exv10w1



 




	 	 	 
	 	 	Exhibit 10.1

	 	 	 

	 	 	
Fiscal Year 2004

Executive Bonus

Plan
	 	 	 
	 	 	
Airgas, Inc.
	 	 	 
	 	 	
April 2003



 






 


Purpose of this Document



The purpose of this document is to allow bonus eligible employees at Airgas,
Inc. to understand the mechanics, measures, and other design features of the
Fiscal Year 2004 Executive Bonus Plan, and serve as a guide in the
implementation and administration of the plan. Included are payout schedules,
specific definitions and terminology, and basic plan governance.


 






 


Airgas, Inc. Fiscal Year 2004 Executive Bonus Plan



Purpose of the Plan


The purpose of the Airgas, Inc. Fiscal Year 2004 Executive Bonus Plan (the
“Plan”) is to align Management’s efforts with the strategic goals of the
Company through competitive annual incentive opportunities. This plan will be
effective from April 1, 2003 to March 31, 2004 (the “Plan Year”).


Eligibility



Participation in the Plan is determined by the function manager (e.g., CFO,
CIO, Senior Vice President).


Target Awards



Participants in the Executive Bonus Plan will be eligible for an annual cash
incentive award (the “Award”) based on the achievement of predetermined goals.
An annual incentive or bonus target is generally determined based on the
participant’s position in the organization, and can vary according to the
judgement of management.


Performance Measurement



Final Award payments are determined by adjusting the target award upward or
downward based on achievement relative to a variety of performance measures,
including: Corporate/Consolidated financial performance, individual
accountabilities, Operating Company and Area performance. Depending upon an
individual’s position and responsibilities, these various performance measures,
assessed based on different weightings, will determine the Award. Performance
measures and weighting have been established for three categories of
participants: Corporate, Operating Company Management and Area Managers.
Details are provided below.


Corporate/Consolidated Performance



Assessment of Corporate/Consolidated performance is based on achievement
relative to consolidated:



	 	•	 	Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA);
	 
	 	•	 	Sales; and
	 
	 	•	 	Return on Capital (ROC).



Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) is
defined as revenue minus expenses (excluding interest, taxes, depreciation and
amortization).


Return on Capital (ROC) is defined as:



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	ROC =	 	
EBITDA – (80% x Depreciation Expense) – Unleveraged Cash
Taxes


Average Capital Outstanding During the Year



Consolidated EBITDA and Sales were chosen to replace Earnings Per Share in the
2004 Plan since EBITDA (driven by sales growth) is the primary measure of
earnings growth over the long term, and it is critical for Airgas to raise its
return on investment. Performance against these measures will be determined
based on achievement relative to predetermined targets for the Plan Year, as
set forth and approved by the Governance and Compensation Committee of the
Airgas, Inc. Board of Directors.


Individual Accountabilities



Individual performance is measured based on achievement relative to at least
one “line-of-sight” goal in the Plan Year. Prior to each Plan Year, each
participant will meet with his/her manager to develop individual performance
goals that are quantifiable (where possible) and are aligned to the Company’s
goals and key financial performance metrics. In addition, these goals should
represent “stretch” targets that are attainable, yet challenging.


Operating Company Metrics



Assessment of operating company performance is based on achievement relative to
financial performance goals set for the operating company in which the
individual works. For the upcoming Plan Year, financial performance at the
operating company level will be based on three measures:



	•	 	Earnings Before Interest,
Taxes, Depreciation, and Amortization (EBITDA);
	 
	•	 	Sales; and
	 
	•	 	Return on Average Capital
Employed (RACE).



Performance against these measures will be determined based on achievement
relative to predetermined targets for the Plan Year, as set forth and approved
by the Governance and Compensation Committee.


Area Performance Metrics



The term “Area” can be defined as either a specific geographic area (group of
branches or sales territory) or functional area. For the upcoming Plan Year,
financial performance at the Area level will be based on two measures:



	•	 	Earning Before Interest, Taxes,
Depreciation, and Amortization (EBITDA); and
	 
	•	 	Sales.



It is recognized that EBITDA may not be an appropriate measure for Area
performance in all cases. Where necessary, operating company management may
use a measure that is closely aligned with EBITDA.


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Performance against these measures will be determined based on achievement
relative to predetermined targets for the Plan Year, as set forth and approved
by the Governance and Compensation Committee.


Weighting of Performance Goals



Corporate Employees


For corporate employees, Award payments will be awarded based on the relative
achievement of these goals carrying the following weights:



	 	 	 	 	 	 	 	 	 	 	 	 	 
	Consolidated Airgas	 	 
	
	 	 	 	 
	EBITDA	 	Sales	 	ROC	 	Individual Performance
	
	 	
	 	
	 	

	45%
	 	 	15	%	 	 	15	%	 	 	25	%



Operating Company Management



For operating company management, Award payments will be awarded based on the
relative achievement of these goals carrying the following weights:



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Consolidated Performance	 	Operating Company Performance	 	 
	
	 	
	 	 	 	 
	EBITDA	 	EBITDA	 	Sales	 	RACE	 	Individual Performance
	
	 	
	 	
	 	
	 	

	25%
	 	 	25	%	 	 	20	%	 	 	15	%	 	 	15	%



Area Managers



For Area managers within the operating companies, Award payments will be
awarded based on the relative achievement of these goals carrying the following
weights:



	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Operating Company	 	 	 	 
	Area Performance	 	Performance	 	Individual Performance
	
	 	
	 	

	Sales	 	EBITDA	 	Sales	 	EBITDA	 	Metric 1	 	Metric 2
	
	 	
	 	
	 	
	 	
	 	

	20%	 	
30%
	 	10%
	 	15%
	 	12.5%
	 	12.5%



Determining Incentive Payouts



Achievement relative to these specific goals determines the extent to which a
participant receives an Award. For quantitative goals, such as
corporate/consolidated, operating company and Area financial measures,
performance is assessed relative to threshold, target, and maximum levels. The
Governance and Compensation Committee has approved tables that identify
corresponding incentive


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payout levels related to threshold, target, and maximum performance levels for
quantitative goals (see graphs below).


For individual accountabilities a maximum achievement percentage for any single
goal or group of goals is 100%, and anything short of full achievement of such
goals will be given an achievement percentage between 0% and 100%. Prior to
the Plan Year, the participant and his or her manager will agree on the
performance framework.


Pay for Performance Relationship



The following graphs indicate the relationship between the achievement of a
particular financial goal and the payout for that goal associated with that
level of achievement. The weighting of these financial goals in determining an
overall incentive payout depends on the participant’s position and level of
responsibility.









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Examples




	1.	 	Corporate



This employee earns $50,000 and has a target percentage of 10% of her base
salary or $5,000. At the end of the Plan year, this example assumes the
following performance results:



	 	•	 	EBITDA was 101% of Plan target, which means a payout of 100%;
	 
	 	•	 	Sales were 101% of Plan target, which means a payout of 110%;
	 
	 	•	 	ROC was at 0.1% above target, leading to a payout of 100%;
	 
	 	•	 	This employee met 80% of individual goals



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	Performance	 	Target	 	Multiplied	 	Performance	 	 	 	 	 	Measure	 	Multiplied	 	Payout	 	 	 	 	 	 	 	 
	Measure	 	Bonus	 	By	 	Weighting	 	Equals	 	Target	 	By	 	%	 	Equals	 	Payout
	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	

	EBITDA
	 	$	5,000	 	 	 	X	 	 	 	45	%	 	 	=	 	 	$	2,250	 	 	 	X	 	 	 	100	%	 	 	=	 	 	$	2,250	 
	SALES
	 	$	5,000	 	 	 	X	 	 	 	15	%	 	 	=	 	 	$	750	 	 	 	X	 	 	 	110	%	 	 	=	 	 	$	825	 
	ROC
	 	$	5,000	 	 	 	X	 	 	 	15	%	 	 	=	 	 	$	750	 	 	 	X	 	 	 	100	%	 	 	=	 	 	$	750	 
	Individual

Performance	 	$	5,000	 	 	 	X	 	 	 	25	%	 	 	=	 	 	$	1,250	 	 	 	X	 	 	 	80	%	 	 	=	 	 	$	1,000	 
	 
	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 
	Totals
	 	 	 	 	 	 	 	 	 	 	100	%	 	 	 	 	 	$	5,000	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	4,825	 
	 
	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 




	2.	 	Operating Company Management



This employee earns $50,000 and has a target percentage of 10% of her base
salary or $5,000. At the end of the Plan year, this example assumes the
following performance results:



	 	•	 	Corporate/Consolidated EBITDA was 101% of Plan target, which means a payout of 100%;
	 
	 	•	 	EBITDA at the operating company was 100% of target, leading to a payout of 100%;
	 
	 	•	 	Sales at Operating company were 101% of target, leading to a payout of 110%;
	 
	 	•	 	RACE at Operating company was 101% of target, leading to a payout of 100%;
	 
	 	•	 	Employee met 80% of individual performance goals.




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Performance	 	Target	 	Multiplied	 	Performance	 	 	 	 	 	Measure	 	Multiplied	 	Payout	 	 	 	 	 	 	 	 
	Measure	 	Bonus	 	By	 	Weighting	 	Equals	 	Target	 	By	 	%	 	Equals	 	Payout
	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	

	Corporate/Consolidated
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	• EBITDA
	 	$	5,000	 	 	 	X	 	 	 	25	%	 	 	=	 	 	$	1,250	 	 	 	X	 	 	 	100	%	 	 	=	 	 	$	1,250	 
	Operating Company
Performance
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	• EBITDA
	 	$	5,000	 	 	 	X	 	 	 	25	%	 	 	=	 	 	$	1250	 	 	 	X	 	 	 	100	%	 	 	=	 	 	$	1,250	 
	 	• Sales
	 	$	5,000	 	 	 	X	 	 	 	20	%	 	 	=	 	 	$	1000	 	 	 	X	 	 	 	110	%	 	 	=	 	 	$	1,100	 
	 	• RACE
	 	$	5,000	 	 	 	X	 	 	 	15	%	 	 	=	 	 	$	750	 	 	 	X	 	 	 	100	%	 	 	=	 	 	$	750	 
	Individual Performance
	 	$	5,000	 	 	 	X	 	 	 	15	%	 	 	=	 	 	$	750	 	 	 	X	 	 	 	80	%	 	 	=	 	 	$	600	 
	 
	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 
	Totals
	 	 	 	 	 	 	 	 	 	 	100	%	 	 	 	 	 	$	5,000	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	4,950	 
	 
	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 




	3.	 	Area Managers — Operating Company



This employee earns $50,000 and has a target percentage of 10% of her base
salary or $5,000. At the end of the Plan year, this example assumes the
following performance results:



	 	•	 	EBITDA at the Area level was 100% of target, leading to a payout of 100%;
	 
	 	•	 	Sales at the Area level was 101% of target, leading to a payout of 110%;
	 
	 	•	 	EBITDA at the Operating company was 101% of target, leading to a payout of 100%;
	 
	 	•	 	Sales at the Operating company were 102% of target, yielding a 120% payout;
	 
	 	•	 	This employee on individual performance met 60% of Metric 1 and 80% of Metric 2.



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To calculate her actual bonus, we multiply each measure target dollar amount by
actual performance results:



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Performance	 	Bonus	 	Multiplied	 	Performance	 	 	 	 	 	Measure	 	Multiplied	 	Payout	 	 	 	 	 	 	 	 
	Measure	 	Target	 	By	 	Weighting	 	Equals	 	Target	 	By	 	%	 	Equals	 	Payout
	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	

	Area Performance
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	• EBITDA
	 	$	5,000	 	 	 	X	 	 	 	30	%	 	 	=	 	 	$	1,500	 	 	 	X	 	 	 	100	%	 	 	=	 	 	$	1,500	 
	 	 	• Sales
	 	$	5,000	 	 	 	X	 	 	 	20	%	 	 	=	 	 	$	1,000	 	 	 	X	 	 	 	110	%	 	 	=	 	 	$	1,100	 
	Operating Company
Performance
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	• EBITDA
	 	$	5,000	 	 	 	X	 	 	 	15	%	 	 	=	 	 	$	750	 	 	 	X	 	 	 	100	%	 	 	=	 	 	$	750	 
	 	 	• Sales
	 	$	5,000	 	 	 	X	 	 	 	10	%	 	 	=	 	 	$	500	 	 	 	X	 	 	 	120	%	 	 	=	 	 	$	600	 
	Individual
Performance
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Metric 1
	 	$	5,000	 	 	 	X	 	 	 	12.5	%	 	 	 	 	 	$	625	 	 	 	X	 	 	 	60	%	 	 	 	 	 	$	375	 
	 	Metric 2
	 	$	5,000	 	 	 	X	 	 	 	12.5	%	 	 	=	 	 	$	625	 	 	 	X	 	 	 	80	%	 	 	=	 	 	$	500	 
	 
	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 
	Totals
	 	 	 	 	 	 	 	 	 	 	100	%	 	 	 	 	 	$	5,000	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	4,825	 
	 
	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 



Funding



The Plan will be self-funding, as corporate profitability targets will be
established net of target Award payments under the Plan. Therefore, achievement
of corporate profitability targets will ensure that the Plan has funded itself.



Executive Bonus Plan Payment



At the end of the Plan Year, after all financial results have been finalized,
including approval of corporate/consolidated, operating company and Area
performance measures by the Governance and Compensation Committee, actual
individual Award payment will be determined. The Award will be paid in cash no
later than 75 days following the end of the fiscal year.


Administration of the Plan



The Management Committee of Airgas, Inc. shall have full power to administer
and interpret the Plan and, in its sole discretion, may establish or amend
rules of general application for the administration of the plan. The Management
Committee may amend or terminate the Plan at any time (except as to performance
and operating goals under the Plan that must be approved by the Governance and
Compensation Committee of the Airgas, Inc. board of directors).


Partial Year Eligibility



Employees who are eligible for the Plan for a portion of the year will receive
a prorated Award based on the base salary earned while they are eligible for
the Plan.



	•	 	New hires
	 


	 	–	New employees will immediately be eligible for the Plan.
	 
	 	–	Base salary will be accumulated from the date of hire to the end of the
Plan Year, unless eligibility ceases prior to that date. Transfers — For
employees who transfer from one job or employee status to another,
eligibility will depend on their award eligibility before and after
transferring.



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	 	–	If an employee transfers from a position that is not bonus eligible to
a position that is eligible for an Award under the Plan, the annual
incentive award will be prorated based on the time in the bonus eligible
position. All calculations are done using year-end financial data.
	 
	 	–	If an employee transfers from a position that is eligible for an Award
under the Plan to a position that is not bonus eligible, the annual
incentive award will be prorated based on the length of time in the bonus
eligible position. All calculations are done using year-end financial
data.
	 
	 	–	If an employee transfers from one position that is eligible for an
Award under the plan to another position that is eligible for an award
under the plan, participation in the Plan will continue uninterrupted.
However, if the transfer involves a move that will change the weightings
used to determine an individual’s annual incentive award, the bonus
calculation will be based on the pro-rated time spent in each position.
All calculations will be done using year-end data. Accountabilities must
be established and assessed for each position separately.
	 


	•	 	Promotions



	 
	 	–	If an employee is promoted during the fiscal year, new accountabilities
must be established to reflect the new position.
	 


	•	 	Terminations
	 


	 	–	Employees who are not employed by Airgas, Inc. on the date the annual
incentive award is paid will receive no payment, unless it is
contractually stated in a separation agreement and except for the
following circumstances:




	 	–	Employees who retire or die during the plan year will be
eligible for a prorated annual incentive award. The annual
incentive award will be calculated from the date when they become
eligible, normally the beginning of the Plan Year to the date of
retirement or death.




	•	 	Leave of absence
	 


	 	–	If an employee is on a leave of absence at the end of the fiscal year,
he or she will be eligible for an Award provided that he or she returns
to work as an active employee. Any Award paid will be prorated based upon
the length of time the employee was actively working during the fiscal
year. The calculation will be made using year-end financial data. The
Award payment will be made in the next regularly scheduled payroll cycle
at the end of the associate’s first month of employment following his or
her return from leave of absence.
	 
	 	–	If an employee is on a leave of absence during the fiscal year, and
returns during the year, he or she will be eligible for an Award. Any
Award paid will be prorated based upon the length of time an associate
was actively working during the fiscal year. The calculation will be made
using year-end financial data.



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Tax Considerations and Withholding



Participants will be required to report taxable income in the year the award is
received. The company will withhold taxes in the appropriate amount on all
payouts.


Bankruptcy



In the event Airgas, Inc. declares bankruptcy, the Management Committee, at its
discretion, may immediately discontinue the Plan. In the event that the Plan is
discontinued, all participants will forfeit the right to any payments under the
Plan.


Future Employment



Payment of an annual incentive Award under this plan does not imply contractual
agreement to extend or continue employment of an employee beyond receipt of the
annual incentive Award.



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