SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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Check the appropriate box:
/ / Preliminary Proxy Statement
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
PRAXAIR INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(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
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/ / Fee paid previously with preliminary materials.
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0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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[PRAXAIR LETTERHEAD]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 23, 2002
Dear Praxair Shareholder:
The Annual Meeting of Shareholders of Praxair, Inc. will be held at 9:30
a.m. on Tuesday, April 23, 2002 in the Grand Ballroom of the Sheraton Danbury,
18 Old Ridgebury Road, Danbury, Connecticut, for the following purposes:
1. To elect five directors to the Board of Directors.
2. To conduct such other business as may properly come before the meeting.
Only holders of Common Stock of Praxair, Inc. of record at the close of
business on February 25, 2002 will be entitled to vote at the meeting or any
adjournment 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 using one of the following
methods:
1. ELECTRONICALLY ON THE INTERNET (if instructions for this method are
included in this package), OR
2. BY TELEPHONE (if instructions for this method are included in this
package), OR
3. By signing and dating the PROXY/VOTING INSTRUCTION CARD enclosed in
this package and returning it in the postage-paid envelope that is
provided.
The giving of such proxy does not affect your right to vote in person if you
attend the meeting.
We encourage you to complete and file your proxy electronically or by
telephone (if those options are available to you) as a means of REDUCING THE
COMPANY'S EXPENSES related to the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ DAVID H. CHAIFETZ
DAVID H. CHAIFETZ,
VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY
March 1, 2002
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL
MEETING IN PERSON, PLEASE PROMPTLY COMPLETE AND FILE
A PROXY, EITHER BY INTERNET, BY TELEPHONE OR BY MAIL.
[PRAXAIR LOGO]
PROXY STATEMENT
TABLE OF CONTENTS
PAGE
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
Item 1: Election of Directors.......................................... 1
Item 2: Other Business................................................. 1
PROXY AND VOTING PROCEDURES................................................. 2
HOW TO RECEIVE YOUR ANNUAL REPORT AND PROXY STATEMENT ON-LINE 3
SHARE OWNERSHIP
Principal Holders...................................................... 4
Directors and Executive Officers....................................... 4
Executive Stock Ownership Guidelines................................... 5
THE BOARD OF DIRECTORS
Director Attendance.................................................... 6
Director Compensation.................................................. 6
The Directors.......................................................... 7
EXECUTIVE OFFICERS.......................................................... 11
COMMITTEES OF THE BOARD
(See also "The Audit Committee & The Independent Accountants")
(See also "The Compensation and Management Development Committee and
Executive Compensation")
Finance and Pension Committee.......................................... 12
Public Policy and Nominating Committee................................. 12
THE COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
AND EXECUTIVE COMPENSATION
The Compensation and Management Development Committee.................. 13
The Committee's Report on Executive Compensation....................... 14
Table 1: Summary Compensation Table............................... 17
Table 2: Option Grants in Last Fiscal Year........................ 18
Table 3: Aggregated Option Exercises in Last Fiscal Year and
FY-End Option Values..................................... 18
Defined Benefit or Actuarial Plans..................................... 19
Employment Contracts and Termination of Employment and Change in
Control Arrangements................................................... 19
SHAREHOLDER RETURN (Performance Graph)...................................... 20
THE AUDIT COMMITTEE & THE INDEPENDENT ACCOUNTANTS
The Audit Committee.................................................... 21
The Independent Accountants............................................ 21
Fees.............................................................. 21
The Audit Committee Report............................................. 22
MISCELLANEOUS
Section 16(a) Beneficial Ownership Reporting Compliance................ 23
Shareholder Proposals for the 2003 Annual Meeting...................... 23
Annual Reports......................................................... 23
Cost of Proxy Solicitation............................................. 23
[PRAXAIR LETTERHEAD]
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, APRIL 23, 2002
This statement is furnished to shareholders of Praxair, Inc. ("Praxair") in
connection with the solicitation of proxies for the Annual Meeting of
Shareholders to be held at the Sheraton Danbury, 18 Old Ridgebury Road, Danbury,
Connecticut on April 23, 2002, at 9:30 a.m. or at any adjournment thereof (the
"Annual Meeting"). This Proxy Statement and the enclosed form of proxy are first
being sent to shareholders on or about March 14, 2002. The enclosed proxy is
solicited on behalf of the Board of Directors of Praxair.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
ITEM 1: ELECTION OF DIRECTORS
Five directors are to be elected. Praxair's Board of Directors is divided
into three classes serving staggered terms. The terms of five of the present
directors expire this year and each of them have been nominated for reelection.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT DALE F. FREY, RAYMOND W. LEBOEUF,
BENJAMIN F. PAYTON, WAYNE T. SMITH AND WILLIAM A. WISE BE ELECTED TO SERVE IN
THE CLASS WITH TERMS EXPIRING IN 2005. Each nominee has agreed to be named in
this Proxy Statement and to serve if elected. Biographical data on these
nominees and the other members of the Board of Directors is presented at page 6
of this Proxy Statement under the caption "The Board of Directors".
Unless you otherwise direct on the proxy form (whether by Internet,
telephone or mail), the proxy holders intend to vote your shares in favor of the
above listed nominees. To be elected, a nominee must receive a plurality of the
votes cast at the Annual Meeting in person or by proxy. 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.
ITEM 2: 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 vote your shares in
accordance with their best judgment.
1
PROXY AND VOTING PROCEDURES
SHAREHOLDERS ENTITLED TO VOTE
Common Stock shareholders of record at the close of business on February 25,
2002 will be entitled to vote at the Annual Meeting. As of that date, a total of
162,814,552 shares of Praxair's Common Stock were outstanding and entitled to
vote. Each share of Common Stock is entitled to one vote.
FILING OF PROXIES
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 and mailing it in the
postage-paid envelope provided. Check your proxy card or the information
forwarded by your bank, broker or other holder of record to see which options
are available to you. Please be aware that, if you vote over the Internet, you
may incur costs such as telecommunication and Internet access charges for which
you will be responsible.
The Internet and telephone voting procedures are designed to authenticate
shareholders by use of a Control Number and to allow shareholders to confirm
that their instructions have been properly recorded.
VOTING OF PROXIES
All shares entitled to vote and be 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, the shares
represented by that proxy will be voted on that matter as recommended by the
Board of Directors. If a proxy is returned by mail unsigned, it will also be
voted as recommended by the Board of Directors. Execution of the proxy also
confers discretionary authority to the proxy holder to vote your shares on other
matters that may properly come before the meeting.
REVOCATION OF PROXY
You may revoke your proxy at any time before it is voted by filing with
Praxair's 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.
VOTING AT THE ANNUAL MEETING
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.
VOTE REQUIRED
Directors will be elected by a plurality of the votes cast at the Annual
Meeting. Except as otherwise provided by law, other matters voted on at the
Annual Meeting will be determined by the majority of votes cast at the Annual
Meeting in person or by proxy by shareholders entitled to vote on the matter.
Abstentions and broker non-votes on filed proxies and ballots are not considered
votes cast and will be counted as neither for nor against a matter or nominee
but the shares represented by such an abstention or broker non-vote will be
considered present at the Annual Meeting for quorum purposes. As to matters
requiring the vote of a majority of the shares either present or outstanding,
and entitled to vote on the matter, abstentions have the same effect as a vote
against the matter and, under Delaware Corporation Law and Securities and
Exchange Commission rules, broker non-votes are deemed to not be entitled to
vote on the matter.
2
HOW TO RECEIVE YOUR ANNUAL REPORT AND
PROXY STATEMENT ON-LINE
SAVE PRAXAIR FUTURE POSTAGE AND PRINTING EXPENSE BY consenting to receive
future annual reports and proxy statements on-line on the Internet.
Most shareholders can elect to view future proxy statements and annual
reports over the Internet instead of receiving paper copies in the mail. Those
shareholders will be given the opportunity to consent to future Internet
delivery when they vote their proxy. (For some shareholders, this option is only
available if you 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 Praxair's 2002
Annual Report and the Proxy Statement for the 2003 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 Assistant Corporate Secretary at
Praxair, Inc., 39 Old Ridgebury Road, M1, Danbury, CT 06810-5113.
3
SHARE OWNERSHIP
PRINCIPAL HOLDERS
The only persons known by Praxair to be beneficial owners of more than five
percent of Praxair's Common Stock (par value $0.01) are the following:
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Name and Address of Number of Shares Percent of Shares
Beneficial Owner Beneficially Owned Outstanding(a)
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FMR Corp.....................................................21,989,845(b) 13.7%
82 Devonshire Street, Boston, MA 02109
Massachusetts Financial Services Company ("MFS") ............10,135,710(c) 6.3%
500 Boylston Street, Boston, MA 02116
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Notes: (a) Based on 162,142,840 total shares outstanding on December 31,
2001 excluding shares held for the account of Praxair.
(b) Holdings as of December 31, 2001 as reported in SEC Schedule 13G
by FMR Corp. According to this report, FMR Corp. had sole voting
power as to 1,590,368 shares and sole investment power as to
21,989,845 shares.
(c) Holdings as of December 31, 2001 as reported in SEC Schedule 13G
by MFS. According to this report, MFS had sole voting power as to
9,970,080 shares and sole investment power as to 10,135,710
shares.
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DIRECTORS AND EXECUTIVE OFFICERS
As of December 31, 2001, directors and executive officers of Praxair
beneficially owned shares of Praxair's Common Stock (par value $0.01) as
follows. Directors and all executive officers as a group, 21 persons,
beneficially own 0.7% of the outstanding shares as of that date.
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SHARES BENEFICIALLY OWNED AND OTHER EQUITY INTERESTS
Common Deferred Stock
Name Position Stock(1) Stock(2) Total Options(3)
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Dennis H. Reilley Chairman, President and 51,676 17,029 68,705 455,000
Chief Executive Officer
Paul J. Bilek Executive Vice President 26,843 12,742 39,585 145,333
Thomas W. von Krannichfeldt Executive Vice President and 13,581 9,410 22,991 84,666
President, Praxair Surface
Technologies, Inc.
Stephen F. Angel Executive Vice President 20,891 3,329 24,220 0
James S. Sawyer Vice President and 16,142 10,945 27,087 75,166
Chief Financial Officer
Alejandro Achaval Director 1,711 12,795 14,506 5,000
Dale F. Frey Director 1,629 1,881 3,510 15,000
Claire W. Gargalli Director 1,720 3,925 5,645 15,000
Ronald L. Kuehn, Jr. Director 5,301 13,246 18,547 15,000
Raymond W. LeBoeuf Director 1,000 9,576 10,576 10,000
Benjamin F. Payton Director 1,796 2,295 4,091 15,000
G. Jackson Ratcliffe, Jr. Director 1,796 20,392 22,188 15,000
Wayne T. Smith Director 0 803 803 0
H. Mitchell Watson, Jr. Director 1,784 8,522 10,306 12,500
William A. Wise Director 0 277 277 0
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Total 145,870 127,167 273,037 862,665
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Directors & Executive (21 persons) 251,362 151,945 403,307 1,216,365
Officers as a group
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Notes: 1) Amounts reported as COMMON STOCK include 25,000 restricted shares for
which Mr. Reilley has sole voting power and which vest in stages
beginning in 2006. Reported shares also include 20,000 restricted
shares for which Mr. Angel has sole voting power and which vest in
stages beginning in 2003.
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 Praxair's common stock and, at
the end of the deferral period, the units are payable in stock.
3) STOCK OPTIONS represent shares that may be acquired upon exercise of
options exercisable within 60 days of December 31, 2001.
4
EXECUTIVE STOCK OWNERSHIP GUIDELINES
The Board of Directors 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
Corporation's officers and senior managers as follows. 106 executives are
currently covered under this stock ownership policy. Individuals are expected to
meet the applicable guideline no more than 5 years after first becoming subject
to it. The guidelines for four of the five members of the Office of the Chairman
(designated by asterisk below), were increased effective in February 2002. These
officers have 3 years to meet the increased guidelines.
Value of Shares Owned
---------------------
Chief Executive Officer* 5.0x Base Salary
Executive Vice Presidents* 3.0x Base Salary
Chief Financial Officer 3.0x Base Salary
Other Executive Officers 1.5x Base Salary
Other Officers and Senior Managers 1.0x Base Salary
As of the date of this Proxy Statement, all covered individuals have met or
exceeded their guidelines, where permitted by law, or are within their
transition period. Stock ownership of the 5 most highly compensated executive
officers in 2001 can be found in the table presented at page 4 of this Proxy
Statement under the caption "Share Ownership."
5
THE BOARD OF DIRECTORS
The following pages present information about the persons who comprise
Praxair's Board of Directors; including the five nominees for reelection. During
2001, the Board held eight meetings.
DIRECTOR ATTENDANCE
During his current term to date, each nominee for reelection attended Board
meetings and meetings of committees of which he is a member as follows: Mr.
Frey, 97%; Mr. LeBoeuf, 98%; Dr. Payton, 100%; Mr. Smith, 100%; and Mr. Wise,
100%. During this same period, the continuing directors collectively attended
97% of such meetings.
DIRECTOR COMPENSATION
No director who is an employee of Praxair is compensated for service as a
member of the Board of Directors or any committee of the Board of Directors.
Compensation for non-employee directors consists of an annual retainer of
$51,000, a $1,300 fee for each Board meeting attended, and a $1,300 fee for each
committee meeting attended. These meeting fees are scheduled to increase to
$1,500 effective April 1st. A director who is also chairman of a Board of
Directors' committee is paid an additional $5,000 annual retainer. Directors are
reimbursed for travel expenses incurred on behalf of Praxair.
Each active non-employee director is also a participant in the 1995 Stock
Option Plan for Non-Employee Directors of Praxair, Inc. On or about April 1st of
each year, each Stock Option Plan participant is granted options to purchase
2,500 shares of Praxair's Common Stock. The exercise price of each option is
100% of the closing price of Praxair's stock as reported by the New York Stock
Exchange on the date of grant. Each option granted under the stock option plan
becomes exercisable on the second anniversary of its date of grant and expires
ten years from the date of grant. The plan contains provisions regarding the
exercisability and termination of outstanding options in the event of
termination of service, retirement, disability, death and change in control of
Praxair.
A Deferred Compensation Plan is also available for non-employee directors.
Under this plan, non-employee directors may, prior to the beginning of a
calendar year, elect to defer to a later date payment of some or all of the cash
fees earned in that year. This deferred payment date is fixed by the director at
the time of his or her deferral election. At the time of the deferral election,
the director also designates that the deferred fees be credited with earnings
based upon a "Cash Account", which earns interest at the prime rate, a "Stock
Unit Account", the value of which varies with the market price of Praxair's
common stock, or a "Discounted Stock Unit Account", in which stock units are
allocated at a 10% discount to the market price of Praxair's common stock on the
date of deferral and, thereafter, their value varies with the market price of
that stock. Stock Unit Accounts and Discounted Stock Unit Accounts are also
credited with additional stock units whenever dividends are paid on Praxair's
common stock. Stock units provide directors the economic equivalent of stock
ownership 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"
and the "Discounted Stock Unit Account" are both paid in the form of Praxair
common stock.
6
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ALEJANDRO ACHAVAL Age 69
Director Since 1992 Term Expires 2004
Chairman, Chief Executive Officer and Controlling Partner of IMEXTRADE S.A.
and Trinidad S.C.A.
[PHOTO]
Mr. Achaval served as Vice Chairman & Chief Executive Officer,
IPAKO Industrias Petroquimicas Argentinas S.A. between 1975 and
his retirement in 1994.
Mr. Achaval also has served as Chairman of the Argentine Chamber
of Chemical and Petrochemical Industries, as a member of the
Board and Executive Committee of the Argentine Board of Industry
and as a director of I.D.E.A. Argentine Institute for Management
Development, the National Institute of Technology (INTI), and
FIPLASTO S.A.
Mr. Achaval is Chairman of FUNDES Argentina and director of
FUNDES International, a subsidiary of Nueva A.G. (Switzerland).
He is also a director of Minetti S.A., a company controlled by
Holderbank A.G. (Switzerland), a director of Praxair Argentina
S.A., an indirect subsidiary of Praxair, Inc. and a director of
the Fundacion Invertir, an Argentine investment foundation.
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DALE F. FREY Age 69
Director Since 1993 Term Expires 2002
Director of Various Corporations
[PHOTO]
Mr. Frey served as Chairman and President, General Electric
Investment Corporation from 1984 to 1997.
Mr. Frey is Chairman of the Damon Runyon-Walter Winchell Cancer
Research Fund. He is a trustee of Franklin & Marshall College
and a member of the New York University Stern School Advisory
Board. He is also a member of the Forstmann Little Company, the
Aurora Capital Partners and the Invemed advisory boards.
Mr. Frey is also a director of After Market Technology
Corporation, Community Health Systems, Inc., McLeodUSA, Inc.,
Roadway Express, Inc., and Yankee Candle Company.
--------------------------------------------------------------------------------
CLAIRE W. GARGALLI Age 59
Director Since 1992 Term Expires 2003
Director of Various Corporations
[PHOTO]
Ms. Gargalli served as Vice Chairman, Diversified Search
Companies from 1990 to 1998.
Ms. Gargalli is a trustee of Carnegie Mellon University and
Middlebury College and she is also a director of Baker Hughes,
Inc. and UNOVA, Inc.
7
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RONALD L. KUEHN, JR. Age 66
Director Since 1992 Term Expires 2004
Director of Various Corporations
[PHOTO]
Mr. Kuehn was Chairman, President and Chief Executive Officer of
Sonat Inc. from 1986 until its merger with El Paso Corporation
(formerly El Paso Energy Corporation) in 1999. He served as
Chairman of El Paso Corporation through 2000.
Mr. Kuehn is a trustee of Tuskegee University and is active in
numerous community and charitable organizations.
Mr. Kuehn is also a director of AmSouth Bancorporation, Dun and
Bradstreet Corporation, El Paso Corporation and Transocean Sedco
Forex Inc.
--------------------------------------------------------------------------------
RAYMOND W. LEBOEUF Age 55
Director Since 1997 Term Expires 2002
Chairman and Chief Executive Officer of PPG Industries, Inc. since 1997
[PHOTO]
In 1995, Mr. LeBoeuf was elected President and Chief Operating
Officer and a director of PPG Industries, Inc. and he assumed
his current positions in 1997.
Mr. LeBoeuf is a director of ITT Industries, Inc., a trustee of
Robert Morris College and a board member of the Allegheny
Conference on Community Development, The Business Roundtable and
the Extra Mile Education Foundation.
--------------------------------------------------------------------------------
BENJAMIN F. PAYTON Age 69
Director Since 1992 Term Expires 2002
President, Tuskegee University since 1981
[PHOTO]
Dr. Payton is a member of the Board of Governors of the U.S. Air
Force Civil Patrol and a director of the National Action Council
for Minority Engineers. He is also on the Board of Directors of
the Tuskegee Chamber of Commerce and is on the Royal Council,
Alabama Shakespeare Festival. In February 2002, he was appointed
by President Bush to be Chairman of the President's Board of
Advisors for Historically Black Colleges and Universities.
Dr. Payton is also a director of AmSouth Bancorporation, AmSouth
Bank, Liberty Corporation and Ruby Tuesday, Inc.
8
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G. JACKSON RATCLIFFE, JR. Age 65
Director Since 1992 Term Expires 2003
Chairman of the Board of Hubbell Incorporated since 1987
[PHOTO]
Mr. Ratcliffe was also President and Chief Executive Officer of
Hubbell Incorporated from 1987 until 2001.
Mr. Ratcliffe is also a director of Barnes Group, Inc., Olin
Corporation and Sunoco, Inc.
--------------------------------------------------------------------------------
DENNIS H. REILLEY Age 49
Director Since 2000 Term Expires 2003
Chairman, President and Chief Executive Officer of Praxair since 2000
[PHOTO]
Mr. Reilley assumed his current positions when he joined Praxair
in 2000. Beginning in 1989, he held senior management positions
in DuPont Co.'s Chemicals and Specialties business including
Vice President and General Manager of Specialty Chemicals. In
May 1999, Mr. Reilley was appointed Executive Vice President and
Chief Operating Officer of DuPont with responsibility for
Pigments and Chemicals, Specialty Polymers, Nylon and Polyester.
Mr. Reilley is past Chairman of the American Chemistry Council,
a member of The Business Roundtable and is on the Executive
Committee of the Society of Chemical Industry. He also is a
director of Entergy Corporation and Marathon Oil Company.
--------------------------------------------------------------------------------
WAYNE T. SMITH Age 56
Director Since 2001 Term Expires 2002
Chairman, President and Chief Executive Officer of Community Health Systems,
Inc. since 2001
[PHOTO]
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 Almost Family and a member of the
Board of the Federation of American Hospitals.
9
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H. MITCHELL WATSON, JR. Age 64
Director Since 1992 Term Expires 2004
President, Sigma Group of America since 1992
[PHOTO]
Mr. Watson is the former President and Chief Executive Officer
of ROLM Company.
Mr. Watson is a Trustee of Helen Keller International.
Mr. Watson is also a director and the non-executive Chairman of
MAPICS, Inc., is Chairman of the Board of Identrus, LLC, and a
director of DDS power.com.
--------------------------------------------------------------------------------
WILLIAM A. WISE Age 56
Director Since 2001 Term Expires 2002
Chairman, President and Chief Executive Officer of El Paso Corporation since
2001
[PHOTO]
Mr. Wise has been with El Paso Corporation (formerly El Paso
Energy Corporation) since 1970 and has been Chief Executive
Officer since January 1990. Mr. Wise has been President from
January 1990 to April 1996 and from July 1998 to the present. He
has been Chairman of the Board from January 2001 to the present
and has also served in this position from January 1994 to
October 1999.
Mr. Wise is former Chairman of the Interstate Natural Gas
Association of America, Chairman of the National Petroleum
Council, and a member of The Business Roundtable. He is also
active in numerous civic and community organizations including
serving as Vice Chairman of the Texas Governor's Business
Council.
10
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, 46, is an Executive Vice President of Praxair. Prior to
joining Praxair in that capacity, Mr. Angel was General Manager for General
Electric Company's Industrial Systems business. From 1996 to 1999, he was
General Manager, Marketing and Sales, for GE's Transportation Systems business.
He assumed his current position in 2001.
Paul J. Bilek, 54, is an Executive Vice President of Praxair. Prior to
assuming this position, Mr. Bilek served as President, North American Industrial
Gases from 1996 to 1998. He assumed his current position in 1998.
David H. Chaifetz, 59, is Vice President, General Counsel and Secretary of
Praxair. He assumed his current positions in 1992 upon Praxair's launch as a
public company.
James J. Fuchs, 49, is a Vice President of Praxair, President of North
American Industrial Gases, and President, Praxair Canada Inc. Prior to these
assignments, Mr. Fuchs served Praxair Asia as a Vice President from 1996 and
then as its President from 1998. He assumed his current position in 2001.
Ricardo S. Malfitano, 43, is President of S.A. White Martins ("SAWM"),
Praxair's Brazilian subsidiary, and is a Vice President of Praxair. He served as
President, North American Industrial Gases and President, Praxair Canada Inc.
from 1998 to 2001. Mr. Malfitano also served as Chief Operating Officer of S.A.
White Martins from 1997 to 1998. He assumed his current position in 2001.
Dennis H. Reilley, 49. See description under "The Board of Directors."
George P. Ristevski, 42, is a Vice President of Praxair and its Controller.
Mr. Ristevski joined Praxair from Electronic Data Systems, Inc. in 1995 to serve
as Director of Corporate Financial Planning and Analysis. In 1997 he was
designated Controller of Praxair Distribution, Inc. He assumed his current
positions in 2000.
James S. Sawyer, 45, is a Vice President of Praxair and its Chief Financial
Officer. Mr. Sawyer served as a Vice President of Praxair and as its Assistant
Treasurer and then Treasurer from 1992 upon Praxair's launch as a public company
until 2000. He was designated Chief Financial Officer in 2000.
Thomas W. von Krannichfeldt, 52, is an Executive Vice President of Praxair.
Mr. von Krannichfeldt also has served as President, Praxair Surface
Technologies, Inc. since 1995. He assumed his current position in 1999.
Alan J. Westendorf, 58, is a Vice President of Praxair and President,
Praxair Europe. In 1996, Mr. Westendorf was designated the North American
Industrial Gases ("NAIG") Vice President-Sales and became an NAIG Senior Vice
President in 1998. He assumed his current positions in 1999.
Wayne J. Yakich, 44, is a Vice President of Praxair and President, Praxair
Distribution, Inc. Mr. Yakich was formerly Vice President, Business Operations
for Praxair Distribution. He assumed his current positions in 2000.
11
COMMITTEES OF THE BOARD
AUDIT COMMITTEE. See information at page 21 of this Proxy Statement under
the caption "The Audit Committee & The Independent Accountants".
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE. See information at page
13 of this Proxy Statement under the caption "The Compensation and Management
Development Committee and Executive Compensation".
FINANCE AND PENSION COMMITTEE. The Finance and Pension Committee is
comprised of Dale F. Frey as Chairman, Alejandro Achaval, Claire W. Gargalli,
Raymond W. LeBoeuf and Dennis H. Reilley. The Committee met two times during
2001. The Finance and Pension Committee: (1) reviews periodically Praxair's
financial policies and objectives; (2) monitors Praxair's financial condition
and its requirements for funds; (3) reviews management recommendations as to the
amounts, timing, types and terms of public stock issues and public and private
debt issues; and (4) reviews periodically Praxair's dividend policy, insurance
program and foreign exchange operations. The Finance and Pension Committee also
reviews the financial, investment and actuarial policies and objectives of the
pension program and, periodically, other employee benefit programs, and the
investment performance of the fund established for the pension program. The
Finance and Pension Committee also performs certain other review functions
related to finance and pension matters.
PUBLIC POLICY AND NOMINATING COMMITTEE. The Public Policy and Nominating
Committee is comprised of G. Jackson Ratcliffe, Jr. as Chairman, Dale F. Frey,
Benjamin F. Payton and Dennis H. Reilley. The Committee met five times during
2001. The Public Policy and Nominating Committee recommends to Praxair's Board
of Directors nominees for election as directors, and periodically reviews
potential candidates, including incumbent directors. The Public Policy and
Nominating Committee reviews policies with respect to the composition,
organization and practices of Praxair's Board of Directors, and developments in
corporate governance matters generally.
The Public Policy and Nominating Committee also reviews Praxair's policies
and responses to important social, political and public issues, including
matters relating to international operations, equal employment opportunity,
charitable contributions, and legislative issues, as well as policies on and
responses to important shareholder issues, including management and shareholder
proposals offered for shareholder approval. The Public Policy and Nominating
Committee reviews Praxair's policies for health, safety and environmental
affairs and Praxair's performance and compliance with its policies and legal
requirements in this area. The Public Policy and Nominating Committee also
performs various other functions relating to public policy matters generally.
The Public Policy and Nominating Committee will consider candidate nominees
for election as director who are recommended by shareholders. Recommendations
should be sent to the Secretary of Praxair and should include the candidate's
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 Public Policy and
Nominating Committee and, if nominated, to be included in the Proxy Statement,
such recommendation must be received by the Secretary on or before the November
1 preceding the annual meeting at which directors will be elected by the
shareholders.
12
THE COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE AND
EXECUTIVE COMPENSATION
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
The Compensation and Management Development Committee is comprised of Ronald
L. Kuehn, Jr. as Chairman, Claire W. Gargalli, Raymond W. LeBoeuf, G. Jackson
Ratcliffe, Jr., H. Mitchell Watson, Jr., and William A. Wise. The Committee met
six times during 2001. The Compensation and Management Development Committee:
(1) determines the direct and indirect compensation, incentive plans and
employee benefits of the Chairman of the Board and the executive officers of
Praxair; and (2) determines, and recommends to Praxair's Board of Directors,
Praxair's policies relating to the compensation of the other elected officers
and, generally, other employees. In addition, the Committee reviews management's
long-range planning for executive development and succession, and performs
certain other review functions relating to management compensation and employee
relations policies.
The six non-employee directors that comprise this Committee have
considerable experience in executive compensation issues and management
development. None of the members of the Committee has ever been an officer or
employee of Praxair or any of its subsidiaries. In discharging its
responsibilities, the Committee employs the services of an independent
compensation consultant. The consultant reports directly to the Committee
regarding these matters.
The following is a report of the Compensation and Management Development
Committee.
13
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
This report addresses and discloses the Committee's policies and
decisions regarding 2001 compensation and long term incentives as they
affected the Chief Executive Officer and the four other most highly paid
executive officers of Praxair (the five individuals collectively called "the
Senior Executives"). These policies and practices also generally affect the
compensation of Praxair's other officers and high level executives.
EXECUTIVE COMPENSATION POLICIES AND PRACTICES
Praxair's executive compensation policies are designed to: (1) align
compensation with the company's annual and long term performance goals; (2)
attract and retain a highly qualified and motivated management team; (3)
reward individual performance; and (4) link the interests of the Senior
Executives directly with those of shareholders through the use of Praxair
stock as a compensation vehicle.
The Committee uses the services of an outside compensation consultant to
review the competitiveness of the company's compensation programs. Praxair
has selected a comparator group of companies from the consultant's database
that it considers as an appropriate group of companies against which to
compare Praxair for compensation purposes. The comparator group comprises 20
companies from various industries that represent the competitive marketplace
for Praxair executives. Since the size of the comparator companies measured
by sales varies somewhat, the consultant adjusts its competitive analysis to
account for that variable. For purposes of the shareholder return
comparisons elsewhere in this proxy statement, Praxair uses an index
focussed on the basic materials industry, based on its belief that an
industry index is an appropriate peer group for investment comparisons. The
companies chosen for the compensation comparator group are not necessarily
those represented in the shareholder return comparisons. The Committee
believes that Praxair's competitors for executive talent are a broader group
of companies and not limited only to the companies in the investment
comparison.
In determining the total compensation opportunity for each Senior
Executive, the Committee takes into account the mix of base salary, variable
compensation and long term incentives. It targets its compensation decisions
to achieve a median total compensation opportunity for comparable jobs
within the comparator group. However, since a large portion of the
compensation opportunity is determined by performance-based variable
compensation, total compensation may be above or below the median based on
individual, business unit and/or total company performance.
SALARY
The Committee reviewed the base salaries of each of the Senior
Executives in comparison to the size-adjusted salaries paid for comparable
jobs by the companies in the comparator group. Generally, the Committee
found that, except for Mr. Reilley, the salaries of the Senior Executives
were at approximately the market median. The Committee approved salary
adjustments for the Senior Executives based on their individual performance,
their salaries relative to the market and in recognition of certain
increased responsibilities. Mr. Reilley's salary was adjusted by 9.4 percent
on an annualized basis, effective April 1, 2001. Mr. Reilley joined Praxair
during March 2000. This represents his first salary adjustment since joining
the Corporation.
14
PERFORMANCE-BASED ANNUAL VARIABLE COMPENSATION
At its January 2001 meeting, the Committee reviewed its method of
determining annual variable compensation awards. In view of the
Corporation's twin objectives of increasing earnings per share and return on
capital, the Committee established growth in sales revenues, net income
after tax, and cash flow as the financial measures against which performance
would be judged for purposes of annual performance-based variable
compensation. Non-financial measures established by the Committee included
achievement of agreed upon goals in the areas of safety and environmental
performance, strategic positioning, speed of execution and people
excellence. Second, the Committee reviewed the current target variable
compensation levels as a percentage of base salary. The target levels were
found to be consistent with the external market place. The target payout
percentages for the Senior Executives range from 55 percent of base salary
up to a high of 85 percent of base salary for Mr. Reilley.
At its January 2002 meeting, the Committee evaluated 2001 performance of
the Corporation against its 2001 Annual Business Plan and considered the
individual performance of each of the Senior Executives. Regarding the
primary measures of performance, namely achievement of financial targets,
the Committee concluded that the Corporation achieved improved performance
in 2001 compared to 2000 and achieved much of its annual plan in spite of an
extremely challenging external environment in the U.S. and some of Praxair's
key international markets. The Committee also noted that the Corporation was
one of a very few of the basic materials companies (chemicals, paper,
minerals, mining, steel) to show improved performance versus the prior year.
Praxair's total shareholder return was +26.2%. In contrast, the S&P 500
Index declined 11.9%. In addition, most of the 2001 nonfinancial goals noted
above either were accomplished or progress was well under way. The Committee
also reviewed the performance of the Corporation in comparison to the
performance measures established by the Committee in 2001 for the Senior
Executives under the Senior Executive Performance Award Plan, approved by
the shareholders in 1996 and 2001 to comply with Section 162(m) of the
Internal Revenue Code.
On the basis of the overall performance during 2001 in relation to both
financial and non-financial plans, the Committee awarded 2001
performance-based annual variable compensation for the Senior Executives at
the target payout. Mr. Reilley's variable compensation was established at
$750,000 based on the foregoing considerations.
LONG TERM INCENTIVES
The Committee granted 165,000 stock options to Mr. Reilley in February
2001. These options were granted at the closing market price on the date of
grant, will vest in February 2002, 2003 and 2004, and have a ten year term.
This grant was based on a competitive evaluation of the long term incentive
component of compensation for chief executive officers in the Corporation's
peer group of comparator companies.
The Committee made annual stock option grants to 97 executive officers,
officers, and other key employees at its February 2001 meeting. These
options were granted at the closing market price on the date of grant, will
vest in February 2002, 2003 and 2004, and have a ten year term. In addition,
stock option grants for 97 officers (excluding the Senior Executives) and
other key employees were made in December 2001. These grants constituted the
long term incentive component of pay for 2001.
15
POLICY WITH RESPECT TO DEDUCTIBILITY OF COMPENSATION EXPENSE
Section 162(m) of the Internal Revenue Code, enacted in 1993, limits the
tax deduction that Praxair may take with respect to the compensation of
certain executive officers, unless the compensation is "performance-based"
as defined in the Code. In order to insure full deductibility for 1996 and
future years, the shareholders adopted in 1996, and reapproved in 2001, a
plan for determining performance-based annual and long term incentives that
is designed to comply with the IRS requirements for deductibility.
CONCLUSION
The Praxair compensation program described above closely links pay with
performance and the creation of shareholder value. The Committee believes
that the program has been and will continue to be successful in supporting
Praxair's financial, growth and other business objectives.
THE COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
Ronald L. Kuehn, Jr., Chairman
Claire W. Gargalli
Raymond W. LeBoeuf
G. Jackson Ratcliffe, Jr.
H. Mitchell Watson, Jr.
William A. Wise
------------------------------------------------
16
TABLE 1
---------------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
---------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
---------------------------------------------------------------------------------------------------------------------------
Awards Payouts
---------------------------------------------------------------------------------------------------------------------------
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name and Salary Bonus1 Compensation Award(s) Options Payouts Compensation3
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
---------------------------------------------------------------------------------------------------------------------------
Dennis H. Reilley 2001 856,250 750,000 146,467(2,7) 0 165,000 0 32,173
Chairman, President and 2000 657,971 660,000 161,179(2,7) 985,9385 400,000 0 24,835
Chief Executive Officer4 1999 - - - - - - -
---------------------------------------------------------------------------------------------------------------------------
Paul J. Bilek 2001 467,250 326,400 18,523(2) 0 55,000 0 24,955
Executive Vice President 2000 437,500 355,000 16,973(2) 0 0 0 23,659
1999 400,000 300,000 6,444(2) 0 50,000 691,509(6) 21,603
---------------------------------------------------------------------------------------------------------------------------
Thomas W. von Krannichfeldt 2001 442,000 173,900 62,313(2,7) 0 35,000 0 28,793
Executive Vice President 2000 430,000 200,000 130,786(2,7) 0 0 0 15,987
1999 232,500 127,942 4,000 0 50,000 400,355(6) 9,374
---------------------------------------------------------------------------------------------------------------------------
Stephen F. Angel 2001 276,190 276,000 50,882(2) 926,000(5) 225,000 0 4,232
Executive Vice President8 2000 - - - - - - -
1999 - - - - - - -
---------------------------------------------------------------------------------------------------------------------------
James S. Sawyer 2001 361,250 216,900 4,820(2) 0 35,000 0 16,799
Vice President and 2000 306,250 205,000 4,556(2) 0 10,000 0 14,156
Chief Financial Officer 1999 222,500 130,000 2,889(2) 0 12,000 291,155(6) 11,356
---------------------------------------------------------------------------------------------------------------------------
Notes: 1) Reported in this column are annual awards that Praxair characterizes
as Performance Based Annual Variable Compensation. Twenty percent of
the variable compensation paid for the three listed years was paid
in the form of Praxair Common Stock or, at the officer's option, at
least 20% was deferred into "deferred stock" units. Data for Mr. von
Krannichfeldt for 1999 includes amounts paid from the Praxair
Surface Technologies, Inc. performance sharing program.
2) Represents the value of the discount from the market value of
Praxair's Common Stock that is, in effect, received by individuals
who have deferred variable compensation or base salary earned in the
listed years into discounted "deferred stock" units under Praxair's
deferred compensation plan for management. Compensation that is
placed in this option must be so deferred for a minimum of 5 years.
In 2000 and 2001, the reported amount also includes the value of
financial planning services provided to the named officers and a
related tax gross-up.
3) Amounts reported in this column for 2001 are comprised of the
following items:
Savings Plan Company Match* Executive Life Insurance Value
--------------------------- ------------------------------
Dennis H. Reilley $32,173 $ 0
Paul J. Bilek 17,682 7,273
Thomas W. von Krannichfeldt 16,664 12,129
Stephen F. Angel 4,232 0
James S. Sawyer 13,613 3,186
*Includes both qualified and unqualified match amounts
4) Mr. Reilley joined Praxair, Inc. on March 6, 2000.
5) Mr. Reilley was granted 25,000 shares of restricted stock on
February 22, 2000. The dollar amount reported in 2000 is calculated
according to SEC rules and equals the number of shares granted times
the closing market price of Praxair, Inc.'s Common Stock on the date
of grant. As of December 31, 2001, Mr. Reilley held a total of
25,000 shares of restricted stock. All of these shares are currently
unvested and have a "value" of $1,381,250 on that date. This "value"
is calculated according to SEC rules by assuming that all such
shares are vested at 2001 year-end and by using the closing market
price of Praxair, Inc.'s Common Stock as of December 31, 2001
($55.250 per share). These shares actually vest in stages beginning
in 2006. Mr. Angel was granted 20,000 shares of restricted stock on
April 23, 2001. As of December 31, 2001, Mr. Angel held 20,000
shares of unvested restricted stock having a "value" of $1,105,000
on that date. These shares actually vest in stages beginning in
2003. Dividends are paid on Mr. Reilley's and Mr. Angel's restricted
stock.
6) Represents the vesting of Performance Stock granted in 1996 for the
performance period 1997 through 1999. Performance Stock vested
according to a pre-established vesting schedule for earnings per
share growth performance of approximately 11% per year during the
period 1997 through 1999. Vested Performance Stock was settled in
shares of the Corporation's Common Stock. Amounts reported represent
the market value of those shares on the settlement date.
7) Includes personal benefits for Mr. Reilley and for Mr. von
Krannichfeldt. Major components of these personal benefits are as
follows:
Mr. Reilley Mr. von Krannichfeldt
----------- ---------------------
2000 2001 2000 2001
---- ---- ---- ----
Relocation expenses $44,839 $28,500 $63,563 $25,769
Tax gross up on the expenses $37,216 $23,364 $51,486 $15,613
8) Mr. Angel joined Praxair on April 23, 2001.
17
TABLE 2
---------------------------------------------------------------------------------------------------------------------------
OPTION GRANTS IN LAST FISCAL YEAR
---------------------------------------------------------------------------------------------------------------------------
Potential Realizable Value
INDIVIDUAL GRANTS at Assumed Annual Rates of
Stock Price Appreciation for
Option Term1
---------------------------------------------------------------------------------------------------------------------------
If Stock at If Stock at
Number of Percent of $71.704/sh $114.117/sh
Securities Total Options (for 2/21 grant) (for 2/21 grant)
Underlying Granted to $75.271/sh $119.857/sh
Options Employees in Exercise (for 4/23 grant) (for 4/23 grant)
Granted Fiscal Year Price Expiration 5% 10%
Name (#) (%) ($) Date ($) ($)
---------------------------------------------------------------------------------------------------------------------------
Dennis H. Reilley 165,000 3.7% $44.020 2/21/2011 $4,567,844 $11,575,823
Paul J. Bilek 55,000 1.2% 44.020 2/21/2011 1,522,615 3,858,608
Thomas W. von Krannichfeldt 35,000 0.8% 44.020 2/21/2011 968,937 2,455,478
Stephen F. Angel 225,000 5.0% 46.210 4/23/2011 6,538,770 16,570,530
---------------------------------------------------------------------------------------------------------------------------
James S. Sawyer 35,000 0.8% 44.020 2/21/2011 968,937 2,455,478
---------------------------------------------------------------------------------------------------------------------------
Note: 1) Potential realizable value is the pre-tax gain that an option holder
would realize at the time of the option expiration date if (a) he or
she would exercise all of the options on their expiration date, and
(b) Praxair's stock price grew between the date of grant and the
exercise date at the annual rate assumed in the column. This pre-tax
gain is calculated by multiplying the number of options by the
difference between the assumed stock price on the option expiration
date and the option exercise price. THE HYPOTHETICAL VALUES
REFLECTED IN THIS TABLE REPRESENT ASSUMED RATES OF APPRECIATION
ONLY; WHICH RATES ARE SET BY SEC RULES. ACTUAL GAINS, IF ANY, ON
STOCK OPTION EXERCISES AND COMMON STOCK HOLDINGS ARE DEPENDENT ON,
AMONG OTHER FACTORS, THE FUTURE PERFORMANCE OF THE COMMON STOCK AND
OVERALL STOCK MARKET CONDITIONS. THERE CAN BE NO ASSURANCE THAT THE
AMOUNTS REFLECTED IN THIS TABLE WILL BE ACHIEVED.
TABLE 3
---------------------------------------------------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION VALUES
---------------------------------------------------------------------------------------------------------------------------
Shares Number of Securities Value1 of Unexercised
Acquired on Value Underlying Unexercised In-the-Money Options
Exercise Realized Options at FY-End at FY-End
Name (#) ($) (#) ($)
---------------------------------------------------------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
---------------------------------------------------------------------------------------------------------------------------
Dennis H. Reilley 0 0 0 565,000 0 $8,177,950
Paul J. Bilek 23,500 $683,570 167,000 55,000 $3,124,500 617,650
Thomas W. von Krannichfeldt 20,000 408,150 73,000 35,000 738,000 393,050
Stephen F. Angel 0 0 0 225,000 0 2,034,000
---------------------------------------------------------------------------------------------------------------------------
James S. Sawyer 0 0 63,500 45,000 1,342,375 585,863
---------------------------------------------------------------------------------------------------------------------------
Note: 1) Before Taxes. The reported dollar value is based on the difference
between the exercise price of the outstanding option and the market
price of Praxair's Common Stock at the close of trading on December
31, 2001. The market price on this date was $55.250 per share.
18
DEFINED BENEFIT OR ACTUARIAL PLANS
Table 4 illustrates the estimated annual benefits payable from Praxair's
Retirement Program at retirement at age 65 based on the assumptions shown.
Calculation of benefits is uniform for all participants in the Retirement
Program, including the named executives.
TABLE 4
---------------------------------------------------------------------------------------------------------------------------
PENSION PLAN TABLE
---------------------------------------------------------------------------------------------------------------------------
Average Annual Estimated Annual Retirement Benefits at Age 65
Remuneration Used for the Years of Company Service Credit Indicated
for Calculating -----------------------------------------------------------------------------------------------------
Retirement Benefits 15 Yrs 20 Yrs 25 Yrs 30 Yrs 35 Yrs 40 Yrs 45 Yrs
---------------------------------------------------------------------------------------------------------------------------
$ 250,000 $ 56,250 $ 75,000 $ 93,750 $112,500 $ 131,250 $ 150,000 $ 168,750
500,000 112,500 150,000 187,500 225,000 262,500 300,000 337,500
750,000 168,750 225,000 281,250 337,500 393,750 450,000 506,250
1,000,000 225,000 300,000 375,000 450,000 525,000 600,000 675,000
1,250,000 281,250 375,000 468,750 562,500 656,250 750,000 843,750
1,500,000 337,500 450,000 562,500 675,000 787,500 900,000 1,012,500
1,750,000 393,750 525,000 656,250 787,500 918,750 1,050,000 1,181,250
---------------------------------------------------------------------------------------------------------------------------
2,000,000 450,000 600,000 750,000 900,000 1,050,000 1,200,000 1,350,000
---------------------------------------------------------------------------------------------------------------------------
o Amounts shown are computed based upon straight life annuity amounts and
are subject to an offset for Social Security benefits. Annual retirement
benefits for program participants are based on salary and bonus (variable
compensation) payments as set forth in Table 1. For purposes of determining
the average annual remuneration used for calculating retirement benefits,
the three highest annual rates of salary and the three highest variable
compensation payments received by the retiree during the previous ten years
are averaged. No other forms of remuneration are included. This table
reflects the combination of qualified and non-qualified pension benefits.
o Credited years of service as of March 1, 2002 are as follows: Dennis H.
Reilley, 27 years; Paul J. Bilek, 33 years; Thomas W. von Krannichfeldt, 26
years; Stephen F. Angel, 1 year; James S. Sawyer, 16 years.
o Credited years of service for Dennis H. Reilley represent combined service
with Praxair, Inc. and DuPont. Mr. Reilley joined Praxair, Inc. on March 6,
2000 and at that time received credit for 25.75 years of service with
DuPont.
o Credited years of service reported for Thomas W. von Krannichfeldt represent
combined service with Praxair, Inc. and Praxair Surface Technologies
(Europe) S.A.
o Mr. Reilley and Mr. von Krannichfeldt are each eligible for retirement
benefits under the Praxair, Inc. Retirement Plan. Upon their retirements,
each will receive retirement benefits under this Plan based on his combined
Praxair and former employer service, less an offset for benefits received
under the former employer's retirement plan.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE IN CONTROL ARRANGEMENTS
Praxair has entered into identical Severance Compensation Agreements (the
"Agreements") with Dennis H. Reilley, Paul J. Bilek, Thomas W. von
Krannichfeldt, Stephen F. Angel, James S. Sawyer, and certain other employees.
The Agreements are designed to retain the executives and provide continuity of
management in the event of any actual or threatened change in control of
Praxair. The Agreements specify circumstances which shall constitute a "Change
in Control" for these purposes. These circumstances include, among others and
subject to the qualifications set forth in the Agreements: (1) any consolidation
or merger in which Praxair is not the continuing or surviving corporation; (2)
the sale, lease, exchange or transfer of all or substantially all of the assets
of the Corporation; (3) acquisition by a person or group of more than 20% of
Praxair's outstanding shares; and (4) a change in the majority composition of
the Board not approved by two-thirds of the directors in office prior to the
change. The Agreements provide that if the executive's employment is terminated
under specified conditions after such a change in control, then the executive
will be entitled to receive: (a) accrued salary, incentive compensation and
benefits; (b) enhanced life, disability, accident, health insurance and pension
benefits; (c) a lump sum payment equal to three times the sum of the executive's
salary, bonus and annualized long term incentive grants (stock options); (d)
reimbursement for certain of the executive's tax liabilities; and (e)
outplacement and financial counseling benefits. Payments will be made by Praxair
or through a grantor trust adopted by Praxair.
The Agreements renew automatically for one year terms, unless Praxair or
the executive gives notice of termination of the Agreement. Notwithstanding any
such notice of termination, if a change in control occurs during the original or
extended term of an Agreement, then the Agreement is automatically renewed for a
period of 24 months beyond the term then in effect. The Agreement terminates if
the executive's employment with Praxair is terminated by the executive or
Praxair prior to a change in control.
19
SHAREHOLDER RETURN
--------------------------------------------------------------------------------
COMPARISON OF CUMULATIVE TOTAL RETURN1 AMONG PRAXAIR, INC.,
S&P 500 INDEX, S&P CHEMICALS INDEX2 and S&P MATERIALS INDEX3
[GRAPH]
Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 29 Dec. 31
1996 1997 1998 1999 2000 2001
-----------------------------------------------------------------
Praxair $100 $ 99 $ 78 $113 $101 $127
S&P 500 $100 $133 $171 $206 $188 $165
S&P Chem. $100 $123 $116 $137 $125 $122
S&P Mat. $100 $109 $102 $129 $113 $116
ASSUMES $100 INVESTED ON DECEMBER 31, 1996 IN PRAXAIR COMMON STOCK, THE S&P 500
INDEX, THE S&P CHEMICALS INDEX, AND THE S&P MATERIALS INDEX.
Note: 1) Total return assumes reinvestment of dividends.
2) The Standard and Poor's (S&P) Chemicals Index is a published index
which covers six companies, including Praxair.
3) The S&P Materials Index (formerly, the S&P Basic Materials Index) is
a published index which covers 39 companies, including Praxair. The
S&P Chemicals Index companies comprise a subset of the S&P Materials
Index companies.
Beginning with this Proxy Statement, Praxair is changing the peer
company index for this performance graph from the S&P Chemicals
Index to the S&P Materials Index. Praxair is making this change
because it believes that investors are increasingly comparing
investment alternatives not just among chemical companies, but also
among other basic materials companies in industries such as pulp and
paper, steel, aluminum and mining which are covered by the broader
S&P Materials Index.
During this transition year, both peer group indexes are shown so
that shareholders may compare them for the most recent 5 year
performance period.
20
THE AUDIT COMMITTEE & THE INDEPENDENT ACCOUNTANTS
AUDIT COMMITTEE
In 2001 the Audit Committee was comprised of H. Mitchell Watson, Jr. as
Chairman, Alejandro Achaval, Ronald L. Kuehn, Jr., Benjamin F. Payton, and Wayne
T. Smith. Each of the Audit Committee members is "independent" within the
meaning of the New York Stock Exchange listing standards. The Committee met
three times during 2001. The Audit Committee assists the Board in monitoring the
independence of Praxair's external and internal auditors and the integrity of
Praxair's financial statements. The Audit Committee: (1) reviews Praxair's
principal policies for accounting, internal control and financial reporting; (2)
recommends to Praxair's Board of Directors the engagement or discharge of the
independent accountants; (3) reviews with the independent accountants the plan,
scope and timing of their audit; (4) reviews the auditor's fees and, after
completion of the audit, reviews with management and the independent accountants
the auditors' report; and (5) reviews with management and the independent
accountants the annual financial statements of Praxair prior to their
publication.
The Audit Committee also reviews the independence of the independent
accountants, the adequacy of Praxair's internal accounting control system and
Corporate Audit function and Praxair's policies on business integrity and ethics
and conflicts of interest. The Audit Committee also performs a number of other
review functions related to auditing the financial statements and internal
controls.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP served as Praxair's independent accountants for
the year ended December 31, 2001 and has been selected by the Board of Directors
to serve in such capacity for the year ending December 31, 2002. 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 FEES. PricewaterhouseCoopers LLP billed Praxair, Inc. and its
affiliates an aggregate amount of $2,463,000 for professional services rendered
for the audit of Praxair's annual financial statements for 2001 and the reviews
of the financial statements included on Praxair's reports on Form 10-Q for that
fiscal year.
FINANCIAL SYSTEMS DESIGN AND IMPLEMENTATION FEES. None.
ALL OTHER FEES. PricewaterhouseCoopers LLP billed Praxair, Inc. and its
affiliates an aggregate amount of $1,465,000 for non-audit services rendered in
2001, the majority of which was tax related work for the Corporation and its
international affiliates.
21
AUDIT COMMITTEE REPORT
The role of the Audit Committee is to assist the Board of Directors in its
oversight of the Company's financial reporting process. The Board of Directors,
in its business judgment, has determined that all members of the Committee are
"independent", as required by applicable listing standards of the New York Stock
Exchange. The Committee operates pursuant to a Charter that was last amended by
the Board on February 22, 2000.
As set forth in the Charter, the management of the Company is responsible
for: (1) the preparation, presentation and integrity of the Company's financial
statements; (2) the Company's accounting and financial reporting principles; and
(3) internal controls and procedures designed to assure compliance with
applicable laws, regulations, and standards. The independent accountants are
responsible for auditing the Company's financial statements and expressing an
opinion as to their conformity with generally accepted accounting principles.
In the performance of its oversight function, the Committee has considered
and discussed the audited financial statements with management and the
independent accountants. The Committee has also discussed with the independent
accountants the matters required to be discussed by the Statement on Auditing
Standards No. 61, Communication with Audit Committees, as currently in effect.
The Committee has discussed with the independent accountants their
independence from the Company and its management. The Committee has received the
written disclosures and the letter from the independent accountants required by
Independence Standards Board Standard No. 1, Independence Discussions with Audit
Committees, as currently in effect. The Committee has also received written
confirmations with respect to non-audit services provided to the Company by the
independent accountants in calendar year 2001 and those planned for 2002. The
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
accountants. Accordingly, the Audit Committee's oversight does not provide an
independent basis to certify that the audit of the Company's 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 Company's independent
accountants are in fact "independent".
Based upon the reports and discussions described in this report, and subject
to the limitations on the role and responsibilities of the Committee referred to
above and in the Charter, the Committee recommended to the Board that the
audited financial statements be included in the Company's Annual Report on Form
10-K for the year ended December 31, 2001 to be filed with the Securities and
Exchange Commission.
THE AUDIT COMMITTEE
H. Mitchell Watson, Jr., CHAIRMAN
Alejandro Achaval
Ronald L. Kuehn, Jr.
Benjamin F. Payton
Wayne T. Smith
-------------------------------------------------------
22
MISCELLANEOUS
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of SEC Forms 3, 4 and 5 furnished to Praxair and
written representations to the effect that no Form 5 is required, Praxair
believes that during the period January 1, 2001 to December 31, 2001, all
reports required by Section 16(a) of the Securities and Exchange Act of 1934
have been filed by its officers and directors.
SHAREHOLDER PROPOSALS FOR THE 2003 ANNUAL MEETING
To be included in Praxair's proxy statement and form of proxy, proposals of
shareholders intended to be presented to Praxair's 2003 Annual Meeting of
Shareholders must be received at Praxair's principal executive offices by
November 13, 2002. Otherwise, in order for a shareholder to bring other business
before that shareholder meeting, Praxair's Certificate of Incorporation requires
that proper written notice be received by Praxair on or before February 21,
2003. Shareholder proposals should be directed to the Assistant Corporate
Secretary, Praxair, Inc., 39 Old Ridgebury Road, M-1, Danbury, CT 06810-5113.
ANNUAL REPORTS
Shareholders of record on February 25, 2002 should have received a copy of
Praxair's 2001 Annual Report to Shareholders either with this Proxy Statement or
prior to its receipt. If, upon receipt of this proxy material, you have not
received the Annual Report to Shareholders, please write to the Assistant
Corporate Secretary at the address below and a copy will be sent to you.
IN ADDITION, A COPY OF PRAXAIR'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED DECEMBER 31, 2001 IS AVAILABLE TO EACH RECORD AND BENEFICIAL OWNER OF
PRAXAIR'S SECURITIES WITHOUT CHARGE UPON WRITTEN REQUEST TO THE ASSISTANT
CORPORATE SECRETARY, PRAXAIR, INC., 39 OLD RIDGEBURY ROAD, M-1, 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 Praxair's stock and reimbursement of
out-of-pocket costs incurred for any follow up mailings. Praxair also has
engaged Morrow & Co., Inc. to assist in the solicitation of proxies from
shareholders at a fee of $7,500 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., Inc.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ DAVID H. CHAIFETZ
DAVID H. CHAIFETZ,
VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY
March 1, 2002
YOU ARE URGED TO PROMPTLY COMPLETE AND FILE A PROXY
23
[PRAXAIR LOGO]
ANNUAL MEETING OF SHAREHOLDERS
APRIL 23, 2002 AT 9:30 AM
SHERATON DANBURY
DANBURY, CT
DIRECTIONS:
FROM NEW JERSEY:
Danbury is about one hour from the Tappan Zee Bridge. After crossing the bridge,
follow signs to New England and the Cross-Westchester Parkway (I-287). From
I-287, take I-684 North towards Brewster. Take Exit 9E (I-84 East to Danbury).
Get off I-84 at Exit 2 (Mill Plain Road). Go to the bottom of the ramp and turn
left, go to the second light and turn right, go to the next light, turn right
(Old Ridgebury Road) and go up the hill. The Sheraton is on your left.
FROM BOSTON:
Take Massachusetts Turnpike (Route 90) to Sturbridge, Exit 9. Proceed onto I-84
West through Hartford and Waterbury to Danbury. Take Exit 2A (Old Ridgebury
Road). The exit ramp circles around and up over the highway. The Sheraton is on
your left.
FROM HARTFORD:
Take I-84 West towards Waterbury/Danbury. Take Exit 2A(Old Ridgebury Road). The
exit ramp circles around and up over the highway. The Sheraton is on your left.
FROM NEW HAVEN:
Take Route 34 West to Newtown where you pick up I-84 West to Danbury. Take Exit
2A (Old Ridgebury Road). The exit ramp circles around and up over the highway.
The Sheraton is on your left.
FROM WHITE PLAINS/WESTCHESTER:
Take I-684 North towards Brewster and proceed to Exit 9E (I-84 East to Danbury).
Get off I-84 at Exit 2 (Mill Plain Road). Go to the bottom of the ramp and
turn left, go to the second light and turn right, go to the next light, turn
right (Old Ridgebury Road) and go up the hill. The Sheraton is on your left.
FROM NY CITY AIRPORTS &LONG ISLAND:
Follow signs to Whitestone Bridge. Cross over bridge and bear left onto the
Hutchinson River Parkway to White Plains and I-684 North towards Brewster. Take
Exit 9E (I-84 East to Danbury). Get off I-84 at Exit 2 (Mill Plain Road). Go to
the bottom of the ramp and turn left, go to the second light and turn right, go
to the next light, turn right (Old Ridgebury Road) and go up the hill. The
Sheraton is on your left.
AIRPORT ARRIVAL:
From the Ground Transportation Center for Connecticut Limousine Service to
Danbury. At the Danbury depot, call the Sheraton Danbury and they will provide
shuttle service for you. There is no car or ground transportation service to
Danbury from Westchester Airport (White Plains, NY) or Windsor-Bradley Airport
(Hartford, CT).
DETACH PROXY CARD HERE ONLY IF YOU ARE NOT VOTING BY INTERNET OR BY TELEPHONE
--------------------------------------------------------------------------------
[PRAXAIR LOGO] PROXY/VOTING INSTRUCTION CARD
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PRAXAIR, INC.
FOR THE ANNUAL MEETING ON APRIL 23, 2002
I (we) hereby authorize Dennis H. Reilley, James S. Sawyer and David H.
Chaifetz, or any of them, and each with the power to appoint his substitute, to
vote as Proxy for me(us) at the Annual Meeting of Shareholders to be held at the
Sheraton Danbury, 18 Old Ridgebury Road, Danbury, Connecticut on April 23, 2002
at 9:30 A.M., or any adjournment thereof, the number of shares which I (we)
would be entitled to vote if personally pres- ent. The proxies shall vote
subject to the directions indicated on the reverse side of this card and proxies
are authorized to vote in their discretion upon such other business as may
properly come before the meeting and any adjournments thereof. THE PROXIES WILL
VOTE AS THE BOARD OF DIRECTORS RECOMMENDS WHERE I (WE) DO NOT SPECIFY A CHOICE.
FOR PARTICIPANTS IN THE PRAXAIR, PRAXAIR DISTRIBUTION, PRAXAIR PUERTO RICO OR
DOW SAVINGS PROGRAMS: As to those shares of Praxair, Inc., if any, that are held
for me in the aforementioned Savings Programs, I instruct the Trustee of the
applicable Savings Program to sign a proxy for me in substantially the form set
forth above and on the reverse side. THE TRUSTEE SHALL MARK THE PROXY AS I
SPECIFY. 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 INSTRUC- TIONS.
PRAXAIR, INC.
P.O. BOX 11140
(Continued and to be dated and NEW YORK, NY 10203-0140
signed on the reverse side.)
[PRAXAIR LOGO] 39 Old Ridgebury Road, Danbury, CT06810-5113
VOTE BYINTERNET OR TELEPHONE
24 HOURS ADAY, 7 DAYS AWEEK
YOU MAY VOTE YOUR SHARES BY PROXY USING ANY OF THE FOLLOWING METHODS. PLEASE
CONSIDER THE CONVENIENCE OF INTERNET OR TELEPHONIC VOTING. THESE METHODS ALSO
REDUCE PRAXAIR'S EXPENSES.
THE INTERNET AND TELEPHONE VOTING FACILITIES WILL CLOSE AT 5:00 PM EASTERN TIME
ON APRIL 22, 2002.
BY INTERNET BY TELEPHONE BY MAIL
ACCESS THE WEBSITE ON A TOUCH-TONE TELEPHONE, DIAL THE MARK, SIGN AND DATE THE PROXY FORM
HTTPS://WWW.PROXYVOTENOW.COM/PXA TOLL-FREE NUMBER ATTACHED BELOW, DETACH IT, AND RETURN
AND FOLLOW THE INSTRUCTIONS. 1-888-216-1276 IT PROMPTLY IN THE ENCLOSED ENVELOPE.
YOU WILL BE ASKED TO ENTER THE AND FOLLOW THE INSTRUCTIONS. YOU WILL
NUMBER LOCATED BELOW IN THE BOX BE ASKED TO ENTER THE NUMBER LOCATED
LABELED "CONTROL NUMBER". BELOW IN THE BOX LABELED "CONTROL NUMBER".
HOW TO RECEIVE YOUR ANNUAL REPORT
AND PROXY STATEMENT ON-LINE
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 THE OPPORTUNITY TO CONSENT
TO FUTURE ELECTRONIC DELIVERY. SEE PAGE 3 OF THE PROXY STATEMENT FOR MORE
INFORMATION ABOUT THIS OPTION.
--------------------------------------------------------------------------------
IF YOU HAVE SUBMITTED YOUR PROXY BY INTERNET OR BY TELEPHONE, THERE IS NO NEED
FOR YOU TO MAIL BACK THE PROXY CARD ATTACHED BELOW.
--------------------------------------------------------------------------------
----------------------------
CONTROL NUMBER FOR
TELEPHONE OR INTERNET VOTING
----------------------------
Use The Internet To Vote * It's Fast And Convenient
HTTPS://WWW.PROXYVOTENOW.COM/PXA
DETACH PROXY CARD HERE ONLY IF YOU ARE NOT VOTING BY TELEPHONE OR INTERNET
--------------------------------------------------------------------------------
/ / SIGN, DATE AND RETURN THE PROXY /X/
CARD PROMPTLY USING THE ENCLOSED VOTES MUST BE INDICATED
ENVELOPE IF YOU DO NOT VOTE BY (X) IN BLACK OR BLUE INK.
INTERNET OR TELEPHONE
1. Election of Directors
FOR all nominees / / WITHHOLD AUTHORITY to vote / / *EXCEPTIONS / /
listed below for all nominees listed below
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED BELOW:
Nominees: 01 -Dale F. Frey, 02 -Raymond W. LeBoeuf, 03 -Benjamin F. Payton,
04 -Wayne T. Smith, 05 -William A. Wise
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
SUCH A MARK WILL BE DEEMED A VOTE "FOR" ALL NOMINEES OTHER THAN THOSE LISTED AS
EXCEPTIONS.)
*Exceptions: ___________________________________________________________________
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment
thereof.
Check here if you
Consent to future electronic delivery of Annual
Report/Proxy Statement (see explanation at
page 3 of the Proxy Statement) / /
To change your address, please mark this box. / /
To include any comments, please mark this box,
and use reverse side. / /
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S C A N L I N E
------------------------------------------
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.
Date Share Owner sign here Co-Owner sign here
---------------- ---------------------------------- ---------------------------