-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LblSR6ICEzehhlyJh8BvRdPLi+ckRXop2jmmOAdSYiSvipR3rN93m0eS3umYC4+F hSxRyo5PuDGsQak8DK0UCg== 0000804212-96-000007.txt : 19960613 0000804212-96-000007.hdr.sgml : 19960613 ACCESSION NUMBER: 0000804212-96-000007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960612 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIRGAS INC CENTRAL INDEX KEY: 0000804212 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-CHEMICALS & ALLIED PRODUCTS [5160] IRS NUMBER: 560732648 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09344 FILM NUMBER: 96579985 BUSINESS ADDRESS: STREET 1: 100 MATSONFORD RD STE 550 STREET 2: 5 RADNOR CORPORATE CENTER CITY: RADNOR STATE: PA ZIP: 19087 BUSINESS PHONE: 2156875253 MAIL ADDRESS: STREET 1: 5 RADNOR CORPORATE CENTER, STE 550 STREET 2: 100 MATSONFORD ROAD CITY: RADNOR STATE: PA ZIP: 19087 10-K 1 FORM 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________ Form 10-K [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 1996 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission File No. 1-9344 AIRGAS, INC. (Exact name of registrant as specified in its charter) Delaware 56-0732648 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5 Radnor Corporate Center, Suite 550 100 Matsonford Road, Radnor, Pennsylvania 19087-4579 (Address of principal executive offices) (Zip Code) (610) 687-5253 (Registrant's telephone number, including area code) Securities Registered Pursuant to Section 12 (b) of the Act: Name of Each Exchange Title of Each Class on Which Registered ______________________________________ _____________________ Common Stock, par value $.01 per share New York Stock Exchange Securities registered pursuant to Section 12 (g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO _________ ________ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the 54,109,515 shares of voting stock held by non-affiliates of the registrant on May 31, 1996 was $1,129.5 million. For purposes of this calculation, only executive officers and directors were deemed to be affiliates. The number of shares of Common Stock outstanding as of May 31, 1996 was 64,297,662. DOCUMENTS INCORPORATED BY REFERENCE The Company's Proxy Statement for the Annual Meeting of Stockholders to be held August 5, 1996 is partially incorporated by reference into Part III. Those portions of the Proxy Statement included in response to Item 402(k) and Item 402(l) of Regulation S-K are not incorporated by reference into Part III. 2 AIRGAS, INC. TABLE OF CONTENTS PART I ITEM PAGE NO. _____ ________ 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . .12 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . .12 PART II 5. Market for the Company's Common Stock and Related Stockholder Matters . 13 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . 13 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . 25 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 25 PART III 10. Directors and Executive Officers of the Company . . . . . . . . . . . . 25 11. Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . 25 12. Security Ownership of Certain Beneficial Owners and Management. . . . . 25 13. Certain Relationships and Related Transactions. . . . . . . . . . . . . 25 PART IV 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K . . . . 25 3 PART I ITEM 1. BUSINESS. GENERAL Airgas, Inc. ("Airgas" or the "Company") classifies its operations in two business segments: distribution and manufacturing. Sales for Airgas were $838, $688 and $519 million in 1996, 1995, and 1994, respectively. Distribution sales represented 96% of total sales and 93% of the Company's operating income in 1996. Financial information by business segment can be found in note 20 to the Company's consolidated financial statements under Item 8. Financial Statements and Supplemental Data. The distribution business is conducted through approximately 520 locations in 38 states, Canada and Mexico. Principal products distributed include: industrial, medical and specialty gases and a wide selection of name-brand welding equipment, accessories and industrial protective equipment ("hardgoods"), including electrode holders, welding wire, cable lugs and connectors, hard hats, welding helmets, hearing protectors, goggles, face shields, safety glasses, welding machines and electrodes. In connection with the distribution of gases, the Company rents industrial gas cylinders and bulk storage tanks to its customers. Additionally, acetylene gas is manufactured and sold as part of the Company's distribution business. Since its formation, the Company's strategy has been to expand through the acquisition of independent distributors. The Company believes that it is the largest distributor of industrial, medical and specialty gases and related equipment in North America. Manufacturing operations include the production of carbon products, calcium carbide and nitrous oxide. THE DISTRIBUTION BUSINESS Industry Background The industrial gas distribution market is broad and includes customers from most major industries. The Company sells nitrogen, oxygen, argon, helium, acetylene, carbon dioxide, nitrous oxide, hydrogen and welding gases and a variety of medical and specialty gases to a diverse customer base. Gases are distributed and stored in industrial gas cylinders and bulk storage tanks. Hardgoods sold through its distribution network include: protective equipment, such as hard hats, welding helmets, goggles, face shields and protective glasses; welding machines and welding consumables; and accessories, such as electrodes, electrode holders and cable connectors. The United States market for industrial gases is approximately $6.5 billion annually. Sales to major users of industrial gases that have the capacity to accept large bulk shipments or pipeline deliveries are generally serviced directly by industrial gas producers and account for approximately $3.5 billion of such market. Historically, industrial gas producers have focused on this segment of the market, which is capital intensive. The remaining $3.0 billion of annual industrial gas sales are made to small bulk users and cylinder gas customers. These small bulk users and cylinder gas customers are also believed to purchase approximately $3.5 billion of hardgoods annually. Small bulk users and cylinder gas customers are served by a fragmented distribution system of approximately 1,000 distributors, the majority of which are independently owned. The Company concentrates on the small bulk, cylinder gas, welding and protective equipment segment of the 4 market. This segment is less capital intensive, in part, because of the long useful lives of the fixed assets , principally cylinders. Company Strategy Acquisition Program Since May 1986, the Company has acquired over 210 distributors of industrial gas and related equipment. These distributors are organized into five operating divisions with approximately 520 locations in 38 states, Canada and Mexico. The five operating divisions provide the Company with a national distribution network that is unique to the industry. The Company's principal business strategy is to continue to expand its distribution network through a program of acquiring independent distributors. The industrial gas distribution industry continues to undergo a consolidation process which the Company believes will continue to present it with opportunities to acquire industrial gas distributors. In April 1996, the Company acquired IPCO Safety Products Company, a $55 million distributor of industrial safety equipment and supplies, to form the basis for its Industrial Distribution Division ("IDD"). IPCO utilizes a system of regional warehouses and telemarketing centers. The Company's strategy is to acquire additional industrial distribution companies with a focus on increasing same-store sales of new industrial product lines through both the acquired businesses and its existing distribution network. The Company believes that its principal competitive advantages in acquiring distributors are its extensive distribution network, its well-organized acquisition program, flexibility in structuring acquisitions to meet sellers' needs and ability to offer sellers and their employees a continuing management role in a decentralized entrepreneurial environment. In seeking to acquire distributors, the Company competes with industrial gas producers and other independent distributors. The Company has made investments in industrial gas operations in Poland and India. At March 31, 1996, the total investment in these foreign operations was less than 1% of total assets. The Company will continue to evaluate foreign industrial gas opportunities, although its principal focus remains on North American expansion. The Company has financed distributor acquisitions primarily with internally generated funds and debt. The Company has been able to obtain debt financing due, in part, to its ability to generate cash flow from operating activities and the long useful lives and relatively stable market values of the fixed assets, principally cylinders. Operating Policies The Company believes that its operations are best managed at the local level by entrepreneurial, incentive-driven executives with backgrounds principally in the industrial gas industry. The president of each distribution subsidiary is typically a former owner or key employee of the acquired business or an experienced executive recruited by management. The continuity afforded by retaining the key employees of an acquired business combined with local management is essential because the Company's distribution business is local in nature and is dependent upon satisfied repeat customers. 5 Customer Base The majority of the Company's gases are generally stored in bulk tanks at the Company's cylinder fill plants and are pumped into cylinders for distribution to customers or, in the case of bulk customers, in tanker trucks or tube trailers for delivery into bulk tanks at the customer's business location. The Company emphasizes sales to cylinder and small bulk gas customers. The distribution of industrial gases historically has been to customers engaged in the business of welding and metal fabrication. In order to better serve these customers, industrial gas distributors have traditionally sold hardgood items through their distribution branch locations. As certain sectors of the economy have grown, such as the electronics and chemicals industries, and as new applications for gases have developed, the customer base of the gas distribution business has broadened significantly to include businesses in almost every major industry, from medical and high technology to consumer and basic industries. For example, the food and beverage industry uses carbon dioxide and nitrogen; the electronics industry uses oxygen, nitrogen, argon, and hydrogen; the healthcare industry uses oxygen, nitrogen, and nitrous oxide; and the chemical and fiber industries use nitrogen. Specialty gases, which are used in numerous industries and in electronic and laboratory applications, include rare gases, high- purity gases, and blended multi-component gas mixtures. The Company helps service its specialty gas customers through its 22 specialty gas mini-labs which operate in 17 states. The Company anticipates continuing growth in this product area. The principal drivers for market growth include: (1) environmental regulations, such as the Clean Air Act, water testing and pollution remediation and testing and monitoring; (2) quality control services using in-line chromatography and spectrography to analyze samples; and (3) the growth of environmental, research and clinical laboratories. The Company has also concentrated its efforts in the small bulk gas market. The primary gases that the Company sells in bulk are liquid oxygen, nitrogen, argon, and carbon dioxide, and gaseous hydrogen, helium and nitrogen. The Company charges customers rent for the use of bulk tanks and tube trailers which are placed on the customer's property The Company believes there are growth opportunities in marketing to these small bulk customers, which it can serve more effectively than industrial gas producers. The Company has recently undertaken initiatives to further develop its industrial gas customer base to selectively include customers which require large volume supplies of gases, such as nitrogen. For these customers, the Company will enter into a long-term supply contract and will construct an air separation plant near the customer's facility or facilities. The Company has entered into agreements with two customers and is constructing two air separation plants which will begin production during fiscal 1998. In addition, terms related to the agreements provide for additional sales of cylinder gases and supplies. The Company's same-store sales, a comparison of current period sales to the prior period's sales, adjusted for acquisitions, has historically followed the real gross domestic product annual growth rate as published by the Commerce Department. Management believes the Company's broad customer base and geographic diversity help to reduce the adverse effects of an economic downturn on the Company. Also, management believes that the gas portion of its distribution business is somewhat resistant to economic downturns due to 6 the following factors: 1) gases frequently represent a fixed cost of operations that do not necessarily decline with production levels; 2) gases are required for maintenance and renovation activities which tend to increase during an economic downturn; 3) industries less subject to the effects of an economic downturn, such as the medical field, are major purchasers of gases; and 4) gas purchases often represent a small portion of a typical user's overall cost of operation and, therefore, do not typically represent a large cost-cutting item. Management further believes that sales of certain lower margin non-consumable hardgoods equipment, such as welding machines, are more adversely impacted during a downturn in the economy and are typically the fastest to rebound during an economic recovery. Products Gases distributed by the Company include oxygen, nitrogen, hydrogen, argon, helium, acetylene, carbon dioxide, nitrous oxide and specialty gases. In addition to gases, the Company distributes a wide selection of name-brand hardgoods, including electrode holders, welding wire, cable lugs and connectors, hard hats, welding helmets, hearing protectors, goggles, face shields, safety glasses, welding machines and electrodes. Of the Company's fiscal 1996 sales from distribution, approximately 51% represent sales of gases and rentals of cylinders and bulk tanks, and 49% represent hardgood sales. The Company intends to strategically broaden its product line in order to increase sales in existing locations and to take advantage of its distribution network. Recent product line additions have included returnable containers, specialty gases (such as refrigerants and sterilizing gases) and additional hardgoods (such as industrial safety products and coatings). As discussed above, the Company acquired IPCO in April 1996. The Company believes the selective addition of complementary product offerings through its distribution network and IDD will enable it to better serve its diverse, expanding customer base. Suppliers The Company purchases industrial, medical and specialty gases pursuant to requirements contracts from all four of the major producers of industrial gases in the United States and three regional producers. The Company believes that if a contractual arrangement with any supplier of gases were terminated, it would be able to locate alternative sources of supply without significant cost increases and with no disruption of service. The Company purchases hardgoods from name-brand manufacturers and suppliers. For certain products, the Company has negotiated favorable pricing based on national purchasing arrangements and is reducing its investment in hardgood inventories by consolidating vendors. MANUFACTURING AND RELATED BUSINESSES Nitrous Oxide The Company produces nitrous oxide which is used in various medical and commercial applications. Nitrous oxide is used as an anesthetic in the medical and dental fields, as a propellant in the packaged food business and is utilized in the manufacturing process of certain high technology electronic industries. The Company's nitrous oxide manufacturing facilities are located in Yazoo City, Mississippi and Donora, Pennsylvania. 7 Carbon Products The Company manufactures carbon electrode paste, carbon ramming paste and electrically calcined anthracite ("ECA") at its manufacturing facility located in Keokuk, Iowa. The Company is the nation's primary manufacturer of carbon electrode paste which is used as a consumable electrode in the production of special alloy steel, nickel and other metals. ECA is used as an ingredient in carbon mixes used in the aluminum industry and as an additive in the production of certain metals. Sales of electrode paste and ECA are conducted through a marketing organization which owns more than five percent of the Company's outstanding common stock (see Item 13. Certain Relationships and Related Transactions). Calcium Carbide The Company is a partner with Elkem Metals Company ("Elkem") in a joint venture (Elkem-American Carbide Company) which primarily sells calcium carbide which is used in the production of acetylene gas. The Company and Elkem receive certain fees, based on net sales, for acting as agents for the joint venture. Additionally, as general manager of the joint venture, Elkem receives a management fee based on net sales. The Company operates a manufacturing facility in Pryor, Oklahoma which sells calcium carbide to the joint venture. COMPETITION Each of the major business areas in which the Company participates is highly competitive. Some competitors are larger than the Company and have greater resources. The Company's industrial gas distribution operations compete with independent distributors and vertically integrated gas producers such as Air Products and Chemicals, Inc., Praxair, Inc., Liquid Air Corporation of America, BOC Gases Group and others, all of which have distribution operations. The Company also purchases industrial gases pursuant to requirements contracts from all four of the above major producers of industrial gases. Competition in the distribution market is based on customer service, prompt delivery, price, consistent product quality, attention to safety procedures, and employee and customer training in the uses of gases and hardgoods. The Company believes its decentralized system allows competitive decisions to be made on the local level which results in reduced costs and/or improved service. In addition, the Company's size allows it to realize economies of scale in purchasing, training, marketing and information systems. REGULATORY AND ENVIRONMENTAL MATTERS The businesses of the Company's subsidiaries are subject to federal and state laws and regulations adopted for the protection of the environment and the health and safety of employees and users of the Company's products. The Company has programs for the operation and design of its facilities to achieve compliance with applicable environmental rules and regulations. The Company believes that it is in compliance in all material respects with such laws and regulations. Expenditures for environmental purposes during 1996 were not material. 8 INSURANCE The Company's policy is to obtain liability and property insurance coverage that is currently available at what management determines to be a fair and reasonable price. As of March 31, 1996, the Company had a liability insurance limit of $51 million. The liability insurance is subject to per- occurrence deductible amounts of $1 million for product liability, general liability and workers' compensation claims, and approximately $500 thousand for motor vehicle liability. The nature of the Company's business may subject it to product and general liability lawsuits. To the extent that the Company is subject to claims which exceed its liability insurance coverages, such suits could have a material adverse effect on the Company's financial position, results of operations or liquidity. No such material lawsuits are pending against the Company or any of its subsidiaries (see Item 3. Legal Proceedings). EMPLOYEES On March 31, 1996, the Company employed approximately 5,200 people of whom approximately 7% were covered by collective bargaining agreements. The Company believes it has good relations with its employees and has not experienced a strike or work stoppage in the past nine years. PATENTS, TRADEMARKS AND LICENSES The Company holds trademark registrations for "Airgas", "Dyna-Switch" and "Va-Weld", and a patent registration for the purification of acetonitrile. The Company believes that its businesses as a whole are not materially dependent upon any single patent, trademark or license. EXECUTIVE OFFICERS OF THE COMPANY The executive officers of the Company are listed below: Name Age Position ____ ___ ________ Peter McCausland (1) 46 Chairman of the Board and Chief Executive Officer Hermann Knieling 58 President and Chief Operating Officer E. Pat Baker 56 Division President - Eastern Division Alfred B. Crichton 48 Division President - Western Division Kenneth A. Keeley 55 Division President - Northern Division Ronald B. Rush 52 Division President - Southern Division William A. Rice, Jr. 49 Division President -Industrial Distribution and Purchasing Britton H. Murdoch 38 Vice President - Finance and Chief Financial Officer Gordon L. Keen, Jr. 51 Vice President - Corporate Development William E. Sanford 36 Executive Vice President - Sales and Marketing Thomas Mason 62 Senior Vice President Scott M. Melman 39 Vice President - Chief Administrative Officer Rudi G. Endres 52 Vice President - International _____________ (1) Member of the Board of Directors 9 Mr. McCausland has been a Director of the Company since June 1986, the Chairman of the Board and Chief Executive Officer of the Company since May 1987, President from June 1986 to August 1988, and from April 1, 1993 to November 30, 1995, and Chairman and Chief Executive Officer of US Airgas since its organization in February 1982. From January 1982 until June 1990, Mr. McCausland was a partner in the law firm of McCausland, Keen & Buckman, Radnor, Pennsylvania, which provides legal services to the Company. Mr. Knieling has been the President and Chief Operating Officer of the Company since December 1, 1995. Mr. Knieling served as Division President - Southern Division from April 1, 1995 to November 30, 1995 and as Division President - Eastern Division from February 3, 1993 to March 1995. Mr. Knieling served as a Regional Vice President from June 1990 to February 1993 and as President of Gulf States Airgas from June 1989 to February 1993. Mr. Knieling owned and operated an industrial gas distributor which was sold to the Company in 1989. Also, Mr. Knieling served in various capacities for Hoechst AG during a period of 18 years, and, prior to his leaving Hoechst in 1982 was President and Chief Executive Officer of its subsidiary, MG Burdett Gas Products Company. Mr. Baker has been the Company's Division President - Eastern Division since April 1, 1995. Mr. Baker served as a Regional Vice President from May 1991 to February 1993 and President of Southwest Airgas since the acquisition of Southwest Airgas (formerly West Texas Welders Supply), in October 1988, to March 1995. Prior to joining Airgas, Mr. Baker was President and owner of West Texas Welders Supply from August 1981 to October 1988. Mr. Crichton has been the Company's Division President - Western Division since February 3, 1993. Mr. Crichton served as a Regional Vice President from May 1991 to February 1993 and as President of Sierra Airgas since the acquisition of Sierra Airgas (formerly Moore Bros.) in January 1987. Mr. Crichton was employed by Union Carbide Industrial Gases (UCIG) from 1969 through 1986, and prior to joining Moore Bros., was President of a subsidiary of UCIG. Mr. Keeley has been the Company's Division President - Northern Division since December 1, 1995. Mr. Keeley served as the Division President - Central Division from February 3, 1993 to November 30, 1995, as a Regional Vice President from April 1989 to February 1993 and as President of Michigan Airgas from March 1984 to March 1989. Prior to 1984, Mr. Keeley owned and operated an industrial gas distributor which was sold to the Company. Mr. Rush has been the Company's Division President - Southern Division since December 1, 1995. Mr. Rush served as President of Sooner Airgas from June 1, 1991 to November 30, 1995 and as Vice President of Sales for Southwest Airgas from September 1990 to May 31, 1991. Mr. Rice has been the Company's Division President - Industrial Distribution and Purchasing since April 1, 1995 and served as Vice President - Purchasing from August 1, 1993 to March 1995. Until August 1993, Mr. Rice was President of Virginia Welding Supply, which was acquired by the Company in July 1992. Mr. Rice has over 20 years of industry experience and serves on the boards of various companies. Mr. Murdoch has been the Vice President - Finance and Chief Financial Officer of the Company since June 1, 1990 and served as Vice President - Corporate Development from September 1987 until May 1990. Mr. Murdoch served as a Vice President of Philadelphia National Bank from 1983 to September 1987. 10 Mr. Keen has been the Vice President - Corporate Development since January 1, 1992. From January 1982 until December 1991, Mr. Keen was a partner in the law firm of McCausland, Keen & Buckman, Radnor, Pennsylvania, which provides legal services to the Company. Mr. Sanford has been the Company's Executive Vice President since December 1, 1995 and Vice President - Sales and Marketing since February 3, 1993. Mr. Sanford served as President of Cascade Airgas from March 1989 to February 1993. From May 1984 to February 1989 Mr. Sanford served as Vice President -- Sales and Marketing for Midwest Carbide. Mr. Mason has been Senior Vice President since December 1, 1995. Mr. Mason served as Assistant to the Chairman from January 1993 to November 1995. Prior to that, Mr. Mason served as Executive Vice President of the Company from March 1990 until January 1993 and served as President from August 1988 until February 1990. Mr. Melman has been Vice President - Chief Administrative Officer since April 1, 1995. Mr. Melman served as Vice President - Corporate Controller from August 1994 to March 1995 and Corporate Controller from August 1986 to July 1994. Prior to joining Airgas, Mr. Melman was the Controller for Integrated Circuit Systems, Inc. from November 1983 to July 1986, and prior to joining Integrated Circuit Systems, Inc., was a Tax Manager for KPMG Peat Marwick LLP. Mr. Endres has been Vice President - International since January 1993. Mr. Endres served as Vice President - Marketing from July 1991 until December 1992. From February 1987, Mr. Endres served as General Manager and Vice President for the western region of Airgas. Prior to joining Airgas, Mr. Endres served for 18 years in various positions nationally and internationally for Messer Griesheim, a major producer of industrial gases headquartered in Germany. His last position was Vice President for Specialty Gases and Chemicals at MG Industries in Valley Forge, PA. OTHER OFFICERS OF THE COMPANY OR ITS SUBSIDIARIES Other officers of the Company are listed below, and include the following: Ronald W. Beebe - Division Vice President - Eastern and Northern Division Richard S. Brennan - Division Vice President - Western Division Donald S. Carlino - Division Vice President - Manufacturing and Industrial Distribution Division Lee C. Cherry - Division Vice President - Southern Division L. James Johnston - Division Vice President - Eastern Division L. Jay Sullivan - Division Vice President - Southern Division Todd R. Craun - General Counsel & Secretary Jeffrey P. Cornwell - Assistant Vice President and Corporate Controller Andrew R. Cichocki - Assistant Vice President, Corporate Development Leslie J. Graff - Assistant Vice President, Corporate Development James N. Borum - Assistant Treasurer and Director of Finance Carey M. Verger - Assistant Vice President, Corporate Taxes 11 Subsidiary Presidents NAME SUBSIDIARY _____ __________ Wendy D. Swift Airgas Canada Geoffrey C. Pulford Airgas Ontario Robert J. Finch Airgas Houston/Specialty Products Robert B. Beasley Airgas Safety David P. Engel Airgas Texas Frank L. Middleton Bay Airgas Dan L. Tatro Cascade Airgas Jeff Allen Central States Airgas Barry W. Himes Cryodyne Technologies Richard W. Johnson Delta Airgas Isaac C. Fortenberry Florida Airgas Patrick M. Visintainer Gateway Airgas Doug Olsen Great Lakes Airgas Dale E. Hess Great Western Airgas Henry B. Coker Gulf States Airgas Michael J. Grebe IPCO Safety Products Company David M. Duvall Jimmie Jones/Sooner Airgas Edward A. Lewis, Jr. Keystone Airgas Steven L. Clark Michigan Airgas J. Robert Hilliard Mid America Airgas John W. Smith Mid States Airgas Ronald H. Scott Midwest Carbide Corp. James B. Sparks Mountain Airgas John Musselman Northeast (includes Connecticut Airgas, Empire Airgas and Northeast Airgas) Theodore D. Erkenbrack Northern Gases Patricia E. Paddock Pacific Airgas Ronald W. Savage Parsons Airgas Zenon Kazmierczak Poligaz Frank B. Sartain Post Airgas Charles Leggett Potomac Airgas Joseph P. Featherstone Red-D-Arc Limited James McCarthy Sierra Airgas John T. Winn, III Southeast Airgas Mark A. Straka Southern California Airgas Charles R. Atkerson Southwest Airgas Noel E. Breedlove, Jr. Trinity Airgas Richard B. Graw TriStates Airgas David J. Bauer Virginia Welding ITEM 2. PROPERTIES. The Company has offices, manufacturing and distribution facilities in 38 states, Canada and Mexico. The principal executive offices of Airgas are located in leased space in Radnor, Pennsylvania. The Company's manufacturing segment produces carbon products at its Keokuk, Iowa, facility; calcium carbide at its Pryor, Oklahoma, facility; and nitrous oxide at its Donora, Pennsylvania and Yazoo City, Mississippi facilities. Manufacturing facility utilization during 1996, based on market demand, has ranged from 65% to 100% . 12 The Keokuk and Pryor facilities are owned by the Company. The Donora plant is located on property leased through the year 2006. The Yazoo City property is owned by the Company; however, it will revert to the local municipality if the plant terminates operations. The Keokuk, Pryor and Donora facilities are pledged as collateral under Industrial Development Board revenue bonds (see note 8 to the Company's consolidated financial statements under Item 8). The Company's distribution segment conducts business from its 520 locations in 38 states, Canada and Mexico. These locations are either owned or are leased from third parties or from employees of the Company who were previous owners of businesses acquired on terms consistent with commercial rental rates prevailing in the surrounding rental market. Eighteen distribution locations in 12 states have acetylene manufacturing plants. The Company's acetylene plants operated at approximately 60 percent of capacity during 1996. The Company believes that its facilities are adequate for its present needs and that its properties are generally in good condition, well maintained and suitable for their intended use. ITEM 3. LEGAL PROCEEDINGS. The Company and its subsidiaries are parties to pending legal proceedings arising out of their business operations. The proceedings involve claims for personal injuries, breach of contract, product warranty and product design, and claims involving employee relations and certain administrative proceedings. Management does not believe that the eventual outcome of any litigation to which the Company or its subsidiaries are parties would have a material adverse effect on the consolidated financial position, results of operations or liquidity. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. 13 PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS. The Company's Common Stock is listed on the New York Stock Exchange (ticker symbol: ARG). The following table sets forth, for each quarter during the last two fiscal years, the high and low sales prices as reported by the New York Stock Exchange. High Low ---- --- 1996 Fiscal (1) First Quarter $13.88 $12.50 Second Quarter 15.00 13.31 Third Quarter 16.63 15.69 Fourth Quarter 20.06 19.81 1995 Fiscal (1) First Quarter $13.82 $10.32 Second Quarter 14.25 11.75 Third Quarter 14.94 10.25 Fourth Quarter 13.25 9.82 ________________ (1) Adjusted to reflect a two-for-one stock split effective on April 15, 1996 (See note 9 to the Company's consolidated financial statements under Item 8). On May 31, 1996, there were approximately 11,000 holders of record of the Company's Common Stock. The present policy of the Company is to retain earnings to provide funds for the operation and expansion of its business and not to pay cash dividends on its Common Stock. Any payment of future dividends and the amounts thereof will depend upon the Company's earnings, financial condition, loan covenants, capital requirements and other factors deemed relevant by the Board of Directors (see note 8 to the Company's consolidated financial statements). ITEM 6. SELECTED FINANCIAL DATA Selected financial data for the Company is presented in the table below and should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 and the Company's consolidated financial statements included in Item 8 herein. 14 (amounts in thousands except per share data): Years Ended March 31, (5) ___________________________________________ 1996 1995 1994 1993 1992 ____ ____ ____ ____ ____ Operating Results: Net sales $838,144 $687,983 $519,349 $410,771 $351,491 Depreciation & amortization(2) 45,762 36,868 30,571 28,045 23,670 Operating income 92,985 72,600 48,667 34,367 26,316 Interest expense, net 24,862 17,625 12,486 11,403 12,838 Income taxes(1) 28,522 23,894 16,027 10,811 7,718 Net earnings 39,720 31,479 20,290 12,469 7,292 Earnings Per Share(3): Primary: Net earnings $ .60 $ .48 $ .31 $ .20 $ .14 Fully Diluted: Net earnings $ .60 $ .48 $ .31 $ .19 $ .13 Balance Sheet Data: Working capital $ 81,588 $ 54,084 $ 47,071 $ 40,253 $ 39,425 Total assets 883,642 645,637 514,897 399,477 338,218 Current portion of long-term debt 12,179 11,780 10,304 9,923 10,026 Long-term debt 385,832 259,970 205,311 158,629 151,098 Other non-current liabilities 34,490 11,116 6,635 762 675 Stockholders' equity(4) 236,209 189,652 156,867 127,571 104,931 _______________ (1) The Company retroactively adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" as of April 1, 1992. (2) Effective April 1, 1993, the Company changed its estimate of the useful lives of its acetylene and high pressure cylinders from 20 to 30 years. This change was made to better reflect the estimated periods during which these assets will remain in service. The change had the effect of reducing depreciation expense in 1994 by approximately $3.1 million and increasing net earnings by $1.9 million or $.03 per share. (3) See notes 3 and 9 to the Company's consolidated financial statements for information regarding earnings per share calculations and adjustment for the stock split effective April 15, 1996. (4) The Company has not paid any dividends on its common stock. (5) During the fiscal years 1992 through 1996, the Company acquired 121 distributors. 15 AIRGAS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Item 7. FINANCIAL REVIEW OVERVIEW The Company's financial results for the year ended March 31, 1996 reflect substantial growth compared to 1995. Net sales of $838 million, net earnings of $39.7 million and earnings per share of $.60 represent increases over 1995 of 22%, 26% and 25%, respectively. The Company also finished 1996 with a record year for acquisitions by completing the acquisition of 42 distributors with aggregate annual sales of approximately $186 million and forming six new hubs. This follows 25 acquisitions in 1995 with aggregate annual sales of approximately $108 million. The Company intends to continue to actively participate in the consolidation taking place in the fragmented industrial gas distribution market by acquiring independent gas distributors. In seeking to acquire distributors, the Company anticipates competition from industrial gas producers and from certain other independent distributors. The Company believes that it is well positioned to acquire distributors because of its extensive distribution network, its well-organized acquisition program, flexibility in structuring acquisitions to meet Sellers' needs and its ability to offer sellers and their employees a continuing management role in a decentralized entrepreneurial environment. During 1996, same-store sales, a comparison of current period sales to the prior period's sales, adjusted for acquisitions, increased 2% compared to the prior year. The Company's same-store sales growth rate has historically followed the real gross domestic product annual growth rate as published by the U.S. Department of Commerce. Weaker economic conditions compared to the prior year, combined with inclement weather, held down same-store sales growth in 1996. Management believes its same-store sales growth is slightly understated since it does not reflect the Company's decision to cease unprofitable sales to certain customers and other sales lost during the consolidation and integration of acquisitions. Future same-store sales growth is primarily dependent on the economy and, to a lesser extent, the Company's ability to expand markets for new and existing products and to increase prices. Management believes the Company's broad customer base and geographic diversity help to reduce the adverse effects of an economic downturn on the Company. Also, management believes that the gas portion of its distribution business is somewhat resistant to an economic downturn since: 1) gases frequently represent a fixed cost of operations that do not necessarily decline with production levels; 2) gases are required for maintenance and renovation activities which tend to increase during an economic downturn; 3) industries less subject to the effects of an economic downturn are major purchasers of gases; and 4) gas purchases often represent a small portion of typical user's overall cost of operation and, therefore, do not typically represent a large cost-cutting item. Management further believes that sales of certain lower margin non-consumable hardgoods equipment, such as welding machines, are more likely to be adversely impacted during a downturn in the economy and, conversely, are typically the fastest to rebound during an economic recovery. The Company is cautiously optimistic that the economy will improve during fiscal 1997. 16 AIRGAS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Sales in 1996 related to gases and rent represent 51% or $408.7 million of total distribution net sales. Bulk and specialty gas sales have increased due to the success of gas marketing programs. In order to support and grow its specialty gas business, the Company has established 22 specialty gas mini-labs which benefit customers by providing them with certain specialty gas products in their local market. In connection with its hardgoods business, which accounted for 49% or $392.8 million of total distribution net sales, the Company is focused on improving profitability by reducing its investment in inventories through the consolidation of vendors, and the negotiation of favorable pricing based on national purchasing arrangements. The Company intends to strategically broaden its product line in order to increase sales in existing locations and to take advantage of its distribution network. Recent product line additions have included returnable containers, specialty gases (such as refrigerants and sterilizing gases) and additional hardgoods (such as industrial safety products and coatings). In April 1996, the Company acquired IPCO Safety Products Company, a $55 million distributor of industrial safety equipment and supplies which utilizes a system of regional warehouses and telemarketing centers. The Company's strategy is to acquire additional industrial distribution companies with a focus on increasing same-store sales of new industrial product lines through both the acquired businesses and its existing distribution network. The Company believes the selective addition of complementary product offerings will enable it to better serve its diverse, expanding customer base. Management believes the acquisition of certain businesses during fiscal 1996 which have a higher mix of lower margin hardgoods sales, as well as IPCO, will lower the Company's distribution operating margins slightly during fiscal 1997, although management anticipates that these acquisitions will be additive to earnings. Excluding lower margin hardgoods businesses, management believes distribution margins should improve during fiscal 1997. The Company has recently undertaken initiatives to further develop its industrial gas customer base to selectively include customers which require large volume supplies of gases, such as nitrogen. For these customers, the Company will enter into a long-term supply contract and will construct an air separation plant near the customer's facility or facilities. The Company has entered into agreements with two customers and is constructing two air separation plants which will begin production during fiscal 1998. In addition, terms related to the agreements provide for additional sales of cylinder gases and supplies. Airgas remains focused on cash flow growth. Historically, operations have generated sufficient cash flow to finance the Company's operating requirements while borrowings have been incurred largely to finance acquisitions. Over the past three years, cash flow from operations has totaled approximately $230 million. This strong cash flow has helped fund the Company's investment in acquisitions, excluding debt assumed, and capital expenditures which, for the past three years totaled $333.3 million and $99.3 million, respectively. At March 31, 1996, The Company had unused availability of $205.0 million unsecured lines of credit. The Company's debt-to-equity ratio of 1.69 at March 31, 1996 increased compared to the prior year's ratio of 1.43 primarily as a result of acquisitions completed during 1996 combined with the purchase of treasury stock. 17 AIRGAS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) RESULTS OF OPERATIONS: 1996 COMPARED TO 1995 ____________________________________________ Net sales increased 22% in 1996 compared to 1995: (in thousands)
1996 1995 Increase ____ ____ __________ Distribution $801,552 $654,381 $147,171 Manufacturing 36,592 33,602 2,990 _______ _______ _______ $838,144 $687,983 $150,161 ======= ======= =======
For the year ended March 31, 1996, distribution sales increased approximately $133 million resulting from the acquisition of 66 distributors of industrial, medical and specialty gases and related equipment since April 1, 1994 and approximately $14 million from same-store sales growth. The Company estimates that had all acquisitions during the year ended March 31, 1996 been consummated on April 1, 1995, distribution sales for the year ended March 31, 1996 would have increased by an additional $100 million. The increase in same-store sales of approximately 2% was the result of slightly higher prices based on selected price increases to certain customers and increased volume within its gas, rental and hardgoods businesses. During 1996, the Company's same-store sales increased 3% in the first quarter, 2% in the second and third quarters and 1% in the fourth quarter. Excluding the impact of the inclement weather, the Company estimates same-store sales growth during the fourth quarter would have been approximately 2%. The Company estimates same-store sales based on a comparison of current period sales to the prior period's sales, adjusted for acquisitions. Sales for the Company's manufacturing operations increased 9% during the year ended March 31, 1996 compared to the prior year, primarily as a result of an increase in the volume of lower margin exports and increased demand for carbon products and nitrous oxide. The increase in distribution gross profit of $72.6 million over 1995 was attributable to increases associated with acquisitions of $62.7 million and same-store gross profit growth of $9.9 million. The majority of the $9.9 million same-store gross profit growth was derived from volume growth in gas and increases in cylinder rent. Higher gas volumes were partially attributable to the success of gas marketing programs, principally small bulk and specialty gases. On a same-store basis, distribution gross margins increased an estimated 0.3% compared to 1995 primarily due to improved rent gross margins combined with slightly higher margins in gases and hardgoods. Increased volumes of lower margin bulk gases partially offset the gas margin improvements. 18 AIRGAS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Selling, distribution and administrative expenses decreased as a percentage of sales to 33.4% in 1996 compared to 34.3% in 1995. The decrease was a result of acquisition consolidation efforts and lower operating costs, such as a reduction in business insurance costs through improved claims management and reduced incident rates. In addition, certain operating costs, such as occupancy costs, are relatively fixed and do not increase proportionately with the increase in same-store sales. Partially offsetting these improvements were normal salary increases and slightly higher distribution costs. Operating income increased 28% in 1996 compared to 1995: (in thousands)
1996 1995 Increase ____ ____ __________ Distribution $86,130 $66,521 $19,609 Manufacturing 6,855 6,079 776 ______ ______ ______ $92,985 $72,600 $20,385 ====== ====== ======
Distribution operating income as a percentage of net distribution sales increased to 10.7% for the year ended March 31, 1996 compared to 10.2% in 1995. The increase in distribution operating income in 1996 was the result of the increase in gross profits from higher same-store sales, improved gross profit margins and operating income provided by acquisitions. Manufacturing operating income increased $776 thousand in 1996 compared to 1995 due to strong demand for carbon products and nitrous oxide, and lower production and delivery costs related to calcium carbide and nitrous oxide business, partially offset by an increase in lower margin sales of carbon products. Interest expense, net, increased $7.2 million in 1996 compared to 1995 primarily as a result of the increase in average outstanding debt associated with the acquisition of industrial gas distributors since April 1, 1994, interest costs associated with the repurchase of Company common stock and slightly higher interest rates, partially offset by an increase in positive cash flow. As discussed in "Liquidity and Capital Resources" below, the Company has hedged floating interest rates under certain borrowings with interest rate swap agreements. Income tax expense represented 41.8% of pre-tax earnings in 1996 compared to 43.2% in 1995. The decrease in the effective income tax rate was primarily due to an increase in pre-tax earnings relative to permanent differences and as a result of the implementation of certain tax planning strategies. 19 AIRGAS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Net earnings increased 26% to $39.7 million or $.60 per share in 1996 from $31.5 million or $.48 per share in 1995. After tax cash flow (net earnings plus depreciation, amortization and deferred income taxes) increased 21% to $96.4 million from $79.9 million in 1995. After tax cash flow is an important measurement of the Company's ability to repay debt through operations and provides the Company with the ability to pursue investment alternatives such as acquisitions, joint ventures and the repurchase of Company stock. RESULTS OF OPERATIONS: 1995 COMPARED TO 1994 Net sales increased 32% in 1995 compared to 1994: (in thousands)
1995 1994 Increase ____ ____ __________ Distribution $654,381 $486,836 $167,545 Manufacturing 33,602 32,513 1,089 _______ _______ _______ $687,983 $519,349 $168,634 ======= ======= =======
In 1995, distribution sales increased approximately $136 million resulting from the acquisition of 40 industrial gas distributors since April 1, 1993 and approximately $32 million from same-store sales. Based on unaudited historical pro forma data, the Company estimates that had all 1995 acquisitions been consummated on April 1, 1994, distribution sales for 1995 would have been approximately $49 million higher. The increase in same-store sales of approximately 5% is primarily the result of increased volume of hardgoods sales and increases in gas and rental businesses. The Company estimates same-store sales based on a comparison of current period sales to the prior period's sales, adjusted for acquisitions. Hardgoods and gas volumes have primarily increased as a result of the general improvement in the economy and certain gas marketing programs. Same-store sales have also increased slightly as a result of price increases initiated during 1995 and 1994 The Company believes that sales of hardgoods are adversely impacted during a recession, and conversely, are typically the fastest to rebound during an economic recovery. Sales for the Company's manufacturing operations increased slightly compared to 1994 primarily as a result of an increase in the volume of lower margin products. Compared to 1994, distribution gross profit increases associated with acquisitions totaled an estimated $69 million. Gross profits associated with distribution same-store sales growth are estimated to total $16 million. The same-store gross profit growth is attributable to increased hardgoods volumes combined with improved gross margins resulting from the Company's national 20 AIRGAS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) purchasing arrangements, success of gas marketing programs and improved gas and rental gross margins due to price increases to customers. On a same-store basis, considering the impact of the change in the Company's sales mix slightly towards lower margin hardgoods sales, distribution gross margins increased an estimated .6% compared to 1994. Selling, distribution and administrative expenses as a percentage of sales decreased to 34.3% compared to 34.8% in 1994. The decrease is a result of acquisition consolidation efforts and from controlling certain operating costs, such as business insurance through improved claims management and reduced incident rates. Through improved billing and collection efforts, the Company has also reduced its bad debt expense and lowered its accounts receivable days sales outstanding to 44 days compared to 49 days at March 31, 1994. In addition, certain operating costs, such as occupancy costs, are relatively fixed even though the Company's same-store sales increased over 1994. Partially offsetting these improvements were normal salary increases. Operating income increased 49% in 1995 compared to 1994: (in thousands)
1995 1994 Increase (Decrease) ____ ____ __________ Distribution $66,521 $42,399 $24,122 Manufacturing 6,079 6,268 (189) ______ ______ ______ $72,600 $48,667 $23,933 ====== ====== ======
Distribution operating income as a percentage of net distribution sales increased to 10.2% compared to 8.7% in 1994. The increase in distribution operating income in 1995 was a result of the increase in gross profits from higher same-store sales, operating income provided by acquisitions and improved gross profit margins. Manufacturing operating income decreased $189 thousand compared to the prior year due to a product shift towards lower margin export sales of carbon products, slightly lower profits from the sale of calcium carbide combined with higher raw material costs, principally ammonium nitrate, for the Company's nitrous oxide plants. Interest expense, net, increased $5.1 million compared to 1994 primarily as a result of the increase in average outstanding debt associated with the acquisition of industrial gas distributors since April 1, 1993 combined with slightly higher interest rates. As discussed in "Liquidity and Capital 21 AIRGAS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Resources" below, the Company has hedged floating interest rates under certain borrowings with interest rate swap agreements. Income tax expense represented 43.2% of pre-tax earnings in 1995 compared to 44.1% in 1994. The decrease in the effective income tax rate is primarily due to an increase in pre-tax earnings relative to permanent differences. Net earnings increased 55% to $31.5 million or $.48 per share in 1995 from $20.3 million or $.31 per share in 1994. After tax cash flow (net earnings plus depreciation, amortization and deferred income taxes) increased 35% to $79.9 million from $59.1 million in 1994. After tax cash flow is an important measurement of the Company's ability to repay debt through operations and provides the Company with the ability to pursue investment alternatives such as acquisitions and the repurchase of Company stock. LIQUIDITY AND CAPITAL RESOURCES _______________________________ The Company has primarily financed its operations, capital expenditures, stock repurchases and acquisitions with borrowings, funds provided by operating activities and the issuance of common stock. Cash flows from operating activities totaled $92 million in 1996. Depreciation and amortization represent $45.8 million of cash flow from operating activities. Deferred income taxes of $10.9 million principally resulted from temporary differences originating from property and equipment. Working capital components of cash flow increased $5.7 million as a result of an increase in accounts receivable, inventories, prepaid expenses and other current assets and a decrease in trade accounts payable, offset by an increase in accrued expenses and other current liabilities. Days-sales outstanding and days-supply of inventory levels have increased slightly from March 31, 1995 levels, principally due to fiscal 1996 acquisitions. Accounts payable decreased $1.5 million due to payments to vendors. Other current liabilities have increased due to increases in accrued interest, income taxes and real estate taxes. Cash used by investing activities totaled $190 million in 1996, which was primarily comprised of $41.2 million for capital expenditures and $153.6 million related to acquisitions. The Company's use of cash for capital expenditures was partially attributable to the continued assimilation of acquisitions which required the Company to make capital expenditures in areas such as combining cylinder fill plants, improving truck fleets and purchasing cylinders in order to return cylinders rented from third parties. Additionally, capital expenditures include the purchase of cylinders and bulk tanks necessary to facilitate gas sales growth. The Company estimates that its maintenance capital expenditures are approximately 2% of net sales. The Company considers the replacement of existing capital assets to be maintenance capital expenditures. In addition, during 1996, the Company entered into operating leases for certain transportation equipment, cylinders and bulk tanks. Had the Company acquired such equipment, capital expenditures would have been increased by $8.3 million. 22 AIRGAS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Financing activities provided cash of $97.9 million in 1996 with total debt outstanding increasing by $126.3 million from March 31, 1995. Debt incurred in connection with the acquisition of distribution businesses, including seller notes and assumed notes, totaled $182.4 million. The Company's Board has approved a four million share common stock repurchase program. Through March 31, 1996, the Company purchased 2.4 million shares of the Company's common stock at an aggregate cost of $28.9 million. The impact of the stock repurchases on earnings per share was immaterial for 1996. The future purchase of common stock is dependent on prevailing market conditions. The Company's primary source of borrowing is a $375 million unsecured revolving credit facility with various commercial banks which matures on August 10, 2000. At March 31, 1996, the Company had approximately $171 million in borrowings under the facility and approximately $52 million committed under letters of credit, resulting in unused availability under the facility of approximately $152 million. On February 5, 1996, the Company entered into a new $100 million unsecured revolving credit facility with a group of commercial banks which matures on July 1, 1997. The facility is intended to provide additional availability to finance the Company's ongoing acquisition program. The terms and conditions of this facility are similar to the Company's existing $375 million facility. At March 31, 1996, the Company had $100 million outstanding under the facility. The Company intends to terminate its $100 million facility in conjunction with an anticipated increase in the Company's $375 million revolving credit facility in September 1996, which will have terms and conditions similar to its existing $375 million facility. The Company has a CDN $50 million Canadian credit facility ($37 million U.S.) with various commercial banks which matures on November 14, 1998. At March 31, 1996, the Company had approximately CDN $33 million ($24 million U.S.) in borrowings outstanding under the facility, resulting in unused availability under the facility of approximately CDN $17 million ($13 million U.S.). The Company also has unsecured line of credit agreements with various commercial banks. At March 31, 1996, these agreements totaled $60 million, under which the Company had aggregate outstanding borrowings of $19 million. At March 31, 1996, the effective interest rate related to outstanding borrowings under all credit lines was approximately 5.79%. The Company's loan agreements contain covenants which include the maintenance of a minimum equity level, maintenance of certain financial ratios, restrictions on additional borrowings and limitations on dividends. In managing interest rate exposure, principally under the Company's floating rate revolving credit facilities, the Company has entered into 18 interest rate swap agreements during the period from June 1992 through March 31, 1996. The swap agreements are with major financial institutions and aggregate $224 million in notional principal amount at March 31, 1996. Approximately $205 million of the notional principal 23 amount of the swap agreements require fixed interest payments based on an average effective rate of 6.53% for remaining periods ranging between 1 and 8 years. Two swap agreements require floating rates ($19.5 million notional amount at 5.53% at March 31, 1996). Under the terms of seven of the swap agreements, the Company has elected to receive the discounted value of the counterparty's interest payments upfront. At March 31, 1996, approximately $23 million of such payments were included in other liabilities. The Company continually monitors its positions and the credit ratings of its counterparties, and does not anticipate nonperformance by the counterparties. The Company will continue to look for appropriate acquisitions and expects to fund such acquisitions, future capital expenditure requirements and commitments related to foreign investments primarily through the use of cash flow from operations, debt, common stock for certain stock acquisition candidates and other available sources. Other funding sources evaluated by the Company from time-to-time include: leasing and the sale of public debt, preferred stock and common stock. Subsequent to March 31, 1996 and through June 5, 1996, the Company has acquired ten distribution businesses with annual sales of approximately $105 million for an aggregate purchase price of approximately $96 million. The Company does not currently pay dividends on its common stock. OTHER Environmental The Company believes that it is in compliance in all material respects with applicable environmental laws and regulations. In conducting due diligence for prospective acquisitions, the Company completes Phase I environmental studies. Expenditures for environmental purposes during 1996 were not material. Concentration of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of trade receivables. Concentrations of credit risk are limited due to the Company's large number of customers and their dispersion across many industries. Credit terms granted to customers are generally net 30 days. Effects of Inflation Historically, the Company has been able to increase the sales price of products in response to market demand, cost of products, competitive factors and other industry trends. Consequently, the impacts of inflation have not had a materially adverse impact on the Company's financial position, results of operations, or liquidity. New Accounting Pronouncements In the first quarter of fiscal 1997, the Company will adopt SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The statement requires the recognition of an impairment loss for an asset held for use when the estimate of undiscounted future cash flows expected to be generated by the asset is less than its carrying amount. Measurement of the impairment loss is based on fair value of the asset. 24 Management believes that the adoption of this statement will not have a material impact on earnings, financial condition or liquidity of the Company. The Company accounts for stock options according to the provisions of Accounting Principles Board Opinion 25 (APB 25), "Accounting for Stock Issued to Employees." In October 1995, the Financial Accounting Standards Board issued FASB Statement No. 123, "Accounting for Stock-Based Compensation." The new standard defines a fair value method of accounting for stock options and similar equity instruments. Companies may elect to continue to use existing accounting rules or adopt the fair value method for expense recognition. Companies that elect to continue to use existing accounting rules will be required to provide pro-forma disclosures of net income and earnings per share assuming the fair value method was adopted. The Company will elect to continue to use existing accounting rules. The new statement is effective for fiscal years beginning after December 15, 1995. Accordingly, the Company will adopt the provisions in the first quarter of fiscal 1997 and present the required pro-forma disclosure provisions for its fiscal year ending March 31, 1997. As the Company will continue to account for stock-based compensation using the intrinsic value method, this statement will not have a material impact on earnings, financial condition or liquidity of the Company. Forward-Looking Statements This report contains forward-looking statements. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, there are certain important factors that could cause the Company's actual results to differ materially from those included in such forward- looking statements. Some of the important factors which could cause actual results to differ materially from those projected include, but are not limited to: the Company's ability to continue to identify and complete strategic acquisitions to enter new markets and expand existing business; continued availability of financing to provide additional sources of funding for future acquisitions, capital expenditure requirements and foreign investments; the effects of competition from independent distributors and vertically integrated gas producers on products and pricing, growth and acceptance of new product lines through the Company's sales and marketing programs; changes in product prices from gas producers and name-brand manufacturers and suppliers of hardgoods; uncertainties regarding accidents or litigation which may arise in the ordinary course of business; and the effects of, and changes in the economy, monetary and fiscal policies, laws and regulations, inflation and monetary fluctuations and fluctuations in interest rates, both on a national and international basis. 25 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The consolidated financial statements and financial statement schedule of the Company are set forth at pages F-1 to F-29 of the report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY. The biographical information relating to the Company's directors appearing in the Proxy Statement relating to the Company's 1996 Annual Meeting of Stockholders is incorporated herein by reference. Biographical information relating to the Company's executive officers is set forth in Item 1 of Part I of this Report. ITEM 11. EXECUTIVE COMPENSATION. The information under "Board of Directors and Committees" and "Certain Transactions" appearing in the Proxy Statement relating to the Company's 1996 Annual Meeting of Stockholders is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this Item is set forth in the section headed "Security Ownership" appearing in the Company's Proxy Statement relating to the Company's 1996 Annual Meeting of Stockholders and such information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information under "Certain Transactions" appearing in the Proxy Statement relating to the Company's 1996 Annual Meeting of Stockholders is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a)(1) and (2): The response to this portion of Item 14 is submitted as a separate section of this report beginning on page F-1. All other schedules have been omitted as inapplicable, or not required, or because the required information is included in the Consolidated Financial Statements or notes thereto. (a)(3) Exhibits. The exhibits required to be filed as part of this annual report on Form 10-K are listed in the attached Index to Exhibits. (b) Reports on Form 8-K. On March 27, 1996, the Company filed a current report on Form 8-K to announce, under Item 5, that its Board of Directors approved a two-for- one split of its common stock, issuable on April 15, 1996, to stockholders of record on April 1, 1996. 26 (c) Index to Exhibits and Exhibits filed as a part of this report. 3.1 Amended and Restated Certificate of Incorporation of Airgas, Inc. dated as of August 7, 1995 (Incorporated by reference to Exhibit 3.1 to the Company's September 30, 1995 Quarterly Report on Form 10-Q). 3.2 Airgas, Inc. By-Laws Amended and Restated November 29, 1994. 4.1 Seventh Amended and Restated Loan Agreement dated August 10, 1995 between Airgas, Inc. and certain banks and NationsBank of North Carolina, N.A. ($375,000,000 credit facility). (Incorporated by reference to Exhibit 4.1 to the Company's September 30, 1995 Quarterly Report on Form 10-Q). 4.3 Loan Agreement dated February 5, 1996 between Airgas, Inc. and certain banks and Nationsbank of North Carolina, N.A. ($100,000,000 credit facility). There are no other instruments with respect to long-term debt of the Company that involve indebtedness or securities authorized thereunder exceeding 10 percent of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to file a copy of any instrument or agreement defining the rights of holders of long- term debt of the Company upon request of the Securities and Exchange Commission. * 10.1 Agreement between the Company and Peter McCausland, dated January 8, 1991, and form of Common Stock Purchase Warrant. (Incorporated by reference to Exhibit 10.16 to the Company's March 31, 1992 report on Form 10-K). * 10.2 Common Stock Purchase Warrant held by Britton H. Murdoch and certain other employees and other persons (Pursuant to Instruction 2 to Item 601 of Regulation S-K, the Common Stock Purchase Warrants, which are substantially identical in all material respects except as to the parties thereto, held by certain employees, including the following Executive Officers and a Director, and other persons are not being filed: Hermann Knieling, Kenneth A. Keeley, Alfred B. Crichton, Gordon L. Keen, Jr., William Sanford, Scott Melman and Ronald Beebe and a Director, Merril Stott). (Incorporated by reference to Exhibit 10.17 to the Company's March 31, 1993 report on Form 10-K). * 10.3 Amended and Restated 1984 Stock Option Plan, as amended effective May 22, 1995 (Incorporated by reference to Exhibit 10.1 to the Company's September 30, 1995 Quarterly Report on Form 10-Q). * 10.4 1989 Non-Qualified Stock Option Plan for Directors (Non-Employees), as amended. (Incorporated by reference to Exhibit 10.7 to the Company's March 31, 1992 report on Form 10-K). * 10.5 Amendment to the 1989 Non-Qualified Stock Option Plan for Directors (Non-Employees) as amended through August 7, 1995 (Incorporated by reference to Exhibit 10.2 to the Company's September 30, 1995 Quarterly Report on Form 10Q. * 10.6 1994 Employee Stock Purchase Plan. (Incorporated by reference to exhibit 10.19 to the Company's March 31, 1993 report on Form 10-K). 27 10.7 Amended and Restated Joint Venture Agreement dated March 31, 1992 between American Carbide and Carbon Corporation and Elkem Metals Company. (Incorporated by reference to Exhibit 10.5 to the Company's March 31, 1992 report on Form 10-K). * 10.8 Airgas, Inc. Management Incentive Plan (Incorporated by reference to Exhibit 10.3 to the Company's September 30, 1995 Quarterly Report on Form 10-Q). (11) Statement re: computation of earnings per share. (21) Subsidiaries of the Company. (23.1) Consent of KPMG Peat Marwick LLP. (23.2) Consent of KPMG Peat Marwick LLP (to be filed by amendment) (23.3) Consent of KPMG Peat Marwick LLP (to be filed by amendment) (27) Financial data schedule (99.1) Form 11-K for the Registrant's 401(K) Plan (to be filed by amendment) (99.2) Form 11-K for the Registrant's Employee Stock Purchase Plan (to be filed by amendment) _____________ * A management contract or compensatory plan required to be filed by Item 14(c) of this Report. 28 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: June 12, 1996 Airgas, Inc. By: /s/ Peter McCausland _________________________ Peter McCausland Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date _________ _____ ____ /s/ Peter McCausland Director, Chairman of the June 12, 1996 ____________________________ Board and Chief Executive Officer (Peter McCausland) /s/ Hermann Knieling President and Chief Operating June 12, 1996 ________________________ Officer (Hermann Knieling) /s/ Britton H. Murdoch Vice President/Finance and June 12, 1996 ____________________________ Chief Financial Officer (Britton H. Murdoch) /s/ Jeffrey P. Cornwell Assistant Vice President and ____________________________ Corporate Controller June 12, 1996 (Jeffrey P. Cornwell) /s/ W. Thacher Brown Director June 12, 1996 ____________________________ (W. Thacher Brown) /s/ Frank B. Foster, III Director June 12, 1996 ____________________________ (Frank B. Foster, III) /s/ Dr. Robert E. Naylor Director June 12, 1996 ____________________________ (Dr. Robert E. Naylor) 29 /s/ James M. Hoak, Jr. Director June 12, 1996 ____________________________ (James M. Hoak, Jr.) /s/ Robert L. Yohe Director June 12, 1996 ____________________________ (Robert L. Yohe) /s/ John A.H. Shober Director June 12, 1996 ____________________________ (John A.H. Shober) /s/ Merril L. Stott Director June 12, 1996 ____________________________ (Merril L. Stott) /s/ Erroll C. Sult Director June 12, 1996 ____________________________ (Erroll Sult) 30 AIRGAS, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES Page Reference In Report on Form 10-K _________ Independent Auditors' Report . . . . . . . . . . . . . . . . . . F-2 Statement of Management's Financial Responsibility . . . . . . . F-3 Consolidated Balance Sheets at March 31, 1996 and 1995 . . . . . F-4 Consolidated Statements of Earnings for the Years Ended March 31, 1996, 1995 and 1994. . . . . . . . . . . . . . . . . F-5 Consolidated Statements of Stockholders' Equity for the Years Ended March 31, 1996, 1995 and 1994. . . . . . . . . . . F-6 Consolidated Statements of Cash Flows for the Years Ended March 31, 1996, 1995 and 1994. . . . . . . . . .. . . . . . . . F-7 Notes to Consolidated Financial Statements. . . . . . . . . . . . F-8 Financial Statement Schedule: Schedule II - Valuation and Qualifying Accounts . . . . . . F-29 All other schedules for which provision is made in the applicable accounting regulations promulgated by the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. F-1 31 INDEPENDENT AUDITORS' REPORT The Board of Directors Airgas, Inc.: We have audited the consolidated financial statements of Airgas, Inc. and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Airgas, Inc. and subsidiaries as of March 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 1996, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth thereon. Philadelphia, Pennsylvania KPMG PEAT MARWICK LLP May 9, 1996 F-2 32 STATEMENT OF MANAGEMENT'S FINANCIAL RESPONSIBILITY Management has prepared and is responsible for the integrity and objectivity of the consolidated financial statements and related financial information in this Annual Report. The statements are prepared in conformity with generally accepted accounting principles. The financial statements reflect management's informed judgment and estimation as to the effect of events and transactions that are accounted for or disclosed. Management maintains a system of internal control at each business unit. This system, which undergoes periodic evaluation, is designed to provide reasonable assurance that assets are safeguarded and records are adequate for the preparation of reliable financial data. In determining the extent of the system of internal control, management recognizes that the cost should not exceed the benefits derived. The evaluation of these factors requires estimates and judgment by management. The Company's financial statements have been audited by KPMG Peat Marwick LLP, independent auditors. Their Independent Auditors' Report, which is based on an audit made in accordance with generally accepted auditing standards is presented on the previous page. In performing their audit, KPMG Peat Marwick LLP considers the Company's internal control structure to the extent they deem necessary in order to plan their audit, determine the nature, timing and extent of tests to be performed and issue their report on the consolidated financial statements. The Audit Committee of the Board of Directors meets with the independent auditors and management to satisfy itself that they are properly discharging their responsibilities. The auditors have direct access to the Audit Committee. Airgas, Inc. /s/ Britton H. Murdoch /s/ Hermann Knieling /s/ Peter McCausland ________________________ ____________________ _______________________ Britton H. Murdoch President and Chief Peter McCausland Vice President and Operating Officer Chairman and Chief Financial Officer Chief Executive Officer F-3 33 AIRGAS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, ________________ (In thousands, except per share amounts) 1996 1995 ________________________________________ ____ ____ ASSETS (Note 8) Current Assets Trade receivables, less allowances for doubtful accounts of $3,396 in 1996 and $4,161 in 1995 . . . . . .$120,811 $ 93,423 Inventories (Note 4) . . . . . . . . . . . . . . . . . . . 86,162 65,947 Prepaid expenses and other current assets. . . . . . . . . 11,601 10,467 _______ _______ Total current assets. . . . . . . . . . . . . . . . . 218,574 169,837 _______ _______ Plant and Equipment, at cost (Note 5). . . . . . . . . . . 586,328 464,983 Less accumulated depreciation. . . . . . . . . . . . . . (147,451) (118,715) _______ _______ Plant and equipment, net . . . . . . . . . . . . . . . . 438,877 346,268 _______ _______ Other Non-current Assets (Note 6) . . . . . . . . . . . . . 60,948 41,388 Goodwill, net of accumulated amortization of $19,552 in 1996 and $15,094 in 1995. . . . . . . . . . 165,243 88,144 _______ _______ $883,642 $645,637 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Current portion of long-term debt (Note 8) . . . . . . . .$ 12,179 $ 11,780 Accounts payable, trade. . . . . . . . . . . . . . . . . . 52,528 43,782 Accrued expenses and other current liabilities (Note 7). . 72,279 60,191 _______ ______ Total current liabilities . . . . . . . . . . . . . . 136,986 115,753 _______ _______ Long-Term Debt (Note 8). . . . . . . . . . . . . . . . . . 385,832 259,970 Deferred Income Taxes (Note 13). . . . . . . . . . . . . . 88,400 67,540 Other Non-current Liabilities. . . . . . . . . . . . . . . 34,490 11,116 Minority Interest in Subsidiaries (Note 19). . . . . . . . 1,725 1,606 Commitments and Contingencies (Note 17) Stockholders' Equity (Note 9) Common Stock, par value $.01 per share, 200,000 shares authorized, 66,314 and 63,002 shares issued in 1996 and 1995, respectively . . . . . . . . . . . . . . . 663 630 Capital in Excess of Par Value . . . . . . . . . . . . . . 91,512 61,820 Retained Earnings. . . . . . . . . . . . . . . . . . . . . 173,360 133,640 Cumulative Translation Adjustments . . . . . . . . . . . . (410) (469) Treasury Stock, 2,355 and 472 common shares at cost in 1996 and 1995, respectively. . . . . . . . . . . . . . (28,916) (5,969) _______ _______ Total stockholders' equity. . . . . . . . . . . . . . 236,209 189,652 _______ _______ $883,642 $645,637 ======= ======= See accompanying notes to consolidated financial statements. F-4 34 AIRGAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS Years Ended March 31, (In thousands, except per share amounts) ______________________________ _______________________________________ 1996 1995 1994 ____ ____ ____ Net Sales Distribution . . . . . . . . . . . . . . . . $801,552 $654,381 $486,836 Manufacturing . . . . . . . . . . . . . . . 36,592 33,602 32,513 _______ _______ _______ Total net sales . . . . . . . . . . . . 838,144 687,983 519,349 _______ _______ _______ Costs and Expenses Cost of products sold (excluding depreciation and amortization) Distribution . . . . . . . . . . . . . . . 395,370 320,800 238,429 Manufacturing. . . . . . . . . . . . . . . 24,121 22,076 20,741 Selling, distribution and administrative expenses . . . . . . . . . . . . . . . . . 279,906 235,639 180,941 Depreciation and amortization. . . . . . . . 45,762 36,868 30,571 _______ _______ _______ Total costs and expenses. . . . . . . . 745,159 615,383 470,682 _______ _______ _______ Operating Income Distribution . . . . . . . . . . . . . . . . 86,130 66,521 42,399 Manufacturing. . . . . . . . . . . . . . . . 6,855 6,079 6,268 _______ _______ _______ Total operating income . . . . . . . . . 92,985 72,600 48,667 Interest expense, net (Note 11). . . . . . . (24,862) (17,625) (12,486) Other income, net (Note 12). . . . . . . . . 782 1,067 453 Minority interest (Note 19). . . . . . . . . (663) (669) (317) _______ _______ _______ Earnings before income taxes. . . . . . 68,242 55,373 36,317 Income taxes (Note 13) . . . . . . . . . . . . 28,522 23,894 16,027 _______ _______ _______ Net earnings. . . . . . . . . . . . . $ 39,720 $ 31,479 $ 20,290 ======= ======= ======= Earnings Per Share (Notes 3 and 9) . . . . . $ .60 $ .48 $ .31 _______ _______ _______ Weighted average shares. . . . . . . . . . . 66,215 65,525 64,780 See accompanying notes to consolidated financial statements. F-5 35 AIRGAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Years Ended March 31, 1996, 1995 and 1994 _________________________________________ Shares of Capital in Common Stock Common Excess of (In thousands) $.01 Par Value Stock Par Value ______________ ______________ _____ __________ Balance--April 1, 1993 . . . . . . . . . 31,999.6 $320 $46,966 Two-for-one stock split (Note 9) . . . . 31,999.6 320 (320) Net earnings . . . . . . . . . . . . . . Foreign currency translation adjustment. Stock warrants and options exercised . . 1,568.8 16 3,477 Tax benefit associated with exercise of stock options and warrants (Note 13) 3,590 Shares issued upon acquisition of minority interests (Note 19). . . . . . 166.7 1 1,739 Shares issued in connection with Employee Stock Purchase Plan (Note 14). 59.5 1 549 ________ ___ ______ Balance--March 31, 1994. . . . . . . . . 65,794.2 $658 $56,001 Net earnings . . . . . . . . . . . . . . Foreign currency translation adjustment. Retirement of treasury stock . . . . . . (3,754.4) (37) (1,445) Purchase of treasury stock (Note 9). . . Issuance of stock in connection with acquisitions . . . . . . . . . . . 123.2 1 1,436 Stock warrants and options exercised . . 538.9 5 1,265 Tax benefit associated with exercise of stock options and warrants (Note 13) 1,859 Shares issued in connection with Employee Stock Purchase Plan (Note 14). 300.2 3 2,704 ________ ___ ______ Balance--March 31, 1995. . . . . . . . . 63,002.1 $630 $61,820 Net earnings . . . . . . . . . . . . . . Foreign currency translation adjustment. Purchase of treasury stock (Note 9). . . Issuance of stock in connection with acquisitions . . . . . . . . . . . 843.7 9 11,435 Stock warrants and options exercised . . 1,841.6 17 3,705 Tax benefit associated with exercise of stock options and warrants (Note 13) 7,613 Shares issued upon acquisition of minority interests (Note 19) 258.1 3 3,547 Shares issued in connection with Employee Stock Purchase Plan (Note 14). 368.2 4 3,392 ________ ___ ______ Balance--March 31, 1996. . . . . . . . . 66,313.7 $663 $91,512 ======== === ====== COLUMNS CONTINUED ON NEXT PAGE F-6 36 AIRGAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - (Continued) Years Ended March 31, 1996, 1995 and 1994 _________________________________________ Cumulative Retained Translation Treasury (In thousands) Earnings Adjustments Stock ______________ _________ ___________ ________ Balance--April 1, 1993 . . . . . . . . . $81,871 $(104) $(1,482) Two-for-one stock split (Note 9) Net earnings. . . . . . . . . . . . . . . 20,290 Foreign currency translation adjustment . (367) Stock warrants and options exercised. . . Tax benefit associated with exercise of stock options and warrants (Note 13). Shares issued upon acquisition of minority interests (Note 19) . . . . . . Shares issued in connection with Employee Stock Purchase Plan (Note 14) . _______ ____ _____ Balance--March 31, 1994 . . . . . . . . .$102,161 $(471) $(1,482) Net earnings. . . . . . . . . . . . . . . 31,479 Foreign currency translation adjustment . 2 Retirement of treasury stock. . . . . . . 1,482 Purchase of treasury stock (Note 9) . . . (5,969) Issuance of stock in connection with acquisitions. . . . . . . . . . . . Stock warrants and options exercised. . . Tax benefit associated with exercise of stock options and warrants (Note 13). Shares issued in connection with Employee Stock Purchase Plan (Note 14) . _______ ____ ______ Balance--March 31, 1995 . . . . . . . . .$133,640 $(469) $(5,969) Net earnings. . . . . . . . . . . . . . . 39,720 Foreign currency translation adjustment . 59 Purchase of treasury stock (Note 9) . . . (22,947) Issuance of stock in connection with acquisitions. . . . . . . . . . . . Stock warrants and options exercised. . . Tax benefit associated with exercise of stock options and warrants (Note 13). Shares issued upon acquisition of minority interests (Note 19). . . . . . . . . . . Shares issued in connection with Employee Stock Purchase Plan (Note 14) . _______ ____ ______ Balance--March 31, 1996 . . . . . . . . .$173,360 $(410) $(28,916) ======= === ====== See accompanying notes to consolidated financial statements. F-6, Continued 37 AIRGAS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Years Ended March 31, 1996 1995 1994 ____ ____ ____ Cash Flows From Operating Activities Net earnings . . . . . . . . . . . . . . . . . . $39,720 $31,479 $20,290 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization . . . . . . . . 45,762 36,868 30,571 Deferred income taxes . . . . . . . . . . . . 10,868 11,549 8,189 Equity in earnings of unconsolidated affiliates (1,428) (840) (1,258) Gain on sale of investment in CBI Industries, Inc. . . . . . . . . . . . . . -- (560) -- (Gain)/Loss on sale of plant and equipment. . (12) 110 (63) Minority interest in earnings . . . . . . . . 663 669 317 Stock issued for employee benefit plan expense 3,396 2,707 550 Changes in assets and liabilities, excluding effects of business acquisitions: Trade receivables, net. . . . . . . . . . . (5,300) (1,179) (5,444) Inventories . . . . . . . . . . . . . . . . (2,509) (1,874) 1,626 Prepaid expenses and other current assets . (960) 198 (546) Accounts payable, trade. . . . . . . . . . (1,461) 2,934 3,799 Accrued expenses and other current liabilities. . . . . . . . . . . . . . . . 4,485 1,332 4,548 Other assets and liabilities, net . . . . . (1,202) (3,441) (4,804) ______ ______ ______ Net cash provided by operating activities. 92,022 79,952 57,775 Cash Flows From Investing Activities ______ ______ _______ Capital expenditures . . . . . . . . . . . . . . (41,236) (36,712) (21,318) Proceeds from sale of plant and equipment. . . . 3,968 2,563 1,914 Business acquisitions, net of cash acquired. . .(153,605) (86,342) (93,375) Purchase of investment in CBI Industries, Inc. . -- (17,026) -- Proceeds from sale of investment in CBI Industries, Inc. . . . . . . . . . . . . . . . -- 17,892 -- Other, net . . . . . . . . . . . . . . . . . . . 860 116 (287) _______ ______ ______ Net cash used by investing activities. . . .(190,013) (119,509) (113,066) Cash Flows From Financing Activities _______ _______ ______ Proceeds from borrowings . . . . . . . . . . . . 692,414 394,193 195,292 Repayment of debt. . . . . . . . . . . . . . . .(594,931) (359,253) (150,844) Financing costs. . . . . . . . . . . . . . . . . (136) (230) (6) Repurchase of treasury stock . . . . . . . . . . (22,947) (5,969) -- Exercise of options and warrants . . . . . . . . 3,722 1,270 3,493 Net overdraft. . . . . . . . . . . . . . . . . . 4,068 4,591 2,459 Other financing activities . . . . . . . . . . . 15,745 4,960 5,120 _______ ______ ______ Net cash provided by financing activities. . 97,935 39,562 55,514 _______ ______ ______ Effects of discontinued activities, net. . . . . 56 (5) (223) _______ ______ ______ Cash Increase (Decrease) . . . . . . . . . . . . -- -- -- Cash--beginning of year. . . . . . . . . . . . . -- -- -- ______ ______ ______ Cash--End of Year. . . . . . . . . . . . . . . . $ -- $ -- $ -- ====== ====== ====== For supplemental cash flow disclosures see Note 18. See accompanying notes to consolidated financial statements. F-7 38 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Presentation The consolidated financial statements include the accounts of Airgas, Inc. and subsidiaries (the "Company"). Unconsolidated affiliates are accounted for on the equity method and generally consist of 20-50% owned operations where control does not exist or is considered temporary. The excess of the cost of these affiliates over the Company's share of their net assets at the acquisition date is being amortized over 20 to 40 years. Significant intercompany accounts and transactions are eliminated. The Company has made estimates and assumptions relating to the reporting of assets and liabilities and disclosure of contingent assets and liabilities to prepare these statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. (b) Inventories Inventories are stated at the lower of cost or market with cost for approximately 81% and 77% percent of the inventories at March 31, 1996 and 1995, respectively, determined by the first-in, first-out (FIFO) method. Cost for the remainder of inventories was determined using the last-in, first-out (LIFO) method. (c) Plant and Equipment Plant and equipment are stated at cost. Depreciation is provided on the straight-line basis over the estimated useful lives of the related assets. Effective April 1, 1993, the Company changed its estimate of the useful lives of its acetylene and high pressure cylinders from 20 to 30 years. This change was made to better reflect the estimated periods during which these assets will remain in service. The change had the effect of reducing depreciation expense in 1994 by approximately $3.1 million and increasing net earnings by $1.9 million or $.03 per share. The Company changed the estimated useful life of cylinders as a result of thorough studies and analyses. The studies considered technological advances in cylinders, empirical data obtained from cylinder manufacturers and other industry experts and experience gained from the Company's maintenance of a cylinder population of approximately two million cylinders. In the first quarter of fiscal 1997, the Company will adopt SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The statement requires the recognition of an impairment loss for an asset held for use when the estimate of undiscounted future cash flows expected to be generated by the asset is less than its carrying amount. Measurement of the impairment loss is based on fair value of the asset. Management believes that the adoption of this statement will not have a material impact on earnings, financial condition or liquidity of the Company. F-8 39 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued) (d) Other Assets Costs related to the acquisition of long-term debt are deferred and amortized over the term of the related debt. Costs and payments pursuant to noncompetition arrangements entered into in connection with business acquisitions are amortized over the terms of the arrangements which are principally over 5 years. On an ongoing basis, management reviews the valuation and amortization of intangible assets. (e) Goodwill Goodwill represents costs in excess of net assets of businesses acquired and is amortized on a straight-line basis over the expected periods to be benefited, which currently ranges from 20 to 40 years. The Company assesses the recoverability of this intangible asset by determining whether the amortization of the goodwill balance over its remaining life can be recovered through projected undiscounted future cash flows. (f) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (g) Foreign Currency Translation The functional currency of the Company's foreign operations is the applicable local currency. The translation of foreign currencies into U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using average exchange rates during each reporting period. The gains or losses, net of applicable deferred income taxes, resulting from such translations are included in stockholders' equity. Gains and losses arising from foreign currency transactions are reflected in the consolidated statements of earnings as incurred. (h) Concentrations of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of trade receivables. Concentrations of credit risk are limited due to the Company's large number of customers and their dispersion across many industries. Credit terms granted to customers are generally net 30 days. F-9 40 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (i) Revenue Recognition Sales are recorded upon shipment to the customer. (j) Financial Instruments In hedging interest rate exposure, the Company enters into interest rate swap agreements. These instruments are not entered into for trading purposes and the Company has the ability and intent to hold these instruments to maturity. The Company only uses non-leveraged instruments. When interest rates change, the difference to be paid or received is accrued and recognized as interest expense over the life of the agreement. The fair values of the Company's financial instruments are estimated based on quoted market prices for the same or similar issues. The carrying amounts for accounts receivable, accounts payable and current portion of long-term debt approximate fair value because of the short-term maturity of these financial instruments. (k) Reclassification Certain reclassifications have been made in previously issued financial statements to conform to the current presentation. (2) ACQUISITIONS The Company has acquired businesses primarily engaged in the distribution of industrial, medical and specialty gases and related equipment . Acquisitions have been recorded using the purchase method of accounting, and, accordingly, results of their operations have been included in the Company's consolidated financial statements since the effective dates of the respective acquisitions. 1996 - During 1996, the Company purchased 42 businesses. The largest of these acquisitions and their effective dates included Tech-Weld, Inc. (April 3, 1995), Trinity Welding Supply, Inc. (May 1, 1995), Red-D-Arc, Limited (June 29, 1995), Capital Welding Supply, Inc. (August 1, 1996), Langdon Oxygen Company (October 5, 1995), Acetylene Gas Company (January 1, 1996), Iatech Sales Co. (January 1, 1996), Welders Equipment Company (February 1, 1996) and Braun Welding Supply, Inc. (March 1, 1996). The aggregate purchase price for these acquisitions amounted to approximately $164 million. The purchase price for the remaining 33 businesses amounted to approximately $73 million. 1995--During 1995, the Company purchased 25 businesses. The largest of these acquisitions and their effective dates included The Jimmie Jones Company (August 1, 1994) and Post Welding Supply (November 1, 1994). The aggregate purchase price for these acquisitions amounted to approximately $83 million. The purchase price for the remaining 23 businesses amounted to approximately $44 million. F-10 41 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (2) ACQUISITIONS - (Continued) 1994--During 1994, the Company purchased 18 businesses. The largest of these acquisitions and their effective dates included General Welding Supply Co. (July 1, 1993), PDI Western Distributing Group, Inc. (July 1, 1993), Phoenix Northeast Distributors Group, Inc. (September 1, 1993) and certain operations of The BOC Group, Inc. (February 1, 1994). The aggregate purchase price for these acquisitions amounted to approximately $90 million. The purchase price for the remaining 14 businesses amounted to approximately $31 million. In connection with the above business acquisitions, the total purchase price, fair value of assets acquired, cash paid and liabilities assumed were as follows: Years Ended March 31, ___________________________ (In thousands) 1996 1995 1994 ______________ ____ ____ ____ Cash paid . . . . . . . . . . . . . . . . . . $141,916 $ 82,258 $ 89,782 Issuance of Airgas common stock . . . . . . . 11,443 775 -- Notes issued to sellers . . . . . . . . . . . 27,820 11,340 5,808 Notes payable assumed and capital leases. . . 4,073 9,067 4,276 Other liabilities assumed and accrued acquisition costs. . . . . . . . . . . . . . 51,505 23,376 20,806 ______ ______ ______ Total purchase price allocated to assets acquired. . . . . . . . . . . . . . . . . . $236,757 $126,816 $120,672 ======= ======= ======= Also, as discussed in note 19, the Company has accounted for the acquisition of subsidiary minority interests in 1996, 1995 and 1994 using the purchase method of accounting. In connection with certain acquisitions, the Company is required to make future payments to sellers based on future earnings of the acquired business in excess of predetermined amounts. Such payments, if any, are capitalized as an additional cost of the acquisition. Amounts payable under contingent payment terms continue through 1997 and are limited to $2.1 million. To-date, the Company has made aggregate payments of $1.1 million under these contingent terms. In addition, certain other acquisitions require the issuance of Airgas common stock if the Airgas common stock price at certain dates during 1999 is less than a previously established price. The purchase price for business acquisitions and minority interests were allocated to the assets acquired and liabilities assumed based on their estimated fair values. Costs in excess of net assets acquired (goodwill) for 1996, 1995 and 1994 amounted to $81.3 million, $40.8 million and $9.9 million, respectively. F-11 42 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (2) ACQUISITIONS - (Continued) The following presents unaudited estimated pro forma operating results as if the 1996 and 1995 acquisitions had been consummated on April 1, 1994. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisitions been made as of April 1, 1994 or of results which may occur in the future. Years Ended March 31, _____________________ (In thousands except per share amounts) 1996 1995 _______________________________________ ____ ____ Net sales . . . . . . . . . . . . . . . . . . . $938,877 $911,818 Net earnings. . . . . . . . . . . . . . . . . . 36,229 25,700 Earnings per share: . . . . . . . . . . . . . . .54 .39 Subsequent to March 31, 1996, the Company has acquired ten distribution businesses with annual sales of approximately $105 million for an aggregate purchase price of approximately $96 million. (3) EARNINGS PER SHARE Primary and fully diluted earnings per share amounts were determined using the Treasury Stock method. (4) INVENTORIES Inventories consist of: March 31, _______________________ (In thousands) 1996 1995 ______________ ____ ____ Finished goods. . . . . . . . . . . . . . . . . . . $85,626 $65,693 Raw materials . . . . . . . . . . . . . . . . . . . 1,879 1,315 ______ ______ 87,505 67,008 Less reduction to LIFO cost . . . . . . . . . . . . (1,343) (1,061) ______ ______ $86,162 $65,947 ====== ====== F-12 43 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (5) PLANT AND EQUIPMENT The major classes of plant and equipment, at cost, are as follows: March 31, _______________________ (In thousands) 1996 1995 ______________ ____ ____ Land and land improvements . . . . . . . . . . . . $ 20,066 $ 17,571 Buildings and leasehold improvements . . . . . . . 58,153 43,714 Machinery and equipment, including cylinders . . . 472,868 376,284 Transportation equipment . . . . . . . . . . . . . 33,724 25,944 Construction in progress . . . . . . . . . . . . . 1,517 1,470 _______ _______ $586,328 $464,983 ======= ======= Depreciation and amortization of plant and equipment charged to operations amounted to $32.0 million, $26.3 million and $21.1 million in 1996, 1995 and 1994, respectively. (6) OTHER NONCURRENT ASSETS Other noncurrent assets include: March 31, _______________________ (In thousands) 1996 1995 ______________ ____ ____ Investment in unconsolidated affiliates (Note 10). $ 9,332 $ 5,473 Noncompete agreements and other intangible assets, at cost, net of accumulated amortization of $46.7 million in 1996 and $37.4 million in 1995 . . . . . . . . . . . . 47,530 31,955 Other assets. . . . . . . . . . . . . . . . . . . . 4,086 3,960 ______ ______ $60,948 $41,388 ====== ====== (7) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities include: March 31, _______________________ (In thousands) 1996 1995 ______________ ____ ____ Cash overdraft. . . . . . . . . . . . . . . . . . . $15,706 $11,638 Insurance payable and related reserves. . . . . . . 5,297 6,304 Customer cylinder deposits. . . . . . . . . . . . . 7,058 6,242 Other accrued expenses and current liabilities. . . 44,218 36,007 ______ ______ $72,279 $60,191 ====== ====== The cash overdraft is attributable to the float of the Company's outstanding checks. F-13 44 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (8) INDEBTEDNESS (a) Long-term debt consists of the following: March 31, _______________________ (In thousands) 1996 1995 ______________ ____ ____ Revolving credit borrowings . . . . . . . . . . . . $314,804 $202,585 Senior subordinated notes . . . . . . . . . . . . . 20,000 27,857 Acquisition notes . . . . . . . . . . . . . . . . . 50,392 26,532 Industrial Development Board revenue bonds. . . . . 2,491 3,450 All other notes, at various rates and maturities. . 10,324 11,326 _______ _______ Total long-term debt. . . . . . . . . . . . . . . . 398,011 271,750 Less current installments . . . . . . . . . . . . . (12,179) (11,780) _______ _______ Long-term debt, excluding current installments. . . $385,832 $259,970 ======= ======= During 1996, the Company amended and increased its unsecured revolving credit facility with various commercial banks from $250 million to $375 million , and converted the facility to a five-year revolver maturing on August 10, 2000. The revolving credit facility also provides for the issuance of letters of credit up to $150 million. Under the terms of the revolving credit facility, interest is payable quarterly. At March 31, 1996, $66 million of money market based borrowings were outstanding under the revolving credit facility with effective rates of 5.57%. At March 31, 1996, $105 million of Libor based borrowings were outstanding under the revolving credit facility with effective rates of 5.98%. At the Company's option, borrowings under the revolving credit facility may be prime based, Libor based or Certificate of Deposit based in each case plus an applicable margin. The Company has an additional $100 million unsecured line of credit with a group of commercial banks which matures in July 1997 and provides for borrowings at the Libor rate plus an applicable margin ($100 million outstanding at 5.76% as of March 31, 1996). The Company intends to terminate its $100 million facility in conjunction with an anticipated increase in the Company's $375 million revolving credit facility in September 1996, which will have terms and conditions similar to its existing $375 million facility. The Company has a CDN $50 million Canadian credit facility ($37 million U.S.) with various commercial banks which matures on November 14, 1998. At March 31, 1996, the Company had approximately CDN $33 million ($24 million U.S.) in borrowings outstanding under the facility, resulting in unused availability under the facility of approximately CDN $17 million ($13 million U.S.). The Company also has unsecured line of credit agreements with various commercial banks. At March 31, 1996, these agreements totaled $60 million, under which the Company had aggregate outstanding borrowings of $19 million, at 5.61%. F-14 45 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (8) INDEBTEDNESS - (Continued) Senior subordinated notes with an original face value aggregating $55 million require semi-annual interest payments at 11.375%. Equal annual principal payments of $4.3 million for $12.8 million of the senior subordinated notes continue through August 1998 and equal annual principal payments of $3.6 million for $7.2 million of the senior subordinated notes continue through July 1997. Acquisition notes represent notes issued to sellers of businesses acquired and are repayable in periodic installments including interest at an average rate of 7.5%. Some acquisition notes require balloon payments which are included in the aggregate maturity schedule. Industrial development revenue bonds have variable interest rates ranging from 60% to 75% of the prime rate. The bonds mature at various dates between 1996 and 2006. Certain bonds are redeemable at the option of the issuer. The bonds are secured by mortgages on certain plant and equipment. Certain of the Company's credit facility agreements contain restrictive covenants which include the maintenance of a minimum equity level, maintenance of certain financial ratios and restrictions on additional borrowings and dividend payments. The aggregate maturities of long-term debt for the five years ending March 31, 2002 and thereafter are as follows (in thousands): Years Ending March 31, Aggregate Maturity ______________________ __________________ 1997 . . . . . . . . . . . . . . . . . . . $ 12,179 1998 . . . . . . . . . . . . . . . . . . . 126,121 1999 . . . . . . . . . . . . . . . . . . . 37,204 2000 . . . . . . . . . . . . . . . . . . . 12,017 2001 . . . . . . . . . . . . . . . . . . . 200,754 2002 and thereafter. . . . . . . . . . . . 9,736 _______ $398,011 ======= The fair value of long term debt as of March 31, 1996 was approximately $400 million based on current rates offered to the Company by financial institutions for similar type instruments. (b) Swap Agreements In managing interest rate exposure, principally under the Company's floating rate revolving credit facilities, the Company has entered into 18 interest rate swap agreements during the period from June 1992 through March 31, 1996, including two forward starting swaps. The interest rate swap agreements are with major financial institutions having a total notional principal amount of $224 million at March 31, 1996. F-15 46 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (8) INDEBTEDNESS - (Continued) Approximately $205 million of the swap agreements require fixed interest payments based on an average effective rate of 6.53% for remaining periods ranging between 1 and 8 years. The remaining $19 million of swap agreements require floating rates (5.53% at March 31, 1996). The effect of the swap agreements was to increase interest expense $1.3 million and $1.2 million in 1996 and 1995, respectively. Under the terms of seven of the swap agreements, the Company has elected to receive the discounted value of the counterparty's interest payments upfront. At March 31, 1996, approximately $23 million of such payments were included in other liabilities. The Company continually monitors its positions and the credit ratings of its counterparties, and does not anticipate nonperformance by the counterparties. The fair market value of these swaps was $2.9 million below their carry value at March 31, 1996. The aggregate maturities of the Company's interest rate swaps by type of swap for the five years ending March 31, 2001 and thereafter are as follows (in thousands): Notional Principal Amounts __________________________ Years Ending March 31, Pay-Fixed Receive-Fixed ______________________ _________ _____________ 1997 . . . . . . . . . . . . . $ 0 $ 0 1998 . . . . . . . . . . . . . 30,000 0 1999 . . . . . . . . . . . . . 12,500 7,500 2000 . . . . . . . . . . . . . 26,179 12,000 2001 . . . . . . . . . . . . . 66,178 0 2002 and thereafter. . . . . . 70,000 0 _______ ______ $204,857 $19,500 ======= ====== (9) STOCKHOLDERS' EQUITY (a) Common Stock On March 22, 1996, the Company's Board of Directors declared a two-for- one stock split to stockholders of record on April 1, 1996, payable on April 15, 1996. Stock options and other rights to acquire the Company's common stock reflect the split. The Statements of Stockholders' Equity have been restated to account for the stock split as if it had occurred on April 1, 1993. All references to the number of shares, except shares authorized, reflect the stock split. (b) Preferred Stock and Redeemable Preferred Stock The Company is authorized to issue 20 million shares of preferred stock. At March 31, 1996 and 1995, no shares were outstanding. The preferred stock may be issued from time to time by the Board of Directors in one or more series, and the Board of Directors is authorized to fix the dividend rights and terms, conversion rights, voting rights, rights and terms of redemption, liquidation preferences, and any other rights, preferences, privileges and restrictions of any series of Preferred Stock, and the number of shares constituting each such series and designation thereof. F-16 47 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (9) STOCKHOLDERS' EQUITY - (Continued) Additionally, the Company is authorized to issue 30,000 shares of redeemable preferred stock. At March 31, 1996 and 1995, no shares were outstanding. (c) Treasury Stock The Company's Board has approved a four million share common stock repurchase program. Through March 31, 1996, the Company purchased 2.4 million shares of the Company's common stock at an aggregate cost of $28.9 million. The impact of the stock repurchases on earnings per share amounts was immaterial for 1996. The future purchase of common stock is dependent on prevailing market conditions. (d) Stock Options The Company has a stock option plan for officers and key employees and has reserved 14,080,000 shares under this plan. Options are granted on terms and conditions determined by a committee of the Board of Directors. At March 31, 1996, 3,774,546 options were available for issuance. The following table summarizes the activity of the plan during the three years ended March 31, 1996: Number Price Per of Shares Share __________ _________ March 31, 1994 Outstanding, beginning of year . . . . . . . . 5,033,292 $1.46 - $3.49 Granted. . . . . . . . . . . . . . . . . . . . 1,339,320 6.32 - 8.57 Exercised. . . . . . . . . . . . . . . . . . . (1,055,408) 1.46 - 3.49 Expired. . . . . . . . . . . . . . . . . . . . (66,304) 1.83 - 6.32 March 31, 1995 Outstanding, beginning of year . . . . . . . . 5,250,900 1.46 - 8.57 Granted. . . . . . . . . . . . . . . . . . . . 1,004,600 11.32 - 14.71 Exercised. . . . . . . . . . . . . . . . . . . (424,060) 1.46 - 7.89 Expired. . . . . . . . . . . . . . . . . . . . (2,500) 3.30 - 6.32 March 31, 1996 Outstanding, beginning of year . . . . . . . . 5,828,940 1.83 - 14.71 Granted. . . . . . . . . . . . . . . . . . . . 974,020 11.44 - 17.31 Exercised. . . . . . . . . . . . . . . . . . . (589,010) 1.83 - 11.32 Expired. . . . . . . . . . . . . . . . . . . . (14,490) 3.30 - 13.32 Outstanding, end of year . . . . . . . . . . . 6,199,460 $ 1.83 -$17.31 The Company maintains a stock option plan covering Directors who are not employees which has 800,000 shares reserved. At March 31, 1996, 400,000 options were available for issuance. F-17 48 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (9) STOCKHOLDERS' EQUITY - (Continued) The following table summarizes the activity of the plan during the three years ended March 31, 1996: Number Price Per of Shares Share __________ _________ March 31, 1994 Outstanding, beginning of year . . . . . . . . 248,000 $2.10 - $4.16 Granted. . . . . . . . . . . . . . . . . . . . 56,000 8.57 Exercised. . . . . . . . . . . . . . . . . . . (32,000) 2.10 - 2.21 March 31, 1995 Outstanding, beginning of year . . . . . . . . 272,000 2.10 - 8.57 Granted. . . . . . . . . . . . . . . . . . . . 40,000 13.82 March 31, 1996 Outstanding, beginning of year . . . . . . . . 312,000 2.10 - 13.82 Granted. . . . . . . . . . . . . . . . . . . . 40,000 13.50 Outstanding, end of year . . . . . . . . . . . 352,000 $2.10 - $13.82 (e) Stock Purchase Warrants The Company and the Chairman of the Company were parties to a Stock and Warrant Issuance Agreement, as amended (the "Warrant Agreement"), which was entered into in connection with the Company's acquisition of US Airgas, Inc., of which the Chairman was the majority shareholder, in May 1986. Pursuant to the Warrant Agreement, the Chairman received warrants to purchase a total of 14,127,432 shares of the Company's common stock. Subsequent to the grant dates, the Chairman transferred warrants to purchase 2,976,800 shares of common stock to employees of the Company and to certain other individuals. As of May 1, 1996, all warrants had been exercised or had expired. F-18 49 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (9) STOCKHOLDERS' EQUITY - (Continued) The following table summarizes the activity of the stock purchase warrants during the three years ended March 31, 1996. Number Price Per of Shares Share __________ _________ March 31, 1994 Outstanding, beginning of year . . . . . . . . 2,105,680 $1.68 - $2.19 Exercised. . . . . . . . . . . . . . . . . . . (481,400) 1.76 - 2.19 March 31, 1995 Outstanding, beginning of year . . . . . . . . 1,624,280 1.68 - 2.19 Exercised. . . . . . . . . . . . . . . . . . . (114,800) 1.76 - 2.19 March 31, 1996 Outstanding, beginning of year . . . . . . . . 1,509,480 1.76 - 2.19 Exercised. . . . . . . . . . . . . . . . . . . (1,252,568) 1.76 - 2.19 Cancelled. . . . . . . . . . . . . . . . . . . (12,712) Outstanding, end of year . . . . . . . . . . . 244,200 $1.76 - $2.19 (f) Shareholder Rights Plan Under the terms of a Shareholder Rights Plan, preferred share purchase rights were distributed during 1988 as a dividend at the rate of one right for each common share. The number of rights outstanding is subject to adjustment under certain circumstances and all rights expire on August 1, 1998. The rights are not exercisable until a person or entity acquires twenty percent of the Company's common stock. Each right will entitle the holder to buy $16.25 worth of the Company's common stock at an exercise price of $8.13. (g) Stock-Based Compensation The Company accounts for stock options according to the provisions of Accounting Principles Board Opinion 25 (APB 25), "Accounting for Stock Issued to Employees." In October 1995, the Financial Accounting Standards Board issued FASB Statement No. 123, "Accounting for Stock-Based Compensation." The new standard defines a fair value method of accounting for stock options and similar equity instruments. Companies may elect to continue to use existing accounting rules or adopt the fair value method for expense recognition. Companies that elect to continue to use existing accounting rules will be required to provide pro-forma disclosures of net income and earnings per share assuming the fair value method was adopted. The Company will elect to continue to use existing accounting rules. The new statement is effective for fiscal years beginning after December 15, 1995. Accordingly, the Company will adopt the provisions in the first quarter of fiscal 1997 and present the required pro-forma disclosure provisions for its fiscal year ending March 31, 1997. As the Company will continue to account for stock-based compensation using the intrinsic value method, this statement will not have a material impact on earnings, financial condition or liquidity of the Company. F-19 50 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (10) INVESTMENT IN UNCONSOLIDATED AFFILIATES At March 31, 1996, the Company's investment in unconsolidated affiliates totaled $9.3 million and includes Elkem-American Carbide Company (U.S.), Poligaz SA (Poland) and Bhoruka Gases, Ltd. (India). The Company's share of earnings from unconsolidated affiliates was $1.4 million, $840 thousand and $1.3 million for the years ended March 31, 1996, 1995 and 1994, respectively. (11) INTEREST EXPENSE, NET Interest expense, net, consists of: Years Ended March 31, ___________________________ (In thousands) 1996 1995 1994 ______________ ____ ____ ____ Interest expense. . . . . . . . . . . . . . . $25,854 $18,476 $13,189 Interest and finance charge income. . . . . . (992) (851) (703) ______ ______ ______ $24,862 $17,625 $12,486 ====== ====== ====== (12) OTHER INCOME, NET Other income, net, consists of: Years Ended March 31, ___________________________ (In thousands) 1995 1994 1993 ______________ ____ ____ ____ Gain on sale of investment in CBI Industries, Inc. . . . . . . . . . . . . . . $ -- $ 560 $ -- Other income,net . . . . . . . . . . . . . . 782 507 453 _____ _____ ___ $ 782 $1,067 $453 ===== ===== === (13) INCOME TAXES Pre-tax earnings were derived from the following sources: Years Ended March 31, ___________________________ (In thousands) 1996 1995 1994 ______________ ____ ____ ____ United States . . . . . . . . . . . . . . . . $66,810 $54,239 $35,621 Foreign . . . . . . . . . . . . . . . . . . . 1,432 1,134 696 ______ ______ ______ $68,242 $55,373 $36,317 ====== ====== ====== F-20 51 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (13) INCOME TAXES - (Continued) Income tax expense consisted of: Years Ended March 31, ___________________________ (In thousands) 1996 1995 1994 ______________ ____ ____ ____ Current: Federal . . . . . . . . . . . . . . . . . $14,657 $ 9,997 $ 6,515 Foreign . . . . . . . . . . . . . . . . . 699 573 326 State . . . . . . . . . . . . . . . . . . 2,298 1,775 997 ______ ______ ______ 17,654 12,345 7,838 ______ ______ ______ Deferred: Federal . . . . . . . . . . . . . . . . . . 9,660 9,829 6,827 Foreign . . . . . . . . . . . . . . . . . . 34 47 61 State . . . . . . . . . . . . . . . . . . . 1,174 1,673 1,301 ______ ______ ______ 10,868 11,549 8,189 ______ ______ ______ $28,522 $23,894 $16,027 ====== ====== ====== Significant differences between taxes computed at the federal statutory rate and the provision for income taxes were: Years Ended March 31, ___________________________ 1996 1995 1994 ____ ____ ____ Taxes at U.S. federal statutory rate . . . . . . 35.0% 35.0% 35.0% Increase in income taxes resulting from: State income taxes, net of federal benefit . . . 3.3 4.0 4.1 Increase in statutory rate on deferred tax items -- -- 4.5 Amortization of non-deductible goodwill. . . . . 1.8 1.8 2.3 Adjustment of federal and state accruals . . . . -- -- (4.5) Other, net . . . . . . . . . . . . . . . . . . . 1.7 2.4 2.7 ____ ____ ____ 41.8% 43.2% 44.1% ==== ==== ==== F-21 52 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (13) INCOME TAXES - (Continued) The significant components of deferred income tax expense attributable to earnings for the years ended March 31, 1996, 1995 and 1994 are as follows: Years Ended March 31, ___________________________ (In thousands) 1996 1995 1994 ______________ ____ ____ ____ Deferred tax expense (exclusive of the effects of other components listed below). . $10,868 $11,549 $ 8,189 Adjustments to deferred tax assets and liabilities for enacted changes in tax laws and rates. . . . . . . . . . . . . . . . . . -- -- 663 Adjustment of federal and state accruals. . . -- -- (663) ______ _____ _____ $10,868 11,549 $ 8,189 ====== ====== ===== The tax effects of cumulative temporary differences that gave rise to the significant portions of the deferred tax liability and deferred tax asset were as follows: March 31, _______________________ (In thousands) 1996 1995 ______________ ____ ____ Deferred Tax Assets: ____________________ Inventories . . . . . . . . . . . . . . . . . . $ 1,396 $ 1,368 Accounts Receivable . . . . . . . . . . . . . . 553 885 Deferred Rental Income. . . . . . . . . . . . . 809 880 Insurance Reserves. . . . . . . . . . . . . . . 1,339 1,791 Other Reserves. . . . . . . . . . . . . . . . . 2,487 2,296 AMT Credit Carryforwards. . . . . . . . . . . . 2,184 3,079 Other . . . . . . . . . . . . . . . . . . . . . 1,151 1,185 ______ ______ 9,919 11,484 ______ ______ Deferred Tax Liabilities: _________________________ Property and equipment. . . . . . . . . . . . . (91,371) (70,787) Intangible Assets . . . . . . . . . . . . . . . (605) (2,734) Other . . . . . . . . . . . . . . . . . . . . . (3,412) (286) ______ ______ (95,388) (73,807) ______ ______ Net Deferred Tax Liability . . . . . . . . . . . $(85,469) $(62,323) ====== ====== The Company has recorded tax benefits amounting to $7.6 million, $1.9 million and $3.6 million in 1996, 1995 and 1994, respectively, resulting from the exercise of stock options and warrants. This benefit has been recorded in capital in excess of par value. F-22 53 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (13) INCOME TAXES - (Continued) The Internal Revenue Service is currently conducting an examination of the Company's federal income tax returns for the years ended March 31, 1993 and 1994. Management believes that the results of this examination will not have a material effect on the Company's earnings, financial condition, or liquidity. (14) BENEFIT PLANS (a) Pension and Profit Sharing Plans The Company has a defined contribution 401(k) plan covering substantially all full-time employees. Under the terms of the plan, the Company makes matching contributions up to two percent of participants' wages plus additional discretionary profit sharing contributions based upon the profitability of the Company. Amounts expensed under the plan for 1996, 1995 and 1994 were $5.1 million, $4.7 million and $3.3 million, respectively. During 1993, the Company authorized termination of two defined benefit pension plans effective December 31, 1992. At December 31, 1995, the plans' projected benefit obligations approximate the plans' net assets available for benefits. The settlement of the vested benefit obligations by the purchase of nonparticipating annuity contracts or lump-sum payments for covered employees is not expected to result in a significant gain or loss. Certain subsidiaries of the Company participate in multi-employer pension plans which provide defined benefits to union employees. Contributions are made to the plans in accordance with negotiated labor contracts. The Company has not taken any action to terminate or withdraw from these plans. Management believes that the Company's liability, if any, for multi-employer plan withdrawal liability will not have a material effect on the Company's financial position, results of operations, or liquidity. Amounts expensed under these plans for 1996, 1995 and 1994 were $482 thousand, $418 thousand and $227 thousand, respectively. (b) Employee Stock Purchase Plan , The Company has established an employee stock purchase plan (the "Plan") to encourage and assist employees to acquire an equity interest in the Company. The Plan is authorized to issue 2 million shares of common stock. Generally, employees may elect to have 1 to 15 percent of their gross pay withheld to buy Airgas, Inc. common stock at 85 to 95 percent of the market value depending upon base salary levels. Market value under the Plan is either the employees' enrollment date market value or the quarterly purchase date market value, whichever is lower. An employee may lock-in a purchase price for up to 27 months. The Plan is designed to comply with the requirements of section 423 of the Internal Revenue Code. F-23 54 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (14) BENEFIT PLANS - (Continued) Under the Plan, 368,194, 300,204 and 59,470 shares were issued at an average purchase price of $9.22, $9.02 and $9.00 per share during 1996, 1995 and 1994, respectively. (c) Other Employee Benefits The Company sponsors a multi-employer postretirement medical benefit plan for certain employees of one subsidiary under a collective bargaining agreement. In accordance with SFAS 106 "Employers Accounting for Postretirement Benefits Other Than Pensions" and APB Opinion No. 16 "Business Combinations", the postretirement benefit obligation was recorded at the acquisition date. The net postretirement benefit expense was $98 thousand and $88 thousand for the years ended March 31, 1996 and 1995 , respectively. The Company's unfunded accumulated postretirement benefit obligation was $896 thousand and $837 thousand at March 31, 1996, and 1995, respectively. In determining the accumulated postretirement benefit obligation, the discount rate used to estimate the actuarial present value of other postretirement benefits was 7.50% and 8.25% at March 31, 1996 and 1995, respectively. The assumed rate of increase in the health care cost trend rate for employees less than age 65 was 8.25% and 9.75% for March 31, 1996 and 1995, declining gradually to 5.25% and 6.0%, respectively, over the next four years. For employees 65 and older, the assumed rate of increase was 6.16% and 6.62% for March 31, 1996 and 1995, declining gradually to 5.25% and 5.5%, respectively, over the next four years. A 1% increase in the healthcare cost trend rate would have increased net postretirement benefit expense approximately $18 thousand and the APBO approximately $139 thousand at March 31, 1996. (15) RELATED PARTIES The Chairman and Vice President -- Corporate Development, were partners in the law firm which provides legal services to the Company. During the years ended March 31, 1996, 1995 and 1994, fees paid to the law firm totaled $754 thousand, $525 thousand, and $551 thousand, respectively. The Company is a party to a sales agency agreement for the sale of carbon products with a company which is a greater than five percent stockholder and a director of that company is also a former director of the Company. The sales agency agreement expires in October 2003. During the years ended March 31, 1996, 1995 and 1994, the Company paid $685 thousand, $543 thousand and $515 thousand, respectively, under this agreement. F-24 55 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (15) RELATED PARTIES - (Continued) A member of the Company's board of directors is the president of a regional producer and distributor of industrial gases and related equipment in the Southeastern United States. During the years ended March 31, 1996, 1995 and 1994, this company paid $987 thousand, $914 thousand and $1.1 million, respectively, to a joint venture of the Company for the purchase of calcium carbide. In addition, this company paid $604 thousand and $546 thousand to the Company for other gas purchases in 1996 and 1995, respectively. (16) LEASES The Company leases certain distribution facilities and equipment under long-term operating leases with varying terms. Most leases contain renewal options and in some instances, purchase options. Rentals under these long-term leases (exclusive of real estate taxes, insurance, and other expenses payable under the terms of the leases) for the years ended March 31, 1996, 1995 and 1994, amounted to $17.8 million, $14.5 million and $9.7 million, respectively. Additionally, the Company leases certain operating facilities from employees of the Company who were previous owners of businesses acquired at market rates. The Company entered into certain operating leases for real estate with a trust established by a commercial bank. The trust is committed to purchase real estate properties up to an aggregate amount of $25 million. The trust holds title to the properties and leases the properties to the Company. The rental payments are based on Libor plus an applicable margin and the cost of the property acquired by the trust. The Company has entered into interest rate swap agreements in a notional principal amount of $10 million to hedge the effects of fluctuations in the Libor based rental rate. At the expiration of the leases in 1999, the Company has the option to purchase the real properties at fair value or assist in the sale of the properties to a third party. The Company has guaranteed a portion of the debt outstanding against these properties in the event the proceeds of a sale are not sufficient to cover the trust's investment in the properties. At March 31, 1996, the Company had a contingent guarantee of approximately $7.6 million related to leased facilities. The Company has also entered into certain operating leases for cylinders and bulk tanks. At the expiration of the leases in 1998, the Company has the option to purchase equipment at a fixed price, assist in the sale of the equipment to third parties, or renew the lease for a period of one year. The Company has guaranteed a portion of the cost of the equipment in the event the proceeds of a sale are not sufficient to cover the lessor's investment in the equipment. At March 31, 1996, the Company had a contingent guarantee of $2.8 million related to equipment under such leases. F-25 56 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) At March 31, 1996, future minimum lease payments under noncancellable operating leases are as follows: (in thousands) ____________ 1997 . . . . . . . . . . . . . . . . . . $17,248 1998 . . . . . . . . . . . . . . . . . . 15,264 1999 . . . . . . . . . . . . . . . . . . 12,845 2000 . . . . . . . . . . . . . . . . . . 10,319 2001 . . . . . . . . . . . . . . . . . . 7,424 2002 and thereafter. . . . . . . . . . . 16,435 ______ $79,535 ====== (17) COMMITMENTS AND CONTINGENCIES The Company is involved in various legal and regulatory proceedings which have arisen in the ordinary course of its business and have not been finally adjudicated. These actions, when ultimately concluded and determined, will not, in the opinion of management, have a material adverse effect upon the Company's consolidated financial position, results of operations or liquidity. (18) CASH FLOWS Cash paid for interest expense and income taxes was as follows: Years Ended March 31, ___________________________ (In thousands) 1996 1995 1994 ______________ ____ ____ ____ Interest . . . . . . . . . . . . . . . . . . . $25,107 $19,011 $13,502 Income taxes (net of refunds). . . . . . . . . 10,325 11,411 5,333 ====== ====== ====== The total purchase price, fair value of assets acquired, cash paid and liabilities assumed for business acquisitions is described in note 2. During 1996 and 1995, the Company entered into capital lease obligations for approximately $912 thousand and $3.7 million, respectively. During 1995, the Company retired 3.8 million shares of treasury stock. (19) MINORITY INTEREST IN SUBSIDIARIES Minority interests in subsidiaries represent the minority shareholders' proportionate share of the equity and the results of operations of certain subsidiaries. Under the terms of exchange rights agreements between the Company and minority shareholders, the Company, under certain circumstances, may require or permit exchange of the minority interests of a subsidiary for common stock of the Company. The agreements provide the minority shareholders with the right to exchange their subsidiary shares for common stock of the Company at certain exchange dates designated by the Board of Directors. Each exchange will be based on the fair value of the subsidiary's shares and the market price of the Company's common stock as of a valuation date designated by the Board of Directors. On August 31, 1995 and February 28, 1994 , in connection with optional exchanges, certain minority shareholders elected to exchange F-26 57 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) their minority interests for an aggregate of 258,116 and 166,732 shares of common stock, respectively. The market price of the Company's common stock on August 31, 1995 and February 28, 1994 was $13.75 and $10.438 per share, respectively . The acquisition of the minority interests has been recorded using the purchase method of accounting. During 1996, 1995 and 1994, the Company sold minority interests in certain of its subsidiaries to employees based on the estimated fair market value of the subsidiary shares. These sales of subsidiary shares were accounted for as capital transactions and, therefore, no gain or loss was recorded. (20) SUMMARY BY BUSINESS SEGMENT The Company, through its subsidiaries, is principally engaged in two related businesses: 1) the distribution of industrial, medical and specialty gases, and related equipment and 2) the manufacture of products for the industrial gas and metals industries. Industrial, medical and specialty gases are distributed through the Company's subsidiaries which operate in five divisions with locations in 38 states, Canada and Mexico. The industrial gas distribution market is broad and includes most major industries. Products manufactured by the Company include nitrous oxide, a gas with applications in the medical, food packaging and certain high technology electronic industries and calcium carbide and carbon products for the production of acetylene gas and for the non-ferrous metal industry. (In thousands) Distribution Manufacturing Total ______________ ____________ _____________ _____ 1996 Net sales . . . . . . . . . . . . . . . $801,552 $ 36,592 $838,144 Operating income . . . . . . . . . . . . 86,130 6,855 92,985 Assets . . . . . . . . . . . . . . . . . 846,129 37,513 883,642 Depreciation and amortization. . . . . . 44,386 1,376 45,762 Additions to plant and equipment excluding business acquisitions. . . . . 39,755 1,481 41,236 1995 Net sales. . . . . . . . . . . . . . . . 654,381 33,602 687,983 Operating income . . . . . . . . . . . . 66,521 6,079 72,600 Assets . . . . . . . . . . . . . . . . . 613,320 32,317 645,637 Depreciation and amortization. . . . . . 35,548 1,320 36,868 Additions to plant and equipment excluding business acquisitions. . . . . 35,961 751 36,712 1994 Net sales . . . . . . . . . . . . . . . 486,836 32,513 519,349 Operating income . . . . . . . . . . . . 42,399 6,268 48,667 Assets . . . . . . . . . . . . . . . . . 487,701 27,196 514,897 Depreciation and amortization. . . . . . 29,101 1,470 30,571 Additions to plant and equipment excluding business acquisitions. . . . . 20,515 803 21,318 F-27 58 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (20) SUMMARY BY BUSINESS SEGMENT - (continued) Corporate operating expenses are allocated between the Company's distribution and manufacturing business segments based on relative sales dollars. (21) SUPPLEMENTARY INFORMATION (UNAUDITED) Summary By Quarter This table summarizes the unaudited results of operations for each quarter of 1996 and 1995: (In thousands, except per share data) First Second Third Fourth _____________________________________ _____ ______ _____ ______ 1996 Net sales . . . . . . . . . . . . . . . $194,272 $199,030 $208,549 $236,293 Operating income. . . . . . . . . . . . 22,037 22,144 22,984 25,820 Net earnings. . . . . . . . . . . . . . 9,454 9,335 9,817 11,114 Net earnings per share (1), (2):. . . . $ .15 $ .14 $ .15 $ .17 1995 Net sales . . . . . . . . . . . . . . . $159,462 $164,986 $174,112 $189,423 Operating income. . . . . . . . . . . . 15,701 17,115 18,577 21,207 Net earnings. . . . . . . . . . . . . . 6,789 7,460 7,790 9,440 Net earnings per share (1), (2):. . . . $ .10 $ .11 $ .12 $ .14 __________________ (1) Earnings per share calculations for each of the quarters are based on the weighted average number of shares outstanding in each period. Therefore, the sum of the quarters do not necessarily equal the full year earnings per share. (2) See notes 3 and 9 to the Company's consolidated financial statements for information regarding earnings per share calculations and adjustment for the stock split effective April 15, 1996. F-28 59 SCHEDULE II CONSOLIDATED AIRGAS, INC. AND SUBSIDIARIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS For the Years Ended March 31, 1996, 1995 and 1994 (In thousands of dollars) Column A Column B Column C ________ ________ ________ Additions _________ Charged Balance at Charged to (Credited) Beginning Cost and to Other Description of Period Expense Accounts ____________ _________ __________ ____________ 1996 Accounts Receivable -- Allowance for doubtful accounts . . $ 4,161 $ 2,719 $ 1,313 (1) LIFO cost reserve . . . . . . . . . 1,061 282 -- Insurance reserves. . . . . . . . . 6,304 19,510 262 1995 Accounts Receivable -- Allowance for doubtful accounts . . $ 4,207 $ 3,102 $ 1,033 (1) LIFO cost reserve . . . . . . . . . 659 402 -- Insurance reserves. . . . . . . . . 5,341 17,038 132 1994 Accounts Receivable -- Allowance for doubtful accounts . . $ 3,392 $ 2,884 $ 1,155 (1) LIFO cost reserve . . . . . . . . . 465 194 -- Insurance reserves. . . . . . . . . 7,046 13,031 165 (COLUMNS CONTINUED ON NEXT PAGE) F-29 60 SCHEDULE II CONSOLIDATED AIRGAS, INC. AND SUBSIDIARIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS For the Years Ended March 31, 1996, 1995 and 1994 (In thousands of dollars) (Columns Continued) Column A Column D Column E ________ ________ ________ Balance at End of Description Deductions Period ____________ ______________ ________ 1996 Accounts Receivable -- Allowance for doubtful accounts . . . $ (4,797) (2) $ 3,396 LIFO cost reserve . . . . . . . . . . -- 1,343 Insurance reserves. . . . . . . . . . (20,779) 5,297 1995 Accounts Receivable -- Allowance for doubtful accounts . . . $ (4,181) (2) $ 4,161 LIFO cost reserve . . . . . . . . . . -- 1,061 Insurance reserves. . . . . . . . . . (16,207) 6,304 1994 Accounts Receivable -- Allowance for doubtful accounts . . . $ (3,224) (2) $ 4,207 LIFO cost reserve . . . . . . . . . . -- 659 Insurance reserves. . . . . . . . . . (14,901) 5,341 ________ (1) Includes collections on accounts previously written-off and allowances for doubtful accounts of businesses acquired less the allowance for doubtful accounts of businesses sold. (2) Write-off of uncollectible accounts. F-29, Continued EX-11 2 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS EX-1 Exhibit 11 AIRGAS, INC. AND SUBSIDIARIES EARNINGS PER SHARE CALCULATIONS For the Years Ended March 31, 1996, 1995 and 1994
Years Ended March 31, ____________________________________________ 1996 1995 1994 Primary/ Primary/ Primary/ Fully Fully Fully Diluted Diluted Diluted _______ _______ _______ Adjustments of Shares Outstanding _________________________________ Shares of common stock outstanding-weighted 62,819,908 62,147,928 61,348,146 Net common stock equivalents 3,394,640 3,376,920 3,431,422 __________ __________ __________ Adjusted shares outstanding 66,214,548 65,524,848 64,779,568 ========== ========== ========== Actual Net Earnings ___________________ Actual net earnings $39,720,000 $31,479,000 $20,290,000 ========== ========== ========== Net Earnings Per Share $ .60 $ .48 $ .31 ========== ========== ==========
Earnings per share amounts for 1996, 1995 and 1994 were determined using the treasury stock method. EX-21 3 SUBSIDIARIES OF THE REGISTRANT EX-2 Exhibit 21 AIRGAS, INC. AND SUBSIDIARIES Airgas, Inc. (Parent) Airgas Breathing Air Systems, Inc. Airgas Canada, Inc. Airgas Holdings Canada Limited Airgas Houston Airgas International, Inc. Airgas Management, Inc. Airgas New England Real Estate, Inc. Airgas Ontario, Inc. Airgas Realty, Inc. Airgas Safety, Inc. Airgas Texas, Inc. (d/b/a WECO) American Carbide and Carbon Corporation (d/b/a Midwest Carbide) Bay Airgas, Inc. Cascade Airgas, Inc. Connecticut Airgas, Inc. Cryodyne Technologies, Inc. Cylinder Leasing Corp. Delta Airgas, Inc. Empire Airgas, Inc. Florida Airgas,Inc. Gateway Airgas, Inc. Great Lakes Airgas, Inc. Great Western Airgas, Inc. Gulf States Airgas, Inc. Keystone Airgas, Inc. Lone Star Airgas, Inc. Maritius Industrial Gases, Inc. Bhoruka Gases, Limited Michigan Airgas, Inc. ATNL, Inc. Mid America Airgas, Inc. Mid America Airgas Holdings Midwest Airgas, Inc. (includes Central States and Midstates Airgas reporting entities) Mountain Airgas, Inc. Nitrous Oxide Corp. Northeast Airgas, Inc. Northern Gases, Inc. Pacific Airgas, Inc. G.S. Parsons Company Post Airgas, Inc. Potomac Airgas, Inc. Red-D-Arc Limited Red-D-Arc, Inc. Sierra Airgas, Inc. Sooner Airgas, Inc. Southeast Airgas, Inc. Southern California Airgas, Inc. Specialty Products and Equipment, Inc. Trinity Airgas, Inc. TriStates Airgas, Inc. (d/b/a Randall-Graw) U.S. Airgas, Inc. Westwind Company Virginia Welding Supply Airgas Polska, SP.ZO.O. Poligaz, S.A. EX-23 4 CONSENT OF INDEPENDENT AUDITORS EX-3 Exhibit 23.1 Consent of Independent Auditors' The Board of Directors Airgas, Inc.: We consent to incorporation by reference in the Registration Statements (Nos. 33-39433, 33-39325, 33-48388, 33-57893, 33-61301, 33-63201, 33-64633 and 33-61899) on Form S-3 and (Nos. 33-25419, 33-21780, 33-33954, 33-64056, 33-64058, 33-64112 and 33-64114) on Form S-8 of Airgas, Inc. of our report dated May 9, 1996, relating to the consolidated balance sheets of Airgas, Inc. and subsidiaries as of March 31, 1996 and 1995, and the related consolidated statements of earnings, stockholders' equity, and cash flows and related schedule for each of the years in the three-year period ended March 31, 1996, which report is included in the March 31, 1996 Annual Report on Form 10-K of Airgas, Inc. KPMG Peat Marwick LLP Philadelphia, Pennsylvania June 10, 1996 EX-3 5 EX 3.2 AIRGAS, INC. BY-LAWS AMENDED AND RESTATED NOVEMBER 29, 1994 EX-4 AIRGAS, INC. BY-LAWS (AMENDED AND RESTATED NOVEMBER 29, 1994) ______________________________ ARTICLE I OFFICES Section 1. The registered office of the Corporation in the State of Delaware shall be in the City of Wilmington, County of New Castle, State of Delaware. The Corporation shall have offices at such other places as the Board of Directors may from time to time determine. ARTICLE II STOCKHOLDERS Section 1: Annual Meeting The annual meeting of the stockholders for the election of Directors and for the transaction of such other business as may properly come before the meeting shall be held on such date within five (5) months after the end of the fiscal year of the Corporation as the Board of Directors shall each year fix. Each such annual meeting shall be held at such place, within or without the State of Delaware, and hour as shall be determined by the Board of Directors. The day, place and hour of each annual meeting shall be specified in the notice of annual meeting. The meeting may be adjourned from time to time and place to place until its business is completed. At the annual meeting of the stockholders, only such business shall be conducted as shall have been specified in the notice of meeting. To be properly brought before an annual meeting, business must (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than sixty days nor more than ninety days prior to the meeting; provided, however, that in the event that less than seventy days' notice or prior public disclosure of the date of the meeting is given or made to stockholder, notice by the stockholder to be timely must be so received not later than the close of business on the tenth day following the date on which such notice of the date of the annual meeting was mailed or such public disclosure was made. A stockholder's notice to the Secretary shall be set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting, EX-5 (b) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the stockholder, and (d) any material interest of the stockholder in such business. Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section I. The presiding officer of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of this Section I, and if he should so determine, he shall so declare to the meeting that any such business not properly brought before the meeting shall not be transacted. Section 2. Special Meetings. Except as otherwise required by law and subject to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or on liquidation, special meeting of the stockholders may be called only by the Chairman of the Board, the President, the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors, or pursuant to the request of holders of 33% of the combined voting power of the then outstanding shares of stock entitled to vote generally in the election of Directors, voting together as a single class. Section 3. Stockholder Action. Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders. Section 4. Notice of Meeting. Except as otherwise provided by statute, written or printed notice stating the place, day and hour of the meeting and, in case of a special meeting, stating the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 60 days before the date of the meeting, either personally or by mail, by or at the direction of the Secretary, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail in a sealed envelope addressed to the stockholder at his last known post office address as it appears on the stock record books of the corporation, with postage thereon prepaid. Attendance of a person at a meeting of stockholders, in person or by proxy, constitutes a waiver of notice of the meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Section 5. Quorum. Except as otherwise required by law, the Certificate of Incorporation or these By-Laws, the holders of a majority of the shares entitled to vote at any meeting of the stockholders, present, in person or by proxy, shall constitute a quorum and the act of the majority of such quorum shall be deemed the act of the stockholders. EX-6 If a quorum shall fail to attend any meeting, the chairman of the meeting may adjourn the meeting to another place, date or time. If a notice of any adjourned special meeting of stockholders is sent to all stockholders entitled to vote thereat, stating that it will be held with those present constituting a quorum, then, except as otherwise required by law, those present at such adjourned meeting shall constitute a quorum and all matters shall be determined by a majority of votes cast at such meeting. Section 6. Qualification of Voters. The Board of Directors (hereinafter sometimes referred to as the "Board") may fix a day and hour not more than sixty nor less then ten days prior to the day of holding any meeting of the stockholders at the time of which the stockholders entitled to notice of and to vote at such meeting shall be determined. Only those persons who were holders of record of voting stock at such time shall be entitled to notice of and to vote at such meeting. Section 7. Procedure. The order of business and all other matters of procedure at every meeting of the stockholders may be determined by the presiding officer. Section 8. Voting Lists. The officer or agent having charge of the transfer book for shares of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder present. The original share or stock ledger or transfer book or a duplicate thereof, shall be the only evidence as to who are the stockholders entitled to examine such list or share ledger or transfer book or to vote at any meeting of stockholders. Section 9. Voting and Proxies. Each holder of Common Stock shall be entitled to one vote per share held of record upon each matter on which stockholders generally are entitled to vote. At all meetings of stockholders, a stockholder entitled to vote may vote in person or by proxy executed in writing by the stockholder or by his duly authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. Unless otherwise provided by law, all questions touching the validity or sufficiency of the proxies shall be decided by the Secretary. Directors shall be elected by a plurality of the votes cast at an election. EX-7 All other action (unless a greater plurality is required by law or by the Certificates of Incorporation or by these By-Laws) shall be authorized by a majority of the votes cast by the holders of shares entitled to vote thereon, present in person or represented by proxy, and where a separate vote by class is required, by a majority of the votes cast by the stockholders of such class, present in person or presented by proxy. SECTION 10. Notification of Nomination of Directors. Nominations for election to the Board of Directors of the Corporation at a meeting of stockholders may be made by the Board of Directors or by any stockholder of the Corporation entitled to vote for the election of directors at such meeting who complies with the notice procedures set forth in this Section 10. Such nominations, other than those made by or on behalf of the Board of Directors, may be made only if notice in writing is personally delivered to, or mailed by first class United States mail, postage prepaid, and received by, the Secretary of the Corporation not less than sixty days nor more than ninety days prior to such meeting; provided, however, that if less than seventy days notice or prior public disclosure of the date of the meeting is given to stockholders, such nomination shall have been mailed by first class United States mail, postage prepaid, and received by, or personally delivered to, the Secretary of the Corporation not later than the close of business on the tenth day following the day on which notice of the date of the meeting was mailed or such public disclosure was made, whichever occurs first. Such notice shall set forth (a) as to each proposed nominee (i) the name, age, business address and, if known, residence address of each such nominee, (ii) the principal occupation or employment of each such nominee, (iii) the number of shares, if any, of stock of the Corporation that are beneficially owned by each such nominee and (iv) any other information concerning the nominee that must be disclosed in proxy solicitations pursuant to the proxy rules of the Securities and Exchange Commission if such person had been nominated, or intended to be nominated, by the Board of Directors (including such person's written consent to be named as a nominee and to serve as a director if elected); and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the Corporation's books, of such stockholder (ii) a representation that such stockholder is a holder of record of shares of stock of the Corporation entitled to vote at the meeting and the class and number of shares of the Corporation which are beneficially owned by such stockholder, (iii) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice and (iv) a description of all arrangements or understandings between such stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by such stockholder. The Corporation also may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation. The presiding officer of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. EX-8 ARTICLE III DIRECTORS Section 1. Number, Election and Terms. Except as otherwise fixed pursuant to the provisions of Article 4 of the Certificate of Incorporation relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional directors under specified circumstances, the number of Directors shall consist of no less than seven and no more than thirteen members, as shall be specifically determined from time to time by resolution of the Board of Directors. The Directors, other than those who may be elected by the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, one class to hold office initially for a term expiring at the annual meeting of stockholders to be held in 1987, another class to hold office initially for a term expiring at the annual meeting of stockholders to be held in 1988, and a third class to hold office initially for a term expiring at the annual meeting of stockholders to be held in 1989, with the members of each class to hold office until their successors are elected and qualified. At each annual meeting of stockholders, the successors or the class of Directors whose term expires at the meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in third year following the year of their election. The term "entire Board" as used in these By-Laws means the total number of Directors which the Corporation would have if there were no vacancies. Subject to the rights of holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, nominations for the election of Directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any stockholder entitled to vote in the election of Directors generally. Section 2. Powers. The business, property and affairs of the Corporation shall be managed by or under the direction on its Board of Directors, which shall have and may exercise all the powers of the Corporation of Incorporation, or by these By-Laws, directed or required to be exercised or done by the stockholders. Section 3. Vacancies. Except as otherwise fixed pursuant to the provisions of Article 4 of the Certificate of Incorporation relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect Directors under specified circumstances, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be fill solely by the affirmative vote of a majority of the remaining Directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office until the next annual meeting of stockholders. No decrease in the number of Directors constituting the Board of Directors shall shorten the term of any incumbent Director. EX-9 Section 4. Removal. Subject to the rights of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect Directors under specified circumstances, any Director may be removed from office, without cause only by the affirmative vote of the holders of 67% of the combined voting power of the then outstanding shares of stock entitled to vote generally in the election of Directors, voting together as a single class. Section 5. Regular Meetings. Regular meetings of the Board shall be held at such times and places as the Board may from time to time determine. Section 6. Special Meetings. Special meetings of the Board may be called at any time, at any place and for any purpose by the Chairman of the Executive Committee, the Chairman of the Board, or the President, or by any officer of the Corporation upon the request of a majority of the entire Board. Section 7. Notice of Meeting. Notice of regular meetings of the Board need not be given. Notice of every special meeting of the Board shall be given to each Director at his usual place of business, or at such other address as shall have been furnished by him for the purpose. Such notice shall be given at least twenty-four hours before the meeting by telephone or by being personally delivered, mailed, or telegraphed. Such notice need not include a statement of the business to be transacted at, or the purpose of, any such meeting. Section 8. Quorum. Except as may be otherwise provided by law or in these By-Laws, the presence of a majority of the entire Board shall be necessary and sufficient to constitute a quorum for the transaction of business at any meeting of the Board, and the act of a majority of such quorum shall be deemed the act of the Board. Section 9. Powers. Members of the Board, or of any committee thereof, may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and such participation shall constitute presence in person at such meeting. Section 10. Action Without a Meeting. Action required or permitted to be taken pursuant to authorization voted at a meeting of the Board, or a committee thereof, may be taken without a meeting if, before or after the action, all members of the Board or of the Committee consent thereto in writing. The written consents shall be filed with the minutes of the proceedings of the Board or Committee. The consent shall have the same effect as a vote of the Board or Committee thereof for all purposes. EX-10 Section 11. Compensation of Directors. Directors shall receive such compensation for their services as shall be determined by a majority of the entire Board provided that Directors who are serving the Corporation as officers or employees and who receive compensation for their services as such officers or employers shall not receive any salary or other compensation for their services as Directors. ARTICLE IV OFFICERS Section 1. Number. The officers of the Corporation shall be a Chairman of the Board, a President, such number of vice presidents as the Board may from time to time determine, a Secretary and a Treasurer. The Chairman of the Board shall be the chief executive officer unless the Board shall otherwise determine. The Chairman of the Board or, in his absence, or if such office be vacant the President, shall preside at all meetings of the stockholders and of the Board. Any person may hold two or more offices at the same time. The Chairman of the Board and the President shall be members of the Board of Directors, but the other officers need not be members of the Board. Section 2. Election and Term of Office. The officers of the Corporation shall be elected annually by the Board at this first meeting of the Board held after the annual meeting of stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as the same can conveniently be held. Each officer, except such officers may be elected or appointed in accordance with the provisions of Section 3 of Article IV, shall hold his office until his successor shall have been duly elected and shall have qualified or until his death, resignation or removal. All officer, agents and employees of the Corporation shall hold their respective offices or positions at the pleasure of the Board of Directors and may be removed at any time by the Board of Directors with or without cause. Section 3. Duties. The officers, agents and employees shall perform the duties and exercise the powers actually incident to the offices or positions held by them respectively, and/or such other duties and powers as may be assigned to them from time to time by the Board of Directors. ARTICLE V EXECUTIVE COMMITTEE Section 1. Election. At any meeting of the Board, an Executive Committee, composed of the Chairman of the Board, the President, and not less than two other members, may be elected by a majority vote of the entire Board to serve until the Board shall otherwise determine. Either the Chairman of the Board or the President, whichever is the chief executive officer, shall be the Chairman of the Executive Committee, and the other shall be the Vice Chairman thereof, unless EX-11 the Board shall otherwise determine. Members of the Executive Committee shall be members of the Board. Section 2. Powers. The Executive Committee shall have and may exercise all of the powers of the Board of Directors when the board is not in session, except that it shall have no power to (a) elect directors or officers; (b) alter, amend or repeal these By-Laws or any resolution or resolutions of the Board of Directors relating to the Executive Committee; (c) declare any dividend or make any other distribution to the stockholders of the Corporation; (d) appoint any member of the Executive Committee, (e) take any other action which legally may be taken only by the Board or (f) approve the acquisition of substantially all the assets or capital stock of a corporation or business entity which has annual sales in excess of twenty percent (20%) of the annual sales of the Corporation as of the date of such approval. Section 3. Vacancies. Vacancies in the Executive Committee may be filled at any time by a majority vote of the entire Board. Section 4. Other Committees. The Board may designate one or more other committees, each consisting of one or more directors of the Corporation as members and one or more directors as alternate members, with such power and authority as prescribed in the By-Laws or as provided in a resolution adopted by a majority of the entire Board. Each Committee, and each member thereof, shall serve at the pleasure of the Board. ARTICLE VI LIABILITY OF DIRECTORS A Director of the Corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, except for liability (i) for any breach of the Director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the Director derived any improper personal benefit. If the Delaware General Corporation Law is hereafter amended to authorize the further elimination or limitation of the liability of a Director, then the liability of a Director of the Corporation shall be eliminated or limited to the fullest extent permitted by the amended Delaware General Corporation Law. Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a Director of the Corporation existing at the time of such repeal or modification. EX-12 ARTICLE VII INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES Section 1. The Corporation shall indemnify to the full extent permitted by, and in the manner permissible under, the laws of the State of Delaware any person made, or threatened to be made, a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, his testator or intestate is or was a director or officer of the Corporation or any predecessor of the Corporation, or served any other enterprise as a director or officer at the request of the Corporation or any predecessor of the Corporation. Section 2. General. The foregoing provisions of this Article VI shall be deemed to be a contract between the Corporation and each director and officer who serves in such capacity at any time while this By-Law is in effect, and any repeal or modification thereof shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts. The foregoing rights of indemnification shall not be deemed exclusive of any other rights to which any director or officer may be entitled apart from the provisions of this Article. The Board of Directors in its discretion shall have the power on behalf of the Corporation to indemnify any person, other than a director or officer, made a party to any action, suit or proceeding by reason of the fact that he, his testator or intestate, is or was an employee of the Corporation. ARTICLE VIII CAPITAL STOCK Section 1. Certificates of Stock. The certificates for shares of the capital stock of the Corporation shall be in such form as shall be approved by the Board. The certificates shall be signed by the Chairman of the Board, the President, and also the Treasurer or the Secretary, and may be sealed with the seal of the Corporation, or a facsimile thereof. The signatures of the aforesaid officers may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation or its employee. The validity of any stock certificate of the Corporation signed and executed by or in the name of duly qualified officers of the Corporation shall not be affected by the subsequent death, resignation, or the ceasing for any other reason of any such officer to hold such office, whether before or after the date borne by or the actual delivery of such certificate. EX-13 The name of the person owning the shares represented thereby, with the number of such shares and the date of issue, shall be entered on the Corporation's capital stock records. All certificates surrendered to the Corporation shall be cancelled, and no new certificates shall be issued until the former certificate for the same number of shares shall have been surrendered and canceled except in case of a lost or destroyed certificate. The Corporation may treat the holder of record or any share or shares of stock as the holder in fact thereof, and shall not be bound to recognize any equitable or other claim to interest in any such share or shares on the part of any other person, whether or not it shall express or other notice thereof, save as expressly provided by law. Section 2. Lost, Stolen or Destroyed Certificates. The Corporation may issue a new certificate for shares in place of a certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Board may require the owner of the lost or destroyed certificate, or his legal representative, to give the Corporation a bond in form satisfactory to the Corporation sufficient to indemnify the Corporation, its transfer agents and registrars against any claim that may be made against them on account of the alleged lost or destroyed certificate or the issuance of such a new certificate. Section 3. Transfer of Shares. Shares of the capital stock of the Corporation shall be transferable by the owner thereof in person or by duly authorized attorney, upon surrender of the certificates therefore properly endorsed. The Board, at its option, may appoint a transfer agent and registrar, or one or more transfer agents and one or more registrars, or either, for the stock of the Corporation. Section 4. Regulations. The Board shall have power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration of certificates for shares of the capital stock of the Corporation. ARTICLE IX AMENDMENTS Section 1. Amendments of By-Laws. Subject to the provisions of the Certificate of Incorporation, these By-Laws may be altered, amended or repealed at any regular meeting of the stockholders (or at any special meeting thereof duly called for that purpose) by a majority vote of the shares represented and entitled to vote at such meeting; provided that in the notice of such special meeting notice of such purpose shall be given. Subject to the laws of the State of Delaware, the Certificate of Incorporation and these By-Laws, the Board of Directors may by majority vote of those present at any meeting at which a quorum is present amend these By-Laws, or enact such other By-Laws as in their judgment may be advisable for the regulation of the conduct of the affairs of the Corporation. EX-14 ARTICLE X CORPORATE SEAL The corporate seal of the Corporation shall have inscribed thereon the name of the Corporation and the words "Corporate Seal 1986-Delaware." Said seal may be used by causing it or a facsimile or equivalent thereof to be impressed or affixed or reproduced, and shall be in the custody of the Secretary. If and when so directed by the Board, a duplicate of the seal may be kept and used by the Treasurer, or by any Assistant Treasurer or Assistant Secretary. ARTICLE XI MISCELLANEOUS PROVISIONS Section 1. Dividends. Dividends upon the outstanding shares of the Corporation may be paid from any source permitted by law. Dividends may be declared at any regular or special meeting of the Board and may be paid in cash or other property or in the form of a stock dividend. Section 2. Fiscal Year. The fiscal year of the Corporation shall end on the 31st day of March of each year, unless otherwise provided by resolution of the Board. Section 3. Stock in Other Corporation. Any shares of stock in any other corporation which may from time to time be held by the Corporation may be represented and voted at any meeting of stockholders of such corporation by the Chairman or the President of the Corporation or by any other person or persons thereunto authorized by the Board, or by any proxy designated by written instrument of appointment executed in the name of the Corporation either by the Chairman, the President, or a Vice President, and attested by the Secretary or an Assistant Secretary. Shares of stock in any other corporation which shares are owned by the Corporation need not stand in its name, but may be held for its benefit in the individual name of the Chairman or of any other nominee designated for the purpose by the Board. Certificates for shares so held for the benefit of the Corporation shall be endorsed in blank, or have proper stock powers attached so that said certificates are at all times in due form for transfer, and shall be held for safekeeping in such manner as shall be determined from time to time by the Board. Section 4. Election of Auditors. The directors shall select independent auditors to audit the books and records of the Corporation for the current fiscal year, subject to the approval of the stockholders at the annual meeting. Should the auditors so elected resign, be removed for good cause shown, or otherwise fail to serve during or with respect to said year, a majority of the directors shall select a substitute firm of auditors to serve with respect to said year. EX-4 6 EXHIBIT 4.3 - LOAN AGREEMENT DATED FEBRUARY 5, 1996 ($100 MILLION CREDIT FACILITY) EX-15 [EXECUTION COPY] LOAN AGREEMENT DATED AS OF FEBRUARY 5, 1996 BY AND AMONG AIRGAS, INC., AS THE BORROWER, THE BANKS NAMED HEREIN AND NATIONSBANK, N.A., AS AGENT EX-16 Table of Contents Page ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . 1 1.01 Definitions. . . . . . . . . . . . . . . . . . . . . 1 1.02 Incorporated Definitions.. . . . . . . . . . . . . . 5 1.03 Accounting Terms.. . . . . . . . . . . . . . . . . . 5 ARTICLE II REVOLVING LOANS . . . . . . . . . . . . . . . . 6 2.01 Loans. . . . . . . . . . . . . . . . . . . . . . . . 6 2.02 Borrowing Procedures . . . . . . . . . . . . . . . . 6 (a) Minimum Amounts.. . . . . . . . . . . . . . . . 6 (b) Types of Loans. . . . . . . . . . . . . . . . . 6 (c) Notice of Borrowing.. . . . . . . . . . . . . . 6 (d) Limitation on Numbers of Eurodollar Loans.. . . 7 (e) Interest Periods During Syndication . . . . . . 7 2.03 Notes. . . . . . . . . . . . . . . . . . . . . . . . 7 2.04 Interest.. . . . . . . . . . . . . . . . . . . . . . 8 2.05 Commitment Fee; Commitment Reductions. . . . . . . . 8 (a) Commitment Fee. . . . . . . . . . . . . . . . . 8 (b) Commitment Reductions. . . . . . . . . . . 9 ARTICLE III ADDITIONAL PROVISIONS REGARDING LOANS . . . . . 9 3.01 Additional Interest Rate Provisions. . . . . . . . . 9 (a) Default Rate. . . . . . . . . . . . . . . . . . 9 (b) LIBOR Base Rate Unascertainable.. . . . . . . . 9 3.02 Conversion and Continuation of Loans.. . . . . . . 10 3.03 Prepayments. . . . . . . . . . . . . . . . . . . . 12 3.04 Additional Costs.. . . . . . . . . . . . . . . . . 12 3.05 Change in Circumstances. . . . . . . . . . . . . . 15 3.06 Indemnity. . . . . . . . . . . . . . . . . . . . . 15 3.07 Payments.. . . . . . . . . . . . . . . . . . . . . 15 3.08 Capital Adequacy.. . . . . . . . . . . . . . . . . 16 ARTICLE IV CONDITIONS PRECEDENT AS OF CLOSING DATE . . . 17 4.01 Conditions Precedent to Initial Loans. . . . . . . 17 ARTICLE V CONDITIONS OF LENDING . . . . . . . . . . . . 18 5.01 Conditions of Lending. . . . . . . . . . . . . . . 18 5.02 Commitment Limitation; Reaffirmation.. . . . . . . 18 ARTICLE VI REPRESENTATIONS AND WARRANTIES. . . . . . . . 19 6.01 Representations and Warranties.. . . . . . . . . . 19 (a) Corporate Organization. . . . . . . . . . . . 19 (b) Corporate Power and Authority to Own Properties, etc.. . . . . . . . . . . . . . . 19 (c) Corporate Power and Authority to Execute, Deliver and Perform the Loan Documents. . . . 19 (d) Validity of Loan Documents. . . . . . . . . . 19 (e) Execution, Delivery and Performance of Loan Documents.. . . . . . . . . . . . . . . . . . 19 (f) Subsidiaries. . . . . . . . . . . . . . . . . 20 (g) Interest in Other Persons.. . . . . . . . . . 20 (h) Financial Statements. . . . . . . . . . . . . 20 (i) Governmental Regulations, etc.. . . . . . . . 20 (j) Governmental Consent. . . . . . . . . . . . . 20 6.02 Incorporated Representations and Warranties. . . . 21 EX-17 ARTICLE VII COVENANTS . . . . . . . . . . . . . . . . . . 21 7.01 Covenants. . . . . . . . . . . . . . . . . . . . . 21 (a) Use of Loan Proceeds. . . . . . . . . . . . . 21 (b) Indemnification.. . . . . . . . . . . . . . . 21 (c) Notice of Event of Default. . . . . . . . . . 22 (d) Further Assurances. . . . . . . . . . . . . . 22 7.02 Incorporated Covenants.. . . . . . . . . . . . . . 22 7.03 Incorporation of Subordinated Debt Covenants.. . . 23 ARTICLE VIII EVENTS OF DEFAULT AND ACCELERATION. . . . . . 23 8.01 Events of Default; Acceleration. . . . . . . . . . 23 ARTICLE IX THE AGENT . . . . . . . . . . . . . . . . . . 25 9.01 Appointment and Authorization. . . . . . . . . . . 25 9.02 Use of Agents, etc.. . . . . . . . . . . . . . . . 25 9.03 General Immunity.. . . . . . . . . . . . . . . . . 25 9.04 Reliance, etc. . . . . . . . . . . . . . . . . . . 26 9.05 Event of Default.. . . . . . . . . . . . . . . . . 26 9.06 No Representations.. . . . . . . . . . . . . . . . 26 9.07 Indemnification of Agent.. . . . . . . . . . . . . 27 9.08 Dealings with the Borrower.. . . . . . . . . . . . 27 9.09 Resignation and Removal. . . . . . . . . . . . . . 27 ARTICLE X MISCELLANEOUS . . . . . . . . . . . . . . . . 28 10.01 Notices.. . . . . . . . . . . . . . . . . . . 28 10.02 No Waiver; Remedies Cumulative. . . . . . . . 29 10.03 Survival of Certain Provisions, etc.. . . . . 29 10.04 Costs.. . . . . . . . . . . . . . . . . . . . 29 10.05 Amendments, Waivers and Consents. . . . . . . 30 10.06 Computations. . . . . . . . . . . . . . . . . 30 10.07 Right of Set-Off. . . . . . . . . . . . . . . 30 10.08 Interim Interest. . . . . . . . . . . . . . . 31 10.09 Counterparts. . . . . . . . . . . . . . . . . 31 10.10 Assignments, Participations, etc. . . . . . . 31 10.11 Term. . . . . . . . . . . . . . . . . . . . . 32 10.12 Governing Law; Severability; Merger.. . . . . 32 10.13 Priority of Loans.. . . . . . . . . . . . . . 33 10.14 Dealings by Banks with the Borrower.. . . . . 33 10.15 Net Payments. . . . . . . . . . . . . . . . . 33 10.16 Headings. . . . . . . . . . . . . . . . . . . 33 EX-18 Exhibits Exhibit A Bank Commitments Exhibit B Form of Note Exhibit C Form of Legal Opinion of Counsel to the Borrower Exhibit D Subsidiaries Exhibit E Interests in Other Persons Exhibit F Existing Indebtedness EX-19 LOAN AGREEMENT THIS LOAN AGREEMENT, dated as of February 5, 1996 (the "Loan Agreement"), is made by and among AIRGAS, INC., a Delaware corporation (the "Borrower"); and NATIONSBANK, N.A., ("NationsBank"); CIBC INC., ("CIBC"); PNC BANK, NATIONAL ASSOCIATION, ("PNC" - hereinafter, NationsBank, CIBC and PNC, together with their successors and assigns, may be referred individually as a "Bank" and collectively as the "Banks"); and NATIONSBANK, N.A., as agent for the Banks (the "Agent"). RECITALS: A. The Borrower has requested that the Banks provide the Borrower with a $100,000,000.00 credit facility for the purposes of (i) financing the acquisition of new Subsidiaries, (ii) financing other investments permitted under this Loan Agreement and (iii) satisfying capital expenditure and working capital needs of the Borrower and its Subsidiaries. B. The Banks have agreed to provide the requested credit facility to the Borrower on the terms and conditions hereinafter set forth. NOW, THEREFORE, the Borrower, the Agent and the Banks agree as follows: ARTICLE I DEFINITIONS 1.01 Definitions. For the purposes hereof: "Applicable Margin" means, with respect to any Eurodollar Loan, (i) for each day of the Interest Period for such Eurodollar Loan occurring during the period from and including the Closing Date through but not including September 30, 1996, 45 basis points, and (ii) for each day of the Interest Period for such Eurodollar Loan occurring on and after September 30, 1996, 70 basis points; "Base Rate" means, for any day, the rate per annum (rounded, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to the greater of (a) the Federal Funds Rate in effect on such day plus 50 basis points or (b) the Prime Rate in effect on such day. If for any reason the Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable after due inquiry to ascertain the Federal Funds Rate for any reason, including the inability or failure of the Agent to obtain sufficient quotations in accordance with the terms EX-20 hereof, the Base Rate shall be determined without regard to clause (a) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Rate, respectively. "Base Rate Loan" means any Loan bearing interest at a rate determined by reference to the Base Rate. "Business Day" means any day not a Saturday, Sunday or legal holiday on which each of the Banks is open for business; provided, however, that, when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London Interbank Market; "Closing Date" means the date as of which this Loan Agreement is executed by the Borrower, the Banks and the Agent and all of the conditions precedent set forth in Article IV hereof have been satisfied; "Commitment", for each Bank, means the commitment of such Bank to make Loans in a maximum principal amount equal to the amount set forth beside the name of such Bank on Exhibit A hereto, as the same may be reduced from time to time in accordance with the terms of Section 2.05(b) hereof; "Commitment Fee" has the meaning assigned to such term in Section 2.05(a) hereof; "Eurodollar Loan" means a Loan bearing interest based on the LIBOR Base Rate; "Event of Default" has the meaning given to said term in Section 8.01 hereof; "Existing Loan Agreement" means that certain Seventh Amended and Restated Loan Agreement dated as of August 10, 1995, as amended as of the date hereof, by and among the Borrower, the banks parties thereto and NationsBank, as agent for such banks; "Federal Funds Rate" means, for any day, the weighted average of the rates on overnight Federal funds transactions, with members of the Federal Reserve System only, arranged by Federal funds brokers, as published for such day by the Federal Reserve Bank of New York (or, in the absence of such publication, as reasonably determined by the Agent); "Incorporated Covenants" has the meaning assigned to such term in Section 7.02 hereof; "Incorporated Definitions" has the meaning assigned to such term in Section 1.02 hereof; "Incorporated Events of Default" has the meaning assigned to such term in Section 8.01(e) hereof; EX-21 "Incorporated Representations" has the meaning assigned to such term in Section 6.02 hereof; "Interbank Offered Rate" means, with respect to any Eurodollar Loan for the Interest Period applicable thereto, the rate appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in U.S. dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If, for any reason, such rate is not available, the term "Interbank Offered Rate" shall mean, with respect to any Eurodollar Loan for the Interest Period applicable thereto, the rate per annum appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates. "Interest Payment Date" means, (i) as to any Eurodollar Loan having an Interest Period of 1 week, the last day of March, June, September and December in each year, (ii) as to any Eurodollar Loan having an Interest Period of 1, 2 or 3 months, the last day of such Interest Period, (iii) as to any Eurodollar Loan having an Interest Period longer than 3 months, the last day of June, September, December and March in each year and the last day of such Interest Period, and (iv) as to any Base Rate Loan, the last day of March, June, September and December in each year. If any Interest Payment Date falls on a day which is not a Business Day, such Interest Payment Date shall be deemed to be the next succeeding Business Day (unless the same would fall in a succeeding month, in which case such Interest Payment Date shall be deemed to be the first preceding Business Day); "Interest Period" means, as to any Eurodollar Loan, prior to February 23, 1996, a period of one (1) week commencing on the date of such Eurodollar Loan and, on and after February 23, 1996 the period commencing on the date of such Eurodollar Loan and ending on the numerically corresponding day (or if there is no corresponding day, the last day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the Borrower may elect; provided, however, that (i) if any Interest Period would end on a day which shall not be a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (ii) no Interest Period shall end later than the Termination Date; "LIBOR Base Rate" means, for the Interest Period for each Eurodollar Loan comprising part of the same borrowing (including conversions, extensions and renewals), a per annum interest rate determined by the Agent pursuant to the following formula: LIBOR Base Rate = Interbank Offered Rate 1 - LIBOR Base Rate Reserve Percentage EX-22 "LIBOR Base Rate Reserve Percentage" means for any day, that percentage (expressed as a decimal) which is in effect from time to time under Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as such regulation may be amended from time to time or any successor regulation, as the maximum reserve requirement (including, without limitation, any basic, supplemental, emergency, special, or marginal reserves) applicable with respect to Eurocurrency liabilities as that term is defined in Regulation D (or against any other category of liabilities that includes deposits by reference to which the interest rate of Eurodollar Loans is determined), whether or not any Bank has any Eurocurrency liabilities subject to such reserve requirement at that time. Eurodollar Loans shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credits for proration, exceptions or offsets that may be available from time to time to a Bank. The LIBOR Base Rate shall be adjusted automatically on and as of the effective date of any change in the LIBOR Base Rate Reserve Percentage. "Loan" means a loan made pursuant to Sections 2.01 and 2.02 hereof; "Loan Documents" means this Loan Agreement and the Notes; "Majority Banks" means, at any time, (i) the holders of at least 51% of the aggregate unpaid principal amount of the Notes at such time, or (ii) if no amounts are outstanding under any of the Notes, Banks having at least 51% of the aggregate amount of the Commitments at such time; "Note" or "Notes" means a promissory note or promissory notes, as the case may be, of the Borrower, executed and delivered as provided in Section 2.03 hereof; "Prime Rate" means the rate of interest per annum as announced publicly in Charlotte, North Carolina by NationsBank as its prime commercial lending rate in effect from time to time, which is not necessarily the best or lowest rate of interest offered by NationsBank to its customers; "Subordinated Debt" means (i) the indebtedness of up to $55,000,000.00 incurred by the Borrower pursuant to the terms of the Senior Subordinated Note Purchase Agreements, the repayment of which is subordinated to the repayment of the indebtedness of the Borrower to the Banks hereunder on terms described in the Senior Subordinated Note Purchase Agreements, and (ii) additional subordinated indebtedness incurred by the Borrower provided that (A) no Event of Default specified in Article VIII hereof, nor any event which upon notice or lapse of time or both, would constitute such an Event of Default, exists immediately prior to or would exist immediately after such additional subordinated indebtedness is incurred and (B) all of the terms and conditions of such additional subordinated indebtedness (including the terms relating to the subordination of such indebtedness to the indebtedness of the Borrower hereunder) are consented to by the Majority Banks prior to the time such indebtedness is incurred. EX-23 "Termination Date" means July 1, 1997; "Unutilized Commitments" means, at any time, the excess of (i) the aggregate Commitments at such time over (ii) the aggregate outstanding principal balance of the Loans at such time. 1.02 Incorporated Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings assigned to such terms in the Existing Loan Agreement, as in effect as of the date hereof (the "Incorporated Definitions"). The incorporation by reference to the Existing Loan Agreement of the Incorporated Definitions pursuant to this Section 1.02 shall survive the termination of the Existing Loan Agreement. For purposes of the incorporation of the Incorporated Definitions pursuant to this Section 1.02, all references in the Incorporated Definitions to the "Agent" shall be deemed to refer to the Agent hereunder, all references in the Incorporated Definitions to a "Bank" or the "Banks" shall be deemed to refer to one or more of the Banks hereunder, all references in the Incorporated Definitions to the "Majority Banks" shall be deemed to refer to the Majority Banks hereunder, all references in the Incorporated Definitions to the "Loan Agreement," or any similar references, shall be deemed to refer to this Loan Agreement, all references in the Incorporated Definitions to a "Note" or the "Notes" shall be deemed to refer to one or more of the Notes issued pursuant to Section 2.03 hereof and all references in the Incorporated Definitions to a "Loan Document" or the "Loan Documents," or any similar references, shall be deemed to refer to one or more of the Loan Documents as defined in Section 1.01 hereof. 1.03 Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis. ARTICLE II REVOLVING LOANS 2.01 Loans. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Bank, severally and not jointly, agrees to make Loans to the Borrower, at any time or from time to time on or after the date hereof and until the Termination Date, in an aggregate principal amount at any time outstanding not exceeding the amount of its then applicable Commitment; provided that, at no time shall the aggregate principal balance of all outstanding Loans made by all of the Banks exceed the aggregate Commitments of all of the Banks. The Borrower may borrow, repay and reborrow hereunder on or after the date hereof and prior to the Termination Date, subject to the terms, provisions and limitations set forth herein. EX-24 2.02 Borrowing Procedures. (a) Minimum Amounts. The Loans made by the Banks on any one date shall be in a minimum aggregate principal amount of $1,500,000.00 or in an integral multiple of $100,000.00 in excess thereof. Loans shall be made ratably from the Banks in accordance with their respective Commitments; provided, however, that the failure of any Bank to make its Loan shall not in itself relieve any other Bank of its obligation to lend hereunder. The initial Loan by each Bank shall be made against delivery to such Bank of an appropriate Note, payable to the order of such Bank, as referred to in Section 2.03 hereof. In the event any Bank shall fail to make a Loan to the Borrower in accordance with the terms hereof, any other Bank may, but shall not be obligated to, make such Loan to the Borrower. (b) Types of Loans. Each Loan shall be either a Eurodollar Loan or a Base Rate Loan (or a combination thereof) as the Borrower may request subject to and in accordance with this Section. Subject to other provisions of this Section and the provisions of Section 3.02 hereof, Loans of more than one type may be outstanding at the same time. (c) Notice of Borrowing. The Borrower shall give the Agent prior written, telefax or telephonic notice, no later than the Business Day of the proposed borrowing in the case of a Base Rate Loan, and no later than three Business Days prior to the Business Day of the proposed borrowing in the case of a Eurodollar Loan, of each borrowing under Section 2.01 hereof. In each case, such notice shall be irrevocable and shall specify the aggregate amount of the proposed borrowing and the date thereof (which shall be a Business Day). Such notice, to be effective, must be received by the Agent not later than 10:00 a.m. (or 1:00 p.m. with respect to a Eurodollar Loan), Charlotte, North Carolina time, on the Business Day specified for a borrowing consisting of a Base Rate Loan and on the third Business Day prior to the date specified for a borrowing consisting of a Eurodollar Loan. Such notice shall specify whether the Loan then being requested is to be (or what portion or portions thereof are to be) a Base Rate Loan or a Eurodollar Loan and, if such Loan or any portion or portions thereof is to be a Eurodollar Loan, the Interest Period with respect thereto. If no election is specified in such notice, such Loan (or the portion thereof as to which no election is specified) shall be a Base Rate Loan. The Agent shall promptly on the same day provide the Banks notice that it has received notice from the Borrower pursuant to this paragraph. On the borrowing date specified in such notice, each Bank shall make its ratable share of the borrowing available to the Borrower at Account No. 001-641-844 maintained at the offices of NationsBank, no later than 5:00 p.m., Charlotte, North Carolina time, in Federal or other immediately available funds. EX-25 (d) Limitation on Numbers of Eurodollar Loans. Notwithstanding any provision to the contrary in this Loan Agreement, the Borrower shall not in any notice of borrowing under this Section 2.02 request any Eurodollar Loan which, if made, would result in an aggregate of more than nine (9) separate Eurodollar Loans of any Bank being outstanding hereunder at any one time. For purposes of the foregoing, (i) Eurodollar Loans made ratably by the Banks pursuant to a discrete borrowing, conversion or continuation request shall be considered a single Loan and (ii) Eurodollar Loans having different Interest Periods, regardless of whether they commence or expire on the same date, shall be considered separate Loans. The Borrower may continue any Eurodollar Loan, or convert all or any part of any Base Rate Loans or Eurodollar Loans into Loans of another type, in accordance with Section 3.02 hereof and subject to the limitations set forth therein. (e) Interest Periods During Syndication. Notwithstanding any provision hereof to the contrary, until February 23, 1996, the Borrower shall be permitted to request an Interest Period of one (1) week only for any Eurodollar Loan hereunder. 2.03 Notes. The Loans by each Bank shall be evidenced by a Note duly executed on behalf of the Borrower, dated the date hereof, in substantially the form of Exhibit B attached hereto, payable to the order of such Bank in a principal amount equal to the Commitment of such Bank. Each Note shall bear interest from its date on the outstanding principal balance thereof as set forth in Section 2.04 hereof. The aggregate unpaid principal amount of the Loans of each Bank at any time shall be the principal amount owing on the Note of such Bank at such time. The principal amount of each Loan, as evidenced by a Note, shall be due and payable on the Termination Date. All accrued and unpaid interest on the outstanding principal balance of each Note shall be payable as provided in Section 2.04 and Section 3.03(c) hereof; provided that, if any such day is not a Business Day, such interest shall be payable on the next succeeding Business Day (unless, in case of a Eurodollar Loan, the same would fall in a succeeding month, in which case such principal shall be payable on the first preceding Business Day). All payments under the Notes shall be made in accordance with Section 3.07 hereof. 2.04 Interest. (a) Subject to the provisions of Section 3.01 hereof, each Base Rate Loan shall bear interest at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 365 days) equal to the Base Rate. Interest shall be payable on each Base Rate Loan quarterly on each Interest Payment Date, commencing with the first of such dates to occur after the date of such Base Rate Loan, and on the Termination Date or the date of conversion of such Base Rate Loan to a Eurodollar Loan. EX-26 (b) Subject to the provisions of Section 3.01 hereof, each Eurodollar Loan shall bear interest at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to the LIBOR Base Rate plus the Applicable Margin. Interest shall be payable on each Eurodollar Loan on each applicable Interest Payment Date, and on the Termination Date, the date of conversion of such Eurodollar Loan to a Base Rate Loan or the date of continuation of such Eurodollar Loan for a subsequent Interest Period. The Agent shall determine the applicable LIBOR Base Rate for each Interest Period at 11:00 a.m., London time, or as soon as practicable thereafter, on the date when such determination is to be made in respect of such Interest Period and shall promptly and on the same day notify the Borrower and the Banks of the LIBOR Base Rate so determined. Such determination shall be conclusive absent manifest error. 2.05 Commitment Fee; Commitment Reductions. (a) Commitment Fee. The Borrower agrees to pay in immediately available funds to the Agent (without offset or counterclaim), for the account of the Banks, in consideration of the Commitments hereunder, on the last day of each June, September, December and March, commencing with the first such date after the date hereof, and on the date of any reduction or termination of the Commitments of the Banks hereunder, a commitment fee (hereinafter called for the purpose of this Section 2.05(a) the "Commitment Fee") of 3/16 of 1% per annum (computed on the basis of the actual number of days elapsed in a year of 365 days) on the average daily Unutilized Commitments during the preceding period or quarter. The Commitment Fee shall commence to accrue as of the date hereof and shall cease to accrue on the earlier of the Termination Date or the date of termination of the Commitments of the Banks hereunder. (b) Commitment Reductions. (i) The Borrower may in full permanently terminate, or from time to time in part permanently reduce, the Commitments, in each case upon at least three Business Days' prior written, telefax or telephonic notice to the Agent. Each partial reduction of the Commitments shall be in an aggregate principal amount of $5,000,000.00 or in an integral multiple of $1,000,000.00 in excess thereof. The Agent shall promptly on the same day provide the Banks notice that it has received notice from the Borrower pursuant to this subparagraph. (ii) In the case of any termination or reduction of the Commitments pursuant to subparagraph (i) above, immediately after giving effect to such termination or reduction the aggregate principal balance of all outstanding Loans made by all of the Banks shall not exceed the aggregate Commitments of all of the Banks. Each reduction in the aggregate Commitments pursuant to EX-27 subparagraph (i) above shall be made ratably among the Banks in accordance with each Bank's Commitment. ARTICLE III ADDITIONAL PROVISIONS REGARDING LOANS 3.01 Additional Interest Rate Provisions. (a) Default Rate. Upon the occurrence and during the continuance of any Event of Default, the Borrower shall on demand from time to time pay interest on the principal balance of the Loans and, to the extent permitted by law, on overdue payments of interest and any other amounts payable hereunder or under any of the other Loan Documents up to the date of actual payment (after as well as before judgment): (i) in the case of principal of or interest on a Loan, at a rate determined by the Agent to be 2% per annum plus the rate which would otherwise be payable under Section 2.04 hereof; and (ii) in the case of any other amount payable hereunder or under any of the other Loan Documents (other than amounts referred to in clause (i) above), at a rate equal to 2% per annum plus the Base Rate. (b) LIBOR Base Rate Unascertainable. In the event, and on each occasion, that on the day two Business Days prior to the commencement of any Interest Period for a Eurodollar Loan, any Bank shall have determined that dollar deposits in the amount of the principal amount of and/or for the Interest Period for such Eurodollar Loan are not generally available to such Bank in the London Interbank Market, or that the rate at which such dollar deposits are being offered will not adequately and fairly reflect the cost to such Bank of making or maintaining the principal amount of such Eurodollar Loan during such Interest Period, or reasonable means do not exist for ascertaining the LIBOR Base Rate for such Eurodollar Loan for such Interest Period, such Bank shall, as soon as practicable thereafter, give written, telefax or telephonic notice of such determination to the Borrower and to the Agent and each other Bank, and, until the circumstances giving rise to such notice no longer exist, any request by the Borrower for a Eurodollar Loan or for conversion to or continuation of a Eurodollar Loan pursuant to Section 2.02 or 3.02 hereof shall be deemed a request for a Base Rate Loan. Each determination by any of the Banks hereunder shall be conclusive absent manifest error. 3.02 Conversion and Continuation of Loans. The Borrower shall have the right, at any time, upon prior written, telefax or telephonic notice to the Agent (which notice shall be irrevocable and, to be effective, must be received by the Agent not later than 11:00 a.m., Charlotte, North Carolina time, in the case of Base Rate Loans, on the Business Day of any conversion, and in the case of Eurodollar Loans, on the third Business Day preceding EX-28 the date of any continuation or conversion), (i) to continue any Eurodollar Loan or portion thereof into a subsequent Interest Period and (ii) to convert any Loan or portion thereof into a Loan of a different type, subject to the following: (a) no Event of Default shall have occurred and be continuing at the time of such continuation or conversion, and the representations and warranties set forth in Article VI hereof shall be true and correct in all material respects on and as of the date of such continuation or conversion with the same effect as though such representations and warranties had been made on and as of such date, except to the extent that such representations and warranties expressly relate to an earlier date; (b) if less than all Loans at the time outstand- ing shall be continued or converted, such continuation or conversion shall be made pro rata among the Banks in accordance with the respective principal amounts of the Loans held by the Banks immediately prior to such continuation or conversion and the notice given to the Banks by the Borrower shall specify the aggregate amount of Loans to be continued or converted; (c) in the case of a continuation or conversion of less than all Loans, the aggregate principal amount of Loans continued or converted shall not be less than $1,500,000.00 or shall be in an integral multiple of $100,000.00 in excess thereof; (d) each conversion or continuation shall be effected by each Bank by applying the proceeds of the new Base Rate Loan or Eurodollar Loan, as the case may be, to the Loan (or portion thereof) being converted or continued, and accrued interest on the Loan (or portion thereof) being converted or continued shall be paid by the Borrower at the time of conversion or continuation, as the case may be; (e) if the new Loan made in respect of a conver- sion or continuation shall be a Eurodollar Loan, the first Interest Period with respect thereto shall commence on the date of conversion or continuation, as the case may be; (f) no Interest Period shall be selected by the Borrower for a Loan converted to or continued as a Eurodollar Loan if such Interest Period is not available to the Borrower pursuant to the terms of the definition of "Interest Period" set forth in Section 1.01 and/or pursuant to the terms of Section 3.01(b) or 3.05 hereof; (g) a Eurodollar Loan may be converted to a Base Rate Loan or continued as a Eurodollar Loan for a subsequent Interest Period only on the last day of the Interest Period therefor; EX-29 (h) each request for a conversion to or continuation of a Eurodollar Loan which shall fail to state an applicable Interest Period shall be deemed to be a request for a Eurodollar Loan having an Interest Period of one (1) month duration; (i) no more than nine (9) separate Eurodollar Loans shall be outstanding hereunder at any one time (it being understood that, for purposes of the foregoing, (i) Eurodollar Loans made ratably by the Banks pursuant to a discrete borrowing, conversion or continuation request shall be considered a single Loan and (ii) Eurodollar Loans having different Interest Periods, regardless of whether they commence or expire on the same date, shall be considered separate Loans); and (j) notwithstanding any provision hereof to the contrary, until February 23, 1996, the Borrower shall be permitted to request an Interest Period of one (1) week only for any Eurodollar Loan hereunder. In the event that the Borrower shall not give notice to continue any Eurodollar Loan into a subsequent Interest Period or convert any such Loan into a Base Rate Loan, such Eurodollar Loan (unless repaid) shall automatically become a Base Rate Loan at the expiration of the then current Interest Period therefor. 3.03 Prepayments. (a) The Borrower shall have the right at any time and from time to time to prepay any Base Rate Loan, in whole or in part, without premium or penalty, upon prior written, telefax or telephonic notice to the Agent no later than 10:00 a.m., Charlotte, North Carolina time, on the Business Day of the proposed prepayment; provided, however, that each such partial prepayment shall be in the aggregate principal amount of at least $1,500,000.00 (or in an integral multiple of $100,000.00 in excess thereof) or the balance of such Loan, if less. (b) The Borrower shall have the right to prepay any Eurodollar Loan, in whole or in part, upon at least three Business Days' prior written or telephonic notice to the Agent; provided, however, that (i) each such partial prepayment shall be in the aggregate principal amount of at least $1,500,000.00 or in an integral multiple of $100,000.00 in excess thereof or the balance of such Loan, if less and (ii) no such prepayment made before the last day of the Interest Period in effect for such Eurodollar Loan shall be permitted unless accompanied by payment of amounts specified in Section 3.06 hereof. (c) Each notice of prepayment shall specify the prepayment date and the principal amount to be prepaid, shall be irrevocable and shall commit the Borrower to prepay such Loan by the amount stated therein. All prepayments under this Section shall be shared pro rata by the Banks and shall be accompanied by accrued interest on the principal EX-30 amount being prepaid to the date of prepayment. Amounts prepaid under the Notes pursuant to this Section prior to the Termination Date shall be available to be reborrowed from the Banks under this Loan Agreement in accordance with the terms hereof. 3.04 Additional Costs. (a) The cost to any Bank of making or maintaining any Eurodollar Loans or of maintaining its Commitment may fluctuate as a result of imposition hereafter of, or changes hereafter in, the reserve requirements promulgated by the Board of Governors of the Federal Reserve System of the United States. Accordingly, the Borrower shall pay to each Bank such additional amount or amounts as will compensate it for the effect of such reserve requirements applicable to it, which determination shall be conclusive absent manifest error. For purposes hereof, the aforesaid reserve requirements shall include any reserve on Eurocurrency Liabilities as defined by Regulation D of said Board at the ratios provided in such Regulation D from time to time. It is hereby agreed that Eurodollar Loans made hereunder shall be deemed to constitute Eurocurrency Liabilities (as defined in such Regulation D). Such Bank shall promptly refund any amounts received by it pursuant to this Section 3.04(a) that were erroneously billed to the Borrower together with interest thereon at the Federal Funds Rate. The provisions of this subsection shall survive termination of this Loan Agreement. (b) In the event that after the date hereof any change in applicable law or regulations or in the interpretation or administration thereof (including, without limitation, any request, guideline or policy not having the force of law) by any authority charged with the administration or interpretation thereof shall occur which shall: (i) subject any Bank to any tax with respect to any Eurodollar Loan (other than any tax on the overall net income of such Bank imposed by the United States of America or by the jurisdiction in which such Bank has its principal office or political subdivision or taxing authority therein); or (ii) change the basis of taxation of any payment to any Bank of principal of or interest on any Eurodollar Loan or fees and other amounts payable hereunder, or any combination of the foregoing; or (iii) impose, modify or deem applicable any reserve, deposit or similar requirement against any assets held by, deposits with or for the account of or loans or commitments by an office of such Bank as it relates to Eurodollar Loans or the Commitment of such Bank; or EX-31 (iv) impose upon such Bank any other condi- tion with respect to this Loan Agreement as it relates to Eurodollar Loans or the Commitment of such Bank; and the result of any of the foregoing shall be to increase the cost to such Bank of making or maintaining any Eurodollar Loan or of maintaining its Commitment or to reduce the amount of any payment (whether of principal, interest or otherwise) received or receivable by such Bank, or to require such Bank to make any payment in connection with any Eurodollar Loan by or in an amount which such Bank in its sole reasonable judgment shall deem material, then and in each such case the Borrower agrees to pay to such Bank, as provided in paragraph (c) below (but without duplication of the payments required under paragraph (a) above), such amounts as shall be necessary to compensate such Bank for such cost, reduction or payment; provided, however, that if any Bank shall request compensation under this Section 3.04(b) with respect to any Eurodollar Loan, the Borrower may, at its option and upon written notice to the Banks, elect to convert such Eurodollar Loan of such Bank into a Base Rate Loan upon the payment by the Borrower of the increased costs described above incurred prior to such conversion and any amount owing in respect of Section 3.06 hereof, it being understood that (A) for purposes of Sections 3.02 and 3.03 hereof, such Base Rate Loan, until the expiration of the Interest Period of the Eurodollar Loan so converted into a Base Rate Loan, shall be subject to prepayment or conversion or continuation only at such times and on such conditions as the Eurodollar Loan from which it was converted and (B) upon such increased costs being eliminated, or reduced by an amount deemed sufficient by the Borrower, such Base Rate Loan may be reconverted into a Eurodollar Loan having an Interest Period expiring on the same date as the Eurodollar Loan previously converted into such Base Rate Loan; provided further, however, that if the result of any the foregoing shall be to decrease the cost to any Bank of making or maintaining any Eurodollar Loan hereunder by a material amount, then such Bank will credit to the Borrower an amount equal to such decreased costs. Promptly after actual notice to any Bank that a change referred to in this paragraph has occurred, such Bank will give notice of such occurrence to the Borrower and the Agent. Each Bank agrees that it will promptly refund any amounts received by it pursuant to this Section 3.04(b) that were erroneously billed to the Borrower together with interest thereon at the Federal Funds Rate. The provisions of this subsection shall survive termination of this Loan Agreement. (c) Each Bank shall promptly deliver to the Borrower from time to time one or more certificates setting forth the amounts due to such Bank under paragraph (a) or (b) above, the reserve requirements or changes as a result of which such amounts are due and the manner of computing such amounts. Each such certificate shall be conclusive in the absence of manifest error. The Borrower shall pay to each EX-32 Bank the amounts shown as due on any such certificate within 10 days after its receipt of the same. No failure on the part of any Bank to demand compensation under paragraph (a) or (b) above on any one occasion shall constitute a waiver of its right to demand such compensation on any other occasion with respect to any other event. The protection of this Section shall be available to each Bank regardless of any possible contention of the invalidity or inapplicability of any law, regulation or other condition which shall give rise to any demand by such Bank for compensation hereunder; provided, however, if such law, regulation or other condition giving rise to such demand is determined to be invalid or inapplicable, such Bank will promptly refund any amount erroneously billed to the Borrower together with interest thereon at the Federal Funds Rate. 3.05 Change in Circumstances. (a) Notwithstanding anything to the contrary contained elsewhere in this Loan Agreement, if any change after the date hereof in any law or regulation or in the interpretation thereof by any governmental authority charged with the administration thereof shall make it unlawful for a Bank to make or maintain a Eurodollar Loan or to effect to its obligations as contemplated hereby with respect to a Eurodollar Loan, then, by prior written notice to the Borrower, such Bank may: (i) declare that Eurodollar Loans will not thereafter be made by such Bank hereunder, whereupon the Borrower shall be prohibited from requesting Eurodollar Loans from such Bank hereunder unless such declaration is subsequently withdrawn; and (ii) require that all outstanding Eurodollar Loans made by it be converted to Base Rate Loans, whereupon all of such Eurodollar Loans shall be automatically converted to Base Rate Loans as of the effective date of such notice as provided in paragraph (b) below (notwithstanding the provisions of Section 3.07 hereof but subject to the provisions of Section 3.06 hereof). (b) For purposes of this Section 3.05, a notice to the Borrower by any Bank pursuant to paragraph (a) above shall be effective with respect to outstanding Eurodollar Loans, if lawful, on the last day of the then current Interest Period; in all other cases, such notice shall be effective on the date of receipt by the Borrower. 3.06 Indemnity. The Borrower shall reimburse each Bank on demand for any actual out-of-pocket loss incurred by it in the reemployment of the funds released by any prepayment or conversion of any Eurodollar Loan required or permitted by any other provision of this Loan Agreement if such Eurodollar Loan is prepaid or converted other than on the last day of any Interest Period for such Eurodollar Loan or upon any failure by the EX-33 Borrower to borrow or convert or continue any Eurodollar Loan. Each Bank shall promptly deliver to the Borrower from time to time one or more certificates setting forth the amounts due to such Bank under this paragraph and the manner of computing such amounts. Determinations by any Bank under this Section 3.06 shall be conclusive absent manifest error. The provisions of this Section shall remain operative and in full force and effect regardless of the expiration of this Loan Agreement. 3.07 Payments. All payments and prepayments of principal, interest and fees (other than the fees payable to the Agent pursuant to Section 7.01(d) hereof), subject to distinctions in the interest rates applicable to any Loans as a consequence of the application of Section 3.04(b) or Section 3.05 hereof, shall be made pro rata among the Banks in accordance with the then outstanding principal amount of the Notes (or in accordance with the Commitments if there are no amounts then outstanding under the Notes). All payments by the Borrower hereunder and under the Notes shall be made to the Agent at its offices at Charlotte, North Carolina time, for the account of each Bank in dollars in Federal or other immediately available funds by 11:00 a.m. Charlotte, North Carolina time, on the date on which such payment shall be due. All payments received by the Agent for the account of a Bank shall be promptly on the same day remitted by the Agent to such Bank. Upon receipt by a Bank of more than its pro rata share of any such payment, whether voluntary or involuntary, it is hereby agreed among the Banks and the Borrower that the Bank receiving such excess payment (the "Receiving Bank") shall be obligated to pay to the other Banks for application to the obligations owing to such Bank hereunder, under such Bank's Note and under the other Loan Documents an amount necessary to reduce the outstanding balances on such obligations owing to such Bank to the balances that would be outstanding on such obligations owing to such Bank if the Receiving Bank had not received more than its pro rata share of such payment; provided, however, that in the event any amount paid by any Receiving Bank to any other Bank pursuant to the immediately preceding sentence is rescinded or must otherwise be returned by the Receiving Bank, each other Bank shall, upon request of the Receiving Bank, repay to the Receiving Bank the amount so paid by the Receiving Bank to such Bank, with interbank compensation representing interest and adjustment penalty for the period commencing on date such payment is returned by the Receiving Bank until the date the Receiving Bank receives such repayment at the Federal Funds Rate. Interest in respect of any Loan hereunder shall accrue from and including the date of such Loan to but excluding the date on which such Loan is paid in full. 3.08 Capital Adequacy. In the event that any Bank shall have determined that the adoption hereafter of or any change hereafter in any applicable law, rule, regulation or guideline regarding capital adequacy, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof or by any court, or compliance by such Bank (or any lending office of such Bank) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable EX-34 agency, has or would have the effect of reducing the rate of return on such Bank's capital or on the capital of such Bank's holding company as a consequence of its obligations hereunder to a level below that which such Bank or such Bank's holding company could have achieved but for such adoption, change or compliance (taking into consideration such Bank's policies or the policies of such Bank's holding company, as the case may be, with respect to capital adequacy) by an amount deemed by such Bank in its sole reasonable judgment to be material, then from time to time the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank or such Bank's holding company for any such reduction suffered. Within a reasonable time after making a request for such additional amount hereunder, such Bank will furnish to the Borrower a statement certifying the amount of such reduction and describing the event giving rise to such reduction, which determination shall be conclusive absent manifest error. Failure on the part of such Bank to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital with respect to any period shall not constitute a waiver of such Bank's rights to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital in such period or in any other period. The protection of this Section 3.08 shall be available to the Bank regardless of any possible conflict or invalidity or inappli- cability of the law, regulation or condition which shall have been impaired. The provisions of this Section 3.08 shall remain operative and in full force and effect regardless of the expiration of this Loan Agreement. ARTICLE IV CONDITIONS PRECEDENT AS OF CLOSING DATE 4.01 Conditions Precedent to Initial Loans. The obligations as of the Closing Date of the Banks to make any Loans are subject to the conditions precedent that the Agent shall have received on or before such day the following, in form and substance satisfactory to the Agent: (a) fully executed copies of this Loan Agreement (including exhibits) and the Notes; (b) resolutions of the directors of the Borrower certified by an officer of the Borrower as of the Closing Date, approving and adopting the documents described in subparagraph (a) above and authorizing the execution, delivery and performance thereof; (c) a certificate of the corporate secretary or an assistant secretary of the Borrower certifying the names and true signatures of the officers of the Borrower authorized to sign the documents described in subparagraph (a) above on behalf of the Borrower and the other documents to be delivered hereunder; EX-35 (d) a certificate of the corporate secretary or an assistant secretary of the Borrower, certifying that the charter documents and bylaws of the Borrower previously delivered to NationsBank in its capacity as agent under the Existing Loan Agreement (and/or any prior agreement restated by the Existing Loan Agreement) have not been amended since August 10, 1995 and through the Closing Date except as provided therein; (e) a copy of the certificate of good standing, existence or its equivalent with respect to the Borrower certified as of a recent date by the State of Delaware; (f) the favorable opinion of McCausland, Keen & Buckman, counsel to the Borrower, substantially in the form of Exhibit C hereto; and (g) a certificate of the corporate secretary or an assistant secretary of the Borrower, certifying that the Senior Subordinated Note Purchase Agreements previously delivered to NationsBank in its capacity as agent under the Existing Loan Agreement (and/or any prior agreement restated by the Existing Loan Agreement) have not been amended since August 10, 1995 and through the Closing Date except as provided therein; (h) such other information and documents as the Agent may reasonably request. ARTICLE V CONDITIONS OF LENDING 5.01 Conditions of Lending. The obligations of the Banks to make any Loans are subject to the satisfaction of the conditions precedent set forth in Article IV hereof on the Closing Date and to the satisfaction of the following further conditions: (a) proper notice of such Loan shall have been given in accordance with Section 2.02(c) hereof; (b) the representations and warranties of the Borrower set forth in Article VI hereof and in the other Loan Documents shall be true and correct in all material respects on and as of the date of such Loan with the same effect as though such representations and warranties had been made on and as of such date, except to the extent that such representations and warranties expressly relate to an earlier date; (c) at the time of and immediately after giving effect to each such Loan, no Event of Default, or any event which upon notice or lapse of time or both would constitute an Event of Default, shall have occurred and be continuing; and EX-36 (d) at the time of and immediately after giving effect to such Loan, the aggregate principal balance of all outstanding Loans made by all of the Banks shall not exceed the aggregate Commitments of all of the Banks. 5.02 Commitment Limitation; Reaffirmation. Each borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such borrowing as to the matters specified in Sections 5.01(b), (c) and (d) hereof. ARTICLE VI REPRESENTATIONS AND WARRANTIES 6.01 Representations and Warranties. The Borrower represents and warrants that: (a) Corporate Organization. Each of the Borrower and its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and is duly authorized and qualified to carry on its business in the manner now being conducted by it in states in which failure to so qualify would or might have a material adverse effect on the business or operations of such Person; (b) Corporate Power and Authority to Own Properties, etc. Each of the Borrower and its Subsidiaries has the legal power and authority to own its properties and assets and to carry on its businesses as now being conducted and as contemplated by this Loan Agreement and the other Loan Documents; (c) Corporate Power and Authority to Execute, Deliver and Perform the Loan Documents. The Borrower has the power and authority to execute, deliver and perform the Loan Documents; (d) Validity of Loan Documents. When executed and delivered, the Loan Documents will be legal, valid and binding obligations of the Borrower and will be enforceable against the Borrower in accordance with their respective terms; (e) Execution, Delivery and Performance of Loan Documents. The execution, delivery and performance of the Loan Documents: (i) have been duly authorized by all requisite corporate action of the Borrower required for the lawful creation and issuance thereof; (ii) do not violate any material provision of law, any order of any court or other agency of government or the corporate charter, certificate of incorporation or by-laws of the Borrower, or any provisions of any indenture, agreement or EX-37 other instrument to which the Borrower or its properties or assets are or will become bound; (iii) will not be in conflict with, result in a breach of or constitute an event of default or an event which, upon notice or lapse of time, or both, would constitute such an event of default under any indenture, agreement or other instrument to which the Borrower is a party; and (iv) do not and will not result in the creation of any lien on any assets of the Borrower; (f) Subsidiaries. All of the direct and indirect Subsidiaries of the Borrower as of the Closing Date are set forth in Exhibit D attached hereto; (g) Interest in Other Persons. Except as set forth in Exhibit E attached hereto, as of the Closing Date neither the Borrower nor any of its Subsidiaries owns any interest in any Person; (h) Financial Statements. The audited consolidated balance sheet, income statement and statement of cash flows of the Borrower and its Subsidiaries prepared as of March 31, 1995, copies of each of which have been furnished to each Bank, fairly present the assets, liabilities and financial condition of the Borrower and its Subsidiaries as at the date thereof, all in accordance with Generally Accepted Accounting Principles, and since such date to and including the date of this Loan Agreement there has been no material adverse change in such condition or in the operations of the Borrower and its Subsidiaries taken as a whole; (i) Governmental Regulations, etc. None of the Borrower or its Subsidiaries is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and no part of the proceeds of any Loan will be used whether directly or indirectly, incidentally or ultimately (i) to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock, or to refund indebtedness incurred for such purpose, or (ii) for any purpose which entails a violation of, or which is inconsistent with, the provisions of the regulations of the Board of Governors of the Federal Reserve System, including without limitation Regulation G, U, T or X thereof. If requested by the Agent, the Borrower agrees that it will (and will cause each of its Subsidiaries to) furnish to the Banks a statement in conformity with the requirements of Federal Reserve Form U-1 referred to in said Regulation U; and EX-38 (j) Governmental Consent. No consent, approval or authorization of, or filing, registration or qualification with, any governmental agency, authority, instrumentality or regulatory body on the part of the Borrower is required in conjunction with the execution, delivery or performance by the Borrower, or for the validity or enforceability, of the Loan Documents. 6.02 Incorporated Representations and Warranties. The Borrower hereby agrees that the representations and warranties contained in Article VIII (other than any of the representations and warranties set forth in Section 8(a), (b), (c), (d), (e), (g), (h), (i), (m) or (u)) of the Existing Loan Agreement, as in effect as of the date hereof (the "Incorporated Representations"), are hereby incorporated by reference and shall be as binding on the Borrower as if set forth fully herein. The incorporation by reference to the Existing Loan Agreement of the Incorporated Representations pursuant to this Section 6.02 shall survive the termination of the Existing Loan Agreement. For purposes of the incorporation of the Incorporated Representations pursuant to this Section 6.02, all references in the Incorporated Representations to the "Agent" shall be deemed to refer to the Agent hereunder, all references in the Incorporated Representations to a "Bank" or the "Banks" shall be deemed to refer to one or more of the Banks hereunder, all references in the Incorporated Representations to the "Majority Banks" shall be deemed to refer to the Majority Banks hereunder, all references in the Incorporated Representations to the "Loan Agreement," or any similar references, shall be deemed to refer to this Loan Agreement, all references in the Incorporated Representations to a "Note" or the "Notes" shall be deemed to refer to one or more of the Notes issued pursuant to Section 2.03 hereof and all references in the Incorporated Representations to a "Loan Document" or the "Loan Documents," or any similar references, shall be deemed to refer to one or more of the Loan Documents as defined in Section 1.01 hereof. ARTICLE VII COVENANTS 7.01 Covenants. The Borrower covenants and agrees with the Banks and the Agent that, so long as this Loan Agreement shall remain in effect or the principal of or interest on any Note or any other expense or amount payable hereunder remains unpaid, and until the Commitments are terminated, unless the Majority Banks shall otherwise consent in writing, it will and will cause each of its Subsidiaries to: (a) Use of Loan Proceeds. Use the proceeds of the Loans for the purposes set forth in RECITAL A hereof; (b) Indemnification. Defend, indemnify and hold harmless the Banks, the Agent, their employees, agents, officers, affiliates and directors, from and against any and all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses (including without EX-39 limitation attorney and consultant fees, court costs and litigation expenses) of whatever kind or nature, known or unknown, contingent or otherwise, arising out of or in any way related to any acquisition permitted by, and/or financed with the proceeds of any borrowings made pursuant to, this Loan Agreement, including, without limitation, all claims of the seller or sellers of any acquired company; (c) Notice of Event of Default. Deliver to the Banks forthwith, upon any Executive Officer of the Borrower obtaining knowledge of an Event of Default or an event which would constitute an Event of Default but for the requirement that notice be given or time elapse or both, a certificate of the chief financial officer or other Executive Officer of the Borrower specifying the nature and period of existence thereof and what action the Borrower proposes to take with respect thereto; and (d) Further Assurances. Execute any and all further documents, agreements and instruments, and take all further actions which may be required under applicable law, or which the Majority Banks may reasonably request, in order to effectuate the transactions contemplated by this Loan Agreement. The provisions of subsection (b) of this Section 7.01 shall remain operative and in full force and effect regardless of the expiration of this Loan Agreement, notwithstanding anything to the contrary set forth in this Loan Agreement or any other of the Loan Documents. 7.02 Incorporated Covenants. The Borrower hereby agrees that the affirmative and negative covenants contained in Articles IX and X of the Existing Loan Agreement, as in effect as of the date hereof (the "Incorporated Covenants"), are hereby incorporated by reference and shall be as binding on the Borrower as if set forth fully herein, except that, for purposes hereof, Exhibit L to the Existing Loan Agreement referred to in Section 10.01(a)(ii) of the Existing Loan Agreement shall be deemed to refer to Exhibit F attached hereto. The incorporation by reference to the Existing Loan Agreement of the Incorporated Covenants pursuant to this Section 7.02 shall survive the termination of the Existing Loan Agreement. For purposes of the incorporation of the Incorporated Covenants pursuant to this Section 7.02, all references in the Incorporated Covenants to the "Agent" shall be deemed to refer to the Agent hereunder, all references in the Incorporated Covenants to a "Bank" or the "Banks" shall be deemed to refer to one or more of the Banks hereunder, all references in the Incorporated Covenants to the "Majority Banks" shall be deemed to refer to the Majority Banks hereunder, all references in the Incorporated Covenants to the "Loan Agreement," or any similar reference, shall be deemed to refer to this Loan Agreement, all references in the Incorporated Covenants to a "Note" or the "Notes" shall be deemed to refer to one or more of the Notes issued pursuant to Section 2.03 hereof and all references in the Incorporated Covenants to a "Loan Document" or the "Loan Documents," or any similar reference, shall be deemed to refer to one or more of the Loan Documents as defined in Section 1.01 hereof. EX-40 7.03 Incorporation of Subordinated Debt Covenants. The covenants of the Borrower (i) contained in Section 10 of each of the Senior Subordinated Note Purchase Agreements, as such covenants may be amended or modified from time to time, and (ii) contained in any documentation evidencing or executed in connection with any other Subordinated Debt as such documents may be amended or modified from time to time, are (until termination of the applicable Subordinated Note Purchase Agreement or the applicable documentation evidencing or executed in connection with such other Subordinated Debt, as the case may be) hereby incorporated herein by reference and shall be as binding on the Borrower as if set forth fully herein. ARTICLE VIII EVENTS OF DEFAULT AND ACCELERATION 8.01 Events of Default; Acceleration. If any of the following events (the "Events of Default") shall occur and be continuing: (a) (i) the failure of the Borrower to make when due any payment of interest, fees or other amounts required by this Loan Agreement and/or any of the other Loan Documents (other than a payment of principal) and the continuation of such failure for five (5) days; or (ii) the failure of the Borrower to make when due any payment of principal required by this Loan Agreement and/or any of the Notes; (b) the failure of the Borrower to comply with any other terms and conditions in this Loan Agreement (including without limitation any covenant incorporated herein by reference pursuant to Section 7.02 or Section 7.03 hereof) or the other Loan Documents within 30 days after the earlier to occur of (i) written notice from the Agent specifying the default and requesting that it be remedied; or (ii) an Executive Officer of the Borrower becomes aware of such violation; (c) any representation or warranty made by the Borrower herein (including without limitation any representation or warranty incorporated herein by reference pursuant to Section 6.02 hereof) or in any of the other Loan Documents or in any certificate, statement or report heretofore or hereafter made (or deemed made pursuant to Article V hereof) shall be untrue in any material respect when made (or deemed made); (d) an event of default shall occur under any of the other Loan Documents; or (e) the occurrence of an "Event of Default" under and as defined in the Existing Loan Agreement, as in effect as of the date hereof, which "Events of Default" (the "Incorporated Events of Default"), are hereby incorporated herein by reference and shall be as binding on the Borrower as if set forth fully herein, such incorporation by EX-41 reference to survive termination of the Existing Loan Agreement. For purposes of the incorporation of the Incorporated Events of Default pursuant to this Section 8.01(e), all references in the Incorporated Events of Default to the "Agent" shall be deemed to refer to the Agent hereunder, all references in the Incorporated Events of Default to a "Bank" or the "Banks" shall be deemed to refer to one or more of the Banks hereunder, all references in the Incorporated Events of Default to the "Majority Banks" shall be deemed to refer to the Majority Banks hereunder, all references in the Incorporated Events of Default to the "Loan Agreement," or any similar references, shall be deemed to refer to this Loan Agreement, all references in the Incorporated Events of Default to a "Note" or the "Notes" shall be deemed to refer to one or more of the Notes issued pursuant to Section 2.03 hereof and all references in the Incorporated Events of Default to a "Loan Document" or the "Loan Documents," or any similar references, shall be deemed to refer to one or more of the Loan Documents as defined in Section 1.01 hereof; then, during the continuance of any such event (other than an event described in Section 11.01(d) of the Incorporated Events of Default), the Agent may and shall upon request of any Bank with respect to an event described in subparagraph (a) above or upon the request of the Majority Banks with respect to any other Event of Default (other than an event described in Section 11.01(d) of the Incorporated Events of Default), by written notice to the Borrower, take any or all of the following actions, at the same or different times: (i) terminate forthwith the Commitments of all the Banks hereunder; (ii) declare the Notes and all fees and other amounts payable hereunder to be forthwith due and payable, whereupon the Notes, both as to principal and interest, and all fees and other amounts payable hereunder, shall become forthwith due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in the Notes to the contrary notwithstanding; and (iii) pursue any other remedy under this Loan Agreement or any other Loan Document or otherwise; and, in any event described in Section 11.01(d) of the Incorporated Events of Default, the Commitments of all the Banks hereunder shall automatically terminate and the Notes, both as to principal and interest, and all fees and other amounts payable hereunder, shall automatically become due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in the Notes to the contrary notwithstanding, and the Agent may pursue any other remedy under this Loan Agreement or any other Loan Document or otherwise. ARTICLE IX THE AGENT 9.01 Appointment and Authorization. Each Bank hereby irrevocably designates and appoints the Agent as the agent of such Bank under this Loan Agreement and the other Loan Documents, EX-42 and each Bank hereby irrevocably authorizes the Agent, as the agent for such Bank, to take such action on its behalf under the provisions of this Loan Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Loan Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Loan Agreement, or any of the other Loan Documents, the Agent shall not have any duties or responsibilities, except those expressly set forth herein and therein, or any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Loan Agreement or the other Loan Documents or otherwise exist against the Agent. 9.02 Use of Agents, etc. The Agent may execute any of its duties under this Loan Agreement or the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 9.03 General Immunity. Neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with any of the Loan Documents (except for its or such Person's own gross negligence or willful misconduct), or (ii) responsible in any manner to any of the Banks for any recitals, statements, representations or warranties made by the Borrower contained in any of the Loan Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, the Loan Documents or the enforceability or sufficiency of any of the Loan Documents, or for any failure of the Borrower to perform its obligations hereunder or thereunder. The Agent shall not be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, any of the Loan Documents or to inspect the properties, books or records of the Borrower or any of its Subsidiaries. 9.04 Reliance, etc. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been given, signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by the Agent. The Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Agent. The Agent shall be fully justified in failing or refusing to take any action under any of the Loan Documents unless it shall first receive such advice or EX-43 concurrence of the Banks as it deems appropriate or it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under any of the Loan Documents in accordance with a request of the Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Banks and all future holders of the Notes. 9.05 Event of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Event of Default (or of any event or condition which, upon notice or lapse of time, or both, would constitute such an Event of Default) unless the Agent has received notice from a Bank or the Borrower referring to the applicable Loan Document and describing such Event of Default (or other such event or condition). In the event that the Agent receives such a notice, the Agent shall give notice thereof to the Banks. The Agent shall take such action with respect to such Event of Default (or other event or condition) as shall be directed in accordance with Section 8.01 or Section 10.05 hereof; provided that, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default (or other event or condition) as it shall deem advisable in the best interests of the Banks. 9.06 No Representations. Each Bank expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Agent or any affiliate thereof hereafter taken, including any review of the affairs of the Borrower and its Subsidiaries, shall be deemed to constitute any representation or warranty by the Agent to any Bank. Each Bank represents to the Agent that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrower and made its own decision to make its Loans hereunder and enter into this Loan Agreement. Each Bank also represents that it will, independently and without reliance upon the Agent or the other Banks, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Loan Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished to the Banks by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Borrower which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. EX-44 9.07 Indemnification of Agent. The Banks agree to indemnify the Agent in its capacity as such (to the extent not reimbursed by the Borrower, and without limiting the obligation of the Borrower to do so), ratably according to the respective amounts outstanding to the Borrower, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including without limitation at any time following the payment of the Notes) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of the Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Bank shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct; provided, further, no Bank shall be obligated for the ratable share of such indemnity obligations of any other Bank. The agreements in this subsection shall survive the payment of the Notes and all other amounts payable hereunder. 9.08 Dealings with the Borrower. NationsBank and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower or any of its Subsidiaries as though NationsBank were not the Agent hereunder. With respect to its Loans made or renewed by it and the Note issued to it, NationsBank shall have the same rights and powers under this Loan Agreement as any Bank and may exercise the same as though it were not the Agent. 9.09 Resignation and Removal. The Agent may resign at any time by giving written notice thereof to the Banks and the Borrower and may be removed at any time with or without cause by the Majority Banks. Upon any such resignation or removal, the Majority Banks shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Majority Banks, and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation or the Majority Banks' removal of the retiring Agent, then the retiring Agent shall select a successor Agent provided such successor Agent is a commercial bank organized under the laws of the United States of America or of any State thereof and has a combined capital and surplus of at least $400,000,000.00. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Loan Agreement and the other Loan Documents. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Article IX shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Loan Agreement and the other Loan Documents. EX-45 ARTICLE X MISCELLANEOUS 10.01 Notices. All notices, requests and demands to or upon the respective parties hereto shall be conclusively deemed to have been received by such party hereto and be effective on the day on which delivered to such party at the address set forth below or to such other address as such party shall specify to the other parties hereto in writing, or, if sent prepaid by registered mail, on the third day after the day on which mailed, addressed to such party at such address: (a) if to the Borrower: Airgas, Inc. Five Radnor Corporate Center, Suite 550 100 Matsonford Road Radnor, Pennsylvania 19087 Attention: Britton H. Murdoch (Facsimile No.: 610-687-1052) [Courtesy Copy to: McCausland, Keen & Buckman Five Radnor Corporate Center, Suite 500 100 Matsonford Road Radnor, Pennsylvania 19087 Attention: Melvin J. Buckman, Esq.] (Facsimile No. 610-341-1099) (b) if to the Agent: NationsBank, N.A. NationsBank Corporate Center, 8th Floor Charlotte, North Carolina 28255 Attention: M. Gregory Seaton Eastern Corporate Group (Facsimile No. 704-386-3271) (c) if to a Bank, to it at its address (or telecopy number) set forth on Exhibit A or in the assignment agreement pursuant to which such Bank became a party hereto. 10.02 No Waiver; Remedies Cumulative. No failure or delay on the part of any of the Banks or the Agent in the exercise of any right, power or privilege hereunder or under any other Loan Document shall operate as a waiver of any such right, power or privilege nor shall any such failure or delay preclude any other or further exercise thereof. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. 10.03 Survival of Certain Provisions, etc. All covenants, agreements, representations and warranties made herein and in the other Loan Documents shall survive the making by the Banks of the Loans and the execution and delivery to the Banks of the Loan Documents and shall continue in full force and effect so EX-46 long as any of the indebtedness of the Borrower to the Banks or any obligations of the Banks under the Commitments remain out- standing. Whenever in this Loan Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party and all covenants, provisions and agreements by or on behalf of the Borrower which are contained in the Loan Documents shall inure to the benefit of the successors and assigns of the Banks. 10.04 Costs. The Borrower agrees to pay all reasonable out-of-pocket costs and expenses of the Agent in connection with the preparation, execution and delivery of the Loan Documents, including, without limitation, the reasonable fees and out-of-pocket expenses of Moore & Van Allen, PLLC, special counsel to the Agent, and out-of-pocket costs and expenses of the Banks in connection with the enforcement of this Loan Agreement and the other Loan Documents and to hold the Banks harmless from any and all such costs, expenses and liabilities. In addition, the Borrower agrees to pay to each Bank an amendment fee of not less than $3,000.00 on the effective date of each agreement hereafter entered into among the Borrower and the Banks (or the Agent on behalf of the Banks) effecting any material amendment, modification or waiver of the terms of this Loan Agreement, including without limitation any such agreement relating to any provision set forth in Article V, Article VI, Article VII or Article VIII hereof. The provisions of this Section shall survive the termination of this Loan Agreement. 10.05 Amendments, Waivers and Consents. With the written consent of the Majority Banks, the Agent and the Borrower may, from time to time, enter into written amendments, supplements or modifications hereto for the purpose of adding any provisions to this Loan Agreement, the Notes or any of the other Loan Documents or changing in any manner the rights of the Banks or of the Borrower hereunder or thereunder, and with the consent of the Majority Banks the Agent on behalf of the Banks may execute and deliver to the Borrower a written instrument waiving, on such terms and conditions as the Agent or Majority Banks may specify in such instrument, any of the requirements of this Loan Agreement or any other Loan Document or any Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (a) extend the maturity of any Note, or reduce the rate or extend the time of payment of interest thereon, or reduce the principal amount thereof, or change the amount or term of any Commitment, or change the amount or time for payment of the Commitment Fee, or amend, modify or waive any provision of this Section 10.05 or reduce the percentage specified in the definition of "Majority Banks" set forth in Section 1.01 hereof, or amend, modify or waive any provision of any Loan Document requiring action or approval by all of the Banks, or waive an Event of Default specified in Section 8.01(a) hereof, or consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Loan Agreement, or release the Borrower from its obligations under this Loan Agreement, or amend, modify or waive any provision of the Loan Documents if such amendment, modification or waiver would have the effect of releasing the obligations to the Agent and the Banks of the parties thereof, in EX-47 each case without the written consent of all the Banks, or (b) amend, modify or waive any provision of Article IX hereof without the written consent of the then Agent. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Banks and shall be binding upon the Borrower, the Banks, the Agent and all future holders of the Notes. In the case of any waiver of the requirements of this Loan Agreement, any other Loan Document or the Notes, the parties thereto shall be restored to their former position and rights thereunder, and any Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Event of Default, or impair any right consequent thereon. 10.06 Computations. Except as otherwise provided for hereunder, interest, fees and premiums hereunder shall be computed on the basis of a three hundred sixty-five (365) day year for the actual number of days in the billing period. 10.07 Right of Set-Off. Upon (i) the occurrence and during the continuance of any Event of Default and (ii) the making of the request or the granting of the consent specified by Section 8.01 hereof to authorize the Agent to declare the Notes and all other obligations owing to the Banks and the Agent hereunder and under the other Loan Documents due and payable pursuant to the provisions of Section 8.01 hereof, each Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing at such Bank to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Loan Agreement, the Notes and the other Loan Documents and although such obligations may be unmatured. 10.08 Interim Interest. Except as otherwise provided for hereunder, should any installment or other payment of the principal of or interest on the Notes become due and payable on other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day thereafter and in the case of an installment of principal, interest shall be payable thereon at the rate per annum herein specified during such extension. 10.09 Counterparts. This Loan Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and it shall not be necessary in making proof of this Loan Agreement to produce or account for more than one such counterpart. 10.10 Assignments, Participations, etc. (a) Any Bank may, at any time upon written notice thereof to the Agent and the Borrower, transfer or assign all or any portion of the indebtedness evidenced by the Note held by such Bank and the Commitment of such Bank hereunder and all of the other rights and obligations of such Bank hereunder and under the other Loan Documents and the terms hereof shall extend to any subsequent holder of the Note; EX-48 provided, however, that any assignment by a Bank hereunder shall (i) be subject to the prior written consent of the Borrower and the Agent (in any case not to be unreasonably withheld) and (ii) be in a minimum principal amount of $5,000,000.00 or in an integral multiple of $1,000,000.00 in excess thereof. On the effective date of any assignment, Exhibit A is deemed amended to reflect such assignment. (b) Any Bank may at any time sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Loan Agreement and the other Loan Documents; provided, however, that (1) such Bank's obligations under this Loan Agreement shall remain unchanged, (2) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations, (3) each participating bank or other entity shall be entitled to the benefit of the cost protection provisions contained in Sections 3.04, 3.05, 3.06, and 3.08 hereof, except that all claims and petitions for payment and payments made pursuant to such Sections shall be made through such selling Bank and except that a participant shall not be entitled to receive pursuant to such provisions an amount larger than its share of the amount to which the selling Bank would have been entitled had no such sale been made, and (iv) the Borrower, the Agent and the other Banks shall continue to deal solely and directly with such selling Bank in connection with such Bank's rights and obligations under this Loan Agreement and the other Loan Documents, and such Bank shall retain the sole right (and participating banks or other entities shall have no right) to enforce the obligations of the Borrower under the Loan Documents and to approve any amendment, modification or waiver of any provi- sion of this Loan Agreement or any of the other Loan Documents (other than amendments, modifications or waivers requiring, pursuant to the terms of Section 10.05 hereof, unanimous consent of the Bank). (c) Any Bank may pledge all or any portion of its rights under this Loan Agreement and/or its Note to a Federal Reserve Bank. No such pledge shall release any Bank from its obligations hereunder or substitute any such Federal Reserve Bank for such Bank as a party hereto. 10.11 Term. The term of this Loan Agreement shall be until the Commitments of the Banks hereunder shall have terminated and the Banks have received payment in full of the unpaid principal and interest of the Notes and all other amounts payable hereunder. 10.12 Governing Law; Severability; Merger. (a) All documents executed pursuant to the transactions contemplated herein including without limitation this Loan Agreement, the Notes and the other Loan Documents shall be deemed to be contracts made under, and for all purposes shall be construed in accordance with, the internal laws and judicial decisions of the State of North Carolina. The Borrower hereby submits to the nonexclusive EX-49 jurisdiction and venue of the state and federal courts of North Carolina for the purpose of resolving disputes hereunder or under the other Loan Documents or for the purposes of collection. The Borrower hereby agrees that both the federal and state courts in Mecklenburg County, North Carolina are a convenient forum and agrees not to raise as a defense that such courts are not a convenient forum. (b) In the event any one or more of the provisions contained in this Loan Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. (c) This Loan Agreement and the other Loan Documents constitute the entire contract among the parties relative to the subject matter hereof and thereof. Any previous agreement among the parties with respect to the subject matter hereof is superseded by this Loan Agreement. 10.13 Priority of Loans. The payment of the indebtedness of the Borrower to the Banks hereunder and under the Notes is senior to the payment of the indebtedness of the Borrower under the Senior Subordinated Note Purchase Agreements in accordance with the terms thereof. 10.14 Dealings by Banks with the Borrower. Nothing contained herein shall be deemed to limit the right of any Bank (or any of its affiliates) to make loans to, accept deposits from and generally engage in any kind of business with the Borrower or any of its Subsidiaries. 10.15 Net Payments. The Borrower hereby agrees that all payments and prepayments of principal, interest and fees required to be made hereunder or under any of the other Loan Documents shall be without deduction for or on account of any present or future taxes, duties or other charges levied or imposed by any foreign nation or any political subdivision or taxing authority thereof. 10.16 Headings. The headings of the sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Loan Agreement. [The remainder of this page has been left blank intentionally.] EX-50 IN WITNESS WHEREOF, each of the parties hereto has caused this Loan Agreement to be duly executed by their duly authorized officers, all as of the day and year first above written. AIRGAS, INC. By /s/ Britton H. Murdoch _____________________________________ Britton H. Murdoch Vice President NATIONSBANK, N.A. By /s/ M. Gregory Seaton _________________________________ M. Gregory Seaton Senior Vice President CIBC, INC. By_________________________________ Title______________________________ PNC BANK, NATIONAL ASSOCIATION By_________________________________ Title______________________________ NATIONSBANK, N.A., as Agent for the Banks By /s/ M. Gregory Seaton _________________________________ M. Gregory Seaton Senior Vice President EX-51 EXHIBIT A BANKS' COMMITMENT LEVELS DOLLAR AMOUNT % OF TOTAL OF NAME AND ADDRESS OF BANK COMMITMENTS COMMITMENT NationsBank, N.A. 80% $80,000,000.00 NationsBank Corporate Center 8th Floor Charlotte, North Carolina 28255 Attn: M. Gregory Seaton Facsimile No.: (704) 386-3271 CIBC Inc. 10% $10,000,000.00 425 Lexington Avenue New York, New York 10017 Attn: Cheryl Root Facsimile No.: (212)856-3991 PNC Bank, National Association 10% $10,000,000.00 Land Title Building Broad & Chestnut Streets Philadelphia, Pennsylvania 19101 Attn: H. Todd Dissinger Facsimile No.: (215)585-6037 100% $100,000,000.00 EX-52 EXHIBIT B PROMISSORY NOTE $____________________ February 5, 1996 FOR VALUE RECEIVED, AIRGAS, INC., a Delaware corporation (the "Borrower"), hereby promises to pay to the order of _____________________, a ________________________, in its individual capacity (the "Bank"), at the office of NationsBank, N.A., as Agent (the "Agent"), at NationsBank Corporate Center, 100 North Tryon Street, Charlotte, North Carolina 28255 (or at such other place or places as the holder hereof may designate), at the times set forth in the Loan Agreement dated as of February 5, 1996 among the Borrower, the Agent, the Bank and certain other banks (as amended from time to time, the "Loan Agreement"; all capitalized terms not otherwise defined herein shall have the meanings set forth in the Loan Agreement), but in no event later than the Termination Date, in lawful money of the United States of America, in immediately available funds, the principal amount of ___________________________________ ($____________) or, if less than such principal amount, the aggregate unpaid principal amount of all Loans made by the Bank to the Borrower pursuant to the Loan Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in like money, at said office, on the dates and at the rates selected in accordance with Article II and Section 3.03(c) of the Loan Agreement. Upon the occurrence and during the continuance of an Event of Default the then remaining principal amount and accrued but unpaid interest shall bear interest at a per annum rate equal to two percent (2%) plus the rate that would otherwise be payable under Section 2.04 of the Loan Agreement until such principal and interest have been paid in full. Further, in the event that payment of all sums due hereunder is accelerated under the terms of the Loan Agreement, this Note and all other indebtedness of the Borrower to the Bank shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition to the principal and interest, all costs of collection, including reasonable attorneys' fees. All borrowings evidenced by this Note and all payments and prepayments of the principal hereof and interest hereon and the respective dates thereof may be endorsed by the holder hereof on Schedule A attached hereto and incorporated herein by reference, or on a continuation thereof which shall be attached hereto and made a part hereof; provided, however, that any failure to endorse such information on such schedule or continuation thereof shall not in any manner affect the obligation of the Borrower hereunder or under the Loan Agreement. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed by its duly authorized officer, all as of the day and year first above written. AIRGAS, INC. By_____________________ Title__________________ EX-53 SCHEDULE A TO THE ____________ PROMISSORY NOTE DATED FEBRUARY 5, 1996 Unpaid Name of Type Principal Person of Interest Payments Balance Making Date Loan Period Principal Interest of Note Notation ____ ____ ________ _________ ________ _________ _________ EX-54 EXHIBIT C FORM OF LEGAL OPINION EX-55 EXHIBIT D SUBSIDIARIES EX-56 EXHIBIT E INTERESTS IN OTHER PERSONS EX-57 EXHIBIT F EXISTING INDEBTEDNESS EX-58 EX-27 7 ART. 5 FDS FOR 1996 10-K
5 1000 12-MOS MAR-31-1996 MAR-31-1996 0 0 120,811 3,396 86,162 218,574 586,328 147,451 883,642 136,986 0 663 0 0 235,546 883,642 838,144 838,144 419,491 419,491 0 0 24,862 68,242 28,522 39,720 0 0 0 39,720 .60 .60
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