<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934 (Amendment No. ___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Section
240.14a-11(c) or Section 240.14a-12
AIRGAS, INC.
(Name of Registrant as Specified In Its Charter)
Nancy D. Weisberg, Esquire
MCCAUSLAND, KEEN & BUCKMAN
Radnor Court
259 North Radnor-Chester Road, Suite 160
Radnor, Pennsylvania 19087-5240
(610) 341-1000
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) Aggregate number of securities to which transaction applies:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and determined):
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) Proposed maximum aggregate value of transaction:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) Total fee paid:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[ ] Fee paid previously with preliminary materials.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) Form, Schedule or Registration Statement No.:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) Filing Party:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) Date Filed:
<PAGE> 1
Radnor Court
259 North Radnor-Chester Road, Suite 100
Radnor, Pennsylvania 19087-5283
July 1, 1998
TO OUR STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of Stockholders to
be held on Monday, August 3, 1998, at 8:30 a.m., Eastern Daylight Time, at the
Company's offices at 259 North Radnor-Chester Road, Suite 100, Radnor,
Pennsylvania 19087.
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,
/s/ Peter McCausland
_______________________________________
Peter McCausland
Chairman, President and Chief Executive
Officer
<PAGE> 2
AIRGAS, INC.
___________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
August 3, 1998
___________________________
TO THE STOCKHOLDERS:
The Annual Meeting of the Stockholders of Airgas, Inc. (the "Company"), a
Delaware corporation, will be held on Monday, August 3, 1998, at 8:30 a.m.,
Eastern Daylight Time, at the Company's offices at 259 North Radnor-Chester
Road, Suite 100, Radnor, Pennsylvania 19087, for the following purposes:
1. To elect three Directors of the Company.
2. To vote upon a proposal to approve the 1998 Employee Stock Purchase
Plan.
3. To vote upon a proposal to ratify the selection of KPMG Peat Marwick
LLP as the Company's independent auditors for the fiscal year ending
March 31, 1999.
4. 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 8, 1998, 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,
/s/ Todd R. Craun
___________________________________
Todd R. Craun, Esq.
Secretary
Radnor, Pennsylvania
July 1, 1998
The Company's Annual Report for the year ended March 31, 1998,
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> 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
3, 1998.
Stockholders of record at the close of business on June 8, 1998, will be
entitled to vote at the Annual Meeting. At the close of business on June 8,
1997, 71,207,867 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 1, 1998.
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 1998
Employee Stock Purchase Plan (Proposal 2) and the ratification of the
selection of the auditors (Proposal 3) 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 and 3, abstentions will have the same
effect as a vote against the proposal. Broker non-votes will have no effect
on the approval of Proposals 2 and 3. 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
<PAGE> 4
Company by mail and, if found to be necessary, by telephone and personal
interviews. The Company has also retained Corporation Investor Communications,
Inc. to assist in the solicitation of proxies at an anticipated fee of $4,500.
All shares represented by valid proxies will be voted.
ELECTION OF DIRECTORS
The Bylaws 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 1998 Annual Meeting have been
nominated to serve for a term expiring at the 2001 Annual Meeting.
The names and biographical summaries of the three persons who have been
nominated to stand for election at the 1998 Annual Meeting and the remaining
directors whose terms are continuing until the 1999 or 2000 Annual Meetings
appear below. W. Thacher Brown, Frank B. Foster, III and Peter McCausland
were elected by the stockholders at the 1995 Annual Meeting. Of the
continuing directors, John A.H. Shober, Merril L. Stott and Argeris N.
Karabelas were elected by the stockholders at the 1996 Annual Meeting and
Robert E. Naylor, Jr., Robert L. Yohe and Rajiv L. Gupta were elected by the
stockholders at the 1997 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 1999 and 2000 Annual Meetings.
Nominees For Election for Terms Expiring at the 2001 Annual Meeting:
W. Thacher Brown Mr. Brown, age 50, has been the Chairman, President
and a director of 1838 Investment Advisors, Inc., an
investment management company, and President of 1838
Investment Advisors, L.P., since July 1988, and has
been President of 1838 Investment Advisors Funds
since 1995. He is a director of the 1838 Bond
Debenture Trading Fund Inc., the 1838 Investment
Advisors Funds 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.
<PAGE> 5
Frank B. Foster, III Mr. Foster, age 64, 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, FinCom
Corporation, Fragrance Impressions, Ltd.,
Carr-Lowrey Glass Company, 1838 Investment
Advisors Funds and OAO Technology Solutions,
Inc. Mr. Foster has been a director of the
Company since 1986.
Peter McCausland Mr. McCausland, age 48, has been a Director of the
Company since June 1986, the Chairman of the Board
and Chief Executive Officer of the Company since
May 1987, President from June 1986 to August 1988,
from April 1, 1993 to November 30, 1995 and since
April 1, 1997. From January 1982 until June 1990,
Mr. McCausland was a partner in the law firm of
McCausland, Keen & Buckman, Radnor, Pennsylvania,
which provides legal services to the Company.
Mr. McCausland serves as a director of Hercules, Inc.
Directors Serving for Terms Expiring at the 1999 Annual Meeting:
John A.H. Shober Mr. Shober, age 65, is a private investor and
corporate director. He has been a director of Penn
Virginia Corporation, a natural resources company,
since 1978, Vice Chairman of the Board of Directors
from 1992 to 1996, and President and Chief Executive
Officer from 1989 to 1992. Mr. Shober also serves as
Chairman of the Board of Directors of Anker Coal
Group, Inc., Vice Chairman of the Board of Directors
of MIBRAG mbH, director of BetzDearborn, Inc.,
Charter Power Systems, Inc., Ensign Bickford
Industries, Inc., and First Reserve Corporation, and
is a member of the Board of Trustees of Eisenhower
Exchange Fellowships. Mr. Shober has served as a
director of the Company since 1990.
Merril L. Stott Mr. Stott, age 69, 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.
Argeris N. Karabelas Mr. Karabelas, age 45, has been Chief Executive
Officer of Worldwide Pharmaceuticals and head of
Healthcare at Novartis Pharma AG, a global life
sciences company, since January 1998. From December
1996 to December 1997, he was Executive Vice
President of SmithKline Beecham Pharmaceuticals, and
from 1993 to 1996, he was President of SmithKline
<PAGE> 6
Pharmaceuticals' North American Division. Prior to
1993, he held a variety of marketing and sales
positions at SmithKline Beecham, including Senior
Vice President of Marketing from 1990 to 1993. From
1989 to 1990, Mr. Karabelas was CEO of
Cytotherapeutics, a biotechnology company. Prior to
that, he was an Assistant Professor of Industrial
Pharmacy and Pharmacokinetics at the Massachusetts
College of Pharmacy. Mr. Karabelas has served as a
director of the Company since August 1996.
Directors Serving for Terms Expiring at the 2000 Annual Meeting:
Robert E. Naylor, Jr. Mr. Naylor, age 65, retired from the Rohm & Haas
Company, a specialty chemical manufacturer, in
December 1995. For ten years prior to his
retirement, he had been Group Vice President and a
director of Rohm & Haas Company. Mr. Naylor has
served as a director of the Company since 1992.
Robert L. Yohe Mr. Yohe, age 62, is an independent investor,
corporate director and advisor. He was Vice Chairman
of Olin Corporation and a member of its Board of
Directors until 1994. Mr. Yohe is a Director of
BetzDearborn, Inc., Calgon Carbon Corporation and The
Middleby Corporation. He also is a trustee of
Lafayette College. Mr. Yohe has served as a director
of the Company since 1994.
Rajiv L. Gupta Mr. Gupta, age 52, has been a Vice President, and the
director for the Asia-Pacific region, of Rohm and
Haas Company, a specialty chemical manufacturer,
since 1993, where he oversees and facilitates the
growth of the company's businesses in the
Asia-Pacific area. In addition, in 1996, Mr. Gupta
was appointed to Rohm and Haas' Chairman's Committee
and is responsible for overseeing Rohm and Haas'
electronic chemicals business. Prior to that, from
1971 until 1993, he held various financial and
management positions with Rohm and Haas, including
business unit director for the plastics additives
business. Mr. Gupta serves as a member of the boards
of trustees of International House, St. Christopher's
Hospital for Children and is a member of the Board of
Directors of Technitrol, Inc.
Board of Directors and Committees
The Board of Directors held 12 meetings during the year ended March 31,
1998. The average attendance by directors at these meetings was 95 percent.
No incumbent director attended less than 75 percent of the aggregate Board and
Committee meetings they were scheduled to attend.
The standing committees of the Board of Directors are a Nominating and
Compensation Committee and an Audit Committee. These committees each held
four meetings during the year ended March 31, 1998.
<PAGE> 7
The members of the Executive Committee are Messrs. McCausland, Foster,
and Stott. As authorized by Delaware law and the Company's Bylaws, 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 Bylaws, 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, Gupta, Naylor and Yohe. 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. Foster, Shober and Naylor.
Its duties include the selection and recommendation of independent auditors
subject to the approval of the stockholders, review of the scope and results
of the annual audit, review of the adequacy and effectiveness of the Company's
internal control structure and review of the organization and scope of the
Company's internal auditing function.
Compensation of Directors
Directors who are not employees of the Company are paid an annual
retainer of $9,000 plus a fee of $1,000 for each Board or Committee meeting
attended, and are entitled to participate in the 1997 Directors' Stock Option
Plan (the "Directors' Plan").
In order to closely align the interests of directors with those of
stockholders, a majority of the directors' compensation is in the form of
stock options. The number of options granted is determined annually by the
Nominating and Compensation Committee. The exercise price of each option is
equal to the fair market value on the date of grant, is exercisable
immediately and has a term of 10 years. On August 4, 1997, each Board member
was granted 4,500 options with a $19.00 exercise price.
The Chairman of the Audit Committee and the Nominating and Compensation
Committee also receive an additional $3,000 annual retainer. Directors are
also reimbursed for their travel expenses for attendance at Board and
Committee meetings.
Filings Under Section 16(a)
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership of the securities with the Securities and
Exchange Commission and the New York Stock Exchange. Such persons are also
required to furnish the Company with copies of all Section 16(a) forms they
file. The Company knows of no greater than ten percent stockholders, other
than one person who is an officer and director.
<PAGE> 8
Based solely on its review of the copies of the forms received by it with
respect to the 1998 fiscal year, or written representations from certain
reporting persons that no Forms 5 were required, the Company believes that all
of its officers and directors complied with all filing requirements applicable
to them, except with respect to the late filing of a Form 4 to report the sale
of 25,000 shares of the Company's Common Stock by Ronald B. Rush in August,
1997, which Form 4 was filed in October 1997, and the late filing of a Form 3
by Rajiv Gupta, who became a director of the Company in August 1997, which
Form 3 was filed in March 1998.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation paid during the fiscal years ended March 31, 1998, 1997 and 1996
to the Company's Chief Executive Officer and each of the Company's four other
most highly compensated executive officers based on salary and bonus earned
during the 1998 fiscal year.
Summary Compensation Table (continued on next page)
Annual Compensation
______________________________________________
Other Annual
Name and Principal Fiscal Compensation
Position Year Salary ($) Bonus ($) (1)
_________________ ______ __________ _________ ____________
Peter McCausland 1998 550,000 497,500 (1)
Chairman, President and 1997 500,000 405,000
Chief Executive Officer 1996 500,000 497,500
E. Pat Baker 1998 225,000 120,263 (1)
Group President 1997 150,000 84,750
- -Distribution (3) 1996 120,000 53,000
Hermann Knieling 1998 250,000 81,605 (1)
Executive Vice President, 1997 250,000 73,750
Group President - 1996 163,333 71,000
Manufacturing, International
and Business Engineering (5)
William A. Rice, Jr. 1998 175,000 112 788 (1)
Group President 1997 130,000 45,240
- -Airgas Direct Industrial 1996 114,700 60,000
Thomas C. Deas, Jr. 1998 180,000 76,320 (1)
Vice President and 1997 22,500 7,830
Chief Financial Officer (8)
<PAGE> 9
Summary Compensation Table (continued from previous page)
Long Term Compensation
_____________________________________________________
Restricted Securities All Other
Name and Principal Fiscal Stock Underlying LTIP Compensation
Position Year Awards Options (#) Payouts ($)(1)
_________________ ____ ________ __________ _______ ____________
Peter McCausland 1998 None 130,000 None 5,070 (2)
Chairman, President and 1997 None 100,000 None 3,911
Chief Executive Officer 1996 None 144,000 None 6,066
E. Pat Baker 1998 None 30,000 None 8,538 (4)
Group President 1997 None 23,000 None 6,150
- -Distribution (3) 1996 None 32,000 None 6,528
Hermann Knieling 1998 None 25,000 None 7,273 (6)
Executive Vice President, 1997 None 35,000 None 6,373
Group President - 1996 None 34,000 None 8,513
Manufacturing, International
and Business Engineering (5)
William A. Rice, Jr. 1998 None 25,000 None 7,136 (7)
Group President 1997 None 20,000 None 6,686
- -Airgas Direct Industrial 1996 None 32,000 None 6,398
Thomas C. Deas, Jr. 1998 None 35,000 None 3,798
Vice President and 1997 None -- None 58
Chief Financial Officer (8)
____________________________
(1) Amount does not exceed the lesser of $50,000 or 10% of total salary and
bonus.
(2) Consists of 4,722 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. McCausland.
(3) Mr. Baker served as Division President-Eastern Division until March 1997,
and has been Group President-Distribution since April 1, 1997.
(4) Consists of 7,638 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 $900 paid for the benefit of Mr. Baker.
(5) Mr. Knieling served as President and Chief Operating Officer until March
1997, and has been Executive Vice President and Group President -
Manufacturing, Business Engineering and International since April 1, 1997.
(6) Consists of $5,869 of employer matching contributions and discretionary
contributions based on the profitability of the Company under the
Company's 401(k) Plan and the value of life insurance premiums of $1,404
paid for the benefit of Mr. Knieling.
(7) Consists of $6,560 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 $576 paid for the benefit of Mr. Rice.
(8) Mr. Deas served as Vice President and Chief Financial Officer from
February 18, 1997 until May 22, 1998.
(9) Consists of $3,450 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 $348 paid for the benefit of Mr. Deas.
<PAGE> 10
Option Grants During 1998 Fiscal Year (continued on next page)
The following table provides information related to options granted to
the named executive officers during fiscal 1998. The Company does not have
any outstanding stock appreciation rights.
Individual Grants
______________________________________________________________________________
No. of
Securities % of Total
Underlying Options
Options Granted to
Granted Employees in Exercise Expiration
Name (#)(2) Fiscal Year Price ($/Sh) Date
____ _________ ____________ ____________ ___________
Peter McCausland 130,000 12.4% $15.63 May 14, 2007
E. Pat Baker 30,000 2.9 15.63 May 14, 2007
Hermann Knieling 25,000 2.4 15.63 May 14, 2007
William A. Rice, Jr. 25,000 2.4 15.63 May 14, 2007
Thomas C. Deas, Jr. 10,000 1.0 14.38 June 22, 1998
25,000 2.4 15.63 June 22, 1998
<PAGE> 11
Options Granted During 1998 Fiscal Year (continued from previous page)
Potential Realization Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Term (1)
_______________________________
Name 0%($)(3) 5%($)(3) 10%($)(3)
____ ________ ________ _________
Peter McCausland $ 0 $1,277,851 $3,238,325
E. Pat Baker 0 294,889 747,306
Hermann Knieling 0 245,741 622,755
William A. Rice, Jr. 0 245,741 622,755
Thomas C. Deas, Jr. 0 90,435 229,180
245,741 622,755
__________________________
(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) Represents options to acquire shares of Common Stock, which become
exercisable in four equal annual installments beginning on the date of
their grant.
(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 $692 million and $1.8 billion, respectively, and the value
of the named executive officers' appreciation will be approximately 0.3%
of the total stockholders' appreciation. Potential stock price
appreciation to all stockholders is calculated based on a total of
71,207,867 shares of Common Stock outstanding on June 15, 1998, and a
price of $15.45 per share, the weighted average exercise price of options
granted in fiscal 1998 referred to in the table above.
<PAGE> 12
Aggregated Option Exercises During 1998 Fiscal Year
and Fiscal Year-End Option Values (continued on next page)
The following table provides information related to employee options
exercised by the named executive officers during fiscal 1998 and the number
and value of such options held at fiscal year-end.
Shares Value
Acquired on Realized
Name Exercise (#) ($)(1)
____ ___________ ________
Peter McCausland ---- ----
E. Pat Baker 12,000 $166,580
Hermann Knieling ---- ----
William A. Rice, Jr. ---- ----
Thomas C. Deas, Jr. ---- ----
<PAGE> 13
(columns continued from previous page)
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
Name at Fiscal Year-End (#) at Fiscal Year-End($)(2)
_____ ____________________________ __________________________
Exercisable Unexercisable Exercisable Unexercisable
___________ _____________ ___________ _____________
Peter McCausland 1,227,000 331,000 $14,041,630 $580,770
E. Pat Baker 74,910 65,250 666,350 88,510
Hermann Knieling 149,050 78,350 1,262,989 112,542
William A. Rice, Jr. 75,800 63,600 441,611 100,397
Thomas C. Deas, Jr. -0- 35,000 -0- 69,200
__________________________
(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 $17.25 per share on March 31,
1998, less the option exercise price.
<PAGE>
<PAGE> 14
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
or restricted stock awards under the Company's stock option plan and the
establishment of performance goals under the Company's Management Incentive
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.
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.
- - 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 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
<PAGE> 15
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 generally are comparable to the median salary
levels paid at companies in the comparison group. The individual's
performance is measured against specific management objectives, such as
pre-tax profits, operating cash flow, debt repayment, safety targets, programs
for training and development of personnel and sales and marketing programs.
However, there 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 75% 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 Management Incentive Plan. 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.
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 1998, the value of options granted was generally between 45% and 55% 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. To further this
objective, the Company intends to implement a formal policy regarding stock
ownership objectives for executives. The Committee intends to review
executive stock ownership annually and, at its discretion, may consider such
ownership in the granting of stock options to executives. 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.
<PAGE> 16
Chief Executive Officer Compensation
The Nominating and Compensation Committee reviewed the Chief Executive
Officer's compensation for fiscal year 1998 and determined that his base
salary should increase to $550,000 in fiscal 1998 from $500,000 in fiscal
1997. This higher base salary approximates the median level of chief
executive officers of the comparison group of companies and is consistent with
the Company's objective of paying a higher level of compensation through its
at risk bonus and stock option programs. The fiscal 1998 bonus award was based
upon the achievement of objective, pre-determined pre-tax profits, operating
cash flow and debt repayment (exclusive of acquisition related debt and
certain special charges) targets, as set forth in the Management Incentive
Plan, and the Chief Executive Officer's performance in meeting specific
strategic and operating objectives. In determining the number of shares to be
awarded as stock options, the Committee considered the executive compensation
paid by the comparison group of companies, and upon the Chief Executive
Officer's performance.
Deductibility
The Company intends, to the extent practicable, to preserve deductibility
under the Internal Revenue Code (the "Code") of compensation paid to its
executive officers while maintaining compensation programs to attract and
retain highly qualified executives in a competitive environment.
Nominating and Compensation Committee
W. Thacher Brown, Chairman
Rajiv L. Gupta
Robert E. Naylor, Jr.
Robert L. Yohe
<PAGE>
<PAGE> 17
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly change in the
cumulative total stockholder return on the Company's Common Stock against the
cumulative total return of the S&P Composite - 500 Stock Index and the S&P
Chemicals Composite Index for the period of five years commencing April 1,
1993 and ended March 31, 1998.
Airgas, Inc.
Comparison of Five Year Cumulative Total Return
350|------------------------------------------------------|
| |
| * |
| & |
D 300|------------------------------------------------------|
| |
O | * *$ |
| |
L 250|------------------------------------------------------|
| & |
L | |
| * & |
A 200|------------------------------------------------------|
| $ |
R | * |
| $ |
S 150|------------------------------------------------------|
| & |
| |
| & $ |
| $ |
100|---*&$------------------------------------------------|
| |
| |
| |
0|----|--------|--------|--------|--------|--------|----|
March 31, 1993 1994 1995 1996 1997 1998
* = Airgas & = Chemicals $ = S&P 500
<PAGE> 18
|-----------|-------|--------|--------|--------|--------|--------|
|March 31, | 1993 | 1994 | 1995 | 1996 | 1997 | 1998 |
|-----------|-------|--------|--------|--------|--------|--------|
|* Airgas | 100 | 170.99 | 212.01 | 318.01 | 270.01 | 276.01 |
|-----------|-------|--------|--------|--------|--------|--------|
|& Chemicals| 100 | 119.53 | 144.05 | 203.84 | 237.84 | 303.66 |
|-----------|-------|--------|--------|--------|--------|--------|
|$ S&P | 100 | 101.47 | 117.27 | 154.92 | 185.63 | 274.73 |
|-----------|-------|--------|--------|--------|--------|--------|
The graph above assumes that $100 was invested on April 1, 1993, in Airgas,
Inc. Common Stock, the S&P Chemicals Composit Index and the S&P 500 Index.
<PAGE>
<PAGE> 19
CERTAIN TRANSACTIONS
On February 28, 1998, John Musselman, Division President - East,
exchanged his minority interest in a subsidiary of the Company for 121,477
shares of the Company's Common Stock. The exchange was pursuant to the terms
of an Exchange Rights Agreement between the Company and Mr. Musselman. In
accordance with the Exchange Rights Agreement, the Company's Board of
Directors designated February 28, 1998 as the Mandatory Exchange Date. The
number of shares of the Company's Common Stock issued to Mr. Musselman in the
Mandatory Exchange was based on a valuation of Mr. Musselman's minority
interest on February 28, 1998, as reviewed by an independent appraiser, and
the market price of the Company's Common Stock on February 28, 1998, which was
$17.94 per share.
The Company leases two properties from Mr. Knieling under two leases that
expire in fiscal 2002. During fiscal 1998, the Company made rental payments
to Mr. Knieling in the aggregate amount of $73,530. The leases were executed
in connection with the purchase by the Company of Mr. Knieling's business
prior to his employment by the Company. 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.
During fiscal 1998, the Company leased cylinders from William A. Rice,
Jr., the Company's Group President - Airgas Direct Industrial, under a capital
lease which expired in December 1997. The lease was executed in connection
with the purchase by the Company of Mr. Rice's business prior to his
employment by the Company. During its 1998 fiscal year, under the cylinder
lease agreement, the Company made principal and interest payments totaling
$130,500 and a final payment of $750,000 in December 1997. 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 1997, the Company made an unsecured loan of $207,595 and a
secured loan of $199,999 to Ronald B. Rush, President - Airgas South, Inc., in
connection with his minority interest in a subsidiary of the Company. Each
loan had an annual interest rate of 8%, with principal and interest due and
payable on or before December 31, 1997. The loans were repaid in full in
September 1997.
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, 1998 (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.
<PAGE> 20
Amount and Nature of Percentage of
Name of Beneficial Owner Beneficial Ownership(1) Shares Outstanding
________________________ ______________________ __________________
Peter McCausland
612 East Gravers Lane
Wyndmoor, PA . . . . . . 9,875,499 (2)(3)(4) 13.6%
W. Thacher Brown . . . . 114,500 (2)(5) *
Frank B. Foster, III . . 64,100 (2) *
John A. H. Shober. . . . 64,500 (2) *
Merril L. Stott. . . . . 211,484 (2)(6) *
Robert E. Naylor, Jr.. . 41,500 (2) *
Robert L. Yohe . . . . . 26,000 (2) *
Argeris N. Karabelas.. . 9,100 (2) *
Rajiv L. Gupta . . . . . 5,500 (2) *
Hermann Knieling . . . . 287,380 (2)(4) *
E. Pat Baker . . . . . . 109,586 (2)(4) *
William A. Rice, Jr. . . 166,304 (2)(4) *
Thomas C. Deas, Jr.. . . 14,145 (2)(4) *
Thomas W. Smith
323 Railroad Avenue
Greenwich, CT 06830. . . 3,695,600 (8) 5.2%
Edward J. McAree
323 Railroad Avenue
Greenwich, CT 06830. . . 3,698,000 (8) 5.2%
Thomas N. Tryforos
323 Railroad Avenue
Greenwich, CT 06380. . . 3,696,392 (8) 5.2%
Putnam Investments, Inc.
One Post Office Square
Boston, Massachusetts 02109 . 6,132,927 (9) 8.6%
The Capital Group Companies, Inc.
333 South Hope Street
Los Angeles, California 90071 . . 5,134,300 (10) 7.2%
Capital Research and Management
Company
333 South Hope Street
Los Angeles, California 90071 . . 5,134,300 (10) 7.2%
All directors and executive
officers as a group (20 persons) 12,182,990 (1)(2)(3)
(4)(5)(6)(7) 16.5%
<PAGE> 21
______________________________
* Less than 1% of the outstanding Common Stock
(1) Includes all options and other rights to acquire shares exercisable on
or within 60 days of March 31, 1998.
(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 which were exercisable as of March 31, 1998 or
became exercisable within 60 days of that date: Mr. McCausland,
1,374,500 shares; Mr. Brown, 50,500 shares; Mr. Gupta, 4,500 shares;
Mr. Foster, 50,500 shares; Mr. Shober, 42,500 shares; Mr. Stott, 26,500
shares; Mr. Naylor, 18,500 shares; Mr. Karabelas, 8,500 shares; Mr.
Yohe, 18,500 shares; Mr. Knieling, 182,650 shares; Mr. Baker, 98,160
shares; Mr. Rice, 102,650 shares; Mr. Deas, 8,750 shares; and all
directors and executive officers as a group, 2,805,761 shares.
(3) Investment and/or voting power with respect to 2,479,408 of such shares
are shared with, or under the control of, members of Mr. McCausland's
immediate family, and 43,663 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 Airgas' 401(k)
Plan as of January 31, 1998: Mr. McCausland, 33,879 shares; Mr. Baker,
11,033 shares; Mr. Knieling, 11,180 shares; Mr. Rice, 27,917 shares;
Mr. Deas, 395 shares; and all executive officers as a group, 116,272
shares.
(5) Includes 8,000 shares owned by members of Mr. Brown's immediate family.
(6) Includes 180,800 shares owned in a living trust of which Mr. Stott and
his spouse are co-trustees and their children are the beneficiaries.
(8) Messrs. Smith, McAree and Tryforos jointly reported on a Schedule 13D,
dated February 11, 1994, (upon which Airgas has relied in making this
disclosure) that in their capacities as investment managers for certain
managed accounts consisting of three private investment limited
partnerships (of which each is a general partner) and an employee
profit sharing plan of a corporation of which Mr. Smith is the sole
stockholder (and for which each of them is a trustee) they had the
following voting and investment power for shares of the Common Stock:
Messrs. Smith, McAree and Tryforos each have shared voting and
dispositive power for 3,695,600 shares; Mr. McAree has sole voting and
dispositive power for 2,400 shares; and Mr. Tryforos has sole voting
and dispositive power for 792 shares.
(9) Putnam Investments, Inc. ("PI"), a wholly-owned subsidiary of Marsh &
McLennan Companies, Inc., wholly owns Putnam Investment Management,
Inc. ("PIM") and The Putnam Advisory Company, Inc. ("PAC"). PI, PIM
and PAC together filed a Schedule 13G/A dated January 21, 1998, upon
which Airgas has relied in making this disclosure. PI has shared
voting power as to 173,600 shares and shared dispositive power as to
6,132,927 shares; PIM has shared dispositive power as to 5,846,627
shares and PAC has shared voting power as to 173,600 shares and shared
dispositive power as to 286,300 shares.
<PAGE> 22
(10) Capital Research and Management Company ("Capital Research"), a
registered investment adviser, is a wholly-owned subsidiary of The
Capital Group Companies ("Capital Group"). Capital Research and
Capital Group reported that they have sole dispositive power and
therefore beneficially own 5,134,300 shares as the result of Capital
Research acting as investment adviser to various investment companies.
Capital Research and Capital Group together filed a Schedule 13G/A
dated February 11, 1998, upon which Airgas has relied in making this
disclosure.
PROPOSAL TO APPROVE THE
1998 EMPLOYEE STOCK PURCHASE PLAN
On May 14, 1998, the Board of Directors approved the 1998 Employee Stock
Purchase Plan ("Stock Purchase Plan") subject to approval by the Company's
stockholders. The text of the Employee Stock Purchase Plan is set forth in
Exhibit A to this Proxy Statement. The following summary of the Employee
Stock Purchase Plan is subject to, and qualified in its entirety by reference
to, Exhibit A.
Vote Required for Approval
To be adopted, the Stock Purchase Plan must be approved by a majority of the
outstanding shares of Common Stock represented and entitled to vote at the
meeting.
The Board unanimously recommends a vote FOR the adoption of the Stock
Purchase Plan.
Summary of the Stock Purchase Plan
The Stock Purchase Plan is designed to encourage and assist employees of the
Company and its subsidiaries to share an equity interest in the Company
through the purchase of Common Stock of the Company at a discount. It is the
intention of the Company to have the Stock Purchase Plan qualify as an
"employee stock purchase plan" under section 423 of the Internal Revenue Code
of 1986, as amended (the "Tax Code"). A discussion of the tax consequences
under the Stock Purchase Plan is set forth below. The Stock Purchase Plan is
not intended to be a plan that meets the requirements of section 401(a) of the
Tax Code, and it is not subject to the provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA"), as amended.
The Stock Purchase Plan will be administered by the Company's Nominating and
Compensation Committee (the "Committee"), consisting of at least two members.
The members of the Committee will be entitled to indemnification in accordance
with the Company's bylaws.
The Stock Purchase Plan allows eligible employees to become participants in
the Stock Purchase Plan during the first trading day that occurs in January,
April, July or October of each year. Each eligible employee who enrolls in the
Stock Purchase Plan is granted an option to purchase shares of Common Stock
under the plan, which option will expire after 27 months, subject to change by
the Committee. A total of 3,000,000 shares of Common Stock, subject to
adjustment, have been reserved for issuance under the Stock Purchase Plan.
<PAGE> 23
Participation in the Stock Purchase Plan is limited to employees of the
Company and any subsidiary of the Company (other than subsidiaries
specifically excluded from participation by the Board of Directors) who work
at least 20 hours per week and at least five months per calendar year, except
for employees who beneficially own 5% or more of the voting power of the
Company's stock. It is anticipated that approximately 7,600 employees of the
Company and its subsidiaries will be eligible to participate. The discount
will generally be 15 percent of the market price of the Common Stock at the
date of purchase, or, if less, 15 percent of the market price of the Common
Stock at the date of enrollment in the Stock Purchase Plan, or such lower
percentage as the Committee determines. If the market price of the stock is
lower on a subsequent enrollment date than it was on the employee's enrollment
date, the employee's option is automatically replaced with a new option at
that lower market price.
Payment for shares purchased under the option can be made only through
payroll withholding, up to a maximum of 15%, or such lesser percentage
established by the Committee, of the employee's regular salary payments and
overtime pay as directed by the employee upon enrollment in the Stock Purchase
Plan. The Company shall then apply the funds withdrawn from the employee's
pay to purchase shares of Common Stock on each of four purchase dates per
year. The option granted pursuant to the Stock Purchase Plan can in no event
give the employee the right to purchase shares in a calendar year with a fair
market value in excess of $25,000, determined as of the applicable enrollment
date.
The rights of employees participating in the Stock Purchase Plan are not
transferable by operation of law or otherwise, except that amounts accrued
through payroll withholding that have not been applied to purchase stock are
to be paid in cash to the legal representative of the employee's estate upon
the employee's death. The Committee may amend or terminate the Stock Purchase
Plan or outstanding options at any time, without notice, including amendments
necessary to preclude a charge to earnings under applicable accounting rules,
provided that stockholder approval is required for any amendment which would
(1) increase the number of shares reserved for purchase under the Stock
Purchase Plan; or (2) amend the requirements regarding the class of employees
eligible to purchase stock under the Stock Purchase Plan.
Summary of Tax Consequences of the Stock Purchase Plan
The following discussion of certain federal income tax consequences of the
Stock Purchase Plan is based on the Tax Code provisions in effect on the date
of this Proxy Statement, current regulations thereunder and existing
administrative rulings of the Internal Revenue Service. The discussion is
limited to the tax consequences on United States citizens and the tax
consequences may vary depending on the personal circumstances of individual
employees.
If the Stock Purchase Plan is approved by the stockholders at the meeting,
the Stock Purchase Plan will qualify under Section 423 of the Tax Code. As
such, if no disposition of the shares of Common Stock purchased by an employee
occurs within one year of the date of purchase or within two years of the
applicable enrollment date, no income tax consequences will arise for the
employee at the time of purchase. Instead, he or she will have taxable
ordinary income at the time of the disposition of the shares to the extent of
the lesser of (i) the difference between the purchase price and the market
price of the Common Stock at the date of enrollment and (ii) the actual gain
(the amount that the market value of the shares on the date of sale exceeds
<PAGE> 24
the participant's purchase price). Any additional gain upon sale of the
shares will be capital gain. There will be no tax consequences to the
Company. If the shares are sold for less than the purchase price, there will
be no ordinary income, and the participant will have a long-term capital loss
of the difference between the sale price and the purchase price.
If a participating employee disposes of the shares of Common Stock prior to
the time periods referenced above (a "disqualifying disposition"), the
employee will have taxable ordinary income at the time of the disqualifying
disposition to the extent that the fair market value of the stock on the date
of purchase exceeds the participant's purchase price. The amount will be
taxable in the year of the disqualifying disposition regardless of whether the
sale price (or fair market value on the date of gift) exceeds the purchase
price. If the disposition is a sale, any change in the value of the shares
after the date of purchase will be a capital gain or loss. The Company will
be allowed a tax deduction equal to the amount of ordinary income realized by
the employee upon a disqualifying disposition.
Other Information Concerning the Stock Purchase Plan.
No determination can be made at this time as to the amount of stock that
will be purchased, the number or identity of employees who will participate,
or the time or times when stock will be purchased, since such amounts will be
determined within the sole discretion of the employees who choose to
participate in the Stock Purchase Plan.
Stock Price Information
The closing price of the Company's Common Stock on the New York Stock
Exchange on June 24, 1998 was $14.375
PROPOSAL TO RATIFY ACCOUNTANTS
The Board of Directors has selected the firm of KPMG Peat Marwick LLP as its
independent auditors to audit the financial statements of the Company for the
fiscal year ending March 31, 1999. 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,
1998. 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 auditors.
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
March 2, 1999, if it is to be included in the Company's proxy statement and
form of proxy relating to the next Annual Meeting.
<PAGE> 25
EXHIBIT A
AIRGAS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose and Effective Date
The Airgas, Inc. 1998 Employee Stock Purchase Plan (the "Plan") is
designed to encourage and assist employees of Airgas, Inc. ("Airgas") and its
subsidiaries (together, the "Company") to acquire an equity interest in the
Company through the purchase of shares of Airgas common stock (the "Common
Stock"). It is the intention of Airgas to have the Plan qualify as an
"employee stock purchase plan" under section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"), and the provisions of the Plan shall be
construed so as to comply with the requirements of section 423. This Plan is
first effective August 5, 1998.
2. Administration
(a) The Plan shall be administered by the Nominating and Compensation
Committee designated by the Airgas Board of Directors (the "Committee") which
shall consist of at least two persons, each of whom is a "non-employee
director" as defined under Rule 16b-3 under the Securities Exchange Act of
1934 (the "Exchange Act"), and an "outside director" as defined under section
162(m) of the Code (the "Non-Employee Director"). If any Committee member
does not qualify as a Non-Employee Director, then such member shall not
participate in any way with respect to Committee action under the Plan and
shall not be treated as a member of the Committee for purposes of the Plan.
The Committee may appoint a secretary and shall make such rules and
regulations for the conduct of its business as it shall deem advisable.
(b) The Committee shall hold meetings at such times and places as it
may determine. Acts approved at a meeting by a majority of the directors who
are members of the Committee or acts approved in writing by the unanimous
consent of the directors who are members of the Committee (not counting any
director who is an employee for either purpose) shall be the valid acts of the
Committee.
(c) Subject to the express provisions of the Plan, the Committee shall
have plenary authority in its discretion to interpret and construe any and all
provisions of the Plan, to adopt rules and regulations for administering the
Plan, and to make all other determinations deemed necessary or advisable for
administering the Plan. The Committee may correct any defect or omission or
reconcile any inconsistency in the Plan, in the manner and to the extent it
shall deem desirable. The Committee's determination on the foregoing matters
shall be final, binding and conclusive.
(d) Subject to the limitations of Section 18, the Committee shall have
the power to amend the Plan from time to time. In particular, the Committee
may increase the option price and/or decrease the option term or make any
other changes which the Committee, in its sole discretion, determines are
necessary or desirable to preclude the establishment of this Plan or the grant
or exercise of any option under it from resulting in a charge to earnings
under applicable rules of the Financial Accounting Standards Board.
(e) The Committee shall have the authority to delegate the regular
operation and administration of the Plan to the appropriate officers and
employees of the Company.
<PAGE> 26
(f) Each Committee member shall be acting in the capacity of a
director of the Company for the purpose of Article VI of the Company's
Certificate of Incorporation in connection with the administration of the Plan
or the granting of options under the Plan.
(g) Each Committee member shall be entitled to indemnification by the
Company in accordance with the provisions and limitations of Article VII of
the Company's By-Laws, as the same may be amended from time to time, in
connection with or arising out of any action, suit or proceeding with respect
to the administration of the Plan or the granting of options under the Plan in
which he may be involved by reason of his being or having been a Committee
member, whether or not he continues to be a Committee member at the time of
the action, suit or proceeding.
3. Number of Shares
(a) A maximum of 3,000,000 shares of Common Stock, subject to
adjustment upon changes in capitalization of the Company as provided in
Subsection (b), may be purchased under the Plan. Shares sold under the Plan
may be newly issued shares or shares held in or hereafter acquired for the
Company's treasury, but all shares sold under the Plan, regardless of source,
shall be counted against the 3,000,000 share limitation.
(b) The aggregate number of shares and class of shares as to which
options may be granted hereunder, the number of shares cov
ered by each outstanding option and the option exercise price thereof shall be
appropriately adjusted in the event of a stock dividend, stock split,
recapitalization or other change in the number or class of issued and
outstanding equity securities of the Company resulting from a subdivision or
consolidation of the Common Stock and/or other outstanding equity security or
a recapitalization or other capital adjustment (not including the issuance of
Common Stock upon the conversion of other securities of the Company which are
convertible into Common Stock) affecting the Common Stock which is effected
without receipt of consideration by the Company. The Committee shall have
authority to determine the adjustments to be made under this Subsection and
any such determination by the Committee shall be final, binding and
conclusive.
4. Eligibility Requirements
(a) Each Covered Employee, as defined in Subsection (b), shall become
eligible to participate in the Plan on the first day of the calendar quarter
(January 1, April 1, July 1, October 1) following his commencement of
employment with Airgas or any Participating Subsidiary.
(b) "Covered Employee" means each Employee, as defined in Subsection
(c), other than:
(i) An employee who, immediately upon enrollment in the Plan,
would own stock directly or indirectly, or hold options, warrants or rights to
acquire stock, which in the aggregate represents five percent or more of the
total combined voting power or value of all classes of stock of the Company;
(ii) An employee who is customarily employed by the Company less
than 20 hours per week or less than five months in any calendar year; and
<PAGE> 27
(iii) An employee who is prohibited by the laws of the nation
of his residence or employment from participating in the Plan.
(c) "Employee" shall mean any individual who is an employee within the
meaning of section 3401(c) of the Code and the Treasury Regulations thereunder
of Airgas or a Participating Subsidiary. Unless otherwise designated by the
Board of Directors, each corporation described in section 424(e) or (f) of the
Code shall be a "Participating Subsidiary".
5. Enrollment and Reenrollment
Each Eligible Employee may become a Participant as of the first Trading
Day that occurs in January, April, July, or October of each year, or such
other days as may be established by the Committee from time to time (the
"Enrollment Dates"), by completing and executing an enrollment form and
submitting such form to the Company. Any enrollment form received by the
Company on or before the 15th day of the month immediately preceding the month
which contains an Enrollment Date (or received on or before the Enrollment
Date in the case of an Employee who becomes an Eligible Employee after such
15th day), or such other date established by the Committee from time to time,
will be effective on that Enrollment Date. A "Trading Day" is any day on
which regular trading occurs on any established stock exchange or market
system on which the Common Stock is traded.
6. Grant of Option on Enrollment or Reenrollment
(a) Each Covered Employee who enrolls or re-enrolls in the Plan is
granted, as of his Enrollment Date, an option to purchase shares of Common
Stock from Airgas under the Plan. Any Participant whose option expires and
who has not withdrawn from the Plan will be automatically re-enrolled in the
Plan and granted a new option on the Enrollment Date immediately following the
date on which the option expires.
(b) In addition, if the "fair market value" (as defined in Subsection
8(e)) of the Common Stock on any later Enrollment Date is equal to or less
than the fair market value on the Enrollment Date as of which any outstanding
option was granted, then (A) the earlier outstanding option shall expire
automatically (as provided under Subsection 6(c)) and (B) a new option shall
be granted automatically on the later Enrollment Date, which date shall be
referred to as an "Automatic Enrollment Date". An Automatic Enrollment Date
shall be treated as an Enrollment Date for purposes of establishing the number
of shares available for purchase, the term and any other operative provision
of an option granted on an Automatic Enrollment Date.
(c) Each option granted under the Plan shall have the following terms.
(i) The option shall expire 27 months after the Enrollment Date,
or after such shorter option period as may be established by the Committee
from time to time; notwithstanding the foregoing, however, whether or not the
option has been fully exercised, the option shall expire on the earliest to
occur of (A) the completion of the purchase of shares on the last Purchase
Date occurring within 27 months after the Enrollment Date, or such shorter
option period as may be established by the Committee before an Enrollment Date
for all options to be granted on such date, or (B) the occurrence of an
Automatic Enrollment Date after the date on which an option is granted under
Subsection 6(a), or (C) the date on which the Employee's participation in the
Plan terminates for any reason.
<PAGE> 28
(ii) Payment for shares under the option shall be made only
through payroll withholding in accordance with Section 7.
(iii) Purchase of shares upon exercise of the option will be
effected only on the Purchase Dates established in accordance with Section 8.
(iv) The price per share under the option will be determined as
provided in Section 8.
(v) Unless otherwise established by the Committee before an
Enrollment Date for all options to be granted on such Enrollment Date, the
number of shares available for purchase under an option granted to a
Participant will be determined by dividing $25,000 by the "fair market value"
(as defined in Subsection 8(e)) of a share of Common Stock on the Enrollment
Date and by multiplying the result by the number of calendar years included in
whole or in part in the period from the Enrollment Date to the expiration of
the options.
(vi) The option (together with all other options then o
utstanding under this and all other similar stock purchase plans of Airgas and
any subsidiary of Airgas) will in no event give the Participant the right to
purchase shares in a calendar year which have a fair market value in excess of
$25,000, determined at the applicable Enrollment Dates.
(vii) The option will in all respects be subject to the terms
and conditions of the Plan, as interpreted by the Committee from time to time.
7. Payroll Withholding and Tax Withholding
(a) Each Participant shall elect, before the Enrollment Date as of
which his participation is effective, to have amounts withheld from his
compensation paid by the Company during the option period, at a rate equal to
any whole percentage up to a maximum of fifteen percent (15%), or such lesser
percentage as the Committee may establish from time to time. For this
purpose, compensation includes regular salary payments, overtime pay, and
Participant elective contributions to the Company's benefit plans which are
excluded from taxation under section 402 or 125 of the Code, but excludes all
other payment including, without limitation, payment of deferred compensation,
Company profit sharing and matching contributions to the Airgas, Inc. 401(k)
Plan, long-term disability, workers' compensation payments, relocation
payments, performance bonuses and expense reimbursements (including but not
limited to travel, entertainment, and moving expenses). Each Participant
shall designate a rate of withholding in his enrollment form and may elect to
increase or decrease the rate of withholding effective as of any subsequent
Enrollment Date, by delivery to the Company not later than 15 days before such
Enrollment Date, of written notice setting forth the withholding rate.
(b) Payroll withholdings shall be credited to an account maintained by
the Company on behalf of each Participant, as soon as practicable after the
withholding occurs. The amounts so withheld shall remain general assets of
the Company until applied to the purchase of shares of Common Stock under the
Plan. The Company shall have no obligation to pay interest on withholdings to
any Participant and shall not be obligated to segregate withholdings.
(c) Upon disposition (within in the meaning of section 424(c) of the
Code) of shares acquired by exercise of an option, each Participant shall pay,
or make provision adequate to the Company for payment of, all federal, state,
and other taxes and any other amount that the Company determines, in its
discretion, are then required (whether or not by tax withholding), including
<PAGE> 29
any such payment or withholding that the Company determines in its discretion
is necessary to allow the Company to claim tax deductions or other benefits in
connection with the disposition. A Participant shall make such similar
provisions for any other payment that the Company determines, in its
discretion, are required due to the exercise of an option, including such
provisions as are necessary to allow the Company to claim tax deductions or
other benefits in connection with the exercise of the option.
8. Purchase of Shares
(a) On each "Purchase Date" within the option period, the Company
shall apply the funds then credited to each Participant's payroll withholdings
account to the purchase of whole shares of Common Stock. A "Purchase Date"
shall be the last Trading Day of each month immediately preceding a month
containing an Enrollment Date, or on such other day as may be established by
the Committee from time to time.
(b) The cost to the Participant of shares purchased under any option
shall be not less than 85%, or such greater percentage as the Committee shall
determine, of the lower of:
(i) the fair market value of the Common Stock on the Enrollment
Date as of which such option was granted; or
(ii) the fair market value of the Common Stock on the Purchase
Date of such shares.
(c) Any funds in an amount less than the cost of one share of Common
Stock remaining in a Participant's payroll withholdings account on a Purchase
Date after any purchase made pursuant to Subsection (a) shall be carried
forward in such account for application on the next Purchase Date.
(d) If on any Purchase Date, the number of shares available under the
Plan are less than the number all Participants would otherwise be entitled to
purchase on such date, purchases shall be reduced proportionately to
eliminate the difference. Any funds that cannot be applied to the purchase of
shares due to such a reduction shall be refunded to Participants as soon as
administratively feasible or credited to another purchase plan.
(e) For purposes of the Plan, the fair market value of the Common
Stock as of any date shall be the closing price of the Common Stock on such
date on the New York Stock Exchange (or such other exchange as the Committee
selects).
9. Withdrawal from the Plan
A Participant may withdraw from the Plan in full (but not in part) at
any time, effective after written notice thereof is received by the Company.
All funds credited to a Participant's payroll withholdings account shall be
distributed to him without interest within 60 days after notice of withdrawal
is received by the Company. Any Eligible Employee who has withdrawn from the
Plan may enroll in the Plan again on any subsequent Enrollment Date in
accordance with the provisions of Section 5.
10. Termination of Employment
Participation in the Plan terminates immediately when a Participant
ceases to be a Covered Employee for any reason whatsoever (including death,
disability or transfer to a subsidiary of the Company that is not a
<PAGE> 30
Participating Subsidiary). As soon as administratively feasible after
termination, the Company shall pay to the Participant or his beneficiary or
legal representative, all amounts credited to the Participant's payroll
withholdings account; provided, however, that if a Participant ceases to be a
Covered Employee because of the commencement of employment with a subsidiary
of the Company that is not a Participating Subsidiary, funds then credited to
such Participant's payroll withholdings account shall be applied to the
purchase of whole shares of Common Stock at the next Purchase Date and any
funds remaining after such purchase shall be paid to the Participant.
11. Distribution upon Death
As soon as administratively feasible after the death of a Participant,
amounts credited to his account shall be paid in cash to the executor,
administrator, or other legal representative of the Participant's estate.
Such payment shall relieve the Company of further liability with respect to
the Plan on account of the deceased Participant.
12. Assignment
(a) The rights of a Participant under the Plan shall not be assignable
by such Participant, by operation of law or otherwise, except to the extent
permitted by Section 11. No Participant may create a lien on any funds,
securities, rights, or other property held by the Company for the account of
the Participant under the Plan.
(b) A Participant's right to purchase shares under the Plan shall be
exercisable only during the Participant's lifetime and only by him, except
that a Participant may direct the Company in the enrollment form to issue
share certificates to the Participant and his spouse in community property, to
the Participant jointly with one or more other persons with right of
survivorship, or to certain forms of trusts approved by the Committee.
13. Administrative Assistance
(a) The Committee may retain a brokerage firm, bank, or other
financial institution to assist in the purchase or sale of shares, delivery of
reports, or other administrative aspects of the Plan. If the Committee so
elects, each Participant shall (unless prohibited by the laws of the nation of
his employment or residence) be deemed upon enrollment in the Plan to have
authorized the establishment of an account on his behalf at such institution.
Shares purchased by a participant under the Plan shall be issued to and held
in the account established for such Participant.
(b) The Committee may restrict the transfer of Shares purchased under
the Plan out of any account established with an institution pursuant to
Subsection (a) as the Committee determines is necessary or desirable to
facilitate administration of the Plan or compliance with Section 7 of the
Plan.
14. Costs
All costs and expenses incurred in administering the Plan shall be paid
by Airgas, except that any stamp duties or transfer taxes applicable to
participation in the Plan may be charged to the accounts of Participants to
whom such expenses are attributable. Any brokerage fees for the purchase of
shares by a Participant shall be paid by Airgas, but brokerage fees for the
resale of shares by a Participant shall be paid by the Participant.
<PAGE> 31
15. Equal Rights and Privileges
All Eligible Employees shall have equal rights and privileges with
respect to the Plan so that the Plan qualifies as an "employee stock purchase
plan" within the meaning of section 423 of the Code and the Treasury
Regulations thereunder. Any provision of the Plan which is inconsistent with
section 423 of the Code shall without further act or amendment by the Company,
the Board of Directors or the Committee be reformed to comply with the
requirements of section 423. This Section 15 shall take precedence over all
other provisions of the Plan.
16. Applicable Law
Except to the extent superseded by Federal law, the Plan shall be
governed by the substantive laws (excluding the conflict of laws rules) of the
State of Delaware.
17. Gender and Number
Except where otherwise clearly indicated by context, the masculine
shall include the feminine and the singular shall include the plural.
18. Modification and Termination
(a) The Committee may amend, alter, or terminate the Plan at any time,
including amendments to outstanding options. No amendment shall be effective
unless within 12 months after it is adopted by the Committee, it is approved
by the holders of a majority of the votes cast at a duly held shareholders'
meeting, if such amendment would:
(i) increase the number of shares reserved for purchase under the
Plan; or
(ii) amend the requirements regarding the class of Employees
eligible to purchase stock under the Plan.
(b) In the event the Plan is terminated, the Committee may elect to
terminate all outstanding options either immediately or upon completion of the
purchase of shares on the next Purchase Date, or may elect to permit options
to expire in accordance with their terms (and participation to continue
through such expiration dates). If the options are terminated prior to
expiration, all funds contributed to the Plan that have not been used to
purchase shares shall be returned to the Participants as soon as
administratively feasible.
(c) In the event of the sale of all or substantially all of the assets
of Airgas, or the merger of Airgas with or into another corporation, or the
dissolution or liquidation of Airgas, a Purchase Date shall occur on the
Trading Day immediately preceding the date of such event, unless otherwise
provided by the Committee in its sole discretion, including provision for the
assumption or substitution of each option under the Plan by the successor or
surviving corporation, or a parent or subsidiary thereof.
19. Rights as an Employee
Nothing in the Plan shall be construed to give any person the right to
remain in the employ of the Company or to affect the Company's right to
terminate the employment of any person at any time with or without cause.
<PAGE> 32
20. Rights as a Shareholder; Delivery of Certificates
Participants shall be treated as the owners of their shares effective
as of the Purchase Date.
21. Board and Shareholder Approval
The Plan was approved by the Nominating and Compensation Committee of
the Board on May 14, 1998 and will be submitted to the shareholders on August
3, 1998.
AIRGAS, INC.
By /s/ Peter McCausland
_____________________________________
Its Chairman and Chief Executive Officer
_____________________________________
Date May 14, 1998
_____________________________________
<PAGE>
<PAGE> 33
AIRGAS, INC.
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
FOR THE ANNUAL MEETING OF STOCKHOLDERS, AUGUST 3, 1998
The undersigned holder of Common Stock of Airgas, Inc. hereby appoints
Peter McCausland, Todd R. Craun and Scott Melman, 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
3, 1998, at the Company's offices at 259 North Radnor-Chester Road, Suite 100,
Radnor, 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 [] 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. Adopt the 1998 Employee Stock Purchase Plan
[] FOR [] AGAINST [] ABSTAIN
3. Ratify the selection of KPMG Peat Marwick LLP
as independent auditors.
[] FOR [] AGAINST [] ABSTAIN
4. In their discretion, upon such other
matters as may properly come before
the Meeting.
<PAGE> 34
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_____________________________________, 1998
PLEASE SIGN AND RETURN PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE.
<PAGE>
