<PAGE>
<PAGE> 1
Five Radnor Corporate Center
100 Matsonford Road, Suite 550
Radnor, Pennsylvania 19087
July 5, 1995
TO OUR STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of Stockholders to
be held on Monday, August 7, 1995, at 8:30 a.m., Eastern Daylight Time, in the
Washington Room, Four Seasons Hotel, 18th Street and Benjamin Franklin
Parkway, Philadelphia, Pennsylvania.
The accompanying Notice of Meeting and Proxy Statement describe the
matters to be acted upon during the Annual Meeting. You are welcome to
present your views on these items and other subjects related to the Company's
operations. Your participation in the activities of the Company is important,
regardless of the number of shares you hold.
To ensure that your shares are represented at the Annual Meeting, whether
or not you are able to attend, please complete the enclosed proxy and return
it to us in the postage-paid envelope.
I hope you will attend the Annual Meeting.
Sincerely,
Peter McCausland
Chairman, President
and Chief Executive Officer
<PAGE>
<PAGE> 2
AIRGAS, INC.
___________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AUGUST 7, 1995
___________________________
TO THE STOCKHOLDERS:
The Annual Meeting of the Stockholders of Airgas, Inc. (the "Company"), a
Delaware corporation, will be held on Monday, August 7, 1995, at 8:30 a.m.,
Eastern Daylight Time, in the Washington Room, Four Seasons Hotel, 18th Street
and Benjamin Franklin Parkway, Philadelphia, Pennsylvania, for the following
purposes:
1. To elect three Directors of the Company.
2. To vote upon a proposal to approve an amendment to the Company's
Certificate of Incorporation to limit the potential liability of the
directors for monetary damages for certain acts or omissions.
3. To vote upon a proposal to amend the Company's Amended and Restated
1984 Stock Option Plan.
4. To vote upon a proposal to approve the Company's Management
Incentive Plan.
5. To vote upon a proposal to ratify the selection of KPMG Peat Marwick
LLP as the Company's independent accountants for the fiscal year
ending March 31, 1996.
6. To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
Stockholders of record at the close of business on June 9, 1995 are
entitled to notice of, and to vote at, the Annual Meeting and any adjournments
thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person, but whether or not you plan to attend, please promptly sign, date and
mail the enclosed proxy in the return envelope. Returning your proxy does not
deprive you of the right to attend the Annual Meeting and vote your shares in
person.
By Order of the Board of Directors,
Todd R. Craun, Esq.
Secretary
Radnor, Pennsylvania
July 5, 1995
The Company's Annual Report for the year ended March 31, 1995 accompanies
this notice, but is not incorporated as part of the proxy statement and is not
to be regarded as part of the proxy solicitation material.<PAGE>
<PAGE> 3
AIRGAS, INC.
____________
PROXY STATEMENT
_______________
This Proxy Statement is furnished in connection with the solicitation of
proxies at the direction of the Board of Directors of Airgas, Inc. (the
"Company") for use at the Annual Meeting of Stockholders to be held on August
7, 1995.
Stockholders of record at the close of business on June 9, 1995 will be
entitled to vote at the Annual Meeting. At the close of business on June 9,
1995, 30,721,158 shares of the Company's $0.01 par value common stock ("Common
Stock") were outstanding. A stockholder is entitled to one vote for each
share of Common Stock held by such stockholder. This Proxy Statement and the
enclosed form of proxy are being mailed to the Company's stockholders on or
about July 5, 1995.
Shares represented by a proxy in the accompanying form, unless previously
revoked, will be voted at the Meeting if the proxy is returned to the Company
properly executed and in sufficient time to permit the necessary examination
and tabulation before a vote is taken. A proxy may be revoked at any time
prior to its exercise by giving written notice to the Secretary of the
Company, by giving a later dated proxy, or by voting in person at the meeting.
Mere attendance at the Annual Meeting will not revoke the proxy. Any specific
instructions indicated on your proxy will be followed. Unless contrary
instructions are given, your proxy will be voted FOR each of the proposals
described in this Proxy Statement and in the discretion of the proxy holders
on such other business as may properly come before the Annual Meeting.
Abstentions are counted as shares present for purposes of determining the
presence or absence of a quorum for the transaction of business. Brokers
holding shares for beneficial owners must vote their shares according to the
specific instructions they receive from the owners. If specific instructions
are not received, brokers may vote these shares in their discretion, except if
they are precluded from exercising their voting discretion on certain
proposals pursuant to the rules of the New York Stock Exchange. In such a
case, the broker may not vote on the proposal absent specific voting
instructions. This results in what is known as a "broker non-vote." A broker
non-vote has the effect of a negative vote when a majority of the shares
issued and outstanding is required for approval of the proposal. A broker
non-vote has the effect of reducing the number of required affirmative votes
when a majority of the shares present and entitled to vote or a majority of
the votes cast is required for approval of the proposal. The election of each
nominee for director (Proposal 1) requires a plurality of votes cast. Brokers
have discretionary authority to vote on this proposal. Approval of the
proposed amendment to the Company's Certificate of Incorporation (Proposal 2)
requires the affirmative vote of the majority of the outstanding shares
entitled to vote. Approval of the proposed amendment to the 1984 Stock
Option Plan (Proposal 3), the Company's Management Incentive Plan (Proposal 4)
and the ratification of the selection of the auditors (Proposal 5) requires
the approval of a majority of the outstanding shares of Common Stock
represented and entitled to vote at the meeting. For purposes of Proposals
2, 3, 4 and 5, abstentions will have the same effect as a vote against the
<PAGE> 4
proposal. Broker non-votes will have no effect on the approval of Proposals
3, 4 and 5, but will have the same effect as a vote against Proposal 2. The
New York Stock Exchange determines whether brokers have discretionary
authority to vote on a given proposal.
The cost of proxy solicitation, including the cost of reimbursing banks
and brokers for forwarding proxies and proxy statements to beneficial owners
of the Common Stock, will be paid by the Company. Proxies will be solicited
without extra compensation by certain officers and regular employees of the
Company by mail and, if found to be necessary, by telephone and personal
interviews. All shares represented by valid proxies will be voted.<PAGE>
<PAGE> 5
ELECTION OF DIRECTORS
The By-Laws of the Company presently provide that the Board of Directors
shall designate the number of directors constituting the Board of Directors,
which shall be no less than seven and no more than thirteen members.
Currently, that number has been fixed by the Board of Directors at nine. The
Board of Directors consists of three classes, with directors of one class to
be elected each year, for terms extending to the annual meeting of
stockholders held in the third year following the year of their election. The
three directors whose terms expire at the 1995 Annual Meeting have been
nominated to serve for a term expiring at the 1998 Annual Meeting.
The names and biographical summaries of the three persons who have been
nominated to stand for election at the 1995 Annual Meeting and the remaining
directors whose terms are continuing until the 1996 or 1997 Annual Meetings
appear below. W. Thacher Brown, Frank B. Foster, III and Peter McCausland
were elected by the stockholders at the 1992 Annual Meeting. Of the
continuing directors, James M. Hoak, Jr., John A.H. Shober and Merril L. Stott
were elected by the stockholders at the 1993 Annual Meeting and Erroll C.
Sult, Robert E. Naylor, Jr. and Robert L. Yohe were elected by the
stockholders at the 1994 Annual Meeting.
All nominees have indicated that they are willing and able to serve as
directors if elected. In the event that any nominee should become
unavailable, the proxy will be voted for the election of any substitute
nominee designated by the Board of Directors or its Nominating and
Compensation Committee.
The Board of Directors recommends that you vote FOR the election of
Messrs. Brown, Foster and McCausland.
Set forth below is certain information regarding the three nominees for
election at the Annual Meeting and the remaining six directors whose terms are
continuing until the 1996 and 1997 Annual Meetings.
Nominees for Election for Terms Expiring at the 1998 Annual Meeting:
W. Thacher Brown Mr. Brown, age 47, has been the President, Treasurer and
a director of 1838 Investment Advisors, Inc., an
investment management company, and President of 1838
Investment Advisors, L.P., since July 1988. He is a
director of the 1838 Bond Debenture Trading Fund Inc. and
The Harleysville Mutual Insurance Company, and was a
Senior Vice President and a director of Drexel Burnham
Lambert Incorporated for more than four years prior to
1988. Mr. Brown has been a director of the Company since
1989.
Frank B. Foster, III Mr. Foster, age 61, has been Chairman of DBH Associates,
a venture capital/consulting firm, since 1989. He was
President and CEO of Diamond-Bathurst Inc., a
publicly-held manufacturer of glass containers, from 1975
until he founded DBH. He also serves as a director of
Contour Packaging, U.S. Precision Glass, Fragrance
Impressions, Ltd., Carr-Lowrey Glass Company and 1838
Investment Advisors, Inc. Mr. Foster has been a director
of the Company since 1986.
<PAGE> 6
Peter McCausland Mr. McCausland, age 45, has been the Chairman of the
Board and the Chief Executive Officer of the Company
since 1987, has been the President since April 1993 and
was the President from 1986 to 1988. Mr. McCausland has
been a director of the Company since 1986.
Directors Serving for Terms Expiring at the 1996 Annual Meeting:
James M. Hoak, Jr. Mr. Hoak, age 51, has been the Chairman of Heritage Media
Corporation, a broadcasting and advertising services
company, since 1987. He is also the Chairman of Cypress
Capital Corporation, a private investment company, since
1991, and Chairman and President of James M. Hoak & Co.,
an investment banking company, and Hoak Securities Corp.,
a broker-dealer, since 1995. Mr. Hoak served as
Chairman and Chief Executive Officer of Crown Media, Inc.,
a cable television company, from 1991 to 1995. He was the
Chairman and Chief Executive Officer of Heritage
Communications, Inc., a cable television company, from
1987 until 1990, and was President for more than five
years prior thereto. He is a director of Midwest
Resources, Inc., Pier 1 Imports, Inc., Texas Industries,
Inc. and Sun Coast Plastics, Inc. He has served as a
director of the Company since 1987.
John A.H. Shober Mr. Shober, age 62, has been the Vice Chairman of Penn
Virginia Corporation, a natural resources company, since
1992, Chief Executive Officer since 1989 and was President
for more than ten years prior to 1989. He has been an
officer of Penn Virginia Corporation since 1971, and
served as a director since 1978. Mr. Shober is a director
of Betz Laboratories, Inc., Ensign Bickford Industries,
Inc., First Reserve Corporation and MIBRAG mbH, as well as
a Member of the Board of Managers of Pennsylvania
Hospital, a Member of the Board of Trustees of Eisenhower
Exchange Fellowships, Inc. and director of the YMCA of
Philadelphia and vicinity. Mr. Shober has served as a
director of the Company since 1990.
Merril L. Stott Mr. Stott, age 66, has been providing management
consulting services to the Company since April 1, 1994.
Prior to that, he was the Director of Management
Development for the Company from April 1, 1993 to March
31, 1994, was President from April 1, 1991 to March 31,
1993, and was Vice President-Operations from August 1988
to March 31, 1991. Mr. Stott has served as a director of
the Company since 1993.
Directors Serving for Terms Expiring at the 1997 Annual Meeting:
Erroll C. Sult Mr. Sult, age 68, has been the President of National
Welders Supply Co., Inc., a major independent producer and
distributor of industrial gases, welding supplies and
related equipment in North Carolina, South Carolina,
Georgia and Virginia, since 1987, and was Executive Vice
President for more than five years prior thereto. Mr.
Sult has served as a director of the Company since 1988.
<PAGE> 7
Robert E. Naylor, Jr. Mr. Naylor, age 62, has been the Group Vice President of
Rohm & Haas Company, a specialty chemical manufacturer,
since 1985, and has served as a director of Rohm & Haas
Company since 1986. Mr. Naylor has served as a director
of the Company since 1992.
Robert L. Yohe Mr. Yohe, age 59, is an independent businessman and
investor. He was Vice Chairman of the Board of Olin
Corporation and a member of Olin's Board of Directors
from September 1990 until April 1994. Mr. Yohe served
in various executive positions at Olin since 1983,
including Executive Vice President from 1987 until
January 1993 and President of the Chemicals Group from
April 1985 until October 1987. He is a director of Betz
Laboratories, Inc., and serves as a director on a number
of business organizations. Mr. Yohe also is a trustee
of Lafayette College. Mr. Yohe has served as a director
of the Company since 1994.
Board of Directors and Committees
The Board of Directors held eleven meetings during the year ended March
31, 1995. The average attendance by directors at these meetings was 98
percent, and all incumbent directors attended at least 90 percent of the Board
and Committee meetings they were scheduled to attend.
The standing committees of the Board of Directors are an Executive
Committee, a Nominating and Compensation Committee and an Audit Committee.
These committees held, respectively, no meetings, two meetings and three
meetings during the year ended March 31, 1995.
The members of the Executive Committee are Messrs. Foster, McCausland and
Sult. As authorized by Delaware law and the Company's By-Laws, the Executive
Committee may exercise all of the powers of the Board of Directors when the
Board is not in session, except that it may not elect directors or appoint
officers, amend the By-Laws, declare dividends, appoint members of the
Executive Committee, approve the acquisition of substantially all the assets
or capital stock of a corporation or business entity which has annual sales in
excess of 20% of the annual sales of the Company or take any other action
which may only be taken by the Board.
The members of the Nominating and Compensation Committee are Messrs.
Brown, Hoak and Shober. Its responsibilities include the review of
compensation practices and corporate benefit plans of the Company, and the
review and recommendation of prospective officers and Board members.
The Committee does not consider nominations for Board membership made by the
Company's stockholders.
The members of the Audit Committee are Messrs. Brown, Naylor and Yohe.
Its duties include the selection of independent accountants subject to the
approval of the stockholders, review of the scope and results of the audit and
review of the organization and scope of the Company's internal auditing and
financial controls.
<PAGE> 8
Compensation of Directors
Directors (other than those who are employees of the Company) are paid an
annual retainer of $9,000 plus a fee of $750 for each Board or Committee
meeting attended, and are entitled to participate in the 1989 Non-Qualified
Stock Option Plan for Directors (Non-Employees) (the "Directors' Plan").
Under the Directors' Plan, on the date of each annual meeting of stockholders,
continuing directors are granted options to purchase 4,000 shares of the
Company's Common Stock at an exercise price equal to the fair market value on
the date of grant. The options are exercisable immediately and have terms of
10 years. Messrs. Brown, Foster, Hoak, Naylor, Shober, Sult, Stott and Yohe
each received options to acquire 2,500 shares (after they each waived their
right to options to acquire 1,500 shares) in fiscal 1995. Directors are also
reimbursed for their travel expenses for attendance at Board and Committee
meetings.
From April 1, 1994 through March 31, 1995, Mr. Stott was paid $38,000 for
consulting services he rendered to the Company.
Filings Under Section 16(a)
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership of the securities with the Securities and
Exchange Commission and the New York Stock Exchange. Such persons are also
required to furnish the Company with copies of all Section 16(a) forms they
file. The Company knows of no greater than ten percent stockholders, other
than one person who is an officer and director.
Based solely on its review of the copies of the forms received by it with
respect to the 1995 fiscal year, or written representations from certain
reporting persons that no Forms 5 were required, the Company believes that all
of its officers and directors complied with all filing requirements applicable
to them, except with respect to one late filing of a Form 4 to report the
grant of transferable option under the Company's Amended and Restated 1984
Stock Option Plan to Peter McCausland in May 1994, which was filed in July
1994.<PAGE>
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation paid during the fiscal years ended March 31, 1995, 1994 and 1993
to the Company's Chief Executive Officer and each of the Company's four other
most highly compensated executive officers based on salary and bonus earned
during the 1995 fiscal year.
Summary Compensation Table (continued on next page)
Annual Compensation
___________________
Other Annual
Name and Principal Fiscal Compensation
Position Year Salary ($) Bonus ($) ($)(1)
_________________ ______ __________ _________ ____________
Peter McCausland 1995 325,000 $580,280 (1)
Chairman, President 1994 325,000 575,000
and Chief Executive 1993 325,000 425,000
Officer
Britton H. Murdoch 1995 153,000 70,000 (1)
Vice President- 1994 147,500 68,300
Finance 1993 139,833 58,200
Kenneth A. Keeley 1995 152,062 64,733 (1)
Division President- 1994 145,000 49,500
Central 1993 145,000 56,145
Alfred B. Crichton 1995 122,308 64,733 (1)
Division President- 1994 115,000 60,300 (2)
West 1993 98,750 37,673
Hermann Knieling 1995 120,000 64,733 (1)
Division President- 1994 115,000 50,700
East 1993 92,750 26,572
<PAGE> 10
Summary Compensation Table (continued from previous page)
Long Term Compensation
______________________
Securities All Other
Name and Principal Restricted Underlying LTIP Compensation
Position Stock Awards Options (#) Payouts ($)(1)
_________________ ____________ ___________ ________ ____________
Peter McCausland None 108,000 None $ 5,766(2)
Chairman, President None 136,000 None 4,558
and Chief Executive None 168,000 None 13,015
Officer
Britton H. Murdoch None 20,200 None 7,692(3)
Vice President- None 25,600 None 6,082
Finance None 20,000 None 5,089
Kenneth A. Keeley None 20,200 None 8,125(4)
Division President- None 25,600 None 6,488
Central None 12,000 None 5,251
Alfred B. Crichton None 22,200 None 6,494(5)
Division President- None 25,600 None 5,029
West None 12,000 None 1,792
Hermann Knieling None 20,200 None 6,900(6)
Division President- None 25,600 None 5,600
East None 12,000 None 2,155
(1) Amount does not exceed the lesser of $50,000 or 10% of total salary and
bonus.
(2) Consists of $5,562 of employer matching contributions and additional
discretionary contributions based on the profitability of the Company
under the Company's 401(k) Plan, and the value of life insurance premiums
of $204 paid for the benefit of Mr. McCausland.
(3) Consists of $7,560 of employer matching contributions and additional
discretionary contributions based on the profitability of the Company
under the Company's 401(k) Plan, and the value of life insurance premiums
of $132 paid for the benefit of Mr. Murdoch.
(4) Consists of $7,549 of employer matching contributions and additional
discretionary contributions based on the profitability of the Company
under the Company's 401(k) Plan and the value of life insurance premiums
of $576 paid for the benefit of Mr. Keeley.
(5) Consists of $6,146 of employer matching contributions and additional
discretionary contributions based on the profitability of the Company
under the Company's 401(k) Plan and the value of life insurance premiums
of $348 paid for the benefit of Mr. Crichton.
(6) Consists of $6,000 of discretionary contributions based on the
profitability of the Company under the Company's 401(k) Plan and the
value of life insurance premiums of $900 paid for the benefit of Mr.
Knieling.
<PAGE> 11
Option Grants During 1995 Fiscal Year (continued on next page)
The following table provides information related to options granted to
the named executive officers during fiscal 1995. The Company does not have
any outstanding stock appreciation rights.
Individual Grants
______________________________________________________________________________
No. of
Securities % of Total
Underlying Options
Options Granted to
Granted Employees in Exercise Expiration
Name (#)(2) Fiscal Year Price ($/Sh) Date
____ _________ ____________ ____________ ___________
Peter McCausland 54,000 10.8% $22.63 May 12, 2004
54,000 10.8 29.41 May 12, 2004
Britton H. Murdoch 6,500 1.3 22.63 May 12, 2004
6,900 1.4 29.41 May 12, 2004
6,800 1.4 29.41 May 12, 2000
Kenneth A. Keeley 6,500 1.3 22.63 May 12, 2004
6,900 1.4 29.41 May 12, 2004
6,800 1.4 29.41 May 12, 2000
Alfred B. Crichton 6,500 1.3 22.63 May 12, 2004
6,900 1.4 29.41 May 12, 2004
6,800 1.4 29.41 May 12, 2000
2,000 .4 29.41 May 12, 2004
Hermann Knieling 6,500 1.3 22.63 May 12, 2004
6,900 1.4 29.41 May 12, 2004
6,800 1.4 29.41 May 12, 2000
<PAGE> 12
Options Granted During 1995 Fiscal Year (continued from previous page)
Potential Realization Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Term (1)
_______________________________
Name 0%($)(3) 5%($)(3) 10%($)(3)
____ ________ ________ _________
Peter McCausland $ 0 $768,522 $1,947,585
0 402,402 1,581,465
Britton H. Murdoch 0 92,507 234,432
0 51,418 202,076
0 6,231 72,627
Kenneth A. Keeley 0 92,507 234,432
0 51,418 202,076
0 6,231 72,627
Alfred B. Crichton 0 92,507 234,432
0 51,418 202,076
0 6,231 72,627
0 14,904 58,573
Hermann Knieling 0 92,507 234,432
0 51,418 202,076
0 6,231 72,627
(1) These amounts, based on assumed appreciation rates of 0%, 5% and 10%
prescribed by the Securities and Exchange Commission rules, are not
intended to forecast possible future appreciation, if any, of the
Company's stock price.
(2) Options to acquire shares of Common Stock, which become exercisable in
four equal annual installments beginning May 12, 1995.
(3) No gain to the optionees is possible without an increase in stock price,
which will benefit all stockholders. If the named executive officers
realize the appreciated values based on the 5% and 10% appreciation rates
set forth in the table, total stockholder value will have appreciated by
approximately $491 million and $1.244, billion, respectively, and the
value of the named executive officers' appreciation will be approximately
0.4% of the total stockholders' appreciation. Potential stock price
appreciation to all stockholders is calculated based on a total of
30,721,158 shares of Common Stock outstanding on June 9, 1995 and a price
of $25.41 per share, the weighted average exercise price of options
granted in fiscal 1995 referred to in the table above.
<PAGE> 13
Aggregated Option Exercises During 1995 Fiscal Year
and Fiscal Year-End Option Values
The following table provides information related to employee options and
warrants exercised by the named executive officers during fiscal 1995 and the
number and value of such options and warrants held at fiscal year-end.
(columns continued on next page)
Shares Value
Acquired on Realized
Name Exercise (#) ($)(1)
____ ___________ ________
Peter McCausland ---- ----
Britton H. Murdoch 36,000 $761,310
Kenneth A. Keeley 12,000 263,760
Alfred B. Crichton 10,000 214,700
Hermann Knieling ---- ----
<PAGE> 14
(columns continued from previous page)
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
Name at Fiscal Year-End (#) at Fiscal Year-End($)(2)
____ ____________________________ __________________________
Exercisable Unexercisable Exercisable Unexercisable
___________ _____________ ___________ _____________
Peter McCausland 313,040 339,000 $6,617,471 $4,324,275
Britton H. Murdoch 76,400 59,400 1,610,370 681,195
Kenneth A. Keeley 268,100 49,300 5,906,462 462,221
Alfred B. Crichton 44,400 50,400 893,450 441,660
Hermann Knieling 26,300 47,700 500,181 425,668
(1) Represents the difference between the option exercise price and the
market value on the date of exercise.
(2) Value based on the closing price of $26.50 per share on March 31,
1995, less the option exercise price.
Termination of Employment and Change in Control Arrangement
The Company has agreed that upon Mr. McCausland's termination of
employment or change in control of the Company, he is entitled to a payment
equal to two times annual salary, the continuation of health insurance and
other employee benefits for a three-year period and automatic vesting of all
previously granted stock options.
NOMINATING AND COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The Nominating and Compensation Committee of the Board of Directors has
furnished the following report on executive compensation. Under the
supervision of the Nominating and Compensation Committee, the Company has
developed and implemented compensation policies, plans and programs. The
Committee is composed of three independent, nonemployee directors. Following
review and approval by the Nominating and Compensation Committee, all issues
pertaining to executive compensation (other than the granting of stock options
under the Company's Amended and Restated 1984 Stock Option Plan) are submitted
to the full Board of Directors for approval.
Since its inception, the Company has maintained the philosophy that
compensation of its entire management team, including executive officer level
positions through operating management positions at the Company's operating
subsidiaries should be directly and materially linked to operating
performance. To achieve this linkage, compensation is heavily weighted
towards bonuses paid on the basis of performance and to the award of stock
options to a relatively broad level of operating management.
<PAGE> 15
Compensation Principles
The foundation of the management compensation program is based on beliefs
and guiding principles designed to align compensation with business strategy,
Company values and management initiatives. The program:
- - Rewards executives for long-term strategic management and the enhancement
of shareholder value through the award of stock options as a significant
percentage of total compensation.
- - Integrates compensation programs with both the Company's annual and
longer-term strategic planning and measurement processes, with particular
emphasis on the growth of cash flow.
- - Provides flexibility in order to maximize local autonomy, which the
Company views as an important element of its success.
Executive Compensation Program
The total compensation program consists of both cash and equity based
compensation. The annual compensation consists of a base salary and an annual
bonus under the Airgas Bonus Plan ("ABP"). (Subject to stockholder approval,
future bonus awards to certain of the executive officers will be granted under
the Company's Management Incentive Plan.) Incentive compensation is closely
tied to corporate and individual performance in a manner that encourages a
continuing focus on building profitability and shareholder value. Once each
year, the Committee determines the salary ranges for executive officers upon
review of salary ranges in companies comparable in size in terms of annual
sales and capitalization. The comparison group includes companies in the
specialty chemicals industry plus distribution companies and fast growth
companies outside of the Company's industrial classification. The Committee
included companies outside of the Company's industry in the comparison group
because it believes that the Company is similar in certain respects to such
companies. Actual salary changes are based upon individual and Company-wide
performance and are fixed at levels slightly below salary levels paid at
companies in the comparison group. The individual's performance is measured
against specific management objectives, such as profit and cash flow, safety
targets, programs for training and development of personnel and sales and
marketing programs.
Offsetting the Company's lower base salary levels, however, is the
opportunity to earn significantly higher total compensation through incentive
bonus and stock option programs. The bonus and stock option components are
"at risk," meaning that the ultimate value of the compensation depends on such
factors as company financial performance, individual performance and stock
price. This at risk portion of the Company's executive compensation ranges
from approximately 60% to 70% of total compensation, which represents a higher
portion of total compensation than for most of the companies in the comparison
group. The Committee approves the participation of key executives in the ABP.
Awards for executive officers vary with a combination of the Company's
achievement of cash flow and earnings goals and are then adjusted
up or down for the executive's achievement of specified objectives and
individual job performance. The Company's objectives that the Committee
considers are the same as those used to determine salary. The Committee
relies on these quantitative and qualitative measures and it uses subjective
judgment and discretion in light of these measures and the Company's
compensation principles described above to determine base salaries and bonuses.
<PAGE> 16
Long-term incentives are provided through the grant of stock options.
The Committee reviews and approves the participation of executive officers of
the Company and its subsidiaries under the Company's stock option plan. The
Committee has the authority to determine the individuals to whom stock options
are awarded, the terms of the options and the number of shares subject to each
option. The size of option grants are based upon position level. The
Committee determines the percentage of total compensation which is to consist
of the value of stock options for each position level and divides that value
by the estimated value of the options, using the Black-Scholes method. During
fiscal 1995, the value of options granted was generally between 40% and 50% of
an executive officer's total compensation. Through grants of stock options,
the objective of aligning executive officers' long-range interests with those
of the stockholders are met by providing the executive officers with the
opportunity to build a meaningful stake in the Company. The Company does not
have a policy regarding stock ownership objectives for executives and,
therefore, the Committee does not consider stock option grants previously
made. As with the determination of base salaries and bonuses, the Committee
relies on quantitative and qualitative measures and exercises subjective
judgment and discretion in view of these measures and the Company's general
policies. Executive officers may also participate in the Company's 401(k)
Plan, which includes Company matching contributions and discretionary
contributions based on the Company's profitability, and the Company's Employee
Stock Purchase Plan, which permits eligible employees to purchase shares of
the Company's Common Stock at varying discounts from the market price,
depending on the employee's compensation level.
Chief Executive Officer Compensation
The Nominating and Compensation Committee reviewed the Chief Executive
Officer's compensation for fiscal year 1995 and determined that his base
salary would remain the same as it had been in 1994 consistent with the
Company's objective of paying a higher level of compensation through its at
risk bonus and stock option programs. The fiscal 1995 bonus award was
approved using a formula that set the Chief Executive Officer's bonus at a
percentage of the Company's cash flow during the fiscal year. Except for a
special cash bonus that was awarded in 1995, the same formula has been used to
determine the Chief Executive Officer's bonus since 1990. An additional
special bonus was awarded in fiscal 1995 to reflect the Chief Executive
Officer's outstanding performance in meeting specific strategic and operating
objectives, such as profit and cash flow targets, successful integration of a
large number of acquisitions and increases in same-store sales. In
determining the number of shares to be awarded as stock options, the Committee
relied upon grant levels specifically determined and recommended by an
independent outside consultant in 1990 for growth-oriented companies
initiating stock option plans, as part of a five-year, front-end loaded stock
option grant plan for the Chief Executive Officer, and upon the Chief
Executive Officer's performance.
<PAGE> 17
Deductibility
The Company intends, to the extent practicable, to preserve deductibility
under the Internal Revenue Code (the "Code") of compensation paid to its
executive officers while maintaining compensation programs to attract and
retain highly qualified executives in a competitive environment.
Accordingly, the Management Incentive Plan and an amendment to the Company's
Amended and Restated 1984 Stock Option Plan have been proposed to permit
compensation generally paid under those plans to be exempt from the limits
contained in Section 162(m) of the Code, although certain compensation paid to
the executives may not be deductible.
John A.H. Shober, Chairman
W. Thacher Brown
James M. Hoak, Jr.<PAGE>
<PAGE> 18
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
During the Company's 1995 fiscal year, Mr. Sult served as a member of the
Nominating and Compensation Committee until August 1, 1994. Mr. Sult is the
President of National Welders Supply Co., Inc. ("National"), a producer and
distributor of industrial gases, welding supplies and related equipment in the
southeastern part of the United States. Since the beginning of fiscal 1995,
National has paid $914,000 to a joint venture of the Company and Elkem Metals
Company for the purchase of calcium carbide.
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly change in the
cumulative total stockholder return on the Company's Common Stock against the
cumulative total return of the S&P Composite - 500 Stock Index and the S&P
Chemicals Composite Index for the period of five years commencing April 1,
1990 and ended March 31, 1995.
<PAGE>
<PAGE> 19
CERTAIN TRANSACTIONS
McClain Corporation ("McClain"), Woodstock, Illinois, which is the
beneficial owner of more than five percent of the Company's Common Stock, is
the exclusive sales agent of a subsidiary of the Company for the sale and
marketing of certain products, including electrically calcined anthracite and
electrode paste, under a sales agency agreement which was renewed by the
parties in October 1993 for a ten-year term (the "Sales Agency Agreement").
The Sales Agency Agreement provides for the payment of commissions to McClain
equal to 5% of the sales for all Company products sold under the Sales Agency
Agreement by McClain. During the fiscal year ended March 31, 1995, Midwest
Carbide, a wholly-owned subsidiary of the Company, paid McClain $543,000
pursuant to the Sales Agency Agreement. The Company believes the amounts paid
to McClain are not inconsistent with industry practices.
As a condition to the amendment in January 1991 of warrants held by Mr.
McCausland, Mr. McCausland exercised warrants and the Company agreed to
guarantee an individual loan for, or to lend to Mr. McCausland directly, the
amount of taxes, if any, which may be payable by reason of the warrant
exercise.
The Company leases two properties from Mr. Knieling under two leases that
expire in fiscal 1996 and 1997. During fiscal 1995, the Company made rental
payments to Mr. Knieling in the aggregate amount of $70,000. The Company
believes that the terms of the leases are no less favorable than could have
been obtained in arms-length transactions with unaffiliated third parties.
Since April 1, 1994, National Welders Supply Co., Inc., of which Mr. Sult
is the President, paid $914,000 to a joint venture of the Company for the
purchase of calcium carbide. The Company believes that the terms of the
transactions are no less favorable than could have been obtained in
arms-length transactions with unaffiliated third parties. See "Compensation
Committee Interlocks and Insider Participation."
The Company leases cylinders from William A. Rice, Jr., Division
President - Industrial Distribution and Purchasing, of the Company, under a
capital lease continuing through December 1997. During its 1995 fiscal year,
the Company made principal and interest payments totaling $174,000 to Mr.
Rice. The Company believes that the terms of the lease are no less favorable
than could have been obtained in arms-length transactions with unaffiliated
third parties.
In April 1995, the Company made a $110,000 loan to William E. Sanford,
Vice President - Sales and Marketing, to assist in the payment of taxes
incurred as a result of Mr. Sanford's exchange of an interest in a subsidiary
for the Company's Common Stock. The loan bears interest at an annual rate of
9%, and principal and interest are due and payable on demand.
In fiscal 1995, Mr. Knieling received a $250,000 contingent payment from
the Company in connection with the Company's acquisition in 1989 of a company
owned by Mr. Knieling.<PAGE>
<PAGE> 20
SECURITY OWNERSHIP
The following table sets forth certain information, according to
information supplied to the Company regarding the number and percentage of
shares of the Company's Common Stock beneficially owned on March 31, 1995 (i)
by each person who is the beneficial owner of more than 5% of the Common
Stock; (ii) by each nominee for director and director (who is a nominee or
continuing director); (iii) by each executive officer named in the Summary
Compensation Table; and (iv) by all directors and executive officers of the
Company as a group. Unless otherwise indicated, the stockholders listed
possess sole voting and investment power with respect to the shares listed.
Name of Beneficial Owner Amount and Nature of Percentage of
Beneficial Ownership(1) Shares Outstanding
Peter McCausland
101 Waterman Avenue
Philadelphia, PA . . . . 4,711,007 (2)(3)(4) 15.1
James M. Hoak, Jr. . . . 22,500 (2) *
Erroll C. Sult . . . . . 38,300 (2) *
W. Thacher Brown . . . . 50,500 (2)(5) *
Frank B. Foster, III . . 25,300 (2) *
John A. H. Shober. . . . 25,500 (2) *
Merril L. Stott. . . . . 183,792 (2)(6) *
Robert E. Naylor, Jr.. . 10,500 (2) *
Robert L. Yohe . . . . . 3,700 (2) *
Britton H. Murdoch . . . 119,040 (2) *
Kenneth A. Keeley. . . . 421,855 (2)(4)(7) 1.4
Alfred B. Crichton . . . 81,058 (2)(4) *
Hermann Knieling . . . . 55,935 (2)(4) *
McClain Corporation
304 West Jackson Street
Woodstock, Illinois 60098 1,580,000 (8) 5.1
Thomas W. Smith
323 Railroad Avenue
Greenwich, CT 06830. . . 1,737,800 (9) 5.6
Thomas N. Tryforos
323 Railroad Avenue
Greenwich, CT 06380. . . 1,738,196 (9) 5.6
<PAGE> 21
(columns continued)
Name of Beneficial Owner Amount and Nature of Percentage of
Beneficial Ownership(1) Shares Outstanding
First Interstate Bancorp.
633 W. 5th Street
Los Angeles, CA 90071. . 1,559,150 (10) 5.1
All directors and
executive officers
as a group (20 persons) 6,284,928 (1)(2)(3)(4)
(5)(6)(7) 19.4
________________________
* Less than 1% of the outstanding Common Stock
(1) Includes all options, warrants and rights to acquire shares currently
exercisable or exercisable within 60 days of March 31, 1995.
(2) Includes the following number of shares of Common Stock which may be
acquired by certain directors and executive officers through the exercise
of options and warrants which were exercisable as of March 31, 1995 or
became exercisable within 60 days of that date: Mr. McCausland, 461,040
shares; Mr. Hoak, 18,500 shares; Mr. Sult, 26,500 shares; Mr. Brown,
22,500 shares; Mr. Foster, 18,500 shares; Mr. Shober, 18,500 shares; Mr.
Stott, 91,300 shares; Mr. Naylor, 10,500 shares; Mr. Murdoch, 102,850
shares; Mr. Keeley, 286,450 shares; Mr. Crichton, 62,350 shares; Mr.
Knieling, 43,050 shares; Mr. Yohe, 2,500 shares; and all directors and
executive officers as a group, 1,597,455 shares.
(3) Investment and/or voting power with respect to 1,086,256 of such shares
are shared with, or under the control of, members of Mr. McCausland's
immediate family, and 60,915 shares are held by a charitable foundation
of which Mr. McCausland is an officer and director.
(4) Includes the following shares of Common Stock held under the Company's
401(k) Plan: Mr. McCausland, 15,605 shares; Mr. Keeley, 8,232 shares; Mr.
Crichton, 3,245 shares; Mr. Knieling, 4,305 shares; and all executive
officers as a group, 59,830 shares.
(5) Includes 4,000 shares owned by members of Mr. Brown's immediate family.
(6) Includes 90,400 shares owned in a living trust of which Mr. Stott and his
spouse are co-trustees and their children are the beneficiaries.
(7) Includes 127,900 shares owned in a living trust, of which Mr. Keeley is
both trustee and beneficiary and 1,100 shares held in a partnership, the
partners of which are Mr. Keeley and his two sons.
(8) McClain Corporation ("McClain") jointly reported with Arthur W. McClain,
Helen S. McClain, Scott D. McClain, Margaret S. McClain and Kelly W.
McClain, the directors of McClain, on a Schedule 13G, dated April 13,
1995 (upon which the Company has relied in making this disclosure), that
they had shared voting and investment power for 1,580,000 shares and sole
voting and investment power for 58,200, 0, 12,500, 2,500 and 2,630
shares, respectively, and that Kelly W. McClain had shared voting and
investment power with his spouse as to 3,660 shares.
<PAGE> 22
(9) Mr. Smith and Mr. Tryforos jointly reported on a Schedule 13D, dated
March 27, 1992, that in their capacities as investment managers for
certain managed accounts they had shared voting and investment power for
more than 5% of the outstanding shares of the Common Stock, and they
subsequently advised the Company that Mr. Smith and Mr. Tryforos have
shared voting and investment power for 1,737,800 shares and that Mr.
Tryforos has sole voting and investment discretion for 396 shares.
(10) First Interstate Bancorp reported on Schedule 13G, dated February 10,
1995 (upon which the Company has relied in making this disclosure), that
it had sole voting power for 895,450 shares, shared voting power for
139,600 shares, sole dispositive power for 1,426,550 shares and shared
dispositive power for 172,600 shares.
PROPOSAL TO APPROVE AN
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO LIMIT THE LIABILITY OF DIRECTORS
The Delaware General Corporation Law (the "GCL") permits a Delaware
corporation to include a provision in its Certificate of Incorporation
eliminating or limiting personal monetary liability of members of its Board of
Directors for certain alleged breaches of fiduciary duty. The Board of
Directors has approved, subject to stockholder approval at the Annual Meeting,
an amendment to the Company's Certificate of Incorporation to add such a
provision in Article 11. The Board recommended that the stockholders approve
the action called for by the following resolution and directed that the
resolution be submitted for approval by the stockholders at the Annual
Meeting.
"RESOLVED, that the stockholders of the Corporation amend the
Corporation's Certificate of Incorporation, as amended, by adding thereto the
following article:
ARTICLE 11
__________
To the fullest extent permitted by Delaware statutory or decisional
law, as amended or interpreted, no director of the Corporation shall be
personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the Corporation
or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law (the "GCL"), or
(iv) for any transaction from which the director derived an improper
personal benefit. If the GCL is amended to authorize corporate action
further eliminating or limiting the personal liability of directors, then
the liability of a director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the GCL, as so amended. Any
repeal or modification of this Article 11 by the stockholders of the
Corporation shall not adversely affect any right or protection of a
director of the Corporation with respect to events occurring prior to the
time of such repeal or modification."
<PAGE> 23
The proposed resolution will protect the directors against personal
liability for monetary damages for certain breaches or their duty of care
(which generally concerns directors' oversight of the corporation's business
and the manner in which the directors make business decisions affecting
the corporation). Under Delaware law, absent the inclusion of this provision,
directors can be held liable for gross negligence in the performance of their
duty of care but not for simple negligence. In a context not involving a
decision by the Board of Directors (i.e., a suit alleging loss due to the
directors' inattention to a particular matter), a simple negligence standard
might apply. The proposed provision protects directors against liability for
monetary damages for negligence in the performance of their duties, including
gross negligence. Under Delaware law, directors remain liable for breaches
of their duty of loyalty to the corporation and its stockholders (which
generally concerns directors' self-interested dealings with respect to the
corporation), as well as for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law and transactions
from which a director derives improper personal benefit, and for unlawful
dividends or unlawful stock repurchases or redemptions. Furthermore, the
proposed provision does not affect the liability of a director to third
parties who are not stockholders or under federal statutes, such as the
federal securities laws, nor does it affect the ability of the Company or a
stockholder to seek equitable relief, such as an injunction or rescission of a
transaction involving a breach of the duty of care, although the availability
of such equitable relief may be of limited usefulness in many circumstances or
may be unavailable as a practicable matter. In addition, the proposed
provision applies only to claims against a director arising out of his role as
a director and not his role as an officer or in any other capacity.
Furthermore, liabilities which may arise out of acts or omissions occurring
prior to the date of the adoption of the amendment to the Certificate of
Incorporation would not be covered by this provision, so that directors would
remain potentially liable for monetary damages in connection with any such
prior acts or omissions.
The principal effect of this provision will be that stockholders will be
giving up a cause of action against a director for breach of fiduciary duty,
including grossly negligent business decisions.
The Board of Directors believes that the adoption of this provision is
important in attracting and retaining qualified directors and the Company
believes that it will enable the Company to receive more favorable directors'
liability insurance rates and provide additional comfort to directors by
providing an added level of protection for decisions made in the Company's
interest. This provision was not proposed in response to any resignation,
threat of resignation or refusal to serve by any director of the Company or
the result of any knowledge on the part of the Board of Directors of any
threatened action or suit against the Board or any of its members. Although
the Company believes it has been able to attract and retain sufficient
qualified persons to serve as its directors, the Board of Directors believes
that the Company should take every possible step to ensure that it will
continue to be able to attract qualified directors.
<PAGE> 24
PROPOSAL TO APPROVE THE AMENDED AND RESTATED
1984 STOCK OPTION PLAN, AS AMENDED
On May 22, 1995, the Board of Directors adopted, subject to stockholder
approval, the Amended and Restated 1984 Stock Option Plan (the "Plan"), as
amended (i) to allow for the continued exercise of non-qualified options held
by employees whose employment terminates due to death, disability or
retirement, to the extent exercisable on the date of termination, unless the
Nominating and Compensation Committee (the "Committee") determines, in its
sole discretion, that all or part of the options that were not exercisable at
the date of termination will be vested and will continue to be exercisable,
(ii) to provide that a pro rata portion of the current year's installment of
non-qualified stock options on the date of termination of employment due to
death, disability or retirement which were not exercisable as of the date of
termination will become exercisable, (iii) to provide that the Committee may,
in its discretion, accelerate vesting of any non-qualified stock option and
(iv) to limit the number of options that may be granted to any individual
under the Plan.
The Board of Directors believes that the granting of stock options is an
effective method of recruiting and retaining valuable employees of the Company
and its subsidiaries by providing an incentive to such persons and
strengthening the identity of interests between such key employees and
the Company. The purpose of the amendment is to (i) provide a more orderly
transition for employees and their families due to the employee's death,
disability or retirement by allowing them to retain and exercise vested and,
to the extent permitted by the amendment, unvested options that have been
issued by the Company, (ii) provide the Committee with flexibility to amend
the vesting schedule of an outstanding option and (iii) allow the Company to
qualify for certain tax deductions for compensation paid to its executive
officers. The amendment provides that no individual may be granted, in any
fiscal year, options to acquire more than 200,000 shares of the Company's
Common Stock, subject to adjustment under certain conditions. Subject to
stockholder approval, the amendment will apply to all non-qualified options
granted beginning on May 22, 1995. If the stockholders do not approve the
Plan as amended, the Plan in its current form will remain in effect.
Summary of Terms and Provisions of the Plan
Options granted pursuant to the Plan are evidenced by written stock
option agreements containing such terms and conditions as may be recommended
and approved from time to time by the Committee, but subject to the terms of
the Plan. The material terms and provisions applicable to options under the
Plan, as amended pursuant to this Proposal, are described below.
General. The Plan was adopted by the Board of Directors and approved by
the stockholders of the Company on June 5, 1984. The Plan was subsequently
amended to incorporate certain changes required by the Internal Revenue Code
of 1986, as amended, to provide for the grant of nonstatutory stock options,
to increase the number of shares available for grant under the Plan, to
provide for the acceleration of exercisability upon a change in control of
options granted under the Plan and to satisfy the requirements contained in
old Rule 16b-3. The purpose of the Plan is to help attract and retain
superior personnel for positions of substantial responsibility with the
Company and to provide officers and other key employees of the Company upon
whose judgment, initiative and efforts the success and development of the
business depends, with an additional incentive to contribute to the Company's
success. As of March 31, 1995, there were approximately 300 employees who
were eligible to receive options under the Plan.
<PAGE> 25
The Plan provides that ISOs and non-qualified stock options to purchase
7,040,000 shares of Common Stock may be granted from time to time until June
4, 1999, unless the Plan is terminated sooner by the Board of Directors. As
of March 31, 1995, 1,758,492 shares have been purchased pursuant to the
exercise of options, 2,914,470 shares were issuable upon the exercise of
outstanding options and 2,367,038 shares were reserved for issuance upon the
exercise of options available for grant. The number of shares covered by
options granted under the Plan and the exercise prices are subject to
adjustment in the event of changes in the outstanding Common Stock of the
Company by reason of stock dividends, recapitalizations, stock splits,
combinations, exchanges of shares and upon similar events. If any option
granted under the Plan expires or terminates for any reason without having
been exercised in full, the unpurchased shares become available again for
purposes of the Plan.
The proposed amendment provides that no individual may be granted, in any
fiscal year, options to acquire more than 200,000 shares of the Common Stock,
as adjusted for stock splits, stock dividends or similar changes in
capitalization.
The Plan is not subject to the Employee Retirement Income Security Act of
1974, as amended.
Exercise Price. The exercise price for each option granted pursuant to
the Plan cannot be less than 100% of the fair market value of the Common
Stock at the time of the grant of the option. If, however, an optionee owns
more than 10% of the total combined voting power of all classes of stock of
the Company, the exercise price for each ISO granted cannot be less than 110%
of the fair market value of the Common Stock on the date of grant. The
Committee determines the fair market value of the Common Stock on the date of
grant.
Payment On Exercise. Full payment for the Common Stock purchased upon
the exercise of an option must be made at the time of exercise. Any federal,
state or local taxes required to be paid or withheld at the time of exercise
shall also be paid or withheld in full prior to any delivery of shares of
Common Stock upon exercise. Payment of the option price upon exercise of any
option must be in cash or its equivalent.
Term of Grant. The term of each option cannot be more than ten years
from the date of grant, provided that in the case of an optionee who owns more
than 10% of the total combined voting power of all classes of stock of the
Company, the term of an ISO cannot be more than five years from the date of
grant.
Exercisability. Except as set forth below and subject to the Committee's
discretion to accelerate exercisability of an option and upon the occurrence
of a "change of control" (as described below), an option may not be
exercisable before the first anniversary of the date of grant, at which
time 25% of the option granted vests, with the balance vesting at a rate of
25% for each additional completed year of continuous employment with the
Company. The Committee may specify other installments or dates for the
exercise of options and may determine that options will vest and become
immediately exercisable in whole or in part.
<PAGE> 26
Non-Transferability. Except as described below, options granted under
the Plan are not transferable or assignable otherwise than by will or the laws
of descent and distribution upon the death of the optionee. During the
lifetime of an optionee, an option is only exercisable by the optionee, or in
the event of his legal disability, by his legal representative. The Committee
may grant or amend outstanding non-qualified options providing that they are
transferable to immediate family members or to trusts for, or partnerships
whose only partners are, such family members.
Termination of Optionee Employment. If an optionee's employment with the
Company is terminated other than by reason of his death, disability or
retirement prior to the expiration of the original term of his option (the
"Expiration Date") such option may be exercised by the optionee, to the extent
of the number of shares of Common Stock with respect to which the optionee
could have exercised it on the date of such termination of employment, or to
any greater extent permitted by the Committee, at any time prior to the
earlier of: (i) 30 days following the date of the optionee's termination of
employment or (ii) the Expiration Date of such option. If an optionee's
employment with the Company terminates due to death, disability or retirement,
the employee's option may be exercised during the balance of the term of the
option, to the extent that it was exercisable on the date of termination,
unless the Committee determines, in its sole discretion, that the options that
were not exercisable at the date of termination will be vested and will
continue to be exercisable. Even if the Committee does not accelerate
vesting, a pro rata portion of the current year's installment of non-qualified
stock options that were not exercisable as of the date of termination will
become exercisable.
Change in Control. Options granted under the Plan become fully
exercisable upon a "change in control" of the Company, which is deemed to have
occurred if (i) a stockholder becomes the beneficial owner of 20% or more of
the Common Stock then outstanding (30% or more of the Common Stock outstanding
with respect to Peter McCausland), (ii) with stockholder approval, the
Company is involved in a merger or any sale of all or any substantially all of
its assets so that its stockholders before such transaction own, immediately
after the transaction, less than 50% of the surviving or acquiring
corporation, or (iii) a change in the majority of the Board of Directors
occurs during a 24-month period without the approval of a majority of the
directors in office at the beginning of such period.
Tax Treatment. A recipient of an ISO within the meaning of Section 422
of the Code will not recognize taxable income for purposes of the regular
income tax upon either the grant or exercise of the ISO. However, for
purposes of the alternative minimum tax imposed under the Code, in the
year in which an ISO is exercised, the amount by which the fair market value
of the shares acquired upon exercise exceeds the option price will be treated
as an item of tax preference and included in the computation of the
recipient's alternative minimum taxable income in the year of exercise. An
optionee will recognize long-term capital gain or loss on a disposition of the
shares acquired upon exercise of an ISO provided that the optionee does not
dispose of such shares within two years from the date the ISO was granted or
within one year after such shares were transferred to him. If the
recipient satisfies the foregoing holding periods, then the Company will not
be allowed a deduction by reason of the grant or exercise of the ISO. As a
general rule, if an optionee disposes of the shares acquired upon exercise of
an ISO before satisfying both holding period requirements (a "Disqualifying
Disposition"), his gain recognized on such a disposition will be taxed as
<PAGE> 27
ordinary income to the extent of the difference between the fair market value
of such shares on the date of exercise and the option price, and the Company
will be entitled to a deduction in that amount. The gain, if any, in excess
of the amount recognized as ordinary income on such a disqualifying
disposition will be long-term or short-term capital gain, depending upon the
length of time the recipient held his shares prior to the disqualifying
disposition.
A recipient of a non-qualified option will not recognize taxable income,
for federal income purposes, upon the grant of an option. Upon exercise of a
non-qualified option, the optionee will generally recognize taxable ordinary
income to the extent that the fair market value of the shares on that date of
exercise exceeds the option price. The Company will generally be allowed a
tax deduction equal to the amount of ordinary income recognized by an optionee
upon exercise of an option. Upon disposition of shares acquired upon exercise
of an option, the optionee will recognize long-term or short-term gain or
loss, depending upon the length of time he held the shares prior to
disposition, equal to the difference between the amount realized on
disposition and the fair market value of the shares on the date of exercise.
A donee of a transferable non-qualified option should not recognize
taxable income or gain as a result of the gift of a transferable option.
However, upon the transfer, the optionee will be required to value the option
for gift tax purposes. Upon exercise by the donee, the optionee, not the
donee, should recognize taxable income in the amount of the difference between
the exercise price and the market price of the Common Stock on the date of
exercise and the Company should receive a deduction in the same amount. Even
though the donee should not incur any income tax upon exercise, the donee's
basis in the stock should be stepped-up to the market price on the date of
exercise.
Termination of Plan. No options may be granted after June 1, 1999,
although all outstanding options will remain in effect until such options
expire or are terminated in accordance with the Plan.
Stock Price Information
The closing price of the Company's Common Stock on the New York Stock
Exchange on June 12, 1995 was $25 3/8.
New Plan Benefits
The table below summarizes the number of options containing the proposed
amended provisions that were granted in May 1995 under the Plan to each of the
persons and groups indicated subject, with respect to the proposed amended
provisions, to stockholder approval.
<PAGE> 28
Name and Position Number of Shares(1)
_________________ ___________________
Peter McCausland, Chairman,
President and Chief Executive
Officer . . . . . . . . . . . . . 72,000
Britton H. Murdoch, Vice
President - Finance . . . . . . . 16,000
Kenneth A. Keeley, Division
President - Central . . . . . . . 16,000
Alfred B. Crichton, Division
President - West. . . . . . . . . 17,000
Hermann Knieling, Division
President - East. . . . . . . . . 17,000
Executive Officer Group . . . . . . 226,500
Non-Executive Officer Employee Group 256,110
(1) Except for the options listed above which were granted on May 22,
1995, future benefits under the Plan are not determinable since
grants of options are at the discretion of the Committee.
The Board of Directors recommends that you vote FOR the approval of the
Plan, as proposed to be amended.
<PAGE> 29
PROPOSAL TO APPROVE THE AIRGAS MANAGEMENT INCENTIVE PLAN
General
On May 22, 1995, the Board of Directors adopted the Airgas Management
Incentive Plan (the "Incentive Plan") and resolved that the Incentive Plan be
submitted to stockholders for approval. The Incentive Plan is designed to
reward designated key personnel that achieve corporate-wide or business
unit-specific pre-tax, profit, cash flow and debt management targets and
subjective operational and strategic goals. The objective component of the
Incentive Plan is based on objective performance-based goals and provides a
maximum award that may be paid to eligible participants. The Incentive Plan
will become effective as of April 1, 1995, if approved by stockholders.
The adoption of the Incentive Plan is made desirable by the recently
enacted Section 162(m) of the Internal Revenue Code of 1986, as amended, to
ensure the Federal income tax deductibility of any awards under the objective
component of the Incentive Plan under one of the statutory exceptions. The
component of the Incentive Plan that is based on objective financial
performance targets is intended to qualify under one of these exceptions that
excludes performance-based compensation payable as the result of the
achievement of objective, pre-set performance targets. Because of the more
subjective nature of the operational and strategic goals, the Company expects
that component of the Incentive Plan will be subject to the $1 million
deduction limit. The objective, performance-based component of the Incentive
Plan is being submitted for stockholder approval to comply with Section
162(m). The Incentive Plan will enhance the ability of the Company to attract
and retain the highest quality management employees who the Company will
depend on to sustain the progress Airgas has experienced.
The affirmative vote of a majority of the shares of Common Stock present
or represented and entitled to vote on the proposal at the Annual Meeting is
required for approval of the Incentive Plan. If the stockholders do not
approve the Incentive Plan, the Incentive Plan will not become effective,
and the Board of Directors will consider whether to adopt some alternative
arrangement based on its assessment of the needs of the Company.
The material features of the Incentive Plan are summarized below.
Eligible Participants
Participation in the Incentive Plan is limited to selected key employees
of the Company. The following personnel categories are eligible to
participate in the Incentive Plan; however, as to whether a particular
employee actually participates is subject to approval by the Nominating and
Compensation Committee (the "Committee") of the Board of Directors:
- Senior corporate staff personnel
- Subsidiary presidents, sales managers, operations managers,
inventory managers, controllers
- Other managers upon recommendation of Division Presidents
The approximate number of persons currently eligible to participate is
250.
<PAGE> 30
Total Incentive Opportunity
Each year, the Committee determines each participant's potential award
level by first setting each participant's total incentive opportunity, which
is expressed as a percentage of the participant's base salary. The total
incentive opportunity ranges from 25% of a subsidiary manager participant's
base salary to a high of 50% for the Chief Executive Officer, subject to
adjustment at the Committee's discretion, each year based on position and such
other matters as the Committee deems relevant.
The total incentive opportunity is then divided into two categories: one
based on the attainment of three objective, performance-based financial
targets pursuant to the objective component of the Incentive Plan, and a
second based on attainment of subjective operational or strategic objectives.
Financial targets for each business unit and subjective goals for each
participant are established at the start of the fiscal year, and the objective
financial targets are approved by the Committee. The Committee may modify the
amounts of the financial targets if it determines that the targets are no
longer suitable, provided that it may not increase the amount of awards that
can be earned under the objective component of the plan.
The split of the total incentive opportunity into awards under the two
components of the Incentive Plan varies by participant based on position and
such other matters as the Committee deems relevant. Subsidiary managers, for
instance, may have up to one-half of their total incentive opportunity
determined by achievement of subjective goals and the remainder based on
objective, performance-based financial targets. Alternatively, only 20% of a
Division President's incentive opportunity may be based on subjective goals
and 80% based on objective performance-based financial targets.
For the Chief Executive Officer, 100% of his incentive opportunity under
the Incentive Plan is determined by the attainment of objective financial
targets pursuant to the objective component of the plan. The Chief Executive
Officer also participates in another plan which is based on subjective
operational and strategic goals.
Calculation of Objective Component of Incentive Award
In order to calculate the objective component of the incentive award, the
Committee sets annual financial performance targets based upon pre-tax
profits, operating cash flow (operating income plus depreciation) and average
interest-bearing debt balances. Actual achievement of each of the three
financial targets as a percentage of the targets can range from 0% to a
maximum of 110%.
The average of the three achievement percentages must be at least 70% for
a bonus to be paid, and the maximum average is 110%, beyond which no
additional bonus can be earned.
The actual amount of each participant's award under the objective
component of the Incentive Plan depends on the participant's potential award
level and the degree to which the pre-set financial targets are achieved. The
maximum amount that a participant can receive under the objective component in
any fiscal year is $750,000.
<PAGE> 31
Termination and Amendment
The Committee may terminate or amend the Incentive Plan at any time,
provided that no amendment may be made that would adversely affect the rights
of the participant with respect to an award granted and outstanding prior to
the date of such termination.
Non-Transferability
Rights acquired under the Incentive Plan are not transferable. Neither
the participation in the Incentive Plan nor any action taken thereunder shall
be construed as giving any participant the right to remain in the employ of
the Company or any of its affiliates or subsidiaries.
Administration
The Incentive Plan will be administered by the Committee. The Committee
establishes the objective financial targets and any other measures as may be
necessary to meet the objectives of the Incentive Plan.
Effective Date
If approved by stockholders, the Incentive Plan will be effective as of
April 1, 1995.
New Plan Benefits
The table below summarizes the amounts that would have been received by
each of the indicated persons and groups under the objective component of the
Incentive Plan had the Incentive Plan been in effect during the last fiscal
year but using current salaries. Annual bonus awards to be issued in the
future under the Incentive Plan cannot be determined at this time.
Name and Position Dollar Value ($)
_________________ _________________
Peter McCausland, Chairman,
President and Chief Executive
Officer . . . . . . . . . . . . . . $ 270,833
Britton H. Murdoch, Vice
President - Finance . . . . . . . . 59,670
Kenneth A. Keeley, Division
President - Central . . . . . . . . 59,346
Alfred B. Crichton, Division
President - West. . . . . . . . . . 43,848
Hermann Knieling, Division
President - East. . . . . . . . . . 46,526
Executive Officer Group . . . . . . . 762,841
Non-Executive Officer Employee Group. $ 2,315,744
The Board of Directors recommends that the Stockholders vote FOR the
approval of the Company's Management Incentive Plan.
<PAGE> 32
PROPOSAL TO RATIFY ACCOUNTANTS
The Board of Directors has selected the firm of KPMG Peat Marwick LLP as
independent certified public accountants to audit the books, records and
accounts of the Company for the fiscal year ending March 31, 1996. The Board
of Directors has proposed that the stockholders ratify the selection of KPMG
Peat Marwick LLP. This firm audited the Company's financial statements for
the fiscal year ended March 31, 1995. Representatives of KPMG Peat Marwick
LLP are expected to attend the Annual Meeting, will have the opportunity
to make a statement if they desire to do so, and are expected to be available
to respond to appropriate questions.
The Board of Directors recommends that you vote FOR ratification of KPMG
Peat Marwick LLP as independent accountants.
STOCKHOLDERS PROPOSALS FOR
NEXT ANNUAL MEETING
Any properly submitted proposal which a stockholder intends to present at
the next Annual Meeting of Stockholders must be received by the Company by
February 29, 1996 if it is to be included in the Company's proxy statement and
form of proxy relating to the next Annual Meeting.
<PAGE>
<PAGE> 33
APPENDIX 1
Airgas, Inc.
Comparison of Five Year Cumulative Total Return
700|------------------------------------------------------|
| |
| |
| * |
600|------------------------------------------------------|
| |
| |
| |
D 500|---------------------------------------*--------------|
| |
O | |
| |
L 400|------------------------------------------------------|
| |
L | |
| |
A 300|------------------------------*-----------------------|
| |
R | |
| |
S 200|------------------------------------------------------|
| &$ |
| * & &$ |
| & &$ $ |
100|---*&$------*-$---------------------------------------|
| |
| |
| |
0|----|--------|--------|--------|--------|--------|----|
March 31, 1990 1991 1992 1993 1994 1995
* = Airgas & = Chemicals $ = S&P 500
|-----------|-------|--------|--------|--------|--------|--------|
|March 31, | 1990 | 1991 | 1992 | 1993 | 1994 | 1995 |
|-----------|-------|--------|--------|--------|--------|--------|
|* Airgas | 100 | 106.74 | 142.56 | 298.54 | 510.51 | 632.91 |
|-----------|-------|--------|--------|--------|--------|--------|
|& Chemicals| 100 | 114.41 | 127.05 | 146.39 | 148.55 | 171.68 |
|-----------|-------|--------|--------|--------|--------|--------|
|$ S&P | 100 | 97.74 | 124.53 | 127.35 | 152.22 | 183.46 |
|-----------|-------|--------|--------|--------|--------|--------|
The graph above assumes that $100 was invested on April 1, 1990, in Airgas,
Inc. Common Stock, the S&P Chemicals Composit Index and the S&P 500 Index.
<PAGE> 34
AIRGAS, INC. APPENDIX 2
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
FOR THE ANNUAL MEETING OF STOCKHOLDERS, AUGUST 7, 1995
The undersigned holder of Common Stock of Airgas, Inc. hereby appoints
Peter McCausland, Todd R. Craun and Britton H. Murdoch, and each of them,
proxies, with powers of substitution in each, to vote on behalf of the
undersigned at the Annual Meeting of Stockholders to be held at 8:30 a.m.
on Monday, August 7, 1995, in the Washington Room, Four Seasons Hotel, 18th
Street and Benjamin Franklin Parkway, Philadelphia, Pennsylvania, and at all
adjournments thereof, according to the number of shares which the undersigned
would be entitled to vote if then personally present, and in their discretion
upon such other business as may come before the Meeting.
SHARES WILL BE VOTED AS INSTRUCTED, BUT IF NO INSTRUCTION IS GIVEN,
SHARES WILL BE VOTED FOR ALL THE NOMINEES FOR DIRECTOR NAMED IN THE PROXY
STATEMENT, FOR THE PROPOSALS DESCRIBED IN THE PROXY STATEMENT AND WITH
DISCRETIONARY AUTHORITY ON SUCH OTHER MATTERS AS MAY COME BEFORE THE
MEETING.
(Continued, and to be signed, on the other side)
________________________________________________
[to be inserted on back of proxy card]
Please mark [] or [] in blue or black ink.
1. Election of Directors.
Nominees: W. Thacher Brown, Frank B. Foster, III, and Peter McCausland
[] FOR all nominees listed above
[] FOR all nominees listed above; except vote withheld from following
nominees (if any): ______________________________________
[] VOTE WITHHELD from all nominees
2. Approve an amendment to the Company's Certificate of Incorporation
to limit the potential liability of the directors for monetary damages
for certain acts or omissions.
[] FOR [] AGAINST [] ABSTAIN
3. Approve the Company's Amended and Restated 1984 Stock Option Plan, as
amended.
[] FOR [] AGAINST [] ABSTAIN
4. Approve the Airgas Management Incentive Plan
[] FOR [] AGAINST [] ABSTAIN
5. Ratify the selection of KPMG Peat Marwick LLP as independent auditors.
[] FOR [] AGAINST [] ABSTAIN
<PAGE> 35
6. In their discretion, upon such other matters as may properly come before
the Meeting.
The undersigned acknowledges receipt with this proxy of a copy of the
Notice of Annual Meeting of Stockholders and the Proxy Statement of the
Board of Directors.
NOTE: Please sign exactly as name(s) appears hereon.
Executors, administrators, trustees, etc.
should give full title as such.
Signature____________________________________________
Signature ___________________________________________
Dated _________________________________________, 1995
PLEASE SIGN AND RETURN PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE.
<PAGE> 36
APPENDIX 3
AIRGAS, INC.
____________
AMENDED AND RESTATED 1984 STOCK OPTION PLAN
(As amended effective May 22, 1995)
1. Purpose
The 1984 Stock Option Plan (the "Plan") is intended to enable AIRGAS,
INC. (the "Company") to attract and retain capable officers and other key
employees of the Company and its subsidiaries and to provide them with
incentives to promote the best interests of the Company by enabling and
encouraging them, through the grant of incentive and nonstatutory stock
options to acquire Company stock. (Incentive and nonstatutory stock options
are sometimes hereinafter referred to individually as an "Option" and,
collectively, as the "Options").
As used in the Plan, the term "incentive stock options" means options
which are intended to qualify as incentive stock options within the meaning of
section 422 of the Internal Revenue Code of 1986 as amended from time to time
(the "Code"), and which are designated as incentive stock options in an Option
Agreement (as defined in Section 5(m) below).
The term "nonstatutory stock options" means options which are intended to
qualify as nonstatutory stock options within the meaning of section 83 of the
Code, and which are designated as nonstatutory stock options in an Option
Agreement.
2. Administration
The Plan shall be administered by the Stock Option Committee of the Board
of Directors (the "Committee"), which shall consist of the members of the
Nominating and Compensation Committee.
Subject to the terms of the Plan, the Committee shall have full authority
to select the persons to whom incentive and/or statutory stock options shall
be granted under the Plan and to set the other terms and conditions thereof.
The Committee also shall have the authority to establish, from time to time,
such rules and regulations, not inconsistent with the provisions of the Plan,
for the proper administration of the plan, and to make such determinations and
interpretations under or in connection with the Plan and the Options granted
hereunder as it deems necessary or advisable. All such rules, regulations,
determinations and interpretations shall be binding and conclusive upon the
Company and upon their respective legal representatives, beneficiaries,
successors and assigns and upon all other persons claiming under or through
any of them.
3. Eligibility
The persons eligible to participate in the Plan shall be the officers and
other key employees, including directors who are also officers or key
employees, of the Company and its subsidiaries who may be designated by the
Committee. The persons eligible to receive Options under the Plan are
hereinafter referred to as "Eligible Individuals."
<PAGE> 37
4. Stock Subject to the Plan
Subject to the provisions of Section 7 hereof, 1,010,000 shares of the
Company's Common Stock, par value $.01 per share ("Shares"), shall be
available for the grant of Options under the Plan, provided that the aggregate
number of Shares for which Options may be granted to directors under the Plan
shall not exceed 250,000 Shares. Shares issuable under the Plan may be
authorized by unissued Shares or reacquired Shares, as the Board shall
determine.
If any Option granted under the Plan expires or otherwise terminates, in
whole or in part, without having been exercised, the Shares subject to the
unexercised portion of such Option shall be available for the granting of
Options under the Plan as fully as if such Shares had never been subject to an
Option.
5. Grants, Terms and Conditions of Options
From time to time until the expiration or earlier termination of the
Plan, the Committee may grant to Eligible Individuals (such grantees are
hereinafter referred to as "Optionees") under the plan such incentive and/or
nonstatutory stock options as it determines are warranted. Options granted
pursuant to the Plan shall be in such form as the Committee shall be in such
form as the Committee from time to time approve, and shall be subject to the
following terms and conditions to the extent such terms and conditions are
applicable to such Option.
(a) Price. The option price per Share under each Option granted
under the Plan shall be determined and fixed by the Committee in its
discretion but shall not be less than the fair market value of the Shares on
the date of grant of such Option. The fair market value of a Share on any day
shall be determined by such method of determining fair market value as shall
be permitted by the Code, or the rules and regulations thereunder, and adopted
by the Committee from time to time.
(b) Term. Subject to earlier termination as provided in
Subsections (c) through (g) below and in Section 7 hereof, and except as
otherwise provided in Subsection (k) below, the duration of each Option shall
not be more than ten (10) years from the date of grant.
(c) Exercise and Payment. Twenty-five percent of the options
granted to each Optionee shall become exercisable for each completed year of
continuous employment with the Company, commencing upon the first anniversary
of the date of grant, as described in the following schedule: year one - 25
percent; year two - 50 percent; year three - 75 percent; and year four - 100
percent. The Committee may specify other installments or dates for the
exercise of options and may determine that Options will become immediately
exercisable in whole or in part in the event of termination of employment,
death, disability or retirement. The purchase price shall be payable in cash
or its equivalent. Except as otherwise provided in Subsections (d) through
(g), (p) and (q) below, Options shall only be exercisable by an Optionee while
he remains in the employ of the Company or a related corporation. Any
Option Shares, the right to the purchase of which has accrued, may be
purchased at any time up to the expiration or termination of the Option.
Options may be exercised, in whole or in part, from time to time, by giving
written notice of exercise to the Company at its principal office, specifying
the number of Shares to be purchased, and accompanied by payment in full of
the aggregate purchase price for such Shares.
<PAGE> 38
(d) Termination of Optionee's Employment. If an Optionee's
employment with the Company is terminated for any reason, with or without
cause, other than by reason of death, disability, or retirement (as described
in Subsections (e), (f) and (g) below) prior to the expiration of the original
term of his Option ("Expiration Date") such Option may be exercised by the
Optionee, to the extent to the number of Shares with respect to which the
Optionee could have exercised it on the date of such termination of
employment, or to any greater extent permitted by the Committee pursuant to
Subsections (c) and (q), at any time prior to the earlier of (i) 30 days
following the date of the Optionee's termination of employment, or (ii) the
Expiration Date of such Option. For purposes of this Subsection, an
Optionee's employment relationship shall be considered as continuing intact
while the Optionee is on military leave, sick leave, or other bona fide leave
of absence (such as temporary employment by the government) if the period of
such leave does not exceed 90 days, or, if longer, so long a the Optionee's
right to reemployment with the Company or a related corporation is guaranteed
either by statute or contract.
(e) Death of Optionee. If an Optionee's employment is terminated
by reason of his death prior to the Expiration Date of his Option, or if an
Optionee whose employment is terminated as a result of retirement or
disability (as described in Subsections (f) and (g) below, if earlier, such
Option may be exercised, by the Optionee's estate, personal representative or
beneficiary who acquired the right to exercise such Option by bequest or
inheritance or by reason of the death of the Optionee, to the extent of the
number of shares with respect to which the Optionee could have exercised it on
the date of his death, subject to pro-rata vesting under Subsection (p) below,
or to any greater extent permitted by the Committee, pursuant to Subsections
(c) and (q), at any prior time to the Expiration date of such Option.
(f) Disability of Optionee. If an Optionee shall become disabled
(within the meaning of section 22(e)(3) of the Code) during his employment
with the Company and his employment with the Company is terminated as a
consequence of such disability prior to the Expiration Date of his Option,
such Option may be exercised by the Optionee, to the extent of such number of
Shares with respect to which the Optionee could have exercised it on the date
of such termination of employment, subject to pro-rata vesting under
Subsection (p) below, or to any greater extent permitted by the
Committee, pursuant to Subsections (c) and (q), at any time prior to the
Expiration date of such Option. In the event of the Optionee's legal
disability, such Option may be so exercised by the Optionee's legal
representative.
(g) Retirement of Optionee. If any Optionee retires in accordance
with the retirement policy of the Company, or with the express consent of the
Board, and his employment with the Company and all related corporations is
terminated as a consequence of such retirement prior to the Expiration Date of
his Option, such may be exercised by the Optionee, to the extent of the number
of Shares with respect to which the Optionee could have exercised it on the
date of his retirement, subject to pro-rata vesting under Subsection (p)
below, or to any greater extent permitted by the Committee, pursuant to
Subsections (c) and (q), at any time prior to the Expiration date of such
Option.
(h) Transferability. No Option shall be assignable or
transferable by an Optionee otherwise than by will or by the laws
of descent and distribution, and during the lifetime of the Optionee, the
Option shall be exercisable only by him, or in the event of his legal
<PAGE> 39
disability, by his legal representative. Notwithstanding the foregoing, the
Committee may grant non-qualified Options that are transferable, without
payment of consideration, to immediate family members (i.e., spouses, children
and grandchildren) of the Optionee or to trusts for, or partnerships whose
only partners are, such family members. The Committee may also amend
outstanding non-qualified Options to provide for such transferability.
(i) Rights as a Stockholder. An Optionee shall have no rights as a
stockholder with respect to any Shares covered by his Option until the
issuance of a stock certificate to him representing such Shares.
(j) Sequential Exercise of Option. Options granted under the Plan
shall be exercisable at the discretion of the Optionee without regard to the
price or the date of grant of any other outstanding Option which was granted
under this Plan or any other plan of the Company or a related corporation, or
a predecessor of the Company or a related corporation before or after the
granting of such Option to the same Optionee to purchase Shares, or to
purchase stock in a corporation which (at the time of granting of such option)
was a related corporation or to purchase stock in a predecessor corporation of
the Company or a related corporation.
(k) Ten Percent Shareholder. Any other provision of the Plan
notwithstanding, if an Eligible Individual owns more than ten percent (10%) of
the total combined voting power of all shares of stock of the Company or of a
related corporation at the time an incentive stock option is granted to such
Eligible Individual, the option price of the incentive stock option shall not
be less than one hundred ten percent (110%) of the fair market value of the
optioned Shares on the date such incentive stock option is granted, and such
incentive stock option by its terms shall not be exercisable after the
expiration of five (5) years from the date such incentive stock option is
granted. For purposes of the Subsection, an Eligible Individual shall be
considered to own any shares of the Company or a related corporation which are
attributed to such Eligible Individual under Section 425(d) of the Code.
(l) Annual Limit on Grant of Incentive Stock Options. The
aggregate fair market value (determined as of the time an incentive stock
option is granted) of the Shares for which an Eligible Individual may be
granted incentive stock options in any calendar year (under the Plan and any
other incentive stock option plan of the Company or a relate corporation)
shall not exceed one hundred thousand dollars ($100,000), or such other annual
limit as may be in effect under the Code at the time the incentive stock
option is granted. In addition, the aggregate fair market value of the stock
exercisable for the first time by an Eligible Individual during any calendar
year shall not exceed $100,000.
(m) Option Agreement and Further Conditions. As soon as
practicable after the grant of an Option, each Optionee shall enter into, and
be bound by the terms of, a stock option agreement (the "Option Agreement")
which shall state the number of Shares to which the Option pertain. The
Option Agreement shall set forth such terms, conditions and restrictions
regarding the Option not inconsistent with the Plan as the Committee, in its
discretion, may impose. The Committee may impose further conditions upon the
exercisability of Options and restrictions on transferability with respect to
Shares issued upon exercise of Options.
(n) Withholding. The obligation of the Company to deliver Shares
upon the exercise of any Option shall be subject to any applicable federal,
state and local tax withholding requirements.
<PAGE> 40
(o) Change in Control. In the event of a Change in Control of the
Company, as defined below, and notwithstanding any provision of this Plan to
the contrary, all Options which have not terminated as of the date of such
"Change in Control" and are which then held by any Optionee, Optionee's
estate, personal representative or legal representative, shall, as of the date
of such "Change of Control" become immediately exercisable
notwithstanding the exercise periods specified in Subsection (c) and the
exercise periods specified in the relevant Option Agreement. A "Change of
Control" shall be deemed to have taken place upon the date when (i) an
individual, firm, corporation, partnership or other entity (other than the
Company, any subsidiary of the Company, or any employee benefit plan of the
Company or a subsidiary of the Company), together with all affiliates and
associates (as such terms are defined in Rule 12(b)-2 under the Securities
Exchange Act of 1934, as amended) shall become the beneficial owner of 20% or
more of the common shares of the Company the outstanding; providing, however,
that this subsection (i) shall not apply to Peter McCausland ("McCausland"),
unless and until McCausland, together with all affiliates and associates,
becomes the beneficial owner of 30% or more of the common shares of the
Company than outstanding; (ii) stockholders approve the consummation of any
merger of the Company or any sale or other disposition of all or substantially
all of its assets, if the stockholders of the Company immediately before such
transaction own, immediately after consummation of such transaction, equity
securities (other than options and other rights to acquire equity securities)
possessing less than 50% of the voting power of the surviving or acquiring
corporation; or (iii) a change in the majority of the Board occurs during any
24-month period without the approval of a majority of directors in office at
the beginning of such period.
(p) Pro-Rata Vesting. In the event an Optionee ceases to be an
employee of the Company or a subsidiary by reason of retirement, death or
disability after the grant to such person of a nonstatutory Option but before
the Option has become exercisable in full, a pro rata portion of the shares
subject to the current fiscal year's installment of such Option shall become
exercisable commencing on the next anniversary of the date of grant of such
Option, based upon the proportion which the number of full calendar months in
such fiscal year prior to such termination of employment bears to the 12
calendar months in the fiscal year.
(q) Acceleration of Vesting. Notwithstanding any other provision
of this Plan, the Committee may accelerate vesting and exercisability of any
outstanding nonstatutory option or any portion thereof to a date or dates
designated by the Committee in accordance with such terms and subject to such
conditions, if any, as the Committee shall specify and as are agreed to by the
Optionee.
(r) Maximum Shares to be Granted to an Optionee. The
maximum number of shares of Common Stock upon which Options may be
granted to any Optionee in any fiscal year of the Company shall be
200,000, subject to adjustment as provided in Section 7 of this
Plan.
<PAGE> 41
6. Investment Purpose
Each Optionee or his legal representative or beneficiaries, may be
required to give satisfactory assurance that Shares acquired upon exercise of
an Option are being acquired for investment not with a view to distribution,
and certificates representing such Shares may be legended accordingly. Such
Shares shall be transferable thereafter only if the proposed transfer is
permissible under the Plan and the Option and if, in the opinion of counsel
(who shall be satisfactory to the Company), such transfer at such time be in
compliance with applicable securities laws.
7. Adjustments
The number of Shares which may be issued under the Plan, as stated in
Section 4 hereof, and the number of Shares issuable upon exercise of
outstanding Options under the Plan (as well as the exercise price per share
under such outstanding Options) shall be equitably adjusted by the Committee
to reflect any stock dividend, stock split, share combination, or similar
change in capitalization of the Company.
In the event the Company is liquidated or a corporate transaction
described in Section 425(a) of the Code and the Treasury Regulations issued
thereunder occurs (as, for example, a merger, consolidation, acquisition of
property or stock separation, or reorganization), each outstanding Option
shall be assumed by the surviving or successor corporation, if any, provided,
however, that the Committee may terminate each outstanding Option if it
determines that such assumption would not be in the best interests if the
Company or a related corporation. The Committee shall give each Optionee to
whom an outstanding Option has been granted fourteen (14) days notice prior to
such termination (by reason of such liquidation or corporate transaction), so
that any outstanding Option or portion thereof may be exercised up to, and
including the earlier of: (i) the date immediately preceding such termination,
or (ii) the Expiration date of such Option. In such event, the Committee may,
in its sole discretion, allow each such Optionee (except directors unless the
exercisability of Options is accelerated pursuant to Section 5(o) hereof to
exercise his Option in full or in part (if it has not otherwise terminated)
regardless of the provisions of Section 5(c) hereof or of the terms of any
Option Agreement. The Committee may in its discretion, change the number of
Shares issuable upon exercise of outstanding Options (except with respect to
Options held by directors).
8. Amendment or Discontinuance of the Plan
The Board at any time, and from time to time, may suspend or discontinue
the Plan or amend it in any respect whatsoever, provided, however, that,
without the approval of the stockholders of the Company (which approval, in
the case of a change in the maximum number of Shares with respect to which
grants may be made under the Plan, may be obtained within twelve months of the
date the change in the maximum number of Shares is adopted by the
Board): (a) the class of individuals eligible to receive Options shall not be
changed, (b) the maximum number of Shares with respect to which grants may be
made under the Plan shall not be increased except as permitted under Section 7
hereof, (c) the limitations on the price at which Options may be granted shall
not be changed, and (d) the duration of the plan under Section 13 shall
materially impair the rights of any holder of an outstanding Option without
the consent of such holder (or make any change that would result in the loss
of the availability of the exemption provided by Rule 16b-3 promulgated under
Section 16(b) of the Securities Exchange Act of 1934).
<PAGE> 42
9. Absence of Rights
The recommendation or selection of an Eligible Individual as a recipient
of an Option under the Plan shall not entitle such person to any Option unless
and until the grant actually has been made by appropriate action of the
Committee; and any such grant is subject to the provisions of the Plan.
Further, the granting of an Option to a person shall not entitle that person
to continued employment, and the Company shall have the absolute right, in its
discretion, to retire such person in accordance with its retirement policies
or otherwise to terminate his employment, whether or not such termination may
result in a partial or total termination of his Option.
10. Application of Funds
The funds received by the Company upon the exercise of Options and
otherwise under the Plan shall be used for general corporate purposes.
11. Shareholder Approval
This Plan is subject to the approval of the holders of at least a
majority of the outstanding Shares, which approval was obtained on June 5,
1985, which date was within 12 months of the date the Plan was adopted by the
Company.
12. No Obligation to Exercise Option
The granting of an Option shall impose no obligation upon an Optionee to
exercise such Option.
13. Termination of Plan
No Options may be granted after June 4, 1999, provided, however, that the
Plan and all outstanding Options shall remain in effect until such Options
have expired or are terminated in accordance with the Plan.
<PAGE> 43
APPENDIX 4
AIRGAS, INC.
____________
MANAGEMENT INCENTIVE PLAN
I. Purpose.
The purpose of the Airgas, Inc. Management Incentive Plan (the
"Plan")is to attract and retain highly qualified management employees who
contribute in a substantial degree to the success of the Company by providing
them with awards based on objective, performance-based financial targets and
subjective operational and strategic goals, thus providing them with an
incentive to contribute further to the success of the Company.
II. Definitions.
For the purposes of the Plan, the following terms shall have the
following meanings:
(1) Awards. Objective Awards and Subjective Awards made pursuant
to the Plan.
(2) Board of Directors. The Board of Directors of Airgas, Inc.
(3) Committee. The Nominating and Compensation Committee of the
Board of Directors or any successor thereto.
(4) Company. Airgas, Inc. or Airgas, Inc. and its subsidiaries,
as the context requires.
(5) Covered Employees. An Employee who is a "covered employee"
within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as
amended, as such section may be amended.
(6) Employee. An employee who is on the active payroll of the
Company or a subsidiary of the Company, whether or not an officer or director,
at any time during the period for which an Award is made.
(7) Objective Awards. Awards based on objective, performance-based
financial targets made pursuant to Section VI(a) hereof.
(8) Participant. An Employee who has been designated by the
Committee to participate in the Plan pursuant to Section IV hereof.
(9) Subjective Awards. Awards based on subjective operational and
strategic goals pursuant to Section VI(b) hereof.
III. Administration.
The Plan shall be administered by the Committee. Committee may make
such determinations and take such action in connection with or in relation to
the Plan as it deems necessary. Each determination made by the Committee
shall be final, binding and conclusive for all purposes and upon all persons.
<PAGE> 44
IV. Eligibility
Objective Awards and Subjective Awards will be granted to those
Employees who shall be selected by the Committee. Such selections, except in
the case of the Company's Chief Executive Officer, shall be made after
considering the recommendations of the Chief Executive Officer. The Committee
shall also give consideration to the contribution made by the Employee to
achievement of the Company's established, objectives and such other matters as
it shall deem relevant. At the discretion of the Committee, Awards may be
made to Employees who retired or whose employment terminated after the
beginning of the period for which an Award is made, or to the designee or
estate of an employee who died during such period.
V. Effective Date.
The Plan shall become effective as of April 1, 1995, subject to the
approval of the Company's stockholders at the Company's 1995 Annual Meeting of
Stockholders.
VI. Awards.
At the beginning of each fiscal year, the Committee shall determine
each Participant's potential award level by first setting each Participant's
total incentive opportunity under the Plan, which is expressed as a percentage
of the Participant's base salary. Total incentive opportunity will range from
25% to a maximum of 50% for the Chief Executive Officer, subject to adjustment
at the discretion of the Committee at the beginning of a fiscal year. Such
determinations shall be based upon the position of the Participant and such
other matters as the Committee shall deem relevant.
The Participant's total incentive opportunity, as described above,
is divided between Objective Awards and Subjective Awards by the Committee,
based upon the position of the Participant and such other matters as the
Committee shall deem relevant.
The amounts of Awards to participants will be determined by the
Committee acting in its discretion. The two types of Awards that may be made
under the Plan are as follows:
(a) Objective Awards. These are Awards based on corporate-wide or
business unit-specific objective, performance-based financial targets as
established by the Committee for this purpose at the beginning of each fiscal
year. These financial targets are based upon pre-tax profits, operating cash
flow (operating income plus depreciation) and average interest-bearing debt
balances. The Committee may modify the amount of the targets if it determines
that they are no longer suitable, provided that it may not increase the Awards
that may be earned pursuant to the targets. Actual achievement of each of the
three financial targets as a percentage of the financial targets can range
from 0% to a maximum of 110%. The average of the three achievement
percentages must be at least 70% for an Objective Award to be paid, and the
maximum average percentage is 110%, beyond which no additional Objective Award
can be earned. The maximum amount of an Objective Award that a Participant
may receive for any fiscal year shall not exceed
$750,000.
<PAGE> 45
(b) Subjective Awards. These are awards based on subjective
operational and strategic objectives established by the Committee for each
participant. These objectives are established by the Committee after
considering the recommendations of the Chief Executive Officer and such other
matters as the Committee shall deem relevant.
Awards will be paid within 75 days of the end of the fiscal year to
which they relate based upon the audit by the Company's independent auditors
for such fiscal year. Awards under the Plan shall be made in cash, except
that the Committee may determine that certain Participants may direct a
portion of their Awards into a profit sharing plan of the Company.
VII. Awards Under Other Plans.
Nothing contained in the Plan shall prohibit the Company or any of
its subsidiaries from granting special performance or recognition awards
under such conditions, and in such form and matter as it sees fit, to
Employees (including Participants) for meritorious service of any nature. In
addition, nothing contained in the Plan shall prohibit the Company or any of
its subsidiaries from establishing other incentive compensation plans
providing for the payment of incentive compensation to Employees (including
Participants).
VIII. Amendment of the Plan.
The Board of Directors or the stockholders may discontinue the Plan
at any time and may from time to time amend or revise the terms of the Plan as
permitted by applicable statutes; provided, however, that no such
discontinuance, amendment or revision shall materially adversely affect any
right or obligation with respect to any Award theretofore made.
