CHANGE OF CONTROL AGREEMENT
This is a CHANGE OF CONTROL AGREEMENT ("Agreement") dated March
17, 1999, between Airgas, Inc., a Delaware corporation (the "Company"), and
Xxxxxxx X. Xxxx, Xx. (the "Executive").
BACKGROUND
Executive is the current President, COO 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
1.1 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
2.1 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.
2.2 Certain Definitions. For purposes of this Agreement:
2.2.1 A "Change of Control" shall mean any one or more of the
following:
2.2.1.1 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;
2.2.1.2 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
2.2.1.3 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.
2.2.2 A "Potential Change of Control" shall be deemed to have occurred
if:
2.2.2.1 The Company enters into an agreement, the consummation of which
would result in the occurrence of a Change of Control of the Company;
2.2.2.2 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;
2.2.2.3 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
2.2.2.4 The Board adopts a resolution to the effect that, for purposes of
this Agreement, a "Potential Change of Control" has occurred.
2.2.3 A "Triggering Event" means a Potential Change of Control or a
Change of Control.
2.3 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.
2.3.1 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:
2.3.1.1 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
2.3.1.2 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.
2.3.2 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.
2.4 Cause Defined. Executive's termination of employment with the Company
shall be for "Cause" if one or more of the following events occur:
2.4.1 Executive's willful misconduct or gross negligence in the
performance of Executive's duties;
2.4.2 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
2.4.3 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.
2.5 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
3.1 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:
3.1.1 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.
3.1.2 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.
3.1.3 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.
3.2 Reduction of Benefits.
3.2.1 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.
3.2.2 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.
3.3 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).
3.4 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.
3.5 Funding.
3.5.1 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.
3.5.2 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.
3.5.3 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.
3.6 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.
3.7 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
4.1 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.
4.2 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 Xxxxxx-Xxxxxxx Xxxx
Xxxxxx, XX 00000-0000
Attention: Corporate Secretary
To Executive: Xxxxxxx X. Xxxx, Xx.
0000 Xxxxxxx Xxxx
Xxxxxxxxxx, 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.
4.3 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.
4.4 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.
4.5 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.
4.6 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:
Xxxxxxx X. Xxxx, Xx. AIRGAS, INC.
Signature: /s/Xxxxxxx X. Xxxx, Xx. By: /s/Xxxxx XxXxxxxxxx
Xxxxxxx X. Xxxx, Xx. Xxxxx XxXxxxxxxx
Date: March 17, 1999 Title: Chairman and CEO
Date: March 17, 1999
