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To: Corporate Office Bonus Eligible Associates
From: Bill Rice
Date: May 23, 2000
Subject: Fiscal Year 2001 Bonus Plan
Executive Summary
I am pleased to announce the Airgas Fiscal Year 2001 Bonus Plan.
The plan is similar to the Fiscal Year 2000 plan, but with some
modifications.
The changes to the plan have resulted in a plan that better aligns
the bonus program with our strategic plans and the emphasis placed
on the need to grow sales in general and sales of Radnor brand
products in particular.
After reviewing the plan, please sign the last page, the "Associate
Acknowledgment," and return it to your Human Resources Department.
This acknowledgment is required for your participation in the plan.
What's Different From Last Year's Plan
3. What We Are Eliminating:
O Cap on bonus plan payouts - this now means that your bonus plan
payout is only limited by your achievements and that of Airgas.
O Requirement that FY '01 EPS exceed that of FY '00 before a
payout can be made.
O The 120% achievement cap placed on debt repayment.
4. What We Are Changing:
O Airgas Consolidated Financial Factor to one measurement,
Earnings Per Share (EPS). This is being done to simplify the bonus
plan and to focus on one critical measurement.
O The "One Airgas" factors to those that are critical to our
success in FY '01. These factors will now be incorporated into
Accountabilities and will no longer be a separate portion of the
Plan. This also means that the Accountabilities portion of the bonus
plan will have a weighting of 45% (it had been 35% during FY `00).
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O Participation criteria. You must be an active associate at
time of payment to be eligible for a bonus. For this past year, the
participation criteria was to be an active associate as of the end
of the fiscal year.
See the applicable section of the Bonus Plan for details about these
changes.
The Plan
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How much can I earn? How does the plan actually work?
Based on your position, a bonus eligible associate has the
opportunity to earn a percentage of his or her annual base salary
(called your "targeted bonus opportunity"). This bonus is based
upon the extent to which you and Airgas achieve certain results by
the end of the fiscal year. Depending on the combined performance
of these two, your bonus can be more or less than your targeted
bonus opportunity. Any bonus earned is paid annually and is paid no
later than 75 days following the end of the fiscal year.
Financial calculations are done using year-end data and taking into
account acquisitions, divestitures and other unusual non-recurring
events that occur during the fiscal year.
The following sections explain the two bonus categories (Airgas
Consolidated Financials and Accountabilities). See Exhibit I for
additional administration information about the plan. If you have
questions after reading about the plan, please talk to your Manager.
Airgas Consolidated Financials
Overall Weighting - 55% of Your Bonus Opportunity
The factor measured under this portion of the plan and its
weightings is:
Factor Weighting
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EPS 100%
How do I calculate my bonus under this portion of the bonus plan?
Achievement of this portion of the plan will be based on EPS (after
bonus accruals). The following chart shows the percentage of your
bonus you earn based on different EPS amounts achieved.
We changed this factor to one measurement, Earnings Per Share (EPS).
This was done so that all of our efforts are focused on the
measurement that has the greatest impact on our stock price.
Additionally, it simplifies this portion of the plan since we now
have only one measurement whereas in the past we had three.
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EPS % Payout
less than $0.53 0%
$0.53 - $0.54 10%
$0.55 - $0.56 15%
$0.57 - $0.58 25%
$0.59 50%
$0.60 100%
$0.61 105%
$0.62 110%
$0.63 120%
$0.64 130%
$0.65 140%
$0.66 150%
For each penny of EPS above $0.66, the bonus payout will increase
10%.
Assume the associate has a targeted bonus opportunity of $5,000 and
EPS at the end of the fiscal year is $0.60, then
$0.60 EPS = 100% Achievement Percentage
55% x $5,000 x 100% = $2,750 (Bonus payment for this factor)
Accountabilities
Overall Weighting - 45% of Your Bonus Opportunity
The weighting for this portion of the Plan has increased from 35% in
FY '00 to 45% in FY `01 since the "One Airgas" category has been
merged into this section.
Your manager will meet with you to develop a list of measurable
objectives that you and he or she agree are important to your
personal development needs and/or support our goal of becoming "One
Airgas."
All participants in this plan who can effect (either directly or
indirectly) the achievement of the following "One Airgas"
initiatives must have them included as part of their
Accountabilities:
O Radnor brand product sales must be at least 10% of the
Company's total hardgood sales for fourth quarter FY `01.
O All required vendor code and part number standardization must
be completed and approved within the time frames specified.
When discussing your accountabilities with your manager, you and
your manager will agree upon a weighting for each Accountability.
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Each Accountability must be given a weighting of at least 20%.
Therefore, you can have no more than five Accountabilities. The
total of all weightings must equal 100%. All accountabilities
should be clearly measurable and should represent "stretch" goals
that are attainable yet challenging.
Included as Exhibit II is an Accountabilities template [not filed].
The template includes the worksheet used to document your
Accountabilities.
What happens if the "One Airgas" factors do not apply to my
position?
Your manager will then replace one or both of these factors
(depending on which factors do not apply to you) and replace them
with objective, measurable Accountabilities that will apply to
everyone in your department.
How do I calculate my bonus under this portion of the plan?
Your manager will determine the degree to which you accomplished
each of your Accountabilities based on the measurement criteria
established with you at the beginning of the fiscal year. For the
"One Airgas" factors, achievement will be based on whether or not
Radnor brand sales are at least 10% of Airgas' hardgood sales for
the fourth quarter in FY `01.
The maximum achievement percentage for any Accountability, either
individually or as a group, is 100%. The extent to which you
achieved/completed your first Accountability is then multiplied by
its weighting. This is repeated for the remaining Accountabilities.
The product (results) from each Accountability is added together.
This sum is then multiplied by 45% of your target bonus opportunity
to determine the bonus earned under this portion of the plan.
For example, assume an associate has been assigned the following
Accountabilities:
Accountability I: All required vendor code and part number
standardization must be completed and approved within the time
frames specified.
Weighting: 40%
Accountability II: Radnor brand products must be at least 10% of the
company's hardgood sales for fourth quarter FY '01.
Weighting: 30%
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Accountability III: Will develop a model to improve the pricing and
profitability analysis on potential new business by December 30,
2000.
Weighting: 30%
At the end of the year, assume the associate has achieved:
Accountability I = 100% x 40% (weighting) = 40%
Accountability II = 80% x 30% (weighting) = 24%
Accountability III = 100% x 30% (weighting) = 30%
40% + 24% + 30% = 94%
Assume that the associate has a target bonus opportunity of $5,000:
45% x $5,000 x 94% = $2,115 (Bonus payment for this factor)
How It All Works
If you have any questions about the Plan, please talk to your
Manager. He or she will be happy to answer your questions.
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EXHIBIT I
Administration
O An associate must be hired by December 31 of the current fiscal
year (i.e., December 31, 2000) to be eligible to participate in this
plan for the current fiscal year. A new hire's bonus opportunity
will be pro-rated to reflect the number of months he or she was an
associate of Airgas during the current fiscal year.
O An associate must be an active employee at time of payment to
be eligible for a bonus. Payments will be made no later than 75 days
following the end of the fiscal year.
O If an associate transfers from one Airgas company to another,
his or her bonus calculation is based on the pro-rated time spent
with each company. All calculations are done using year-end
financial data. Accountabilities must be established by each
company and performance will be measured against each group of
accountabilities separately.
O If an associate is promoted during the fiscal year, new
Accountabilities must be established to reflect the new position.
O If an associate is moved from a bonus eligible position to a
non-bonus eligible position (or vice versa), the bonus calculation
is pro-rated to represent the time worked by the associate as a
bonus eligible employee. All calculations are done using year-end
financial data.
O Bonus calculations are based on an associate's annual salary as
of the last day of the fiscal year. However, if the associate is
promoted (or demoted and the associate has had a reduction in
salary) during the fiscal year, the calculation is done to reflect
the pro-rated time spent in each position. All calculations are
done using year-end financial data.
O If an associate is on a leave of absence at the end of the
fiscal year, he or she will be eligible for a bonus provided that he
or she returns to work as an active employee for at least one month
within 13 weeks of the end of the fiscal year. Any bonus paid will
be pro-rated based upon the length of time an associate was an
active employee during the fiscal year. The calculation will be
made using year-end financial data. The bonus 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 leave of
absence.
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O If an associate is on a leave of absence during the fiscal year
and returns to active status during the year, he or she will be
eligible for a bonus. Any bonus paid will be pro-rated based upon
the length of time an associate was an active employee during the
fiscal year. The calculation will be made using year-end financial
data.
O Accountabilities (individually or as a group) cannot have an
achievement greater than 100%.
O Eligibility for participation is determined by the function
manager (e.g., CFO; CIO; Senior Vice President, Legal and Corporate
Development).
O Participants may be given the opportunity to elect to receive
their bonus in stock, in lieu of cash. (If this option is made
available at a later date, participants will receive additional
information.)
O Nothing in this bonus plan changes an associate's at-will
employment status.
O The Company reserves the right to modify or terminate this
bonus plan or any of its components at its discretion.
O The Nominating and Compensation Committee, or its designate, is
responsible for the administration of this plan.
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Exhibit II -- Accountabilities template [not filed]
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ASSOCIATE ACKNOWLEDGMENT
I acknowledge that I have received a copy of the Fiscal Year 2001 Bonus
Plan. I further acknowledge that I understand that any Fiscal Year 2001
bonus I may be eligible for will be determined by the provisions of this
bonus plan.
_______________________ ______________________
Associate Printed Name Date
_______________________ ______________________
Associate Signature Airgas Company
