ARG Airgas, Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (date of earliest event reported): January 25, 2016

 

AIRGAS, INC.

(Exact name of registrant as specified in its charter)

 

259 North Radnor-Chester Road, Suite 100

Radnor, PA 19087-5283

(Address of principal executive offices, including zip code)

 

Registrant's telephone number, including area code: (610) 687-5253

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrants under any of the following provisions (see General Instruction A.2. below):

 

 

 

 

On January 25, 2016, the Governance and Compensation Committee of the Board of Directors (the "Board") of Airgas, Inc. (the "Company") approved amendments to the Airgas, Inc. Executive Bonus Plan (the "Executive Bonus Plan") and on January 26, 2016, the Board approved amendments to the Airgas, Inc. Management Bonus Plan For Corporate Management (the "Management Bonus Plan", and together with the Executive Bonus Plan, the "Bonus Plans").

The amendments to the Bonus Plans are being implemented in connection with a Company-wide transition from a fiscal year bonus year to a calendar year bonus year.  Because the Bonus Plans cover named executive officers of the Company, the specific amendments to such plans are described herein as required by applicable Securities and Exchange Commission rules.  Such amendments are consistent with the amendments being made to all of the Company's annual management bonus plans in accordance with this bonus year transition.

The amendments to the Bonus Plans provide that, in lieu of the performance period commencing on April 1, 2015 and ending on March 31, 2016, the Bonus Plans will be in effect for a performance period commencing on April 1, 2015 and ending on December 31, 2015, and thereafter, for a performance period commencing on January 1, 2016 and ending on December 31, 2016.  Further, the amendments provide that, with respect to the performance period ending on December 31, 2015, (i) of the financial performance targets originally established for the four quarters covered by the period April 1, 2015 through March 31, 2016, the targets relating to the three quarters covered by the period April 1, 2015 through December 31, 2015 will apply, and (ii) bonuses will be calculated based on the level of achievement of the applicable performance targets, and by applying each participant's target bonus opportunity percentage to the portion of such participant's base salary attributable to such performance period.

The description of the amendments to the Bonus Plans set forth above is qualified in its entirety by reference to the full text of the amended Executive Bonus Plan and the amended Management Bonus Plan, attached hereto as Exhibit 10.1 and Exhibit 10.2, respectively.

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

EXHIBIT INDEX

 

                                                                                                                                                                                                                                                                                                                                                                       Exhibit 10.1

AIRGAS, INC.

EXECUTIVE BONUS PLAN

Airgas, Inc. (the "Company") believes in providing incentives to attract, retain and reward Executive Officers who are responsible for providing leadership to the Company in attaining established business objectives.

The purpose of the Airgas, Inc. Executive Bonus Plan (the "Plan") is to align management's efforts with the strategic goals of the Company through competitive annual incentive opportunities. The Plan's performance period originally in effect for the period April 1, 2015 to March 31, 2016 will instead cover the period April 1, 2015 through December 31, 2015 (the "Short Plan Year").  The Plan will thereafter be effective on a calendar year basis, beginning with the period from January 1, 2016 through December 31, 2016 (the "Plan Year") and will automatically renew on each January 1 unless earlier terminated by the Governance and Compensation Committee of the Board of Airgas, Inc., or such other committee of the Board as may be responsible for executive compensation issues (the "Committee").  All references herein to Plan Year shall include the Short Plan Year unless otherwise specified.

The Executive Officers of the Company ("Participants") are eligible for payments of Awards under the Plan provided that such Participants are employed by the Company on the last day of  the Plan Year (unless previously terminated due to retirement, disability or death as more fully described herein). For purposes of the Plan, Executive Officers of the Company are defined as those employees who constitute "officers" of the Company for the purposes of Section 16 of the Securities Exchange Act of 1934, and any other employee of the Company deemed to be a "covered employee" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, as such section may be amended.

Participants in the Plan in respect of each Plan Year will be eligible for a cash incentive award in respect of such Plan Year (the "Award") based on the achievement of predetermined goals as set forth in the Performance Measurement section of the Plan. Participants will have an assigned Award target equal to a specific percentage of salary earned during the Plan Year. For this purpose, salary is defined as the Participant's annual base pay on the last day of the Plan Year, except where proration is required as a result of partial year participation or when a significant change of duties causes a significant change in the Participant's annual base pay, as determined by the Committee. An Award target is determined based on the Participant's position in the organization. The maximum Award that may be paid in any single year to any Participant is $2,000,000.

All Awards payable shall be based solely upon the achievement of specific performance targets based on one or more of the following criteria:

○	Earnings per share (EPS)

○	Return on capital (ROC)

○	Earnings before interest, taxes, depreciation, amortization and special gains (charges) (Adjusted EBITDA)

○

Sales

○	Return on equity (ROE)

○	After tax cash flow (ATCF)

○	Free cash flow (FCF)

○	Operating expense as a percentage of sales

○	Gross profit

○	Days purchases outstanding (DPO)

○	Operating income (OI)

○	Days sales outstanding (DSO)

○	Working capital

○	Transactions accuracy

Final Award payments will vary based on the level of achievement measured against pre-determined performance targets. Depending upon a Participant's position and responsibilities, these various performance measures, assessed based on different weightings, will determine the Award.

The Committee will establish the specific performance targets for the Plan within each of the above criteria within 90 days after the beginning of the respective Plan Year.  Of the performance targets originally established in respect of the four quarters covered by the period April 1, 2015 through March 31, 2016, the targets relating to the three quarters covered by the period April 1, 2015 through December 31, 2015 will apply in respect of the Short Plan Year.

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

At the end of each Plan Year, after all financial results have been finalized, the actual Award payment will be determined and the Committee will certify in writing, that the performance goals associated with the Award have been satisfied prior to the payment of the Award. The Award will be paid in cash no later than 75 days following the end of the Plan Year.

The Committee 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 and may amend or terminate the Plan at any time.

Participants who are eligible for the Plan for a portion of the Plan Year will receive a prorated Award based on the base salary earned while they are eligible for the Plan or such other arrangement as agreed upon when hired.

·

New hires

○	Newly hired Participants 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 Participants who transfer from one job or employee status to another, eligibility will depend on their award eligibility before and after transferring.

○	If a Participant transfers from a position that is not Plan eligible to a position that is eligible for an Award under the Plan, the Award will be prorated based on the time in the Plan eligible position. All calculations are done using Plan Year-end financial data.

○	If a Participant transfers from a position that is eligible for an Award under the Plan to a position that is not Plan eligible, the Award will be prorated based on the length of time in the Plan eligible position. All calculations are done using Plan Year-end financial data.

○

If a Participant 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 a Participant's Award, the Award calculation will be based on the pro-rated time spent in each position.  All calculations will be done using Plan Year-end data. Accountabilities must be separately established and assessed for each position.

·	Promotions

○	If a Participant is promoted during the Plan Year, new accountabilities must be established to reflect the new position.

·	Terminations

○	Employees who are not employed by the Company on the last day of the Plan Year are not deemed to be Participants and therefore are ineligible to receive any Award under the Plan, except for the following circumstances:

○	Participants who retire, become disabled or die during the Plan Year will be eligible for a prorated Award. The Award will be calculated from the date when they become eligible, normally the beginning of the Plan Year to the date of retirement, disability or death.

·	Leave of absence

○

If a Participant is on a leave of absence at the end of the Plan 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 Participant was actively working during the Plan Year. The calculation will be made using Plan Year-end financial data. The Award payment will be made in the next regularly scheduled payroll cycle at the end of the Participant's first month of employment following his or her return from leave of absence.

○

If a Participant is on a leave of absence during the Plan Year and returns during the Plan Year, he or she will be eligible for an Award. Any Award paid will be prorated based upon the length of time a Participant was actively working during the Plan Year. The calculation will be made using Plan Year-end financial data.

 

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

In the event that the Company declares bankruptcy, the 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.

Payment of an Award under the Plan does not imply a contractual agreement to extend or continue employment of a Participant beyond receipt of the Award.

                                                                                                                                                                                                                                                                                                                                                            Exhibit 10.2

 

Airgas, Inc. Management Bonus Plan

For Corporate Management

 

Acknowledgement and Agreement

I acknowledge that I have received and reviewed the Airgas, Inc. Management Bonus Plan for Corporate Management (the "Plan") together with Appendix A, and agree to the terms and conditions of the Plan.  I also understand and agree that the terms and conditions of the Plan supersede and replace any and all prior plans, agreements and understandings concerning the Company's bonus plans, bonus policies or schedules, and exclusively determine my ability to earn bonuses as an associate of the Company.  I acknowledge that the Company may terminate or make changes to this Plan, its bonus policies or schedules at any time, but such changes must be in writing to be effective.  Finally, I understand and agree that nothing in this Plan is intended to or shall modify my status as an at-will associate of the Company. I understand that my employment may be terminated by me or the Company at any time, with or without cause and with or without advance notice.

______________________________________________

Airgas, Inc. Management Bonus Plan

For Corporate Management

Pay for Performance Relationship

The basis of pay for performance starts with the target awards, and the assumption that if the target is met for any given measure, payment will be made at 100% of the target. The next step is to take into consideration that the targets have some stretch built into them and an achievement that falls below 100% still represents good performance. How much below the 100% level achievement can fall and still be rewarded is dependent on the measure. Similarly, how large a payment is above the 100% level is also dependent on the measure.

The measures used to determine bonus amount for participants in the Plan are: Airgas Consolidated Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), Return on Capital (ROC) and individual performance.

EBITDA is defined as revenue minus expenses excluding interest, income taxes, depreciation and amortization. EBITDA is the key profit measurement at Airgas and thus serves as the most comprehensive metric for our performance.  Seventy Percent (70%) of the Bonus potential will be based on EBITDA.

ROC measures operating income as a percentage of Average Capital Employed. Fifteen Percent (15%) of the Bonus potential will be based on ROC.

	Capital Employed is defined as total Assets less non-interest bearing Current Liabilities.

	Average Capital Employed is the average of the Capital Employed at the beginning of the fiscal year and the end of each month during the fiscal year.

Individual Performance is a measure of how well you met the objectives agreed between you and your manager at the start of the fiscal year. In aggregate, individual performance accounts for 15% of the Plan Period Bonus potential.

Each objective is weighted so that the maximum achievement percentage for all accountabilities equals 100%. For Participants who also participate in the Airgas, Inc. Executive Bonus Plan (the "Executive Plan"), the 15% of their bonus potential in respect of a Plan Period that is based on individual performance will be determined and paid under the Plan, and the remaining 85% of their bonus potential in respect of a Plan Period will be determined and paid under the Executive Plan.

For each Plan Period, the following charts outline the relationships that apply between the achievement of a particular financial goal and the payout associated with the achievement of that goal.

 

 EBITDA: No payment until reaching at least 90% achievement of target, maximum payment 140%.

 ROC: No payment until reaching at least 90% achievement of target, maximum payment 150%

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