UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
AIRGAS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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AIRGAS
Radnor Court
259 North Radnor-Chester Road, Suite 100
Radnor, Pennsylvania 19087-5283
July 2, 2001
TO OUR STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of Stockholders
to be held on Thursday, August 2, 2001, 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
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Peter McCausland
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
AIRGAS, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AUGUST 2, 2001
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TO THE STOCKHOLDERS:
The Annual Meeting of the Stockholders of Airgas, Inc. (the "Company"),
a Delaware corporation, will be held on Thursday, August 2, 2001, 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 approve the 2001 Employee Stock
Purchase Plan.
3. 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, 2002.
4. To consider a stockholder proposal.
5. 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 18, 2001, 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, Esq.
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Todd R. Craun, Esq.
SECRETARY
Radnor, Pennsylvania
July 2, 2001
The Company's Annual Report for the year ended March 31, 2001,
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.
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,
2001.
Stockholders of record at the close of business on June 18, 2001, will
be entitled to vote at the Annual Meeting. At the close of business on June 18,
2001, 74,074,598 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, 2001.
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 you indicate
otherwise on your proxy card, your shares will be voted FOR each of the
Company's proposals 1, 2 and 3 and AGAINST the stockholder proposal, and at the
discretion of the proxy holders on such other business as may properly come
before the Annual Meeting. The Board of Directors unanimously recommends that
you vote to approve each of the Company's proposals and vote against the
stockholder proposal.
Abstentions are counted as shares present for purposes of determining
the presence or absence of a quorum for the transaction of business, but are not
counted as shares voted and therefore have the effect of a vote against
Proposals 2 and 3. 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 at 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 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 2001 Employee Stock Purchase Plan (Proposal 2) and the
ratification of the selection of the auditors (Proposal 3) require the approval
of a majority of the outstanding shares of Common Stock present and entitled to
vote at the meeting. Brokers are not precluded from voting on Proposals 2 and 3,
and therefore broker non-votes will have the same effect as a vote against the
proposals. With respect to the stockholder proposal, uninstructed shares may not
be voted by brokers. 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 $6,000.
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 2001 Annual Meeting have been nominated to serve for a term
expiring at the 2004 Annual Meeting.
The names and biographical summaries of the three persons who have been
nominated to stand for election at the 2001 Annual Meeting and the remaining
directors whose terms are continuing until the 2002 or 2003 Annual Meetings
appear below. W. Thacher Brown, Frank B. Foster, III and Peter McCausland were
elected by the stockholders at the 1998 Annual Meeting. Of the continuing
directors, John A. H. Shober, Lee M. Thomas and Robert L. Yohe were elected by
the stockholders at the 1999 Annual Meeting and James W. Hovey, Paula A. Sneed
and David M. Stout were elected at the 2000 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 Governance and Compensation Committee.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF MR.
BROWN, MR. FOSTER AND MR. 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 2002 and 2003 Annual Meetings.
NOMINEES FOR ELECTION FOR TERMS EXPIRING AT THE 2004 ANNUAL MEETING:
W. Thacher Brown Mr. Brown, age 53, has been the Chairman, President
and a director of 1838 Investment Advisors, LLC, an
investment management company, since July 1988,
President of 1838 Investment Advisors Funds since
1995, President of MBIA Asset Management since 1998
and a director 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.
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Frank B. Foster, III Mr. Foster, age 67, 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 FinCom Corporation, 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 51, 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 1993 to November 1995 and from April 1997 to
January 1999. Mr. McCausland serves as a director of
Hercules, Inc. and as a member of the Board of
Trustees of Eisenhower Fellowships, Inc.
DIRECTORS SERVING FOR TERMS EXPIRING AT THE 2002 ANNUAL MEETING:
John A.H. Shober Mr. Shober, age 68, is a private investor and
corporate director. Mr. Shober 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 President's Advisory Council of
Eisenhower Fellowships, Inc. Mr. Shober has served as
a director of the Company since 1990.
Lee M. Thomas Mr. Thomas, age 57, is the Executive Vice
President-Consumer Products 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
positions 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 65, is a private 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, 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.
3
DIRECTORS SERVING FOR TERMS EXPIRING AT THE 2003 ANNUAL MEETING:
James W. Hovey Mr. Hovey, age 55, is President of The Fox Companies,
a diversified real estate development firm, which he
joined in 1972, where he has been responsible for the
development of numerous housing units and office
buildings, and of a sports arena. In conjunction with
The Fox Companies, Mr. Hovey is also currently
involved in several start-up business ventures,
including sales forecasting software and fitness and
health care. Mr. Hovey also serves as an overseer of
the Graduate School of the University of
Pennsylvania, a member of the Advisory Board of the
Wharton School Real Estate Center, a trustee of
Eisenhower Fellowships, Inc., and a trustee of the
World Affairs Council in Philadelphia. Mr. Hovey has
been a director of the Company since October 1999.
Paula A. Sneed Ms. Sneed, age 53, is Group Vice President,
President, E-commerce and Marketing Services and a
member of Kraft's Management Committee, the company's
policy decision-making group. She is responsible for
leading Kraft's innovation through the rapidly
emerging field of E-Commerce, a division Kraft
established in September 1999. Ms. Sneed also
oversees Kraft's 600-person Marketing Services
organization that ensures world-class marketing,
including advertising, media, promotions, marketing
research and other marketing disciplines for more
than 100 major food brands. Ms. Sneed joined General
Foods Corporation (which later merged with Kraft
Foods) in 1977, and has served in various executive
positions since 1986. She also serves as a trustee of
the Illinois Institute of Technology and Simmons
College, and a member of the Executive Leadership
Council and The Chicago Network. Ms. Sneed is also a
member of the Board of Westchester/Fairfield Inroads.
Ms. Sneed has been a director of the Company since
August 1999.
David M. Stout Mr. Stout, age 47, has been President, U.S.
Pharmaceuticals, GlaxoSmithKline since 1999. Prior to
that, he served as Senior Vice President and
Director, Sales and Marketing-U.S., for SmithKline
Beecham from October 1996 until 1998. Mr. Stout was
President of Schering Laboratories, a division of
Schering-Plough Corporation, from 1994 until 1996. He
held various executive and sales and marketing
positions with Schering-Plough from 1979, when he
joined the company, until 1994. Mr. Stout has been a
director of the Company since August 1999.
4
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held seven meetings during the year ended March
31, 2001. The average attendance by directors at these meetings was 98 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 Governance and Compensation Committee, an Audit Committee and a
Finance Committee. During the year ended March 31, 2001, the Governance and
Compensation Committee held four meetings, the Audit Committee held five
meetings, and the Finance Committee held three meetings.
The members of the Executive Committee are Peter McCausland, W. Thacher
Brown and Frank B. Foster, III. 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 of Directors.
The members of the Governance and Compensation Committee are David M.
Stout, Lee M. Thomas, and Robert L. 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
Governance and Compensation Committee will consider written recommendations for
nominees for directors which are submitted in accordance with the Company's
Bylaws. Under the Bylaws, stockholders are entitled to nominate persons for
election as directors only if, among other things, written notice has been
given, in the case of an annual meeting, not earlier than 120 days and not later
than 90 days prior to the anniversary of the preceding year's annual meeting.
The notice must set forth information about the proposed nominee and the consent
of the nominee, among other things.
The members of the Audit Committee are Frank B. Foster, III, John A.H.
Shober and Paula A. Sneed. Each member of the Committee is independent from the
Company and its management. The Committee acts pursuant to a written charter
adopted by the Board of Directors and attached as Exhibit A to this Proxy
Statement. The purpose of the Committee is to assist the Board of Directors in
fulfilling its oversight responsibilities regarding accounting and reporting
practices, internal controls, and compliance with laws and regulations. The
Committee's primary duties are to:
o Assess the integrity of the Company's financial reporting process and
system of internal control through discussions with management, the
internal auditors and the independent auditors.
o Recommend for approval by the Board of Directors and ratification by the
stockholders an independent firm of certified public accountants to serve
as independent auditors for the Company.
o Assess the effectiveness, objectivity and independence of the independent
auditors.
o Review the fees paid to the independent auditors and the extent to which
the independent auditors may be retained to perform other services.
5
o Monitor the effectiveness and objectivity of the internal audit function.
o Provide an avenue of communication among the independent auditors, internal
auditors, management and the Board of Directors.
o Recommend to the Board of Directors that the audited financial statements
be included in the Company's annual report to stockholders.
o Prepare the Report of the Audit Committee included in the annual proxy
statement pursuant to Item 306 of Regulation S-K.
The Report of the Audit Committee for fiscal year 2001 appears on page 17.
The members of the Finance Committee are W. Thacher Brown, James W.
Hovey and John A.H. Shober. The purpose of the Committee is to review, advise
and make recommendations to senior management and to the Board of Directors on
the financial affairs, policies and programs of the Company. The Committee meets
periodically, but not less than three times per year, to review financial issues
of the Company, including the following: capital structure; policies regarding
dividends, stock splits and stock repurchases; current and projected capital
requirements and the issuance of debt and equity securities; credit agreements
and major changes thereto and borrowings and financings of every nature;
insurance programs and practices for managing insurable risks; and strategic and
business planning processes.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company are paid an annual
retainer of $12,000 plus a fee of $1,500 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 Governance
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 2, 2000, each Board member was granted 12,500
options with a $5.25 exercise price.
The Chairmen of the Audit Committee, the Governance and Compensation
Committee and the Finance 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
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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 his spouse.
Based solely on its review of the copies of the forms received by it
with respect to the 2001 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, with the following exceptions: (i) Andrew R. Cichocki failed to file
one Form 4 regarding one transaction; (ii) Jeffrey P. Cornwell failed to report
one transaction on a Form 4 timely filed by him; (iii) Rudi G. Endres failed to
file one Form 4 regarding one transaction; (iv) Frank B. Foster, III, failed to
file one Form 4 regarding one transaction; (v) Samuel H. Goldstein, a former
officer of the Company, failed to file one Form 4 regarding one transaction; and
(vi) John Musselman failed to report two transactions on a Form 4 timely filed
by him. Each of the referenced reporting persons filed a Form 5 for the fiscal
year ended March 31, 2001 to correct the failures to report the referenced
transactions.
7
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation paid during the fiscal years ended March 31, 2001, 2000 and 1999 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 2001 fiscal year.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------------------------- --------------------------------------------------------
SECURITIES ALL OTHER
NAME AND PRINCIPAL FISCAL OTHER ANNUAL RESTRICTED UNDERLYING LTIP COMPENSATION
POSITION YEAR SALARY($) BONUS($) COMPENSATION(1) STOCK AWARDS OPTIONS(#) PAYOUTS ($)(1)
-------- ---- --------- -------- --------------- ------------ ---------- ------- ------
Peter McCausland 2001 550,000 200,000 (1) None 150,000 None 5,687 (2)
CHAIRMAN AND 2000 550,000 100,000 None 130,000 None 5,530
CHIEF EXECUTIVE OFFICER 1999 550,000 -0- None 130,000 None 4,778
Roger F. Millay 2001 255,000 64,388 (1) None 31,000 None 1,437 (4)
SENIOR VICE PRESIDENT - 2000 81,846 60,000 None 30,000 None 68
FINANCE AND CHIEF
FINANCIAL OFFICER (3)
Ted R. Schulte 2001 225,000 91,775 (1) None 25,000 None 7,474 (5)
SENIOR VICE PRESIDENT - 2000 216,420 75,260 None 21,000 None 4,503
GAS OPERATIONS 1999 184,120 89,270 None 16,500 None 4,458
Alfred B. Crichton 2001 186,300 66,807 (1) None 29,000 None 7,650 (6)
DIVISION PRESIDENT- 2000 180,000 44,105 None 26,000 None 7,308
WEST 1999 170,000 28,050 None 35,000 None 6,766
Glenn M. Fischer 2001 182,380 60,606(7) (1) None 150,000 None 68 (8)
PRESIDENT AND CHIEF
OPERATING OFFICER (7)
---------------------------------------------
(1) Amount does not exceed the lesser of $50,000 or 10% of total salary and
bonus.
(2) Consists of $5,525 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 $162 paid for the benefit of Mr. McCausland.
(3) Mr. Millay has served as Senior Vice President-Finance and Chief
Financial Officer since November 1999.
(4) Consists of $1,275 of employer matching contributions under the
Company's 401(k) Plan and the value of life insurance premiums of $162
paid for the benefit of Mr. Millay.
(5) Consists of $7,312 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 $162 paid for the benefit of Mr. Schulte.
(6) Consists of $7,488 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 $162 paid for the benefit of Mr. Crichton.
(7) Mr. Fischer has served as President and Chief Operating Officer since
November 2000. Mr. Fischer's compensation does not include $140,000
paid to him as a non-recurring signing bonus.
(8) Consists of the value of life insurance premiums of $68 paid for the
benefit of Mr. Fischer.
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OPTION GRANTS DURING FISCAL YEAR 2001
The following table provides information related to options granted to
the named executive officers during fiscal year 2001. The Company does not have
any outstanding stock appreciation rights.
POTENTIAL REALIZATION VALUE AT ASSUMED
ANNUAL RATES OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS OR OPTION TERM (1)
------------------------------------------------------------------------------------------ ----------------------------------------
NO. OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED (#)(2) FISCAL YEAR PRICE ($/SH) DATE 0%($)(3) 5%($)(3) 10%($)(3)
---- -------------- ----------- ------------ ---- -------- --------- ---------
Peter McCausland 150,000 8.4% 5.50 May 15, 2010 0 518,838 1,314,838
Roger F. Millay 31,000 1.7% 5.50 May 15, 2010 0 107,227 271,733
Ted R. Schulte 25,000 1.4% 5.50 May 15, 2010 0 86,473 219,140
Alfred B. Crichton 29,000 1.6% 5.50 May 15, 2010 0 100,309 254,202
Glenn M. Fischer 150,000 8.4% 6.81 Sept. 28, 2010 0 642,416 1,628,008
-----------------------
(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 $280
million and $710 million, respectively, and the value of the
named executive officers' appreciation will be approximately
0.5% of the total stockholders' appreciation. Potential stock
price appreciation to all stockholders is calculated based on a
total of 74.1 million shares of Common Stock outstanding and
entitled to vote on June 18, 2001 and a price of $6.01 per
share, the weighted average exercise price of options granted in
fiscal year 2001 referred to in the table above.
9
AGGREGATED OPTION EXERCISES DURING FISCAL YEAR 2001
AND FISCAL YEAR-END OPTION VALUES
The following table provides information related to employee options
exercised by the named executive officers during fiscal year 2001 and the number
and value of such options held at fiscal year-end.
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL AT FISCAL
SHARES ACQUIRED VALUE YEAR-END(#) YEAR-END($)(2)
NAME ON EXERCISE (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- --------------- ----------- ------------- ----------- -------------
Peter McCausland -0- -0- 982,869 345,000 2,680,625 357,000
Roger F. Millay -0- -0- 7,500 53,500 -0- 73,780
Ted R. Schulte -0- -0- 13,500 49,000 -0- 59,500
Alfred B. Crichton -0- -0- 208,750 72,250 175,364 69,020
Glenn M. Fischer -0- -0- -0- 150,000 -0- 160,500
--------------------
(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 $7.88 per share on March
31, 2001, less the option exercise price.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
The Company has entered into "change-of-control" agreements
("Change-of-Control Agreements") with Mr. McCausland, Mr. Fischer, Mr. Millay,
Mr. Schulte, Mr. Crichton and ten 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 one to
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
10
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 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.
GOVERNANCE AND COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The Governance and Compensation Committee of the Board of Directors has
furnished the following report on executive compensation. Under the supervision
of the Governance and Compensation Committee, the Company has developed and
implemented compensation policies, plans and programs. The Committee is composed
of three independent, non-employee directors. Following review and approval by
the Governance 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 plans and the establishment of
performance goals under the Company's management bonus plans) 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.
11
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 bonus plans. 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
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.
In addition to salary, 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 45% to 65% 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 Bonus 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
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, adjusting that value to determine the
options granted using the Black-Scholes method. During fiscal 2001, the value of
options granted was generally between 30% 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 15% discount from the market price.
12
CHIEF EXECUTIVE OFFICER COMPENSATION
The Governance and Compensation Committee reviewed the Chief Executive
Officer's compensation for fiscal year 2001 and determined that his base salary
would remain the same as it had been in fiscal year 2000. 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. A fiscal year 2001 bonus of $200,000 was awarded to the Chief
Executive Officer. This was the result of the Company achieving certain of the
objective performance targets of pre-tax earnings, gross profit growth, and debt
repayment (exclusive of acquisition related debt and certain special charges) as
set forth in the Management Bonus 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.
GOVERNANCE AND COMPENSATION COMMITTEE
Robert L. Yohe, Chairman
David M. Stout
Lee M. Thomas
13
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 MidCap 400 Chemicals Index and the S&P MidCap 400 Index for
the period of five years commencing April 1, 1996 and ended March 31, 2001.
The Company has approved the use of the S&P MidCap 400 Chemicals Index
and the S&P MidCap 400 Index for purposes of this performance comparison because
they include companies of similar size to that of the Company.
--------------------------------------------------------------------------------
AIRGAS, INC.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
------------------------------------------------------------------------------------------------------
March 31 1996 1997 1998 1999 2000 2001
------------------------------------------------------------------------------------------------------
Airgas 100 84.91 86.79 42.14 41.82 39.65
------------------------------------------------------------------------------------------------------
S&P MidCap 400 Chemicals 100 82.95 109.38 57.49 58.78 62.29
------------------------------------------------------------------------------------------------------
S&P MidCap 400 100 110.62 164.86 165.59 228.67 212.75
------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The graph above assumes that $100 was invested on April 1, 1996, in Airgas, Inc.
Common Stock, S&P MidCap 400 Chemical Index, and the S&P MidCap 400 Index.
--------------------------------------------------------------------------------
14
CERTAIN TRANSACTIONS
The Company leases office space from William A. Rice, Jr., the
Company's former President and Chief Operating Officer, who resigned from the
position on November 1, 2000. The lease has a term of five years ending in
fiscal 2002, with a five-year renewal option. During fiscal 2001, the Company
paid rent of $80,899 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, 2001 (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 ............................. 10,757,419 (2)(3)(5) 15.5 %
Bonnie F. McCausland
612 East Gravers Lane
Wyndmoor, PA ............................. 9,706,924 (2)(4) 14.2 %
W. Thacher Brown.......................... 139,250 (2)(6) *
Frank B. Foster, III...................... 88,850 (2) *
John A. H. Shober......................... 89,250 (2) *
Lee M. Thomas ............................ 26,750 (2)(7) *
Robert L. Yohe ........................... 58,250 (2) *
Paula A. Sneed ........................... 19,750 (2) *
David M. Stout ........................... 18,750 (2) *
James W. Hovey ........................... 51,250 (2) *
Roger F. Millay............................ 19,985 (2)(5) *
Ted R. Schulte ............................ 31,305 (2)(5) *
`
Alfred B. Crichton......................... 259,236 (2)(5) *
Glenn M. Fischer........................... -0- *
Airgas, Inc. Employee Benefits Trust
259 N. Radnor-Chester Rd., Suite 100
Radnor, PA 19087........................... 5,700,801 (8) 7.7%
Dimensional Fund Advisors Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401..................... 4,068,401 (9) 6.0%
Pacific Financial Research
9601 Wilshire Blvd, Suite 800
Beverly Hills, CA 90210.................... 4,890,400 (10) 7.2%
All directors and executive officers
as a group (19 persons)..................... 12,256,839 (2)(3)(4)(5)(6)(7) 17.4%
-----------------------------------------
15
* 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, 2001.
(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, 2001 or became exercisable within 60 days of that date:
Mr. McCausland, 1,398,000 shares; Mrs. McCausland, 398,264 shares held
for the benefit of her children; Mr. Brown, 59,250 shares; Mr. Foster,
59,250 shares; Mr. Shober, 59,250 shares; Mr. Thomas, 24,750 shares;
Mr. Yohe, 43,250 shares; Ms. Sneed, 18,750 shares; Mr. Stout, 18,750
shares; Mr. Hovey, 18,750 shares; Mr. Schulte, 26,625 shares; Mr.
Millay, 15,250 shares; Mr. Crichton, 229,000 shares; and all directors
and executive officers as a group, 2,282,865 shares.
(3) Investment and/or voting power with respect to 9,693,061 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, and 12,363 shares are held by a charitable foundation of which
Mr. McCausland is an officer and director.
(4) Investment and/or voting power with respect to 9,693,061 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 12,363 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, 2001: Mr. McCausland, 38,159 shares; Mr. Millay,
510 shares; Mr. Schulte, 1,162 shares; Mr. Crichton, 10,273 shares; and
all executive officers as a group, 72,600 shares.
(6) Includes 8,000 shares owned by members of Mr. Brown's immediate family.
16
(7) Includes 2,000 shares owned by members of Mr. Thomas' immediate family.
(8) The Airgas, Inc. Employee Benefits Trust has shared dispositive power
as to 5,700,801 shares.
(9) Dimensional Fund Advisors Inc. ("Dimensional"), an investment adviser,
filed a Schedule 13G dated February 2, 2001, upon which the Company has
relied in making this disclosure. Dimensional has sole voting and
dispositive power as to 4,068,401 shares. Dimensional disclaims
beneficial ownership as to all 4,068,401 shares.
(10) Pacific Financial Research, an investment adviser, filed a Schedule 13G
dated February 14, 2001, upon which the Company has relied in making
this disclosure. Pacific Financial Research has sole voting power as to
4,771,900 shares, and sole dispositive power as to 4,890,400 shares,
and shares voting power as to 118,500 shares.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee reviewed and discussed the audited financial
statements of the Company for the fiscal year ended March 31, 2001 with the
Company's management and with the independent auditors. The Committee reviewed
with the independent auditors their judgment as to the quality of the Company's
application of generally accepted accounting principles and other such matters
as required by Statement on Auditing Standards No. 61, "Communications with
Audit Committees," as amended.
The Committee discussed with both the Company's internal and independent
auditors the overall scope and plans for their respective audits. The Committee
periodically met with the internal and independent auditors, with and without
management present, to discuss the results of their examinations, evaluations of
internal controls and overall quality of the Company's financial reporting.
The Committee has discussed with and received written disclosure and the
letter from the independent auditors required by Independence Standard No. 1,
"Independence Discussions with Audit Committees," as amended, as to their
independence from the Company and its management.
Based on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the year ended March
31, 2001, for filing with the Securities and Exchange Commission. The Audit
Committee also recommended to the Board of Directors, subject to stockholders'
ratification, the selection of KPMG LLP as the Company's independent auditors
for the 2002 fiscal year.
AUDIT COMMITTEE
Frank B. Foster, III, Chairman
John A.H. Shober
Paula A. Sneed
17
PROPOSAL TO APPROVE THE
2001 EMPLOYEE STOCK PURCHASE PLAN
On May 9, 2001, the Board of Directors approved the 2001 Employee Stock
Purchase Plan ("Employee Stock Purchase Plan") subject to approval by the
Company's stockholders. The 2001 Employee Stock Purchase Plan will replace the
1998 Employee Stock Purchase Plan which has an insufficient number of shares
available to provide future issuances of shares and is substantially the same as
the proposed plan. The text of the Employee Stock Purchase Plan is set forth in
Exhibit B 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 B.
VOTE REQUIRED FOR APPROVAL
To be adopted, the Employee 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
EMPLOYEE STOCK PURCHASE PLAN.
SUMMARY OF THE EMPLOYEE STOCK PURCHASE PLAN
The Employee 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 Employee 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 Employee Stock Purchase Plan is set forth below. The Employee 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 Employee Stock Purchase Plan will be administered by the Company's
Governance 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 Employee Stock Purchase Plan allows eligible employees to become
participants in the Employee 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 Employee 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 1,500,000 shares of
Common Stock, subject to adjustment, have been reserved for issuance under the
Employee Stock Purchase Plan.
Participation in the Employee 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 7,500 employees of the
Company and its subsidiaries will be eligible
18
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 Employee 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 Employee 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 Employee 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 Employee 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 Employee 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 Employee Stock Purchase Plan; or (2) amend the requirements regarding
the class of employees eligible to purchase stock under the Employee Stock
Purchase Plan.
SUMMARY OF TAX CONSEQUENCES OF THE EMPLOYEE STOCK PURCHASE PLAN
The following discussion of certain federal income tax consequences of
the Employee 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 Employee Stock Purchase Plan is approved by the stockholders at
the meeting, the Employee 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 and 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 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.
19
If a participating employee sells or otherwise disposes (including by
gift) 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 in the case of a gift, the 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 EMPLOYEE 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 Employee Stock Purchase Plan.
STOCK PRICE INFORMATION
The closing price of the Company's Common Stock on the New York Stock
Exchange on June 28, 2001 was $11.45.
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, 2002. 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, 2001. 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 Company paid the following fees to the independent auditors for
services provided to the Company during fiscal 2001:
o Audit Fees:
Aggregate fees billed for professional services rendered for the audit of
the Company's fiscal year 2001 annual financial statements and reviews of
the financial statements included in the Company's quarterly report on
Forms 10-Q were $430,000.
o Financial Information System Design and Implementation Fees:
There were no such services provided by the independent auditors during
fiscal year 2001.
o All Other Fees:
Aggregate fees billed principally related to the audits of the Company's
employee benefit plans and the Company's trade receivables securitization
were $126,000.
20
The Audit Committee considered whether the services provided above are
compatible with maintaining the independent auditor's independence.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF
KPMG LLP AS INDEPENDENT AUDITORS.
21
STOCKHOLDER PROPOSAL
The following proposal, for which the Board of Directors and the
Company accept no responsibility and urge stockholders to vote against, was
submitted by Wynnefield Partners Small Cap Value, L.P. ("Wynnefield"), a
stockholder of the Company. Wynnefield has informed the Company that its address
is 450 Seventh Avenue, Suite 509, New York, New York 10123 and that it is the
beneficial owner of 183,100 shares of the Company's Common Stock, and together
with its affiliates, Wynnefield Partners Small Cap Value, L.P. I and Wynnefield
Small Cap Value Offshore Fund Ltd., beneficially owns 400,000 shares of the
Company's Common Stock.
PROPOSED RESOLUTION OF STOCKHOLDER
"RESOLVED, that the stockholders of Airgas, Inc. (the
"Company") hereby request the Company's Board of Directors to promptly
establish and authorize a committee of independent, non-employee
directors to work with the Company's senior management and to engage
outside professional advisors, as necessary, to identify and develop
strategic alternatives to maximize current stockholder value,
specifically with a view to consummation of a business combination,
sale of control or similar extraordinary corporate transaction with a
strategic partner."
SUPPORTING STATEMENT SUBMITTED BY STOCKHOLDER
"Wynnefield believes the Company's performance has negatively
impacted the market value of the Company's Common Stock. During the
fiscal year ended 3/31/97, the reported closing sale price of the
Common Stock peaked at $26.88; whereas the reported closing sale price
of the Common Stock on 2/28/01 was $8.11. Earnings per share of Common
Stock (calculated on a fully diluted basis, excluding non-recurring
gains and special and other charges, "EPS") for the fiscal year ended
3/31/97 were $0.65, compared to $0.52 for the fiscal year ended
3/31/00. Moreover, in connection with implementation of the Company's
acquisition strategy, the Company's outstanding long-term debt
increased by approximately 167%, from approximately $260 million at
3/31/95 to approximately $694 million at 12/31/00.
We believe it is apparent from the above information, derived
from the Company's periodic reports and financial news services, that
the acquisition of non-core businesses has served only to leverage up
the Company and, instead of generating significant EPS increases, has
generated EPS decreases.
We believe mid-sized capitalization chemical companies have
difficulty achieving core business critical mass and maximizing value
and returns for investors. Data published by Standard & Poor's and
Bloomberg, L.P. indicates that during the five-year period ended
2/28/01, return on investment ("ROI") in the Common Stock was
approximately negative 54.94%. During the same period, ROI was
approximately negative 11.14% in the S&P MidCap 400 Chemicals Index
(the "MDCHEM") -- the index selected by the Company for comparative
performance graph purposes in its Definitive Proxy Statement dated
6/30/00. Therefore, we conclude that the Common Stock substantially
underperformed the MDCHEM.
22
We note that over the same period, ROI in the S&P Chemicals
(SPCHMC) Composite Index (for larger companies) gained approximately
33.59%, thereby outperforming both the Common Stock and the MDCHEM.
We believe that excessive senior management turnover has
eroded investor, community and financial market confidence in the
Company's performance and the Common Stock. Notably, the Company has
had three different Chief Financial Officers during the past three
years and has replaced both the Chief Information Officer and Chief
Operating Officer since the date of the Company's Definitive Proxy
Statement dated 6/30/00.
FOR THE FOREGOING REASONS, WE BELIEVE IMMEDIATE STEPS SHOULD
BE TAKEN TO MAXIMIZE CURRENT STOCKHOLDER VALUE AND WYNNEFIELD
RECOMMENDS THAT YOU VOTE "FOR" ITS SHAREHOLDER PROPOSAL."
STATEMENT OF THE BOARD OF DIRECTORS IN OPPOSITION TO THE STOCKHOLDER PROPOSAL
The Board of Directors unanimously recommends a vote AGAINST the
proposal and firmly believes that the implementation of the proposal described
above would not be in the best interests of the stockholders and would not, in
fact, "maximize value" to the stockholders.
The Board of Directors consists of experienced individuals who are
familiar with the Company's businesses and the markets in which the Company
operates. Eight of the Company's nine Board Members are outside directors, and
are therefore independent of management. The Board of Directors and management
of the Company remain committed to increasing stockholder value and at all times
are willing to consider alternative strategies to accomplish this goal. The
Board of Directors, together with management and outside advisors, regularly
evaluate the Company's strategies for maximizing stockholder value and continue
to concentrate on improving the Company's earnings on a long-term, sustained
basis. During the past year, the Board of Directors appointed a special
committee of independent directors which asked the Company's financial advisor,
Goldman, Sachs & Co., to review alternatives to maximize stockholder value,
including a business combination with or sale of control to a strategic partner.
After consultations with its financial advisor, the Board of Directors concluded
that the best course of action to take to maximize stockholder value was to
execute the Company's strategies now in place. In light of this recent
determination, adoption of the stockholder proposal would result in a wasteful
and duplicative use of corporate resources.
The Board of Directors believes that the proposal described above could
seriously prejudice and jeopardize the financial interests of the Company's
stockholders. The sale of a company involves an examination of a complex array
of factors, including the changing competitive environment, the state of the
economy, availability of potential buyers, long-term and short-term prospects of
the businesses and many other factors. Acting hastily to force a sale of the
Company would force the Company to negotiate with bidders from a position of
weakness and obstruct the ability of the Board of Directors to maximize
stockholder value. Furthermore, in light of the fact that current public market
valuations of integrated gas producers and distribution companies, including the
Company, are extremely low compared to other
23
periods, the Board of Directors believes that implementation of the stockholder
proposal would be akin to a "fire sale" and would therefore be contrary to the
best interests of the Company's stockholders.
In addition, although the proposal only requests and does not obligate
the Board of Directors to take the recommended action, the Board of Directors
believes that an announcement that the stockholder proposal has been adopted
could severely damage the Company's relationships with its lenders, customers,
suppliers, employees and other constituencies. Such results could have an
adverse impact on the Company's ability to compete effectively in the short and
long term, leading to a potential decline in revenues, profits and stockholder
value.
The Board of Directors believes that, at present, the interests of the
stockholders are best served by the Company focusing primarily on increasing
operating earnings. Therefore, the Company will attempt to improve its long-term
prospects by continuing to focus on internal growth and acquisitions and
alliances which will complement the Company's businesses and result in improved
operating efficiencies. The Board of Directors believes that continued focus on
the Company's internal growth, acquisition strategies and improved operating
efficiencies will enhance stockholder value over the long term.
The Board of Directors believes that positive trends in the Company's
recent operating results supports the Board's current strategic plans. Net
earnings for the quarter ended March 31, 2001 were $0.12 per share compared to
$0.08 per share in the fourth quarter of the prior year. In addition, the strong
cash flow characteristics of the Company's business permitted the Company to pay
down approximately $113 million of debt in fiscal 2001. The Company's same store
sales growth of 2.5% in the quarter ended March 31, 2001, in the face of
deteriorating U.S. manufacturing conditions, continued an encouraging 12-month
trend of sales growth attributable to strategic accounts, cross-selling of
gases, hardgoods and safety products to the Company's current customers, and the
growth of private label and strategic products. The success of the Company's
strategies has been reflected in its stock price, which increased 92% from
$5.375 at May 31, 2000, to $10.30 at May 31, 2001, and 25% since the stockholder
submitted its proposal.
The Board of Directors is aware that on June 27, 2001, Wynnefield filed
with the SEC a letter addressed to the Company's stockholders. The Board of
Directors believes that the letter merely reiterates the stockholder's proposal
and raises no additional issues.
Regardless of the outcome of the vote on this proposal, the Board of
Directors, consistent with its fiduciary duty to the stockholders, has and will
continue to consider all reasonable avenues to increase stockholder value.
However, the Board of Directors believes it is in the best interests of the
stockholders to allow the Board of Directors to maintain flexibility in
determining the appropriate courses of action. Therefore, for all of the reasons
stated above, the Board of Directors urges stockholders to vote AGAINST this
proposal.
REQUIRED VOTE
The approval of the stockholder proposal requires the affirmative vote
of a majority of the votes cast by the holders of shares of Common Stock of the
Company as of the record date, present in person or represented by proxy.
Abstentions will have the same effect as a vote cast against the proposal, and
broker non-votes will have the effect of reducing the number of affirmative
votes required for approval of the proposal. Uninstructed shares may not be
voted by brokers on the stockholder proposal.
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THE
ADOPTION OF THE STOCKHOLDER PROPOSAL. PROXIES SOLICITED BY THE BOARD OF
DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN THEIR
PROXIES.
STOCKHOLDERS' PROPOSALS FOR
NEXT ANNUAL MEETING
STOCKHOLDER PROPOSALS FOR INCLUSION IN NEXT YEAR'S PROXY STATEMENT
Under the rules of the Securities and Exchange Commission, if a
stockholder wants to submit a proposal for inclusion in the Proxy Statement and
presentation at the 2002 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, 2002.
OTHER STOCKHOLDER PROPOSALS FOR PRESENTATION AT NEXT YEAR'S ANNUAL MEETING
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 2002 Annual Meeting, the
Company's Bylaws require, and the Securities and Exchange Commission rules
permit, that the proposal be received at the Company's principal executive
offices not earlier than April 4, 2002 and not later than May 4, 2002. However,
if the date of the Annual Meeting is more than 30 days before or more than 60
days after August 1, 2002 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.
25
EXHIBIT A
AIRGAS, INC.
AUDIT COMMITTEE CHARTER
PURPOSE
The purpose of the Audit Committee is to assist the Board in fulfilling
its oversight responsibilities to the shareholders, potential shareholders, and
investment community relating to the accounting and reporting practices and
financial results, the quality of the systems of internal controls established
by management, the degree of compliance with laws, regulations and the Business
Conduct Policy, and the effectiveness of the internal and external audit process
of Airgas, Inc. and its subsidiaries (the "Company").
In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities and personnel of the Company and the power to retain outside
counsel, auditors or other experts for this purpose.
The independent auditors shall be accountable to the Audit Committee
and the Board of Directors who represent the Company's shareholders.
MEMBERSHIP
Committee members and chair will be elected by the Board of Directors
upon the recommendation of the Governance and Compensation Committee. The
Committee shall consist of at least three and no more that six independent
members of the Board. Audit Committee members will have no relationship to the
Company that may interfere with the exercise of their independence from
management and the Company, and they will be financially literate or will become
financially literate within a reasonable period of time after election to the
Committee. At least one member of the Committee will have accounting or related
financial management expertise.
MEETINGS
o The Audit Committee will meet periodically, but no less
frequently than four times per year, and may call special
meetings and ask members of management or others to attend a
meeting to provide pertinent information as required.
o The Committee will regularly update the Board of Directors
regarding Audit Committee activities. Minutes of all Audit
Committee meetings will be submitted to the Board, or the
Audit Committee shall report to the Board of Directors at each
Board meeting following a meeting of the Audit Committee.
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RESPONSIBILITIES
GENERAL
o The Audit Committee's function is one of oversight,
recognizing that the Company's management is responsible for
preparing the Company's financial statements and that the
independent auditors are responsible for auditing those
financial statements. Additionally, the Committee recognizes
that financial management, including the internal auditors, as
well as the independent auditors, have more time, knowledge
and detailed information on the Company than do Committee
members. Consequently, in carrying out its oversight
responsibilities, the Committee is not providing any expert or
special assurance as to the Company's financial statements or
any professional certification as to the external auditors'
work.
o The Committee shall review the adequacy of this charter
annually.
o The Committee will provide sufficient opportunity for the
internal and independent auditors to meet with the members of
the Committee without members of management present.
INDEPENDENT AUDITORS
o The Committee shall annually review the performance
(effectiveness, objectivity, and independence) of the
independent auditors. The Committee shall request and receive
a written statement from the independent auditors as required
by Independence Standards Board Standard No. 1 delineating all
relationships between the independent auditors and the
Company. Additionally, the Committee shall discuss with the
independent auditors any disclosed relationships that may
affect auditor objectivity or independence.
o The Committee shall recommend to the Board the independent
auditors to be selected to audit the financial statements of
the Company, along with their audit fee.
o The Audit Committee will review any proposed discharge of the
independent auditors and make a recommendation for action by
the full Board.
AUDIT PERFORMANCE MONITORING
o The Committee shall annually review the performance
(effectiveness and objectivity) of the Risk Assurance
function. The Committee will review the proposed audit plans
of the Risk Assurance auditors for the coming year, progress
against those plans, and the coordination of such plans with
the independent auditors.
o The Committee will meet with the independent auditors and
financial management to review the scope of the proposed audit
for the current year and the audit procedures to be utilized.
At the conclusion of the audit, the Committee will review the
audit results, including any management letter comments,
disagreements with management over accounting issues,
reporting issues or significant changes in the audit plans.
o The Committee will monitor the effectiveness and objectivity
of the Risk Assurance function.
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o The Committee shall review the appointment, replacement,
resignation or dismissal of the director of Risk Assurance and
report to the full Board on the matter.
INTERNAL CONTROLS
o The Committee will discuss the adequacy and effectiveness of
the Company's internal controls with management, the
independent auditors and internal auditors.
o Inquiry will be made of management, the internal auditors and
independent auditors about significant risks or exposures in
the business of the Company and the steps management has taken
to minimize such risks.
REPORTING
o As a whole, or through the Committee chair, the Committee
shall review with the independent auditors the Company's
interim financial results to be included in the Company's
quarterly reports to be filed with the Securities and Exchange
Commission.
o The Committee shall review with management and the independent
auditors the audited financial statements and recommend to the
Board of Directors that the audited financial statements be
included in the Company's Annual Report on form 10-K.
o The Committee shall review and consider with the independent
auditors the matters required to be discussed by Statement on
Auditing Standards ("SAS") No. 61, as amended.
o The Committee shall review the fees paid to the independent
auditors and the extent to which the independent auditors may
be retained to perform other services.
o The Committee shall prepare the Report of the Audit Committee
incorporated into the annual proxy statement pursuant to Item
306 of Regulation S-K adopted by the Securities and Exchange
Commission.
OTHER
o The Committee will take such other action, within the scope of
the foregoing, and will make reports and recommendations to
the Board, as the Committee shall deem appropriate from time
to time.
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EXHIBIT B
AIRGAS, INC.
2001 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE AND EFFECTIVE DATE
The Airgas, Inc. 2001 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
2, 2001.
2. ADMINISTRATION
(a) The Plan shall be administered by the Governance 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.
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(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.
(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 1,500,000 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 1,500,000 share limitation.
(b) The aggregate number of shares and class of shares as to
which options may be granted hereunder, the number of shares covered 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;
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(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
(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
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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.
(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
outstanding 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 125, 132 or 402 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.
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(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 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.
(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).
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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
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
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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.
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
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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.
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 Governance and Compensation Committee of
the Board on May 8, 2001 and will be submitted to the shareholders on August 2,
2001.
AIRGAS, INC.
By: /s/ Peter McCausland
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Peter McCausland
Chairman and Chief Executive Officer
Date: June 25, 2001
B-8
AIRGAS, INC.
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
FOR THE ANNUAL MEETING OF STOCKHOLDERS, AUGUST 2, 2001
The undersigned holder of Common Stock of Airgas, Inc. hereby appoints
Peter McCausland, Todd R. Craun and Roger F. Millay, 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 Thursday, August 2,
2001, in 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 EACH OF THE COMPANY'S PROPOSALS 1, 2 AND 3 AND AGAINST THE
STOCKHOLDER PROPOSAL, ALL AS MORE PARTICULARLY DESCRIBED IN THE PROXY STATEMENT,
AND WITH DISCRETIONARY AUTHORITY ON SUCH OTHER MATTERS AS MAY COME BEFORE THE
MEETING. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO APPROVE
EACH OF THE COMPANY'S PROPOSALS 1, 2 AND 3 AND AGAINST THE STOCKHOLDER PROPOSAL.
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
The Board of Directors recommends voting FOR Proposals 1, 2 and 3
1. Election of Directors FOR all nominees WITHHOLD AUTHORITY to vote *EXCEPTIONS
listed below ____ for all nominees listed below ____ ____
Nominees: W. Thacher Brown, Frank B. Foster, III and Peter McCausland
(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
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2. Approve the 2001 Employee Stock Purchase Plan.
FOR ____ AGAINST ____ ABSTAIN ____
3. Ratify the selection of KPMG LLP as independent auditors.
FOR ____ AGAINST ____ ABSTAIN ____
The Board of Directors recommends voting AGAINST Proposal 4
4. Stockholder proposal described on pages 22-25 of the proxy statement.
FOR ____ AGAINST ____ ABSTAIN _____
5. In their discretion, upon such other matters as may properly come before the Meeting.
Change of Address or
Comments mark here ____
Note: Please sign exactly as name(s) appears hereon. Executors, administrators,
trustees, etc. should give full title as such.
Date: 2001
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Signature
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Signature
Votes must be indicated
(x) in Black or Blue ink
PLEASE SIGN AND RETURN PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE.