What is the main change being reported in this 8-K filing?

The main change is the amendment of Air Products' Long Term Incentive Plan (LTIP) and executive change-in-control severance agreements. The LTIP now requires a "double trigger" for accelerated vesting of equity awards upon a change in control, meaning both a change in control event and a subsequent termination of employment are necessary. Existing executive severance agreements will also be updated to reflect this double trigger mechanism.

What does "double trigger" vesting mean for executives and shareholders?

For executives, it means their equity awards will not automatically vest solely because of a change in control. They must also face an involuntary termination or resignation for good reason within two years following the change in control. For shareholders, this reduces the risk of large, automatic payouts to executives in a transaction, aligning executive incentives more closely with the long-term success of the company post-acquisition.

Are there any exceptions to the double trigger vesting?

Yes, the double trigger is conditional on replacement awards not preserving the value or terms of existing awards. If replacement awards are significantly inferior or not issued by a publicly listed company, or if specific conditions are not met by the surviving entity, the original vesting terms might apply. Additionally, awards can be settled for cash at the change-in-control price under certain circumstances.

What is the significance of removing the "grandfather provision" for excise tax gross-ups?

Previously, executive change-in-control severance agreements might have included provisions to "gross up" (cover) any excise taxes an executive might owe on severance payments under Section 280G of the IRS code. The discontinuation of this "grandfather" provision for new agreements means that executives will likely bear the cost of these excise taxes themselves, reducing a potential financial benefit for executives and a cost for the company.

APD 8-K: Leadership Changes

Summary

This 8-K filing from Air Products & Chemicals, Inc. (APD) on September 22, 2014, details significant amendments to the company's Long Term Incentive Plan (LTIP) and executive change-in-control severance agreements, effective immediately and for future agreements. The primary change is the shift from "single trigger" to "double trigger" vesting for future equity awards under the LTIP upon a change in control. This means accelerated vesting will only occur if a change in control happens *and* the executive's employment is terminated without cause or they voluntarily resign for good reason within 24 months post-change in control, provided replacement awards are not equivalent. These amendments aim to better align executive compensation with shareholder interests during potential acquisition scenarios. The filing also clarifies that new executive change-in-control severance agreements will no longer include a "grandfather" provision for excise tax gross-ups related to Section 280G of the IRS code for agreements entered into on or after October 1, 2014. This change reflects a shift away from providing tax gross-ups on potential parachute payments.

Key Highlights

1Shift from "single trigger" to "double trigger" vesting for future equity awards under the Long Term Incentive Plan (LTIP) upon a change in control.
2Double trigger vesting requires both a change in control event and subsequent termination of employment (without cause or for good reason) within 24 months for awards to vest.
3Replacement equity awards must be from a publicly listed company, preserve value, and offer comparable terms to qualify for double trigger provisions.
4Performance-conditioned awards being replaced will convert to time-based vesting awards under the double trigger scenario.
5New executive change-in-control severance agreements will no longer include "grandfathered" excise tax gross-ups under Section 280G for agreements entered into on or after October 1, 2014.
6These changes align executive compensation more closely with shareholder interests during change-in-control events.

Air Products & Chemicals, Inc. 8-K Report, Executive Changes (Sep 23, 2014)

Summary

Key Highlights

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