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>
[LOGO] AIRGAS
Radnor Court
259 North Radnor-Chester Road, Suite 100
Radnor, Pennsylvania 19087-5283
July 2, 1999
TO OUR STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of Stockholders to
be held on Monday, August 2, 1999, at 2.00 p.m., Eastern Daylight Time, at the
Company's offices at 259 North Radnor-Chester Road, 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 and Chief Executive Officer
<PAGE>
AIRGAS, INC.
---------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
August 2, 1999
---------------------------
TO THE STOCKHOLDERS:
The Annual Meeting of the Stockholders of Airgas, Inc. (the "Company"), a
Delaware corporation, will be held on Monday, August 2, 1999, at 2:00 p.m.,
Eastern Daylight Time, at the Company's offices at 259 North Radnor-Chester
Road, Radnor, Pennsylvania 19087, for the following purposes:
1. To elect three Directors of the Company.
2. To vote upon a proposal to ratify the selection of KPMG LLP as the
Company's independent auditors for the fiscal year ending March 31,
2000.
3. 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 7, 1999, 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 2, 1999
The Company's Annual Report for the year ended March 31, 1999, 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>
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 2,
1999.
Stockholders of record at the close of business on June 7, 1999, will be
entitled to vote at the Annual Meeting. At the close of business on June 7,
1999, 72,094,219 shares of the Company's $0.01 par value common stock ("Common
Stock") were outstanding and entitled to vote. 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 2, 1999.
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. Ratification of the selection of the auditors (Proposal 2) requires
the approval of a majority of the outstanding shares of Common Stock represented
and entitled to vote at the meeting. For purposes of Proposal 2, abstentions
will have the same effect as a vote against the proposal. Broker non-votes will
have no effect on the approval of 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. The
Company has also retained Corporation Investor Communications, Inc. to assist in
the solicitation of proxies at an anticipated fee of $5,000.
<PAGE>
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 1999 Annual Meeting have been nominated to serve for a term
expiring at the 2002 Annual Meeting.
The names and biographical summaries of the three persons who have been
nominated to stand for election at the 1999 Annual Meeting and the remaining
directors whose terms are continuing until the 2000 or 2001 Annual Meetings
appear below. John A.H. Shober was elected by the stockholders at the 1996
Annual Meeting, Lee M. Thomas was appointed to the Board in August 1998 and
Robert L. Yohe was elected by the stockholders at the 1997 Annual Meeting. Of
the continuing directors, Robert E. Naylor, Jr. and Rajiv L. Gupta were elected
by the stockholders at the 1997 Annual Meeting, and W. Thacher Brown, Frank B.
Foster, III and Peter McCausland were elected by the stockholders at the 1998
Annual Meeting. In order to fill the vacancy in the class of directors to be
elected at the 1999 Annual Meeting created by the retirement in 1998 of Merril
Stott and to allow the stockholders to elect three directors to the Board of
Directors, the Board of Directors and Mr. Yohe have determined that Mr. Yohe,
who was a member of the class of directors to be elected at the 2000 Annual
Meeting, become a member of the class to be elected at the 1999 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.
Shober, Thomas and Yohe.
Set forth below is certain information regarding the three nominees for
election at the Annual Meeting and the remaining five directors whose terms are
continuing until the 2000 and 2001 Annual Meetings.
Nominees For Election for Terms Expiring at the 2002 Annual Meeting:
John A.H. Shober Mr. Shober, age 66, 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 Vice Chairman
of the Board of Directors of MIBRAG mbH and a director
of Anker Coal Group, Inc., C&D Technologies, Inc.,
Ensign Bickford Industries, Inc., First Reserve
Corporation, Hercules, Inc., 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.
2
<PAGE>
Lee M. Thomas Mr. Thomas, age 55, is the Executive Vice
President-Paper and Chemicals of Georgia-Pacific
Corporation. Mr. Thomas has held this and other senior
executive positions within Georgia-Pacific Corporation
since 1993. Prior to that, he was Chairman and Chief
Executive Officer of Law Companies Environmental Group
Inc. and has held numerous federal and state government
positions, including with the U.S. Environmental
Protection Agency, the Federal Emergency Management
Agency and the Office of the Governor of South
Carolina. Mr. Thomas also serves as a member of the
Board of Directors of Research Atlanta. Mr. Thomas has
served as a director of the Company since August 1998.
Robert L. Yohe Mr. Yohe, age 63, 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 Calgon Carbon
Corporation, LaRoche Industries Inc., Marsulex Inc. and
The Middleby Corporation. He also is a trustee of
Lafayette College. Mr. Yohe has served as a director of
the Company since 1994.
Directors Serving for Terms Expiring at the 2000 Annual Meeting:
Robert E. Naylor, Jr. Mr. Naylor, age 66, retired from Rohm and 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 and Haas
Company. Mr. Naylor has served as a director of the
Company since 1992.
Rajiv L. Gupta Mr. Gupta, age 53, has been Vice Chairman of Rohm and
Haas Company, a specialty chemical manufacturer, since
January 1, 1999. Prior to that, he was a Vice
President, and the director for the Asia- Pacific
region, of Rohm and Haas from 1993 until January 1999.
Mr. Gupta was appointed to the Chairman's Committee of
Rohm and Haas in 1996 and is responsible for overseeing
Rohm and Haas' electronic chemicals business. Mr. Gupta
serves as a member of the Board of Trustees of
International House, as a member of the advisory board
of Drexel University School of Business and as a member
of the Board of Directors of Technitrol, Inc. Mr. Gupta
has served as a director of the Company since 1997.
Directors Serving for Terms Expiring at the 2001 Annual Meeting:
W. Thacher Brown Mr. Brown, age 51, has been the Chairman, President and
a director of 1838 Investment Advisors, Inc., an
investment management company, since July 1988,
President of 1838 Investment Advisors Funds since 1995,
President of MBIA Asset Management since 1998 and Chief
Investment Officer of MBIA Insurance Company since
1999. 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.
3
<PAGE>
Frank B. Foster, III Mr. Foster, age 65, has been Chairman of DBH
Associates, a venture capital/consulting firm, since
1987. 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., 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 49, 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 from April 1, 1997 to
January 1999. Mr. McCausland serves as a director of
Hercules, Inc.
Board of Directors and Committees
The Board of Directors held six meetings during the year ended March 31,
1999. The average attendance by directors at these meetings was 90 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 an Executive
Committee, a Nominating and Compensation Committee and an Audit Committee. These
committees each held four meetings during the year ended March 31, 1999.
The members of the Executive Committee are Messrs. McCausland, Brown and
Foster. 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, Thomas, 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 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.
4
<PAGE>
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 July 31, 1998, each Board member was granted 6,000 options
with a $13.50 exercise price.
The Chairmen of the Audit Committee and the Nominating and Compensation
Committee also receive an additional $3,000 annual retainer. Directors are also
reimbursed for their travel expenses for attendance at Board and Committee
meetings.
Filings Under Section 16(a)
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership of the securities with the Securities and
Exchange Commission and the New York Stock Exchange. Such persons are also
required to furnish the Company with copies of all Section 16(a) forms they
file. The Company knows of no greater than ten percent stockholders, other than
one person who is an officer and director and that person's spouse.
Based solely on its review of the copies of the forms received by it with
respect to the 1999 fiscal year, or written representations from certain
reporting persons that no Forms 5 were required, the Company believes that all
of its officers and directors complied with all filing requirements applicable
to them, except with respect to the late filing of Forms 3 by Ted R. Schulte,
Michael L. Molinini and Patrick M. Visintainer, who became officers of the
Company in January 1999, which Forms 3 were filed in March 1999.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation paid during the fiscal years ended March 31, 1999, 1998 and 1997 to
the Company's Chief Executive Officer and each of the Company's four other most
highly compensated executive officers based on salary and bonus earned during
the 1999 fiscal year.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
----------------------------------------------- ---------------------------------------------------------
Other Annual Securities All Other
Name and Principal Fiscal Compensation Restricted Underlying LTIP Compensation
Position Year Salary($) Bonus($) (1) Stock Awards Options(#) Payouts ($)(1)
-------- ------ --------- -------- ------------- -------------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Peter McCausland 1999 550,000 -0- (1) None 130,000 None 4,778 (2)
Chairman and 1998 550,000 497,750 None 130,000 None 5,070
Chief Executive Officer 1997 500,000 405,000 None 100,000 None 3,911
Hermann Knieling 1999 250,000 48,640 (1) None 10,000 None 7,554 (4)
Executive Vice President, 1998 250,000 81,605 None 25,000 None 7,273
Group President- 1997 250,000 73,750 None 35,000 None 6,373
Manufacturing,
International and
Business Engineering (3)
William A. Rice, Jr. 1999 225,000 60,356 (1) None 85,000 None 6,861 (6)
President and Chief 1998 175,000 112,788 None 25,000 None 7,136
Operating Officer (5) 1997 130,000 45,240 None 20,000 None 6,686
Ted R. Schulte 1999 184,120 89,270 (1) None 16,500 None 4,458 (8)
Vice President- 1998 68,105 41,395 None 0 None 145
Gas Operations (7)
Samuel H. Goldstein 1999 180,000 45,000 (1) None 27,500 None 6,376 (10)
Senior Vice President- 1998 170,000 61,540 None 10,000 None 4,861
Chief Information
Officer (9) 1997 89,743 50,000 None 10,000 None 77
</TABLE>
- ----------
(1) Amount does not exceed the lesser of $50,000 or 10% of total salary and
bonus.
(2) Consists of $4,430 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. Knieling served as President and Chief Operating Officer until March
1997, and as Executive Vice President and Group President - Manufacturing,
Business Engineering and International from April 1, 1997 until his
retirement on March 31, 1999.
(4) Consists of $6,150 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.
(5) Mr. Rice served as Group President - Airgas Direct Industrial from March
1997 until January 1999, and has been President and Chief Operating Officer
since January 1999.
(6) Consists of $6,285 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.
(7) Mr. Schulte has served as Vice President - Gas Operations since November
1998.
(8) Consists of $4,110 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. Schulte.
(9) Mr. Goldstein joined the Company in September 1997.
(10) Consists of $6,172 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 $204
paid for the benefit of Mr. Goldstein.
6
<PAGE>
Option Grants During 1999 Fiscal Year
The following table provides information related to options granted to the
named executive officers during fiscal 1999. The Company does not have any
outstanding stock appreciation rights.
<TABLE>
<CAPTION>
Potential Realization Value at Assumed
Annual Rates of Stock Price Appreciation
Individual Grants for Option Term (1)
- ----------------------------------------------------------------------------------------- ---------------------------------------
% of Total
No. of Securities Options
Underlying Granted to
Options Employees in Exercise Expiration
Name Granted (#)(2) Fiscal Year Price ($/Sh) Date 0%($)(3) 5%($)(3) 10%($)(3)
- ------------------ ----------------- ------------- ------------ -------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Peter McCausland 130,000 7.8% $15.94 May 14, 2008 $ 0 $1,303,195 $3,302,553
Hermann Knieling 10,000 .6 15.94 May 14, 2008 0 100,246 254,043
William A. Rice, Jr. 35,000 2.1 15.94 May 14, 2008 0 350,860 889,149
50,000 3.0 8.50 March 4, 2009 0 267,280 677,341
Ted R. Schulte 3,000 .18 15.25 April 27, 2008 0 28,772 72,914
3,500 .21 15.94 May 14, 2008 0 35,086 88,915
10,000 .60 8.50 March 4, 2009 0 53,456 135,468
Samuel H. Goldstein 20,000 1.2 15.94 May 14, 2008 0 200,492 508,085
7,500 .45 8.50 March 4, 2009 0 40,092 101,601
</TABLE>
- ----------
(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 $594 million and $1.5 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 72.1 million shares of
Common Stock outstanding and entitled to vote on June 7, 1999 and a price
of $13.10 per share, the weighted average exercise price of options granted
in fiscal 1999 referred to in the table above.
7
<PAGE>
Aggregated Option Exercises During 1999 Fiscal Year
and Fiscal Year-End Option Values
The following table provides information related to employee options
exercised by the named executive officers during fiscal 1999 and the number and
value of such options held at fiscal year-end.
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at Fiscal Year-End(#) at Fiscal Year-End($)(2)
Shares Acquired Value -------------------------- ---------------------------
Name on Exercise (#) Realized ($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Peter McCausland -0- -0- 1,374,500 313,500 $4,627,920 -0-
Hermann Knieling 93,000 $640,379 89,650 54,750 -0- -0-
William A. Rice, Jr. -0- -0- 102,650 121,750 40,960 -0-
Ted R. Schulte -0- -0- -0- 16,500 -0- -0-
Samuel H. Goldstein -0- -0- 7,500 40,000 -0- -0-
</TABLE>
- ----------
(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 $8.38 per share on March 31, 1999, less
the option exercise price.
Termination of Employment and Change of Control Arrangements
The Company entered into "change-of-control" agreements ("Change-of-Control
Agreements") with Mr. McCausland, Mr. Rice, Mr. Goldstein and other key
management personnel. The terms of the agreements are consistent with similar
agreements used in other major U.S. public corporations and provide salary and
benefit continuation if the executive is terminated upon a change-of-control. A
change-of-control is defined to include events in which a party (other than Mr.
McCausland) acquires 20% or more of the combined voting power of the Company's
then outstanding securities; or in which Mr. McCausland, together with all
affiliates and associates, acquires 30% or more of the combined voting power of
the Company's then outstanding securities. Under the Change-of-Control
Agreements, following the executive's termination, he or she would be entitled
to a lump sum payment equal to two or three times (depending upon the executive)
the executive's annual base salary at the time of termination plus the
executive's potential bonus amount for the fiscal year in which the
change-of-control occurred. The executive's health and welfare benefits would
also continue for two or three years, depending upon the executive, and the
executive would be vested in all stock options and restricted stock. The cash
and non-cash amounts payable under the Change of Control Agreements and under
any other arrangements with the Company are limited to the maximum amount
permitted without the imposition of an excise tax under the Internal Revenue
Code. Generally, this would limit an executive's benefits to 2.99 times the
executive's average annual compensation for the preceding five years.
Subject to the above limitation of 2.99 times average annual compensation,
in addition to Mr. McCausland's right to payment of two times his annual salary
and bonus under his Change of Control Agreement, under an arrangement entered
into in 1992, in the event of the termination of Mr. McCausland's employment for
any reason including a change of control, Mr. McCausland is entitled to a
payment equal to two times his annual salary, the continuation of health
insurance and other employee benefits for a three-year period and automatic
vesting of all of his stock options. Generally, the
8
<PAGE>
limitation under Mr. McCausland's Change of Control Agreement would reduce the
amount payable under his 1992 arrangement to the extent that the aggregate
benefits under the Change of Control Agreement and the 1992 arrangement exceed
2.99 times his average annual compensation for the preceding five years.
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 four independent, non-employee 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:
o 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.
o Integrates compensation programs with both the Company's annual and
longer-term strategic planning and measurement processes.
o 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.
Periodically, 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
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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 1999, 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. As with the determination of base salaries and
bonuses, the Committee relies on quantitative and qualitative measures,
exercising 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 a discount from the market
price (15% discount since January 1, 1999).
Chief Executive Officer Compensation
The Nominating and Compensation Committee reviewed the Chief Executive
Officer's compensation for fiscal year 1999 and determined that his base salary
would remain the same as it had been in fiscal 1998. This 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. No fiscal year 1999 bonus was awarded to the Chief Executive Officer.
This was the result of the Company not achieving its minimum threshold for
payout under the objective performance targets of pre-tax earnings, gross profit
growth,
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and debt repayment (exclusive of acquisition related debt and certain special
charges) as set forth in the Management Incentive Plan, and certain other
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 the Chief Executive Officer's performance.
Deductibility
The Company intends, to the extent reasonably practicable, to minimize the
non-deductibility, under the Internal Revenue Code (the "Code"), of compensation
paid to its executive officers while maintaining the flexibility of its
compensation programs to attract and retain highly qualified executives in a
competitive environment.
Nominating and Compensation Committee
W. Thacher Brown, Chairman
Rajiv L. Gupta
Lee M. Thomas
Robert L. Yohe
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STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Below is a 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, the S&P 500 Chemicals Composite
Index, the MidCap 400 Index and the MidCap 400 Chemicals Index for the period of
five years commencing April 1, 1994 and ended March 31, 1999.
The Company has approved the use of the S&P MidCap 400 Index and the MidCap
400 Chemicals Index for purposes of this performance comparison because they
include companies of similar size to that of the Company. The S&P 500 Index and
the S&P 500 Chemicals Composite Index are shown again this year because they
were used last year and the SEC rules require that when a new index is selected,
the prior index must be shown in the year a change occurs.
Airgas, Inc.
Comparison of Five Year Cumulative Total Return
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
March 31 1994 1995 1996 1997 1998 1999
- --------------------------------------------------------------------------------
Airgas 100 123.97 185.96 157.89 161.41 78.36
- --------------------------------------------------------------------------------
S&P 500 Chemicals 100 120.52 170.54 198.98 254.05 223.61
- --------------------------------------------------------------------------------
S&P 500 100 115.57 152.67 182.93 270.74 320.72
- --------------------------------------------------------------------------------
MidCap 400 Chemicals 100 124.91 169.05 140.22 184.91 97.01
- --------------------------------------------------------------------------------
S&P MidCap 400 100 108.42 139.31 154.11 229.67 230.69
- --------------------------------------------------------------------------------
The graph above assumes that $100 was invested on April 1, 1994, in Airgas, Inc.
Common Stock, the S&P 500 Chemical Composite Index, the S&P 500 Index, the
MidCap 400 Chemical Index, and the MidCap 400 Index.
12
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CERTAIN TRANSACTIONS
The Company leases two properties from Mr. Knieling under two leases that
expire in fiscal 2002. During fiscal 1999, the Company made rental payments to
Mr. Knieling in the aggregate amount of $73,500. 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.
The Company leases office space from William A. Rice, Jr., the Company's
President and Chief Operating Officer. The lease has a term of five years ending
in fiscal 2002, with a five-year renewal option. During fiscal 1999, the Company
paid rent of $68,900 under the lease. 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.
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, 1999 (i) by
each person who is the beneficial owner of more than 5% of the Common Stock;
(ii) by each director and nominee for 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.
Amount and Nature of Percentage of
Name of Beneficial Owner Beneficial Ownership(1) Shares Outstanding
------------------------ ----------------------- ------------------
Peter McCausland
612 East Gravers Lane
Wyndmoor, PA..................... 10,359,756 (2)(3)(5) 14.1%
Bonnie F. McCausland
612 East Gravers Lane
Wyndmoor, PA..................... 7,184,557 (2)(4) 9.9%
W. Thacher Brown................. 120,500 (2)(6) *
Frank B. Foster, III............. 70,100 (2) *
John A. H. Shober................ 70,500 (2) *
Lee M. Thomas.................... 8,000 (2) *
Robert E. Naylor, Jr............. 47,500 (2) *
Robert L. Yohe................... 32,000 (2) *
Rajiv L. Gupta................... 11,500 (2) *
Hermann Knieling................. 225,110 (2)(5) *
Samuel H. Goldstein.............. 15,821 (2) *
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William A. Rice, Jr.............. 248,404 (2)(5) *
Ted R. Schulte................... 2,134 (2)(5) *
Pacific Financial Research
9601 Wilshire Blvd, Suite 800
Beverly Hills, CA 90210.......... 6,097,500 (7) 8.5%
GSB Investment Management, Inc.
301 Commerce Street, Suite 2001
Fort Worth, Texas 76102.......... 5,095,589 (8) 7.1%
All directors and executive
officers
as a group (20 persons)......... 11,211,325 (1)(2)(3)(5)(6) 15.2%
- ----------
* 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, 1999.
(2) Includes the following number of shares of Common Stock which may be
acquired by certain directors, executive officers and five percent
stockholders through the exercise of options which were exercisable as of
March 31, 1999 or became exercisable within 60 days of that date: Mr.
McCausland, 1,500,500 shares; Mrs. McCausland, 373,264 shares held for the
benefit of her children; Mr. Brown, 40,500 shares; Mr. Gupta, 10,500
shares; Mr. Foster, 56,500 shares; Mr. Shober, 48,500 shares; Mr. Thomas,
6,000 shares; Mr. Naylor, 24,500 shares; Mr. Yohe, 24,500 shares; Mr.
Knieling, 118,150 shares; Mr. Goldstein, 15,000 shares; Mr. Rice, 130,650
shares; Mr. Schulte, 1,625 shares; and all directors and executive officers
as a group, 1,976,925 shares.
(3) Investment and/or voting power with respect to 7,146,194 of such shares are
shared with, or under the control of, Mr. McCausland's spouse, Bonnie
McCausland, and other members of Mr. McCausland's immediate family, 36,863
shares are held by a charitable foundation of which Mr. McCausland is an
officer and director and 2,000,000 shares are held by a grantor retained
annuity trust of which Mr. McCausland is the trustee and the annuitant.
(4) Investment and/or voting power with respect to 7,146,194 shares are shared
with, or under the control of, Mrs. McCausland's spouse, Peter McCausland,
and other members of Mrs. McCausland's immediate family, and 36,863 shares
are held by a charitable foundation of which Mrs. McCausland is an officer
and director.
(5) Includes the following shares of Common Stock held under Airgas' 401(k)
Plan as of March 31, 1999: Mr. McCausland, 35,363 shares; Mr. Knieling,
12,407 shares; Mr. Rice, 29,329 shares; Mr. Schulte 293 shares; and all
executive officers as a group, 77,392 shares.
(6) Includes 8,000 shares owned by members of Mr. Brown's immediate family.
(7) Pacific Financial Research, an investment adviser, filed a Schedule 13G
dated February 11, 1999, upon which the Company has relied in making this
disclosure. Pacific Financial Research has sole voting and dispositive
power as to 6,097,500 shares.
(8) GSB Investment Management, Inc. ("GSB"), an investment adviser, filed a
Schedule 13G dated February 12, 1999, upon which the Company has relied in
making this disclosure. GSB has sole voting power as to 1,559,155 shares,
sole dispositive power as to 4,959,189 shares and shares dispositive power
as to 136,400 shares.
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PROPOSAL TO RATIFY ACCOUNTANTS
The Board of Directors has selected the firm of KPMG LLP as its independent
auditors to audit the financial statements of the Company for the fiscal year
ending March 31, 2000. The Board of Directors has proposed that the stockholders
ratify the selection of KPMG LLP. This firm audited the Company's financial
statements for the fiscal year ended March 31, 1999. Representatives of KPMG 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
LLP as independent auditors.
STOCKHOLDERS' PROPOSALS FOR
NEXT ANNUAL MEETING
Under the rules of the SEC, if a stockholder wants to submit a proposal for
inclusion in the Proxy Statement for presentation at the 2000 Annual Meeting,
the proposal must be received by the Company, attention: Mr. Todd R. Craun,
Secretary, at the principal offices of the Company, by March 4, 2000.
For any proposal, including a nomination for election to the Board of
Directors, that is not submitted for inclusion in next year's Proxy Statement,
but is instead sought to be presented directly at the 2000 Annual Meeting, the
Company's Bylaws require, and the SEC rules permit, that the proposal be
received at the Company's principal executive offices not earlier than April 4,
2000 and not later than May 4, 2000. However, if the date of the Annual Meeting
is more than 30 days before or more than 60 days after August 2, 2000, the
notice must be received not earlier than 120 days before the Annual Meeting and
not later than the later of 90 days before the Annual Meeting or the 10th day
following public announcement of the date of the meeting. The Bylaws also
provide that the notice must contain certain information regarding the proposal
and the nomination.
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1. Election of Directors
FOR all nominees WITHHOLD AUTHORITY to vote *EXCEPTIONS
listed below |X| for all nominees listed below. |X| |X|
Nominees: John A. H. Shober, Lee M. Thomas and Robert L. Yohe
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
*Exceptions ____________________________________________________________________
2. Ratify the selection of KPMG LLP as independent auditors.
FOR |X| AGAINST |X| ABSTAIN |X|
3. In their discretion, upon such other matters as may properly come before
the Meeting.
Change of Address or
Comments Mark Here |X|
NOTE: Please sign exactly as name(s) appears hereon.
Executors, administrators, trustees, etc. should
give full title as such.
DATE: _____________________________________, 1999
_________________________________________________
Signature
_________________________________________________
Signature
Votes must be indicated
(x) in Black or Blue ink. |X|
PLEASE SIGN AND RETURN PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE.
AIRGAS, INC.
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
FOR THE ANNUAL MEETING OF STOCKHOLDERS, AUGUST 2, 1999
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 2:00 p.m. on Monday, August 2,
1999, at the Company's offices at 259 North Radnor-Chester Road, 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 PROPOSAL DESCRIBED IN THE PROXY STATEMENT AND WITH DISCRETIONARY
AUTHORITY ON SUCH OTHER MATTERS AS MAY 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. (Continued, and to be signed, on the other side)
AIRGAS, INC.
P.O. BOX 11491
NEW YORK, N.Y. 10203-0491
