def14a
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 þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to Section 240.14a-12
AIRGAS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ No fee required
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
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o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously. Identify the previous filing
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TABLE OF CONTENTS
Radnor Court
259 North Radnor-Chester Road
Radnor, Pennsylvania 19087-5283
June 29, 2007
TO OUR STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of Stockholders to be held on Tuesday,
August 7, 2007, at 11:00 a.m., Eastern Daylight Time, at the Four Seasons Hotel, One Logan Square,
Philadelphia, Pennsylvania 19103.
The accompanying Notice of Meeting and Proxy Statement describe the matters to be acted upon
at the Annual Meeting. You are welcome to present your views on these items and other subjects
related to our operations. Your participation in our activities is important, regardless of the
number of shares you hold.
To ensure that your shares are represented at the Annual Meeting, whether or not you are able
to attend, please complete the enclosed proxy and return it to us in the postage-paid envelope.
I hope you will attend the Annual Meeting.
Sincerely,
Peter McCausland
Chairman, President and Chief Executive Officer
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO OUR STOCKHOLDERS:
The Annual Meeting of the Stockholders of Airgas, Inc., a Delaware corporation, will be held
on Tuesday, August 7, 2007, at 11:00 a.m., Eastern Daylight Time, at the Four Seasons Hotel, One
Logan Square, Philadelphia, Pennsylvania 19103, for the following purposes:
1. To elect four Directors of the company.
2. To vote upon a proposal to ratify the selection of KPMG LLP as Airgas independent
registered public accounting firm for the fiscal year ending March 31, 2008.
3. To transact such other business as may properly come before the Annual Meeting or any
adjournments thereof.
Stockholders of record at the close of business on June 21, 2007, 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,
Dean A. Bertolino
Vice President, General Counsel and Secretary
Radnor, Pennsylvania
June 29, 2007
Airgas Annual Report to Stockholders for the fiscal year ended March 31, 2007 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. for use at the Annual Meeting of Stockholders
to be held on August 7, 2007.
Stockholders of record at the close of business on June 21, 2007, will be entitled to vote at
the Annual Meeting. At the close of business on June 21, 2007, 79,192,940 shares of our $0.01 par
value common stock were outstanding and entitled to vote. Stockholders are entitled to one vote
for each share of common stock held. This proxy statement and the enclosed form of proxy are being
mailed to Airgas stockholders on or about June 29, 2007.
Shares represented by a proxy in the accompanying form, unless previously revoked, will be
voted at the Annual Meeting if the proxy is returned to us properly executed and in sufficient time
to permit the necessary examination and tabulation before a vote is taken. You may revoke a proxy
at any time prior to its exercise by giving written notice to our Secretary, by giving a later
dated proxy, or by voting in person at the Annual Meeting. Mere attendance at the Annual Meeting
will not revoke the proxy. Any specific instructions indicated on your proxy will be followed.
Unless record holders indicate otherwise on their proxy cards, their shares will be voted FOR each
of Airgas Proposals 1 and 2, and at the discretion of the proxy holders on such other business as
may properly come before the Annual Meeting. Shares held by brokers for beneficial owners will be
voted as described below. The Board of Directors unanimously recommends that you vote to approve
each of Airgas proposals.
Abstentions are counted as shares present for purposes of determining the presence or absence
of a quorum for the transaction of business at the Annual Meeting, but are not counted as shares
voted in favor of a proposal and therefore have the effect of a vote against Proposal 2. 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 (NYSE). 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. Ratification of the selection of
our independent registered public accounting firm (Proposal 2) requires the approval of a majority
of the outstanding shares of our common stock present and entitled to vote at the Annual Meeting.
Brokers are not precluded from voting on Proposal 2 and, therefore, there will be no broker
non-votes on that proposal.
The cost of proxy solicitation, including the cost of reimbursing banks and brokers for
forwarding proxies and proxy statements to beneficial owners of our common stock, will be paid by
Airgas. Some of our officers and other employees may solicit proxies without extra compensation by
mail and, if found to be necessary, by telephone and personal interviews. Airgas has also retained
Georgeson Shareholder Communications, Inc. to assist in the solicitation of proxies at an
anticipated fee of $7,500 plus out-of-pocket expenses.
GOVERNANCE OF THE COMPANY
Corporate Governance Commitment
Our Board of Directors believes strongly that good corporate governance accompanies and
greatly aids our long-term business success. This success has been the direct result of our key
business strategies and our highest business standards. The Board strongly supports these key
strategies, advising on design and implementation, and seeing that they guide our operations. To
accomplish our strategic goals, we have, consistently over many years, developed and followed a
program of corporate governance. The Board has adopted a set of Corporate Governance Guidelines,
and its Governance and Compensation Committee is responsible for reviewing and reassessing the
Guidelines on an annual basis and making recommendations to the Board concerning changes to the
Guidelines. The Guidelines are published on our website at www.airgas.com and are available in
print to any stockholder who requests them from our Secretary. The Guidelines address the
following matters.
Board Independence and Expertise
Board and Committee Independence
The Board of Directors is composed entirely of independent outside directors, with the
exception of the Chief Executive Officer. The committees of the Board are also entirely composed
of independent outside directors, with the exception of the Executive Committee, of which the Chief
Executive Officer is a member.
The Board of Directors has determined that the following directors, comprising all of the
directors other than the Chief Executive Officer, are independent under the listing standards of
the NYSE: William O. Albertini; W. Thacher Brown; James W. Hovey; Richard C. Ill; Paula A. Sneed;
David M. Stout; Lee M. Thomas; and John C. van Roden, Jr. In order to assist the Board in making
this determination, the Board has adopted Director Independence Standards, which are attached to
this proxy statement as Appendix A. These standards identify material relationships that a
director may have with Airgas that might interfere with the directors ability to exercise
independent judgment. Each of the directors identified above meets the standards set forth in the
Director Independence Standards.
In the course of determining the independence of each outside director, the Board considered
all transactions, relationships and arrangements, as required by our Director Independence
Standards. In particular, with respect to each of the most recent three completed fiscal years,
the Board evaluated for:
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director Albertini, the amount of annual purchases of goods and services from
Airgas by Triumph Group, Inc., the company where he serves as a director, and
determined that the amount of purchases in the 2007 fiscal year was below 2% of Triumph
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director Ill, the amount of annual purchases of goods and services from Airgas
by Triumph Group, Inc., the company where he serves as president and chief executive
officer and a director, and determined that the amount of purchases in the 2007 fiscal
year was below 2% of Triumph Groups consolidated gross revenues; |
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director Sneed, the amount of annual purchases of goods and services from
Airgas by Kraft Foods, Inc., the company where she served until December 2006 as an
executive officer, and determined that the amount of purchases in the 2007 fiscal year
was below 2% of Krafts consolidated gross revenues; |
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director Stout, the amount of annual purchases of goods and services from
Airgas by GlaxoSmithkline, the company where he serves as an executive officer, and
determined that the amount of purchases in the 2007 fiscal year was below 2% of
GlaxoSmithklines consolidated gross revenues; and |
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director Thomas, the amount of annual purchases of goods and services from
Airgas by Rayonier, Inc., the company where he serves as president and chief executive
officer, and determined that the amount of purchases in the 2007 fiscal year was below
2% of Rayoniers consolidated gross revenues. |
Board Membership Criteria
As the composition of the Board of Directors demonstrates, Airgas values experience in
business, educational achievement, moral and ethical character, diversity, skills, accountability
and integrity, financial literacy, high performance standards and industry knowledge. The
Governance and Compensation Committee is responsible for screening, selecting and recommending to
the Board candidates for election as directors.
Audit Committee and Governance and Compensation Committee Independence
The Board of Directors, in its business judgment, has determined that each of the members of
the Audit Committee meets the independence requirements of the Securities and Exchange Commission
(SEC) and the NYSE. The Audit Committee regularly holds separate executive sessions with (1)
Airgas independent registered public accounting firm, without management present, (2) our Chief
Financial Officer and (3) our chief internal auditor. The Board has also determined that each of
the members of the Governance and Compensation Committee satisfies the independence requirements of
the NYSE.
Director Nomination Process
The Governance and Compensation Committee reviews possible candidates for the Board of
Directors and recommends the nominees for director to the Board of Directors for approval. The
Board of Directors has adopted criteria for the selection of nominees to the Board, which are a
part of our Corporate Governance Guidelines. These criteria describe specific traits, abilities
and experience that the Governance and Compensation Committee and the Board look for in selecting
candidates for election to the Board. The Governance and Compensation Committee considers
suggestions from many sources, including stockholders, regarding possible candidates for director.
These suggestions, together with a complete description of the nominees qualifications, experience
and background, and a statement signed by the nominee in which he or she consents to such
nomination and which includes the name of the stockholder making the suggestion and evidence of
that persons ownership of Airgas stock, including the number of shares held and the length of time
of ownership, should be submitted to the Secretary of Airgas at 259 North Radnor-Chester Road,
Radnor, Pennsylvania 19087-5283 not less than 120 days prior to the anniversary date of the most
recent annual meeting of stockholders, or if the meeting has been changed by more than 30 days from
the date of the previous years meeting, not less than 60 days before the date of the meeting.
Possible candidates who have been suggested by stockholders are evaluated by the Governance and
Compensation Committee in the same manner as are other possible candidates.
In addition to making suggestions to the Governance and Compensation Committee for the
selection of nominees as described above, under our bylaws, stockholders are also entitled to
nominate persons for election as directors 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
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preceding years annual meeting. The notice must set forth information about the proposed
nominee and the consent of the nominee, among other things.
Charters and Code of Ethics and Business Conduct
In addition to the Corporate Governance Guidelines, we maintain the following to support our
corporate governance policies:
Charters for Board Committees
The Governance and Compensation Committee and the Audit Committee use charters adopted by the
Board that set forth the authority and responsibilities of the committees under the corporate
governance rules of the SEC and the NYSE.
Code of Ethics and Business Conduct
Airgas Code of Ethics and Business Conduct ensures that our business is conducted in a
consistently legal and ethical manner. Our General Counsel oversees compliance with the Code of
Ethics and Business Conduct. Airgas Code of Ethics and Business Conduct is available on our
website at www.airgas.com and is available in print to any stockholder who requests it from our
Secretary. All of our employees, including our Chief Executive Officer, Chief Financial Officer
and Controller, are required to comply with the Code of Ethics and Business Conduct. The Code of
Ethics and Business Conduct covers all areas of professional conduct, including compliance with
laws, conflicts of interest, confidentiality, corporate opportunities, use of company assets and
reporting illegal or unethical behavior. The Code of Ethics and Business Conduct describes our
procedures to receive, retain and address complaints regarding accounting, internal controls and
auditing matters, and other illegal or unethical behavior.
Directors are Stockholders
Meaningful Director Stock Ownership
Board members are expected to develop a meaningful ownership position in Airgas stock. For
more information on director stock ownership requirements, please see Compensation of Directors
beginning on page 11 of this proxy statement. Board members receive stock options each year as a
significant component of their overall compensation.
Direct Access to Management and Independent Advisors
Airgas provides directors with complete access to management. Key senior managers regularly
attend Board meetings. Topics are presented to the Board by the members of management who are most
knowledgeable about the issue at hand, irrespective of seniority, which allows dialogue to develop
between directors and management. The Board and each of the Audit Committee and the Governance and
Compensation Committee have the right to consult with and retain independent legal and other
advisors at Airgas expense.
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Ensuring Management Accountability
Performance-Based Compensation
We have linked the pay of associates in management and executive level positions to company
performance. As described in greater detail under Compensation Discussion and Analysis included
in this proxy statement, the Governance and Compensation Committee adheres to this
pay-for-performance philosophy, and stock-based incentives constitute a significant component of
senior managements overall compensation.
CEO Evaluation Process
The non-management members of the Board conduct an annual evaluation of the CEOs performance
and compensation. The CEO is evaluated against goals set each year, including both objective
measures and subjective criteria consistent with, and in furtherance of, Airgas strategic goals
and initiatives. As part of the overall evaluation process, the Board meets informally with the
CEO to give and seek feedback on a regular basis. The non-management members of the Board meet in
executive sessions to review the CEOs performance.
Functioning of the Board
Directorship Limits
To devote sufficient time to properly discharge their duties, no director may serve on more
than three other boards of directors of public companies. Recognizing the value of continuity of
directors who have experience with Airgas, there are no limits on the number of terms for which a
director may hold office. Directors are required to resign from the Board by the date of the
annual meeting of stockholders in the year in which the director has his or her seventieth
birthday.
Attendance at Board and Stockholder Meetings
Directors are expected to attend all meetings of the Board and committees on which they serve
and annual stockholder meetings. Each director attended at least seventy-five percent of the
meetings of the Board and the committees on which he or she served during the 2007 fiscal year.
All of the then current directors attended the last Annual Meeting.
Executive Sessions and Stockholder Communications with the Board
The Board holds two regularly scheduled executive sessions each year where non-management
directors meet without management participation. In the event that one or more of the
non-management directors were not to qualify as independent directors, the Board will also hold at
least one meeting each year of the independent directors. Interested persons may communicate
directly and confidentially with the non-management directors by writing to the Acting Chairperson,
Non-Management Directors, Airgas, Inc., 259 North Radnor-Chester Road, Radnor, Pennsylvania
19087-5283. Each year, the Board selects the Acting Chairperson of the non-management directors
who will preside at the executive sessions of the Board and with whom stockholders wishing to
communicate with the non-management directors may communicate.
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Assessing the Boards Performance
Board Evaluation Process
The Board of Directors conducts an annual evaluation of itself and its committees. The
directors first evaluate overall Board performance against certain criteria that the Board has
determined are important to its success. These include financial oversight, succession planning,
compensation, corporate governance, strategic planning and Board structure and role. The Board
then reviews the results of the evaluation and discusses what, if any, action should be taken to
improve its performance.
ELECTION OF DIRECTORS
(Proposal 1)
Our bylaws provide that our Board of Directors designates the number of directors constituting
the Board of Directors, and that there should be at least 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 elected each year, for terms extending to
the annual meeting of stockholders held in the third year following the year of their election.
The names and biographical summaries of the four persons who have been nominated to stand for
election at the 2007 Annual Meeting and the remaining directors whose terms are continuing until
the 2008 or 2009 Annual Meetings appear below. W. Thacher Brown, Richard C. Ill and Peter
McCausland have been nominated to serve as directors for terms expiring at the 2010 Annual Meeting
and John C. van Roden, Jr., who was appointed by the Board in October 2006 to replace Mr. Yohe, who
retired from the Board after reaching the Boards mandatory retirement age, has been nominated to
serve as director for a term expiring at the 2008 Annual Meeting. Of the continuing directors,
William O. Albertini and Lee M. Thomas were elected by the stockholders at the 2005 Annual Meeting.
Their terms continue until the 2008 Annual Meeting. James W. Hovey, Paula A. Sneed and David M.
Stout were elected by the stockholders at the 2006 Annual Meeting and their terms continue until
the 2009 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 recommended by the Governance and Compensation Committee to the Board of
Directors and selected by the Board.
The Board of Directors recommends that you vote FOR the election of Mr. Brown, Mr. Ill, Mr.
McCausland and Mr. van Roden.
Set forth below is certain information regarding the four nominees for election at the Annual
Meeting and the remaining five directors whose terms are continuing.
Nominees for Election for Terms Expiring at the 2010 Annual Meeting:
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W. Thacher Brown
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Mr. Brown, age 59, was the Chairman,
President and a director of 1838
Investment Advisors, LLC, an investment
management company, from July 1988
until May 2004, President of MBIA Asset
Management, LLC from 1998 until
September 2004 and a director of MBIA
Insurance Company from 1999 until
September 2004. He is a director of
the Rivus Bond Fund, The Harleysville
Group, Inc. and The Harleysville Mutual
Insurance Company, and was a Senior
Vice President and a director of Drexel
Burnham Lambert Incorporated for more
than four years prior to |
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1988. Mr.
Brown also serves as a member of the
Board of Trustees of Eisenhower
Fellowships, Inc., as a director of the
Fox Chase Cancer Center and as a
director of the Pennsylvania
Horticultural Society. Mr. Brown has
been an Airgas director since 1989. |
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Peter McCausland
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Mr. McCausland, age 57, has been an
Airgas director since June 1986, the
Chairman of the Board and Chief
Executive Officer of Airgas since May
1987, and President of Airgas from June
1986 to August 1988, from April 1993 to
November 1995, from April 1997 to
January 1999 and from January 2005 to
the present. Mr. McCausland serves as
a director of NiSource Inc., The
Valspar Corporation, the Fox Chase
Cancer Center, the Independence Seaport
Museum and the International Oxygen
Manufacturers Association, Inc. and as
a member of the Board of Trustees of
Eisenhower Fellowships, Inc. |
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Richard C. Ill
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Richard C. Ill, age 64, has been
President and Chief Executive Officer
and a director of Triumph Group, Inc.,
a company that designs, manufactures,
repairs and overhauls aircraft
components and assemblies, since 1993.
Mr. Ill serves as a director of P.H.
Glatfelter Company and is a member of
the advisory board of Outward Bound,
USA. Mr. Ill has served as an Airgas
director since 2004. |
Nominee for Election for Term Expiring at the 2008 Annual Meeting:
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John C. van Roden, Jr.
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Mr. van Roden, age 58, served as
Executive Vice President and Chief
Financial Officer of P.H. Glatfelter
Company, a diversified global
manufacturer of specialty papers and
engineered products, from 2003 to 2006,
and currently serves as a consultant to
the company on strategic issues. Prior
to that, he served as Senior Vice
President and Chief Financial Officer
for Conectiv from 1998 to 2003, and as
the Senior Vice President and Chief
Financial Officer of Lukens Inc. from
1982 to 1998. Mr. van Roden also
serves on the boards of H.B. Fuller
Company, Semco Energy, Inc., and Penn
Virginia GP Holdings, L.P. Mr. van
Roden has served as a director of the
Company since October 2006. |
Directors Serving for Terms Expiring at the 2008 Annual Meeting:
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William O. Albertini
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Mr. Albertini, age 64, served as
Executive Vice President and Chief
Financial Officer of Bell Atlantic
Global Wireless, Inc. from September
1997 until his retirement in April
1999. From January 1991 until August
1997, Mr. Albertini served as Executive
Vice President and Chief Financial
Officer of Bell Atlantic Corp. and,
from 1995 to 1997, he served as a
member of its Board of Directors. In
addition, Mr. Albertini is a director
of Triumph Group, Inc., Charming
Shoppes, Inc. and BlackRock, Inc. He
also serves as a trustee of the Weller
Foundation. Mr. Albertini has served
as an Airgas director since 2003. |
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Lee M. Thomas
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Mr. Thomas, age 63, has been President
and Chief Executive Officer of
Rayonier, Inc. since March 2007.
Previously, he served as President of
Georgia-Pacific Corporation, beginning
in September 2002, and as |
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President and
Chief Operating Officer, beginning in
March 2003, until his retirement in
December 2005. Mr. Thomas held these
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 is a director of
Rayonier, Inc. and Regal Entertainment
Group and also serves as a member of
the board of the Federal Reserve Bank
of Atlanta. Mr. Thomas has served as
an Airgas director since 1998. |
Directors Serving for Terms Expiring at the 2009 Annual Meeting:
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James W. Hovey
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Mr. Hovey, age 61, 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. Mr. Hovey also serves as a member of the
Board of Trustees of Eisenhower Fellowships, Inc. and a
director of the Philadelphia Orchestra. Mr. Hovey has been
an Airgas director since 1999. |
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Paula A. Sneed
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Ms. Sneed, age 59, served as Executive Vice President of
Global Marketing Resources and Initiatives for Kraft Foods,
Inc. from June 2005 until her retirement in December 2006.
She was responsible for leading Krafts approximately
700-person Global Marketing Services organization that
ensures world-class marketing, including advertising,
media, promotions, marketing research, packaging, digital
and interactive marketing, CRM and other marketing
disciplines for more than 100 major food brands. Ms. Sneed
joined General Foods Corporation (which later merged with
Kraft Foods, Inc.) in 1977, and served in various executive
positions since 1986. She also serves as a trustee of
Simmons College, Teach for America and the Chicago
Childrens Museum. Ms. Sneed is also a member of the board
of directors of The Charles Schwab Corporation. Ms. Sneed
has been an Airgas director since 1999. |
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David M. Stout
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Mr. Stout, age 53, has been President, Pharmaceuticals,
GlaxoSmithKline, with responsibility for global
pharmaceutical operations, since January 2003. Prior to
that, he served as President, U.S. Pharmaceuticals from
1999 to January 2003. 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 an Airgas director since
1999. |
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Board of Directors and Committees
The Board of Directors held eight meetings during the fiscal year ended March 31, 2007. Each
director attended at least 75% of the Board and committee meetings that he or she was scheduled to
attend during the 2007 fiscal year.
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 fiscal year ended
March 31, 2007, the Executive Committee held one meeting, the Governance and Compensation Committee
held four meetings, the Audit Committee held 11 meetings and the Finance Committee held four
meetings.
Executive Committee
The members of the Executive Committee are W. Thacher Brown, Peter McCausland and David M.
Stout. As authorized by Delaware law and our bylaws, the Executive Committee may exercise all of
the powers of our 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 that has annual sales in excess of 20% of the annual sales of Airgas
or take any other action that may only be taken by the Board of Directors. Historically, and in
accordance with the policy of the Executive Committee, the Executive Committee has met infrequently
and only in extraordinary circumstances.
Governance and Compensation Committee
The members of the Governance and Compensation Committee are Richard C. Ill, David M. Stout
and Lee M. Thomas. Each member of the Committee is independent from Airgas and its management.
The Committees primary responsibilities under the terms of its charter include:
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establishing qualifications for Board membership; |
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interviewing and recommending candidates to fill new positions on the Board; |
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reviewing candidates recommended by stockholders for positions on the Board; |
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considering requests for waivers from the Code of Ethics and Business Conduct
for Board members and senior executives; |
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recommending assignment of Board members to committees; |
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reviewing policies for Board compensation; |
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reviewing and recommending changes to Board policies and procedures as they
affect the organization and activities of the Board and its committees; |
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making reports for consideration by the Board; |
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considering matters of corporate governance, and reviewing, annually, the
Corporate Governance Guidelines; |
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reviewing succession plans for senior executive officers; |
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conducting an annual evaluation of its performance and its charter; |
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reviewing and approving corporate goals and objectives and evaluating,
annually, the performance of the CEO and other officers in light of such goals and
objectives; |
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determining the compensation of the CEO based upon the evaluation of the
performance of the CEO; |
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approving senior executive compensation; |
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reviewing and making recommendations to the Board with respect to incentive
compensation plans and equity-based compensation plans; |
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administering, and approving and ratifying awards to senior executives under,
our stock option and incentive compensation plans; |
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reviewing and discussing the Compensation Discussion and Analysis section, also
referred to in this proxy statement as CD&A, of the annual proxy statement and, based
on such review and discussion, recommending that the CD&A be included in the proxy
statement; and |
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preparing the Compensation Committee Report for the annual proxy statement. |
The Committee may, in its sole discretion, engage director search firms or compensation
consultants. The Committee also may consult with outside advisors to assist it in carrying out its
duties.
The Report of the Governance and Compensation Committee for the 2007 fiscal year appears on
page 26 of this proxy statement. A copy of the Governance and Compensation Committee Charter can
be found on our website at www.airgas.com and is available in print to any stockholder who requests
it from our Secretary.
Audit Committee
The members of the Audit Committee are William O. Albertini, Paula A. Sneed and John C. van
Roden, Jr. Each member of the Committee is independent from Airgas and its management. In
addition, the Board of Directors has determined that Messrs. Albertini and van Roden are each an
audit committee financial expert. The Committee acts pursuant to a written charter adopted by
the Board of Directors. 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 Committees responsibilities under the
terms of its charter include:
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meeting at least quarterly with management, our chief internal auditor and our
independent registered public accounting firm in separate executive sessions; |
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assessing the integrity of Airgas financial reporting process and system of
internal controls through discussions with management, the internal auditors and the
independent registered public accounting firm; |
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selecting, appointing and recommending for ratification by our stockholders, an
accounting firm to serve as Airgas independent registered public accounting firm; |
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setting the fees to be paid to the independent registered public accounting
firm and pre-approving all audit services to be provided by the independent registered
public accounting firm; |
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establishing policies and procedures for the engagement of the independent
registered public accounting firm to provide permitted non-audit services and
pre-approve the performance of such services; |
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assessing the performance (effectiveness, objectivity and independence) of the
independent registered public accounting firm; |
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reviewing an annual report from the independent registered public accounting
firm describing its internal quality control procedures and any material issues raised
by the most recent internal or peer review of the independent registered public
accounting firm; |
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reviewing with management and the independent registered public accounting firm
the adequacy and effectiveness of the internal audit function; |
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providing an avenue of communication among the independent registered public
accounting firm, internal auditors, management and the Board of Directors; |
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reviewing with management and the independent registered public accounting firm
Airgas annual and quarterly financial statements, including the disclosures under
Managements Discussion and Analysis of Financial Condition and Results of
Operations; |
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reviewing our earnings releases; |
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discussing with management and the independent registered public accounting
firm major issues regarding accounting principles and financial statement
presentations; |
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establishing procedures for the confidential and anonymous receipt, retention
and treatment of complaints regarding Airgas accounting, internal controls and
auditing matters; |
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retaining independent counsel and other advisors as necessary to fulfill its responsibilities; |
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conducting an annual evaluation of its performance and its charter; |
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recommending to the Board of Directors that the audited financial statements be
included in Airgas Annual Report to Stockholders; and |
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preparing the Report of the Audit Committee for the annual proxy statement. |
The Report of the Audit Committee for the 2007 fiscal year appears on page 41 of this proxy
statement. A copy of the Audit Committee Charter can be found on our website at www.airgas.com and
is available in print to any stockholder who requests it from our Secretary.
Finance Committee
The members of the Finance Committee are W. Thacher Brown, James W. Hovey and John C. van
Roden, Jr. The purpose of the Committee is to review, advise and make recommendations on Airgas
financial affairs, policies and programs. The Committee meets periodically, but not less than
three times per year, to review Airgas financial issues, including Airgas:
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capital structure; |
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policies regarding dividends, stock splits and stock repurchases; |
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current and projected capital requirements and the issuance of debt and equity securities; |
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credit agreements and major changes to them and borrowings and financings of
every nature; |
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insurance programs and practices for managing insurable risks; |
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programs and practices for managing interest rate, foreign exchange and
commodities price risk; |
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benefit plan trust investment policies, administration and performance; |
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standing with credit rating agencies and the decisions and contingencies that
might affect its credit rating; and |
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relationships with, and approach to managing its relationships with, public and
private lenders. |
COMPENSATION OF DIRECTORS
Only directors who are not employees of Airgas receive compensation for their services as
directors. Our compensation package for non-employee directors for the 2007 fiscal year was
composed of cash, which consisted of an annual retainer of $25,000 (increased on July 1, 2006 from
the prior fiscal years annual retainer of $18,000), plus a fee of $1,500 for each Board or
committee meeting attended during the 2007 fiscal year, and stock option grants under the Airgas,
Inc. 1997 Directors Stock Option Plan, also referred to in this proxy statement as the 1997
Directors Plan. The cash component of the directors compensation is set by the Governance and
Compensation Committee. We also reimburse our non-employee directors for their out-of-pocket
expenses incurred in connection with attendance at Board, committee and stockholder meetings, and
other company business. Non-employee directors are eligible to participate in the Airgas, Inc.
2006 Equity Incentive Plan, also referred to in this proxy statement as the 2006 Equity Plan, and
the Airgas, Inc. Deferred Compensation Plan II, also referred to in this proxy statement as the
Deferred Compensation Plan II, and some of our directors have participated in the Airgas, Inc.
Deferred Compensation Plan I, referred to in the proxy statement as the Deferred Compensation Plan
I, and more fully described under the heading Retirement and Other Plans and Programs found on
page 22 of this proxy statement.
11
In order to closely align the interests of directors with those of our 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 closing price of our common stock on the date of grant and each option
is exercisable immediately. Options granted to non-employee directors during the 2007 fiscal year
expire after eight years and options granted to non-employee directors in prior fiscal years expire
after 10 years. On August 9, 2006, each Board member serving on the Board as of that date was
granted options to acquire 6,500 shares of our common stock with an exercise price of $36.18 per
share. Concurrent with becoming a director on October 3, 2006, Mr. van Roden received a stock
option grant to acquire 5,540 shares of our common stock at an exercise price of $36.05 per share.
The Chairmen of the Governance and Compensation Committee and the Finance Committee also
receive an additional $3,000 annual retainer, and the Chairman of the Audit Committee receives an
additional $5,000 annual retainer.
Each year, non-employee directors may elect to defer, under the Deferred Compensation Plan II,
all or a portion of his or her directors fees. The amount deferred is credited to an account that
tracks valuation funds selected by the participant from a family of funds under the plan, one of
which tracks Airgas common stock. The balance is paid at the election of the director within the
alternatives offered under the plan, and the unpaid account balance accrues interest based on
earnings in the selected valuation funds. In addition, some of our current directors maintain
balances in the Deferred Compensation Plan I.
We believe that directors should be stockholders and should have a financial stake in the
company. Directors are expected to maintain, within five years of joining our Board, at least
25,000 shares of Airgas common stock or shares having a value equal to five times the directors
annual Board retainers. Compliance with these guidelines is expected by January 31, 2012 for all
current directors, and all but one director satisfies these ownership requirements at the present
time.
12
Director Compensation Table
The following table shows the compensation earned by each non-employee director in the 2007
fiscal year.
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Fees Earned or |
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Option Awards |
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All Other |
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Director |
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Paid in Cash ($)(1) |
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($)(2) |
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Compensation ($) |
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Total ($) |
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William O. Albertini |
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56,750 |
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89,318 |
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-0- |
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146,068 |
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W. Thacher Brown |
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54,750 |
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89,318 |
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-0- |
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144,068 |
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James W. Hovey |
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41,250 |
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89,318 |
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-0- |
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130,568 |
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Richard C. Ill |
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41,250 |
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89,318 |
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-0- |
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130,568 |
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Paula A. Sneed |
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51,750 |
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89,318 |
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-0- |
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141,068 |
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David M. Stout |
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39,750 |
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89,318 |
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-0- |
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129,068 |
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Lee M. Thomas |
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45,500 |
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89,318 |
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-0- |
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134,818 |
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John C. van Roden, Jr.
(3) |
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21,364 |
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75,843 |
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-0- |
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97,207 |
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Robert L. Yohe(4) |
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26,204 |
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89,318 |
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-0- |
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115,522 |
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(1) |
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Consists of the aggregate amount of all fees earned or paid in cash for services as a
director, consisting of annual board and committee chair retainers and board and committee
meeting fees earned by non-employee directors, as described above. During the 2007 fiscal
year, Mr. Albertini and Ms. Sneed chose to defer portions of their cash compensation as
directors under the Deferred Compensation Plan II. |
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(2) |
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The amounts shown reflect the dollar amount of options recognized for financial statement
reporting purposes for the fiscal year ended March 31, 2007 for the stock options granted to
the non-employee directors. The compensation expense reflected in the table is the same as
the grant date fair value pursuant to SFAS 123R. The fair value was estimated using the
Black-Scholes option pricing model in accordance with SFAS 123R. The material assumptions
incorporated into the model include the exercise price of the option, the estimated term of
the option until exercise (which is 5.4 years for each of the directors in the table above),
an interest rate factor (5.0%) based on the U.S. Treasury rate over the estimated term of the
option until exercise, a volatility factor (36.2%) based on the standard deviation of the
price of our common stock and a dividend yield (0.8%) based on the annualized dividend rate
per share of our common stock. The actual value of the options, if any, will depend on the
extent that the market value of our common stock at exercise is greater than the exercise
price of the option. Each non-employee director (other than Mr. van Roden) was granted an
option under the 1997 Directors Plan to purchase 6,500 shares on August 9, 2006 with an
exercise price of $36.18 per share. Mr. van Roden was granted an option to purchase 5,540
shares on October 3, 2006, the date on which he became a director, at an exercise price of
$36.05 per share. As of March 31, 2007, the following non-employee directors held options to
purchase the following number of shares: Mr. Albertini, 28,500 shares; Mr. Brown, 71,250
shares; Mr. Hovey, 65,250 shares; Mr. Ill, 21,000 shares; Ms. Sneed, 65,250 shares; Mr.
Stout, 65,250 shares; Mr. Thomas, 49,875 shares; Mr. van Roden, 5,540 shares; and Mr. Yohe,
59,000 shares. |
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Mr. van Roden was appointed as a director on October 3, 2006 to replace Mr. Yohe, who
retired from the Board on that date. |
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Mr. Yohe retired as a director on October 3, 2006. |
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COMPENSATION DISCUSSION AND ANALYSIS
Overview of Compensation Program
The Governance and Compensation Committee of our Board of Directors has responsibility for
establishing and implementing our compensation philosophy, and for continually monitoring our
adherence to that philosophy. The Committee reviews and approves compensation levels for all
Airgas executive officers as well as all of our compensation, retirement, perquisite and insured
benefit programs, including programs applicable to our senior management team, which includes our
named executive officers. With respect to Peter McCausland, our Chairman, President and Chief
Executive Officer, the Committee annually evaluates his accomplishments and performance against
established objectives and sets his compensation level based upon such evaluation. The Committee,
as it did in the 2007 fiscal year, may choose to award additional annual cash incentive
compensation to our CEO based upon the Committees subjective evaluation of his performance. These
functions are set forth in the Committees Charter, which appears on our website (www.airgas.com)
and is reviewed annually by the Committee. The Committee seeks to ensure that the total
compensation paid to our executives is fair, reasonable and competitive and consistent with our
compensation philosophy. Generally, the types of compensation and benefits provided to our named
executive officers are similar to those provided to other Airgas executives.
The following individuals, included in the Summary Compensation Table for the 2007 Fiscal
Year found on page 27 of this proxy statement, are referred to as our named executive officers
throughout this proxy statement:
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Peter McCausland, Chairman, President and Chief Executive Officer; |
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Robert M. McLaughlin, Senior Vice President and Chief Financial Officer; |
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Michael L. Molinini, Executive Vice President and Chief Operating Officer; |
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B. Shaun Powers, President, Eastern Division; |
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Ted R. Schulte, President, Gas Operations Division; and |
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Roger F. Millay, Former Senior Vice President and Chief Financial Officer. |
Compensation Philosophy and Objectives
Our goal is to maintain compensation and benefit plans that will allow us to attract and
retain highly qualified employees while motivating and rewarding performance that will lead to
sustained increases in the value of our stockholders investment in Airgas. We also seek to align
the interests of our named executive officers with those of our investors by evaluating performance
primarily on the basis of key financial measures. Given these goals, our compensation philosophy
has been, and continues to be, to emphasize pay for performance programs designed to reward
superior financial performance and long-term enhancement of stockholder value, while maintaining
competitive base pay, retirement, healthcare and other fixed compensation programs. We set base
salary, annual cash incentive opportunities and long-term equity incentive opportunities to reflect
an individual executives level of responsibility and performance against established objectives,
and we rely on our judgment and discretion after reviewing Airgas performance and evaluating the
executives performance.
Role of the Committee and Executive Officers in Compensation Decisions
The Committee has primary responsibility for assisting the Board in evaluating potential
candidates for executive positions, including the CEO position, and for overseeing the development
of succession plans. The Committee oversees the design, development and implementation of the
compensation program for the CEO and the other executives, including the named executive officers.
The Committee evaluates the performance of the CEO and determines the CEOs compensation in light
of
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the goals and objectives of the compensation program. Mr. McCausland, Mr. Molinini and Mr.
McLaughlin, as appropriate, assess the performance of our other executives, including the other
named executive officers, and the Committee approves their compensation based on recommendations
from Mr. McCausland. The Committee has not sought advice or assistance from compensation
consultants.
The Committees work is accomplished through a series of meetings, following a regular
calendar schedule, to ensure that all major elements of compensation are addressed and compensation
and benefit programs are properly designed, implemented and monitored. Occasionally, special
meetings are called to address matters that require attention outside of the regular compensation
cycle. Working with the Committee Chair, Lee M. Thomas, Dean A. Bertolino, our Vice President,
General Counsel and Corporate Secretary, and Dwight T. Wilson, our Senior Vice President, Human
Resources, prepare an agenda and supporting materials for each meeting, which are provided to
Committee members between two to four days in advance of the meeting. Messrs. Wilson and
Bertolino, along with Mr. McCausland, generally attend Committee meetings by invitation, but are
excused for executive sessions. As requested, Messrs. McCausland, Bertolino and Wilson offer their
opinions and recommendations to the Committee. The Committee may invite other members of
management to attend meetings (as necessary) to discuss items within their specific areas of
responsibility, although they do not play a role in their own compensation determination, other
than discussing individual performance objectives with the CEO.
Setting Executive Compensation
Elements of Executive Compensation
Consistent with our compensation philosophy, the Committee has structured our annual and
long-term executive compensation programs to motivate executives to achieve the business goals we
set, and these programs reward the executives for achieving and exceeding those goals. The key
elements of our executive compensation program are:
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base salary; |
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annual cash incentive awards; and |
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long-term incentive compensation. |
These key elements are addressed separately below. In determining each component of
compensation, the Committee takes into account all other elements of an executives compensation
package.
Our compensation programs for executives, and in particular for our named executive officers,
are designed to reflect their success, both individually and as a management team, in attaining key
objectives. For example, 85% to 90% of our annual cash incentive payments are calculated based on
Airgas performance with regard to certain key financial metrics versus budgeted levels and 10% to
15% of those payments are calculated based on an executives individual performance and
contributions. There are two levels of approval for each discretionary award and the Committee has
final approval for awards to executives who report directly to Mr. McCausland. Our equity-based
program is intended to reward the management teams success in delivering value to our
stockholders. Specifically, stock option grants reward our executives for their contributions that
result in increases in our stock price over time. In each case, we strive to ensure that our
compensation program provides rewards based on meaningful measures of performance, and the
Committee makes adjustments to the incentive programs each year in light of past experience,
changes in strategic focus, regulatory requirements and other relevant factors.
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Benchmarking Compensation against Our Peers
Periodically, Mr. Wilson provides the Committee with data comparing our elements of
compensation and levels of executive compensation against relevant companies in the chemicals and
wholesale distribution industries and comparably-sized companies in other industries, including a
comparison of compensation elements of individual executives where the positions are sufficiently
similar to make comparison meaningful. Currently, the peer group for compensation comparisons is
Albemarle Corporation, Applied Industrial Technologies, Inc., Cabot Corporation, Chemtura
Corporation, Cytec Industries, Inc., Ecolab Inc., Ferro Corporation, FMC Corporation, Georgia Gulf
Corporation, W.W. Grainger, Inc., International Flavors and Fragrances, Inc., Lubrizol Corporation,
Nalco Holding Company, Olin Corporation, Patterson Companies, Inc., PolyOne Corporation, Rockwood
Holdings, Inc., RPM International, Inc., A. Schulman, Inc., Scotts Miracle-Gro Company,
Sigma-Aldrich Corporation, Valspar Corporation, Wesco International, Inc. and Westlake Chemical
Corporation. The peer group includes companies in the S&P 400 MidCap index, including companies in
the S&P MidCap 400 Chemicals industry group, plus other companies that are similar in size to
Airgas. The peer group includes companies outside of our industry because the Committee believes
that Airgas is similar in certain respects to such companies.
The most recent benchmarking of executive compensation levels was performed by Mr. Wilson
during the 2006 fiscal year. The benchmarking compared compensation of our named executive officers
to the 25th percentile and 50th percentile base salary, total cash
compensation and total direct compensation of similar positions in the peer group companies.
Direct compensation adds the Black-Scholes value of stock option grants and the reported value of
stock grants to the total cash compensation. We believe that periodic reviews of outside
compensation practices are appropriate to determine if our compensation levels and mix of
components might require rebalancing.
Given the nature of our businesses, we compete with companies across the two broad industry
groups mentioned above for top executive-level talent. As such, the Committee generally expects,
over time, to set total compensation levels for our executives approximating the median level of
compensation paid to similarly situated executives of chemicals and wholesale distribution
companies of comparable size to Airgas. Variations from this general philosophy may occur based
upon the expertise and experience level of a given executive, as well as individual, company and
market factors.
During the 2007 fiscal year, the Committee approved an increase to Mr. Molininis annual cash
incentive target percentage to 60% of base salary from 50% of base salary during the prior fiscal
year based on comparison to the second-ranked executive in the peer group companies. The Committee
approved an increase in Mr. McLaughlins annual base salary to $300,000, taking into consideration
the comparison to the chief financial officers in the peer group companies.
Components of Executive Compensation for the 2007 Fiscal Year
Given our philosophy of pay for performance, a significant percentage of total compensation
is allocated to performance-based incentives. As a general matter, we recognize that, as employees
progress to higher levels within our organization, they assume more responsibility for our overall
performance and returns to stockholders. Consequently, we seek to link greater portions of
executive compensation to criteria and metrics that are tied to the creation of stockholder value.
Looking at the named executive officers as a group, 65% of their target total compensation for the
2007 fiscal year was allocated to at risk components consisting of annual cash incentives and
stock options, with the remaining 35% allocated to base salary. Our policy for allocating value
between long-term and currently-paid compensation is to ensure adequate base compensation to
attract and retain personnel, while providing
16
strong incentives for our executives to maintain an ownership mentality, focusing them on
maximizing long-term value creation for them and our stockholders.
Combined target cash and non-cash incentive compensation for named executive officers for the
2007 fiscal year ranged from 51% to 74% of total target compensation. Excluding Mr. Millay, actual
cash incentive compensation ranged from 26% to 38% and non-cash incentive compensation ranged from
24% to 40% of total compensation for the named executive officers for the 2007 fiscal year. We
believe that these mixes are both competitive within the marketplace and consistent with our stated
compensation philosophy.
Base Salary
Base salary is the component of compensation that is fixed and intended to compensate our
executives, based on their experience, expertise, job responsibilities and the performance of their
responsibilities during the fiscal year. While base salaries must be competitive in order to
recruit and retain qualified executives, we do not generally seek to pay base salaries at levels
exceeding the market median among comparably-sized companies in all industries. Our review of base
salaries paid to our executives peers indicate that the base salaries of our named executive
officers are at or below the median for comparably-sized general industry companies, chemical
industry companies and wholesale distribution companies. Consistent with our compensation
philosophy that we offer compensation based on superior performance, we strive to use incentive
compensation, rather than base salary, to provide executives with an above-market compensation
opportunity if we exceed budgeted financial performance metrics and drive increases in stockholder
value.
Each year, our Governance and Compensation Committee reviews the base salary of Mr. McCausland
and all other executive officers. In making adjustments to base salary levels, the Committee
considers:
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the executives level of responsibilities; |
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the executives experience and breadth of knowledge; |
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the executives individual performance as assessed through annual performance reviews; |
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the executives role in management continuity and development plans; |
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internal equity factors, meaning relative pay differences for different job levels; and |
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on a periodic basis, benchmark data on the compensation practices of peer
companies, whether from available salary survey data or as reported in public company
proxies. |
The normal interval between salary reviews for most executive officers and most other
employees is 12 months, usually completed in the quarter following the fiscal-year end. Mr.
McCauslands salary increases have been less frequent, as the Committee prefers to move his salary
in larger increments. All named executive officers received a merit pay increase for the 2007
fiscal year, averaging 6.25%. These increases were approved by the Committee in May 2006. In
October 2006, the Committee approved a promotional increase for Mr. McLaughlin in recognition of
the sizeable expansion of his responsibilities as CFO.
Mr. McCauslands base salary was adjusted to $750,000 in June 2006, recognizing the overall
performance of Airgas during the 2006 fiscal year and the enlargement of his responsibilities with
the growth of Airgas.
17
Annual Cash Incentive Awards
Annual cash incentive awards for our executive officers are intended to promote the
achievement of our corporate and division financial performance goals, as well as individual
performance goals. Each of our named executive officers participates in our 2004 Executive Bonus
Plan, referred to as our Executive Bonus Plan. In addition, depending upon the named executive
officers position and responsibilities with Airgas, each named executive officer participates in
one of the following Airgas annual cash incentive plans for which executive officers and other
management employees may be eligible, which plans, together with our Executive Bonus Plan, are
referred to in this proxy statement as our Management Bonus Plans:
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the Fiscal Year 2007 Management Bonus Plan for Corporate Employees, in which
Messrs. McCausland, McLaughlin, Millay and Molinini participated during the 2007 fiscal
year, is available to all management-level employees who have corporate-wide
responsibility; |
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the Fiscal Year 2007 Management Bonus Plan for Operating Company Management, in
which Mr. Powers (Division President) participated during the 2007 fiscal year, is
available to all management-level employees who work within our distribution
businesses; and |
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the Fiscal Year 2007 Management Bonus Plan for Gas Operations Management, in
which Mr. Schulte (Division President) participated during the 2007 fiscal year, is
available to all management-level employees who worked within our Gas Operations
division and its subsidiaries. |
The overall cash incentive award paid to each executive officer is composed of (1) a cash
incentive award under our Executive Bonus Plan that is based on corporate performance goals and (2)
a cash incentive award under the applicable Management Bonus Plan that is based on individual
performance goals. In addition, the Committee may, in its discretion, grant to any executive
officer a cash award outside of any of our plans described above.
Corporate Performance Goals. Within 90 days after the beginning of each fiscal year,
the Committee (1) reviews our performance during the prior fiscal year, (2) analyzes anticipated
value drivers in our industry and within our company and proposed performance objectives for the
current fiscal year and (3) determines the specific performance criteria for each executive officer
and the metrics that will be used for the current fiscal year under our Executive Bonus Plan, based
on such review and analysis. Examples of performance criteria that the Committee may consider are
cash flow growth, overall sales growth, sales growth for specific products or markets, margin
improvements and return on capital (ROC). After selecting the performance criteria, the Committee
establishes performance metrics within the selected criteria and assigns to each of our executive
officers a target award. The target award, expressed as a percentage of the executive officers
base salary for the fiscal year, is determined based upon the executives position in the company.
In addition, each of the pre-determined performance criteria (e.g., ROC) is weighted by the
Committee, in its judgment, to reflect its relative importance, and becomes a separate component of
the executive officers cash incentive award. For example, as more fully described below under
Assigned Importance to Performance Criteria, the Committee weighted the ROC component of the
annual cash incentive awards at 15% for Messrs. McCausland, McLaughlin, Millay and Molinini. The
Committee also sets a target payout, expressed as a percentage, for each component, which may vary
depending upon our actual performance with respect to the component against the pre-determined
performance metrics. Our executive officers will receive cash incentive awards under the Executive
Bonus Plan if, at the end of the fiscal year, Airgas has achieved the performance metrics
established within the criteria selected by the Committee at the beginning of the fiscal year.
Actual cash award payments will vary based upon Airgas
18
level of achievement of the pre-determined corporate performance metrics and the different
weights assigned to each performance criteria component for each executive officer. As more fully
described below, for the 2007 fiscal year, corporate financial performance goals represented 85% of
the overall annual potential cash incentive award available for each executive officer who was not
a Division President and corporate and division financial performance goals represented 90% of the
overall annual potential cash incentive award available for each executive officer who was a
Division President.
Individual Performance Goals. In addition to the corporate and division financial
performance goals described above, under the applicable Management Bonus Plan, a portion of each
named executive officers annual cash incentive award is based on individual performance measured
against personal objectives. The Committee established individual performance objectives for Mr.
McCausland after consultation with him at the beginning of the fiscal year regarding his priorities
for the 2007 fiscal year. Mr. McCausland established individual performance objectives with
Messrs. McLaughlin and Molinini, and Mr. Molinini established individual performance objectives for
Messrs. Powers and Schulte (Division Presidents). The Committee reviewed, and based upon its
subjective evaluation, approved the scores for Messrs. McLaughlin and Molinini, and Mr. McCausland
reviewed, and based upon his subjective evaluation, approved the scores for Messrs. Powers and
Schulte. For the 2007 fiscal year, individual performance goals under the Management Bonus Plans
represented 15% of the overall annual potential cash incentive award available for each executive
officer who was not a Division President and 10% of the overall annual potential cash incentive
award available for each executive officer who was a Division President.
Performance Criteria Selected for the 2007 Fiscal Year under Executive Bonus Plan.
The Committee determined that incentive cash award payments for the 2007 fiscal year for our named
executive officers, other than for our Division Presidents, would be based on our performance for
the fiscal year with regard to two key corporate financial performance criteria, as measured
against budgeted levels:
|
|
|
cash flow measured as earnings before interest, taxes, depreciation and
amortization (EBITDA); and |
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|
return on capital (ROC). |
For Messrs. Powers and Schulte, who are Division Presidents, the Committee determined that
their incentive cash award payments would be determined based on additional financial performance
criteria relating to the performance of their divisions, as measured against budgeted levels:
|
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EBITDA (for each respective division and as consolidated); |
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return on average capital employed (RACE); and |
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|
gross profit for targeted growth strategies, such as specific product lines or
market segments. |
Target Award Percentages Assigned for the 2007 Fiscal Year. The Committee established
the following incentive target awards as percentages of annual base salary for each of our named
executive officers for the 2007 fiscal year:
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|
100% for Mr. McCausland; |
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|
60% for Mr. Molinini; and |
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50% for Messrs. McLaughlin, Millay, Powers and Schulte. |
Assigned Importance to Performance Criteria. The Committee assigned the following
relative weights to the corporate and division financial performance criteria for each named
executive officer for the 2007 fiscal year:
19
|
|
|
Consolidated EBITDA (weighted at 70% for Messrs. McCausland, McLaughlin, Millay
and Molinini and weighted at 10% for Messrs. Powers and Schulte); |
|
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ROC (weighted at 15% for Messrs. McCausland, McLaughlin, Millay and Molinini); |
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Division EBITDA (weighted at 55% for Messrs. Powers and Schulte); |
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Division RACE (weighted at 10% for Messrs. Powers and Schulte); and |
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Gross Profit for Growth Strategies (weighted at 15% for Messrs. Powers and Schulte). |
Individual Objectives under the Management Bonus Plans. Following the fiscal
year-end, the Committee evaluated Mr. McCauslands performance against his pre-determined
individual objectives, Mr. McCausland evaluated the performance of Messrs. McLaughlin and Molinini
against their pre-determined individual objectives and Mr. Molinini evaluated the performance of
Messrs. Powers and Schulte against their pre-determined individual objectives. Beyond his
pre-determined individual objectives, the Committee recognized Mr. McCauslands outstanding
leadership in building a highly effective team and infrastructure to manage the rapid growth of
Airgas, and in conceiving and executing strategic initiatives that have positioned Airgas for
continued growth rates above industry standard. For a more detailed description of the annual
incentive compensation awards received by the named executive officers, see Summary Compensation
Table for the 2007 Fiscal Year found on page 27 of this proxy statement.
Calculation of the Cash Awards. A participants target incentive award is multiplied
by the weight for each component to determine the target payout for each component. Each
performance score as a percentage (e.g., meeting the goal equals a 100% score) is multiplied by the
target payout for the specific component to determine the actual incentive award for each
component. Performance scores for each component utilizing performance criteria may range between
0% and 130% to 150% depending on the specific criteria. Performance scores for the individual
objectives may range between 0% and 100%. The total incentive award is the sum of the components.
The aggregate scores for bonus metrics are limited to 132.5% for Messrs. McCausland, McLaughlin and
Molinini, and 138.5% for Messrs. Powers and Schulte. Extraordinary performance may be recognized
with an additional bonus amount, but the total award opportunity is capped so that the maximum
possible award is 200% of target. For the 2007 fiscal year, the Committee awarded each named
executive officer, except for Mr. Millay, an aggregate cash incentive compensation award above the
executives aggregate target amount, but below each executives maximum award opportunity.
Mr. McCausland and all of the other named executive officers (except Mr. Millay, who was not
eligible for an award because his employment ceased prior to the payment of the awards) received
their annual cash incentive awards for the 2007 fiscal year in June 2007 following Committee
approval at its regular May meeting. Annual cash incentive awards earned by our named executive
officers for performance during the 2007 fiscal year appear in the Summary Compensation Table for
the 2007 Fiscal Year on page 27, under the headings Non-Equity Incentive Plan Compensation and
Bonus.
Long-Term Equity Incentive Compensation
Our equity compensation program is designed to provide the Committee the flexibility to award
long-term equity compensation incentives from several types of equity-based awards. The
Committees objective in granting equity awards is to provide a strong incentive to our executives
and key employees to focus on the ongoing creation of stockholder value by offering significant
compensation opportunities for superior performance. These award opportunities not only allow us
to offer a competitive overall compensation package, but also further opportunities for stock
ownership by our employees in order to increase their proprietary interest in Airgas and, as a
result, their interest in our long-term success and their commitment to creating stockholder value.
20
Long-term equity incentives under our 2006 Equity Plan may consist of nonqualified stock
options, incentive stock options (ISOs), stock appreciation rights (SARs), restricted stock,
restricted stock units or any combination of the above, as the Committee may determine.
Previously, and including grants made to executive officers in May 2006, under our 1997 Stock
Option Plan, long-term equity incentives could have consisted of awards of nonqualified stock
options, ISOs and restricted stock.
The Committee historically has granted nonqualified stock options as the exclusive form of
equity-based compensation. The table below provides certain information regarding our use of stock
options during the last 10 fiscal years.
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Weighted |
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Employee Options |
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Total Outstanding |
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Total Shares |
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Average |
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|
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|
Granted in Fiscal |
|
|
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|
|
Employee Options as |
|
|
Underlying |
|
Option |
|
No. of Employees |
|
Year as a % of |
|
Employee Options |
|
a % of Outstanding |
Fiscal |
|
Options Granted |
|
Exercise |
|
Granted Options |
|
Outstanding Shares |
|
Fair Value on |
|
Shares at Fiscal |
Year-End |
|
to Employees |
|
Price ($) |
|
in Fiscal Year |
|
at Fiscal Year-End |
|
Date of Grant ($) |
|
Year-End |
|
3/31/1998 |
|
|
1,244,577 |
|
|
|
15.45 |
|
|
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474 |
|
|
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1.7 |
|
|
|
8,151,979 |
|
|
|
8.9 |
|
3/31/1999 |
|
|
1,665,007 |
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13.10 |
|
|
|
598 |
|
|
|
2.3 |
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|
9,690,341 |
|
|
|
10.1 |
|
3/31/2000 |
|
|
1,126,845 |
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|
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11.27 |
|
|
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535 |
|
|
|
1.7 |
|
|
|
5,848,326 |
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|
|
11.0 |
|
3/31/2001 |
|
|
1,734,215 |
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|
|
5.71 |
|
|
|
800 |
|
|
|
2.5 |
|
|
|
5,428,093 |
|
|
|
11.9 |
|
3/31/2002 |
|
|
1,525,120 |
|
|
|
9.29 |
|
|
|
565 |
|
|
|
2.2 |
|
|
|
8,098,387 |
|
|
|
11.8 |
|
3/31/2003 |
|
|
1,168,250 |
|
|
|
16.52 |
|
|
|
493 |
|
|
|
1.6 |
|
|
|
9,836,665 |
|
|
|
11.1 |
|
3/31/2004 |
|
|
1,104,800 |
|
|
|
19.36 |
|
|
|
488 |
|
|
|
1.5 |
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|
|
9,081,456 |
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|
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10.4 |
|
3/31/2005 |
|
|
1,007,500 |
|
|
|
21.15 |
|
|
|
446 |
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|
|
1.3 |
|
|
|
9,349,600 |
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|
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9.1 |
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3/31/2006 |
|
|
1,007,200 |
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|
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24.03 |
|
|
|
538 |
|
|
|
1.3 |
|
|
|
9,417,320 |
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8.4 |
|
3/31/2007 |
|
|
933,900 |
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|
|
36.19 |
|
|
|
472 |
|
|
|
1.2 |
|
|
|
12,838,558 |
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|
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8.1 |
|
Average Per Year |
|
|
1,251,741 |
|
|
|
15.80 |
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|
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541 |
|
|
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1.7 |
|
|
|
8,774,073 |
|
|
|
10.1 |
|
In granting long-term equity incentive awards, the Committee determines:
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the executive officers to receive awards; |
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|
the number of shares in each grant to an executive officer; |
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the aggregate number of shares available for Mr. McCausland to grant in stock
options to non-executive officers pursuant to his delegated authority; and |
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|
the terms and conditions of each award. |
Long-term equity incentive awards for the 2007 fiscal year were determined and approved at the
Committees regularly scheduled May 2006 meeting and are reflected in this proxy statement,
including in the Summary Compensation Table for the 2007 Fiscal Year found on page 27 and the
Grants of Plan-Based Awards in the 2007 Fiscal Year table found on page 30 of this proxy
statement.
In determining the size of long-term equity incentive awards to the named executive officers
for the 2007 fiscal year, the Committees objective was to maintain the number of shares in each
grant comparable to the 2006 fiscal year award levels. The Committee considered the dilution rate
(shares granted as a percentage of shares outstanding), historical grants to the executive
officers, the Black-Scholes valuation model for stock options, the value of equity-based
compensation to top executives in
comparable chemical and wholesale distribution companies and grant sizes relative to the
executives peers at Airgas.
21
Our aim is to focus our executives on providing superior returns to our stockholders and
driving for sustained increases in Airgas stock price. We believe that nonqualified stock options
effectively focus our executives on these goals and are an efficient use of shares available under
the plan.
Our stock option award program helps us to:
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motivate and reward superior performance on the part of executives and key employees; |
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enhance the link between the creation of stockholder value and long-term
executive incentive compensation; |
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encourage increased stock ownership in Airgas by executives; and |
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|
maintain competitive levels of total compensation. |
Option Grant Practices. The Committee makes decisions on stock option grants based
solely on our compensation and retention objectives and our established measurements of the value
of these awards. Each May, at its regularly scheduled meeting, the Committee approves the annual
stock option awards for executive officers and the total shares available for stock option grants
to our other key employees throughout the remainder of the fiscal year. The grant date for
executive officers is the date of that meeting, on which the exercise price for the awards is set.
We do not backdate options. In addition, we do not plan to coordinate grants of options so that
they are made before announcement of favorable information, or after announcement of unfavorable
information. For the 2007 fiscal year, options to purchase 262,200 shares were granted to 11
executive officers.
The only other times stock options are typically granted are in connection with a new hire or
in recognition of a special achievement, known as a Chairmans Award. The exercise price for
these grants is set on the date of employment or the date of final approval, whichever is later.
The Committee delegated authority to Mr. McCausland to make these grants to employees, other than
to executive officers, subject to an aggregate limit in the 2007 fiscal year of 68,600 shares. For
the 2007 fiscal year, these grants totaled 6,000 shares to five non-executive
officer employees. The Committee has not delegated any other aspect of the stock option grant
process to any other person or committee.
The exercise price of all awarded stock options under the 1997 Option Plan and the 2006 Equity
Plan is equal to the closing selling price of Airgas shares on the NYSE on the date of grant,
except that in the past under the 1997 Option Plan, when the grant decision was finalized by the
Committee on a given date prior to the opening of trading on the NYSE, the Committee has set the
exercise price for such awarded stock options at the closing price of our common stock from the
last preceding trading day. Employee stock option awards in the 2007 fiscal year vest and become
exercisable in equal 25% increments on each of the first four anniversaries of the grant date and
expire on the eighth anniversary of the grant date, or earlier, upon certain terminations of
employment.
Airgas has not granted equity awards to employees other than through the grant of stock
options.
Retirement and Other Plans and Programs
We maintain the following plans and programs to provide retirement benefits to salaried
employees, including Mr. McCausland and each of the named executive officers:
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the Airgas, Inc. 401(k) Plan, referred to as the 401(k) Plan; |
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the Deferred Compensation Plan I; and |
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the Deferred Compensation Plan II. |
22
We maintain the following plan to provide additional benefits to salaried employees, including
each of the named executive officers, except Mr. McCausland:
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|
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the Airgas, Inc. Amended and Restated 2003 Employee Stock Purchase Plan,
referred to as the Employee Stock Purchase Plan. |
The benefits available under these plans are intended to provide income replacement after
retirement, either through withdrawals from the 401(k) Plan, the Deferred Compensation Plan I or
the Deferred Compensation Plan II.
The 401(k) Plan is a qualified 401(k) defined contribution plan designed to encourage salaried
employees to save and invest for retirement. Under the 401(k) Plan, employees may contribute up to
the annual IRS limits on a pre-tax basis. We match employee contributions at a rate of $0.50 for
each $1.00 contributed by the employee, up to 4% of the employees base salary. Our matching
contributions vest 100% after the completion of one year of service, and are made in the 401(k)
funds in the same weightings per fund as the employees contributions. One choice available to
participants is an investment in a fund that holds Airgas common stock.
The Deferred Compensation Plan I is a nonqualified, unfunded plan. In May 2004, our Board
authorized the termination of the plan for new participants and the discontinuance of further
deferrals by existing participants after May 31, 2004. The plan provided employees the opportunity
to defer all or any portion of their base salaries and annual cash incentive awards and
non-employee directors the opportunity to defer all or a portion of their annual cash compensation.
Amounts deferred are unsecured, but earn a return equal to the performance of selected mutual
funds. See the table entitled, Nonqualified Deferred Compensation for the 2007 Fiscal Year on
page 33 of this proxy statement for an additional discussion of the Deferred Compensation Plan I.
The purpose of the salary and incentive award deferral program was to provide highly-compensated
employees with a convenient and efficient opportunity to save for retirement or other future
events, such as college expenses, while deferring applicable income taxes until withdrawal. All
named executive officers were eligible, but only Messrs. Millay, Molinini and Schulte held balances
in the plan during the 2007 fiscal year.
The Deferred Compensation Plan II is a nonqualified, unfunded plan, which became effective on
July 1, 2006. The plan provides our non-employee directors and a select group of highly
compensated employees, including the named executive officers, the opportunity to defer up to 75%
of their base salary and all or any portion of their annual incentive awards (or director fees, for
non-employee directors). Amounts deferred are unsecured, but earn a return equal to the
performance of selected mutual funds, one of which tracks the Airgas common stock price. See the
table entitled, Nonqualified Deferred Compensation for the 2007 Fiscal Year on page 33 of this
proxy statement for an additional discussion of the Deferred Compensation Plan II. The purpose of
the program is to provide highly-compensated employees with a convenient and efficient
opportunity to save for retirement or other future events, such as college expenses, while
deferring applicable income taxes until withdrawal. All named executive officers were eligible,
but only Messrs. Molinini and Schulte contributed to the plan during 2007.
The Employee Stock Purchase Plan is a section 423(b) plan. The purpose of the Plan is to
encourage and assist employees to acquire an equity interest in Airgas through the purchase of
shares of Airgas common stock at a discount by payroll deduction. The discounted purchase price is
85% of the lower of the closing price per share on the enrollment date or the closing price per
share on the date on which the shares are purchased. The enrollment dates and purchase dates occur
quarterly, at the beginning of each calendar quarter.
23
Change of Control Agreements
Airgas has entered into change of control agreements with Messrs. McCausland, McLaughlin,
Molinini, Powers, Schulte and Millay and two other executive officers. The terms of the agreements
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 our then-outstanding securities, or in which
Mr. McCausland, together with all affiliates and associates, acquires 30% or more of the combined
voting power of our then-outstanding securities. Under the change of control agreements in place
as of the end of the 2007 fiscal year, following the executives termination, he or she would be
entitled to a lump-sum payment equal to two times the sum of the executives annual base salary at
the time of termination, plus the executives potential annual cash incentive award for the fiscal
year in which the change of control occurred. The executives health and welfare benefits would
also continue for up to three years 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 Airgas are limited to the maximum amount permitted without the
imposition of an excise tax under the Internal Revenue Code. Generally, this would limit an
executives benefits under the agreement to 2.99 times the executives average annual compensation
for the preceding five years.
In addition, under an arrangement entered into in 1992, in the event of the termination of Mr.
McCauslands employment for any reason, other than for material dishonesty, 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. The limitation under Mr. McCauslands change of control
agreement would include the amount payable under his 1992 arrangement for determining whether
benefits would be reduced under his change of control agreement to comply with the limitation of
2.99 times his average annual compensation for the preceding five years.
The Airgas, Inc. Severance Pay Plan, referred to in this proxy statement as the Severance Pay
Plan, provides severance benefits to all of our employees, including the named executive officers,
in the event their employment is terminated (other than for cause and other non-qualifying
terminations defined in the plan). Benefits under the plan are not available to a named executive
officer if the named executive officer is eligible for similar benefits under a separate severance
agreement with Airgas. Severance related benefits under the Severance Pay Plan are provided only
if a participant executed a severance agreement satisfactory to Airgas. For a more detailed
description of the benefits which our named executive officers may be eligible to receive under the
Severance Pay Plan, see Potential Payments upon Termination Severance Benefits found on page
33 of this proxy statement.
In June 2007, the Committee approved a new form of change of control agreement so that
benefits provided to some of our executives in the event of a change of control will conform to
recent changes to applicable federal tax laws. The Committee delegated authority to our CEO to
enter into arrangements with some of our executive officers, including those mentioned above and
three other executives, using the new form of change of control agreement. The new agreement will
provide benefits to those executive officers that are substantially similar to those in the
existing change of control agreements without causing them to incur additional taxes under the
applicable federal tax law changes.
Perquisites and Personal Benefits
Mr. McCausland received an automobile allowance and an airline club membership and utilized
our corporate aircraft for personal use during the 2007 fiscal year. Mr. McCausland reimbursed
Airgas for all direct costs associated with his personal use of the corporate aircraft. There were no other perquisites for
24
executive officers during the 2007 fiscal year, except those benefits generally
available to all employees. For a more detailed description of the perquisites and personal
benefits received by our named executive officers, see the table on page 29 of this proxy statement
entitled, All Other Compensation for the 2007 Fiscal Year.
Other Matters
Stock
Ownership Guidelines
We believe that stock ownership guidelines help to further focus our management team on the
long-term success of our business and the interests of our stockholders. All executives at the
Vice President level and higher and all presidents of our subsidiaries are expected to acquire and
hold, within five years after accepting their positions, the lesser of a fixed number of Airgas
shares or Airgas shares with a value equal to a designated multiple of their base salary. There
are four tiers within our management team covered by ownership guidelines. For the Chief Executive
Officer, the minimum level is the lesser of 200,000 shares or a value equal to five times base
salary; for the Executive Vice President and the Chief Financial Officer, 75,000 shares or a value
equal to three times base salary; for Senior Vice Presidents and selected other corporate senior
officers, 40,000 shares or a value equal to two times base salary; and for other Vice Presidents
and subsidiary Presidents, 25,000 shares or a value equal to one times base salary.
Our executives are expected to comply with these guidelines starting on May 31, 2008 (five
years after the guidelines were originally adopted) or five years after the executive becomes
covered by the applicable ownership guideline tier. As of the end of the 2007 fiscal year, all of
our named executive officers and all but three other executive officers subject to our stock
ownership guidelines have already met their expected ownership levels.
Implications of Tax and Accounting Matters
Deductibility of Executive Compensation. Airgas is able to take deductions in excess of $1
million for certain performance-based incentives, including incentives provided under certain plans
approved by our stockholders, paid to the persons identified in Section 162(m) of the Internal
Revenue Code of 1986, as amended. Under Section 162(m), corporations may not deduct, when
computing taxable income, salary and non-performance based compensation exceeding $1 million paid
to a single executive. While Airgas seeks to structure compensation it pays so that it is eligible
for deduction, if compliance with the terms of Section 162(m) conflicts with our compensation
philosophy, or with actions that the Committee believes are in the best interests of Airgas and our
stockholders, the Committee may conclude that payment of non-deductible compensation is appropriate
under the circumstances to allow us to pay competitive compensation to our executive officers. For
the 2007 fiscal year, Mr. McCausland was paid $191,667 of non-deductible compensation under Section
162(m).
Nonqualified Deferred Compensation. On October 22, 2004, the American Jobs Creation Act of
2004 became law, changing tax rules applying to nonqualified deferred compensation arrangements.
While the final regulations have not yet become effective, we believe that Airgas is operating in
good faith compliance with the statutory provisions that became effective January 1, 2005. A more
detailed discussion of our nonqualified deferred compensation arrangements is provided on page 32
under the heading Nonqualified Deferred Compensation for the 2007 Fiscal Year.
25
Accounting for Stock-Based Compensation. On April 1, 2006, we began accounting for
stock-based awards, including stock options, in accordance with the requirements of FASB Statement
123(R).
REPORT OF THE GOVERNANCE AND COMPENSATION COMMITTEE
The Governance and Compensation Committee of our Board of Directors has reviewed and discussed
the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management
and, based on such review and discussion, the Committee recommended to the Board that the
Compensation Discussion and Analysis be included in this proxy statement, which is incorporated by
reference into our 2007 Annual Report on Form 10-K filed with the SEC.
Governance and Compensation Committee
Lee M. Thomas, Chair
Richard C. Ill
David M. Stout
26
EXECUTIVE COMPENSATION
Executive Compensation Tables
The following table sets forth certain information concerning the compensation earned during
the fiscal year ended March 31, 2007 by our named executive officers based on salary and bonus
earned during the 2007 fiscal year.
Summary Compensation Table for the 2007 Fiscal Year
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Change in |
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Pension Value |
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and |
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Non-Equity |
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Nonqualified |
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Name and |
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Option |
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Incentive Plan |
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Deferred |
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All Other |
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Principal |
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Fiscal |
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Salary |
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|
|
|
|
Awards |
|
Compensation |
|
Compensation |
|
Compensation |
|
|
Position(1) |
|
Year |
|
($)(2) |
|
Bonus ($)(3) |
|
($)(4) |
|
($)(5) |
|
Earnings(6) |
|
($)(7) |
|
Total ($) |
|
Peter McCausland |
|
|
2007 |
|
|
|
741,667 |
|
|
|
337,500 |
|
|
|
1,079,495 |
|
|
|
982,500 |
|
|
|
-0- |
|
|
|
12,308 |
|
|
|
3,153,470 |
|
Chairman, President
& Chief Executive
Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert M. McLaughlin |
|
|
2007 |
|
|
|
253,904 |
|
|
|
-0- |
|
|
|
98,004 |
|
|
|
167,591 |
|
|
|
-0- |
|
|
|
4,463 |
|
|
|
523,962 |
|
Senior Vice
President and Chief
Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger F. Millay |
|
|
2007 |
|
|
|
153,098 |
|
|
|
-0- |
|
|
|
276,505 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
3,572 |
|
|
|
433,175 |
|
Former Senior Vice
President and Chief
Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael L. Molinini |
|
|
2007 |
|
|
|
354,750 |
|
|
|
-0- |
|
|
|
230,164 |
|
|
|
285,318 |
|
|
|
-0- |
|
|
|
7,537 |
|
|
|
877,769 |
|
Executive Vice
President and Chief
Operating Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B. Shaun Powers |
|
|
2007 |
|
|
|
275,586 |
|
|
|
-0- |
|
|
|
174,970 |
|
|
|
184,441 |
|
|
|
-0- |
|
|
|
5,661 |
|
|
|
640,658 |
|
Division President-
East |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ted R. Schulte |
|
|
2007 |
|
|
|
274,411 |
|
|
|
-0- |
|
|
|
165,876 |
|
|
|
173,726 |
|
|
|
-0- |
|
|
|
5,713 |
|
|
|
619,726 |
|
Division President-
Gas Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mr. Millay resigned as our Chief Financial Officer effective on September 20, 2006. On
October 3, 2006, Mr. McLaughlin was named Senior Vice President and Chief Financial
Officer. Previously, Mr. McLaughlin was Vice President and Controller. |
|
(2) |
|
Messrs. Molinini and Schulte deferred a portion of their salaries earned in the 2007
fiscal year under the Deferred Compensation Plan II, the information for which is
included in the table under Nonqualified |
27
|
|
|
|
|
Deferred Compensation for the 2007 Fiscal Year on page 33 of this proxy statement. Each of the named executive officers also
contributed a portion of his salary to our 401(k) Plan. |
|
(3) |
|
As discussed on page 20 of this proxy statement under Compensation Discussion and
Analysis Annual Incentive Awards Individual Objectives under Management Bonus
Plans, our Governance and Compensation Committee awarded Mr. McCausland an
extraordinary award for the 2007 fiscal year in recognition of Airgas strategic
accomplishments in addition to its financial performance. The Governance and
Compensation Committee did not award any discretionary compensation for the 2007 fiscal
year to any other of our named executive officers. |
|
(4) |
|
The following stock options were granted to the named executive officers on May 23,
2006: Mr. McCausland, 100,000; Mr. McLaughlin, 10,000; Mr. Millay, 26,600; Mr. Molinini,
28,700; Mr. Powers, 15,800; and Mr. Schulte, 15,800. The amounts shown reflect the
dollar expense recognized for financial reporting purposes with respect to the 2007
fiscal year for stock options granted to the named executive officers, in the 2007
fiscal year and in prior fiscal years (to the extent such awards remain unvested in
whole or in part at the beginning of the 2007 fiscal year), in accordance with SFAS 123R
and do not correspond to the actual value that may be realized by the named executive
officers. Pursuant to SEC rules, the amounts shown exclude the impact of estimated
forfeitures related to service-based vesting conditions. For information on the
valuation assumptions made in the calculation of these amounts refer to Note 14 to
Airgas financial statements for the fiscal year ended March 31, 2007, included in our
Annual Report on Form 10-K filed with the SEC on May 30, 2007. For information on the
valuation assumptions with respect to grants made prior to the 2007 fiscal year, refer
to the note on Other Stock Related Information for the Airgas financial statements in
our Annual Report on Form 10-K for the respective fiscal year-end. See the table under
Grants of Plan-Based Awards in the 2007 Fiscal Year for information on the options
granted in the 2007 fiscal year to the named executive officers. |
|
(5) |
|
The amounts shown reflect cash incentive awards earned by our named executive officers
under the stockholder-approved Executive Bonus Plan for performance in fiscal year 2007,
based on performance criteria established at the beginning of the 2007 fiscal year by
our Governance and Compensation Committee. For officers with corporate-wide
responsibilities, including Messrs. McCausland, McLaughlin, Millay and Molinini, the
Committee established two formulaic performance criteria for the fiscal year earnings
before interest, taxes, depreciation and amortization (EBITDA), and return on capital
(ROC). For officers with direct division or subsidiary company responsibility,
including Messrs. Powers and Schulte, the Committee established four formulaic
performance criteria for the fiscal year consolidated EBITDA, division or subsidiary
EBITDA, return on average capital employed (RACE), and gross profit on specific product
lines or market segments. In addition, a portion of each award is based on achievement
of individual performance goals set at the beginning of the fiscal year, which do not
rely on formulas for determining the attainment levels. The individual performance
goals are related to significant projects or strategic milestones and achievement is
assessed following the end of the fiscal year. For Mr. McCausland, our Governance and
Compensation Committee awarded $337,500 in additional discretionary compensation in
recognition of his strategic and operational accomplishments in addition to the goals
set at the beginning of the fiscal year. This additional amount resulted in $191,667 of
compensation above the tax deductible cap of Section 162(m) of the Internal Revenue
Code. See page 18 of this proxy statement under Compensation Discussion and Analysis
Annual Cash Incentive Awards for more detailed information on the Executive Bonus
Plan. |
|
(6) |
|
Airgas offers its executive officers two deferred compensation plans Deferred
Compensation Plan I and Deferred Compensation Plan II. Under each plan, earnings are
calculated in the same manner and at the same rate as earnings on externally-managed,
publicly-available mutual funds or on an externally-managed fund tracking Airgas common
stock. We believe earnings in the deferred compensation plans are not considered
above-market or preferential earnings for the purposes of this Summary Compensation
Table. Airgas does not offer its executive officers a defined benefit pension plan.
See the table under Nonqualified Deferred Compensation for the 2007 Fiscal Year on page 33 of this proxy statement for
additional information. |
|
(7) |
|
The amounts shown consist of the following items detailed in the table under All Other
Compensation for the 2007 Fiscal Year: |
28
|
|
|
contributions by the company to the named executive officers 401(k) plan; |
|
|
|
|
automobile allowances; and |
|
|
|
|
reimbursement for airline club memberships. |
All Other Compensation for the 2007 Fiscal Year
The table below presents an itemized account of All Other Compensation provided to our
named executive officers during the 2007 fiscal year, regardless of the amount and any
minimum thresholds provided under SEC rules and regulations. Consistent with our philosophy of
pay for performance, perquisites and other compensation are limited in scope and amount.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matching |
|
|
|
|
|
|
|
|
|
|
Contributions |
|
Auto |
|
Airline Club |
|
Total All Other |
Name |
|
to 401(k) ($) |
|
Allowance ($) |
|
Memberships ($) |
|
Compensation ($) |
|
Peter McCausland(1) |
|
|
4,208 |
|
|
|
7,200 |
|
|
|
900 |
|
|
|
12,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert M. McLaughlin |
|
|
4,463 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
4,463 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger F. Millay |
|
|
3,572 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
3,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael L. Molinini |
|
|
7,237 |
|
|
|
-0- |
|
|
|
300 |
|
|
|
7,537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B. Shaun Powers |
|
|
5,361 |
|
|
|
-0- |
|
|
|
300 |
|
|
|
5,661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ted R. Schulte |
|
|
5,413 |
|
|
|
-0- |
|
|
|
300 |
|
|
|
5,713 |
|
|
|
|
(1) |
|
Mr. McCausland reimbursed Airgas $107,311 for all direct costs associated with his
personal use of the corporate aircraft. The amount reimbursed reflects the aggregate
incremental cost to Airgas as recognized under SEC Regulation S-K. In determining the
incremental costs for personal use, we considered fuel, supplies, contracted pilot fees,
hangar and landing fees, and travel expenses for the flight crew. |
29
Grants of Plan-Based Awards in the 2007 Fiscal Year
The following table sets forth information about equity awards and potential future non-equity
incentive payouts provided to our named executive officers during the 2007 fiscal year under the
1997 Stock Option Plan and the Management Bonus Plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts |
|
|
|
|
|
|
|
|
|
|
|
|
Under |
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity Incentive Plan |
|
All Other Option |
|
Exercise or Base |
|
Grant Date |
|
|
|
|
|
|
Awards(1) |
|
Awards: Number of |
|
Price of |
|
Fair Value of |
|
|
Grant |
|
Threshold |
|
Target |
|
Maximum |
|
Securities |
|
Option Awards |
|
Option |
Name |
|
Date |
|
($) |
|
($) |
|
($) |
|
Underlying Options |
|
($/share)(2) |
|
Awards ($) |
|
Peter McCausland |
|
|
|
|
|
|
187,500 |
|
|
|
750,000 |
|
|
|
1,500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/23/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
36.17 |
|
|
|
1,374,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert M. McLaughlin |
|
|
|
|
|
|
31,983 |
|
|
|
127,932 |
|
|
|
169,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/23/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000 |
|
|
|
36.17 |
|
|
|
137,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger F. Millay |
|
|
|
|
|
|
40,572 |
|
|
|
162,286 |
|
|
|
215,029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/23/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,600 |
|
|
|
36.17 |
|
|
|
365,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael L. Molinini |
|
|
|
|
|
|
54,450 |
|
|
|
217,800 |
|
|
|
288,585 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/23/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,700 |
|
|
|
36.17 |
|
|
|
394,338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B. Shaun Powers |
|
|
|
|
|
|
29,531 |
|
|
|
138,968 |
|
|
|
192,471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/23/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,800 |
|
|
|
36.17 |
|
|
|
217,092 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ted R. Schulte |
|
|
|
|
|
|
29,439 |
|
|
|
138,538 |
|
|
|
146,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/23/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,800 |
|
|
|
36.17 |
|
|
|
217,092 |
|
|
|
|
(1) |
|
These columns show the potential value of the payouts for each named executive officer
under the Executive Bonus Plan for the 2007 fiscal year if the threshold, target or
maximum goals are satisfied for all performance goals. The potential payouts are
performance-driven and therefore completely at risk. The performance criteria,
performance goals and salary and incentive award percentages for determining the payouts
are described under Compensation Discussion and Analysis Annual Cash Incentive
Awards beginning on page 18 of this proxy statement. As reflected in the Summary
Compensation Table for the 2007 Fiscal Year, no award was paid to Mr. Millay, as he did
not meet the plan eligibility criterion requiring employment with Airgas on the date
awards are paid except by retirement, disability or death. Awards were paid for the
2007 fiscal year to each of the other named executive officers and formulaic performance
scores exceeded pre-established performance targets for each officer. |
|
(2) |
|
The Governance and Compensation Committee met and approved the grants of stock options
under our 1997 Stock Option Plan to our named executive officers on May 23, 2006, prior
to the open of the NYSE. All of the stock options detailed in the table have a term of
eight years and an exercise price set at the closing price of our common stock on the
immediately prior trading day. All future grants of stock options under our 2006 Equity
Plan will have an exercise price set as the closing price of our common stock on the
date of grant. |
30
Outstanding Equity Awards at 2007 Fiscal Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities Underlying |
|
Option |
|
Option |
|
|
Unexercised Options |
|
Exercise |
|
Expiration |
Name |
|
Exercisable (#) |
|
Unexercisable (#) |
|
Price ($) |
|
Date (1) |
|
Peter McCausland |
|
|
130,000 |
|
|
|
|
|
|
|
15.63 |
|
|
|
05/14/2007 |
|
|
|
|
130,000 |
|
|
|
|
|
|
|
15.94 |
|
|
|
05/14/2008 |
|
|
|
|
130,000 |
|
|
|
|
|
|
|
11.50 |
|
|
|
05/18/2009 |
|
|
|
|
150,000 |
|
|
|
|
|
|
|
5.50 |
|
|
|
05/16/2010 |
|
|
|
|
150,000 |
|
|
|
|
|
|
|
8.99 |
|
|
|
05/08/2011 |
|
|
|
|
125,000 |
|
|
|
|
|
|
|
16.52 |
|
|
|
05/06/2012 |
|
|
|
|
86,250 |
|
|
|
28,750 |
|
|
|
19.22 |
|
|
|
05/12/2013 |
|
|
|
|
57,500 |
|
|
|
57,500 |
|
|
|
21.15 |
|
|
|
05/25/2014 |
|
|
|
|
27,500 |
|
|
|
82,500 |
|
|
|
24.09 |
|
|
|
05/24/2015 |
|
|
|
|
|
|
|
|
100,000 |
|
|
|
36.17 |
|
|
|
05/23/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert M. McLaughlin |
|
|
3,000 |
|
|
|
|
|
|
|
10.49 |
|
|
|
06/25/2011 |
|
|
|
|
11,200 |
|
|
|
|
|
|
|
16.52 |
|
|
|
05/06/2012 |
|
|
|
|
7,725 |
|
|
|
2,575 |
|
|
|
19.22 |
|
|
|
05/12/2013 |
|
|
|
|
5,000 |
|
|
|
5,000 |
|
|
|
21.15 |
|
|
|
05/25/2014 |
|
|
|
|
2,350 |
|
|
|
7,050 |
|
|
|
24.09 |
|
|
|
05/24/2015 |
|
|
|
|
|
|
|
|
10,000 |
|
|
|
36.17 |
|
|
|
05/23/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger F. Millay |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael L. Molinini |
|
|
7,500 |
|
|
|
|
|
|
|
8.99 |
|
|
|
05/08/2011 |
|
|
|
|
18,700 |
|
|
|
|
|
|
|
16.52 |
|
|
|
05/06/2012 |
|
|
|
|
12,975 |
|
|
|
4,325 |
|
|
|
19.22 |
|
|
|
05/12/2013 |
|
|
|
|
7,800 |
|
|
|
7,800 |
|
|
|
21.15 |
|
|
|
05/25/2014 |
|
|
|
|
7,500 |
|
|
|
22,500 |
|
|
|
29.04 |
|
|
|
05/24/2015 |
|
|
|
|
|
|
|
|
28,700 |
|
|
|
36.17 |
|
|
|
05/23/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B. Shaun Powers |
|
|
15,000 |
|
|
|
|
|
|
|
7.05 |
|
|
|
03/28/2011 |
|
|
|
|
22,500 |
|
|
|
|
|
|
|
16.52 |
|
|
|
05/06/2012 |
|
|
|
|
15,600 |
|
|
|
5,200 |
|
|
|
19.22 |
|
|
|
05/12/2013 |
|
|
|
|
9,000 |
|
|
|
9,000 |
|
|
|
21.15 |
|
|
|
05/25/2014 |
|
|
|
|
4,225 |
|
|
|
12,675 |
|
|
|
24.09 |
|
|
|
05/24/2015 |
|
|
|
|
|
|
|
|
15,800 |
|
|
|
36.17 |
|
|
|
05/23/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ted R. Schulte |
|
|
750 |
|
|
|
|
|
|
|
15.25 |
|
|
|
04/24/2008 |
|
|
|
|
875 |
|
|
|
|
|
|
|
15.94 |
|
|
|
05/14/2008 |
|
|
|
|
5,000 |
|
|
|
|
|
|
|
8.50 |
|
|
|
03/04/2009 |
|
|
|
|
21,000 |
|
|
|
|
|
|
|
11.50 |
|
|
|
05/18/2009 |
|
|
|
|
25,000 |
|
|
|
|
|
|
|
5.50 |
|
|
|
05/16/2010 |
|
|
|
|
30,000 |
|
|
|
|
|
|
|
8.99 |
|
|
|
05/08/2011 |
|
|
|
|
22,500 |
|
|
|
|
|
|
|
16.52 |
|
|
|
05/06/2012 |
|
|
|
|
15,600 |
|
|
|
5,200 |
|
|
|
19.22 |
|
|
|
05/12/2013 |
|
|
|
|
8,000 |
|
|
|
8,000 |
|
|
|
21.15 |
|
|
|
05/25/2014 |
|
|
|
|
3,750 |
|
|
|
11,250 |
|
|
|
24.09 |
|
|
|
05/24/2015 |
|
|
|
|
|
|
|
|
15,800 |
|
|
|
36.17 |
|
|
|
05/23/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
(1) |
|
The stock options listed above vest in 25% increments per year over four years. Except
for the stock options granted to the named executive officers during the 2007 fiscal
year, which have eight-year terms, all stock options granted to the named executive
officers as set forth above have 10-year terms, subject to earlier termination or
expiration in the event of termination of service or as otherwise set forth in the
Airgas 1984 Stock Option Plan or the 1997 Stock Option Plan. |
Option Exercises During the 2007 Fiscal Year
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Number of Shares |
|
Value Realized |
Name |
|
Acquired on Exercise |
|
on Exercise ($) |
|
Peter McCausland |
|
|
-0- |
|
|
|
-0- |
|
|
|
|
|
|
|
|
|
|
Michael L. Molinini |
|
|
-0- |
|
|
|
-0- |
|
|
|
|
|
|
|
|
|
|
Ted R. Schulte |
|
|
-0- |
|
|
|
-0- |
|
|
|
|
|
|
|
|
|
|
Robert M. McLaughlin |
|
|
-0- |
|
|
|
-0- |
|
|
|
|
|
|
|
|
|
|
B. Shaun Powers (1) |
|
|
10,000 |
|
|
|
336,200 |
|
|
|
|
|
|
|
|
|
|
Roger F. Millay (2) |
|
|
145,900 |
|
|
|
3,845,180 |
|
|
|
|
(1) |
|
Mr. Powers exercised 10,000 stock options on March 1, 2007, with an exercise price of
$7.05 and a market price of $40.67. |
|
(2) |
|
On November 10, 2006, Mr. Millay exercised 40,000 stock options with an exercise price
of $8.99, 20,000 stock options with an exercise price of $8.44, and 13,250 stock options
with an exercise price of $5.50. The closing price of our common stock on November 10,
2006 was $38.31. On November 27, 2006, Mr. Millay exercised 29,900 stock options with
an exercise price of $16.52 and 20,700 stock options with an exercise price of $19.22.
The closing price of our common stock on November 27, 2006 was $41.19. On November 29,
2006, Mr. Millay exercised 15,000 stock options with an exercise price of $21.15 and
7,050 stock options with an exercise price of $24.09. The closing price of our common
stock on November 29, 2006 was $42.40. |
Nonqualified Deferred Compensation for the 2007 Fiscal Year
The Deferred Compensation Plan I is a nonqualified, unfunded plan. In May 2004, our Board
authorized the termination of the plan for new participants and the discontinuance of further
deferrals by existing participants after May 31, 2004. The Deferred Compensation Plan I provided
employees the opportunity to defer base salary and all or any portion of their annual bonus.
Amounts deferred are unsecured, but earn a return equal to the performance of selected mutual
funds. All named executive officers were eligible, but only Messrs. Millay, Molinini and Schulte
held balances in the Deferred Compensation Plan I during the 2007 fiscal year.
The Deferred Compensation Plan II is a nonqualified, unfunded plan available for contribution
since July 1, 2006. The Deferred Compensation Plan II provides employees the opportunity to defer
base salary and all or any portion of their annual bonus. Amounts deferred are unsecured, but earn
a return equal to the performance of selected mutual funds and a choice to track Airgas common stock. There are no
Airgas contributions to the Deferred Compensation Plan II. The purpose of the salary and bonus
deferral program is to provide highly compensated employees with a convenient and efficient
32
opportunity to save for retirement or other future events, such as college expenses, while
deferring applicable income taxes until withdrawal. All named executive officers were eligible,
but only Messrs. Molinini and Schulte contributed to the Deferred Compensation Plan II during the
2007 fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate |
|
|
|
|
Executive |
|
Registrant |
|
Aggregate |
|
Withdrawals/ |
|
Aggregate |
|
|
Contributions |
|
Contributions |
|
Earnings in |
|
Distributions in |
|
Balance |
Name |
|
in FY 2007 ($)(1) |
|
in FY 2007 ($) |
|
FY 2007 ($)(2) |
|
FY 2007 ($)(3) |
|
at 3/31/07 ($) |
|
Peter McCausland |
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert M. McLaughlin |
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger F. Millay |
|
|
-0- |
|
|
|
-0- |
|
|
|
1,866 |
|
|
|
6,747 |
|
|
|
34,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael L. Molinini |
|
|
5,294 |
|
|
|
-0- |
|
|
|
8,135 |
|
|
|
-0- |
|
|
|
145,474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B. Shaun Powers |
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ted R. Schulte |
|
|
14,431 |
|
|
|
-0- |
|
|
|
46,915 |
|
|
|
-0- |
|
|
|
459,022 |
|
|
|
|
(1) |
|
Reflects participation by Messrs. Molinini and Schulte in the deferred compensation
plan during the 2007 fiscal year. Salary deferral became available to officers in the
Deferred Compensation Plan II on July 1, 2006. |
|
(2) |
|
Reflects earnings on balances in the Deferred Compensation Plan I and the Deferred
Compensation Plan II. Earnings are from tracking the results of mutual funds and a fund
tracking Airgas common stock as selected by the named executive officer from the fund
choices offered in each plan. |
|
(3) |
|
Mr. Millay withdrew some of the balance from the Deferred Compensation Plan I upon
ending his employment with Airgas. |
Potential Payments upon Termination
Our named executive officers are eligible to receive benefits in the event their employment is
terminated (1) by Airgas without cause, (2) upon their retirement, disability or death or (3) in
certain circumstances following a change in control. The amount of benefits will vary based on the
reason for the termination.
The following sections present calculations as of March 31, 2007 of the estimated benefits our
named executive officers would receive in these situations. Although the calculations are intended
to provide reasonable estimates of the potential benefits, they are based on numerous assumptions
and may not represent the actual amount a named executive officer would receive if an eligible
termination event were to occur.
In addition to the amounts disclosed in the following sections, each named executive officer
would retain the amounts which he has earned or accrued over the course of his employment prior to
the termination event, such as the named executive officers balances under our deferred
compensation plans, accrued retirement benefits and previously vested stock options. For further
information about previously earned and accrued amounts, see the tables entitled Summary
Compensation Table for the 2007 Fiscal Year, Outstanding Equity Awards at the 2007 Fiscal
Year-End, Option Exercises During the 2007 Fiscal Year and Non-Qualified Deferred Compensation for the 2007 Fiscal Year.
33
Severance Benefits
If the employment of a named executive officer, other than Mr. McCausland, is terminated due
to (1) a lack of work, (2) a reorganization of our business, (3) the closing of all or a portion of
the named executive officers principal workplace or (4) economic conditions, and not as a result
of a change of control, the named executive officer may be entitled to receive benefits under our
Severance Pay Plan. Messrs. McLaughlin, Molinini, Powers and Schulte participate in our severance
plan, which is generally available to other employees. Severance-related benefits under the plan
are provided only if the participant executes a separation agreement prepared by Airgas, which
includes a release of claims in consideration of the payments.
Mr. McCauslands severance benefits are contained in an employment agreement, which is
described below. In the event that Mr. McCauslands employment is terminated for reasons other
than material dishonesty, he would receive a lump-sum payment equal to two times his annual
salary that was effective at the end of his active employment, continuation of health and welfare
benefits for the three years following active employment and immediate vesting of all unvested
stock options.
The following table presents the estimated separation benefits that we would have been
required to pay to Mr. McCausland under the terms of his employment agreement if his employment had
been terminated, other than for material dishonesty, as of March 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested |
|
|
|
|
Named Executive |
|
|
|
|
|
Severance |
|
Stock Options |
|
Health & Welfare |
|
|
Officer |
|
|
|
|
|
Payments ($) |
|
($) |
|
Benefits ($) |
|
Total ($) |
Peter McCausland |
|
|
|
|
|
|
1,500,000 |
(1) |
|
|
3,954,688 |
(2) |
|
|
16,785 |
(3) |
|
|
5,471,473 |
|
|
|
|
(1) |
|
Represents a lump-sum payment equal to two times Mr. McCauslands annual salary. |
|
(2) |
|
The value of accelerated vesting of stock options is estimated using the in-the-money
value as of March 31, 2007 based on a stock price of $42.15. |
|
(3) |
|
The estimated net cost to Airgas of Mr. McCauslands health and welfare benefits
continued for three years. |
Retirement, Disability and Death
Death or Retirement
To be eligible for retirement, an executive officer must be at least age 65 or have combined
age and Airgas service at least equal to 75 years. Mr. McCausland is the only named executive
officer who is eligible for retirement as of March 31, 2007. In the event of death or retirement,
an executive or his beneficiary is entitled to vesting of an additional year of unvested stock
options and continued eligibility to exercise the vested stock options under the same terms as an
active employee (i.e., until the original expiration dates unless terminated earlier under the
terms of the applicable equity plan). Additionally, the named executive officer or his or her
beneficiary is entitled to the executives annual incentive cash bonus award, prorated based upon
the number of days the executive was an active employee with Airgas during the fiscal year, on the
next bonus payment date. In the event of a named executive officers death, his or her beneficiary
also would receive payouts under Airgas-funded life insurance policies.
34
The following table presents the estimated benefits payable, based on death or retirement on
March 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
Named |
|
Bonus Payment |
|
Vesting of Unvested |
|
|
Executive Officer |
|
($)(1) |
|
Stock Options ($)(2) |
|
Total |
Peter McCausland |
|
|
1,320,000 |
|
|
|
1,909,138 |
|
|
|
3,229,138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert M. McLaughlin |
|
|
167,591 |
|
|
|
168,936 |
|
|
|
336,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael L. Molinini |
|
|
285,318 |
|
|
|
359,429 |
|
|
|
644,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B. Shaun Powers |
|
|
184,411 |
|
|
|
313,661 |
|
|
|
498,072 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ted R. Schulte |
|
|
173,726 |
|
|
|
294,582 |
|
|
|
468,308 |
|
|
|
|
(1) |
|
Represents the named executive officers full bonus for the 2007 fiscal year payable on
June 15, 2007. |
|
(2) |
|
The value of vesting of stock options on the next anniversary is estimated using the
in-the-money value as of March 31, 2007, based on a stock price of $42.15. |
Disability
Upon an executives termination of employment due to disability, the named executive officer
would receive the stock option benefits described in the Additional Benefits upon Retirement
table above.
The following table presents the estimated benefits payable upon death or disability as of
March 31, 2007.
|
|
|
|
|
|
|
Vesting of |
Named Executive Officer |
|
Unvested Stock Options ($)(1) |
Peter McCausland |
|
|
1,909,138 |
|
|
|
|
|
|
Robert M. McLaughlin |
|
|
168,936 |
|
|
|
|
|
|
Michael L. Molinini |
|
|
359,429 |
|
|
|
|
|
|
B. Shaun Powers |
|
|
313,661 |
|
|
|
|
|
|
Ted R. Schulte |
|
|
294,582 |
|
|
|
|
(1) |
|
The value of vesting of stock options on the next anniversary is estimated using the
in-the-money value as of March 31, 2007 based on a stock price of $42.15. |
Potential Change of Control Payments
We have agreements with all the named executive officers, which take effect only if a change
of control or a potential change of control occurs. The severance and other benefits payable to
the named executive officers under their agreements are due only if (1) there is a change of
control and (2) we terminate their employment unrelated to cause, or if they terminate their
employment for good reason within three years following a change of control, commonly referred to as a Double Trigger. Good
35
reason includes a material diminution of position, a material decrease in compensation and benefits in the
aggregate or a meaningful change in location.
Mr. McCauslands agreement entitles him to a lump-sum payment equal to two times his annual
base salary plus two times his annual cash incentive target bonus. Mr. McCausland also is entitled
to the lump-sum payment equal to two times his annual base salary, as described above under
Severance Benefits. Messrs. McLaughlins, Molininis, Powers and Schultes agreements entitle
them to a lump-sum payment equal to two times the annual base salary plus two times the cash
incentive target bonus. All agreements accelerate vesting of all outstanding unvested stock
options and entitle the named executive officer to continuation of health and welfare benefits for
up to three years. In the aggregate, the benefits under these agreements are capped at 2.99 times
the average base compensation as defined in Section 280G of the Internal Revenue Code.
A change of control is defined in the agreements to include a change in a majority of the
Board, consummation of certain mergers, the sale of all or substantially all of Airgas assets and
stockholder approval of a complete liquidation or dissolution. The change of control definition
also includes events in which a party (other than Mr. McCausland) acquires 20% or more of the
combined voting power of our then-outstanding securities, or in which Mr. McCausland, together with
all affiliates and associates, acquires 30% or more of the combined voting power of our
then-outstanding securities. A potential change of control occurs if Airgas enters into an
agreement that results in a change of control, a credible party announces the intent to cause a
change of control, a holder of at least 10% of the outstanding shares increases ownership by at
least 5% of the shares outstanding, or the Board declares a potential change of control.
The following table assumes that each named executive officer is terminated after a change of
control for reasons other than cause, retirement, disability or death. These values are estimated
as of March 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & Welfare |
|
|
Named Executive |
|
Severance |
|
Vesting of Unvested |
|
Benefits |
|
|
Officer |
|
Payments ($) |
|
Stock Options ($)(2) |
|
($)(3) |
|
Total ($) |
Peter McCausland |
|
|
4,500,000 |
(1) |
|
|
3,954,688 |
|
|
|
16,785 |
|
|
|
8,471,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert M. McLaughlin |
|
|
849,776 |
(4) |
|
|
351,168 |
|
|
|
24,750 |
|
|
|
1,225,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael L. Molinini |
|
|
1,161,600 |
|
|
|
840,948 |
|
|
|
16,785 |
|
|
|
2,019,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B. Shaun Powers |
|
|
833,808 |
|
|
|
631,631 |
|
|
|
24,750 |
|
|
|
1,490,189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ted R. Schulte |
|
|
795,616 |
(4) |
|
|
584,895 |
|
|
|
24,750 |
|
|
|
1,405,261 |
|
|
|
|
(1) |
|
Mr. McCausland would have received the severance payment under his 1992 employment
agreement (two times his annual base salary) in addition to the severance payment under
his change of control agreement (two times his annual base salary plus two times his
annual cash incentive target bonus). |
|
(2) |
|
The value of accelerating vesting of stock options is estimated using the in-the-money
value as of March 31, 2007, based on a stock price of $42.15. |
|
(3) |
|
The estimated net cost to Airgas of health and welfare benefits continued for three
years. |
|
(4) |
|
The estimated severance payments to Mr. McLaughlin and Mr. Schulte reflect the cap to
limit benefits to 2.99 times the average base compensation as defined in Section 280G of
the Internal Revenue Code. |
36
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Review and Approval of Related Person Transactions
We review all relationships and transactions in which Airgas and our directors and executive
officers or their immediate family members are participants to determine whether such persons have
a direct or indirect material interest. Our legal staff is primarily responsible for the
development and implementation of processes and controls to obtain information from the directors
and executive officers with respect to related person transactions and for then determining, based
on the facts and circumstances, whether Airgas or a related person has a direct or indirect
material interest in the transaction. As required under SEC rules, transactions that are
determined to be directly or indirectly material to Airgas or a related person are disclosed in our
proxy statement. In addition, the Audit Committee reviews and approves or ratifies any related
person transaction that is required to be disclosed. In the course of its review and approval or
ratification of a disclosable related party transaction, the Committee considers:
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the nature of the related persons interest in the transaction; |
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the material terms of the transaction, including, without limitation, the
amount and type of transaction; |
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the importance of the transaction to the related person; |
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the importance of the transaction to Airgas; |
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whether the transaction would impair the judgment of a director or executive
officer to act in the best interest of Airgas; and |
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any other matters the Committee deems appropriate. |
Transactions
Since the beginning of the 2007 fiscal year, we have not engaged in any transaction or series
of similar transactions, or any currently proposed transaction or series of similar transactions,
to which Airgas or any of its subsidiaries was or is to be a participant (1) in which the amount
involved exceeds $120,000 and (2) in which any of our directors, executive officers or persons
known to us to be beneficial owners of more than 5% of our common stock, or members of the
immediate families of those individuals, had or will have, a direct or indirect material interest.
We do have business relationships with corporations or other organizations in which a
director, nominee for director or executive officer of Airgas may also be a director, executive
officer, investor or trustee, or have some other similar direct or indirect relationship with the
other corporation or organization. For example, we provide goods and services to companies such as
GlaxoSmithKline (of which David M. Stout, one of our directors, is President, Pharmaceuticals),
Kraft Foods, Inc. (of which Paula A. Sneed, one of our directors, was Executive Vice President of
Global Marketing Resources and Initiatives until December 2006), Triumph Group, Inc. (of which,
William O. Albertini, one of our directors, is a director, and Richard C. Ill, one of our
directors, is President and Chief Executive Officer and a director) and Georgia-Pacific Corporation
(of which Lee M. Thomas, one of our directors, was President and Chief Operating Officer and a
director during our 2006 fiscal year). In all instances, including those described above, we enter
into these arrangements in the ordinary course of business and each party provides to or receives
from the other the relevant goods and services on a non-exclusive basis at arms-length negotiated
rates. In addition, none of our directors was directly involved with the negotiation or
consummation of any such arrangement. While any revenue, profits or other aspects of a business
relationship with us may, of course, affect the individuals overall compensation or value of his
or her investments in the other corporation or organization, we do not believe that in any of these
cases the relevant director receives or has received any compensation from the other corporation
that is directly linked to an Airgas-related business arrangement. None of these arrangements is material to us or to the
37
other corporation or organization involved, and we do not believe that any indirect interest that our directors may have with respect to such an
arrangement is material.
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Below is a graph comparing the yearly change in the cumulative total stockholder return on our
common stock against the cumulative total return of the S&P MidCap 400 Chemicals Index and the S&P
MidCap 400 Index for the five-year period that began April 1, 2002 and ended March 31, 2007.
We have 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 Airgas is a component of the indices and they
include companies of similar size as Airgas.
Airgas, Inc.
Comparison of Five-Year Cumulative Total Return
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March 31 |
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2002 |
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2003 |
|
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2004 |
|
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2005 |
|
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2006 |
|
|
2007 |
|
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|
¨ |
|
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|
Airgas, Inc. |
|
|
|
100 |
|
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|
|
92.09 |
|
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|
106.86 |
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120.74 |
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199.10 |
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216.24 |
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m |
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S&P MidCap 400 Chemicals |
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100 |
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74.24 |
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97.42 |
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124.38 |
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128.30 |
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156.55 |
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n |
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S&P MidCap 400 |
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100 |
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76.55 |
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114.14 |
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126.04 |
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153.29 |
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166.24 |
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The graph above assumes that $100 was invested on April 1, 2002, in Airgas, Inc. common stock,
the S&P MidCap 400 Chemicals Index, and the S&P MidCap 400 Index.
38
SECURITY OWNERSHIP
The following table sets forth certain information, according to information supplied to
Airgas regarding the number and percentage of shares of our common stock beneficially owned on
March 31, 2007 (1) by each person who is the beneficial owner of more than 5% of our common stock,
(2) by each director and nominee for director, (3) by each named executive officer and (4) by all
of our directors, nominees for director and executive officers as a group. Unless otherwise
indicated, the stockholders listed possess sole voting and investment power with respect to the
shares listed.
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Amount and Nature of |
|
Percentage of |
Name of Beneficial Owner |
|
Beneficial Ownership(1) |
|
Shares Outstanding% |
Peter McCausland
1113 Brynlawn Road
Villanova, PA |
|
|
8,166,441 |
(2)(3)(4) |
|
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10.3 |
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Bonnie F. McCausland
1113 Brynlawn Road
Villanova, PA |
|
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7,182,780 |
(5) |
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9.1 |
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William O. Albertini |
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48,500 |
(2) |
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* |
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W. Thacher Brown |
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185,750 |
(2)(6) |
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* |
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James W. Hovey |
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87,750 |
(2) |
|
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* |
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Richard C. Ill |
|
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28,250 |
(2) |
|
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* |
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Paula A. Sneed |
|
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70,256 |
(2) |
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* |
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David M. Stout |
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66,250 |
(2) |
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* |
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Lee M. Thomas |
|
|
50,875 |
(2) |
|
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* |
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|
John C. van
Roden, Jr. |
|
|
8,040 |
(2)(7) |
|
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* |
|
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|
|
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Michael L. Molinini |
|
|
81,821 |
(2) |
|
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* |
|
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Robert McLaughlin |
|
|
45,104 |
(2) |
|
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* |
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Ted R. Schulte |
|
|
157,732 |
(2)(4) |
|
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* |
|
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B. Shaun Powers |
|
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90,619 |
(2) |
|
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* |
|
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Roger F. Millay |
|
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3,584 |
|
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* |
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FMR Corp.
82 Devonshire Street
Boston, MA 02109 |
|
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5,713,700 |
(8) |
|
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7.3 |
|
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All directors and executive officers as a group
(21 persons) |
|
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9,466,164 |
(2)(3)(4)(5)(6)(7) |
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11.9 |
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39
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* |
|
Less than 1% of our outstanding common stock |
|
(1) |
|
Includes all options and other rights to acquire shares exercisable on or within 60 days
of March 31, 2007. |
|
(2) |
|
Includes the following number of shares of our common stock which may be acquired by
certain directors, executive officers and 5% stockholders through the exercise of options
that were exercisable as of March 31, 2007 or became exercisable within 60 days of that date:
Mr. McCausland, 966,250 shares; Mr. Albertini, 28,500 shares; Mr. Brown, 71,250 shares; Mr.
Hovey, 65,250 shares; Mr. Ill, 21,000 shares; Ms. Sneed, 65,250 shares; Mr. Stout, 65,250
shares; Mr. Thomas, 49,875 shares; Mr. van Roden, 5,540 shares; Mr. Molinini, 77,375 shares;
Mr. McLaughlin, 39,200 shares; Mr. Schulte, 149,375 shares; Mr. Powers, 84,200 shares; and
all directors and executive officers as a group, 2,026,030 shares. |
|
(3) |
|
Investment and/or voting power with respect to 7,106,210 of such shares are shared with, or
under the control of, Mr. McCauslands spouse, Bonnie McCausland, and 35,070 shares are held
by a charitable foundation of which Mr. McCausland is an officer and director. |
|
(4) |
|
Includes the following shares of our common stock held under our 401(k) Plan as of March
31, 2007: Mr. McCausland, 43,211 shares; Mr. Schulte, 1,764 shares; and all executive
officers as a group, 57,712 shares. |
|
(5) |
|
Investment and/or voting power with respect to 7,106,210 of such shares are shared with, or
under the control of, Mrs. McCauslands spouse, Peter McCausland, and 35,070 shares are held
by a charitable foundation of which Mrs. McCausland is an officer and director. |
|
(6) |
|
Includes 8,000 shares owned by members of Mr. Browns immediate family. |
|
(7) |
|
Includes 1,500 shares owned by a general partnership of which Mr. van Roden is a 0.5% owner
and a general partner. |
|
(8) |
|
FMR Corp. and several related entities filing for the purposes of such report
(collectively, FMR), filed a Schedule 13G on February 14, 2007, upon which Airgas has
relied in making this disclosure. FMR has sole voting power as to 362,480 shares and sole
dispositive power as to 5,713,700 shares. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive
officers and directors, and persons who own more than 10% of a registered class of our equity
securities, to file reports of ownership and changes in ownership of the securities with the SEC
and the NYSE. Such persons are also required to furnish us with copies of all Section 16(a) forms
they file. We are aware of one 10% stockholder, who is also an officer and director, and his
spouse.
Based solely on its review of the copies of such reports furnished to us, or written
representations from certain reporting persons that no other reports were required, we believe that
all of our officers and directors complied with all filing requirements applicable to them.
40
REPORT OF THE AUDIT COMMITTEE
The Audit Committee reviewed and discussed our audited financial statements for the fiscal
year ended March 31, 2007 with our management and with the independent registered public accounting
firm. The Audit Committee reviewed with the independent registered public accounting firm its
judgment as to the quality of our application of U.S. generally accepted accounting principles and
other such matters as required by Statement on Auditing Standards No. 61, Communications with
Audit Committees, as amended.
The Audit Committee discussed with both our internal auditors and independent registered
public accounting firm the overall scope and plans for their respective audits. The Audit
Committee periodically met with the internal auditors and the independent registered public
accounting firm, with and without management present, to discuss the results of their examinations,
evaluations of our internal control over financial reporting and the overall quality of our
financial reporting.
The Audit Committee has discussed with and received written disclosure and a letter from the
independent registered public accounting firm as required by the Independence Standards Boards
Standard No. 1, Independence Discussions with Audit Committees, as amended, as to their
independence from Airgas and its management.
Based on the reviews and discussions referred to above, the Audit Committee recommended to the
Board of Directors that the audited financial statements be included in our Annual Report on Form
10-K for the year ended March 31, 2007, for filing with the Securities and Exchange Commission.
The Audit Committee also appointed, and the Board of Directors is proposing that the stockholders
ratify the appointment of, KPMG LLP as our independent registered public accounting firm for the
2008 fiscal year.
Audit Committee
William O. Albertini, Chair
Paula A. Sneed
John C. van Roden, Jr.
41
PROPOSAL TO RATIFY INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Proposal 2)
The Audit Committee of the Board of Directors has appointed the firm of KPMG LLP as our
independent registered public accounting firm to audit our financial statements for the fiscal year
ending March 31, 2008. The Board of Directors has proposed that the stockholders ratify the
appointment of KPMG LLP. This firm audited our financial statements for the fiscal year ended
March 31, 2007. 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.
Audit and Non-Audit Fees
The following table shows the fees that we paid to the independent registered public
accounting firm for services provided to us during the 2007 and 2006 fiscal years:
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2006 |
Audit Fees |
|
$ |
1,357,000 |
|
|
$ |
1,150,000 |
|
Audit-Related Fees |
|
$ |
221,000 |
|
|
$ |
117,000 |
|
|
|
|
|
|
|
|
|
|
Tax Fees |
|
$ |
23,000 |
|
|
$ |
10,000 |
|
All Other Fees |
|
$ |
|
|
|
$ |
|
|
|
|
|
Audit Fees consist of fees billed for professional services rendered for the
audit of our annual financial statements, the audit of the effectiveness of our
internal control over financial reporting and reviews of the financial statements
included in our quarterly report on Forms 10-Q. |
|
|
|
|
Audit-Related Fees consist of services that are reasonably related to the
performance of the audit or review of our financial statements and are not reported
under Audit Fees. The services for the fees disclosed under this category for the
2007 and 2006 fiscal years include approximately $73,000 and $40,000, respectively, for
employee benefit plan audits. These fees for the 2007 and 2006 fiscal years also
include work performed related to the review of various technical accounting matters
and work performed related to accounting for acquisitions. |
|
|
|
|
Tax Fees consist of professional services rendered by the independent
registered public accounting firm for tax compliance, tax return review and tax advice. |
The Audit Committee considered whether the services provided above are compatible with
maintaining the independent registered public accounting firms independence.
Pre-Approval of Audit and Non-Audit Services
Under the Audit Committees audit and non-audit services pre-approval policy, as adopted by
the Audit Committee in 2003, the Audit Committee must pre-approve all audit and non-audit services
provided by the independent registered public accounting firm. The policy, as described below,
sets forth the procedures and conditions for such pre-approval of services to be performed by the
independent registered public accounting firm. The policy utilizes both a framework of general
pre-approval for certain specified services and specific pre-approval for all other services.
42
Prior to engagement of the independent registered public accounting firm for the next years
audit, the Audit Committee is asked to pre-approve the engagement of the accounting firm, and the
projected fees for audit services and audit-related services (assurance and related services that
are reasonably related to the performance of the independent registered public accounting firms
review of the financial statements). The fee amounts approved for the audit and audit-related
services are updated to the extent necessary at the regularly scheduled meetings of the Audit
Committee during the year.
In addition, pursuant to its policy, the Audit Committee has pre-approved certain categories
of non-audit services to be performed by the independent registered public accounting firm and an
aggregate maximum amount of fees to be paid for such services. The Audit Committee receives
updates from management and reviews these services at each of its quarterly meetings. Additional
pre-approval is required for any of these services if the fees exceed the originally pre-approved
aggregate amount annually. If we desire to engage the independent registered public accounting firm
for other services that are not within the pre-approved categories, the Audit Committee must
approve such specific engagement as well as the projected fees.
In the 2007 fiscal year, there were no fees paid to KPMG LLP under a de minimis exception to
the rules that waives pre-approval for certain non-audit services.
The Board of Directors recommends that you vote FOR ratification of KPMG LLP as our
independent registered public accounting firm.
STOCKHOLDER PROPOSALS FOR
NEXT ANNUAL MEETING
Stockholder Proposals for Inclusion in Next Years 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 2008 Annual Meeting, the
proposal must be received by us, attention: Mr. Dean A. Bertolino, Secretary, at our principal
offices, by March 2, 2008.
Other Stockholder Proposals for Presentation at Next Years Annual Meeting
For any proposal, including a nomination for election to the Board of Directors, that is not
submitted for inclusion in next years proxy statement, but is instead sought to be presented
directly at the 2008 Annual Meeting, our bylaws require, and the SEC rules permit, that the
proposal be received at our principal executive offices not earlier than April 11, 2008 and not
later than May 11, 2008. However, if the date of the Annual Meeting is more than 30 days before or
more than 60 days after August 7, 2008, 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. Our bylaws also provide that
the notice must contain certain information regarding the proposal and the nomination.
43
APPENDIX A
DIRECTOR INDEPENDENCE STANDARDS
No director of Airgas, Inc. (the Company) will be considered independent unless the board
of directors affirmatively determines that the director has no material relationship with the
Company (either directly or as a partner, stockholder or officer of an organization that has a
relationship with the Company). When making independence determinations, the Board broadly
considers all relevant facts and circumstances, as well as any other rules, interpretations and
considerations of the New York Stock Exchange (NYSE), or any rule or regulation of any other
regulatory body or self-regulatory body applicable to the Company. The Board has established the
following standards, based upon those set forth in the NYSE Listing Standards, to assist it in
determining director independence. These standards shall be interpreted in accordance with
interpretations of the NYSE Listing Standards.
A director will not be independent if:
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the director is a current partner or employee of the Companys
independent auditor; |
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|
|
an immediate family member of the director is a current partner
of the Companys independent auditor; or |
|
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|
|
an immediate family member of the director is a current
employee of the Companys independent auditor and participates in the firms
audit, assurance or tax compliance (but not tax planning) practice. |
A director will not be independent if within the preceding three years:
|
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the director was employed by the Company; |
|
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|
|
an immediate family member of the director was employed by the
Company as an executive officer; |
|
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|
the director, or an immediate family member of the director,
received more than $100,000 per year in direct compensation from the Company
(other than directors fees and pension or other forms of deferred compensation
for prior service with the Company); |
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|
the director was (but is not currently) a partner with or
employed by the Companys independent auditor and worked on the Companys audit
within such three years; |
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|
an immediate family member of the director was (but is not
currently) a partner with or employed by the Companys independent auditor and
worked on the Companys audit within such three years; or |
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|
|
an executive officer of the Company was on the compensation
committee of the board of directors of a company that employed either the
director or an immediate family member of the director as an executive officer. |
None of the following relationships shall disqualify any director or nominee from being
considered independent and such relationships shall be deemed to be immaterial relationships with
the Company:
|
|
|
a director is a current employee, or a directors immediate
family member is a current executive officer, of another company that has made
payments to, or received payments from, the Company for property or services in
an amount which, in any of the last three fiscal years, did not exceed the
greater of (a) $1,000,000 or (b) 2% of such other companys consolidated gross
revenues; |
A-1
|
|
|
a director or a directors immediate family member is an
executive officer of another company in which the Company owns a common stock
interest, and the amount of the common stock interest is less than 5% of the
total shareholders equity of the company for which the director serves as an
executive officer; or |
|
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|
|
a director or a directors immediate family member serves as an
officer, director or trustee of a tax exempt organization, and the Companys
contributions to the organization in any single fiscal year are less than the
greater of (a) $1,000,000 or (b) 2% of that organizations gross revenues. |
A-2
Alrgas.
C/O PROXY SERVICES
P.O. BOX 9141
FARMINGDALE, NY 11735 |
VOTE BY INTERNET www.proxyvote.com
Use the Internet to transmit your voting
instructions and for electronic delivery of
information up until 11:59 P.M. Eastern Time the
day before the cut-off date or meeting date. Have
your proxy card in hand when you access the web
site and follow the instructions to obtain your
records and to create an electronic voting
instruction form.
ELECTRONIC DELIVERY OF FUTURE
STOCKHOLDER COMMUNICATIONS
If you would like to reduce the costs incurred by
Airgas, Inc. in mailing proxy materials, you can
consent to receiving all future proxy statements,
proxy cards and annual reports electronically via
e-mail or the Internet. To sign up for electronic
delivery, please follow the instructions above to
vote using the Internet and, when prompted,
indicate that you agree to receive or access
stockholder communications electronically in
future years.
VOTE BY PHONE 1-800-690-6903
Use any touch-tone telephone to transmit your
voting instructions up until 11:59 P.M. Eastern
Time the day before the cut-off date or meeting
date. Have your proxy card in hand when you call
and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it
in the postage-paid envelope we have provided or
return it to Airgas, Inc., c/o |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |
AIRGA1 KEEP
THIS PORTION FOR
YOUR RECORDS DETACH
AND RETURN THIS
PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
The Board of Directors recommends voting
FOR Proposals 1 and 2. |
For Withhold For All To withhold authority to vote for any individual Vote On
Directors All All Except nominee(s), mark For All Except and write the name(s) of the
nominee(s) on the line below. |
Nominees:
W. Thacher Brown, Richard C. Ill, Peter McCausland, and 0 0 0
John C. van Roden, Jr. |
2. Ratify the selection of KPMG LLP as the Companys independent registered public accounting firm. 0 0 0 |
3. In their discretion, vote upon such other matters as may properly come before the
Meeting. |
Note: Please sign exactly as name(s) appear(s) hereon. Executors, administrators, trustees,
etc. should give full title as such. |
For comments, please check this box and write them 0 on the back where indicated
Yes No Yes No Please indicate if you plan to attend this meeting 0 0
Please indicate if you wish to view meeting materials 0 0 electronically via
the Internet rather than receiving a hard copy, please note that you will continue to receive a
proxy card for voting purposes only |
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date |
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY |
FOR THE ANNUAL MEETING OF STOCKHOLDERS, AUGUST 7, 2007 |
The undersigned holder of Common Stock of Airgas, Inc. hereby appoints Peter McCausland, Dean
A. Bertolino and Robert M. McLaughlin, and each of them, as proxies, with powers of substitution in
each, to vote on behalf of the undersigned at the Annual Meeting of Stockholders to be held at
11:00 a.m. on Tuesday, August 7, 2007, at the Four Seasons Hotel, One Logan Square, Philadelphia,
Pennsylvania, and at all adjournments thereof, as designated on the reverse side of this proxy, 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. If the undersigned is a
participant in the Airgas, Inc. 401(k) Plan and has a portion of his interest in the plan invested
in Airgas Common Stock, the undersigned also instructs the trustee of the trust to vote the shares
attributable to the undersigneds interest in the same manner shown on this proxy and in the
discretion of the trustee upon such other business as may come before the Meeting, and if no
instructions are given, the trustee will vote the shares in the same proportions as the shares for
which voting instructions have been received. |
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 AND FOR THE COMPANYS PROPOSAL 2, 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 COMPANYS PROPOSALS 1 AND 2. |
The undersigned acknowledges receipt with this proxy of a copy of the Notice of Annual
Meeting of Stockholders and the Proxy |
(If you noted any Comments above, please mark corresponding box on
the reverse side.) |
PLEASE SIGN AND RETURN PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE. |
(Continued, and to be signed, on the other side) |