Exhibit 10.18
Fiscal Year 2002
Executive Bonus
Plan
Airgas, Inc.
April 2001
Purpose of this Document
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The purpose of this document is to allow employees at the Manager
level and above at Airgas, Inc. to understand the mechanics,
measures, and other design features of the Fiscal Year 2002
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 2002 Executive Bonus Plan
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PURPOSE OF THE PLAN
The purpose of the Airgas, Inc. Fiscal Year 2002 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, 2001 to March 31, 2002 (the "Plan Year").
ELIGIBILITY
Participation in the plan is determined by the function manager
(e.g., CFO, CIO, Senior Vice President, Legal, and Corporate
Development).
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 the Executive Committee.
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 financial goals,
individual accountabilities, the Project One initiative, and
operating company metrics (where appropriate). Depending upon an
individual's position and responsibilities, these various
performance measures, assessed based on different weightings,
will determine the Award. Participants at the corporate level
will not be measured on the financial performance of any
operating company.
CORPORATE PERFORMANCE
Assessment of corporate performance is based on achievement
relative to Airgas Consolidated Financials for the Plan Year. For
upcoming Plan Year, the only consolidated financial measure will
be Earnings Per Share (EPS), which was chosen by the Executive
Committee so that all employees' efforts are focused on a
measurement that has a significant impact on the Airgas, Inc.
stock price. Performance against this measure will be determined
based on achievement relative to predetermined targets for the
Plan Year, as set forth by the Executive Committee. Earnings per
share, for the purposes of the Plan, is defined below:
Net Profit (After Bonus Accruals) After Taxes
(Excludes Any Large, Non-Recurring, One-Time Charges
at the Discretion of the Executive Committee)
EPS = -----------------------------------------------------
Weighted Average Shares Outstanding During the year
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 a set of key objectives that are important to the
participant's personal development needs, as well as the goals
that support the company's strategic initiatives. All
accountabilities should be clearly measurable and represent
"stretch" goals that are attainable yet challenging. No more than
five key individual objectives will be established, and no single
individual objective will have a weighting of less than 20% of
the total for individual accountabilities. The maximum
achievement percentage for any single accountability or group of
accountabilities is 100%.
PROJECT ONE INITIATIVE
Performance relative to the Project One initiative will be
measured based on an individual's achievement relative to
specific Project One objectives that are relevant to that
individual.
Project One, representing "the way forward to success", includes
short- and long-term programs designed to support the
implementation of a series of key strategic initiatives in
support of management's vision of "One Airgas". These initiatives
are to:
o Increase market penetration;
o Migrate customers to the appropriate channels to meet their needs;
o Improve supply chain efficiencies;
o Redesign key business processes; and
o Focus on people.
Prior to each Plan Year, each participant will meet with his/her
manager to develop a specific set of objectives that are relevant
to the individual's responsibilities, and related to the Project
One initiative. The maximum achievement percentage for any single
Project One goal or group of goals is 100%.
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:
o Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA);
o Sales; and
o Working Capital (accounts receivable and hardgoods inventory only:
target equals days sales outstanding plus hardgoods days supply).
These three measures will be used to assess performance at all
operating companies, with the following weights:
EBITDA Sales Working Capital
------ ----- ---------------
33.3% 33.3% 33.3%
Performance against these measures will be determined based on
achievement relative to predetermined targets for the Plan Year,
as set forth by the Executive Committee.
WEIGHTING OF PERFORMANCE GOALS
Project One Executive Steering Committee:
At the discretion of their immediate supervisors, Award payments
for members of the Project One Executive Steering Committee will
be awarded based on the relative achievement of these goals
carrying the following weights:
EPS Project One
--- -----------
65% 35%
Corporate Employees:
For corporate employees, Award payments will be awarded based on
the relative achievement of these goals carrying the following
weights:
Individual
EPS Accountabilities Project One
--- ---------------- -----------
65% 25% 10%
Operating Company Presidents:
For operating company presidents, Award payments will be awarded
based on the relative achievement of these goals carrying the
following weights:
Operating
Company
EPS Metrics Project One
--- --------- -----------
25% 50% 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:
Operating
Company Individual
EPS Metrics Accountabilities Project One
--- --------- ---------------- -----------
25% 50% 15% 10%
Project One Team Members:
For full-time members of the Project One team, Award payments
will be awarded based on the relative achievement of these goals
carrying the following weights:
EPS Project One
--- -----------
30% 70%
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 and operating company financial
measures, performance is assessed relative to threshold, target,
and maximum levels. Prior to the Plan Year, the Executive
Committee will approve tables that identify corresponding
incentive payout levels related to threshold, target, and maximum
performance levels for quantitative goals. Levels of performance
between these levels will be interpolated. See the performance tables
below.
For individual accountabilities and Project One goals, 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.
EPS SALES
Achievement Payout% Achievement Payout%
- --------------------- ---------------------
$0.50 20% 97% 25%
$0.51 36% 98% 50%
$0.52 52% 99% 75%
$0.53 68% 100% 100%
$0.54 84% 101% 110%
$0.55 100% 102% 120%
$0.56 115% 103% 130%
$0.57 130% 104% 140%
$0.58 145% 105% 150%
$0.59 155%
$0.60 160%
WORKING CAPITAL EBITDA
Achievement Payout% Achievement Payout%
- --------------------- ----------------------
103% 25% 90% 25%
102% 50% 91% 30%
101% 75% 92% 35%
100% 100% 93% 40%
99% 110% 94% 45%
98% 120% 95% 50%
97% 130% 96% 60%
96% 140% 97% 70%
95% 150% 98% 80%
94% 160% 99% 90%
93% 170% 100% 100%
92% 180% 101% 110%
91% 190% 102% 125%
90% 200% 103% 140%
104% 155%
105% 170%
106% 185%
107% 200%
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 corporate and operating performance,
the actual 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 Executive 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 Executive Committee may amend or
terminate the Plan at any time.
PARTIAL YEAR ELIGIBILITIY
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.
o 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.
o Transfers-For employees who transfer from one job or employee
status to another, eligibility will depend on their award
eligibility before and after transferring.
- 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 separately
established and assessed for each position separately.
o Promotions
- If an employee is promoted during the fiscal year, new
accountabilities must be established to reflect the new position.
o 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.
o 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.
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 Executive
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.