,389
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13,863
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43,568
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Ira D. Hall
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Director
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1,500
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3,876
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5,376
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23,568
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Raymond W. LeBoeuf
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Director
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2,000
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40,386
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42,386
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43,568
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Larry D. McVay
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Director
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1,910
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1,015
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2,925
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4,123
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Wayne T. Smith
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Director
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10,000
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20,189
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30,189
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23,568
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H. Mitchell Watson, Jr.
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Director
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948
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33,212
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34,160
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|
|
|
18,568
|
|
Robert L. Wood
|
|
Director
|
|
|
2,700
|
|
|
|
1,397
|
|
|
|
4,097
|
|
|
|
23,568
|
|
|
|
Total
|
|
|
|
|
226,152
|
|
|
|
195,967
|
|
|
|
422,119
|
|
|
|
2,435,442
|
|
|
|
Directors
and Executive
Officers as a group
|
|
(18 persons)
|
|
|
258,071
|
|
|
|
196,784
|
|
|
|
454,855
|
|
|
|
2,849,027
|
|
|
|
(1) Reported shares include 23,917 unvested restricted
shares for which Mr. Angel has sole voting power and that
will vest on April 23, 2011.
(2) Deferred Stock represents stock price-based units into
which deferred compensation has been invested pursuant to the
deferred compensation plans for management and for non-employee
directors. Holders have no voting rights with respect to
Deferred Stock. The value of Deferred Stock units varies with
the price of Praxairs common stock and, at the end of the
deferral period, the units are payable in Praxair common stock.
(3) Stock Options represent shares that may be acquired
upon exercise of options exercisable within 60 days of
March 1, 2010.
6
Corporate
Governance and Board Practices
Praxairs
Governance Principles
Praxair operates under Corporate Governance Guidelines which are
set forth in Appendix 1 to this Proxy Statement and are
posted at Praxairs public website, www.praxair.com.
Consistent with those guidelines, the Board has adopted the
following policies and practices, among others:
Business Integrity and Ethics. One of the
Boards first acts upon Praxairs launch as a public
company was to adopt policies and standards regarding Compliance
with Laws and Business Integrity and Ethics. The current version
of the Boards policy in these areas is posted at
Praxairs public website, www.praxair.com and is available
in print to any shareholder who requests it. This Code of Ethics
applies to Praxairs directors and to all employees,
including Praxairs Chief Executive Officer
(CEO), Chief Financial Officer, and Controller.
Director Independence. The Board has adopted
independence standards for service on Praxairs Board of
Directors which are set forth in Appendix 2 to this Proxy
Statement and are posted at Praxairs public website,
www.praxair.com. The Board has applied these standards to all of
the incumbent non-management directors (all incumbent directors
are non-management except for Mr. Angel, the Companys
Chairman & CEO), and has determined that all of these
directors qualify as independent. The Board is not otherwise
aware of any relationship with the Company or its management
that could potentially impair a directors exercise of
independent judgment. See also related information which is
presented in this Proxy Statement under the caption
Certain Relationships and Transactions.
Board Leadership. As set forth in Corporate
Governance Guidelines attached to this Proxy Statement as
Appendix 1, the Board believes that the best leadership
model for the Company is that of a combined Chairman &
CEO, balanced by certain practices and policies to assure
effective independence in the Boards oversight, advice and
counsel.
The Governance & Nominating Committee (consisting
entirely of independent directors) periodically examines the
Board leadership structure as well as other governance practices
and conducts an annual assessment of Board and Committee
effectiveness. The Governance & Nominating Committee
has determined that the present leadership structure continues
to be effective and appropriate, as demonstrated by the
Companys sustained superior performance relative to its
peers over a number of years.
The Board believes that the substantive duties of the Chairman,
including calling and organizing meetings and preparing agendas,
are best performed by one who has
day-to-day
familiarity with the business issues confronting the Company and
an understanding of the specific areas in which management seeks
advice and counsel from the Board.
Board independence is achieved by the appointment by the
independent directors of an Executive Session Presiding Director
(Presiding Director) and by other practices set
forth in the Corporate Governance Guidelines and described more
fully below. These practices assure effective independent
oversight as well as effective independent leadership while
maintaining (1) practical efficiency, (2) the
responsibility of each independent director to assert leadership
when appropriate according to his or her background and
expertise, and (3) appropriate authority on the part of
each independent Committee Chair within the scope of his or her
Committees subject matter responsibility.
The Presiding Director assures that appropriate independence is
brought to bear on important Board and governance practices. The
Presiding Directors duties and responsibilities are
summarized in the Corporate Governance Guidelines and in the
Presiding Directors appointing resolutions (cited below).
There are other sources of independence for the Board in
addition to the Presiding Directors leadership. The
Presiding Directors duties are complemented by
(1) the strong leadership vested in, and exercised by, the
Boards independent Committee Chairs with respect to the
matters overseen by their Committees, and (2) the
responsibility of each director to assert leadership according
to his or her particular experience and expertise. Among the
reasons to maintain a strong Committee structure and leadership
is the diversity
7
of issues and risks confronted by a global industrial company.
The Board believes that exercising Board leadership and
oversight through Committees is the most effective method of
ensuring that these matters receive the diverse expertise and
attention they deserve.
In addition, the Board is strengthened by the responsibility of
each director to communicate candid advice and counsel directly
to the CEO. This approach assures that each director is free to
exercise and express independent judgment without filtering, and
enables the valuable expression of a diversity of views in Board
meetings.
Finally, it is recent practice for the independent directors to
appoint as the Presiding Director the Chair of the Boards
Governance & Nominating Committee. This practice is in
recognition of the Committees oversight of the
Boards and the Companys overall governance
practices. The duties of the Chair of the Governance &
Nominating Committee complement and unify the duties of the
Presiding Director in most respects.
The Boards resolutions appointing the Presiding Director
specify the following roles and responsibilities:
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|
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Serve as Chairman of any formal private meetings of all of the
non-management directors,
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|
|
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Serve as the contact by which interested parties may make their
concerns known to the Boards non-management directors as
required by the NYSE Listing Standards and act as a spokesperson
for the Board in engagements with shareholders or external
parties as required,
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|
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Conduct performance reviews of the CEO based on contributions
from the Compensation & Management Development
Committee and other non-management directors,
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|
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|
Serve as temporary acting Chairman in the event of
unavailability or incapacitation of the Chairman,
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|
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|
Serve as an advisor or liaison to the CEO to provide a sense of
the non-management directors regarding governance or Board
matters in cases where direct communication of such sentiment is
inappropriate or awkward or where the CEO requests a consensus
or collective judgment of the non-management directors,
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Provide leadership to the Board in the event of a crisis or
other event or circumstance which would make management
leadership inappropriate or ineffective, in which cases the
Presiding Director shall have the authority to convene meetings
of the full Board or of the non-management directors, and
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|
Review with the Chairman in advance of each Board meeting the
agenda and such other matters pertaining to the meeting and its
agenda as the Presiding Director may request.
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Board Role in Risk Oversight. At least
annually, the full Board reviews the Companys risk
identification, assessment and management processes and the
guidelines and policies by which key risks are managed. As part
of that review, the Board discusses (1) the key enterprise
risks that management has identified, (2) management
accountability for managing or mitigating each risk,
(3) the steps being taken to manage each risk, and
(4) which Board Committees will oversee each risk area on
an ongoing basis.
The risk factors disclosed in Item 1A of the Companys
Form 10-K
and Annual Report illustrate the diversity of the risks faced by
a global industrial company and illustrate the need for a strong
Board Committee structure to oversee the management of risks in
specific subject areas. Each Committees calendar of
recurring meeting agenda topics addresses risk areas pertinent
to the Committees subject-matter responsibilities. These
areas include: financing and currency exchange risks
(Finance & Pension Committee), compensation risks, and
executive development and retention (Compensation &
Management Development Committee), regular review of the
Boards governance practices and the Companys
sustainability (Governance & Nominating Committee),
and internal controls, investigations, and integrity standards
compliance (Audit Committee). Other risk areas are regularly
reviewed by the full Board. These include: safety and
environmental risk (covered at each Board meeting), economic,
market and
8
competitive risk (part of business operating reports at each
Board meeting, and the annual operating and strategic reviews),
and compliance risks (supplementing reporting within the Audit
Committee). In addition, risk identification and assessment is
integrated into Board decision-making with respect to capital
projects and acquisitions, entry into new markets, financings,
and cash flow analysis, among other things.
In Committee meetings and full Board deliberations, each
director brings his or her particular operating, financial,
management development, and other experiences and expertise to
bear in assessing managements response to specific risks
and in providing advice and counsel with respect to risk
mitigation and management.
Mandatory Director Retirement. The
Boards policy is that a director who has attained the age
of 72 must retire from the Praxair Board prior to the first
annual shareholders meeting held after his or her 72nd birthday.
The Board also has a policy against service on the Board by an
officer of the Company after his or her retirement, resignation
or removal as an officer.
Limits to Service on Other Boards. The
Boards policy is that no non-management director may serve
on more than five additional public company boards and no member
of the Audit Committee may serve on more than two additional
public company audit committees. Also, the Chairman &
CEO may not serve on more than two additional public company
boards.
Director Nomination Process. For a
description of the Boards policy regarding nominees for
election as directors, see The Governance &
Nominating Committee on page 20 of this Proxy
Statement.
Director Election and Resignation
Policy. Praxairs Certificate of Incorporation
and Bylaws require a director nominee to receive a majority of
the votes cast at an annual meeting in order to be elected
(meaning a greater number of for votes than
against votes) in an uncontested election of
directors. The Boards Corporate Governance Guidelines
require that any director nominee who is then serving as a
director must tender his or her resignation if he or she fails
to receive this majority vote. The Governance &
Nominating Committee of the Board would then consider the
resignation offer and recommend to the Board whether to accept
or reject the resignation, or whether other action should be
taken. The Board would take action on the Committees
recommendation within 90 days following certification of
the vote, and promptly thereafter publicly disclose its decision
and the reasons therefor.
Communications with the Board. The Board
believes that the most efficient means for shareholders and
other interested parties to raise issues and questions is to
direct such communications to the Company through its Investor
Relations Department or other methods as described in the
Contact Us section of the Companys public
website, www.praxair.com.
If, notwithstanding these methods, a shareholder or other
interested party wishes to direct a communication specifically
to the Companys Board of Directors, then the following
means are available (to ensure that the communication is
properly directed in a timely manner, it should be clearly
identified as intended for the Board):
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(1)
|
Telephone (Voice Mail):
1-800-719-0719
within the U.S.A., or
+1(203)
837-2960 for
outside the U.S.A.
|
|
|
(2)
|
Mail:
Praxair, Inc.
Attn: Board of Directors
P.O. Box 2478
Danbury, CT, U.S.A.
06813-2478
|
|
|
(3)
|
E-mail:
praxair_integrity@praxair.com
|
9
The above addresses are supervised by the Companys
Security Department which will promptly forward to the Corporate
Secretarys Office any communication intended for the
Board. The Corporate Secretarys Office will collect and
organize all such communications, deleting any that are
solicitations or which contain offensive material. A summary of
communications received will be periodically provided to the
Presiding Director who will make the final determination
regarding the disposition of any such communication.
The Board believes that the Company should speak with one voice
and has empowered management to speak on the Companys
behalf subject to the Boards oversight and guidance on
specific issues. Therefore, in most circumstances, the Board
will not respond directly to inquiries received in this manner
but may take into consideration ideas, concerns and positions
that are presented in a concise, clear, supported and
constructive manner.
Director Attendance at the Annual Shareholders
Meeting. Absent extenuating circumstances, each
member of the Board is expected to attend the Annual Meeting of
Shareholders. All of the then incumbent directors attended the
2009 annual meeting.
Policy Statement on Rights Agreements. The
Board will adopt or materially amend a Stockholder Protection
Rights Agreement only if, in the exercise of its fiduciary
responsibilities under Delaware law, and acting by a majority of
its independent directors, it determines that such action is in
the best interests of Praxairs shareholders. If the Board
adopts or materially amends a Stockholder Protection Rights
Agreement, it will submit such action to a non-binding
shareholder vote as a separate ballot item at the first annual
meeting of shareholders occurring at least six months after such
action.
Director Stock Ownership Guidelines. The
Boards policy is that non-management directors must
acquire and hold during their service as a Praxair Board member
shares of the Companys stock equal in value to at least
four times the base cash retainer for non-management directors.
Directors have five years from their initial election to meet
this guideline. As shown in the stock ownership table presented
at page 6 of this Proxy Statement under the caption
Share Ownership, all non-management directors have
met this guideline or are within the
5-year
transition period afforded to them to do so; and most
substantially exceed the guideline. In addition, any new
non-management director must, no later than the effective date
of his or her election, acquire, using his or her own personal
assets, shares of the Companys stock equal in value to the
base cash retainer then in effect.
Executive Stock Ownership Guidelines. The
Board believes that it is important for executive officers to
acquire a substantial ownership position in Praxair. In this
way, their interests will be more closely aligned with those of
shareholders. Significant stock ownership focuses the
executives attention on managing Praxair as equity owners.
Accordingly, stock ownership guidelines have been established
for the Companys officers as follows. Twenty-two
executives are currently covered under this stock ownership
policy. Individuals are expected to meet the applicable
guideline no more than five years after first becoming subject
to it.
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Shares To Be Owned
|
|
Chief Executive Officer
|
|
100,000
|
Executive Vice Presidents
|
|
30,000
|
Chief Financial Officer
|
|
25,000
|
Senior Vice Presidents
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|
20,000
|
Other Executive Officers
|
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10,000-15,000
|
Other Officers
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5,000
|
As of the date of this Proxy Statement, all covered individuals
have met or exceeded their guidelines, where permitted by law,
or are within the
5-year
transition period afforded to them to do so. Stock ownership of
the five most highly compensated Executive Officers in 2009 can
be found in the table presented at page 6 of this Proxy
Statement under the caption Share Ownership.
10
Succession Planning and Personnel
Development. Under the leadership of the
Compensation & Management Development Committee, it is
the Boards practice to annually conduct a formal
Succession Planning and Personnel Development session in which
evaluations of senior executives are reviewed with respect to
their potential for promotion into senior leadership positions,
including that of the CEO. In addition, a wide variety of senior
executives are purposely exposed to the Board by way of Board
and Committee presentations and directors have unrestricted
access to a broad cross-section of managers and high potential
employees for assessment and development purposes, as well as
for information gathering.
CEO Performance Evaluation. The Board has in
place a process whereby the Presiding Director conducts a
performance review at least annually of the CEO taking into
account the views of all of the other independent directors.
This is in addition to the evaluation inherent in the
Compensation & Management Development Committees
determination of the CEOs compensation.
Strategy Review and Oversight. It is the
Boards practice to conduct a
full-day
session at least annually to review the strategies of the
Company overall and of its key business components and to
provide advice and counsel to management regarding the strategic
issues facing the Company. In addition, throughout the year,
management reports to the Board on the status of significant
strategic initiatives and issues.
Board Effectiveness Assessment. As set forth
in the Corporate Governance Guidelines, the Board assesses its
effectiveness at least annually under a process determined by
the Governance & Nominating Committee. Typically, this
assessment includes evaluating its effectiveness in the areas of
Performance of Core Responsibilities, Decision-Making Support,
the Quality of Deliberations, and Director Performance, as well
as consideration of additional Board practices and policies
recommended as best practices by recognized governance
authorities. In addition, directors are given measures of
individual director effectiveness for purposes of
self-assessment, reflection and self-improvement.
Auditor Independence. The Board recognizes
the importance of ensuring the independence of the
Companys independent auditor. See page 17 of this
Proxy Statement under the caption The Independent
Auditor for a summary of some of the policies designed to
monitor and support such independence.
Director Compensation. The compensation paid
to non-management directors in 2009 and a description of the
Companys director compensation program are presented at
pages 60 to 62 of this Proxy Statement under the caption
Director Compensation. The principles used by the
Board in determining director compensation are set forth in the
Boards Corporate Governance Guidelines included in
Appendix 1 to this Proxy Statement.
Review,
Approval or Ratification of Transactions with Related
Persons
Relevant Polices. The Companys Compliance with
Laws and Business Integrity and Ethics Policy (Ethics
Policy), prohibits employees, officers and Board members
from having a personal, financial or family interest that could
in any way prevent the individual from acting in the best
interests of the Company (a conflict of interest)
and provides that any conflict of interest waiver relating to
Board members or executive officers may be made only after
review and approval by the Board upon the recommendation of its
Governance & Nominating Committee.
In addition, the Boards Corporate Governance Guidelines
(attached as Appendix 1 to this Proxy Statement) require
that any related party transaction by an executive
officer or director be pre-approved by a committee of
independent and disinterested directors. For this purpose, a
related party transaction means any transaction or
relationship that is reportable under the SECs
Regulation S-K,
Item 404, or that, in the case of a non-management
director, would violate the Boards independence standards.
Reporting and Review Procedures. To implement the
foregoing policies, the Governance & Nominating
Committee has adopted a written procedure for the Handling of
Potential Conflicts of Interests which specifies a process for
the referral of potential conflicts of interests to the Board
and standards for the Boards evaluation of those matters.
This policy applies to any transaction or relationship involving
an executive officer, a member of the Board of Directors, a
nominee for election as a director of the Company, or a family
member of any of the foregoing which (1) could violate the
Companys Ethics
11
Policy provisions regarding conflicts of interest,
(2) would be reportable under the SECs disclosure
rules, or (3) in the case of a non-management director,
would violate the Boards independence standards.
In summary, under this procedure, potential conflicts of
interest are reported to the Corporate Secretary for preliminary
analysis to determine whether referral to the
Governance & Nominating Committee is appropriate.
Potential conflicts of interest can be self-identified by the
director or executive officer or may arise from internal audits,
the integrity hotline or other referrals, or through periodic
due diligence conducted by the Corporate Secretarys
office. The Governance & Nominating Committee then
examines the facts and circumstances of each matter referred to
it and makes a final determination as to (1) whether the
transaction or relationship would (or does) constitute a
violation of the conflicts of interest provisions of the
Companys Ethics Policy, and (2) whether the
transaction or relationship should be approved or ratified and
the conditions, if any, of such approval or ratification. In
determining whether a transaction or relationship constitutes a
violation of the conflicts of interest provisions of the
Companys Ethics Policy, the Governance &
Nominating Committee considers, among other factors, the
materiality of the transaction or relationship to the
individuals personal interest, whether the
individuals personal interest is materially adverse to or
competitive with the interests of the Company, and whether the
transaction or relationship materially interferes with the
proper performance of the individuals duties or loyalty to
the Company. In determining whether to approve or ratify a
transaction or relationship, the Governance &
Nominating Committee considers, among other factors, whether the
matter would constitute a violation of the conflicts of interest
provisions of the Companys Ethics Policy, whether the
matter would violate the NYSE listing standards, the expected
practical impact of the transaction or relationship on the
individuals independence of judgment or ability to act in
the best interests of the Company, the availability,
practicality and effectiveness of mitigating controls or
safeguards such as recusal, restricted access to information,
reassignment etc., and the best interests of the Company and its
shareholders generally.
Application of Policies &
Procedures. During 2009, no actual or potential
conflicts of interest were identified with respect to the
executive officers and directors of the Company.
Certain
Relationships and Transactions
When determining whether any director or nominee is independent,
the Board considers all facts and circumstances and any
relationships that a director or nominee may have with the
Company, directly or indirectly, other than serving as a
director. To assist the Board in making independence
determinations, it also applies the independence standards set
forth in Appendix 2 to this Proxy Statement.
In determining that each non-management director and director
nominee is independent, in February 2010, the Board considered
the following circumstances and relationships of those directors
and nominees who then had any direct or indirect relationship
with the Company: In the ordinary course of its business,
Praxair sells products to, or purchases products from, the
company of which Mr. Smith is an executive officer. The
dollar value of these transactions is far below the limits set
forth in the Boards independence standards and, for the
last three fiscal years, was significantly less than 1% of
either Praxairs or Mr. Smiths companys
consolidated revenues. Therefore, the Board has determined that
such relationships are not material and do not otherwise impair
the ability of Mr. Smith to exercise his independent
judgment as a director.
Section 16(a)
Beneficial Ownership Reporting Compliance
Based solely upon a review of SEC Forms 3, 4 and 5
furnished to the Company and written representations from the
Companys executive officers and directors, the Company
believes that those persons complied with all Section 16(a)
filing requirements during 2009 with respect to transactions in
the Companys stock.
12
Board
Committees
The Board currently has four standing committees as described in
the tables below and each is comprised of only independent
directors. The Charters for each of these committees may be
found in the Governance section of Praxairs public
website, www.praxair.com and are available in print to any
shareholder who requests them.
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|
Meetings and Current Members
|
|
|
Summary Responsibilities
|
|
AUDIT COMMITTEE
Meetings in 2009: 5
Current Members:
Raymond W. LeBoeuf, Chairman
Claire W. Gargalli
Ira D. Hall
Larry D. McVay
H. Mitchell Watson, Jr. (until March 2010)
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|
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Assists the Board in its oversight of (a) the independence, qualifications and performance of Praxairs independent auditor, (b) the integrity of Praxairs financial statements, (c) the performance of Praxairs internal audit function, and (d) Praxairs compliance with legal and regulatory requirements. In furtherance of these responsibilities, the Audit Committee, among other duties,
(1) appoints the independent auditor to audit Praxairs financial statements, approves the fees and terms of such engagement, approves any non-audit engagements of the independent auditor, and meets regularly with, and receives various reports from, the independent auditor. The independent auditor reports directly to the Audit Committee;
(2) reviews Praxairs principal policies for accounting and financial reporting and its disclosure controls and processes, and reviews with management and the independent auditor Praxairs annual financial statements prior to their publication;
(3) reviews assessments of Praxairs internal controls, the performance of the Internal Audit function, the performance evaluations of the General Auditor and the Chief Compliance Officer, and the guidelines and policies by which Praxair undertakes risk assessment and risk management; and
(4) reviews the effectiveness of Praxairs compliance with laws, business conduct, integrity and ethics programs.
More information on the Audit Committees role and conclusions regarding financial reports and on the independent auditor is presented under the captions Audit Committee Report and The Independent Auditor following this table.
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13
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|
Meetings and Current Members
|
|
|
Summary Responsibilities
|
|
COMPENSATION &
MANAGEMENT
DEVELOPMENT COMMITTEE
Meetings in 2009: 4
Current Members:
Wayne T. Smith, Chairman
Nance K. Dicciani
Edward G. Galante
Robert L. Wood
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Assists the Board in its oversight of (a) Praxairs compensation and incentive policies and programs, and (b) management development and succession, in both cases particularly as they apply to Praxairs executive officers. In furtherance of these responsibilities, the Compensation & Management Development Committee, among other duties,
(1) determines Praxairs policies relating to the compensation of the executive officers and assesses the competitiveness and appropriateness of their compensation and benefits;
(2) approves corporate goals relevant to the CEOs compensation, evaluates the CEOs performance in light of these goals and sets the CEOs compensation accordingly;
(3) reviews managements long-range planning for executive development and succession, and develops a CEO succession plan;
(4) reviews Praxairs management incentive compensation and equity compensation plans and oversees their administration, and reviews incentive compensation policies and practices applicable to all employees generally, to confirm that incentive compensation programs do not encourage excessive risk taking that could be material to the Company; and
(5) reviews periodically the Companys diversity policies and objectives, and programs to achieve those objectives.
More information on the Compensation & Management Development Committees processes with respect to executive compensation is presented under the caption The Compensation & Management Development Committee following this table.
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14
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|
Meetings and Current Members
|
|
|
Summary Responsibilities
|
|
GOVERNANCE &
NOMINATING COMMITTEE
Meetings in 2009: 6
Current Members:
Claire W. Gargalli, Chairperson
Edward G. Galante
Wayne T. Smith
H. Mitchell Watson, Jr. (until March 2010)
Robert L. Wood
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Assists the Board in its oversight of (a) the selection, qualifications, compensation and performance of Praxairs directors, (b) Praxairs governance, including the practices and effectiveness of the Board, and (c) various important public policy concerns that affect the Company. In furtherance of these responsibilities, the Governance & Nominating Committee, among other duties,
(1) recommends to the Board nominees for election as directors, and periodically reviews potential candidates, including incumbent directors;
(2) reviews policies with respect to the composition, organization and practices of the Board, and developments in corporate governance matters generally; and
(3) reviews Praxairs policies and responses to broad public policy issues such as social responsibility, corporate citizenship, charitable contributions, sustainable development, legislative issues, and important shareholder issues, including management and shareholder proposals offered for shareholder approval.
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More information on the Governance & Nominating
Committees director nomination processes is presented
under the caption The Governance & Nominating
Committee following this table.
|
|
|
FINANCE & PENSION
COMMITTEE
Meetings in 2009: 3
Current Members:
Ira D. Hall, Chairman
Nance K. Dicciani
Raymond W. LeBoeuf
Larry D. McVay
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Assists the Board in its oversight of (a) Praxairs financial position and financing activities, (b) Praxairs financial risk management policies and activities, and (c) the ERISA-qualified, funded plans sponsored by Praxair. In furtherance of these responsibilities, the Finance & Pension Committee, among other duties,
(1) monitors Praxairs financial condition and its requirements for financing, and reviews, and recommends to the Board, the amounts, timing, types and terms of public stock issues and public and private debt issues;
(2) reviews Praxairs foreign exchange and interest rate exposures, the results of its foreign exchange hedging activities, and Praxairs practices for managing insurable risks;
(3) reviews Praxairs policies on dividends and stock repurchases; and
(4) reviews the investment performance, administration and funded status of Praxairs funded benefit plans and appoints administration and investment committees to act as fiduciaries of such plans.
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15
The Audit
Committee
Audit
Committee Report
A principal role of the Audit Committee is to assist the Board
of Directors in its oversight of the Companys financial
reporting process. The Board of Directors, in its business
judgment, has determined that all members of the Audit Committee
are independent, as required by applicable listing
standards of the NYSE and by the Boards independence
standards set forth in Appendix 2 of this Proxy Statement.
As set forth in the Audit Committees Charter, the
management of the Company is responsible for: (1) the
preparation, presentation and integrity of the Companys
financial statements; (2) the Companys accounting and
financial reporting principles; and (3) internal controls
and procedures designed to ensure compliance with applicable
laws, regulations, and standards, including internal control
over financial reporting. The independent auditor is responsible
for auditing the Companys financial statements and
expressing an opinion as to their conformity with generally
accepted accounting principles.
In the performance of its oversight function, the Audit
Committee has considered and discussed the audited financial
statements with management and the independent auditor. The
Audit Committee has also discussed with the independent auditor
the matters required to be discussed by the Statement on
Auditing Standards No. 61, as amended (AICPA, Professional
Standards, Vol. 1, AU Section 380), as adopted by the
Public Company Accounting Oversight Board in Rule 3200T.
The Audit Committee has discussed with the independent auditor
its independence from the Company and its management. The Audit
Committee has received the written disclosures and the letter
from the independent auditor required by applicable requirements
of the Public Company Accounting Oversight Board. The Audit
Committee has also received written confirmations from
management with respect to non-audit services provided to the
Company by the independent auditor in calendar year 2009 and
those planned for 2010. The Audit Committee has considered
whether the provision of such non-audit services is compatible
with maintaining PricewaterhouseCoopers independence.
In its oversight role for these matters, the Audit Committee
relies on the information and representations made by management
and the independent auditor. Accordingly, the Audit
Committees oversight does not provide an independent basis
to certify that the audit of the Companys financial
statements has been carried out in accordance with generally
accepted auditing standards, that the financial statements are
presented in accordance with generally accepted accounting
principles or that the Companys independent auditor is, in
fact, independent.
Based upon the review and discussions described in this report,
and subject to the limitations on the role and responsibilities
of the Audit Committee referred to above and in the Charter, the
Audit Committee recommended to the Board that the audited
financial statements be included in the Companys
Form 10-K
and Annual Report for the year ended December 31, 2009 to
be filed with the SEC.
The Audit Committee
Raymond W. LeBoeuf, Chairman
Claire W. Gargalli
Ira D. Hall
Larry D. McVay
H. Mitchell Watson, Jr.
16
The
Independent Auditor
Auditor
Selection and Attendance at the Annual Meeting
PricewaterhouseCoopers LLP served as Praxairs independent
auditor for the year ended December 31, 2009 and has been
selected by the Boards Audit Committee to serve in such
capacity for the year ending December 31, 2010.
Representatives of PricewaterhouseCoopers LLP are expected to be
present at the Annual Meeting to be available to respond to
appropriate questions and to make a statement if they desire.
Audit
Partner and Audit Firm Rotation
The Audit Committees policy is that the audit engagement
partner should rotate off the Companys account no less
frequently than every five years. During its history as a public
company since 1992, Praxair has had five audit engagement
partners. The current engagement partner has been in place since
January 1, 2008.
With respect to audit firm rotation, the Audit Committee
believes that it is inappropriate to establish a fixed limit on
the tenure of the independent auditor. Continuity and the
resulting in-depth knowledge of the Company strengthens the
audit. Moreover, the mandatory partner rotation policy expressed
above, normal turnover of audit personnel, the Audit
Committees policy regarding the hiring of auditor
personnel as described below, and the Audit Committees
practices restricting non-audit engagements of the independent
auditor as described below, all mitigate against any loss of
objectivity that theoretically could arise from a long-term
relationship. As provided in the Audit Committees Charter
and as further described below, the Audit Committee continuously
evaluates the independence and effectiveness of the independent
auditor and its personnel, and the cost and quality of its audit
services. The Audit Committee will periodically consider
alternatives to ensure that the Audit Committee and the
Companys shareholders are receiving the best audit
services available.
Auditor
Independence
As noted in the Audit Committee Charter and in the Audit
Committee Report presented above, the independent auditor
reports directly to the Audit Committee and the Audit Committee
is charged with evaluating its independence.
Non-Audit
Engagement Pre-Approval Policy
To help ensure independence of the independent auditor, the
Audit Committee has established a policy whereby all non-audit
engagements of the independent auditor must be approved in
advance by the Audit Committee or its Chairman, has set forth
limitations codifying its bias against such engagements, and has
adopted a guideline that, absent special circumstances, the
aggregate cost of non-audit engagements in a year should not
exceed the audit fees for that year. As noted below in the
report on independent auditor fees, such non-audit engagements
were approximately 5.9% of audit fees in 2009. All of the
Audit-Related Fees, Tax Fees and All Other Fees disclosed below
were approved by the Audit Committee.
Hiring
Policy Auditor Employees
In addition, the Audit Committee has established a policy
whereby no former employee of the independent auditor may be
elected or appointed an officer of the Company earlier than two
years after termination of the engagement or employment.
Fees
Paid to the Independent Auditor
Audit Fees. PricewaterhouseCoopers LLP billed
Praxair, Inc. and its affiliates an aggregate amount of
$6,302,000 and $6,291,000 for professional services rendered in
2009 and 2008, respectively, for the audit of Praxairs
annual financial statements, the reviews of the financial
statements included in Praxairs reports on
Form 10-Q,
the opinion regarding the Companys internal controls over
financial
17
reporting as required by § 404 of the Sarbanes-Oxley
Act of 2002, and services that are normally provided by the
independent auditor in connection with statutory and regulatory
filings or engagements for those fiscal years.
Audit-Related Fees. PricewaterhouseCoopers LLP
billed Praxair, Inc. and its affiliates an aggregate amount of
$116,000 and $16,000 for assurance and related services rendered
in 2009 and 2008, respectively, that are reasonably related to
the performance of the audit or review of Praxairs
financial statements other than the fees disclosed in the
foregoing paragraph. These fees related primarily to due
diligence services and certifications required by customers and
others.
Tax Fees. PricewaterhouseCoopers LLP billed Praxair,
Inc. and its affiliates an aggregate amount of $209,000 and
$87,000 for professional services rendered in 2009 and 2008,
respectively, for tax compliance and tax preparation, including
preparation of original and amended tax returns, and claims for
refunds.
All Other Fees. PricewaterhouseCoopers LLP billed
Praxair, Inc. and its affiliates an aggregate amount of $47,000
and $27,000 for products and services rendered in 2009 and 2008,
respectively, other than those reported in the foregoing
paragraphs. These services related primarily to consulting and
advice in regard to local country issues for
non-U.S. subsidiaries.
The
Compensation & Management Development
Committee
Executive
Compensation
Praxairs Compensation & Management Development
Committee of the Board (the Compensation Committee)
consists of four non-management directors appointed by the Board
who meet the independence requirements of the NYSE and the
Boards standards for director independence as set forth at
Appendix 2 of this Proxy Statement. Among other duties, the
Compensation Committee is responsible for considering and
determining executive compensation. Consideration and
determination of directors compensation is the
responsibility of the Governance & Nominating
Committee of the Board.
Committee Charter and Responsibilities: As set forth
in the Compensation Committees charter, with respect to
the compensation of the executive officers reported in this
Proxy Statement, the Compensation Committee has the authority to:
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determine the policies relating to the executive officers;
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determine and authorize the salaries, performance-based variable
compensation, long term incentive awards, terms of employment,
retirement or severance, benefits, and perquisites of the
executive officers; and
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review and approve corporate goals and objectives relevant to
the CEOs compensation, evaluate the CEOs performance
in light of those goals and objectives and set the CEOs
compensation level based on this evaluation.
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Delegation and CEO Involvement: The Compensation
Committee may not delegate any of the foregoing authority to any
other persons. With respect to the allocation of compensation
and awards to employees other than the executive officers, the
Compensation Committee may, and has, delegated authority to the
CEO, subject to guidelines established by the Compensation
Committee. The CEO does not determine the compensation of any of
the executive officers but he does offer for the Compensation
Committees consideration his views on relevant matters as
described in more detail in this Proxy Statement in the section
captioned Compensation Discussion and Analysis.
18
Committee Process for Executive Compensation: With
regard to executive compensation, the Compensation Committee
generally follows the following schedule and process in its
annual cycle of meetings:
Review trends in executive compensation and the
competitiveness of the Companys executive compensation
program as presented by the Compensation Committees
consultant.
Review the Companys incentive programs with
respect to excessive risk-taking.
Approve the management performance-based variable
compensation plans for the following plan year including
establishment of financial and non-financial goals and payout
formulas based on levels of performance against those goals.
Evaluate executive officers aggregate
compensation using a tally sheet approach.
Determine for each executive officer the following
elements of
his/her
direct compensation for the upcoming calendar year:
(1) salary adjustment (typically effective on April 1),
(2) target performance-based variable compensation (percent
of salary) and (3) value and form of long term incentive
awards.
Determine performance-based variable compensation
earned for the previous plan year based on an evaluation of
Company performance against the goals previously established by
the Compensation Committee and, and for each executive officer,
an evaluation of individual performance.
Determine shares earned upon vesting or maturing of
outstanding performance equity awards based on an evaluation of
Company performance against goals previously established by the
Compensation Committee.
Determine terms and conditions, including
performance conditions as applicable, of long term incentive
awards including calculation of the number of equity units to be
awarded based on the dollar value to be delivered as established
in December.
Review perquisites and personal benefits available
to executive officers.
Review executive officer stock transactions and
compliance with stock ownership guidelines.
Review proposed proxy statement disclosures with
respect to executive compensation.
Compensation Consultant: The Compensation Committee
engages a third-party compensation consultant to assist it in
such analysis as is necessary to inform and support the
Compensation Committees decisions on executive
compensation. For its consideration of 2009 executive
compensation, the Compensation Committee engaged Deloitte
Consulting. The purpose of the engagement was to provide to the
Compensation Committee data, analysis and advice with regard to
executive compensation. The scope of the consultants work
is described in this Proxy Statement in the section captioned
Compensation Discussion and Analysis. During 2009,
the Governance & Nominating Committee engaged Deloitte
Consulting to provide to that Committee data, analysis and
advice with regard to director compensation. The scope of the
consultants work is described in this Proxy Statement in
the section captioned Director Compensation
Changes for 2010.
During 2009, the Company engaged U.S. affiliates of
Deloitte Consulting, primarily related to providing expatriate
income tax preparation. The Audit Committee was notified of
these engagements, for which pre-approval by the Board or any of
its committees was not required. The aggregate fees paid to
Deloitte Consulting for its 2009 services to Board Committees in
respect to executive and director compensation
19
was $236,370. The aggregate fees paid to U.S. affiliates of
Deloitte Consulting for expatriate income tax preparation and
certain other consulting services performed in 2009 was
approximately $330,000.
The Compensation Committee has reviewed the level of fees paid
to Deloitte for non-executive and director compensation services
and concluded that the additional services provided by Deloitte
and its U.S. affiliates did not impair Deloitte
Consultings ability to provide independent and objective
advice to the Compensation Committee.
The
Governance & Nominating Committee
The Governance & Nominating Committee is comprised of
five non-management directors who meet the independence
requirements of the NYSE and the Boards standards for
director independence set forth in Appendix 2 to this Proxy
Statement. Among other duties, the Governance &
Nominating Committee has responsibility for the director
nomination process.
Director
Nominations
The Governance & Nominating Committee will consider
any candidate for election to the Board who is timely
recommended by a shareholder. Recommendations should be sent to
the Corporate Secretary of Praxair and should include the
candidates name and qualifications and a statement from
the candidate that he or she consents to being named in the
proxy statement and will serve as a director if elected. In
order for any candidate to be considered by the
Governance & Nominating Committee and, if nominated,
to be included in the proxy statement, such recommendations must
be received by the Corporate Secretary on or before the date
specified on page 63 of this Proxy Statement under the
caption Shareholder Proposals for the 2011 Annual
Meeting.
In addition to considering any shareholder-recommended
candidates for election as directors, prior to each annual
meeting of shareholders, the Governance & Nominating
Committee considers each of the incumbent directors for
nomination for reelection to the Board, unless an incumbent does
not wish to be reelected or will be retiring from the Board
under the Boards retirement policy.
Director &
Nominee Selection Criteria
The qualities and skills sought in director nominees are
governed by the projected needs of the Board at the time the
Governance & Nominating Committee considers adding a
new director or re-nominating incumbent directors. Consistent
with the Boards Corporate Governance Guidelines (attached
as Appendix 1 to this Proxy Statement), the Committee seeks
to build and maintain a Board that contains a range of
experiences, competencies, and perspectives that is well-suited
for advice and counsel to, and oversight of, the Companys
business and operations. In doing so, the Committee takes into
account a variety of factors, including:
(1) the Companys strategies and its market,
geographic and regulatory environments, both current and
projected,
(2) the mix of experiences, competencies, and perspectives
(including gender, ethnic and cultural diversity) currently
represented on the Board,
(3) the results of the Boards annual self-assessment
process,
(4) the CEOs views as to areas in which management
would like to have additional advice and counsel from the
Board, and
(5) with respect to the incumbent directors, meeting
attendance, participation and contribution, and the
directors current independence status.
The Committee also seeks in each director candidate a breadth of
experience and background that (a) will allow the director
to contribute to the full range of issues confronting a global
industrial company and
20
(b) will qualify the director to serve on, and contribute
to, any of the Boards standing committees, thus
facilitating the Boards committee rotation policy.
In addition, the Governance & Nominating Committee
believes that every director nominee should demonstrate a strong
record of integrity and ethical conduct, an absence of conflicts
that might interfere with the exercise of his or her independent
judgment, and a willingness and ability to represent all
shareholders of the Company.
Additional information about the specific skills, qualifications
and backgrounds of each of the present director nominees may be
found at page 22 of this Proxy Statement under the under
caption The Board of Directors.
New
Director Selection Process
When the need to recruit a director arises, the
Governance & Nominating Committee will consult the
other directors, the CEO and, on occasion, third party
recruiting firms to identify potential candidates. The candidate
evaluation process may include inquiries as to the
candidates reputation and background, examination of the
candidates experiences and skills in relation to the
Boards needs at the time, consideration of the
candidates independence as measured by the Boards
independence standards, and other considerations that the
Governance & Nominating Committee deems appropriate at
the time. Prior to formal consideration by the
Governance & Nominating Committee, any candidate who
passes such screening is interviewed by the
Governance & Nominating Committee (or the
Governance & Nominating Committee Chairman) and by the
CEO.
21
The
Board of Directors
The following pages present information about the persons who
comprise Praxairs Board of Directors, all of whom have
been nominated for reelection to serve until the 2011 annual
meeting and until their successors are elected and qualify.
During 2009, the Board held eight meetings.
Director
Attendance
During 2009, the nominees for reelection to the Board
collectively attended 97% of all Board meetings and meetings of
committees of which he or she is a member, and no nominee
attended fewer than 93% of such meetings.
The
Directors and Nominees
The Governance & Nominating Committee recommended to
the Board, and the Board approved, the nomination for reelection
of each incumbent director, except for Mr. Watson who
retired from the Board as of March 15, 2010.
Each of the director nominees listed below has experience as a
senior executive of a U.S. public company. Each nominee
also has served as a director of one or more U.S. public
companies and on a variety of board committees. As such, each
has executive management and director oversight experience in
most, if not all, of the following areas which are critical to
the conduct of the Companys business: strategy development
and implementation, risk assessment and management, financial
accounting and reporting, internal controls, corporate finance,
capital project evaluation, the evaluation, compensation,
motivation and retention of senior executive talent, public
policies as they affect global industrial corporations,
compliance, corporate governance, productivity management,
safety management, project management, and, in most cases,
global operations. Many of the nominees also bring particular
insights into specific end-markets that are important to the
Company. These nominees collectively provide a range of
perspectives, experiences and competencies well-suited to
providing advice and counsel to management and to overseeing the
Companys business and operations. A description of the
Governance & Nominating Committees process and
criteria for nominating director candidates may be found at
page 20 of this Proxy Statement under the caption
Director & Nominee Selection Criteria.
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STEPHEN F. ANGEL
Director Since 2006
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Age 54
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Chief Executive Officer of Praxair, Inc. since January 1, 2007,
and Chairman since May 1, 2007. Before becoming the Chief
Executive Officer, Mr. Angel served as President & Chief
Operating Officer from March to December 2006, and as Executive
Vice President from 2001 to 2006. Prior to joining Praxair in
2001, Mr. Angel was General Manager for the General Electric
Company Industrial Systems Power Equipment business from 1999 to
2001, and was General Manager, Marketing and Sales, for
GEs Transportation Systems business from 1996 to 1999.
Mr. Angel is a member of the Board of the U.S.-China Business
Council and a member of the U.S.-Brazil CEO Forum, a member of
the Board of the Business Roundtable, and a member of the Board
of Directors of the American Chemistry Council.
As the Chief Executive Officer of the Company and a former
senior operating executive at GE, a diversified manufacturing
company, Mr. Angel brings the senior executive experience and
skills cited above. He also has a deep insight into the
industrial gases industry and the needs, challenges and global
opportunities of the Company in particular.
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22
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NANCE K. DICCIANI
Director Since 2008
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Age 62
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Former President & Chief Executive Officer of Honeywell
Specialty Materials, a strategic business group of Honeywell
International, Inc., from 2001 until her retirement in 2008.
Dr. Dicciani joined Honeywell from Rohm and Haas Company
where she was Senior Vice President and Business Group Executive
of Chemical Specialties and Director of the European Region,
responsible for business strategy and worldwide operations of
five business units and for the companys operations and
infrastructure in Europe, the Middle East and Africa.
Previously, she served as Rohm and Haas Vice President and
General Manager of the Petroleum Chemicals division and headed
the companys worldwide Monomers business.
In 2006, President George W. Bush appointed Dr. Dicciani to
the Presidents Council of Advisors on Science and
Technology. She has served on the Board of Directors and
Executive Committee of the American Chemistry Council and has
chaired its Research Committee. She also serves on the Board of
Directors of Halliburton Company (where she serves on the Audit
and Health, Safety and Environment committees), and Rockwood
Holdings, Inc. (where she is the Lead Director and serves on the
Audit Committee, the Compensation Committee and is the Chairman
of the Corporate Governance and Nominating Committee) and on the
Board of Trustees of Villanova University. Dr. Dicciani is
an Operating Partner of Advent International, a private equity
firm.
As a former senior operating executive at Honeywell, a global
industrial and consumer products manufacturing company, and at
Rohm and Haas, a global chemicals company, Dr. Dicciani
brings the senior executive experience and skills noted above.
She also has a substantial understanding of technology policy,
management and markets.
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EDWARD G. GALANTE
Director Since 2007
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Age 59
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Former Senior Vice President and a member of the Management
Committee of ExxonMobil Corporation from 2001 until his
retirement in 2006. His principal responsibilities included the
worldwide downstream business Refining &
Supply, Fuels Marketing, Lubricants and Specialties, and
Research and Engineering. Immediately prior to this, Mr. Galante
was Executive Vice President of ExxonMobil Chemical Company.
Mr. Galante is a director of Foster Wheeler Ltd. (where he
serves on the Audit Committee and the Governance and Nominating
Committee). He also serves on the Boards of Junior Achievement
Worldwide, the United Way Foundation of Metropolitan Dallas, and
as a Trustee of Northeastern University. He also is an Executive
in Residence in Northeasterns College of Business
Administration.
As a former senior operating executive at ExxonMobil, one of the
largest global energy companies, Mr. Galante brings the senior
executive experience and skills described above. He also has an
in-depth understanding of engineering management and of
worldwide energy markets, operations and technology.
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23
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CLAIRE W. GARGALLI
Director Since 1992
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Age 67
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Former Vice Chairman, Diversified Search Companies (executive
search consultants) from 1990 to 1998. Ms. Gargalli was the
Chairman and Chief Executive Officer of Equibank, and Chairman
of Liberty Bank, in each case from 1984-1990. Ms. Gargalli has
been Praxairs Executive Session Presiding Director since
January 1, 2008.
Ms. Gargalli is a director of Baker Hughes, Inc. (where she
serves on the Finance Committee and the Compensation Committee)
and Virginia National Bank. She is also a trustee emeritus of
both Carnegie Mellon University and Middlebury College. During
the past five years Ms. Gargalli was also a director of
Intermec, Inc. and UNOVA, Inc. (where she served on the Audit
Committee). She also has served on the Audit Committee of
Western Atlas, Inc.
As a former Chief Executive Officer of a banking company, Ms.
Gargalli brings the senior executive experience and skills cited
above. By reason of her additional experience in the executive
search industry, she also has an enhanced perspective on the
evaluation, compensation, motivation and retention of senior
executive talent.
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IRA D. HALL
Director Since 2004
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Age 65
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Former President & Chief Executive Officer of Utendahl
Capital Management, L.P. (an asset management company) from 2002
through 2004. From 1999 to 2001, Mr. Hall served as Treasurer of
Texaco Inc., and from 1998 to 1999, he was General Manager,
Alliance Management of Texaco Inc. Prior to joining Texaco, Mr.
Hall held several positions with International Business
Machines.
Mr. Hall is the past chairman of the board of the Executive
Leadership Council. He also serves on the Deans Advisory
Council of the Stanford Graduate School of Business, is a
trustee emeritus of Stanford University, and is a board member
and Treasurer of the Jackie Robinson Foundation. During the
past five years he was also a director of The Pepsi Bottling
Group Inc., The Reynolds & Reynolds Company and Imagistics
International, Inc. (where he served on the Audit Committee of
each company and was Chairman of the Compensation Committee of
The Pepsi Bottling Group, Inc.), and Ameriprise Financial
Inc.
As a former Chief Executive Officer of an asset management
company and a former senior finance executive at Texaco, a large
energy company, Mr. Hall brings the senior executive experience
and skills noted above. He also has a substantial understanding
of capital markets, asset management, and pension fund
matters.
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24
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RAYMOND W. LEBOEUF
Director Since 1997
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Age 63
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Former Chairman & Chief Executive Officer of PPG
Industries, Inc. (a diversified manufacturer of coatings, glass
and chemicals) from 1997 to 2005. From 1995 to 1997, Mr. LeBoeuf
served as President & Chief Operating Officer of PPG
Industries, Inc. and was elected a director in 1995. From
1988-1994, he was the Chief Financial Officer of PPG.
Mr. LeBoeuf is a director of MassMutual Financial Group (where
he serves on the Audit Committee, the Human Resources Committee
and the Operations Committee). During the past five years he
was a director of ITT Industries, Inc. (where he served on the
Audit Committee), a member of the Business Roundtable, and a
trustee of Robert Morris University.
As a former Chief Executive Officer and Chief Financial Officer
of PPG Industries, a global diversified manufacturing company,
Mr. LeBoeuf brings the senior executive experience and skills
described above. He also has an in-depth understanding of
corporate and international finance, financial reporting and
internal controls.
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LARRY D. MCVAY
Director Since 2008
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Age 62
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Principal of Edgewater Energy Partners, LLC, an energy industry
consulting and investment firm. Mr. McVay served as the Chief
Operating Officer of TNK-BP Holding from 2003 until his
retirement in 2006. TNK-BP Holding, based in Moscow, Russia, is
a vertically integrated oil company 50%-owned by BP PLC. Mr.
McVays responsibilities at TNK-BP included executive
leadership for the upstream, downstream, oil field services,
technology and supply chain management. He previously served as
Technology Vice President - Operations and Vice President of
Health Safety Environment for BPs Exploration and
Production operations from 2000 to 2003. Prior to joining BP,
Mr. McVay held numerous positions at Amoco, including
engineering management and senior operating leadership
positions.
Mr. McVay is a director of Callon Petroleum Company (where he
serves on the Audit Committee, the Compensation Committee and
the Strategic Planning Committee) and Chicago Bridge & Iron
Company (where he serves on the Audit Committee, the Corporate
Governance Committee, and the Strategic Initiatives Committee).
He is also a member of the Deans Council of Texas Tech
Universitys Engineering School.
As a former senior operating executive at BP, one of the largest
global energy companies, Mr. McVay brings the senior executive
experience and skills cited above, and has an in-depth
understanding of engineering management and of worldwide energy
markets, operations and technology. He also has practical
experience in operating in Russia and the Middle East.
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25
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WAYNE T. SMITH
Director Since 2001
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Age 64
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Chairman, President & Chief Executive Officer of Community
Health Systems, Inc. (a hospital and healthcare services
company) since 2001. In 1997, Mr. Smith was elected President
and then Chief Executive Officer and a director of Community
Health Systems, Inc. Prior to joining Community Health Systems,
he served as Chief Operating Officer, President, and a director
of Humana Inc.
Mr. Smith is a director of Citadel Broadcasting Corporation
(where he serves on the Audit Committee and the Compensation
Committee) and a trustee, and past Chairman of, the Federation
of American Hospitals.
As the Chief Executive Officer of Community Health Systems, a
large healthcare services company, Mr. Smith brings the senior
executive experience and skills described above. He also has an
in-depth understanding of the health care business and the
regulatory, compliance and business environment in which it
operates.
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ROBERT L.WOOD
Director Since 2004
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Age 55
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Former Chairman, President & Chief Executive Officer of
Chemtura Corporation (a specialty chemicals company) from 2004
to 2008. Prior to joining Chemtura, Mr. Wood served in various
senior management positions at Dow Chemical Company, most
recently as business group president for Thermosets and Dow
Automotive from November 2000.
Mr. Wood is also a director of Jarden Corporation (where he
serves on the Audit Committee and is the Chairman of the
Executive Compensation Committee), and has served as chairman of
the American Plastics Council. During the past five years, he
was also a director of the American Chemistry Council.
As a former Chief Executive Officer of Chemtura Corporation, a
global specialty chemicals company, and a former senior
operating executive of Dow, a global chemicals company, Mr. Wood
brings the senior executive experience and skills noted above.
He also has a deep understanding of the specific challenges and
opportunities facing a global basic materials company.
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26
Executive
Officers
The following Executive Officers have been elected by the Board
of Directors and serve at the pleasure of the Board. It is
expected that the Board will elect officers annually following
each annual meeting of shareholders.
Stephen F. Angel, 54, See description under The Board of
Directors.
James T. Breedlove, 62, is Senior Vice President, General
Counsel and Secretary of Praxair, Inc. and served as Vice
President, General Counsel and Secretary from 2004 to 2006.
Prior to joining Praxair in 2004, Mr. Breedlove was Senior
Vice President and General Counsel at GE Equipment Services from
2002, and from 1992 to 2002 he served as a Senior Vice President
of a division of General Electric Capital Corp.
Domingos H. G. Bulus, 48, is President of White Martins Gases
Industriais Ltda. (White Martins), Praxairs
Brazilian subsidiary, and is a Vice President of Praxair, Inc.
He served as President of Praxair Asia from 2001 to 2003.
Mr. Bulus also served as Executive Director of the Andean
Treaty region for White Martins from 1996 to 2001. He assumed
his current position in 2003.
James J. Fuchs, 57, is a Senior Vice President of Praxair, Inc.,
and served as a Vice President from 2001 to 2006. Since 2001, he
also has been President of North American Industrial Gases, and
President of Praxair Canada. Since December 2009, he has also
overseen Praxair Distribution, Inc. In 2006, Mr. Fuchs also
assumed responsibility for Praxairs Mexican operations.
Prior to these assignments, Mr. Fuchs served Praxair Asia
as its President from 1998 and as a Vice President from 1996.
Ricardo S. Malfitano, 51, is an Executive Vice President of
Praxair, Inc., overseeing Praxairs South America and Asia
regions, the electronics and healthcare businesses, global
supply systems, global procurement, global operations
excellence, safety and environmental compliance and global
sustainability. Mr. Malfitano served as a Senior Vice
President of Praxair from 2003 to 2006 and was President of
White Martins, and President, Praxair South America from 2001 to
2003. He served as President, North American Industrial Gases
and President of Praxair Canada from 1998 to 2001.
Eduardo Menezes, 46, is a Vice President of Praxair, Inc. and
President of Praxair Europe. He served as Managing Director of
Praxairs business in Mexico from 2004 to 2007, as Vice
President and General Manager for Praxair Distribution, Inc.
from 2003 to 2004 and as Vice President, U.S. West Region,
for North American Industrial Gases, from 2000 to 2003. He
assumed his current positions in 2007.
George P. Ristevski, 50, is a Vice President of Praxair, Inc.
and President of Praxair Distribution, Inc. From 2002 to 2007 he
was President of Praxair Healthcare Services, Inc. and from 2000
to 2002, he was Vice President and Controller for Praxair, Inc.
James S. Sawyer, 53, is an Executive Vice President and the
Chief Financial Officer of Praxair, Inc. and oversees the
surface technologies business. From 2003 to 2006, he served as a
Senior Vice President and the Chief Financial Officer.
Mr. Sawyer was designated the Companys Chief
Financial Officer in 2000.
Matthew J. White, 37, has been Vice President and Controller of
Praxair, Inc. since August 2008. Before that, he was the Finance
Director of Praxairs North American Industrial Gases
Division since 2004. From 2000 to 2004, he held various
financial and accounting positions at Gentek, Inc., a
diversified chemical, automotive and telecommunications holding
company, including Group Controller of its Performance Products
division. In 2004, Mr. White also served as Vice President
of Finance at Fisher Scientific, a scientific and laboratory
instruments distributor. He is a certified public accountant and
a chartered financial analyst.
27
Executive
Compensation
Compensation
Committee Report
The Compensation & Management Development Committee
(the Compensation Committee) reviewed and discussed
with management the Compensation Discussion and
Analysis below and recommended to the Board that it be
included in this Proxy Statement. The Compensation Committee has
represented to management that, to the extent that the
Compensation Discussion and Analysis discloses the
Compensation Committees deliberations and thinking in
making executive compensation policies and decisions, it is
accurate and materially complete.
The Compensation & Management Development
Committee
Wayne T. Smith, Chairman
Nance K. Dicciani
Edward G. Galante
Robert L. Wood
Compensation
Discussion and Analysis
This Compensation Discussion and Analysis
(CD&A) provides context for the policies and
decisions underlying the compensation reported in the executive
compensation tables included in this Proxy Statement for the
Companys Chief Executive Officer (CEO), Chief
Financial Officer (CFO) and the three other
executive officers who had the highest total compensation for
2009, as set forth in the Summary Compensation Table
below (these five executive officers are collectively referred
to as the Named Executive Officers or the
NEOs). The Compensation Committee of the
Companys Board of Directors is responsible for policies
and decisions regarding the compensation and benefits for NEOs.
A detailed description of the Compensation Committees
responsibilities and processes is set forth under the heading
The Compensation & Management Development
Committee on pages 18 to 20 of this Proxy Statement.
Certain facts described in this CD&A reflect Compensation
Committee deliberations in private session, which the
Compensation Committee has advised management are accurate and
materially complete.
Praxairs
Executive Compensation Objectives and Approach
The Compensation Committee has established the following
objectives for Praxairs executive compensation program:
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attract and retain executive talent;
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build and support a performance-driven culture and motivate
executives to deliver strong business results; and
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align executives with shareholder expectations by closely
linking total compensation with
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short term business performance, and
longer term shareholder value creation.
The Compensation Committee seeks to achieve these objectives by
providing a competitive total compensation package designed to
attract and retain high-performing, results-oriented executives.
The compensation package includes (1) direct compensation
of base salary, annual performance-based variable compensation
and long term incentives, (2) certain retirement and other
benefits generally available to other employees,
(3) severance benefits, and (4) a limited value of
perquisites. The Compensation Committee uses as a guide the
median value of total direct compensation of the benchmarking
market data discussed below. Total direct compensation actually
earned, and the actual proportion of each direct compensation
element to the total, may be more or less than the targeted
28
amounts depending upon the Companys business and stock
price performance and other factors discussed below.
A competitive base salary and variable compensation opportunity,
along with retirement and other benefits, serve to attract and
retain executive talent. Because at least 75% of NEOs
target total direct compensation opportunity for 2009 is in the
form of performance-based variable compensation and long-term
incentives, executives are also motivated to deliver strong
business performance and create shareholder value. These
compensation elements are at risk and are dependent
upon the Companys achieving financial and other business
goals set by the Compensation Committee and, for long term
incentives, the Companys stock price performance.
Executive severance arrangements in the event of a
change-in-control
of the Company provide a retention incentive and encourage
continuity of management.
In order to further align shareholder and executives
interests, the Compensation Committee has established stock
ownership guidelines for NEOs (see disclosure on details of
these guidelines in the Corporate Governance and Board Practices
section of this Proxy Statement under the caption
Executive Stock Ownership Guidelines). NEOs may meet
these guidelines by acquiring Company stock or stock-equivalent
units through long term incentive grants, as well as through the
Companys Compensation Deferral Program, 401(k) savings
plan, Dividend Reinvestment and Stock Purchase Plan and through
other personal investments.
The Compensation Committee considers whether the Companys
compensation policies and practices create incentives for
risk-taking that could have a material adverse effect on the
Company. In December 2009, the Compensation Committee conducted
a review of the Companys incentive compensation programs
applicable to all employees, including executive officers, in
order to evaluate whether they encourage excessive risk-taking
through either the design of the executive and management
incentive programs, or operational decision-making that could
affect compensation payouts. The Compensation Committee
determined that (1) there exist sufficient operational
controls, checks and balances that prevent or constrain
compensation-driven decision-making that is inappropriate or
excessively risky including, among others, frequent risk
discussions with the Board, particularly in connection with
capital project or acquisition proposals, (2) the Company
does not use highly leveraged short term incentives that would
tend to drive high risk decisions for short term, unsustainable
gain, and (3) the Companys stock ownership guidelines
and the recapture policy described below also serve
as disincentives for unacceptable risk-taking. Based upon this
review, the Compensation Committee concluded that the
Companys incentive compensation programs are designed
appropriately to provide reasonable assurance that they do not
encourage excessive risk-taking.
Key
Executive Compensation Factors and Considerations
The key factors that the Compensation Committee considers in
determining NEO compensation are summarized below, followed by a
discussion and analysis of the individual elements of NEO
compensation. As described below, the determination of annual
performance-based variable compensation for 2009 was made in
part by use of a formula that measured Company financial
performance achieved against selected and pre-set financial
measures. Except for this formula, individual compensation
decisions in 2009 required considerable judgment and the
balancing of subjective considerations such as those listed in
this section.
Compensation
Consultant Analysis and Advice
The Compensation Committee engages an executive compensation
consultant to provide data, analysis and advice. During 2009,
the Compensation Committee engaged Deloitte Consulting. The
scope of Deloitte Consultings engagement included advice
on the determination of NEO compensation, preparation and
presentation to the Compensation Committee of reports on
executive compensation trends and various other materials
related, for example, to the design of performance-based
variable compensation programs, long term incentive program
design changes, and review of plan documents.
29
In December 2008, Deloitte Consulting analyzed the compensation
benchmarking study performed by management, reviewed other
independent compensation data and gave advice on competitive
compensation for the Companys executive officers. In
advance of applicable Compensation Committee meetings, the CEO
and certain management personnel discussed the consultants
analysis and the data to be presented at the meeting, and the
CEO solicited the consultants views on his proposed
recommendations for executive officer compensation (other than
his own). In its deliberations, including in private sessions
with the consultant, the Compensation Committee requested the
consultants view of the CEOs recommendations, as
well as input on the CEOs compensation.
Benchmarking
The Compensation Committee uses benchmark market data to help
determine the appropriate amount of total direct compensation
opportunity for each NEO and the elements of each NEOs
direct compensation.
Selection of Benchmark Companies. For determinations
of compensation for 2009, the Compensation Committee utilized
benchmark companies selected with advice of its compensation
consultant. The benchmark companies comprised a Key Company
Group and a Practices Tracking Group. The Key
Company Group peers were selected with reference to the
following financial measures: Market Capitalization, Revenue and
Net Income and are generally similar in size to the Company in
one or more of these measures. The Compensation Committee used
the Key Company Group to assess competitive market
compensation levels for NEO positions. For 2009, the
21 companies identified below were included in the Key
Company Group:
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Air Products and Chemicals
Applied Materials
Baker Hughes
Baxter International
Chesapeake Energy Corp
Covidien
CSX Corp
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Duke Energy
DuPont
EMC
General Mills
Illinois Tool Works
Ingersoll Rand
International Paper
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Kellogg
Kimberly Clark
Monsanto
Norfolk Southern
PPG Industries
Schering Plough Corp
US Steel
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The Compensation Committee also consulted market data from a
broader Key Industry Group, comprised of companies
included in a broad spectrum of manufacturing industries, in
order to ensure that market data from the Key Company Group
was not impacted by any unusual or short-term factors.
The Practices Tracking Group consists of companies that
are in the same industry as the Company
and/or are
considered to be companies that our executives may consider for
employment if they were to leave the Company. The Practices
Tracking Group was used for an evaluation of executive
compensation practices in the chemicals industry such as: forms
of equity awards, stock ownership guidelines, perquisites and
personal benefits, and retirement and other termination
arrangements. For 2009 decisions, the Compensation
Committees pay practices evaluation used a Practices
Tracking Group comprised of the following companies: Air
Products and Chemicals, Ashland, Celanese Corp, Chemtura
Corporation, Dow Chemical, DuPont, Eastman Chemical, Huntsman
Corp, Lubrizol, Monsanto and PPG Industries.
Application of Benchmark Data. For target total
direct compensation opportunity, the Compensation Committee
examined the median and the 75th percentiles of benchmark
company data for each NEOs position. When possible, data
provided to the Compensation Committee was adjusted based on
regression analysis to account for the differing scope of
operations of comparator companies. Although the Compensation
Committee uses the median as a guide for determining
compensation levels, actual values set for any individual NEO
may, from time to time, deviate from the median (a) to
account for experience in the position, (b) because of
year-to-year
swings in market median data, (c) so as to maintain the
desired internal equity among executive positions, and
(d) to balance the mix of compensation elements deemed
appropriate for each NEO. The value of total direct compensation
opportunity targeted for each NEO in 2009 approximated the
median of the Key Company and Key Industry groups
as determined by the benchmarking process.
30
Recommendations
of the Chief Executive Officer
The CEO does not determine the compensation of any of the
executive officers, but he provides input to the Compensation
Committee on such matters as:
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salary adjustments, target (percent of salary) performance-based
variable compensation and the value of long term incentive
awards for individual executive officers (other than himself)
based on analysis of the market benchmark data.
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the form of long term incentive awards most appropriate to drive
sustainable shareholder value creation while also providing
appropriate retention incentive for NEOs.
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the companies against which it is appropriate to benchmark the
Companys executive compensation.
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the financial and non-financial performance metrics to be used
in the Companys incentive program.
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Evaluation
of Aggregate Compensation
Total Compensation and Benefits. The Compensation
Committee considers whether the value of each NEOs
aggregate compensation package, in which all components of his
direct compensation and benefits are viewed together using a
tally sheet format, is consistent with the
Compensation Committees executive compensation objectives.
In December 2008, the Compensation Committee performed this
review and determined that the total compensation opportunity
granted to each NEO in 2008 was consistent with its executive
compensation objectives and that no structural adjustments
should be made to any component of the 2009 total compensation
opportunity.
Termination Benefits. The Compensation Committee
also considers the total payments and benefits that could be
received by each NEO under various employment termination
events, including retirement, voluntary resignation, and
termination by the Company, including following a
change-in-control
of the Company. The Compensation Committee conducted this review
in October 2008 and approved revised executive severance
compensation agreements effective January 1, 2009 that
reduced certain termination benefits available to NEOs when
compared to those available under the then existing agreements.
The revised agreements also required a nondisclosure,
nonsolicitation and noncompetition agreement be executed in
favor of the Company and included changes in order to comply
with the requirements of Section 409A of the Internal
Revenue Code. The terms of the revised executive severance
compensation agreements are discussed below in the subsection
titled
Change-in-Control
Arrangements and in the section titled Potential
Payments upon Termination or
Change-in-Control.
Other
Considerations
Tax and Accounting. Under Internal Revenue Code
Section 162(m), the Company may not take a tax deduction
for compensation paid to any NEO (other than the Companys
CFO) that exceeds $1 million in any year unless the
compensation is performance-based. While the
Compensation Committee endeavors to structure compensation
(including performance-based variable compensation as discussed
below) so that the Company may take a tax deduction, it does not
have a policy requiring that all compensation must be deductible
and it may, from time to time, authorize compensation that is
not tax deductible. Accounting treatments were reviewed but did
not impact the selection and design of equity and equity-related
compensation for 2009, although all such grants were made in a
manner as to not require
mark-to-market
accounting treatment.
Analysis of the Use of Long Term Incentives. The
Compensation Committee reviewed 2009 stock transactions by
executive officers and their year-end holdings so as to monitor
the executives use of long term incentives. The review
included ensuring executives were within stock ownership
guidelines, examining transactions for hedges or other
risk-management techniques applied to stock-based incentives,
and inspection for improper dispositions back to the Company or
other self-dealing. Based on this review, the Compensation
Committee determined that the long term incentives previously
granted to NEOs continue to be used appropriately.
31
Elements
of Direct Compensation for Executive Officers
The methods by which the amounts of 2009 direct compensation for
NEOs were determined and the reasons therefor are described in
the following sections for each element of direct compensation.
Salary
The salary level for each NEO is established by the Compensation
Committee from its consideration of the benchmark data for
equivalent positions in the Key Company Group and is
typically effective April 1 of each year. The Compensation
Committee also considered the impact of the global economic
downturn and resulting cost reduction actions taken by the
Company in late 2008. To demonstrate alignment of executive
compensation with the Companys cost reduction actions, the
CEO recommended, and the Compensation Committee determined, that
NEOs and other key employees would receive no base salary merit
increases in 2009. The salaries reported in the Summary
Compensation Table reflect actual cash paid for each
calendar year.
Annual
Performance-Based Variable Compensation
The performance-based variable compensation reported for each
NEO (in the column of the Summary Compensation Table
captioned Non-Equity Incentive Plan Compensation)
represents that earned for 2009 performance. Below is a
description of how the Compensation Committee determined the
2009 annual performance-based variable compensation earned by
each NEO under the Companys Variable Compensation Plan.
The Company uses comparable criteria to determine
performance-based variable compensation awarded to all eligible
employees.
Target Performance-Based Variable Compensation
Level. The target performance-based variable
compensation level for 2009 for each NEO (meaning the amount of
variable compensation, expressed as a percent of salary, that
would be earned for 100% achievement of the financial
performance mid-point goals) was established by the Compensation
Committee in January 2009 and ranged from 75% to 120% of salary.
The target for each NEO was established by the Compensation
Committee primarily from its consideration of the benchmark data
for equivalent positions in the Key Company Group (with
secondary reference to the Key Industry Group, as
described above).
Establishment of Financial Measures. In January
2009, the Compensation Committee selected three financial
measures that it determined were appropriate to meet the
compensation objectives of driving desired short term business
performance for the 2009 plan year and increasing total
shareholder return. These financial measures were the
Companys corporate consolidated results with respect to
(1) sales revenue (2) net income, and (3) working
capital as a percent of sales (defined as trade receivables,
inventory and payables, excluding non-operating items such as
deferred taxes and pensions), with each measure weighted
equally. Sales revenue and net income are accounting items
reported in accordance with GAAP in the Companys public
financial statements except that the Compensation Committee may
approve certain adjustments to reported results based on
differences between operating plan assumptions and actual
results such as currency exchange rates and product price
changes caused only by changes in certain raw material costs.
Establishment of Financial Goals. Mid-point goals
were established for each financial measure which corresponded
to a 100% payout of the target performance-based variable
compensation. In addition, values were established for each
financial measure representing minimum and maximum rewarded
performance levels corresponding to potential payouts ranging
from zero to 200% of target. The 2009 mid-point financial goals
as set by the Compensation Committee in January 2009 are set
forth in the table below under the caption 2009 Results
and Payout Based on Performance.
The Compensation Committee designed the relationship between pay
and performance so as to ensure that performance which
significantly outperformed the target financial goals would be
rewarded with well-above target payout levels. Similarly,
performance that did not meet the goals would reduce the
performance-based variable compensation payout to as low as zero
in the case of failure to meet the
32
pre-established
minimum performance threshold. In setting the mid-point goals,
the Compensation Committee sought to establish challenging but
achievable goals that would motivate and reward the NEOs for the
delivery of strong business results without encouraging
excessive risk taking. The factors considered by the
Compensation Committee in assessing the challenge inherent in
the goals included:
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managements operating plan,
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macro-economic trends and outlooks in each of the countries in
which the Company operates,
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currency exchange trends and outlook,
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expected 2009 industrial gases industry peer performance and
that of the broader S&P 500,
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shifts in key customer markets, and
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expected contribution from contracts already awarded and
decisions or actions already made or taken.
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Non-Financial Goals. The Compensation Committee also
established non-financial goals with respect to
(1) strategic positioning of the business for long term
performance, (2) performance relative to peers,
(3) safety and environmental compliance, including
improvements in recordable injuries and lost workday rates,
(4) employee engagement and people development, including
diversity in hiring, retention and advancement, and career
development for future leadership for the Company,
(5) demonstrated organizational capabilities in
productivity and efficiency resulting from the Companys
Six Sigma and other initiatives, and (6) audit/compliance
initiatives and issues. Based on the CEOs assessment of
performance against non-financial goals, including evidence
supporting that assessment, and its assessment of the
Companys performance of these non-financial goals plus
consideration of unforeseen external factors beyond
managements control that may have helped or hindered
managements achievement of the financial goals, the
Compensation Committee may make a subjective adjustment of up to
plus or minus 35% to performance-based variable compensation
payout as determined by the performance against financial
measures.
Individual Performance. The Compensation Committee
may make a positive or negative adjustment to each NEOs
performance-based variable compensation (calculated based on the
performance against financial and non-financial goals described
above) based on the CEOs recommendations for individual
performance adjustments for NEOs other than himself, and
its evaluation of individual performance, determined with
reference to one or more of the qualitative factors described
below. For 2009, an adjustment could have been applied resulting
in a payout as low as zero or as high as 150% of the NEOs
performance-based variable compensation so calculated.
In evaluating individual performance, the Compensation Committee
considers various qualitative factors relating to each NEO,
examples of which may include:
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the NEOs performance in his principal area of
responsibility and the degree to which the Compensation
Committee wishes to drive and reward such performance;
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the Companys retention goals for the NEO;
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recognition of relative roles and responsibilities of NEOs
within the Company; and
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the NEOs exhibition of the values, competencies and
behaviors that are important to the success of the Company.
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Performance-Based Variable Compensation
Illustration. To illustrate how the Compensation
Committee made 2009 performance-based variable compensation
determinations under the Variable Compensation Plan, assume the
following hypothetical example: (1) a NEOs base
salary was $500,000 and his target performance-based variable
compensation was 75% of base salary; (2) the Company
achieved below target performance for each of the financial
measures rendering a financial payout result of
65 percentage points; (3) the Compensation Committee
determined that the Companys achievement of non-financial
goals supported a positive adjustment of 30 percentage
points; and (4) the Compensation
33
Committee made an upward adjustment of 10% to the NEOs
performance-based variable compensation based upon his
individual performance. The NEOs performance-based
variable compensation would have been $391,875, calculated as
follows: $500,000 base salary times 75% times 95% (being the
65 percentage points for financial performance plus the
30 percentage points positive adjustment for non-financial
performance) times 110% for individual performance.
Adjustments of Payouts Under Section 162(m). In
January 2009, the Compensation Committee established an upper
limit on performance-based variable compensation that could be
paid to NEOs for 2009 under the shareholder-approved
Praxair, Inc. Plan for Determining Awards under
Section 162(m) (the 162(m) Plan). For
2009, the Compensation Committee identified the participants in
the 162(m) Plan and approved the maximum performance-based
variable compensation payment that could be paid to each NEO
based on budgeted Net Income performance. At the end of the
performance period, the Compensation Committee certified the Net
Income earned and the maximum performance-based variable
compensation awards available to each NEO under the 162(m) Plan.
It then exercised its downward discretion available under the
162(m) Plan to adjust the actual payment to a level it deemed
appropriate for each NEO according to the methodology described
above.
Recapture Policy. The Compensation Committee has
adopted a policy for the recapture of annual performance-based
variable compensation payouts, equity grants and certain equity
gains in the event of a later restatement of financial results.
Specifically, if the Board, or an appropriate committee thereof,
has determined that any fraud by any elected officer of the
Company materially contributed to the Company having to restate
all or a portion of its financial statement(s), the Board or
committee shall take, in its discretion, such action as it deems
necessary to remedy the misconduct. In determining what remedies
to pursue, the Board or committee will take into account all
relevant factors, including consideration of fairness and
equity. Among those remedies, the Board or committee, to the
extent permitted by applicable law, may require reimbursement of
any performance-based cash, stock or equity-based award paid or
granted to, or gains realized (such as through the exercise of
stock options or sale of equity securities) by, any or all
elected officers of the Company, if and to the extent that:
(a) the amount of such cash, stock or equity-based award
was calculated based upon, or realized gain can reasonably be
attributed to, certain financial results that were subsequently
reduced due to a restatement, and
(b) the amount of the cash, stock or equity-based award, or
gain that would have been paid or granted or realized, would
have been lower than the amount actually paid or granted or
realized.
2009 Results and Payout Based on
Performance. Despite the difficult economic environment
in 2009, management was able to leverage cost reduction and
productivity initiatives to offset much of the impact of lower
sales, resulting in actual net income exceeding 2008 net
income. Sales were significantly below the mid-point goal,
resulting in no payout related to that measure. Net Income and
Working Capital results fell short of the mid-point goals only
marginally and therefore contributed to a partial payout of
variable compensation for these measures. The table below shows
for each financial performance measure the Companys 2008
and 2009 actual financial performance as adjusted under the
Variable Compensation Plan, and the 2009 mid-point goals set by
the Compensation Committee for a 100% payout.
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2008 Actual
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2009 Actual
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Performance
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2009 Mid-Point
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Performance
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(adjusted per Plan)
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Goals
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(adjusted per Plan)
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Financial Measure
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($ millions)
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($ millions)
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($ millions)
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Sales
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$
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10,520
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$
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9,963
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$
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9,062
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Net Income
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$
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1,198
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$
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1,275
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$
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1,228
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Working Capital as a % of sales
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12.7
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%
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12.8
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%
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13.2
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%
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The Compensation Committee engaged the Companys internal
audit department to verify that the Companys performance
against the pre-established corporate consolidated financial
measures was
34
properly determined for 2009 performance-based variable
compensation. The report of the internal auditors confirmed to
the Compensation Committee that such performance was properly
determined.
In addition to determining performance against financial
measures, the Compensation Committee determined that the
Companys performance with respect to the pre-established
non-financial goals was generally strong, and, consequently,
should be a positive factor in determining performance-based
variable compensation. For example, the Compensation Committee
noted that the Company had (i) enhanced and leveraged
productivity and efficiency programs as a result of Six Sigma
and other initiatives, (ii) begun various international
capital projects and joint ventures that would enhance the
Companys strategic position for the future,
(iii) implemented enhanced career development programs to
strengthen employee engagement and to support employment
diversity goals, including hiring, advancement and retention,
(iv) launched expanded compliance trainings and developed
new control programs, and (v) continued improvements in the
number of lost work days and recordable injuries. The
Compensation Committee applied a positive adjustment of
30 percentage points to the variable compensation payout in
recognition of the Companys performance relative to the
non-financial goals.
Positive adjustments were also made to the payouts of each NEO
based upon his individual performance, resulting in the total
performance-based variable compensation award reported in the
Summary Compensation Table. Individual positive adjustments were
based upon the Compensation Committees evaluation of NEO
performance against factors that included those listed above
under the subcaption Individual Performance.
For 2009, the Compensation Committee determined that a positive
adjustment for each NEO was supported by each NEOs
performance with respect to: (a) successfully addressing
the effects of the economic downturn by taking actions to
mitigate the negative impact the downturn could have had on his
area, and (b) positioning his area for further improvements
in productivity, employee development, compliance, and safety.
However, the Compensation Committee did not find it practical,
nor did it attempt, to assign relative weights to any individual
factors or subject them to pre-defined, rigid formulas, or set
financial or other objective goals related to personal
performance, and the importance and relevance of specific
factors varied for each NEO. In 2009, none of these factors
individually, nor any combination of them collectively, had any
material impact on the total annual compensation for any NEO;
nor was there any material variation in individual performance
adjustments among the NEOs.
Long
Term Incentive Awards
The Company provides long term incentives in order to motivate
employees and thereby enhance long term shareholder value and to
attract and retain executive talent. The long term incentive
grants reported for each NEO in the Grants of Plan-Based
Awards table below represent the stock option grants and
performance share unit awards made in February 2009.
Determining the Value to be Delivered. The 2009
target dollar value of long term incentive awards for each NEO
was established by the Compensation Committee in December 2008
primarily from its consideration of the benchmark data for
equivalent positions in the Key Company Group (with
secondary reference to the Key Industry Group, as
described above). Retention of the NEOs was considered but did
not have a material impact on value of the awards to be
delivered. In determining the target dollar value of long term
incentive awards to be delivered in 2009 to NEOs, the
Compensation Committee did not deem relevant the number or value
of equity awards then held by NEOs or the amount of previous
gains realized by NEOs from exercises of options, the vesting of
performance share units, or in Mr. Angels case, the
vesting of previously-granted restricted stock.
Determining the Form of Award. The Compensation
Committee determined that 2009 long term incentive awards should
be a mix of time-vesting stock options (50% of the target value)
and performance share unit awards with a three-year performance
period (50% of the target value). It made this determination
based in part on its review of market trends with Deloitte
Consulting that indicated an increased use of diversified equity
awards, and to address employee retention concerns resulting
from the
35
reduced value of outstanding option awards resulting from the
substantial decline in the Companys stock price and in the
stock market during an historic financial markets dislocation.
The Compensation Committee determined that stock options
presented an appropriate balance of risk and reward in that
stock options have no value unless the Companys stock
price increases above the option exercise price. The potential
for future value acts both as a retention tool and an incentive
to deliver strong business results that would be expected to
increase the Companys stock price, thereby creating
shareholder value. The Compensation Committee also noted that,
because of the Companys historical record of excellent
shareholder return performance, the Companys executives
place high value on stock options as a long term incentive
vehicle. Finally, the Compensation Committee considered that the
vesting terms, as well as the opportunity provided by stock
options for substantial leveraged value from sustainable growth
in shareholder value over their ten-year term, encourage long
term decision-making.
To assure a strong alignment with shareholders interests,
the performance share unit awards granted in February 2009
generally vest after three years from the grant date provided
that the Company has attained a minimum level of cumulative
earnings per share (EPS) growth for a three-year
performance period beginning on January 1, 2009 and ending
on December 31, 2011. A three-year performance period was
believed to be an appropriate medium-term balance between the
one-year
performance-based
variable compensation goals and the longer-term stock option
share price growth goals. If EPS goals are met, the performance
share unit awards will vest and will be settled in shares of
Company common stock. The payment of shares will range from 50%
to 150% of the individuals target amount,
depending upon the Companys cumulative EPS growth for the
performance period compared against pre-established EPS growth
goals. If the EPS goals are not met, the awards will be
forfeited. However, if as a result of materially adverse and
unforeseen market conditions beyond the control of the Company,
the Companys cumulative EPS growth for the performance
period does not meet the threshold level for payout but does
exceed the average cumulative EPS growth in operating earnings
of the companies included in the Materials Sector of the
Standard & Poors 500 index for the same performance
period, each participant will receive a payment of shares equal
to 50% of his or her target award unless the
Compensation Committee determines that no payment should be made.
Determining the Amount of Award. In January 2009,
the Compensation Committee determined the number of option
shares and performance share units to be granted to each NEO
based on a target for the dollar value to be delivered to each
NEO from long term incentive awards. The number of option shares
was based on an estimated valuation of the Companys
options using a Black-Scholes valuation model and applying that
per-option value to 50% of the dollar value to be awarded to
each NEO. The number of performance share units was based on the
estimated valuation of the shares and applying that per-share
value to 50% of the dollar value to be awarded to each NEO, as
previously determined.
Determining the Grant Date. The Compensation
Committees practice has been to approve at its regular
meeting in late January the total number of long term incentives
to be allocated among all eligible employees, and to approve
specific long term incentive awards to be granted to each NEO
and the other executive officers. The Compensation Committee
sets the actual grant date of these long term incentive awards
as the date of the Boards regular meeting in late
February. The option exercise price of stock options is fixed at
100% of the closing price of the Companys common stock on
the NYSE on that February meeting date. For employees other than
NEOs, separate stock option grants and other equity awards may
occur on other dates throughout each year as part of hiring new
employees, to address individual retention concerns, or upon
promotions.
Consistent with this practice, on January 26, 2009, the
Compensation Committee established February 24, 2009 as the
grant date for NEOs and other eligible employees
options and performance share unit awards, coinciding with the
Boards next scheduled meeting date. This grant date was
established so that:
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The grant date (and, thereby, the exercise price) for NEOs
options is aligned with those granted to all other eligible
employees.
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36
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A reasonable interval would exist between the Companys
public release of 2009 earnings results in late January 2009 and
the February 24, 2009 grant date upon which the exercise
price of the options was set.
|
2010 Restricted Stock Unit Grants. In January 2010,
the Compensation Committee approved long-term incentive awards
to certain executive officers and other key members of
management consisting of time-vesting restricted stock units.
The awards were in addition to stock options and performance
share units for 2010. The purpose of the additional award was to
recognize the overall success of the recipients in addressing
the effects on the Company of the global economic downturn in
2009. To assure continued alignment with shareholder interests,
the Compensation Committee determined that restricted stock
units vesting in three equal annual installments were the
appropriate vehicle for these awards. The recipients of the
awards included all of the NEOs except the CEO. The awards were
granted on February 23, 2010, the same date on which the
regular 2010 stock option and performance share unit grants were
made.
Benefit
Plans Available to Executive Officers
The Companys practice is to make available to NEOs
essentially the same benefit plans generally available to other
employees in the U.S. Neither the financial resources of
the NEO, nor the amount or form of present or past direct
compensation paid to the NEO, was deemed by the Compensation
Committee as relevant to any NEOs continuing eligibility
to participate in these plans in 2009. Except as discussed
below, benefits for NEOs under these plans are available and
calculated on the same basis as for the other plan participants.
Adjustments are made so as to continue the benefits to all
participants, including NEOs, to the extent that they would
otherwise be limited by income or other restrictions imposed by
the federal tax laws. From time to time, the Compensation
Committee may approve certain other adjustments to be applied to
a NEO when it is in the best interests of the Company such as to
facilitate the recruitment of an executive. Any such adjustments
that are in place for any NEO are disclosed in the tables in
this Proxy Statement or their accompanying footnotes or
narratives. In addition to the benefit plans listed below,
employees, including NEOs, are eligible to participate in other
Company plans such as the 401(k) Savings Plan, medical plan,
dental plan, and relocation and vacation programs.
Retirement
Plans
The benefits payable to NEOs under the Companys retirement
plans are described in the Pension Benefits table
below and its accompanying footnotes and narrative. As described
more fully therein, the Compensation Committee, with the advice
of its independent consultant, has in the past approved certain
additional pension retirement benefits for certain executives,
including service year credits for Mr. Angel and minimum
retirement benefits for Mr. Breedlove. These benefits were
provided in order to attract these executives to the Company
and/or to
provide additional retention incentive by compensating them for
benefits lost upon departure from their previous employers. Also
described in the footnotes are certain adjustments for
Messrs. Malfitano and Fuchs related to their service in
Brazil and Canada, respectively, which adjustments are generally
available to all similarly situated employees.
Tax-Qualified Pension Plan. The Company maintains a
tax-qualified defined benefit pension plan for most
U.S. employees, including the NEOs.
Supplemental Retirement Income Plans. The Company
maintains non-qualified unfunded supplemental retirement income
plans (Supplemental Plans) for the primary purpose
of providing retirement benefits that would otherwise be paid to
U.S. employees under the tax-qualified pension plan but for
the application of certain federal tax law limitations. Because
of their income levels, each NEO is eligible to participate in
the Supplemental Plans. The incremental benefits paid under the
Supplemental Plans are calculated in the same manner as the
underlying tax-qualified pension plan and generally result in no
greater benefit than if federal tax law limitations were not in
place.
37
Compensation
Deferral Program
U.S. employees eligible to participate in the Variable
Compensation Plan, including the NEOs, are eligible to
participate in the Companys Compensation Deferral Program.
Contributions, earnings, withdrawals and year-end balances for
2009 for each NEO under the Compensation Deferral Program are
reported in the Nonqualified Deferred Compensation
table below.
The primary benefit to participants in this plan is that income
taxes on any compensation deferred into the plan, and on any
earnings within the plan on those deferrals, are also deferred
until the account is actually paid out to the individual.
Contributions to the plan are voluntary and represent
compensation already earned by the participant. The Company also
makes contributions that would have been made on the
employees behalf to the 401(k) Savings Plan but for the
application of certain federal tax law limits under that plan.
No preferential earnings opportunities are available under the
plan to participants, including NEOs. A NEOs account
balance in the plan at any point in time reflects the value of
his deferred compensation (and the Company contributions noted
above) as if he had invested it, at the time it was earned, in
Praxair stock or a fixed income security, as the NEO chose or as
provided under the Compensation Deferral Program. Therefore,
these balances are irrelevant to any present or future
compensation decisions for the NEO or the amount of any
severance payment that should be paid to NEOs.
Perquisites
and Personal Benefits
The Companys policy is not to extend perquisites or
personal benefits to employees other than for limited and
specifically defined business purposes. The incremental costs to
the Company in 2009 of those benefits provided to NEOs that the
SEC deems to be perquisites and personal benefits
are reported in the Summary Compensation Table below
(included in the amounts reported in the column captioned
All Other Compensation). The Compensation Committee
exercises oversight over the perquisites and personal benefits
that are made available to NEOs. Accordingly, the Compensation
Committee reviewed 2009 Company expenses, regardless of amount,
that could be construed as a perquisite or personal benefit for
each NEO. The purposes of this review included ensuring that:
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the costs of such perquisites and personal benefits are not
unreasonable and do not constitute a misuse of Company assets.
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each such expense has a legitimate business purpose.
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such perquisites and personal benefits are within the mainstream
of the practices of the Practices Tracking Group.
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such perquisites and personal benefits are properly disclosed to
shareholders in accordance with applicable SEC rules.
|
The Compensation Committee determined that, beginning in 2008,
the Company would no longer reimburse NEOs for any taxes imputed
to them on the value of Company-provided perquisites and
personal benefits (such reimbursements are typically called
tax
gross-ups).
In addition, the Companys internal audit department
performed its annual audit of executive officer expense reports
for compliance with Company policies, and the independent
auditors reviewed that work. Based on these reviews, the
Compensation Committee determined that the perquisites and
personal benefits available to NEOs in 2009, and their costs to
the Company, were reasonable and properly disclosed to
shareholders.
Severance
and
Change-in-Control
Arrangements
Severance
Plan
All full-time U.S. employees, including NEOs, are eligible
to participate in the Companys severance plan. This plan
provides a terminated employee with a severance payment
calculated based on the
38
employees time in service and salary rate at the time of
termination. The maximum payment is generally limited to
26 weeks of base pay. This benefit applies only to
terminations by the Company other than for cause. Under the
plan, the Company retains the discretion to pay severance
benefits in excess of this limit on a case by case basis.
Change-in-Control
Arrangements
The Company has entered into identical executive severance
compensation agreements with certain senior executives,
including NEOs. These agreements provide for certain payments to
be made to the executive in the event of both (1) a
change-in-control
of the Company (as defined in the agreements), and (2) the
termination of his or her employment within two years thereafter
by the Company without cause or by the executive for good reason
(a so-called double trigger). The purposes of these
agreements are, if an actual or threatened
change-in-control
occurs, to encourage retention of executives for continuity of
management, and to keep executives focused on performing their
duties rather than seeking immediate employment elsewhere. As a
condition to entering into the executive severance compensation
agreements, the Company requires each NEO to enter into a
Nondisclosure, Nonsolicitation and Noncompetition Agreement
under which the NEO agrees not to (a) disclose Company
confidential information both during and after termination of
his or her employment with the Company, (b) solicit the
Companys customers and employees for a period of two years
following the NEOs termination of employment with the
Company for any reason, and (c) engage in any activities
that compete with those of the Company for a period of two years
following the NEOs termination of employment. The
Compensation Committee determined that these arrangements are
generally comparable to those provided by companies in the
Practices Tracking Group and provide a legitimate and
reasonable benefit to the Company and its shareholders.
In December 2009, the Compensation Committee determined that,
for any executive who becomes an officer of the Company on or
after January 1, 2010, his or her executive severance
compensation agreement would include fewer benefits than
available to current executives. The material terms of the
current and future executive severance compensation agreements
are described in the Section below captioned Potential
Payments Upon Termination or
Change-In-Control.
39
EXECUTIVE
COMPENSATION TABLES
The tables below present compensation information for NEOs and
include footnotes and other narrative explanations important for
your understanding of the compensation information in each
table. The Summary Compensation Table summarizes key components
of NEO compensation for 2009, 2008 and 2007. The five tables
following the Summary Compensation Table provide more detailed
information about the various types of NEO compensation for
2009, some of which are included in the Summary Compensation
Table. The final table provides information regarding
compensation that NEOs would receive when their employment with
the Company terminates under various circumstances or upon a
change-in-control.
SUMMARY
COMPENSATION TABLE
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Change in
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Pension Value
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and Nonqualified
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Non-equity
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Deferred
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Stock
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Incentive Plan
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Compensation
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All other
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Awards
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Option Awards
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Compensation
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Earnings
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Compensation
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Name and Principal Position
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Year
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Salary ($)(1)
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($)(2)
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($)(2)
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($)(3)
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($)(4)
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($)(5)
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Total ($)(6)
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Stephen F. Angel, Chairman President & Chief Executive
Officer
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2009
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1,035,000
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3,035,109
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2,266,156
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1,242,000
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2,478,000
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128,039
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10,184,304
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2008
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1,026,250
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1,194,594
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3,230,706
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2,500,000
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2,134,000
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94,031
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10,179,581
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2007
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1,000,000
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1,263,823
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3,382,051
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2,800,000
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2,155,000
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119,152
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10,720,026
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Ricardo S. Malfitano, Executive Vice President
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2009
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585,000
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904,902
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675,395
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457,470
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642,000
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24,553
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3,289,320
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2008
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576,250
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335,560
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977,744
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915,360
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2,243,000
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14,412
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5,062,326
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2007
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550,000
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378,655
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1,014,725
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1,029,600
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862,000
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19,546
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3,854,526
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James S. Sawyer, Executive Vice President & Chief
Financial Officer
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2009
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550,000
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875,621
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653,660
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448,800
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269,000
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20,625
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2,817,706
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2008
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543,750
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335,560
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977,744
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813,330
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47,000
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19,639
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2,737,023
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2007
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525,000
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378,655
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1,014,725
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917,280
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763,000
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19,091
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3,617,751
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James J. Fuchs, Senior Vice President
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2009
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460,000
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641,934
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479,458
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323,840
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187,000
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15,515
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2,107,747
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2008
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451,250
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244,120
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714,860
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644,010
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806,000
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18,422
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2,878,662
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2007
|
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425,000
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|
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283,991
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|
|
|
|
761,318
|
|
|
|
|
667,140
|
|
|
|
|
311,000
|
|
|
|
|
30,800
|
|
|
|
|
2,479,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James T. Breedlove, Senior Vice President, General
Counsel & Secretary
|
|
|
|
2009
|
|
|
|
|
460,000
|
|
|
|
|
583,935
|
|
|
|
|
435,666
|
|
|
|
|
303,600
|
|
|
|
|
282,000
|
|
|
|
|
22,467
|
|
|
|
|
2,087,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
455,000
|
|
|
|
|
239,925
|
|
|
|
|
683,729
|
|
|
|
|
606,050
|
|
|
|
|
303,000
|
|
|
|
|
22,317
|
|
|
|
|
2,310,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
435,000
|
|
|
|
|
276,615
|
|
|
|
|
739,378
|
|
|
|
|
623,560
|
|
|
|
|
119,000
|
|
|
|
|
21,283
|
|
|
|
|
2,214,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts reported are actual salaries paid for the
calendar year and include adjustments to base salary rates if
applicable. Base salary adjustments are typically effective
April 1 of each year.
(2) These amounts are the full grant date fair value of
stock and option awards made for each year as determined under
accounting standards related to share-based compensation. The
Option Awards amounts are the values for options granted in each
of the years. The Stock Awards amounts are the values for
performance share unit grants made to each NEO in each of the
years valued at the target number of shares granted. The maximum
values of the performance share unit awards are: Mr. Angel:
$4,552,664, $2,389,188, and $2,527,646 for 2009, 2008 and 2007,
respectively; Mr. Malfitano: $1,357,353, $671,120 and
$757,310 for 2009, 2008 and 2007, respectively; Mr. Sawyer:
$1,313,432, $671,120, and $757,310 for 2009, 2008 and 2007,
respectively; Mr. Fuchs: $962,901, $488,240 and $567,982
for 2009, 2008 and 2007, respectively; and Mr. Breedlove:
$875,903, $479,850 and $553,230 for 2009, 2008 and 2007,
respectively. The assumptions used in computing the Option
Awards and Stock Awards amounts are included in Note 15 to
the Companys 2009 financial statements in the 2009
Form 10-K
and Annual Report.
The Stock Awards and Option Awards column amounts were not
actually paid to any NEO in any of the years. A performance
share unit grant made in 2007 vested and was paid out in 2009.
In addition, a stock option has value only if the Companys
stock price increases above the option
40
exercise price (an
in-the-money
option). If a NEO exercises an
in-the-money
option, he would then realize an actual gain. Any gain actually
realized for options exercised in 2009, and the number of
performance share units that vested in 2009 and the value
realized upon vesting are reported in the Option Exercises
and Stock Vested table below.
(3) In 2009, 2008, and 2007, the Company achieved certain
financial and non-financial goals that the Compensation
Committee set under the Companys Variable Compensation
Plan. Therefore, the Compensation Committee awarded each NEO
performance-based variable compensation payments in February
2010 (for 2009 performance), February 2009 (for 2008
performance), and February 2008 (for 2007 performance). These
amounts are reported as Non-equity Incentive Plan
Compensation. See the detailed description of the Variable
Compensation Plan in the preceding CD&A under the
sub-heading
Annual Performance-Based Variable Compensation.
(4) Amounts in this column are the annual increase in
actuarial present value of retirement benefits payable under the
Companys Pension Program. These amounts were not actually
paid to any NEO. See the detailed description of the Pension
Program and how these amounts are calculated following the
Pension Benefits table below. The total pension
present value accrued for each NEO through 2009 under the
Companys Pension Program is also disclosed in that table.
No amounts accumulated under the Companys Compensation
Deferral Program earn above market or preferential
interest or other earnings; therefore, no earnings are included
in this column.
(5) The amounts in this column include Company matching
contributions to the Companys 401(k) Savings Plan and
Company contributions to the Compensation Deferral Program
described under the Nonqualified Deferred
Compensation table below. Company plan contributions in
2009 were: $37,941 for Mr. Angel; $11,883 for
Mr. Malfitano; $20,625 for Mr. Sawyer; $15,515 for
Mr. Fuchs; and $22,467 for Mr. Breedlove. This column
also includes any perquisites or personal benefits that exceeded
$10,000 for any NEO during 2009, valued at the Companys
incremental costs. Such perquisites or personal benefits were:
(1) financial planning services and physical examinations
provided to Messrs. Angel and Malfitano, and
(2) $77,428 for Mr. Angels personal use of
corporate aircraft. For reasons of security and time management,
the Board requires the Chief Executive Officer to use the
Companys corporate aircraft for personal use as well as
business travel. The aircraft is available for the
Companys use through a time-share arrangement. The Company
pays a fixed time-share charge for the right to use the
aircraft, and a per-trip charge. The Company calculates the
incremental aircraft costs for Mr. Angels personal
use as the full amount of those per-trip charges attributable to
his personal use. The fixed time-share charge is not included as
an incremental cost, as the Company must pay this amount even if
Mr. Angel does not use the aircraft for personal travel.
Consistent with Company policy, NEOs were not reimbursed for any
taxes imputed to them on the value of Company-provided
perquisites or personal benefits.
In addition, the Company pays for or provides executive officer
travel, lodging and related expenses incurred in connection with
attending Company business related events, including Board
meetings (including the expenses related to the attendance of
spouses if they are specifically invited for appropriate
business purposes), and may provide use of Company chartered
aircraft if available. No amounts are reported in the table for
these business expenses. The Company also maintains certain
country club memberships for business entertainment purposes
which memberships, by club rules, may be in an executives
name. By Company policy, reimbursement of club costs is
authorized only when membership and use of the club facilities
are judged to be important to the conduct of the Companys
business. As no NEO made personal use of these club memberships
during 2009, no amounts are reported in the table.
(6) The amount reported in the Total column is
the sum of all of the columns. It includes the Stock Awards,
Option Awards and Change in Pension Value amounts, which were
not actually paid to any NEO in 2009, 2008, or 2007. The Stock
Awards, Option Awards and Change in Pension Value amounts
actually paid or provided in the future may be more or less than
the reported amounts. The amount of compensation actually paid
or provided to each NEO for 2009 (being Salary, Non-equity
Incentive Plan Compensation and All Other Compensation) was:
Mr. Angel: $2,405,039 (24% of Total Compensation reported);
Mr. Malfitano: $1,067,023 (32% of Total Compensation
reported); Mr. Sawyer: $1,019,425 (36% of Total
Compensation reported); Mr. Fuchs: $799,355 (38% of Total
Compensation reported); and Mr. Breedlove: $786,067 (38% of
Total Compensation reported).
41
2009
GRANTS OF PLAN-BASED AWARDS
The following table provides more detailed information regarding
the 2009 Non-Equity Incentive Plan Compensation, Stock Awards
and the Option Awards reported in the Summary Compensation Table
above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts Under Non-
|
|
|
Estimated Future Payouts Under
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive Plan Awards
|
|
|
Equity Incentive Plan Awards
|
|
|
|
|
|
Option
|
|
|
Exercise or
|
|
|
Grant Date
|
|
|
|
|
|
|
Compen-
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Base
|
|
|
Fair Value of
|
|
|
|
|
|
|
sation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other Stock
|
|
|
Number of
|
|
|
Price of
|
|
|
Stock and
|
|
|
|
|
|
|
Committee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: Number of
|
|
|
Securities
|
|
|
Option
|
|
|
Option
|
|
|
|
|
|
|
Approval
|
|
|
Threshold
|
|
|
|
|
|
|
|
|
Threshold
|
|
|
|
|
|
|
|
|
Shares of Stock or
|
|
|
Underlying
|
|
|
Awards
|
|
|
Awards ($)
|
Name
|
|
|
Grant Date
|
|
|
Date(1)
|
|
|
($)
|
|
|
Target ($)
|
|
|
Maximum ($)
|
|
|
(#)
|
|
|
Target (#)
|
|
|
Maximum (#)
|
|
|
Units (#)
|
|
|
Options (#)
|
|
|
($/Sh)
|
|
|
(5)
|
Stephen F. Angel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable Cash Compensation(2)
|
|
|
|
|
|
|
|
|
0
|
|
|
1,242,000
|
|
|
4,378,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Share Units(3)
|
|
|
2/24/2009
|
|
|
1/26/2009
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
53,900
|
|
|
80,850
|
|
|
|
|
|
|
|
|
|
|
|
3,035,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time-Vesting Options(4)
|
|
|
2/24/2009
|
|
|
1/26/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
281,510
|
|
|
60.92
|
|
|
2,266,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ricardo S. Malfitano
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable Cash Compensation(2)
|
|
|
|
|
|
|
|
|
0
|
|
|
497,250
|
|
|
1,752,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Share Units(3)
|
|
|
2/24/2009
|
|
|
1/26/2009
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
16,070
|
|
|
24,105
|
|
|
|
|
|
|
|
|
|
|
|
904,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time-Vesting Options(4)
|
|
|
2/24/2009
|
|
|
1/26/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83,900
|
|
|
60.92
|
|
|
675,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James S. Sawyer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable Cash Compensation(2)
|
|
|
|
|
|
|
|
|
0
|
|
|
467,500
|
|
|
1,647,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Share Units(3)
|
|
|
2/24/2009
|
|
|
1/26/2009
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
15,550
|
|
|
23,325
|
|
|
|
|
|
|
|
|
|
|
|
875,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time-Vesting Options(4)
|
|
|
2/24/2009
|
|
|
1/26/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,200
|
|
|
60.92
|
|
|
653,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James J. Fuchs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable Cash Compensation(2)
|
|
|
|
|
|
|
|
|
0
|
|
|
368,000
|
|
|
1,297,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Share Units(3)
|
|
|
2/24/2009
|
|
|
1/26/2009
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
11,400
|
|
|
17,100
|
|
|
|
|
|
|
|
|
|
|
|
641,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time-Vesting Options(4)
|
|
|
2/24/2009
|
|
|
1/26/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,560
|
|
|
60.92
|
|
|
479,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James T. Breedlove
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable Cash Compensation(2)
|
|
|
|
|
|
|
|
|
0
|
|
|
345,000
|
|
|
1,216,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Share Units(3)
|
|
|
2/24/2009
|
|
|
1/26/2009
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
10,370
|
|
|
15,555
|
|
|
|
|
|
|
|
|
|
|
|
583,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time-Vesting Options(4)
|
|
|
2/24/2009
|
|
|
1/26/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,120
|
|
|
60.92
|
|
|
435,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) On January 26, 2009 the Compensation Committee
approved the total number of time-vesting stock options and
target performance share units to be allocated among all
eligible employees and specifically approved the time-vesting
stock options and target performance share units to be granted
to NEOs and all other executive officers. The Compensation
Committee set February 24, 2009 as the actual grant date of
these awards. The option exercise price was 100% of the closing
price of the Companys common stock on the NYSE on that
date. For a more detailed description of the Compensation
Committees long term incentive grant practices, see the
CD&A under the sub caption Long Term Incentive
Awards.
(2) The actual amount of performance-based variable
compensation paid in February 2010 for 2009 performance is shown
in the Summary Compensation Table under the
Non-Equity Incentive Plan Compensation column for
2009. The amounts shown in these columns are the range of
potential 2009 payments that could have been made under the
Companys Variable Compensation Plan in accordance with the
performance criteria determined by the Compensation Committee.
As no minimum amount was payable, no Threshold
amounts are reported. Target amounts are expressed as a percent
of each NEOs salary, assuming achieving 100% of Company
financial goals. The Maximum amounts
42
are the maximum payments that could
be made. However, payout at the maximum has never been attained.
For more information, see the explanation in the CD&A under
the
sub-heading
Annual Performance-Based Variable Compensation.
(3) These are the threshold, target and maximum number of
shares that may be earned under performance share unit awards
made in February 2009. See the explanation below this table and
in the CD&A under the caption Long Term Incentive
Awards for more information about the performance share
unit awards.
(4) These are the number of shares underlying time-vesting
stock option grants made in February 2009. See the explanation
below this table and in the CD&A under the caption
Long Term Incentive Awards for more information
about the stock option grants.
(5) The amounts in this column are the full grant date fair
values of the performance share units (valued at the target
number of shares granted) and the time-vesting option grants,
made in February 2009 calculated in accordance with accounting
standards related to share-based compensation. They are neither
amounts that were paid to any NEO nor what the Company
recognized as compensation expense in 2009 under accounting
standards related to share-based compensation.
Additional
Information Regarding Plan-Based Awards
The 2009 option grants and performance share unit awards
reported in the table above were made under the 2002 Praxair,
Inc. Long Term Incentive Plan (the Stock Plan).
Options and performance share units granted to NEOs are made on
substantially the same terms as grants to all other eligible
employees.
2009
Option Grant Terms
Time-vesting option grants were made to NEOs in 2009. The
material terms of the grants are described below.
|
|
|
|
|
Time-vesting options vest in consecutive equal annual
installments over three years, beginning on the first
anniversary of the grant date. However, vesting may accelerate
in certain cases discussed below.
|
|
|
|
Options expire on the tenth anniversary of the grant date.
Options will expire before ten years if employment terminates,
except for certain termination reasons described below.
|
|
|
|
Options may be exercised only while the NEO is actively employed
except:
|
|
|
|
|
(a)
|
If a NEO becomes disabled, or retires after the first
anniversary of the option grant date, the option continues to
become exercisable at the times set forth in the grant agreement
and after becoming exercisable, may be exercised at any time up
to its termination date (the option is forfeited if the NEO
retires before the first anniversary of the grant date).
Retirement generally means reaching age 65, or
reaching age 62 with at least 10 years of service to
the Company, or accumulating 85 points (points being
the sum of age plus years of service).
|
|
|
(b)
|
If the Company terminates the NEOs employment other than
for cause after the first anniversary of the option grant date,
time-vesting options continue to become exercisable at the times
set forth in the grant agreement. After becoming exercisable,
the option may be exercised for the lesser of the term remaining
or three years after such termination of employment (generally
the option is forfeited if employment is terminated before the
first anniversary of the grant date).
|
|
|
(c)
|
Upon the NEOs death, time-vesting options immediately
become fully vested and may be exercised by a beneficiary or an
estate for the lesser of the term remaining or three years after
a NEOs death.
|
|
|
(d)
|
If the Company terminates the NEOs employment other than
for cause, or the NEO terminates his employment, in either case
within two years after a change-in control of the
Company, the option may be exercised for the lesser of the term
remaining or three years after such termination (time-vesting
options become immediately vested in full upon a
change-in-control
whether or not employment is terminated).
|
43
2009
Performance Share Unit Grant Terms
|
|
|
|
|
Performance share units generally vest on the third anniversary
of their date of grant provided that the NEO has remained
continuously employed by the Company and the Company has
attained a minimum level of cumulative earnings per share (EPS)
growth at the end of the three-year period. Vesting may
accelerate in certain cases discussed below. Except as described
below, if a NEOs employment with the Company terminates or
if the Company fails to attain the minimum EPS target for the
performance period, the performance share unit award is
immediately forfeited.
|
|
|
|
Each performance share unit award includes a target number of
shares of the Companys common stock that may be paid out
to a NEO. If vested, performance share units are settled in
shares of Company common stock with the number of shares payable
ranging from 50% to 150% of the NEOs target amount,
depending upon the Companys cumulative EPS growth for the
performance period compared against pre-established EPS growth
goals set forth in the award agreement. If, as a result of
materially adverse and unforeseen market conditions beyond the
control of the Company, the Companys cumulative EPS growth
for the performance period does not meet the minimum threshold
level for payout but does exceed the average cumulative EPS
growth in operating earnings of the companies included in the
Materials Sector of the Standard & Poors 500 index for
the same performance period, the NEO will receive a payment of
shares equal to 50% of his target award unless the Compensation
Committee otherwise determines that no payment should be made.
|
|
|
|
Performance share units become immediately vested in full and
payable upon the earlier of (i) the NEOs total and
permanent disability, (ii) termination of employment with
the Company due to death, or (iii) a
change-in-control
of the Company, each occurring prior to the third anniversary of
the grant date. In such case, the number of shares of common
stock payable to settle the award is the target number of shares
granted under the award.
|
|
|
|
If either (i) a NEO retires after the first anniversary of
the grant date, or (ii) the Company terminates the
NEOs employment other than for cause after the first
anniversary of the grant date, the award will vest on the third
anniversary of the grant date provided that the applicable EPS
performance criteria are met, and payment will be made
thereafter with the number of shares paid in settlement of the
award determined based upon the Companys actual
performance. The performance share unit award will be forfeited
if a NEO retires or his employment is terminated other than for
cause on or before the first anniversary of the grant date. For
purposes of a performance share unit award, a NEO will
retire if he terminates employment with the Company
other than for cause after either attaining age 65,
attaining age 62 and completing at least ten years of
employment with the Company, or accumulating 85 points, where
each year of the NEOs age and each year of employment with
the Company, count as one point.
|
The Stock Plan defines
change-in-control
to mean, generally, (1) any consolidation or merger in
which the Company is not the continuing or surviving
corporation; (2) the liquidation of the Company or the sale
of all or substantially all of the assets of the Company;
(3) an acquisition by a person or group of more than 20% of
the Companys outstanding shares; or (4) a change in
the majority composition of the Board not approved by two-thirds
of the directors in office before the change.
44
2009
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The table below shows each NEOs outstanding option grants
and unvested performance share units and restricted stock, if
any, at the end of 2009. For each outstanding option grant, the
table shows the option shares that have vested (or that are
Exercisable) and those not yet vested (or that are
Unexercisable).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan
|
|
|
Plan Awards:
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Awards:
|
|
|
Market or
|
|
|
|
Number of
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
|
|
|
Number of
|
|
|
Payout Value of
|
|
|
|
Securities
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
|
|
Units of
|
|
|
Market Value
|
|
|
Unearned
|
|
|
Unearned
|
|
|
|
Underlying
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
|
|
|
|
|
|
|
|
|
Stock That
|
|
|
of Shares or
|
|
|
Shares, Units
|
|
|
Shares, Units or
|
|
|
|
Unexercised
|
|
|
Options (#)
|
|
|
Unearned
|
|
|
Option
|
|
|
|
|
|
Option
|
|
|
Have Not
|
|
|
Units of Stock
|
|
|
or Other Rights
|
|
|
Other Rights
|
|
|
|
Options (#)
|
|
|
Un-
|
|
|
Options
|
|
|
Exercise
|
|
|
Option Grant
|
|
|
Expiration
|
|
|
Vested
|
|
|
That Have Not
|
|
|
That Have Not
|
|
|
That Have Not
|
Name
|
|
|
Exercisable(1)
|
|
|
exercisable(1)
|
|
|
(#)(2)
|
|
|
Price ($)
|
|
|
Date
|
|
|
Date
|
|
|
(#)(3)
|
|
|
Vested ($)(4)
|
|
|
Vested (#)(5)
|
|
|
Vested ($)(5)
|
Stephen F. Angel
|
|
|
50,000
|
|
|
0
|
|
|
0
|
|
|
23.105
|
|
|
4/23/2001
|
|
|
4/23/2011
|
|
|
23,917
|
|
|
1,920,774
|
|
|
68,140
|
|
|
5,472,323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110,000
|
|
|
0
|
|
|
0
|
|
|
27.430
|
|
|
1/2/2002
|
|
|
1/2/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
0
|
|
|
0
|
|
|
26.425
|
|
|
2/28/2003
|
|
|
2/28/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,000
|
|
|
0
|
|
|
0
|
|
|
36.580
|
|
|
2/24/2004
|
|
|
2/24/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
143,100
|
|
|
0
|
|
|
0
|
|
|
44.250
|
|
|
2/22/2005
|
|
|
2/22/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130,600
|
|
|
0
|
|
|
0
|
|
|
53.980
|
|
|
2/28/2006
|
|
|
2/29/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
205,533
|
|
|
102,767
|
|
|
0
|
|
|
61.470
|
|
|
2/27/2007
|
|
|
2/27/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
0
|
|
|
85,000
|
|
|
83.890
|
|
|
2/26/2008
|
|
|
2/26/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,066
|
|
|
130,134
|
|
|
0
|
|
|
83.890
|
|
|
2/26/2008
|
|
|
2/26/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
281,510
|
|
|
0
|
|
|
60.920
|
|
|
2/24/2009
|
|
|
2/24/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ricardo S. Malfitano
|
|
|
68,000
|
|
|
0
|
|
|
0
|
|
|
26.425
|
|
|
2/28/2003
|
|
|
2/28/2013
|
|
|
0
|
|
|
0
|
|
|
20,070
|
|
|
1,611,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,000
|
|
|
0
|
|
|
0
|
|
|
36.580
|
|
|
2/24/2004
|
|
|
2/24/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
0
|
|
|
0
|
|
|
44.250
|
|
|
2/22/2005
|
|
|
2/22/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92,500
|
|
|
0
|
|
|
0
|
|
|
53.980
|
|
|
2/28/2006
|
|
|
2/29/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,666
|
|
|
30,834
|
|
|
0
|
|
|
61.470
|
|
|
2/27/2007
|
|
|
2/27/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
0
|
|
|
30,000
|
|
|
83.890
|
|
|
2/26/2008
|
|
|
2/26/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,266
|
|
|
36,534
|
|
|
0
|
|
|
83.890
|
|
|
2/26/2008
|
|
|
2/26/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
83,900
|
|
|
0
|
|
|
60.920
|
|
|
2/24/2009
|
|
|
2/24/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James S. Sawyer
|
|
|
25,000
|
|
|
0
|
|
|
0
|
|
|
44.250
|
|
|
2/22/2005
|
|
|
2/22/2015
|
|
|
0
|
|
|
0
|
|
|
19,550
|
|
|
1,570,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,750
|
|
|
0
|
|
|
0
|
|
|
53.980
|
|
|
2/28/2006
|
|
|
2/29/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,833
|
|
|
21,584
|
|
|
0
|
|
|
61.470
|
|
|
2/27/2007
|
|
|
2/27/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
0
|
|
|
30,000
|
|
|
83.890
|
|
|
2/26/2008
|
|
|
2/26/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,133
|
|
|
38,314
|
|
|
0
|
|
|
83.890
|
|
|
2/26/2008
|
|
|
2/26/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
81,200
|
|
|
0
|
|
|
60.920
|
|
|
2/24/2009
|
|
|
2/24/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James J. Fuchs
|
|
|
62,600
|
|
|
0
|
|
|
0
|
|
|
53.980
|
|
|
2/28/2006
|
|
|
2/29/2016
|
|
|
0
|
|
|
0
|
|
|
14,310
|
|
|
1,149,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,266
|
|
|
23,134
|
|
|
0
|
|
|
61.470
|
|
|
2/27/2007
|
|
|
2/27/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
0
|
|
|
22,000
|
|
|
83.890
|
|
|
2/26/2008
|
|
|
2/26/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,333
|
|
|
26,667
|
|
|
0
|
|
|
83.890
|
|
|
2/26/2008
|
|
|
2/26/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
59,560
|
|
|
0
|
|
|
60.920
|
|
|
2/24/2009
|
|
|
2/24/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James T. Breedlove
|
|
|
20,000
|
|
|
0
|
|
|
0
|
|
|
44.270
|
|
|
11/15/2004
|
|
|
11/15/2014
|
|
|
0
|
|
|
0
|
|
|
13,230
|
|
|
1,062,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,200
|
|
|
0
|
|
|
0
|
|
|
44.250
|
|
|
2/22/2005
|
|
|
2/22/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,400
|
|
|
0
|
|
|
0
|
|
|
53.980
|
|
|
2/28/2006
|
|
|
2/29/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,933
|
|
|
22,467
|
|
|
0
|
|
|
61.470
|
|
|
2/27/2007
|
|
|
2/27/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
0
|
|
|
20,000
|
|
|
83.890
|
|
|
2/26/2008
|
|
|
2/26/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,100
|
|
|
26,200
|
|
|
0
|
|
|
83.890
|
|
|
2/26/2008
|
|
|
2/26/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
54,120
|
|
|
0
|
|
|
60.920
|
|
|
2/24/2009
|
|
|
2/24/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
(1) Each time-vesting option vests, or became fully vested,
in three consecutive equal annual installments beginning on the
first anniversary of the grant date, except for the option
granted to Mr. Breedlove on November 15, 2004, 50% of
which vested on November 15, 2006, and the other 50% of
which vested on November 15, 2009.
(2) Each performance-vesting option vests on the third
anniversary of the grant date, if at any time prior to
January 1, 2011, the Companys cumulative completed
fiscal year earning per share (EPS) increases by at least 33%
over the Companys EPS for the year ended December 31,
2007. Otherwise, the option is forfeited on the third
anniversary of the grant date.
(3) The shares shown in this column are shares of
restricted stock granted to Mr. Angel. See the description
below this table for more information about the terms of this
grant. Mr. Angels grant of 20,000 shares
(adjusted to 40,000 shares to reflect a later
2-for-1
stock split) was made on April 23, 2001, in connection with
his joining the Company. The first 25% of the total grant vested
on April 23, 2003, another 25% vested on April 23,
2007, and the final 50% will vest on April 23, 2011,
assuming continued employment through that date.
(4) The market value reported in this column is the number
of shares of Mr. Angels unvested restricted stock
times the closing price of the Companys common stock on
the NYSE of $80.31 per share on December 31, 2009.
(5) The number of shares reported is the target number of
performance share units granted in February 2008 and 2009. The
reported market value of these shares reflects the
Companys common stock price per share on the NYSE of
$80.31 on December 31, 2009.
Additional
Information Regarding Outstanding Equity Awards
The material terms of the 2009 option grants and performance
share unit awards reported in the table above are described
above under the caption Additional Information Regarding
Plan-Based Awards. The material terms of the other grants
made prior to 2009 that were outstanding at December 31,
2009 included in the table above are described below.
2008
and Prior Outstanding Option Grant Terms
Both time-vesting and performance-vesting option grants were
made to NEOs in 2008. The material terms of outstanding
time-vesting option grants made in 2008 and in prior years are
substantially the same as those described for the 2009
time-vesting option grants described under Additional
Information Regarding Plan-Based Awards. The material
terms of the 2008 performance-vesting option grants are
described below.
|
|
|
|
|
Performance-vesting options vest on the third anniversary of the
grant date only if, at any time prior to January 1, 2011,
and while the individual remains employed by the Company, the
Companys cumulative completed fiscal year EPS increase by
at least 33% over the Companys EPS for the year ended
December 31, 2007. The vesting may accelerate in certain
cases discussed below.
|
|
|
|
Performance-vesting options expire on the tenth anniversary of
the grant date. Options will expire before ten years if
employment terminates, except for certain termination reasons
described below.
|
|
|
|
Performance-vesting options may be exercised only while the NEO
is actively employed except:
|
|
|
|
|
(a)
|
If a NEO becomes disabled, or retires after the first
anniversary of the option grant date, performance-vesting
options will become exercisable on the third anniversary of
their grant date only if the applicable EPS performance criteria
were satisfied prior to the date the NEO became disabled or
retired. After becoming exercisable, a performance-vesting
option may be exercised at any time up to its termination date
(the option is forfeited if the NEO retires before the first
anniversary of the grant date or if the performance criteria are
not met). Retirement generally means reaching
age 65, or reaching age 62 with at least 10 years
of service to the Company, or accumulating 85 points
(points being the sum of age plus years of service).
|
|
|
(b)
|
If the Company terminates the NEOs employment other than
for cause after the first anniversary of the option grant date,
performance-vesting options will become exercisable on the third
anniversary of their grant date only if the applicable EPS
performance criteria were satisfied prior to the date the
NEOs employment terminated. After becoming exercisable,
the option may be exercised for the lesser of the term remaining
or three
|
46
|
|
|
|
|
years after such termination of employment (generally the option
is forfeited if employment is terminated other than for cause
before the first anniversary of the grant date or if the
performance criteria are not met).
|
|
|
|
|
(c)
|
Upon the NEOs death, performance-vesting options
immediately become fully vested and may be exercised by a
beneficiary or an estate for three years after a NEOs
death.
|
|
|
(d)
|
If the Company terminates the NEOs employment other than
for cause, or the NEO terminates his employment, in either case
within two years after a change-in control of the
Company, the option may be exercised for the lesser of the term
remaining or three years after such termination
(performance-vesting options immediately become fully vested
upon a
change-in-control
whether or not employment is terminated).
|
2008
Performance Share Unit Grant Terms
The values of performance share units granted in February 2008
are included in the table above as they were outstanding as of
December 31, 2009. On February 26, 2010 these grants
were paid out in shares of common stock pursuant to their terms.
While they remained outstanding, the material terms of these
performance share unit grants were:
|
|
|
|
|
Each performance share unit award included a target number of
shares of the Companys common stock that could be paid out
to NEOs. The payout depended on the Companys financial
performance in 2008 and 2009 and equaled the target number of
shares multiplied by the two-year average of the corporate
consolidated business financial performance factors that the
Compensation Committee determined for performance-based variable
cash compensation for those years ranging from zero to 200% (see
the description of these performance factors in the CD&A
under the caption Annual Performance-Based Variable
Compensation-Establishment of Financial Goals).
|
|
|
|
Performance share units, if earned, would vest two years after
their grant date if the NEO remained continuously employed by
the Company, but vesting could have accelerated in certain cases
discussed below. Except as described below, if a NEOs
employment with the Company terminated, the performance share
unit award would have been immediately forfeited.
|
|
|
|
Performance share units would have become immediately vested in
full and payable upon the earlier of (i) the NEOs
death or disability, or (ii) a
change-in-control
of the Company, each occurring prior to the second anniversary
of the grant date and while the NEO was employed by the Company.
In such case, the number of shares of common stock payable to
settle the award would have been the target number of shares
granted under the award.
|
|
|
|
If a NEO retired after the first anniversary of the grant date,
or the Company terminated the NEOs employment other than
for cause after the first anniversary of the grant date, the
award would have vested on the second anniversary of the grant
date and payment would have been made thereafter with the number
of shares paid in settlement of the award determined based upon
the Companys actual performance. The performance share
unit award would have been forfeited if a NEO retired or his
employment was terminated other than for cause on or before the
first anniversary of the grant date.
|
The
change-in-control
definition under the Stock Plan applicable to 2008
performance-vesting options and performance share units is
described above under Additional Information Regarding
Plan-Based Awards.
47
Restricted
Stock Grant
Footnote (3) to the above table describes the general
vesting schedule of Mr. Angels restricted stock
grant. The other material terms of this grant are:
|
|
|
|
|
Any shares that have not vested will be forfeited if
(i) Mr. Angel terminates his employment (other than
upon death or disability), or (ii) the Company terminates
his employment for cause.
|
Regardless of the vesting schedule described above, all shares
will vest immediately if: (i) the Company terminates
Mr. Angels employment other than for cause;
(ii) he becomes disabled; (iii) he dies; or
(iv) if a
change-in-control
of the Company occurs. Under the restricted stock grant, a
change-in-control
is generally as defined in the Stock Plan (see Additional
Information Regarding Plan-Based Awards) but also
includes: (1) a transaction in which the Companys
common stock is converted into cash or some other security,
except for a merger in which the Companys stockholders own
the same proportion of stock in the surviving corporation,
(2) the Company is required to make a
Form 8-K
filing with the SEC to report a
change-in-control,
and (3) a person or group owning 20% or more of the
Companys outstanding shares begins to solicit proxies.
|
|
|
|
|
The unvested shares earn dividends at the same rate and at the
same time as dividends are paid to all Company shareholders. The
dividends are not paid in cash, but are reinvested to purchase
additional shares of restricted stock at the NYSE closing price
of the Companys common stock on the dividend payment
dates. All reinvested shares will vest on the last vesting date
of the entire grant.
|
2009
OPTION EXERCISES AND STOCK VESTED
This table provides information about any options that were
exercised, or performance share units or restricted stock that
vested during 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares Acquired
|
|
|
Value Realized on
|
|
|
Shares Acquired
|
|
|
Value Realized
|
Name
|
|
|
on Exercise (#)
|
|
|
Exercise ($)(1)
|
|
|
on Vesting (#)(2)
|
|
|
on Vesting ($)(2)
|
Stephen F. Angel
|
|
|
75,000
|
|
|
4,497,825
|
|
|
29,195
|
|
|
1,684,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ricardo S. Malfitano
|
|
|
0
|
|
|
0
|
|
|
8,747
|
|
|
504,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James S. Sawyer
|
|
|
0
|
|
|
0
|
|
|
8,747
|
|
|
504,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James J. Fuchs
|
|
|
0
|
|
|
0
|
|
|
6,560
|
|
|
378,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James T. Breedlove
|
|
|
0
|
|
|
0
|
|
|
6,390
|
|
|
368,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The option exercise value realized equals the
(i) NYSE market price of the Companys common stock at
the time of the option exercise minus the option exercise price,
multiplied by (ii) the option shares exercised. These
amounts are before taxes.
(2) Shares acquired pursuant to the payout in February 2009
of performance share unit awards made in February 2007. The
value of the shares equals the number of shares paid out
multiplied by the NYSE market price of the Companys common
stock on the payout date.
48
2009
PENSION BENEFITS
The table below shows certain retirement benefit information
under the Companys Pension Program described after the
table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present Value of
|
|
|
|
|
|
|
|
|
|
|
|
Number of Years of
|
|
|
Accumulated
|
|
|
|
Payments During Last
|
|
Name
|
|
|
Plan Name
|
|
|
Credited Service (#)
|
|
|
Benefit ($)(1)
|
|
|
|
Fiscal Year ($)
|
|
Stephen F. Angel (2)
|
|
|
Praxair Pension Plan
|
|
|
9
|
|
|
|
204,000
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Retirement Income Plan
|
|
|
19
|
|
|
|
8,809,000
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ricardo S. Malfitano (3)
|
|
|
Praxair Pension Plan
|
|
|
29
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Retirement Income Plan
|
|
|
29
|
|
|
|
7,669,000
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James S. Sawyer (4)
|
|
|
Praxair Pension Plan
|
|
|
24
|
|
|
|
803,000
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Retirement Income Plan
|
|
|
24
|
|
|
|
3,611,000 (7
|
)
|
|
|
|
1,141,740 (7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James J. Fuchs (5)
|
|
|
Praxair Pension Plan
|
|
|
36
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Retirement Income Plan
|
|
|
36
|
|
|
|
5,834,000
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Praxair Canada Pension Plan
|
|
|
27
|
|
|
|
717,000
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Praxair Canada Supplemental
|
|
|
27
|
|
|
|
1,331,000
|
|
|
|
|
0
|
|
|
|
|
Employee Retirement Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James T. Breedlove (6)
|
|
|
Praxair Pension Plan
|
|
|
5
|
|
|
|
50,000
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Retirement Income Plan
|
|
|
18
|
|
|
|
1,168,000
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) See the narrative below for a description of the
Present Value of Accumulated Benefit. The values for each plan
listed above are additive.
(2) The Praxair Pension Plan credited years of service for
Mr. Angel represent his actual years of service with the
Company. Effective January 1, 2011, assuming continuous
employment, Mr. Angel will receive an additional credit
under the Companys Supplemental Retirement Income Plans
(collectively referred to as the SRIP) for
10 years of service that he had with his prior employer,
General Electric Company. He also will receive credit under the
SRIP for an additional 11.64 years of General Electric
service on January 1, 2016 if he remains continuously
employed with the Company until that date. If Mr. Angel is
terminated for cause, he will not be granted any additional
service credit for any purpose and will forfeit any additional
service previously credited. If he is involuntarily terminated
other than for cause (a) on or before December 31,
2010, the full additional 10 years service credit
would be accelerated to the effective date of termination, or
(b) during the period from January 1, 2011 through
December 31, 2015, the full additional
11.64 years service credit would be accelerated to
the effective date of termination. If Mr. Angel dies or
there is a
change-in-control
of the Company (as defined in the Severance Agreements described
below under the caption Potential Payments Upon
Termination or
Change-in-Control),
(a) on or before December 31, 2010, the full
additional 10 years service credit would be
accelerated to the date of the event, or (b) during the
period from January 1, 2011 though December 31, 2015,
the full additional 11.64 years service credit would
be accelerated to the date of the event. If he becomes disabled,
service credit will continue to accrue according to the terms of
the Companys Pension Program, plus the additional years of
service credit on the dates specified above. Under financial
accounting rules, the Company is recognizing as an accrued
pension liability the additional years of service credit that
Mr. Angel may receive under the SRIP over the course of his
anticipated years of service. Therefore, the service and value
amounts shown in the table reflect this ratable accrual. When he
retires from the Company, he will receive retirement benefits
under the Companys Pension Program based on his service
with the Company and any additional General Electric service
that the Company recognizes at his retirement date (as described
in the preceding sentences), less an offset for benefits he
receives under the General Electric retirement plans. The values
shown above include the effect of this offset. At the end of
2009, the present value of the accumulated benefit for
Mr. Angels 9 years of actual years of service
with the Company under the SRIP was $3,470,000.
(3) Credited years of service reported for
Mr. Malfitano combine his service with Praxair and White
Martins, the Companys Brazilian subsidiary. Years of
service reflect certain equitable adjustments for
Mr. Malfitano related to his service for White Martins,
which adjustments were generally available to all similarly
situated employees. When he retires from the Company, he will
receive Pension Program retirement benefits based on his
combined Praxair and White Martins service, less an offset for
the benefits he receives under the White Martins retirement
plan. The values shown above include the effect of this offset.
The White Martins retirement plan in which Mr. Malfitano
participates is not a defined benefit plan and, therefore, is
not separately included in the table above.
(4) In accordance with transition rules under
Section 409A of the Internal Revenue Code, certain SRIP
participants (including the NEOs) were previously offered an
election as to the payment form of their SRIP benefits. At that
time, Mr. Sawyer elected to received his SRIP benefits in
an annuity form. The present value of Mr. Sawyers
accumulated benefit reflects this election.
(5) Credited years of service reported for Mr. Fuchs
combine his service with Praxair and Praxair Canada, Inc. Years
of service reflect certain equitable adjustments for
Mr. Fuchs related to his service in Canada, which
adjustments were generally available to all similarly situated
49
employees. When he retires from the
Company, he will receive Pension Program retirement benefits
based on his combined U.S. and Canadian service, less an offset
for the benefits he receives under the Canadian retirement
plans. The values shown above include the effect of this offset.
(6) The Praxair Pension Plan credited years of service for
Mr. Breedlove are his actual years of service with the
Company. Pursuant to an agreement, upon his completion of five
years of service with the Company on November 14, 2009,
Mr. Breedlove was awarded credit for retirement purposes
for 13 additional years of service that he had with his
prior employer, General Electric Company. As a participant in
the Account-Based Design component of the Pension Program, which
is described below, these additional years of service have no
effect on his benefit under either the Praxair Pension Plan or
the SRIP. However, pursuant to the aforementioned agreement, on
November 14, 2009, Mr. Breedlove became entitled to a
minimum retirement benefit from the Company, when combined with
the benefit he receives under the retirement plans of his former
employer, General Electric Company, which is payable upon his
retirement. The values in the table include the effect of the
offset for benefits payable to Mr. Breedlove from General
Electrics retirement plans. The present value of the
accumulated benefit for Mr. Breedloves 5 years
of actual service with the Company under the SRIP was $148,908
at the end of 2009. In addition, the 13 years of prior
service credit is included for purposes of determining
Mr. Breedloves eligibility for retirement
treatment for his outstanding equity awards following his
termination of employment with the Company other than for cause.
(7) These amounts reflect the payment of a pension benefit
to a former spouse.
Additional
Information Regarding Pension Benefits
Present
Value of Accumulated Benefit
The table above includes a Present Value of Accumulated
Benefit. This is the value in todays dollars of the
total expected future retirement benefits that each NEO may
receive under the Pension Program (described below). These are
accrued amounts as of the end of 2009; none of these amounts
have been paid to the NEOs. For any given year, there will be a
change in the accumulated benefit. For example, from one year to
the next, the accumulated benefit may increase because a NEO has
worked for an additional year and received credit for that or
his Pension Program compensation has increased. The annual
change in accumulated benefit is disclosed in the Summary
Compensation Table above in the Change in Pension
Value column.
The Company recognizes these amounts as a future pension
liability on its financial statements. The Company calculates
these amounts using complex actuarial valuations and
assumptions. These assumptions are described in Footnote 16 to
the Companys 2009 financial statements and in
Managements Discussion and Analysis under the caption
Critical Accounting Policies-Pension Benefits in the
2009
Form 10-K
and Annual Report. However, as required by SEC rules, the table
above assumes that each NEO will retire at the earliest
retirement age that would provide full benefits. Generally, this
is the earliest of reaching age 65, or reaching age 62
with at least 10 years of service to the Company, or
accumulating 85 points (points being the sum of age
plus years of service). The value in todays dollars of the
total retirement benefits that each NEO eventually receives may
be more or less than the amount shown in the above table.
General
Terms of the Praxair Pension Program
The Company has a retirement pension program for all of its
eligible U.S. employees (the Pension Program).
The Company has an obligation to pay pension benefits according
to formulas described below under Benefits
Calculations. The Pension Program does not include the
Companys 401(k) Savings Plan, which is a defined
contribution plan. The 401(k) Savings Plan is funded by
employee and Company contributions but the Company does not
promise any given retirement benefit. Instead, any retirement
payments will depend on employee and Company contributions and
the investment return on those contributions. As it applies to
NEOs and certain other employees, the Pension Program has the
following two parts:
|
|
|
|
1.
|
The Praxair Pension Plan is intended to meet Federal tax
law rules so that it will be considered a tax-qualified
defined benefit retirement plan (the Pension
Plan). Applicable laws require the Company to periodically
set aside funds to meet its obligations under this plan. The
rules also limit the amount of benefits that can be paid and do
not allow using pay above certain levels to calculate retirement
benefits. One or more of these limitations apply to NEOs and to
certain other employees. Therefore, the Company maintains
several non-qualified supplemental
|
50
|
|
|
|
|
plans described in paragraph (2) below. These supplemental
plans allow pension benefits to be paid beyond those otherwise
allowed under the Pension Plan.
|
|
|
|
|
2.
|
The Praxair Equalization Benefit and Supplemental Retirement
Income Plans (collectively referred to as the
SRIP) are non-qualified deferred compensation
plans under the Federal tax rules. Therefore, the Company does
not set aside funds to meet these plan obligations. Instead,
SRIP participants have only the Companys promise to pay
the amounts due following their termination of employment with
the Company. The terms of the SRIP are largely identical to
those of the Pension Plan except that: (i) benefits payable
under the SRIP are not limited by the Federal tax law limits
described above, (ii) in order to comply with Federal tax
law governing non-qualified deferred compensation plans,
specifically, Section 409A of the Internal Revenue Code,
benefits accrued under the SRIP are payable at different times
and in different forms than those payable under the Pension
Plan, and (iii) NEOs may have additional benefits paid
under the SRIP that are not the same as the standard benefits of
the Pension Plan (see the footnotes to the above table regarding
the crediting of extra years of service for Mr. Angel and
the minimum retirement benefit for Mr. Breedlove).
|
Except for Mr. Breedlove, each NEO participates in the
Pension Program Traditional Design (a defined benefit design
providing benefits based on final average pay and years of
service), which was available to eligible employees hired on or
before April 30, 2002. Employees hired on or after
May 1, 2002 participate in the Account-Based Design (a
cash balance pension design). Mr. Breedlove
participates in the Account-Based Design.
Benefits
Calculations
The Company calculates Pension Program benefits using one of the
following two basic designs:
Traditional
Design
|
|
|
|
|
This benefit formula considers an employees final average
pay and years of service with the Company.
|
|
|
|
Generally, an employees annual pension benefit is
determined using a formula of 1.5% times the employees
years of service with the Company times the employees
final average pay. This is subject to several reductions,
including offsets for the employees projected Social
Security benefits and certain pension benefits payable under
pension programs maintained by the Companys subsidiaries
or affiliates. For this purpose, the employees final
average pay is equal to his or her highest three years of
salary and annual performance-based variable compensation
(separately chosen) out of the last ten years of service.
|
|
|
|
|
|
Traditional Design pension benefits generally become vested upon
the employees completion of 5 years of service with
the Company.
|
|
|
|
|
|
The payment of benefits may not begin while the employee is
still employed by the Company and its subsidiaries.
|
|
|
|
|
|
Benefits under the Pension Plan become payable as follows:
|
|
|
|
|
|
Unreduced pension benefits are generally payable from the
Pension Plan beginning upon the earliest of (i) the
employees reaching age 65, (ii) the
employees reaching age 62 and completing at least
10 years of service with the Company, or (iii) when
the sum of the employees age plus years of service with
the Company equals at least 85. Mr. Fuchs is currently
eligible for this unreduced retirement benefit.
|
|
|
|
Employees may elect to retire and receive reduced early
retirement benefits under the Pension Plan as early as
age 50 with the completion of at least 10 years of
service with the Company. In this case, the employees
Pension Plan Program benefits are reduced by 5% for each year by
which his or her early retirement date precedes the earliest
date on which he or
|
51
|
|
|
|
|
she would have been eligible to commence an unreduced benefit.
Messrs. Malfitano and Sawyer are currently eligible for
this reduced early retirement benefit.
|
|
|
|
|
|
Employees who terminate with a vested benefit can elect to
receive a significantly reduced Pension Plan benefit upon
attaining age 50.
|
|
|
|
Pension Plan benefits are paid in an annuity form.
|
|
|
|
|
|
Traditional Design benefits under the SRIP are generally payable
in a lump sum following the employees separation from
service with the Company, with the lump sum payment being
actuarially equivalent to the employees accrued benefit
under the SRIP determined using actuarial factors set forth in
the Pension Plan and the SRIP.
|
|
|
|
|
|
Traditional Design SRIP benefits become immediately vested and
payable in a lump sum upon the occurrence of a
change-in-control
of the Company (as defined in the SRIP).
|
Account-Based
Design
|
|
|
|
|
Available to eligible employees who voluntarily elected to move
from the Traditional Design to this Account-Based Design
effective January 1, 2002. Otherwise, this design applies
to all eligible employees hired on or after May 1, 2002.
|
|
|
|
|
|
This is a cash balance pension design. The Company
makes an annual notional contribution for each
participant equal to 4% of eligible pay (salary plus annual
variable compensation).
|
|
|
|
|
|
The Company credits each participants notional account
balance with interest each year based on the
30-year
Treasury Bond rate in effect during the preceding October.
|
|
|
|
|
|
Employees completing at least three years of service earn a
vested right to a pension benefit.
|
|
|
|
|
|
Benefits equal to the employees notional account balance
under the Pension Plan are generally payable in an annuity form
or, if elected by the participant, in a lump sum, beginning any
time after the participants termination of employment
(assuming he or she completed at least three years of service).
|
|
|
|
|
|
Benefits equal to the employees notional account balance
under the SRIP are payable in a single lump sum.
|
|
|
|
|
|
Account-Based Design SRIP benefits become immediately vested and
payable in a lump sum upon the occurrence of a
change-in-control
of the Company (as defined in the SRIP).
|
Providing
Extra Pension Benefits
The Company may credit to an employee more years of service
under the Pension Program than the employee may actually work
for the Company. The Company will consider this as part of
negotiations to hire or to retain a highly valued executive or
certain other employees. In 2001, the Company agreed to provide
Mr. Angel with additional service years under the Pension
Program Traditional Design in order to provide Mr. Angel
with a long-term incentive for staying with the Company. In
connection with hiring Mr. Breedlove, the Company agreed to
provide a minimum retirement benefit under the Pension Program
Account-Based Design. Please see the notes to the table above
for additional information.
52
2009
NONQUALIFIED DEFERRED COMPENSATION
This table shows information regarding compensation amounts that
(i) the NEOs decided not to receive in cash but elected to
defer to a later date under the Companys Compensation
Deferral Program, and (ii) Company contributions related to
the Compensation Deferral Program.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Company
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
|
|
|
|
Contributions
|
|
|
Contributions
|
|
|
Earnings in
|
|
|
Withdrawals/
|
|
|
Aggregate Balance
|
|
|
|
in Last Fiscal
|
|
|
in Last Fiscal
|
|
|
Last Fiscal
|
|
|
Distributions
|
|
|
at Last Fiscal Year
|
Name
|
|
|
Year ($)(1)
|
|
|
Year ($)(2)
|
|
|
Year ($)(3)
|
|
|
($)(4)
|
|
|
End ($)(5)
|
Stephen F. Angel
|
|
|
0
|
|
|
29,625
|
|
|
1,389,914
|
|
|
0
|
|
|
5,021,922
|
Ricardo S. Malfitano
|
|
|
0
|
|
|
11,883
|
|
|
261,751
|
|
|
0
|
|
|
4,008,388
|
James S. Sawyer
|
|
|
0
|
|
|
11,438
|
|
|
119,110
|
|
|
264,479
|
|
|
355,069
|
James J. Fuchs
|
|
|
0
|
|
|
8,063
|
|
|
24,511
|
|
|
0
|
|
|
88,799
|
James T. Breedlove
|
|
|
0
|
|
|
10,750
|
|
|
15,322
|
|
|
0
|
|
|
55,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) NEOs did not make any deferral elections with respect
to compensation payable for 2009.
(2) These amounts are Company contributions made in 2010
for the 2009 calendar year under the Compensation Deferral
Program. These represent matching contributions that would have
been made to the 401(k) Savings Plan on behalf of each NEO but
for certain Federal tax law limits under that plan. These
amounts are included in All Other Compensation in
the Summary Compensation Table above.
(3) All Company contributions to the Compensation Deferral
Program are invested in a
stock-unit
equivalent account that tracks the value of the Companys
common stock. Amounts that each NEO chose to defer of some or
all of his eligible compensation (performance-based variable
compensation and/or salary), are invested in (i) the
Company common
stock-unit
account and/or (ii) a fixed income account. The earnings in
this column are notional earnings based on the price of the
Companys common stock as of December 31, 2009 and/or
the return on the fixed income fund. See the further explanation
below this table.
(4) A distribution was made from Mr. Sawyers
account in 2009.
(5) Balances are net of prior payouts and otherwise are the
total of (i) all compensation that NEOs earned in past
years (not just in 2009) but chose to defer,
(ii) Company contributions made to the Compensation
Deferral Program on behalf of each NEO, and (iii) any
notional investment earnings on these amounts. The balances are
not amounts paid in 2009.
Additional
Information Regarding Nonqualified Deferred
Compensation
The following summarizes the material terms of the Praxair, Inc.
Compensation Deferral Program (Compensation Deferral
Program).
Deferral
Elections; Company Contributions
Eligible employees, including NEOs, may elect to defer receipt
of all or some portion of their annual performance-based
variable compensation payments and up to 50% (in 10% increments)
of their base salaries. Deferral elections are generally
required to be made in December of the year prior to the year in
which the amounts to be deferred will be earned. In exchange for
this deferral, the Company promises to pay that amount, plus
amounts earned on deferral investments, upon the employees
termination from the Company, or at some other future date
specified by the employee. In addition, the Company makes a
notional contribution to the Compensation Deferral Program on
behalf of each NEO equal to the matching contributions that
would have been made to the 401(k) Savings Plan on behalf of the
NEO but for the application of certain Federal tax law limits
under that plan.
Income that is deferred, including notional Company
contributions, and any earnings, are not taxed as income until
paid out at the end of the deferral period. The Company does not
fund or segregate any monies from its general funds, create any
trusts, or make any special deposits for payment of benefits
under the Compensation Deferral Program. All plan balances are
notional and are kept as book entries only. A participants
or beneficiarys right to receive a payment under the
Compensation Deferral Program is no greater than the right of an
unsecured general creditor of the Company. In addition, the
Company may make contributions on behalf of an eligible
employee, as discussed in footnote (2) to the table above.
53
Deferral
Investments
Participants may invest their performance-based variable
compensation deferrals and base salary deferrals into either
(1) the Praxair
stock-unit
equivalent account whose value tracks the market value of
Praxair common stock, including reinvestment of dividends into
additional Praxair stock-equivalent units, or (2) a fixed
income account whose interest rate is fixed annually and is
equal to the
1-year
U.S. Treasury Bond rate as of the end of the immediately
preceding year, plus 50 basis points. For 2009, this fixed
rate was 0.84%. All Company contributions are made into the
Praxair
stock-unit
equivalent account. No preferential earnings are paid to
participants, including NEOs.
Deferral
Payouts
At the time he or she elects to defer the amounts, a participant
has the two choices described below for receiving a future
payment of his or her deferred amounts and their earnings.
Company contributions are paid out only upon retirement or
termination of employment.
|
|
|
|
1.
|
Upon Retirement or Termination. If a participant retires
(defined as the participants termination of employment
with the Company after reaching age 50 and completing at
least five years of service), payment would normally be made in
January of the year following the last day worked. If a
participant dies or his or her employment with the Company
terminates for any reason other than retirement, payment would
normally be made as soon as practicable following the
participants death or termination.
|
|
|
2.
|
January of a Specified Year. Payment is normally made
during the January of the year that a participant specifies for
payment of the amount. Once a participant specifies a year of
payment, the amount will not normally be paid until January of
that year, even if the participant earlier retires or otherwise
terminates employment. The only exception is if the participant
dies, in which case the deferred amounts are paid immediately to
the participants beneficiary.
|
If a
change-in-control
of the Company (as defined in the Compensation Deferral Program)
occurs, all previously deferred amounts will be paid within
45 days after the
change-in-control,
regardless of any payout election that a participant previously
made.
Generally, all distributions from the Compensation Deferral
Program are made in a single lump sum. Any portion of a
participants account that is invested in the Praxair
stock-unit
equivalent account will be distributed in shares of Praxair
common stock. Deferred income invested in the fixed income
account will be distributed in cash.
54
POTENTIAL
PAYMENTS UPON TERMINATION OR
CHANGE-IN-CONTROL
If a NEOs employment with the Company terminates, or a
change-in-control
of the Company occurs with subsequent involuntary termination,
he may be entitled to receive certain payments
and/or
benefits from the Company. The table below shows the estimated
payments
and/or
benefits in connection with the following events based upon the
assumptions described below:
|
|
|
|
1.
|
Voluntary Termination, which includes a NEOs
resignation or retirement, and
Involuntary-for-Cause
Termination, which includes the Companys termination
of the NEOs employment for reasons such as violation of
certain Company policies or for certain performance-related
issues.
|
|
|
2.
|
Involuntary Termination, which includes a termination
other than for cause, but not including a termination related to
a
change-in-control
of the Company. Terminations due to death or disability result
in substantially the same treatment as an Involuntary
Termination, except as described below.
|
|
|
3.
|
A
Change-in-Control
of the Company, as defined under the executive severance
compensation agreements and under the terms of various plans and
agreements described below.
|
The Company entered into identical executive severance
compensation agreements related to a
change-in-control
of the Company (the Severance Agreements) with
certain officers, including NEOs. Under the Severance
Agreements, a
change-in-control
is defined substantially the same as it is defined in the Stock
Plan (see Additional Information Regarding Plan-Based
Awards).
The Severance Agreements provide generally that if a NEOs
employment is terminated within two years after a
change-in-control
either by the Company without cause, or by the NEO for good
reason (in both cases, as defined in the Severance Agreements),
then he will be entitled to receive: (a) accrued salary,
performance-based variable compensation, and benefits;
(b) enhanced life, accident, health insurance and pension
benefits; (c) a lump sum severance payment equal to three
times the sum of his annual salary and target performance-based
variable compensation award; and (d) in some cases,
reimbursement for the excise tax imposed by Section 4999 of
the Internal Revenue Code and corresponding income tax
liabilities associated with payment of the excise tax. The
Company will make these payments or they will be made through a
grantor trust that the Company may adopt and the timing of such
payments will be postponed to the extent required to comply with
the requirements of Section 409A of the Internal Revenue
Code. A Severance Agreement terminates if the executives
employment with the Company is terminated by the executive or by
the Company prior to a
change-in-control
or if the executive ceases to hold an officer level position
with the Company prior to a
change-in-control.
In 2009, the Compensation Committee determined that, for any
executive who becomes an officer of the Company on or after
January 1, 2010, his or her severance agreement will
provide benefits as described above except that, the lump sum
payment will be equal to two times the sum of his or her annual
salary and target performance-based variable compensation award
and would not include any reimbursement for the excise tax
imposed by Section 4999 of the Internal Revenue Code and
corresponding income tax liabilities associated with payment of
the excise tax.
General
Assumptions
Set forth below after the table are narrative descriptions of
payments
and/or
benefits that would have been provided, if any, related to each
employment termination event or a
change-in-control
on December 31, 2009. Also discussed is the basis upon
which the payments
and/or
benefits were calculated. Except as noted below, these amounts
are the incremental or enhanced amounts that a NEO may have
received that are greater than those that the Company would have
provided to employees generally under the same circumstances.
They are estimates only and are based on various assumptions
discussed below. The actual amounts that would be paid or the
benefits that would be provided can be determined only at the
time that each event occurs.
The table and the narrative discussion below assume that
(i) each NEOs employment terminated on
December 31, 2009 due in turn, to each termination event,
including termination within two years after a
55
change-in-control,
as contemplated by the Severance Agreements; (ii) a
change-in-control
occurred on December 31, 2009 under the terms of various
plans and agreements unrelated to the Severance Agreements,
regardless of a termination of employment; and (iii) values
related to outstanding Long-Term Incentive stock awards reflect
the market value of the Companys common stock of $80.31
per share, which was the closing price on the NYSE as of
December 31, 2009, the last trading day of 2009.
2009 Amounts
Potentially Payable Upon Termination
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Performance-
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Other Post-
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Deferred
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Based Variable
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Long-term
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Retirement
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Excise Tax
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Total for each
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Severance
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Termination
|
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Compensation
|
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Compensation
|
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Incentive
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Benefit
|
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Gross-up
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Termination
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Benefits
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Benefits
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Payout
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Payments
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Awards
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Enhancements
|
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Payment
|
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Event
|
Name
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Termination Event
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($)
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($)
|
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($)
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($)
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($)
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($)
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|
($)
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|
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($)
|
Stephen F. Angel
|
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Voluntary or
Involuntary for Cause
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
Involuntary
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
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14,787,707
|
|
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5,436,000
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|
0
|
|
|
|
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20,223,707
|
|
|
|
|
Change-in-Control
|
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6,831,000
|
|
|
|
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27,137
|
|
|
|
|
0
|
|
|
|
|
1,242,000
|
|
|
|
|
14,787,707
|
|
|
|
|
9,421,000
|
|
|
|
|
0
|
|
|
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32,308,844
|
|
|
|
|
|
|
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|
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|
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Ricardo S. Malfitano
|
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Voluntary or
Involuntary for Cause
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
Involuntary
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
3,819,555
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
3,819,555
|
|
|
|
|
Change-in-Control
|
|
|
|
3,246,750
|
|
|
|
|
17,958
|
|
|
|
|
0
|
|
|
|
|
497,250
|
|
|
|
|
3,819,555
|
|
|
|
|
3,268,000
|
|
|
|
|
0
|
|
|
|
|
10,849,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
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|
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|
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|
|
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|
|
|
|
|
|
|
|
James S. Sawyer
|
|
|
Voluntary or
Involuntary for Cause
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
Involuntary
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
3,551,171
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
3,551,171
|
|
|
|
|
Change-in-Control
|
|
|
|
3,052,500
|
|
|
|
|
32,922
|
|
|
|
|
0
|
|
|
|
|
467,500
|
|
|
|
|
3,551,171
|
|
|
|
|
2,786,000
|
|
|
|
|
0
|
|
|
|
|
9,890,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
James J. Fuchs
|
|
|
Voluntary or
Involuntary for Cause
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
Involuntary
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
2,739,949
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
2,739,949
|
|
|
|
|
Change-in-Control
|
|
|
|
2,484,000
|
|
|
|
|
27,137
|
|
|
|
|
0
|
|
|
|
|
368,000
|
|
|
|
|
2,739,949
|
|
|
|
|
720,000
|
|
|
|
|
0
|
|
|
|
|
6,339,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James T. Breedlove
|
|
|
Voluntary or
Involuntary for Cause
|
|
|
|
0
|
|
|
|
|
28,851
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
28,851
|
|
|
|
|
Involuntary
|
|
|
|
0
|
|
|
|
|
28,851
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
2,535,166
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
2,564,017
|
|
|
|
|
Change-in-Control
|
|
|
|
2,415,000
|
|
|
|
|
38,522
|
|
|
|
|
0
|
|
|
|
|
345,000
|
|
|
|
|
2,535,166
|
|
|
|
|
215,040
|
|
|
|
|
0
|
|
|
|
|
5,548,728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
Benefits
Under the Companys generally applicable Severance Plan, if
employment terminates for certain reasons, employees are
generally eligible for severance benefits of up to a maximum of
26 weeks of base pay, depending on their completed years of
service. The Company also has the discretionary ability, on a
case by case basis, to increase the severance benefits paid to
any employee, subject to certain plan limitations. NEOs are
eligible for such severance benefits which are determined in the
same manner as determined for all other eligible employees. Any
other post-termination severance benefits for NEOs that would
have been greater than those generally available to all
employees are described below.
Change-in-Control. Each
NEO has a Severance Agreement with the Company described above.
These agreements provide a formula for determining the severance
benefit due to NEOs for a termination of employment in
connection with a
change-in-control
in lieu of benefits payable under the Companys Severance
Plan. Under the Severance Agreements, NEOs would have received
the amounts shown in the table.
56
Other
Post-Termination Benefits
The Company provides standard benefits that are generally
available to all employees, including group health and dental
insurance, group life insurance and long-term disability
benefits. Any post-termination benefits for NEOs that would have
been greater than those generally available to all employees are
described below.
Voluntary Termination,
Involuntary-for-Cause
Termination, and Involuntary Termination. The Company
currently provides retiree medical benefits to employees who
meet certain age and service requirements at the time of their
termination. Mr. Breedlove would be entitled to receive
retiree medical benefits pursuant to a contractual agreement
between him and the Company. The table shows the value of these
additional medical benefits.
Change-in-Control. Under
the Severance Agreements, NEOs are entitled to continued life,
accident and health insurance for two years. If a NEO is
re-employed and his new employer provides comparable or better
medical coverage at no cost to the NEO, then the Company would
not provide the continued coverage. If Mr. Breedloves
employment is involuntarily terminated other than for cause in
connection with a
change-in-control,
he would also be entitled to the retiree medical benefits
described in Voluntary Termination,
Involuntary-for-Cause
Termination, and Involuntary Termination above. The
table shows the estimated value of all of these benefits.
Deferred
Compensation Payout
Each NEOs accrued balance in his Compensation Deferral
Program account would be payable in accordance with his payout
election, as described under the Nonqualified Deferred
Compensation table above. Under the Compensation Deferral
Program, the payout of deferred balances is accelerated upon a
change-in-control.
There is no value calculated for this acceleration as a NEO
would be simply receiving the amount that he deferred sooner
than the time he had originally elected.
Annual
Performance-Based Variable Compensation Payments
Annual performance-based variable compensation awards that NEOs
may receive are entirely at the discretion of the Boards
Compensation Committee. It is speculative whether the
Compensation Committee would have made such awards for 2009 if a
NEOs employment terminated under the Voluntary
Termination, Involuntary- for-Cause Termination, or the
Involuntary Termination events on or before December 31,
2009. If the Compensation Committee had made such awards for
2009, it is also speculative how the amounts might have related
to the amounts set forth in the Grants of Plan-Based
Awards table in the Estimated Possible Payouts Under
Non-equity Incentive Plan Awards columns. For a
change-in-control,
the Severance Agreements provided a formula for determining the
accrued annual performance-based variable compensation payment
due to a NEO. The amounts shown in the table are based on the
NEOs target annual performance-based variable compensation
award for 2009 (expressed as a percent of salary for that year)
times current base salary.
Long Term
Incentive Awards
Each NEO has outstanding Long Term Incentive Awards granted
under the Stock Plan or prior equity plans. See the Grants
of Plan-Based Awards and Outstanding Equity Awards
at Fiscal Year-End tables above, and the material terms of
time-vesting stock option, performance-vesting stock option,
performance share units and restricted stock grants described in
the narratives to those tables. In certain termination events,
or upon a
change-in-control,
there would be an acceleration of vesting of restricted stock,
performance share units
and/or stock
options. For purposes of this disclosure, values are attributed
to this acceleration, as described below.
Voluntary Termination, or
Involuntary-for-Cause
Termination. If a NEO voluntarily terminates his
employment prior to being retirement eligible, (as defined in
the applicable award) or the Company terminates his employment
for cause, his unexercised stock options and unvested
performance share
57
unit awards will be immediately forfeited. If a NEO retires
before the first anniversary of the option or performance share
unit grant date, as applicable, the respective options or
performance share units associated with that grant also will be
immediately forfeited. No acceleration of the exercisability of
any stock option or performance share unit award occurs upon
retirement and, therefore, no value is attributed to stock
options or performance share unit awards under these termination
events. In addition, no value is attributed for the unvested
restricted stock award held by Mr. Angel, as it would be
forfeited in connection with these termination events.
Involuntary Termination or
Change-in-Control. The
table shows the values attributable to acceleration of vesting
in these termination events (restricted stock, time-vesting
stock options, performance-vesting stock options and performance
share unit awards). As of December 31, 2009, Mr. Angel
had 23,917 unvested shares of restricted stock that would vest
immediately. The value of these shares is the number of shares
that would vest times the per share price of Praxairs
common stock. Other than upon death, or upon a
change-in-control
(as defined in the Stock Plan described under the Grants
of Plan-Based Awards table above), time-vesting stock
options do not become immediately exercisable, but will continue
to become exercisable at the times set forth in the grant
agreements, and may be exercised until the lesser of their
remaining term or three years. Performance-vesting stock options
become immediately forfeited if the performance goal has not
been met at the time of termination, otherwise, they will
continue to become exercisable at the time set forth in the
grant agreements, and may be exercised until the lesser of their
remaining term or three years.
In the Involuntary Termination and
Change-in-Control
events, the only value is with respect to time-vesting and
performance-vesting stock options whose vesting accelerates upon
death or a
change-in-control.
This option acceleration value is determined by the difference
between the exercise price of the accelerated options and the
per share price of the Companys common stock times the
number of the accelerated option shares. There is no value
attributable for stock options already vested prior to death or
prior to a
change-in-control.
All performance share unit awards immediately vest with a target
payout upon a NEOs death or disability or upon a
change-in-control
(as such terms are defined in the Stock Plan described under the
Grants of Plan-Based Awards table above). This
performance share unit award acceleration value is determined as
the per share price of the Companys common stock times the
target number of shares subject to the performance share unit
award.
Retirement
Benefit Enhancements
The Pension Program benefits for each NEO are discussed as part
of the Pension Benefits table above, and no enhanced
benefits would be payable under the Pension Program that are not
otherwise included in the Pension Benefits table.
Voluntary Termination,
Involuntary-for-Cause
Termination, and Involuntary Termination. As shown in the
table, except for Messrs. Angel and Breedlove, NEOs would
not be entitled to any additional or enhanced benefit under
these termination events, but any vested benefit would be
preserved and would become payable under the Pension Program at
such time as the NEOs would otherwise become eligible for
pension payments. If Mr. Angel is terminated involuntarily
other than for cause, he will be entitled to the additional
years of credit service as described in footnote (2) to the
Pension Benefits table. The amount shown in this
table above is the value of such additional years of credit
service that is not included in the Pension Benefits table
values. If Mr. Breedlove terminates for any reason, he will
be entitled to the minimum retirement benefit described in
footnote (6) to the Pension Benefits table. No
amount is shown in this table above because the full value of
such minimum retirement benefit is included in the Pension
Benefits table values.
Change-in-Control. The
Severance Agreements do not provide for the crediting of years
of service or similar enhanced benefits that would be payable
under the Pension Program itself. Instead, the Severance
Agreements provide for lump sum payments equal to the
incremental value of three
58
additional years of age and service credited under the Pension
Program for NEOs participating in the Pension Program
Traditional Design. Mr. Angel also would be entitled to the
additional years of service credit described in footnote
(2) to the Pension Benefits table above. For
Mr. Breedlove, the only NEO participating in the Pension
Program Account-Based Design, the Severance Agreement provides
for a lump sum payment equal to 12% of his pension eligible
compensation (determined without reference to any applicable
Internal Revenue Code limits) to duplicate 3 years of
Company contributions under the Pension Program Account-Based
Design. In addition, if Mr. Breedloves employment was
terminated in connection with a
change-in-control,
he would be entitled to the minimum retirement benefit described
in footnote (6) to the Pension Benefits table
above.
Excise
Tax Gross-Up
Payment
Under the Severance Agreements, the Company would reimburse NEOs
for amounts they owed under Section 4999 of the Internal
Revenue Code due to their receipt of excess
parachute payments, as well as for all taxes due in
connection with such reimbursements. If the aggregate present
value of the benefits provided to a NEO in connection with a
change-in-control
does not exceed 105% of the threshold amount at which such
payments become an excess parachute payment
resulting in the excise tax, the Company would reduce the
benefits payable to the NEO to the extent necessary to avoid
such excise tax. The excise tax reimbursements apply only to the
Change-in-Control
termination event under the Severance Agreements, but no NEO
would have been subject to such excise tax had such event
occurred on December 31, 2009.
59
Director
Compensation
Director
Compensation Program.
The
Company paid the amounts reported in the table below pursuant to
its director compensation program in effect for 2009. The
Company does not pay any director who is a Company employee
(Mr. Angel in 2009) for serving as a member of the
Board of Directors or any committee of the Board of Directors.
The Governance & Nominating Committee of the Board
determines non-management director compensation consistent with
the Directors Compensation principles set forth in the
Corporate Governance Guidelines included in this Proxy Statement
at Appendix 1. The director compensation program in effect
for 2009 is described below.
Cash Compensation.
|
|
|
|
|
A $55,000 annual retainer paid quarterly.
|
|
|
|
A $1,500 fee for each Board and each committee meeting attended.
|
|
|
|
An additional $10,000 annual retainer paid quarterly to each
chairman of a Board committee ($15,000 for the chairman of the
Audit Committee).
|
|
|
|
An additional $10,000 annual retainer paid quarterly to the
Executive Session Presiding Director.
|
Equity Compensation. Each active non-management
director participates in the 2005 Equity Compensation Plan for
Non-Employee directors of Praxair, Inc. which was approved by
shareholders at the 2005 Annual Meeting. The plan allows grants
of stock options, restricted stock, unrestricted stock, deferred
stock units under the Fees Deferral Plan described below, or any
combination thereof, as the Governance & Nominating
Committee determines. Under that plan, the Committee may make an
annual equity grant to each non-management director having a
value up to an amount set by the Board. For 2009, the Board set
this amount at $85,000.
The Governance & Nominating Committee selected stock
options and deferred stock units as the forms of equity for the
2009 grant, with options representing approximately 50% of the
value of the equity granted, and deferred stock units
representing approximately 50%. The exercise price of each
option granted was 100% of the NYSE closing price of the
Companys common stock on the date of grant. These 2009
options vest in consecutive equal annual installments over three
years, beginning on the first anniversary of the grant date. All
of the 2009 options expire on the tenth anniversary of the date
of grant. The plan contains provisions regarding the
exercisability and vesting of outstanding options in the event
of termination of service, retirement, disability, death and
change-in-control
of Praxair. The deferred stock units were delivered by means of
a cash award that was credited to each directors stock
unit account under the Directors Fees Deferral Plan and
mandatorily deferred for a minimum of three years. The deferred
stock units were fully vested (non-forfeitable) upon the date of
grant.
The number of option shares granted in 2009 to deliver $42,500
in value was determined by using the Black Scholes valuation
model. This value is not the same as the full grant date fair
value determined by accounting standards related to share-based
compensation reported in the Options Awards column
in the table below. The number of deferred stock units credited
to each directors stock unit account so as to deliver the
$42,500 value as of January 1, 2009, was based upon the
average of the closing prices of the Companys stock for
the twenty trading days prior to January 1, 2009.
Fees Deferral Plan. Under the Directors Fees
Deferral Plan, non-management directors may, before the
beginning of a calendar year, elect to defer to a later date
payment of some or all of the cash fees that may be earned in
the upcoming year. A director fixes this deferred payment date
when making a deferral election. A director also chooses whether
the deferred fees will earn amounts based upon a Cash
Account, or a Stock Unit Account. The Cash
Account earns interest at the prime rate, while the value of the
Stock Unit Account tracks the market price of the Companys
common stock. Stock Unit Accounts are also credited with
additional stock units whenever dividends are paid on the
Companys common
60
stock. Dividends are credited at the same rate as they are paid
to all shareholders. Stock units provide directors the economic
equivalent of owning the Companys stock, except that the
units may not be transferred or sold and they do not provide any
voting or other shareholder rights. The Cash Account
is paid to the director in cash on the designated payment date.
The Stock Unit Account is paid in shares of Company
common stock.
Expenses. The Company pays or reimburses directors
for travel, lodging and related expenses incurred in connection
with attending board and committee meetings, the Annual Meeting
and other Company business-related events (including the
expenses related to the attendance of spouses if they are
specifically invited for appropriate business purposes), and may
provide use of Company chartered aircraft. From time to time,
the Company may reimburse a directors expenses for
his/her
participation in third party-supplied continuing education
related to the directors board or committee service.
Changes
for 2010.
During
2009, the Governance & Nominating Committee engaged
Deloitte Consulting to provide data, analysis and advice to
support the Committees periodic review of the
Companys director compensation program, including a report
on director compensation trends and benchmarking of director
compensation against peer companies. Such analysis and advice
was last conducted in late 2006 by another consultant. The data
indicated, among other things, that the average total
compensation for the Companys non-management directors was
substantially below the median of that paid to directors at
benchmark companies in the Key Company Group and other large
companies in general industry. As a result of this review, the
Governance & Nominating Committee recommended to the
Board, and the Board adopted, certain changes to the director
compensation program, effective January 1, 2010, designed
to align the program more closely with the director compensation
programs of such benchmark companies. Specifically, the
Committee determined to eliminate per-meeting director fees, to
increase the base annual retainer to $90,000, to increase the
value of equity to be delivered annually to $130,000, and to
deliver such equity solely in the form of deferred stock units
which are subject to one-year vesting and mandatorily deferred
for a minimum of 3 years.
61
This table shows (i) the fees that the Companys
non-management directors earned in 2009, (ii) the grant
date fair value of stock options, and (iii) other amounts
disclosed as All Other Compensation.
2009
DIRECTOR COMPENSATION TABLE
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Change in Pension
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Non-Equity
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Value and
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Fees Earned or
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Stock
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Incentive Plan
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Nonqualified Deferred
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All Other
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Paid in Cash
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Awards
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Option Awards
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Compensation
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Compensation
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Compensation
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Total
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Name
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($)(1)
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($)
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($)(2)
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($)
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Earnings (3)
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($)(4)
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($)
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Nance K. Dicciani
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121,600
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0
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37,030
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0
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0
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7,500
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166,130
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Edward G. Galante
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127,600
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0
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37,030
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0
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0
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0
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164,630
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Claire W. Gargalli
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149,100
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0
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37,030
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0
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0
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6,250
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192,380
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Ira D. Hall
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136,100
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0
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37,030
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0
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0
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7,500
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180,630
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Raymond W. LeBoeuf
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141,100
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0
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37,030
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0
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0
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0
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178,130
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Larry D. McVay
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126,100
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0
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37,030
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0
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0
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2,500
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165,630
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Wayne T. Smith
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134,600
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0
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37,030
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0
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0
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7,500
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179,130
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H. Mitchell Watson, Jr.(5)
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129,100
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0
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37,030
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0
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0
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8,000
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174,130
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Robert L. Wood
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126,100
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0
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37,030
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0
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|
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|
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0
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|
|
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0
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163,130
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(1) Certain non-management directors elected to defer some
or all of their cash retainers and/or meeting fees earned in
2009 pursuant to the Directors Fees Deferral Plan
described above. Any deferred amounts are included in this
column. Also includes the fair market value at the time of its
crediting to the directors deferred compensation account
($45,600) of the 2009 deferred stock unit grant discussed above
under Director Compensation Program.
(2) The amounts shown in this column were not actually paid
to any of the directors in 2009. The reported amounts represent
the aggregate grant date fair value for options granted in 2009
calculated in accordance with accounting standards related to
share-based compensation. The assumptions used in computing
these amounts are included in Note 15 to the Companys
2009 financial statements in the 2009
Form 10-K
and Annual Report. The actual gain that a non-management
director may receive from exercising an option sometime in the
future may be higher or lower than these reported amounts, and
these options have value only if the price of the Companys
stock increases above the options exercise price.
Each non-management director then serving received a stock
option grant on February 24, 2009 of 4,600 shares at
an exercise price of $60.92 per share. The exercise price of the
option grant was 100% of the NYSE closing price of the
Companys common stock on the date of grant. At
December 31, 2009, the non-management directors had the
following outstanding stock option awards, some of which were
not fully or partially vested: Nance K. Dicciani,
6,146 shares; Edward G. Galante, 9,025 shares; Claire
W. Gargalli, 47,930 shares; Ira D. Hall,
27,930 shares; Raymond W. LeBoeuf, 47,930 shares;
Larry D. McVay, 8,485 shares; Wayne T. Smith,
27,930 shares; H. Mitchell Watson, Jr., 22,930 shares;
and Robert L. Wood, 27,930 shares.
(3) Some non-management directors defer cash fees pursuant
to the Directors Fees Deferral Plan
and/or have
balances from previous deferrals. As none of the earnings on
these deferred amounts is above market or otherwise
preferential, no amounts are included in this column.
(4) Amounts in this column do not represent compensation
paid to the directors. These amounts are Company matching
contributions of the non-management directors charitable
donations to educational institutions made in 2009. SEC rules
require disclosure of these amounts in this table. The Praxair
Foundation matches personal donations to eligible educational
institutions, up to a $7,500 maximum per year per donor for
2009. This matching gift program is available to Company
employees and non-management directors on the same basis.
(5) Mr. Watson retired from the Board effective
March 15, 2010.
62
Miscellaneous
Shareholder
Proposals for the 2011 Annual Meeting
In order to be included in Praxairs proxy statement and
form of proxy, proposals of shareholders intended to be
presented at Praxairs 2011 annual meeting of shareholders
must be received in writing at Praxairs principal
executive offices by November 18, 2010. Otherwise, in order
for a shareholder to bring other business before that
shareholder meeting, Praxairs Certificate of Incorporation
requires that proper written notice be received by Praxair on or
before February 26, 2011. Shareholder proposals or related
written notices must be delivered by mail addressed to the
Assistant Corporate Secretary, Praxair, Inc., 39 Old Ridgebury
Road, M-1, Danbury, CT
06810-5113.
Annual
Reports
Shareholders of record on March 1, 2010 should have
received either (1) a notice that Praxairs 2009
Form 10-K
and Annual Report is available on the Internet or (2) a
printed copy of both this Proxy Statement and the 2009
Form 10-K
and Annual Report. If you have received a printed copy of this
Proxy Statement without the 2009
Form 10-K
and Annual Report, please write to Investor Relations at the
address below and a copy will be sent to you.
A COPY OF PRAXAIRS ANNUAL REPORT ON
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009 IS AVAILABLE TO EACH
HOLDER OR BENEFICIAL OWNER OF PRAXAIRS COMMON STOCK AS OF
MARCH 1, 2010. THIS REPORT WILL BE FURNISHED WITHOUT CHARGE UPON
WRITTEN REQUEST TO THE INVESTOR RELATIONS DEPARTMENT, PRAXAIR,
INC., 39 OLD RIDGEBURY ROAD, M-2, DANBURY, CT
06810-5113.
Cost
of Proxy Solicitation
The entire cost of soliciting proxies will be borne by Praxair
including the expense of preparing, printing and mailing this
Proxy Statement. Solicitation costs include payments to
brokerage firms and others for forwarding solicitation materials
to beneficial owners of Praxairs stock and reimbursement
of
out-of-pocket
costs incurred for any follow up mailings. Praxair also has
engaged Morrow & Co., LLC to assist in the
solicitation of proxies from shareholders at a fee of $8,000
plus reimbursement of
out-of-pocket
expenses. In addition to use of the mail, proxies may be
solicited personally or by telephone by employees of Praxair
without additional compensation, as well as by employees of
Morrow & Co., LLC.
BY ORDER OF THE BOARD OF DIRECTORS
JAMES T. BREEDLOVE,
Senior Vice President, General Counsel &
Secretary
March 16, 2010
YOU ARE
URGED TO PROMPTLY COMPLETE AND SUBMIT A PROXY
63
APPENDIX 1
CORPORATE
GOVERNANCE GUIDELINES
The Corporation shall comply with all applicable legal
requirements and New York Stock Exchange standards; and the
Board shall adopt such additional practices and structures that
it believes will improve the Corporations governance so as
to better serve the interests of the shareholders and the other
constituencies of the Corporation.
Business Integrity, Ethics and Compliance with
Laws. The Board believes that a strong integrity,
ethics, and compliance culture is (1) a social obligation
to those impacted by the Corporation, (2) necessary for
maintaining investor trust, and (3) a necessary condition
for effective corporate governance, the absence of which cannot
be overcome by formal practices and structures. The Board
believes further that such culture must be driven by example and
emphasis at the top of the organization.
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The Board shall adopt and periodically review a Corporate Policy
on Compliance with Laws and Business Integrity and Ethics, and
such policy shall be equally applicable to the directors of the
Corporation as it is to its officers and employees.
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The Board, acting through its Audit Committee, shall oversee and
monitor managements development and operation of
preventative, reporting, investigation, and resolution programs
for implementing that policy.
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Ethical values and performance shall be significant factors in
the selection of directors, the CEO, and senior management.
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Each elected officer of the Corporation shall be accountable to
the Board for policy compliance within
his/her
areas of responsibility and compliance performance shall be
considered in the performance reviews and compensation
determinations for such officers.
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Any related transaction by an officer or director
shall be pre-approved by a Committee of independent and
disinterested directors. A related transaction shall
mean any transaction reportable under the rule SK
Item 404 of the Securities and Exchange Commission or that
would violate the Boards Independence Standards.
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Role of the Board of Directors. The duties of the
Board are largely defined by Delaware law, federal statutes and
regulations (notably those of the Securities and Exchange
Commission), and New York Stock Exchange Listing Standards. The
Board shall focus its priorities on the following core
responsibilities:
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Advice and counsel to management regarding significant issues
facing the Corporation.
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Assessing the performance of the Chief Executive Officer and
senior management and setting compensation accordingly.
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Succession planning and management development.
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Overseeing the Corporations integrity and ethics,
compliance with laws, and financial reporting.
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Evaluating and approving the Corporations strategic
direction and initiatives and monitoring implementation and
results.
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Monitoring the Corporations operating results and
financial condition.
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Understanding and assessing risks to the Corporation and
monitoring the management of those risks.
|
1-1
Board and Committee Effectiveness Assessment. To
assure that it is effectively fulfilling its role, the Board
must periodically reflect on its own performance.
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At least annually, the Board shall assess the Corporations
governance practices and structures; and its effectiveness as a
Board in fulfilling its responsibilities and in addressing the
issues facing the Corporation.
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The Governance & Nominating Committee shall be
responsible for organizing and initiating this assessment and
shall take into account the views and recommendations of
recognized governance authorities as well as national and
international codes of best governance practices.
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Each Board Committee, under the leadership of its Chairman,
shall conduct a self-assessment of its effectiveness at least
annually, including a review of its charter from the Board.
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Board Leadership. Combining the positions of
Chairman and Chief Executive Officer provides the most effective
leadership model for this Corporation but, in order to assure a
proper balance between the Chairman/CEO and the independent
directors, and to assure effective leadership in the event of a
contingency:
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Regular private meetings of the independent directors shall be
scheduled no less than quarterly.
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The independent directors shall elect an Executive Session
Presiding Director (PD) to preside at such meetings and to
provide leadership in the event of the incapacitation of the
Chairman or of a crisis or other event or circumstance which
would make management leadership inappropriate or ineffective.
It is the practice to appoint the Chair of the
Governance & Nominating Committee to this position.
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The PD shall act as a spokesman and contact for the Board or the
Company in engagements with shareholders or external parties
when the circumstances warrant.
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The PD shall be responsible for conducting at least annually a
formal performance review of the Chief Executive Officer.
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The PD may periodically advise the Chief Executive Officer of
the views of the independent directors and, when circumstances
warrant, serve as a liaison between the Chief Executive Officer
and the independent directors. However, such role shall not
diminish (1) the responsibility of each director to
communicate frank advice and counsel directly to the Chief
Executive Officer, and (2) the benefits of the Chief
Executive Officer having a frank and open relationship with each
director.
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The Chairman shall ensure that the Boards agendas,
schedules, and information flow to the directors provide
adequate focus, time, and background for the Board to fulfill
its core responsibilities.
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Each Committee shall review at least annually its charter from
the Board and the annual calendar of agenda topics and meetings.
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The Chairman shall ensure that each Committees agendas
cover every item of the Committees responsibility as set
forth in the Committees charter as adopted by the Board.
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The Chairman shall discuss with the PD, and the PD shall review
in advance of each Board meeting: the agenda and such other
matters pertaining to the meeting and its agenda as the PD may
request.
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Management shall discuss with the applicable independent
Committee Chair, and that Committee Chair shall review in
advance of each Committee meeting: the agenda, the time
allocated for each agenda topic for that Committee meeting, and
such other matters pertaining to the meeting and its agenda as
the Committee Chair may request.
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1-2
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The Chair of the Governance Committee shall ensure that the
Board and Committee effectiveness assessment (as described in
the foregoing section of these Guidelines) includes an
assessment of the coverage of required oversight matters over
the annual cycle of Board and Committee meetings, the time
allocated to agenda topics and the quality and sufficiency of
information provided by management to the Board and its
Committees.
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Each director shall have the right to request that items be
added to the Board and Committee agendas, that additional time
be allocated to discussion of an issue, and that additional
information be provided by management or other sources.
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The Board shall have access to management other than the Chief
Executive Officer for the purposes of information gathering and
management assessment and development.
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Board Structure. Much of the oversight work of the
Board shall be done through specialized Committees in which a
focus and expertise can be brought to bear on important issues.
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As a minimum, the Board shall have standing Committees as
follows: an Audit Committee, a Governance & Nominating
Committee, a Compensation & Management Development
Committee, and a Finance & Pension Committee.
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Each of the foregoing Committees shall be comprised only of
independent directors.
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The Board shall formally adopt a written charter for each
Committee specifying in detail the responsibilities delegated to
that Committee.
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Each Committee Charter shall provide authority to the Committee
to retain and pay such external advisors as it deems necessary
to fulfill its obligations.
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Each Committee shall regularly report to the full Board on its
reviews, actions, decisions and recommendations.
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While director qualifications, anticipated retirement dates, and
other considerations may constrain strict adherence to any fixed
rotation policy, it shall be the goal of the Board to regularly
rotate Committee Chairs and members every 3-5 years while
maintaining at all times on each Committee some number of
members having reasonable tenure and experience in the Committee.
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The Governance & Nominating Committee shall review
Committee membership at least annually and recommend to the
Board any changes that may be appropriate; and the Board shall
appoint Committees annually at the meeting immediately following
the Annual Shareholders Meeting.
|
Board Independence and Shareowner
Representation. The Board recognizes its duties to the
shareowners of the Corporation and believes that it can best
fulfill those responsibilities by being and acting independent
of management.
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A substantial majority of the Board shall be independent.
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The Board shall establish and periodically review independence
standards for service on the Corporations Board.
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Board members and candidates shall be periodically evaluated for
compliance with these independence standards.
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Director stock ownership guidelines shall be established to
insure that each director has sufficient meaningful long term
stake in the performance of the company to be aligned with the
interests of long term shareowners; but not so substantial to
the individuals total wealth as to potentially compromise
the directors independence or willingness to raise issues
that may adversely affect the short-term market price.
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1-3
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Any director appointed by the Board to fill a vacancy shall
stand for election at the next meeting of the shareholders for
which inclusion of such nomination in the Corporations
proxy materials is practicable.
|
Director Qualifications and Performance. The Board
acknowledges the importance of insuring that it has the mix of
perspectives, experience and competencies that are appropriate
to the Corporations strategies, and its business, market,
geographic, and regulatory environments. The Board also
recognizes that its effectiveness is dependent on having
directors who have the time to focus on the Corporations
issues, and who contribute to an open Board culture that
encourages frank discussion and free exchange of information.
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The Governance & Nominating Committee shall be
responsible for evaluating the mix of Board member skills
required in connection with filling any vacancy on the Board.
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The Committee shall take into account the Chief Executive
Officers views as to areas in which management desires
additional advice and counsel.
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It shall be the Boards policy that any director whose
principal employment materially changes from that in effect at
the time s/he was first selected for service on the
Corporations Board shall offer his or her resignation as a
director.
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The Board shall establish, and periodically review, a policy
limiting each directors service on other public company
Boards and Audit Committees to assure that the
Corporations directors are able to provide sufficient
focus on their responsibilities to this Board.
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The Board shall establish such tenure policies as it deems
necessary to maintain an appropriate balance between fresh
perspectives and energy and institutional experience and
knowledge of the Corporation.
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The full Boards self-assessment of its effectiveness shall
include questions regarding the preparedness and contributions
of directors generally. The Governance & Nominating
Committee shall provide feedback to directors and suggest
additional training as deemed appropriate based on this
self-assessment.
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The Governance & Nominating Committee shall privately
consider measures of director effectiveness when recommending an
incumbent director for re-election.
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Directors shall be periodically offered self-assessments as a
way to communicate expectations and the factors by which
effective directorship can be measured, to encourage reflection
and self-improvement, and to provide another means for directors
to identify their requests for additional training or
orientation to assist them in discharging their duties as
directors.
|
Director Election and Resignation Policy. Any
nominee for election to the Board of Directors who is then
serving as a Director and, in an uncontested election, receives
a greater number of against votes than
for votes shall promptly tender his or her
resignation following certification of the vote. The Governance
and Nominating Committee of the Board shall then consider the
resignation offer and recommend to the Board whether to accept
or reject the resignation, or whether other action should be
taken; provided that any director whose resignation is under
consideration shall not participate in the committees
recommendation regarding whether to accept the resignation. The
Board shall take action on the committees recommendation
within 90 days following certification of the vote, and
promptly thereafter publicly disclose its decision and the
reasons therefor.
Director
Training.
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Each director is responsible for his or her own continuing
education.
|
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Management shall periodically identify for the Board third
party-provided continuing education programs and the Corporation
shall sponsor the attendance of any director who wishes to
attend any such program, as well as attendance at other like
programs that may be identified by the director.
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Management shall annually conduct training related to matters
within the oversight responsibilities of the Audit Committee,
and non-Audit Committee members shall be free to attend as well.
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The Corporate Secretary will be responsible for designing and
organizing an orientation program tailored to the needs of any
new director.
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Director Compensation. Compensation for the
non-management directors service to the Corporation shall
be based on the following principles:
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Total compensation shall be targeted at the median of a
benchmark group of U.S. public companies in the S&P
500 selected by the Governance Committee having similar size,
business complexity and global reach as the Corporation.
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At least 50% of the total compensation value delivered shall be
in the form of equity so as to align each directors
interests with that of the Corporations diversified
shareholders.
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The form of equity granted and terms of grant shall be aligned
with the directors long term focus and fiduciary role.
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Mandatory stock ownership guidelines shall be established to
require each director to acquire and hold a meaningful
investment in the Corporations stock during the
directors tenure on the Board, including acquisition from
personal resources before or upon first joining the Board.
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Compensation arrangements shall provide flexibility to allow
each director to balance a mix of equity and cash according to
his/her own
needs while meeting the mandatory stock ownership guidelines.
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The Governance Committee shall have the responsibility to
periodically review the appropriateness of the directors
compensation program and the foregoing principles.
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Political Donations. The Corporation shall comply
with all applicable federal and state laws governing
contributions of Corporate assets for political purposes.
In accordance with law, the Corporation may administratively
support one or more federal or state political action committees
(PAC) comprised of the voluntary contributions of employees or
retirees but individual donations to such PACs shall not be
coerced in any way nor shall an individuals donation
decision affect in any way that persons employment status
or performance evaluation.
Shareholder Rights Plan Policy. The Board will adopt
or materially amend a Stockholder Rights Plan only if, in the
exercise of its fiduciary responsibilities under Delaware law,
and acting by a majority of its independent directors, it
determines that such action is in the best interests of
Praxairs shareholders. Also, if the Board adopts or
materially amends a Stockholder Rights Plan, it will submit such
action to a non-binding shareholder vote as a separate ballot
item at the first annual meeting of shareholders occurring at
least six months after such action.
Whenever a Rights Agreement is in place, a committee of
independent directors shall evaluate the Agreement annually to
determine whether it continues to be in the best interests of
the Companys stockholders. Among the subjects of this
annual review will be consideration of whether the threshold for
calling a special meeting is appropriate in view of the
ownership profile of the company.
Independent Auditors. The Audit Committees
Charter shall provide that this Committee is responsible for
evaluating the independence of the Corporations
independent auditors, and adopting such policies as it deems
necessary to assure that independence.
The independent auditors shall report to the Audit Committee and
that Committee shall be directly responsible for the
appointment, compensation, retention and oversight of the work
of the independent auditors.
1-5
APPENDIX 2
BOARD
POLICY
DIRECTOR
INDEPENDENCE STANDARDS
To assist the Board in determining the independence of each
director, the Boards Governance & Nominating
Committee has established the following minimum Director
Independence Standards.
Independence
Standards for Board Service
A director will not be considered independent
if:
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the director is, or has been within the last three years, an
employee of the Company;
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an immediate family member of the director is, or has been
within the last three years, an executive officer of the Company;
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the director has received, or has an immediate family member who
has received, during any twelve-month period within the last
three years, more than $100,000 in direct compensation from the
Company, other than: (a) directors fees and pension
or other forms of deferred compensation for prior service with
the Company, provided that such compensation is not contingent
on continued service, and (b) compensation received by a
directors immediate family member for service as an
employee of the Company (other than as an executive officer);
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(A) the director or an immediate family member of the
director is a current partner of a firm that is the
Companys internal or external auditor; (B) the
director is a current employee of such firm; (C) the
director has an immediate family member who is a current
employee of such firm and who participates in the firms
audit, assurance or tax compliance (but not tax planning)
practice; or (D) the director or an immediate family member
of the director was within the last three years (but is no
longer) a partner or employee of such firm and personally worked
on the Companys audit within that time;
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a present executive officer of the Company serves or served on
the compensation committee of the board of directors of a
company that, at the same time within the last three years,
employs or employed either the director or an immediate family
member of the director as an executive officer;
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a director is a current employee, or an immediate family member
of a director is a current executive officer, of another company
that has made payments to, or received payments from, the
Company for property or services in an amount which, in any of
the last three fiscal years, exceeds the greater of
$1 million, or two percent (2%) of the other companys
consolidated gross revenues;
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a director serves as an executive officer of a
not-for-profit,
tax exempt organization, and within the preceding three years,
the Company or the Praxair Foundation made discretionary
charitable contributions to the organization in any single
fiscal year that, in the aggregate, exceeded the greater of
(a) $1 million, or (b) two percent (2%) of that
organizations consolidated gross revenues, based on the
organizations latest publicly available financial
information.
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If any director or a directors immediate family member has
or had any relationship or transaction of a type set forth in
any of the above standards, and that relationship or transaction
does not fully meet the criteria stated in the applicable
standard, then the relationship or transaction shall be
considered immaterial and deemed to not impair the
directors independence.
2-1
Independence
Standards for Audit Committee Members
In addition to the above standards, a director will not
be considered independent for purposes of service on
the Audit Committee if the director:
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receives any direct or indirect consulting, advisory or other
compensatory fee from the Company, other than compensation for
service as a director; or
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is an affiliated person of the Company (generally,
an owner of more than 10% of the Companys voting stock).
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(the interpretation and application of these two standards shall
be governed by
Rule 10A-3
of the Securities and Exchange Commission).
For purposes of these standards:
immediate family member includes a persons
spouse, parents, step-parents, children, step-children,
siblings, mothers and
fathers-in-law,
sons and
daughters-in-law,
brothers and
sisters-in-law
and anyone (other than a tenant or domestic employees) who
shares the persons home.
executive officer, when used in the context of a
public company, has the same meaning specified for the term
officer in
Rule 16a-1(f)
under the Securities Exchange Act of 1934.
Company means Praxair, Inc. and any of its
consolidated subsidiaries.
2-2
PROXY/VOTING INSTRUCTION CARD
This proxy is solicited on behalf of the Board of Directors of Praxair, Inc.
for the Annual Meeting of Shareholders on April 27, 2010
I (we) hereby authorize James S. Sawyer and James T. Breedlove, or either of them, and
each with the power to appoint his substitute, to vote as Proxy for me (us) at the Annual Meeting
of Shareholders of Praxair, Inc. to be held at the Danbury Plaza Hotel, 18 Old Ridgebury Road,
Danbury, CT on April 27, 2010 at 9:30 A.M., or any adjournment or postponement thereof, the number
of shares of common stock of Praxair, Inc. which I (we) would be entitled to vote if personally
present. The proxies shall vote such shares as directed on the reverse side of this card and the
proxies are authorized to vote in their discretion upon such other business as may properly come
before the Annual Meeting and any adjournments or postponements thereof. I (we) revoke all proxies
heretofore given to vote at the Annual Meeting.
If I (we) properly sign and return this proxy card, my (our) shares will be voted as I (we)
specify on each Proposal. If I (we) do not specify a choice on one or more Proposals, the proxies
will vote my (our) shares as the Board of Directors recommends on each such Proposal.
For Participants in the Praxair, Inc., Praxair Distribution, Inc., Praxair Healthcare
Services, Inc., Praxair Puerto Rico, LLC or Dow Chemical Company Employee Savings Plans: As to
those shares of Praxair, Inc. common stock, if any, that are held for me in the aforementioned
Savings Plans, I instruct the Trustee of the applicable Savings Plan to vote my shares as I have
directed on the reverse side of this proxy card. Where I do not specify a choice, my shares will be
voted in the same proportion as the trustee votes the shares for which it receives instructions.
PRAXAIR, INC.
(Continued, and to be marked, dated and signed, on the other side)
ê FOLD AND DETACH HERE ê
ANNUAL MEETING OF SHAREHOLDERS April 27, 2010 AT 9:30 A.M.
DANBURY PLAZA HOTEL DANBURY, CT
IF YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE NOTE:
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Only shareholders, and the invited guests of Praxair, will be granted admission to the
Annual Meeting. |
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To assure admittance: |
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If you hold shares of Praxair, Inc. common stock through a broker, bank or other
nominee, please bring a copy of your broker, bank or nominee statement evidencing your
ownership of Praxair common stock as of the March 1, 2010 record date |
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Please bring a photo ID, if you hold shares of record as of March 1, 2010, including
shares in certificate or book form or in the Praxair, Inc. Dividend Reinvestment and Stock
Purchase Plan (DRISP) |
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Please bring your Praxair ID if you are an employee shareholder |
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The Annual Meeting will start promptly at 9:30 A.M. on Tuesday, April 27, 2010. |
From Points West of Danbury:
Take I-84 East to Exit 2 (Mill Plain Road) in Danbury. After exiting, stay left and go to the
bottom of the ramp and turn left. Go to the second light and turn right (Mill Plain Road). Go to
the next light and turn right (Old Ridgebury Road). Go up the hill and the Danbury Plaza Hotel is
on your left.
From Points East of Danbury:
Take I-84 West to Exit 2A (Old Ridgebury Road) in Danbury. The exit ramp circles around and up over
the highway. The Danbury Plaza Hotel is on your left.
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BY MARKING THIS
CARD, YOU ARE VOTING ALL SHARES OF YOUR PRAXAIR COMMON STOCK INCLUDING
THOSE HELD IN THE SAVINGS PLAN(S). |
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Vote MUST
be indicated (X) in Black or Blue Ink |
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The Board of
Directors recommends a vote FOR PROPOSAL 2. |
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1. Election of
Directors. |
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With- |
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The Board of Directors
recommends a vote FOR the nominees listed below |
For All |
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Hold All |
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For All Except |
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Nominees: (01)
Stephen F. Angel (02) Nance K.
Dicciani |
(06) Raymond W. LeBoeuf (07) Larry D.
McVay |
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(03) Edward G. Galante |
(08) Wayne T. Smith |
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For |
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Against |
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Abstain |
(04)
Claire W. Gargalli (05) Ira D.
Hall |
(09) Robert L. Wood |
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2. |
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Proposal to ratify the appointment of the
Independent Auditor |
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(INSTRUCTIONS: To withhold authority to vote for any
individual nominee, mark the For All Except box and write that nominees
name in the space provided below. Such a mark will be deemed a vote FOR
all nominees other than those listed as exceptions.) |
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In their discretion, the Proxies are authorized to
vote upon such other business as may properly come before the meeting or
any adjournment or postponement thereof. |
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Exceptions: |
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Check here if you |
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Consent to future electronic
delivery of the Annual Report/Proxy Statement (see explanation in the Proxy
Statement) |
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Check here if you |
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Have written comments or change of
address on this card |
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Please be sure to
sign and
date this Proxy in the box below. |
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Stockholder
sign above |
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Co-holder (if any)
sign above |
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Please sign name
exactly as it appears on this card. Joint owners should each sign. Attorneys,
trustees, executors, administrators, custodians, guardians or corporate officers
should give full title.
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* * * IF YOU WISH TO VOTE BY INTERNET OR TELEPHONE, PLEASE READ THE
INSTRUCTIONS BELOW * * *
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FOLD AND DETACH
HERE IF YOU ARE VOTING BY MAIL
é
é
PROXY VOTING
INSTRUCTIONS
Stockholders of record
have three ways to vote:
1. By Mail; or
2. By Telephone (using a
Touch-Tone Phone); or
3. By Internet.
Vote by
Telephone
Call Toll-Free on a
Touch-Tone Phone anytime prior to
3 A.M. Eastern Time, April 27 2010.
1-888-216-1276
Vote by
Internet
Prior to 3 A.M.
Eastern Time, April 27, 2010, go to
https://www.proxyvotenow.com/pxa
A telephone or Internet
vote authorizes the named proxies to vote your shares in the same manner as if
you marked, signed, dated and returned this proxy. Please note telephone and
Internet votes must be cast prior to 3 A.M. Eastern Time, April 27, 2010.
It is not necessary to return this proxy if you vote by telephone or
Internet.
Please note that the
last vote received, whether by telephone, Internet or by mail, will be the vote
counted.
IMPORTANT NOTICE
REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE
HELD ON APRIL 27, 2010:
THE PROXY
STATEMENT AND 2009 FORM 10-K AND ANNUAL REPORT ARE NOW AVAILABLE FOR VIEWING AND
DOWNLOADING AT:
2009 Form 10-K and Annual Report:
www.praxair.com/annualreport
2010 Notice of Meeting and Proxy
Statement: www.praxair.com/proxy
Save Praxair future
postage and printing expense by consenting to receive future annual reports
and proxy statements on-line on the Internet. Whether you vote by Internet, by
telephone or by mail, you will be given an opportunity to consent to future
electronic delivery. See the proxy statement for more information about this
option.