CHANGE OF CONTROL AGREEMENT
This is a CHANGE OF CONTROL AGREEMENT ("Agreement") dated
January 3, 2000, between Airgas, Inc., a Delaware corporation (the
"Company"), and Xxxxx X. Xxxxxx (the "Executive").
BACKGROUND
Executive is the current Chief Financial Officer of the
Company. The Board of Directors of the Company (the "Board") has
determined it is in the Company's best interest to assure that the
Company will have the continued dedication of Executive,
notwithstanding the possibility, threat or occurrence of a Change of
Control of the Company, as will be defined below. To diminish the
inevitable distraction to Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of
Control, to encourage Executive's full attention and dedication to the
Company currently and in the event of any Change of Control, and to
provide Executive with compensation arrangements upon a Change of
Control that provide Executive financial security and that are
competitive with peer corporations of the Company, the Company and
Executive desire to enter into this Agreement that is in the best
interests of the Company and Executive.
NOW, THEREFORE, intending to be legally bound, and in
consideration of the mutual promises and representations set forth in
this Agreement, the Company and Executive agree as follows:
ARTICLE I - TERM OF AGREEMENT
Term. The term of this Agreement shall commence as of the date
hereof, and shall terminate upon the earlier of (i) Executive's
termination of employment with the Company for any reason, or (ii) the
later of (A) date which is three years following the date on which a
Change of Control, as defined in Section 2.2, occurred; or (B) the
date as of which funding is required under 3.5.2 following a
Standstill Agreement provided, however, that the Agreement shall
remain in effect until Executive (or Executive's beneficiary if
Executive is not alive) has received any and all amounts to which
Executive is entitled under Article III, if any.
ARTICLE II - TERMINATION OF EXECUTIVE'S EMPLOYMENT
Change of Control Required. No amounts or benefits shall be paid or
become payable to Executive under this Agreement unless a Change of
Control, as defined in Section 2.2, occurs.
Certain Definitions. For purposes of this Agreement:
A "Change of Control" shall mean any one or more of the following:
As a result of a tender offer, stock purchase, other stock
acquisition, merger, consolidation, recapitalization, reverse split,
sale or transfer of any asset or other transaction any person or group
(as such terms are used in and under Section 13(d) of the Securities
Exchange Act of 1934 (the "Exchange Act")) other than the Company, any
affiliate, or any employee benefit plan of the Company or an
affiliate, shall become the beneficial owner (as defined in Rule 13-d
under the Exchange Act) directly or indirectly of securities of the
Company representing 20% or more of the combined voting power of the
Company's then outstanding securities; providing, however, that this
provision shall not apply to Xxxxx XxXxxxxxxx ("XxXxxxxxxx"), unless
and until XxXxxxxxxx, together with all affiliates and associates,
becomes the beneficial owner of 30% or more of the combined voting
power of the Company's then outstanding securities;
Stockholders approve the consummation of any merger of the Company or
any sale or other disposition of all or substantially all of its
assets, if the Company's stockholders immediately before such
transaction own, immediately after consummation of such transaction,
equity securities (other than options and other rights to acquire
equity securities) possessing less than 50% of the voting power of the
surviving or acquiring corporation; or
A change in the majority of the individuals who constitute the Board
occurs during any period of two years for any reason without the
approval of at least a majority of directors in office at the
beginning of such period.
A "Potential Change of Control" shall be deemed to have occurred if:
The Company enters into an agreement, the consummation of which would
result in the occurrence of a Change of Control of the Company;
Any person (including the Company) publicly announces an intention to
take or to consider taking actions which if consummated would
constitute a Change of Control of the Company;
Any person, other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or a corporation owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company, who is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 10% or more of
the combined voting power of the Company's then outstanding
securities, increases his beneficial ownership of such securities by
5% or more of the combined voting power of the Company's then
outstanding securities on the effective date of this Agreement;
provided, that this Section 2.2.2.3 shall not apply to an increase in
ownership by XxXxxxxxxx; or
The Board adopts a resolution to the effect that, for purposes of this
Agreement, a "Potential Change of Control" has occurred.
A "Triggering Event" means a Potential Change of Control or a Change
of Control.
Termination of Executive's Employment Entitling Executive to Benefits.
A termination of Executive's employment In Connection With a Change of
Control (as hereinafter defined), for any reason set forth in this
Section 2.3 shall entitle Executive to the amounts and benefits set
forth in Section 3.1. Such termination shall be considered "In
Connection With a Change of Control" if such termination occurs (i)
within three years following a Change of Control or (ii) following a
Potential Change of Control but before an actual Change of Control,
provided the Potential Change of Control results in a Change of
Control within one year following the Potential Change of Control.
Voluntary Termination for Good Reason. Executive may notify the
Company of Executive's intention to terminate employment with the
Company for Good Reason, as hereinafter defined, In Connection With a
Change of Control. The Company shall have 30 days to cure the defects
stated in such notice that would give rise to a termination for Good
Reason. If the Company has not cured all such defects at the end of
that 30-day period, Executive may terminate employment with the
Company effective, for purposes of this Agreement, as of the date that
Executive provided notice to the Company pursuant to the first
sentence of this Section 2.3.1, and Executive shall be entitled to the
amounts and benefits set forth in Section 3.1. For purposes of this
Agreement, "Good Reason" shall mean any of the following:
Any change in Executive's total compensation and benefits package from
the Company that, in the aggregate, materially decreases Executive's
total compensation. Such changes include, but are not limited to, a
decrease in Executive's annual base salary, a decrease in any
incentive compensation opportunity, a decrease in any material benefit
plan, program or policy in which Executive is participating at the
time of a Triggering Event, or the taking of any action by the Company
that would adversely affect Executive's participation in or materially
reduce Executive's opportunity to receive benefits under any such
benefit plan, program or policy or that would deprive Executive of any
material fringe benefit enjoyed by Executive at the time of a
Triggering Event; provided, however, that no single decrease shall be
determinative, but rather the aggregate of all such decreases and any
increases in compensation or benefits shall determine whether there
has been a material decrease in Executive's total compensation and
benefits package; or
Executive's relocation to any location more than 35 miles from the
location at which Executive performed his duties prior to a Triggering
Event, except for required travel by Executive on the Company's
business to an extent substantially consistent with Executive's
business travel obligations prior to a Triggering Event.
Involuntary Termination Other Than for Cause. If the Company
terminates Executive's employment other than for Cause, as defined in
Section 2.4, In Connection With a Change of Control, Executive shall
be entitled to the amounts and benefits set forth in Section 3.1.
Cause Defined. Executive's termination of employment with the Company
shall be for "Cause" if one or more of the following events occur:
Executive's willful misconduct or gross negligence in the performance
of Executive's duties;
Executive's commission of any act of fraud or embezzlement against the
Company or Executive's commission of a felony or any other offense
involving moral turpitude; or
Executive's unauthorized dissemination of confidential information,
observations, and data concerning the business plans, financial data,
customer lists, trade secrets and acquisitions strategies of the
Company and its subsidiaries which has a material adverse effect on
the Company or its subsidiaries.
No Other Amounts Payable. Except as provided in Section 2.3, no
amounts or benefits shall be paid or become payable to Executive under
this Agreement.
ARTICLE III - BENEFITS
Benefits. If Executive's employment with the Company terminates in a
manner described in Section 2.3, the Company shall pay Executive the
following amounts and provide to Executive the following benefits,
subject to Sections 3.3:
Cash Payment. As soon as practicable, but not later than 60 days
following the later of (i) Executive's termination of employment, or
(ii) the Change of Control, the Company shall make a lump sum payment
to Executive equal to three times the sum of (x) and (y), as described
immediately hereafter. For this purpose, (x) equals the greater of
Executive's annual base salary as in effect (a) immediately prior to
Executive's termination, or (b) at the time a Triggering Event
occurred, and (y) equals the potential bonus amount determined for
Executive under the Company's bonus plan for the fiscal year of the
Company in which a Triggering Event occurred (or, if no such bonus
amount has been determined for any such fiscal year, the immediately
preceding fiscal year of the Company) as if 100% of plan established
pursuant to such bonus plan were achieved and the maximum level of the
discretionary portion were achieved.
Health and Welfare Benefits. For a period of three years following
Executive's termination of employment, the Company shall continue to
provide Executive with medical, dental, prescription drug, life,
accidental death, and disability (short-term and long-term) insurance
benefits at the same level and cost to Executive as were in effect
immediately prior to Executive's termination. If the Executive's
employment terminates after a Potential Change of Control and no
Change of Control occurs within one year of the Potential Change of
Control, such benefits shall continue only until the expiration of
such one-year period. However, the above benefits shall terminate if
Executive is entitled to comparable coverage from a subsequent
employer, to the extent permitted under Code section 4980B. The
Executive and his dependents shall continue to receive or be eligible
for benefits under the Company's Scholarship and Tuition Reimbursement
Programs as if the Executive remained employed by the Company for the
remainder of the relevant academic year(s) in which the Executive's
employment terminates.
Stock Options and Restricted Stock. All stock options and restricted
stock grants awarded to Executive under any stock option or stock
grant plans of the Company shall become fully vested upon a Change of
Control and, notwithstanding any provision of any such option plan to
the contrary, any stock option shall remain exercisable until that
option's expiration date, determined without regard to Executive's
termination of employment.
Reduction of Benefits.
Reduced Payment. If any payment or benefit provided to Executive by
the Company pursuant to this Agreement or otherwise (the "Payment")
shall be determined to be an "Excess Parachute Payment," (as defined
in Code section 280G(b)(1)), that would be subject to the excise tax
imposed by Code Section 4999, then the aggregate present value of
amounts or benefits payable to Executive pursuant to this Agreement
(the "Agreement Payments") shall be reduced (but not below zero) to
the Reduced Amount. The "Reduced Amount" shall be an amount expressed
in present value that maximizes the aggregate present value of
Agreement Payments without causing any payments or benefits hereunder
to be an Excess Parachute Payment. Anything to the contrary
notwithstanding, if the Reduced Amount is zero and it is determined
further that any payment from the Company to Executive that is not an
Agreement Payment would nevertheless be an Excess Parachute Payment,
then the aggregate present value of Payments that are not Agreement
Payments shall also be reduced (but not below zero) to an amount, if
any, if the present value of such lesser amount maximizes the
aggregate present value of Payments to Executive on an after-tax
basis, taking into account income and excise taxes under section 1 and
section 4999 of the Code. For purposes of this Section 3.2 present
value shall be determined in accordance with section 280G(d)(4) of the
Code.
Determination of Agreement Payments. All determinations required
under this Section 3.2 shall be made by a national accounting firm
retained by the Company at its own expense. The accounting firm shall
provide the Company and the Executive with a report and supporting
calculations within 15 business days of the date Executive's
employment with the Company terminates or such earlier time as is
requested by the Company. In addition, the accounting firm shall
provide an opinion to Executive that the Executive has substantial
authority not to report any excise tax on Executive's federal income
tax return with respect to the Agreement Payments. Any such
determination by the accounting firm shall be binding upon the Company
and Executive. Executive shall determine which and how much of the
Agreement Payments or Payments, as the case may be, shall be
eliminated or reduced consistent with the requirements of this Section
3.2, provided that, if Executive does not make such determination
within 10 business days of the receipt of the calculations from the
accounting firm, the Company shall elect which and how much of the
Agreement Payments or Payments, as the case may be, shall be
eliminated or reduced consistent with the requirements of this Section
3.2 and shall notify Executive promptly of such election. Within 10
business days thereafter, the Company shall pay to or distribute to or
for the benefit of Executive such amounts are then due to Executive
under this Agreement.
Deferral of Benefits. If the Company, based on written advice of
reputable counsel, a copy of which shall be provided to Executive,
determines that in the aggregate any benefit or payment under this
Agreement and under any other arrangement or agreement between the
Company and Executive would not be deductible for federal income taxes
by the Company solely as a result of the application of section 162(m)
of the Code, the payment of any amounts otherwise payable under this
Agreement in the then current year shall be reduced, but not below
zero, by the amount of any such non-deductible amounts. The Company
shall pay the entire non-deductible amount to Executive at the
earliest possible time or times that such amounts (or portions
thereof) may be paid to Executive without such amounts being non-
deductible under Code section 162(m), along with interest accrued on
such amounts since the date they would have been payable but for this
Section 3.3 calculated at the applicable federal short-term rate. If
any other agreement between the Company and Executive provides for the
deferral of payments from the Company to Executive solely as a result
of the application of Code section 162(m), the deferral provisions in
this Agreement shall prevail and all deferrals shall be made from
amounts payable under Section 3.1 of this Agreement before any amounts
may be deferred under any other arrangements solely as a result of the
application of Code section 162(m).
Withholding Taxes. The Company shall withhold from any payments or
benefits made under this Agreement all applicable federal, state and
local income and employment taxes, as well as any other amounts
required to be withheld under any law.
Funding.
Required Funding. The Company shall not be required to fund in
advance the amounts and benefits payable under this Agreement until a
Triggering Event occurs. Upon the occurrence of a Triggering Event,
the Company shall immediately contribute an amount to an irrevocable
grantor trust, of which Executive is the beneficiary and a third-party
is the trustee (a "Trust"), equal to 120% of the amounts that could
become payable to Executive under this Agreement.
Standstill Agreements. Notwithstanding Section 3.5.1, if a
transaction is approved by the Board, including one that would
constitute a Change of Control, and the transaction is accompanied by
a Board approved standstill agreement that provides for (i) no further
acquisition of Company securities by the shareholder(s) entering into
the agreement and (ii) management autonomy for the Company's
management at the time the agreement is executed (a "Standstill
Agreement"), the Board shall determine whether to contribute amounts
to a Trust to fund benefits payable under this Agreement at the time
the Standstill Agreement is executed. The Company shall fund such a
Trust, however, if after such a transaction and the execution of a
Standstill Agreement (i) the terms of the Standstill Agreement,
including the management autonomy provision, are violated or (ii) the
Company terminates any of its executive officers without Cause, as
defined in Section 2.4. If a Trust is to be funded under this Section
3.5.2, the Company shall immediately contribute an amount to the Trust
equal to 120% of the amounts that could become payable to Executive
under this Agreement.
Payments from Trust and Reversions. To the extent any provision of
this Agreement provides for a payment from the Company to Executive,
the Company may direct the trustee of a Trust created pursuant to this
Section 3.5 to make such payment to the extent that any remaining
assets in the Trust are reasonably expected to be sufficient for any
additional amounts or benefits that may be due Executive from the
Company under this Agreement. No amount in a Trust may revert to the
Company until 90 days after the expiration of the Term of this
Agreement. Notwithstanding the above, (i) if the Triggering Event
causing a Trust to be funded under Section 3.5.1 is a Potential Change
of Control and no Change of Control occurs within one year of the
Potential Change of Control, amounts in the Trust may revert to the
Company at the expiration of such one-year period, and (ii) if
Executive has brought a lawsuit against the Company claiming amounts
or benefits under this Agreement, no amounts from the Trust shall
revert to the Company while such claim is pending.
Legal Expenses. If Executive determines in good faith to retain legal
counsel and/or to incur other reasonable costs or expenses in order to
enforce any or all of Executive's rights under this Agreement, the
Company shall pay all such attorneys' fees, costs and expenses
incurred in connection with non-frivolous applications to interpret or
enforce Executive's rights. In addition, during the pendency of any
such controversy or claim, the Company will continue to pay Executive,
with the customary frequency, the greater of Executive's base pay as
in effect immediately prior to the Triggering Event or immediately
prior to Executive's termination of employment, and, to the extent
permitted under law, to provide the Executive with the same benefits
Executive was receiving immediately prior to the Triggering Event
until the controversy or claim finally is resolved. These payments
and the provision of benefits hereunder shall be in addition to, and
not in derogation or mitigation of any other payment or benefit due
Executive under this Agreement.
No Duty of Mitigation. The Executive shall have no duty to seek new
employment after his employment with the Company terminates or to take
any other actions which could reduce the amounts the Company is
obligated to pay or reduce the benefits the Company is required to
provide under this Agreement.
ARTICLE IV - MISCELLANEOUS
Modification of This Agreement. Executive acknowledges and agrees
that no one employed by or representing the Company has any authority
to make oral statements which modify, waive or discharge, in any
manner, any provision of this Agreement. Executive further
acknowledges and agrees that no provision of this Agreement may be
modified, waived or discharged unless agreed to in writing, and signed
and executed by Executive and the Board, or its delegate. Executive
acknowledges and agrees that in executing this Agreement Executive has
not relied upon any representation or statement made by the Company or
its representatives, other than those specifically stated in this
Agreement.
Notices. All notices required or permitted hereunder shall be made in
writing by hand-delivery, certified or registered first-class mail,
facsimile transmission or air courier guaranteeing overnight delivery
to the other party at the following addresses:
To Company: Airgas, Inc.
000 X. Xxxxxx-Xxxxxxx Xxxx
Xxxxxx, XX 00000-0000
Attention: Corporate Secretary
To Executive: Xxxxx X. Xxxxxx
0000 Xxxxxx Xxx Xxxxx
Xxxxxxx, XX 00000
or to such other address as either of such parties may designate in a
written notice served upon the other party in the manner provided
herein. All notices required or permitted hereunder shall be deemed
duly given and received when delivered by hand, if personally
delivered; on the fifth day next succeeding the date of mailing if
sent by certified or registered first-class mail, when received if
sent by facsimile transmission, and on the next business day, if
timely delivered to an air courier guaranteeing overnight delivery.
Employment Status. Unless an agreement between the Company and the
Executive provides otherwise, the Company and Executive acknowledge
that, notwithstanding this Agreement, the employment of Executive by
the Company is "at will," and the Company may terminate Executive's
employment with the Company at any time, although certain terminations
as specified in Article II will entitle Executive to amounts and
benefits from the Company.
Other Arrangements Not Affected. Except as otherwise provided herein,
this Agreement shall not have any effect on any other benefit plan,
arrangement or agreement under which Executive currently participates,
has in the past participated, or may in the future participate.
Applicable Law. The parties have agreed that this Agreement shall be
governed by, construed and enforced in accordance with the laws of the
Commonwealth of Pennsylvania without giving effect to conflict of law
principles.
Headings. The headings used throughout this Agreement have been used
for convenience only and do not constitute matter to be considered in
interpreting this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the dates indicated below:
Xxxxx X. Xxxxxx AIRGAS, INC.
Signature: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxxx XxXxxxxxxx
Xxxxx X. Xxxxxx Xxxxx XxXxxxxxxx
Date: 1/4/00 Title: Chairman and Chief Executive
Officer
Date: 1/14/00
