-----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, LcVClwNd0fsfIOz1IirlVPuTqrYew40SCnZ/pPlNAZe0XbCGxbpVN6b/Tf3odT7r ahlTv6G6aGRfbm8ZqCEtrA== 0000804212-99-000017.txt : 19991115 0000804212-99-000017.hdr.sgml : 19991115 ACCESSION NUMBER: 0000804212-99-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 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-Q SEC ACT: SEC FILE NUMBER: 001-09344 FILM NUMBER: 99747054 BUSINESS ADDRESS: STREET 1: 259 RADNOR-CHESTER ROAD STREET 2: SUITE 100 CITY: RADNOR STATE: PA ZIP: 19087 BUSINESS PHONE: 6106875253 MAIL ADDRESS: STREET 1: 259 RADNOR-CHESTER ROAD STREET 2: SUITE 100 CITY: RADNOR STATE: PA ZIP: 19087 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 1999 Commission file number: 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.) 259 North Radnor-Chester Road, Suite 100 Radnor, PA 19087-5283 (Address of principal executive offices) (ZIP code) (610) 687-5253 (Registrant's telephone number, including area code) 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 Common Stock outstanding at November 5, 1999: 70,209,648 shares 2 AIRGAS, INC. FORM 10-Q September 30, 1999 INDEX PART I - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Earnings for the Three and Six Months Ended September 30, 1999 and 1998 (Unaudited)...3 Consolidated Balance Sheets as of September 30, 1999 (Unaudited) and March 31, 1999......................4 Consolidated Statements of Cash Flows for the Six Months Ended September 30, 1999 and 1998 (Unaudited).............5 Notes to Consolidated Financial Statements (Unaudited).......................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...............................................13 Item 3. Quantitative and Qualitative Disclosures About Market Risk..........26 PART II - OTHER INFORMATION Item 1. Legal Proceedings...................................................29 Item 4. Submission of Matters to a Vote of Security Holders.................29 Item 5. Other Information...................................................30 Item 6. Exhibits and Reports on Form 8-K....................................31 SIGNATURES...................................................................32 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. AIRGAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (Dollars in thousands, except per share amounts)
Three Months Ended Six Months Ended September 30, September 30, 1999 1998 1999 1998 Net sales Distribution $ 346,973 $ 354,208 $ 692,940 $ 714,761 Gas Operations 40,316 42,384 73,842 82,604 Total net sales 387,289 396,592 766,782 797,365 Costs and expenses Cost of products sold (excluding depreciation and amortization) Distribution 186,647 192,789 375,079 390,140 Gas Operations 16,200 17,755 29,035 37,507 Selling, distribution and administrative expenses 129,185 132,509 256,146 262,153 Depreciation and amortization 22,953 21,748 45,119 43,345 Special charge - - - (1,000) Total costs and expenses 354,985 364,801 705,379 732,145 Operating income Distribution 26,408 26,072 52,668 54,612 Gas Operations 5,896 5,719 8,735 9,608 Special charge - - - 1,000 Total operating income 32,304 31,791 61,403 65,220 Interest expense, net (14,435) (15,720) (28,218) (30,526) Other income, net 15,183 709 15,405 831 Equity in earnings of unconsolidated affiliates 725 1,222 1,725 1,976 Earnings before income taxes and the cumulative effect of an accounting change 33,777 18,002 50,315 37,501 Income tax expense 14,865 7,522 21,728 15,746 Earnings before the cumulative effect of an accounting change 18,912 10,480 28,587 21,755 Cumulative effect of an accounting change, net of taxes -- -- (590) -- Net earnings $ 18,912 $ 10,480 $ 27,997 $ 21,755 Basic earnings per share: Earnings per share before the cumulative effect of an accounting change $ .27 $ .15 $ .41 $ .31 Cumulative effect per share of an accounting change -- -- (.01) -- Net earnings per share $ .27 $ .15 $ .40 $ .31 Diluted earnings per share: Earnings per share before the cumulative effect of an accounting change $ .27 $ .15 $ .40 $ .30 Cumulative effect per share of an accounting change -- -- (.01) -- Net earnings per share $ .27 $ .15 $ .39 $ .30 Weighted average shares outstanding: Basic 69,700 70,000 69,800 70,100 Diluted 71,200 71,700 71,200 71,800 Comprehensive income $ 18,965 $ 10,329 $ 28,199 $ 21,619 See accompanying notes to consolidated financial statements.
4 AIRGAS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts)
(Unaudited) September 30, March 31, 1999 1999 ASSETS Current Assets Trade receivables, less allowances for doubtful accounts of $6,483 at September 30, 1999 and $6,092 at March 31, 1999 $ 199,796 $ 195,708 Inventories, net 157,418 154,424 Deferred income tax asset, net 7,783 7,549 Prepaid expenses and other current assets 21,326 21,161 Total current assets 386,323 378,842 Plant and equipment, at cost 1,034,201 993,496 Less accumulated depreciation (304,390) (275,637) Plant and equipment, net 729,811 717,859 Goodwill, net of accumulated amortization of $61,659 at September 30, 1999 and $54,986 at March 31, 1999 427,846 428,349 Other non-current assets 136,309 173,422 Total assets $1,680,289 $1,698,472 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable, trade $ 71,698 $ 85,486 Accrued expenses and other current liabilities 106,454 108,295 Current portion of long-term debt 8,875 19,645 Total current liabilities 187,027 213,426 Long-term debt 835,015 847,841 Deferred income taxes 148,586 142,675 Other non-current liabilities 20,366 23,585 Commitments and contingencies -- -- Stockholders' Equity Preferred stock, no par, 20,000 shares authorized, no shares issued or outstanding at September 30, 1999 and March 31, 1999 -- -- Common stock, par value $.01 per share, 200,000 shares authorized, 72,615 and 72,024 shares issued at September 30, 1999 and March 31, 1999, respectively 726 720 Capital in excess of par value 194,892 190,175 Retained earnings 317,087 289,090 Accumulated other comprehensive loss (708) (910) Treasury stock, 671 and 130 common shares at cost at September 30, 1999 and March 31, 1999, respectively (8,368) (1,129) Employee benefits trust, 1,451 and 826 common shares at cost at September 30, 1999 and March 31, 1999, respectively (14,334) (7,001) Total stockholders' equity 489,295 470,945 Total liabilities and stockholders' equity $1,680,289 $1,698,472 See accompanying notes to consolidated financial statements. 5
AIRGAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands)
Six Months Ended Six Months Ended September 30, 1999 September 30, 1998 CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 27,997 $ 21,755 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 45,119 43,345 Deferred income taxes 6,750 5,511 Equity in earnings of unconsolidated affiliates (1,725) (2,563) Gain on divestiture (14,369) -- (Gain) loss on sales of plant and equipment 7 (292) Minority interest in earnings (51) 39 Stock issued for employee benefit plans 2,707 3,109 Other non-cash charges 1,027 (1,000) Changes in assets and liabilities, excluding effects of business acquisitions and divestitures: Trade receivables, net (1,618) (16,308) Inventories, net (697) (10,758) Prepaid expenses and other current assets (139) 756 Accounts payable, net (14,274) (1,865) Accrued expenses and other current liabilities 3,792 (986) Other assets and liabilities, net (3,302) (8,526) Net cash provided by operating activities 51,224 32,217 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (30,841) (56,528) Proceeds from sale of plant and equipment 955 1,152 Proceeds from divestitures 46,596 10,463 Business acquisitions, net of cash acquired (23,377) (42,307) Business acquisitions, holdback settlements (830) (1,564) Investment in unconsolidated affiliates (30) (139) Dividends from unconsolidated affiliates 1,897 1,697 Other, net (358) 4,831 Net cash used by investing activities (5,988) (82,395) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 77,985 258,505 Repayment of debt (102,461) (182,733) Purchase of treasury stock (15,345) (13,982) Exercise of stock options 904 356 Cash overdraft (6,319) (11,968) Net cash provided (used) by fiancing activities (45,236) 50,178 Cash Increase (Decrease) $ -- $ -- Cash - beginning of period -- -- Cash - end of period $ -- $ -- Cash paid during the period for: Interest $ 29,067 $ 31,292 Income taxes (net of refunds) $ 5,427 $ 3,000 See accompanying notes to consolidated financial statements.
6 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) BASIS OF PRESENTATION The consolidated financial statements include the accounts of Airgas, Inc. and its 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. Intercompany accounts and transactions are eliminated in consolidation. The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles. These statements do not include all disclosures required for annual financial statements. These financial statements should be read in conjunction with the more complete disclosures contained in the Company's audited consolidated financial statements for the fiscal year ended March 31, 1999. The financial statements reflect, in the opinion of management, all adjustments necessary to present fairly the Company's financial position, results of operations and cash flows for the periods presented. Such adjustments are of a normal, recurring nature except for the impact of acquisitions, divestitures and the accounting change which are discussed in the notes to the accompanying financial statements. The interim operating results are not necessarily indicative of the results to be expected for an entire year. Certain reclassifications have been made to previously issued financial statements to conform to the current presentation. (2) ACCOUNTING CHANGE The Company adopted Statement of Position 98-5 "Reporting on the Costs of Start-up Activities" ("SOP 98-5"), as required, in the first quarter of fiscal year 2000 resulting in a charge to net earnings of $590 thousand, or $.01 per diluted share. In accordance with SOP 98-5, the charge has been reflected on a separate line entitled "Cumulative effect of an accounting change, net of taxes", on the consolidated statement of earnings. The charge primarily resulted from the write-off of start-up costs capitalized in connection with the Company's two air separation units constructed during fiscal 1998 and 1999. (3) ACQUISITIONS AND DIVESTITURES During the quarter ended September 30, 1999, the Company acquired three distributors of industrial gas and related equipment with aggregate sales of approximately $24 million. On August 4, 1999, the Company completed its previously announced divestiture of its operations in Poland and Thailand to Linde AG. The divestiture resulted in a non-recurring gain of $14.4 million ($7.6 million after-tax, or $.11 per diluted share) which was recognized in "other income, net." Cash proceeds from the sale were $46.2 million ($38.4 million after taxes and closing costs). The operations in Poland and Thailand had combined sales and operating losses in fiscal 2000 as follows: Three Months Ended Six Months Ended (In thousands) September 30, 1999 September 30, 1999 Sales $7,141 $12,724 Operating loss $ (29) $ (550) 7 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) The Company divested two non-core businesses during the quarter ended June 30, 1998. Consideration for the divestitures included the assumption of certain liabilities and cash proceeds of approximately $10.5 million. Divestiture reserves, established during the fourth quarter of fiscal 1998, were adjusted by $1 million ($575 thousand after-tax) to reflect differences between the original loss estimates and the actual loss on the divestitures. The divested non-core businesses had combined sales and operating income for the three months ended June 1998 of $4.6 million and $121 thousand, respectively. (4) EARNINGS PER SHARE Basic earnings per share is calculated by dividing net earnings by the weighted average number of shares of the Company's Common Stock outstanding during the period. Diluted earnings per share is calculated by adjusting the weighted average common shares outstanding for the dilutive effect of common stock equivalents related to stock options and contingently issuable shares. The table below reconciles basic weighted average common shares outstanding to diluted weighted average common shares outstanding for the three and six months ended September 30, 1999 and 1998:
Three Months Ended Six Months Ended September 30, September 30, (In thousands) 1999 1998 1999 1998 Weighted average common shares outstanding: Basic 69,700 70,000 69,800 70,100 Stock options 1,300 1,600 1,200 1,600 Contingently issuable shares 200 100 200 100 Diluted 71,200 71,700 71,200 71,800
(5) INVENTORIES Inventories consist of:
(Unaudited) September 30, March 31, (In thousands) 1999 1999 Finished goods FIFO $ 132,039 $ 129,501 Finished goods LIFO 25,999 25,652 Raw materials 935 853 LIFO reserve (1,555) (1,582) $ 157,418 $ 154,424
8 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) (6) OTHER NON-CURRENT ASSETS Other non-current assets include:
(Unaudited) September 30, March 31, (In thousands) 1999 1999 Investments in unconsolidated affiliates $ 73,848 $ 100,834 Non-compete agreements and other intangible assets, at cost, net of accumulated amortization of $91.6 million at September 30, 1999 and $85.5 million at March 31, 1999 51,922 55,894 Other assets 10,539 16,694 $ 136,309 $ 173,422
The decrease in investments in unconsolidated affiliates is primarily due to the divestiture of operations in Poland and Thailand. (7) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities include:
(Unaudited) September 30, March 31, (In thousands) 1999 1999 Cash overdraft $ 10,640 $ 16,959 Restructuring reserves 4,723 5,087 Insurance payable and related reserves 10,474 9,584 Customer cylinder deposits 8,117 8,233 Accrued interest 12,208 12,331 Other accrued expenses and current liabilities 60,292 56,101 $ 106,454 $ 108,295
The cash overdraft is attributable to the float of the Company's outstanding checks. Restructuring reserves primarily relate to pending divestitures. (8) LEASE TRANSACTION In October 1999, the Company renewed a lease of real estate with a trust established by a commercial bank. The original operating lease was amended to include the sale leaseback of certain equipment. The appraised value of the real estate and equipment under the lease totaled approximately $46 million. The lease has a five-year term and has been accounted for as an operating lease. The Company has guaranteed a residual value of the real estate and the equipment at the end of the lease term of approximately $31 million. A gain of approximately $12 million on the equipment portion of the transaction has been deferred until the expiration of the Company's guarantee of the residual value. Cash proceeds received from the transaction were used to repay debt outstanding under the Company's revolving credit facility. 9 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) (9) STOCKHOLDERS' EQUITY Changes in stockholders' equity were as follows:
Employee Shares of Common Treasury Benefits (In thousands of shares) Stock $.01 Par Value Stock Trust Balance-April 1, 1999 72,024 130 826 Common Stock issuance (a) 591 -- -- Purchase of treasury stock -- 1,214 -- Reissuance of treasury stock (b) -- (48) -- Sale of treasury stock to Trust (c) -- (625) 625 Balance-September 30, 1999 72,615 671 1,451
Accumulated Capital in Other Employee Compre- Common Excess of Retained Comprehensive Treasury Benefits hensive (In thousands of dollars) Stock Par Value Earnings Loss Stock Trust Income Balance-April 1, 1999 $720 $190,175 $289,090 $ (910) $ (1,129) $(7,001) $ -- Net earnings -- -- 27,997 -- -- -- 27,997 Common Stock issuance (a) 6 3,473 -- -- -- -- -- Foreign currency translation adjustments -- -- -- 202 -- -- 202 Purchase of treasury stock -- -- -- -- (14,317) -- -- Reissuance of treasury stock (b) -- (247) -- -- 424 -- -- Sale of treasury stock to Trust (c) -- 679 -- -- 6,654 (7,333) -- Tax benefit from stock options exercises -- 812 -- -- -- -- -- Balance-September 30, 1999 $726 $194,892 $317,087 $ (708) $ (8,368) $(14,334) $28,199 (a) Issuance of Common Stock for stock option exercises and for the Company's Employee Stock Purchase Plan. (b) Reissuance of Common Stock in connection with stock option exercises. (c) Sale of Common Stock from treasury to the Employee Benefits Trust.
On October 12, 1999, the Employee Benefits Trust purchased 671 thousand shares of Common Stock from the Company at fair market value. 10 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) (10) COMMITMENTS AND CONTINGENCIES (a) Litigation In July 1996, Praxair, Inc. ("Praxair") filed suit against the Company in the Circuit Court of Mobile County, Alabama. The complaint alleged tortious interference with business or contractual relations with respect to Praxair's Right of First Refusal contract with the majority shareholders of National Welders Supply Company, Inc. ("National Welders") by the Company in connection with the Company's formation of a joint venture with National Welders. In June 1998, Praxair filed a motion to dismiss its own action in Alabama and commenced another action in the Superior Court of Mecklenburg County, North Carolina, alleging substantially the same tortious interference by the Company. The North Carolina action also alleges breach of contract against National Welders and certain shareholders of National Welders and unfair trade practices and conspiracy against all the defendants. In the North Carolina action Praxair seeks compensatory damages in excess of $10 thousand, punitive damages and other unspecified relief. The Company believes that Praxair's North Carolina claims are without merit and intends to defend vigorously against such claims. The Company is involved in various legal and regulatory proceedings that 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 condition, results of operations or liquidity. (b) Insurance Coverage The Company has established insurance programs to cover workers' compensation, business automobile, general and product liability. These programs have self-insured retentions of $500,000 per occurrence. Losses are accrued based upon the Company's estimates, developed with third party insurance adjusters, of the aggregate liability for claims incurred, claims incurred but not reported and on Company experience. The Company has established insurance reserves that management believes are adequate. 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 that exceed its liability insurance coverage of $100 million, such suits could have a material adverse effect on the Company's financial position, results of operations or liquidity. 11 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) (11) SUMMARY BY BUSINESS SEGMENT Information related to the Company's operations by business segment for the three months ended September 30, 1999 and 1998 is as follows:
Three Months Ended Three Months Ended September 30, 1999 September 30, 1998 (In thousands) Gas Gas Distribution Operations Combined Distribution Operations Combined Gas and rent $ 145,314 $ 39,369 $ 184,683 $ 143,223 $ 34,759 $ 177,982 Hardgoods 201,659 947 202,606 210,985 484 211,469 Other (1) -- -- -- -- 7,141 7,141 Total net sales 346,973 40,316 387,289 354,208 42,384 396,592 Intersegment sales -- 7,726 7,726 -- 7,594 7,594 Gross profit 160,326 24,116 184,442 161,419 24,629 186,048 Gross profit margin 46.2% 59.8% 47.6% 45.6% 58.1% 46.9% Operating income 26,408 5,896 32,304 26,072 5,719 31,791 Earnings before income taxes 15,267 18,510 33,777 14,110 3,892 18,002 EBITDA (2) 45,814 9,443 55,257 44,501 9,038 53,539 EBITDA margin 13.2% 23.4% 14.3% 12.6% 21.3% 13.5% Assets 1,458,402 221,887 1,680,289 1,450,791 269,240 1,720,031
12 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) (11) SUMMARY BY BUSINESS SEGMENT - (Continued) Information related to the Company's operations by business segment for the six months ended September 30, 1999 and 1998 is as follows:
Six Months Ended Six Months Ended September 30, 1999 September 30, 1998 (In thousands) Gas Gas Distribution Operations Combined Distribution Operations Combined Gas and rent $ 288,095 $ 71,895 $ 359,990 $ 285,715 $ 67,561 $ 353,276 Hardgoods 404,845 1,947 406,792 429,046 790 429,836 Other (1) -- -- -- -- 14,253 14,253 Total net sales 692,940 73,842 766,782 714,761 82,604 797,365 Intersegment sales -- 16,385 16,385 -- 13,523 13,523 Gross profit 317,861 44,807 362,668 324,621 45,097 369,718 Gross profit margin 45.9% 60.6% 47.3% 45.4% 54.6% 46.4% Operating income, excluding special charge in 1998 52,668 8,735 61,403 54,612 9,608 64,220 Earnings before income taxes, excluding special charge in 1998 and cumulative effect of an accounting change in 1999 30,931 19,384 50,315 30,765 5,736 36,501 EBITDA (2) 90,910 15,612 106,522 91,588 15,977 107,565 EBITDA margin 13.1% 21.1% 13.9% 12.8% 19.3% 13.5% Assets 1,458,402 221,887 1,680,289 1,450,791 269,240 1,720,031
A reconciliation of the combined operating segments to the applicable line items on the consolidated financial statements for the six months ended September 30, 1998 is as follows: Six Months Ended (In thousands) September 30, 1998 Segment operating income $ 64,220 Special charge 1,000 Operating income $ 65,220 Segment earnings before income taxes $ 36,501 Special charge 1,000 Earnings before income taxes $ 37,501 (1) Represents sales of calcium carbide and carbon products. (2) EBITDA - Operating income, excluding special charges, plus depreciation and amortization, is a measure of the Company's ability to generate cash flow and should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with generally accepted accounting principles. 13 AIRGAS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS: THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 1998 INCOME STATEMENT COMMENTARY Net Sales Net sales decreased 2.3% in the quarter ended September 30, 1999 ("current quarter") compared to the quarter ended September 30, 1998 ("prior year quarter").
Three Months Ended (In thousands) September 30, Net Sales 1999 1998 Decrease Distribution $346,973 $354,208 $(7,235) (2.0%) Gas Operations 40,316 42,384 (2,068) (4.9%) $387,289 $396,592 $(9,303) (2.3%)
The Distribution segment's principal products and services include hardgoods; industrial medical and specialty gases; and equipment rental. Hardgoods consist of welding supplies and equipment, safety products, and industrial tools and supplies. Industrial gases consist of packaged and small bulk gases. Equipment rental fees are generally charged on cylinders, cryogenic liquid containers, bulk tanks and welding equipment. Distribution sales decreased $7.2 million primarily as a result of a decline in same-store hardgoods sales, partially offset by acquisitions. Distribution same-store sales decreased $11.5 million (-3.2%) as a result of lower sales of hardgoods of $12.1 million (-5.7%), offset by gas and rent sales growth of $600 thousand (.4%). Hardgoods sales were negatively impacted in the current quarter by the continued slowness in certain manufacturing and industrial markets including: metal fabrication, petro- chemical, agriculture, mining and shipbuilding. Gas and rent sales growth was partially attributable to the expansion of its rental welder fleet and strategic product sales, particularly sales related to refrigerants and medical gases. Acquisition and divestiture activity accounted for a net increase of $4.3 million in sales as the acquisition of eight distributors since July 1, 1998 were partially offset by a divestiture during fiscal 1999. Gas Operations' sales primarily include dry ice and carbon dioxide that are used for cooling and beverage applications. In addition, the segment includes the Company's foreign operations and businesses that produce and distribute specialty gases and nitrous oxide. Prior to the divestiture in December 1998, the segment also included sales of calcium carbide and carbon products ("calcium carbide and carbon operations"). Although the Company's operations in Poland and Thailand were divested in August 1999, the current period includes a full quarter of operating results due to delayed financial reporting. Sales decreased $2.1 million compared to the prior year quarter as a result of the calcium carbide and carbon operations divestiture, partially offset by same-store sales growth and acquisitions. Sales decreased $8.4 million primarily due to the divestiture of the calcium carbide and carbon operations. Gas Operations' same-store sales increased $1.7 million (4.5%) from higher liquid carbon dioxide and nitrous oxide volumes. Seasonality and a stable supply of product helped liquid carbon dioxide volumes. Sales of specialty gases also increased primarily due to higher refrigerant sales during the summer months. Three dry ice acquisitions completed since July 1, 1998 contributed sales of $4.6 million over the prior year quarter. 14 AIRGAS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The Company estimates same-store sales based on a comparison of current period sales to the prior period sales, adjusted for acquisitions and divestitures. Future same-store sales growth is dependent on the economy, competition and the Company's ability to implement price increases and sell additional products and services to existing and new customers. Gross Profits Gross profits decreased .9% during the current quarter compared to the prior year quarter.
Three Months Ended (In thousands) September 30, Gross Profits 1999 1998 Decrease Distribution $160,326 $161,419 $(1,093) (.7%) Gas Operations 24,116 24,629 (513) (2.1%) $184,442 $186,048 $(1,606) (.9%)
The decrease in Distribution gross profits of $1.1 million resulted from a same-store gross profits decline of $3.3 million (-2%), offset by net acquisition and divestiture activity of $2.2 million. Declines in same-store gross profits consisted of decreases in hardgoods of $3.9 million (-6.7%), partially offset by gas and rent gross profits growth of $600 thousand (.6%). The decrease in hardgoods same-store gross profits resulted primarily from reduced sales to certain manufacturing and industrial markets. Additionally, competitive pricing pressures have impacted hardgoods gross margins. However, centralized purchasing and distribution and private label products have helped support hardgoods margins. The increase in gas and rental same-store gross profits resulted primarily from increased rental revenue from an expanded rental welder fleet and from increases in gas storage containers. Acquisition and divestiture activity resulted in a net increase in gross profits of $2.2 million from eight distribution acquisitions since July 1, 1998, offset by a divestiture in fiscal 1999. The Distribution gross profit margin of 46.2% in the current quarter increased 60 basis points from 45.6% in the prior year quarter as a result of a shift in sales mix more heavily weighted towards higher margin gas and rental revenues. The decrease in Gas Operations' gross profits of $513 thousand resulted from the divestiture of calcium carbide and carbon operations on December 31, 1998, which had gross profits of $2.5 million in the prior year quarter, offset by gross profits of $2 million from three dry ice acquisitions completed since July 1, 1998. Gas Operations' gross profit margin, excluding the divestiture which had lower margins, decreased from 65% in the prior year quarter to 60% in the current quarter primarily due to lower dry ice margins. Increased production costs, from higher electricity rates and lower operating efficiencies at peak production levels during the summer months, impacted margins. Margins on foreign operations were also down. 15 AIRGAS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Operating Expenses Selling, distribution and administrative expenses ("operating expenses") consist of personnel and related costs, distribution and warehouse costs, occupancy expenses and other selling, general and administrative expenses. Operating expenses decreased $3.3 million (-2.5%) compared to the prior year quarter primarily resulting from the Company's cost reduction program initiated during the third and fourth quarters of fiscal 1999 and from the elimination of certain repositioning expenses recognized in the prior year. The Company believes its cost reduction program combined with the elimination of certain repositioning expenses will lower operating expenses by approximately $12 - $15 million on an annual basis. The cost reductions have impacted many areas of the Company's expense structure, including headcount reductions and administrative cost reductions from the consolidation of back office functions. As a percentage of net sales, operating expenses remained unchanged at 33.4% compared to the prior year quarter. Depreciation and amortization totaled $23 million in the current quarter, an increase of $1.2 million (5.5%) compared to the prior year quarter. Depreciation and amortization expense relative to sales was 5.9% in the current quarter compared to 5.5% in the prior year quarter. Depreciation and amortization expense increased primarily as a result of acquisitions and capital expenditures since July 1, 1998. Operating Income Operating income increased 1.6% compared to the prior year quarter primarily due to lower operating expenses resulting from cost reductions and acquisitions, partially offset by lower gross profits from a decline in hardgoods sales.
Three Months Ended (In thousands) September 30, Operating Income 1999 1998 Increase Distribution $ 26,408 $ 26,072 $ 336 1.3% Gas Operations 5,896 5,719 177 3.1% $ 32,304 $ 31,791 $ 513 1.6%
The Distribution segment's operating income margin increased 20 basis points to 7.6% in the current quarter compared to 7.4% in the prior year quarter. Gas Operations' operating income margin, excluding the divested calcium carbide and carbon operations, increased 200 basis points to 14.6% in the current quarter from 12.6% in the prior year as a result of operating cost reductions and acquisitions. Interest Expense Interest expense, net, totaled $14.4 million and reflects a decrease of $1.3 million (8.2%) compared to the prior year quarter. The decrease in interest expense resulted from lower interest rates and lower average outstanding debt levels. The decrease in debt is primarily due to the after-tax proceeds from the divestitures of the calcium carbide and carbon operations and operations in Poland and Thailand. As discussed in "Liquidity and Capital Resources" and in Item 3 "Quantitative and Qualitative Disclosures About Market Risk", the Company manages interest rate exposure of certain borrowing instruments through participation in interest rate swap agreements. 16 AIRGAS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Other Income, net Other income, net, totaled $15.2 million in the current quarter and included a $14.4 million gain from the divestiture of operations in Poland and Thailand. Other income, net, totaled $709 thousand in the prior year quarter. Equity in Earnings of Unconsolidated Affiliates Equity in earnings of unconsolidated affiliates of $725 thousand decreased $497 thousand compared to the prior year quarter primarily as a result of lower earnings from the Company's liquid carbon dioxide joint venture and from joint venture earnings from National Welders Supply ("National Welders"). The liquid carbon dioxide joint venture incurred higher electric costs related to peak production during the summer months. National Welders' earnings were impacted by a slowdown in certain industrial markets that it serves and from the impact of hurricane Floyd. Income Tax Expense Income tax expense, excluding the taxes on the gain from the divestiture of operations in Poland and Thailand, represented 41.5% of pre- tax earnings for the current quarter compared to 41.8% in the prior year quarter. Including the gain on the divestiture, income tax expense represented 44% of pre-tax earnings in the current quarter. Net Earnings Net earnings for the quarter ended September 30, 1999 were $18.9 million, or $.27 per diluted share, compared to $10.5 million, or $.15 per diluted share, in the prior year quarter. Net earnings in the current quarter, excluding the gain on the divestiture of operations in Poland and Thailand, were $11.4 million, or $.16 per diluted share. EBITDA Operating income, plus depreciation and amortization ("EBITDA"), was $55.3 million in the current quarter compared to $53.5 million in the prior year quarter. EBITDA as a percentage of sales of 14.3% in the current quarter increased from 13.5% in the prior year quarter primarily due to cost reductions and acquisitions. 17 AIRGAS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) RESULTS OF OPERATIONS: SIX MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE SIX MONTHS ENDED SEPTEMBER 30, 1998 INCOME STATEMENT COMMENTARY Net Sales Net sales decreased 3.8% for the six months ended September 30, 1999 ("current period") compared to the six months ended September 30, 1998 ("prior year period").
Six Months Ended (In thousands) September 30, Net Sales 1999 1998 Decrease Distribution $692,940 $714,761 $(21,821) (3.1%) Gas Operations 73,842 82,604 (8,762) (10.6%) $766,782 $797,365 $(30,583) (3.8%)
Distribution sales decreased $21.8 million as a result of a same-store sales decline of $25.5 million (-3.6%), offset by a net sales increase of $3.7 million, representing the net effect of acquisition and divestiture activity. The decrease in same-store sales resulted from a $28.4 million (-6.6%) decline in hardgoods sales, partially offset by gas and rent same-store sales growth of $2.9 million (1%). The lower hardgoods sales resulted from the continued slowness in certain manufacturing and industrial markets. Gas and rent same-store sales growth was partially attributable to the Company's expansion of its rental welder fleet and strategic product sales, particularly sales related to refrigerants and medical gases. Sales of $12.6 million from fourteen distributor acquisitions since April 1, 1998 were offset by the divestiture of three businesses during fiscal 1999 which had sales of $8.9 million in the prior year period. Gas Operations' sales decreased $8.8 million in the current period as a result of divestitures which had sales of approximately $16.3 million in the prior year period, partially offset by sales of $7.5 million from four dry ice acquisitions completed since April 1, 1998. The divestitures primarily consisted of the fiscal 1999 divestiture of the Company's calcium carbide and carbon operations. 18 AIRGAS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Gross Profits Gross profits decreased 1.9% in the current period compared to the prior year period.
Six Months Ended (In thousands) September 30, Gross Profits 1999 1998 Decrease Distribution $317,861 $324,621 $(6,760) (2.1%) Gas Operations 44,807 45,097 (290) (.6%) $362,668 $369,718 $(7,050) (1.9%)
The decrease in Distribution gross profits of $6.8 million resulted from a same-store gross profit decline of $8.2 million (-2.5%), partially offset by acquisition and divestiture activity. The decline in same-store gross profits consisted of a decrease in hardgoods of $10 million (-8.5%), partially offset by gas and rent gross profit growth of $1.8 million (.9%). The decrease in hardgoods same-store gross profits resulted primarily from the continued slowness in certain manufacturing and industrial markets and from price concessions in certain regions to retain customers in response to competition. The increase in gas and rental same-store gross profits resulted primarily from increased rental revenue from an expanded rental welder fleet and from increases in gas storage containers. Gross profits of $5.9 million from fourteen distributor acquisitions since April 1, 1998 were partially offset by the divestiture of three businesses during fiscal 1999 which had gross profits of $4.5 million in the prior year period. The overall Distribution gross profit margin of 45.9% in the current period increased 50 basis points from 45.4% in the prior year period as a result of a shift in sales mix more heavily weighted towards higher margin gas and rental revenues. The decrease in Gas Operations gross profits of $290 thousand resulted from the divestiture of the Company's calcium carbide and carbon operations during fiscal 1999 offset by four dry ice acquisitions completed since April 1, 1998. Excluding the impact of the divestiture of calcium carbide and carbon operations, the current period gross profit margin of 61% was flat compared to the prior year period. Operating Expenses Selling, distribution and administrative expenses ("operating expenses") decreased $6 million (-2.3%) compared to the prior year period primarily resulting from the Company's cost reduction program initiated during the third and fourth quarters of fiscal 1999 and from the elimination of certain repositioning expenses recognized in the prior year. The Company believes its cost reduction program combined with the elimination of certain repositionng expenses will lower operating expenses by approximately $12 - $15 million on an annual basis. The cost reductions have impacted many areas of the Company's expense structure, including headcount reductions and administrative cost reductions from the consolidation of back office functions. As a percentage of net sales, operating expenses increased 50 basis points to 33.4% compared to the prior year period. The increase in the ratio of operating expenses relative to sales resulted from the decrease in sales, which was larger than the Company's reduction of operating expenses. Depreciation and amortization totaled $45.1 million in the current period representing an increase of $1.8 million (4.1%) compared to the prior year period. Depreciation and amortization expense increased primarily as a result of acquisitions and capital expenditures since April 1, 1998. Depreciation and amortization expense relative to sales was 5.9% for the current period compared to 5.4% in the prior year period. 19 AIRGAS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Operating Income Excluding special charges, operating income decreased 4.4% compared to the prior year period. The decrease in operating income was primarily due to lower gross profits from the decline in hardgoods sales, partially offset by a reduction in operating expenses.
Six Months Ended (In thousands) September 30, Operating Income 1999 1998 Decrease Distribution $ 52,668 $ 54,612 $(1,944) (3.6%) Gas Operations 8,735 9,608 (873) (9.1%) Special Charges -- 1,000 (1,000) -- $ 61,403 $ 65,220 $(3,817) (5.9%)
The Distribution segment's operating income margin of 7.6% was flat compared to the prior year period. Gas Operations' operating income margin of 11.8% increased 30 basis points compared to the prior year period, excluding the calcium carbide and carbon operations. The increase in Gas Operations' operating income margin was primarily due to operating cost reductions and dry ice acquisitions. Interest Expense Interest expense, net, totaled $28.2 million representing a decrease of $2.3 million (-7.6%) compared to the prior year period. The decrease in interest expense was primarily attributable to lower interest rates and lower average outstanding debt levels. As discussed in "Liquidity and Capital Resources" and in Item 3 "Quantitative and Qualitative Disclosures About Market Risk", the Company manages interest rate exposure of certain borrowing instruments through participation in interest rate swap agreements. Other Income, net Other income, net, totaled $15.4 million in the current period and included a $14.4 million gain from the divestiture of operations in Poland and Thailand. Other income, net, totaled $831 thousand in the prior year period. Equity in Earnings of Unconsolidated Affiliates Equity in earnings of unconsolidated affiliates of $1.7 million decreased $251 thousand (-12.7%) compared to the prior year period primarily from lower liquid carbon dioxide joint venture earnings. Higher electric costs associated with peak production during the summer months adversely impacted earnings. 20 AIRGAS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Income Tax Expense Income tax expense, excluding the taxes on the gain from the divestiture of operations in Poland and Thailand, represented 41.5% of pre- tax earnings for the current period compared to 42% in the prior year period. Including the gain on the divestiture, income tax expense represented 43.2% of pre-tax earnings in the current period. Net Earnings Net earnings in the current period were $28 million, or $.39 per diluted share, compared to $21.8 million, or $.30 per diluted share, in the prior year period. Net earnings, excluding special items (the current period cumulative effect of an accounting change and a gain on the divestiture of the Company's Poland and Thailand operations and the special charge in the prior period), were $21 million, or $.30 per diluted share, compared to $21.2 million, or $.29 per diluted share, in the prior year period. EBITDA Operating income, excluding special charges, plus depreciation and amortization ("EBITDA"), was $106.5 million in the current period compared to $107.6 million in the prior year period. EBITDA as a percentage of sales increased to 13.9% compared to 13.5% in the prior year period. 21 AIRGAS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) LIQUIDITY AND CAPITAL RESOURCES Cash Flows Cash flows from operating activities totaled $51.2 million for the six months ended September 30, 1999. Adjustments to reconcile net income to net cash provided by operating activities included depreciation and amortization of $45.1 million and deferred income taxes of $6.8 million from temporary differences, offset by a $14.4 million gain on the divestiture of operations in Poland and Thailand. Additionally, cash flows from working capital components decreased $12.9 million largely as a result of a decrease in accounts payable of $14.3 million related to the timing of payments to vendors. Accounts receivable increased $1.6 million with days' sales outstanding increasing to 49 days from 47 days at March 31, 1999. The increase in accounts receivable has resulted from the effects of computer conversions, changes in administrative personnel and from a slowing in certain manufacturing and industrial markets. Inventories increased $697 thousand with hardgoods days' supply of inventory increasing to 86 days from 77 days at March 31, 1999. The increase in hardgoods days' supply of inventory is primarily due to an increase in safety and welding product inventories in connection with centralized purchasing and distribution. After-tax cash flow (net earnings, excluding the cumulative effect of an accounting change, a gain from a divestiture and a special charge, plus depreciation, amortization and deferred income taxes) increased 4.3% to $72.9 million compared to $69.9 million in the prior year period. Cash used by investing activities totaled $6 million during the six months ended September 30, 1999. Activities that used cash during the period primarily included capital expenditures of $30.8 million and three distributor acquisitions totaling $23.4 million. The divestiture of operations in Poland and Thailand provided cash of $46.2 million ($38.4 million after taxes and closing costs). Capital expenditures during the current period were 45% lower compared to the prior year period. Capital expenditures associated with the purchase of cylinders, bulk tanks, rental welders and machinery and equipment totaled approximately $23 million or 75% of the total capital expenditures during the current period. Management continues to focus on improving asset utilization and believes that fiscal 2000 capital spending will total less than $75 million. Financing activities used cash of $45.2 million primarily for the repayment of debt and the repurchase of the Company's Common Stock. Additionally, cash overdraft, the float of the Company's outstanding checks, decreased by $6.3 million since March 31, 1999. The Company will continue to look for appropriate acquisitions of distributors. Future acquisitions and capital expenditures are expected to be funded through cash flows from operations, debt, Common Stock for certain acquisitions, funds from the divestiture of certain businesses and other available sources. The Company believes that its sources of financing are adequate for its anticipated needs and that it could arrange additional sources of financing for unanticipated requirements. The cost and terms of any future financing arrangement will depend on the market conditions and the Company's financial position at that time. The Company does not currently pay dividends. 22 AIRGAS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Financial Instruments The Company has unsecured revolving credit facilities totaling $725 million and $100 million Canadian (US$68 million) under a credit agreement with a final maturity date of December 5, 2002. The credit agreement contains covenants that include the maintenance of certain financial ratios, restrictions on additional borrowings and limitations on dividends. At September 30, 1999, the Company had borrowings under the credit agreement of approximately $515 million and $42 million Canadian (US$29 million). The Company also had commitments under letters of credit supported by the credit agreement of approximately $57 million. Availability under the credit facilities was approximately $192 million at September 30, 1999. At September 30, 1999, the effective interest rate on borrowings under the credit facilities averaged 5.79% (5.84% on U.S. borrowings and 4.86% on Canadian borrowings). At September 30, 1999, the Company had the following long-term debt outstanding under medium-term notes: $50 million of unsecured notes due September 2001 bearing interest at a fixed rate of 7.15%; $75 million of unsecured notes due March 2004 bearing interest at a fixed rate of 7.14%; and $100 million of unsecured notes due September 2006 bearing interest at a fixed rate of 7.75%. Additionally, at September 30, 1999, long-term debt of the Company included acquisition notes and other long-term debt instruments of approximately $75 million with interest rates ranging from 6% to 9%. The Company also has a shelf registration statement which is currently effective under applicable federal securities laws and may be used to issue debt and other types of securities up to an aggregate of approximately $175 million. In managing interest rate exposure, principally under the Company's floating rate revolving credit facilities, the Company participates in 25 interest rate swap agreements. The swap agreements are with major financial institutions and aggregate $568 million in notional principal amount at September 30, 1999. Eighteen swap agreements with approximately $331 million in notional principal amount require fixed interest payments based on an average effective rate of 6.35% for remaining periods ranging between one and five years. Seven swap agreements with approximately $237 million in notional principal amount require variable interest payments based on an average rate of 5.57% at September 30, 1999. Under the terms of five swap agreements, the Company has elected to receive the discounted value of the counterparties' interest payments up-front. At September 30, 1999, approximately $6.6 million of such payments were included in other non-current liabilities. The Company monitors its positions and the credit ratings of its counterparties, and does not anticipate non-performance by the counterparties. Share Repurchase Program In March 1999, the Company's Board of Directors authorized the repurchase of up to seven million shares of the Company's outstanding Common Stock. The shares may be repurchased in the open market or in privately negotiated transactions depending on market conditions and other factors. The Company has financed its repurchase programs with borrowings and funds provided by operating activities. During the six months ended September 30, 1999, the Company repurchased 1.2 million shares at an average cost of $11.78 per share, including 175 thousand shares to complete a previous repurchase program. The effect of the share repurchases on earnings per share for the current quarter was not material. Subsequent to September 30, 1999, the Company repurchased approximately 300 thousand shares at an average cost of $9.82 per share. As of November 5, 1999, the remaining shares authorized for repurchase under the repurchase program totaled approximately 5.7 million shares. AIRGAS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Employee Benefits Trust On October 12, 1999, the Employee Benefits Trust purchased 671 thousand shares of Common Stock from the Company at fair market value. AIRGAS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) YEAR 2000 READINESS DISCLOSURE Year 2000 Issues The Company is aware of the issues associated with the Year 2000 matter. The "Year 2000" matter relates to whether computer hardware and software and equipment will properly recognize date sensitive information referring to the Year 2000. Potential computer system and equipment failures arising from years beginning with "20" rather than "19" are a known risk. The Company's exposure to Year 2000 issues rests primarily in three main areas: information systems hardware and application software, embedded chip technology which may be found in a wide variety of operating equipment and third party Year 2000 readiness. Information Systems Hardware and Application Software With respect to information systems hardware and application software, the Company's businesses generally do not utilize "home grown" programs or systems that require programming to become Year 2000 compliant. The Company typically uses "out of the box" or "shrink wrap" software for its business needs. Implementation of standardized software and computer systems has been substantially completed across the Company in connection with the Company's Repositioning Plan. Although vendors for such software have advised the Company that their software is Year 2000 compliant, the Company has reviewed time dimensional testing performed by a third party on one critical system with no significant compliance exceptions identified. The Company intends to complete internal time dimensional testing for the other critical system by the end of November 1999. Although execution of the Repositioning Plan addresses certain significant Year 2000 issues, it was not undertaken primarily as a remediation initiative. The Company believes that standardized operating platforms will help provide for an effective multi-channel distribution network. Expenditures related to the system conversion and standardization project have totaled approximately $18 million over the duration of the project, of which approximately $12 million represented new capital equipment and software. While the Company's standardization project will continue into the Year 2000, management believes that the critical operating systems utilized by the Company are Year 2000 compliant. Although it is considered unlikely by management that the Company's information systems hardware and application software will result in a Year 2000 problem, the Year 2000 matter could have a material impact on the business, results of operations and financial condition of the Company as well as on customers of the Company. The Company has not determined the extent to which its business and customers might be affected in that event. In conjunction with the Repositioning Plan, the Company has established a national data center equipped with systems hardware and application software that its vendors have indicated are Year 2000 compliant. Time dimensional testing of data center hardware has been completed with no significant compliance exceptions identified. In addition, the Company has substantially completed testing of its desktop personal computers with very few failures noted. Embedded Chips The Company's Year 2000 project team includes designated operating company managers responsible for directing Year 2000 remediation efforts. These managers, in cooperation with the Company's national information services personnel, have completed inventories, risk assessments and testing of critical manufacturing processes and related equipment containing embedded chips. No significant instances of non-compliance were identified. The Year 2000 project team has also completed the process of contacting certain suppliers to obtain Year 2000 readiness product information for less significant equipment containing embedded chips. Through this inquiry, the Company identified certain non-compliant phone systems for repair or replacement. The Company anticipates completing the necessary repairs and replacements by December 1999. Management has developed contingency plans for the affected phone systems and believes the contingency plans are sufficient such that operations will not be materially impacted if the phone system repairs and replacements are not completed by December 1999. The Company estimates expenditures for Year 2000 remediation, including the replacement of non-compliant embedded chip equipment, will total approximately $1 million. Of this total, the Company expects approximately $800 thousand will be for capital upgrades and replacements. The Company believes it will complete the remediation of embedded chip equipment and processes prior 25 AIRGAS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) to the year 2000. However, if repair, replacement or contingency plans are not completed before the Year 2000 or if contingency plans are inadequate, then the Year 2000 matter could have a material impact on the business, results of operations and financial condition of the Company. Third Parties The Company's Year 2000 issues relate not only to its own business systems and equipment but also to those of its customers, vendors and suppliers. To mitigate the risk to the Company arising from third parties, the Company has contacted significant suppliers, customers and other critical business partners to determine if they have effective Year 2000 plans in place. The Company anticipates that this evaluation will be ongoing through the remainder of calendar year 1999. Most of the Company's key suppliers have indicated that they have active Year 2000 compliance programs. As a contingency plan, alternative suppliers have been identified as deemed necessary. In addition, audits of certain key suppliers to confirm Year 2000 readiness have been completed with no significant issues identified. However, there can be no assurance that the Company's customers, vendors, suppliers and other third parties will successfully resolve their own Year 2000 issues in a timely manner sufficient to prevent impact to the Company. Contingency Plans The Company believes that its most reasonably likely worst case scenario changes over time. The Company has developed certain contingency plans to address currently identified Year 2000 issues. These plans address potential disruptions of the Company's business including administrative and supply chain functions. Administrative contingency plans provide for back-up data processing facilities, which have been tested and found to be Year 2000 compliant, and encompass the national data center, critical business software and communications networks. Supply chain contingency plans include identifying alternative suppliers and arranging for back-up or alternative transportation for shipping the Company's products. Contingency plans will continue to be developed and refined through the remainder of calendar year 1999, as deemed necessary. Additionally, as of January 1, 2000, the Company intends to begin providing 24-hour information services support through the use of manned call centers to assist the Company's various locations with any internal Year 2000 related problems. The Company anticipates that information services support will continue until all critical systems have been determined to be fully operational. Resources The Company is funding the computer conversion and standardization project as well as non-compliant equipment repairs and replacements from cash flow generated by operations and other available financing sources. Substantially all of the effort to accomplish the remediation objectives with regard to the computer conversion and standardization project, embedded chip equipment, and evaluation of third party readiness has been performed by internal Company personnel. 26 AIRGAS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Forward-looking Statements This report contains statements that are forward-looking, as that term is defined by the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission in rules, regulations and releases. The Company intends that such forward-looking statements be subject to the safe harbors created thereby. All forward-looking statements are based on current expectations regarding important risk factors, and the making of such statements should not be regarded as a representation by the Company or any other person that the results expressed therein will be achieved. Important factors that could cause actual results to differ materially from those contained in any forward-looking statement include, but are not limited to, underlying market conditions, growth in same-store sales, the Company's ability to reduce costs and capital spending, the Company's efforts to improve asset utilization, implementation and standardization of information systems projects, any potential problems relating to Year 2000 matters (including without limitation, those relating to the Company's ability to identify and timely remediate Year 2000 problems, unanticipated remediation costs, timely resolution of Year 2000 problems by significant vendors, suppliers, customers and other similar third parties, and the Company's ability to develop and implement contingency plans, if necessary), the success and timing of acquisitions and divestitures, 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 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. The Company does not undertake to update any forward-looking statement made herein or that may be made from time to time by or on behalf of the Company. Item 3. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk The Company's primary market risk exposure is from changes in interest rates. The Company's policy is to manage interest rate risk exposure through the use of a combination of fixed and floating rate debt and interest rate swap agreements. The Company maintains the ratio of fixed to variable rate debt within parameters established by management under policies approved by the Board of Directors. At September 30, 1999, the ratio of fixed versus floating debt was 44% - 56%. In addition, the Company monitors its positions and the credit ratings of its counterparties, thereby minimizing the risk of non-performance by the counterparties. The Company does not enter into derivative financial instruments for trading purposes. The table below summarizes the Company's market risks associated with long-term debt obligations and interest rate swaps as of September 30, 1999. For long-term debt obligations, the table presents cash flows related to payments of principal and interest by expected fiscal year of maturity. For interest rate swaps, the table presents the notional amounts underlying the interest rate swaps by year of maturity. The notional amounts are used to calculate contractual payments to be exchanged and are not actually paid or received. Fair values were computed using market quotes, if available, or based on discounted cash flows using market interest rates as of the end of the period. PAGE <27>
Expected Fiscal Year of Maturity ____________________________________________________ (In millions) Fair Fixed Rate Debt: 2000 2001 2002 2003 2004 2005 Thereafter Total Value Medium-term notes $ -- $ -- $ 50 $ -- $ 75 $ -- $100 $225 $208 Interest expense $ 17 $ 17 $ 15 $ 13 $ 10 $ 8 $ 7 $ 87 Average interest rate 7.41% 7.41% 7.45% 7.49% 7.49% 7.75% 7.75% Acquisition notes $ 5 $ 13 $ 21 $ 1 $ 20 $ -- $ 2 $ 62 $ 59 Interest expense $ 5 $ 4 $ 3 $ 2 $ 1 $ -- $ -- $ 15 Average interest rate 7.47% 7.47% 7.47% 7.47% 7.47% 7.47% 7.47% Other notes $ 2 $ 1 $ 1 $ 1 $ -- $ -- $ -- $ 5 $ 5 Average interest rate 6.90% 6.90% 6.90% 6.90% Variable Rate Debt: Revolving credit facilities $ -- $ -- $ -- $544 $ -- $ -- $ -- $544 $544 Interest expense $ 31 $ 31 $ 31 $ 31 $ -- $ -- $ -- $124 Interest rate (a) 5.79% 5.79% 5.79% 5.79% Other notes $ -- $ 1 $ 7 $ -- $ -- $ -- $ -- $ 8 $ 8 Average interest rate 8.75% 8.75% US $ denominated Swaps: 15 Swaps Receive Variable/Pay Fixed $ 15 $ 55 $120 $ 93 $ -- $ 40 $ -- $323 $ (7) Variable Receive rate (3 month LIBOR) = 5.36% Weighted average pay rate = 6.35% 7 Swaps Receive Fixed/Pay Variable $ 57 $ 50 $ 50 $ -- $ 30 $ -- $ 50 $237 $ 2 Weighted average receive rate = 6.60 % Variable pay rate (6 month LIBOR) = 5.57% Canadian $ denominated Swaps: 3 Swaps Receive Variable/Pay Fixed $ 3 $ 3 $ 2 $ -- $ -- $ -- $ -- $ 8 $ -- Variable Receive rate (3 month CAD BA) = 4.88% (b) Weighted average pay rate = 6.66% Other LIBOR based agreements: Operating leases with trust $ 13 $ -- $ -- $ -- $ -- $ -- $ -- $ 13 $ 13 Variable rate (3 month LIBOR plus 110 basis points = 6.46%) 28 (a) The variable rate of long-term debt obligations is based on the London Interbank Offered Rate ("LIBOR") as of September 30, 1999. For future periods, the variable interest rate is assumed to remain at 5.79% with the principal balance of long-term debt obligations held constant at $544 million. However, the variable rate and borrowing levels of long-term debt may fluctuate materially from those presented above. (b) The variable receive rate for Canadian dollar denominated interest rate swaps is the rate on Canadian Bankers' acceptances ("CAD BA").
Limitations of the tabular presentation As the table incorporates only those interest rate risk exposures that exist as of September 30, 1999, it does not consider those exposures or positions that could arise after that date. In addition, actual cash flows of financial instruments in future periods may differ materially from prospective cash flows presented in the table due to future fluctuations in variable interest rates and Company debt levels. Foreign Currency Rate Risk Certain subsidiaries of the Company are located in foreign countries. The Company does not hedge its exposure to translation gains and losses relating to foreign currency net asset exposures. The Company considers its exposure to foreign currency exchange fluctuations to be immaterial to its consolidated results of operations. 29 PART II - OTHER INFORMATION Item 1. Legal Proceedings For information regarding certain litigation, reference is made to the Company's Form 10-Q for the quarter ended June 30, 1999, which is incorporated herein by reference. Item 4. Submission of Matters to a Vote of Security Holders. The annual meeting of the stockholders of the Company was held on August 2, 1999, where the following actions were taken: (a) The stockholders voted to elect John A.H. Shober, Lee M. Thomas, and Robert L. Yohe to the Board of Directors. The votes cast for each Director were as follows: No. of Shares For Withheld/Against John A.H. Shober 65,359,222 1,098,178 Lee M. Thomas 65,363,551 1,093,849 Robert L. Yohe 65,442,801 1,014,599 In addition to the Board members elected at the Annual Meeting, the following are directors whose terms in office as directors continued after the meeting: W. Thacher Brown, Frank B. Foster, III, Rajiv L. Gupta, Peter McCausland, and Robert E. Naylor, Jr. Subsequently, Mr. Gupta and Dr. Naylor both retired from the Board. (b) The stockholders voted to ratify the selection of KPMG LLP as the Company's independent auditors. The votes cast in regard to the action were as follows: No. of Shares For Withheld/Against Abstain 65,699,974 665,048 92,378 30 Item 5. Other Information Board of Directors Appointments On September 7, 1999, the Company announced the appointment of Paula A. Sneed and David M. Stout to the Company's board of directors to fill the seats vacated by Mr. Gupta and Mr. Stott who retired from the board during fiscal 2000 and fiscal 1999, respectively. On October 20, 1999, the Company announced the appointment of James W. Hovey to the board to suceed Dr. Naylor who retired. Ms. Sneed, age 51, is executive vice president, Kraft Foods and president of Kraft's e-commerce division. Ms. Sneed earned a Masters of Business Administration from Harvard University and an undergraduate degree from Simmons College. She was also the recipient of an Honorary Doctorate of Business Administration degree from Johnson and Whales University in 1991. Ms. Sneed is also a director of Hercules, Inc. and Westchester/Fairfield Inroads, Inc. Mr. Stout, age 45, is president, SmithKline Beecham Pharmaceuticals-North America. Prior to joining Smith-Kline, Mr. Stout was president of Schering Laboratories, the U.S. pharmaceutical operation of Schering-Plough Corporation. Mr. Stout received a Bachelor or Arts degree in biology from Western Maryland College in 1976. He also serves on the Board of Trustees for both Western Maryland College and Magee Rehabilitation Hospital. Mr. Hovey, age 54, is president of The Fox Companies, a diversified real estate development firm. Mr. Hovey earned a Masters degree in City Planning from the University of Pennsylvania and a Bachelor of Science degree in economics from the Wharton School at the University of Pennsylvania. Mr. Hovey currently serves as an overseer of the Graduate School of Fine Arts at the University of Pennsylvania, a director of the National Association of Industrial and Office Properties, a member of the Advisory Board of the Wharton School Real Estate Center, a trustee of Eisenhower Exchange Fellowships, Inc., and a trustee of the World Affairs Council in Philadelphia, Pennsylvania. Chief Financial Officer Appointment On November 1, 1999, the Company announced the appointment of Roger F. Millay as senior vice president and chief financial officer, effective November 29, 1999. Mr. Millay succeeds Scott Melman who will be assuming a new role at the Company. Prior to joining the Company, Mr. Millay, age 42, was senior vice president and chief financial officer at Transport International Pool, a $2 billion division of General Electric Capital Corporation ("GE Capital"). Other positions during his twelve-year career at General Electric included chief financial officer roles at GE Capital Mexico and Colony Advisors, Inc., a GE Capital joint venture. Mr. Millay earned a graduate degree from Georgetown University's school of business and an undergraduate degree from the University of Virginia. 31 Item 6. Exhibits and Reports on Form 8-K a. Exhibits The following exhibits are being filed as part of this Quarterly Report on Form 10-Q: Exhibit No. Description 3 By-Laws (Amended and Restated August 2, 1999) 10 Airgas, Inc. 401(k) Plan (Amended and Restated) 11 Calculation of earnings per share 27 Financial Data Schedules as of September 30, 1999 and 1998 b. Reports on Form 8-K On July 30, 1999, the Company filed a Form 8-K pursuant to Item 5, reporting its earnings for the first quarter ended June 30, 1999. 32 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Airgas, Inc. (Registrant) Date: November 11, 1999 /s/ Scott M. Melman Scott M. Melman Senior Vice President and Chief Financial Officer EX-3 2 EXHIBIT 3 - BY-LAWS (AMENDED AND RESTATED AUGUST 2, 1999) AIRGAS, INC. BY-LAWS (AMENDED AUGUST 2, 1999) ______________________________ 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) be 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 earlier than the close of business on the 120th day prior to the first anniversary of the preceding year's annual meeting and not later than the close of business on the 90th day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after suchanniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder's notice as described above. A stockholder's notice to the Secretary shall 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, (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 1, 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 holders of any class or series of stock having a preference over the Common Stock as to dividends or on liquidation, a special meeting of the stockholders may be called only by (i) the Chairman of the Board, (ii) the President, (iii) the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors, or (iv) subject to the procedures set forth in this Section 2, pursuant to a 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. Upon request in writing sent by registered mail to the Chairman of the Board or the President by any stockholder or stockholders entitled to call a special meeting of the stockholders pursuant to this Section 2, the Board of Directors shall determine a place and time for such meeting, which time shall not be less than ninety (90) nor more than one hundred and twenty (120) days after the receipt and determination of the validity of such request, and a record date for the determination of stockholders entitled to vote at such meeting in the manner set forth in Section 6 hereof. Following such receipt and determination, it shall be the duty of the Secretary to cause notice to be given to the stockholders entitled to vote at such meeting, in the manner set forth in Section 4 hereof, that a meeting will be held at the time and place so determined. 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. 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. 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 (a) in the case of an annual meeting of the stockholders, in accordance with the fourth sentence of the third paragraph of Section 1 of these By-Laws and (b) in the case of a special meeting of the stockholders, not earlier than the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a stockholder's notice as described above. 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. 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 filled 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. 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. 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 shall be a member 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 the 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 officers, 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 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. 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 VII 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. 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 canceled, 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. 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 Corporations. 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-10 3 EXHIBIT 10 - AIRGAS, INC. 401(K) PLAN (AMENDED AND RESTATED) i AIRGAS, INC. 401(k) PLAN (Amended and Restated Effective January 1, 1997) (Revised) Airgas, Inc. (the "Company") adopted the Airgas, Inc. 401(k) Plan (the "Plan") for the benefit of certain Employees (as defined in the Plan) of the Company and its affiliates effective January 1, 1988. The Company amended the Plan from time to time. The Company's subsidiary, Midwest Carbide Corporation, adopted the Keokuk Bargaining Unit 401(k) Plan (the "Keokuk Plan") effective January 1, 1988, for the benefit of certain of its Employees (as provided therein). The Company provided for the merger of the Keokuk Plan with and into this Plan effective as of January 1, 1997. The Company hereby amends and completely restates the Plan effective January 1, 1997, except as expressly stated to the contrary herein, subject to the subsequent condition that the Internal Revenue Service issues a determination that the Plan meets all applicable requirements of section 401(a) of the Code (as defined in subsection 1(f)), that employer contributions thereto remain deductible under section 404 of the Code and that the trust fund maintained with respect thereto remains tax exempt under section 501(a) of the Code. The Plan, as herein amended and restated, shall apply only to an Employee who is credited with an Hour of Service (as defined in subsection 1(o)) on or after January 1, 1997, and to the Accrued Benefit of a former employee held in the Plan on January 1, 1997. The Company executed the Plan as initially amended and restated effective January 1, 1997 on January 27, 1997. The Company revised the Plan as set forth herein to include subsequent amendments to the Plan and reflect governmental interpretations of law applicable to the Plan. ii AIRGAS, INC. 401(k) PLAN (Amended and Restated Effective January 1, 1997) (Revised) TABLE OF CONTENTS Section Page 1 DEFINITIONS 1 (a) Accrued Benefit 1 (b) Administrator or Plan Administrator 1 (c) Annual Additions 1 (d) Board of Directors 1 (e) Break in Service 1 (f) Code 1 (g) Committee 2 (h) Company 2 (i) Compensation 2 (j) Employee 3 (k) Entry Date. 3 (l) ERISA 3 (m) Fiduciary 3 (n) Fund 3 (o) Hour of Service 3 (p) Investment Category 5 (q) Investment Manager 5 (r) Limitation Year 6 (s) Matching Account 6 (t) Member 6 (u) Normal Retirement Date 6 (v) Parent Company Stock. 6 (w) Participating Company 6 (x) Payroll Period 6 (y) Period of Service 6 (z) Period of Severance 7 (aa) Plan 7 (ab) Plan Year 7 (ac) Profit Sharing Account 7 (ad) Related Entity 7 (ae) Restatement Effective Date 8 (af) Rollover Account 8 (ag) Salary Reduction Account 8 (ah) Service 8 (ai) Severance Date 8 (aj) Supplemental Participating Company Contribution 9 (ak) Trust Agreement 9 (al) Trustee 9 (am) Valuation Date 9 (an) Year of Service for Eligibility 9 iii AIRGAS, INC. 401(k) PLAN (Amended and Restated Effective January 1, 1997) (Revised) TABLE OF CONTENTS Section Page 2 ADMINISTRATION OF THE PLAN 10 (a) ERISA Reporting and Disclosure by Administrator 10 (b) Committee 10 (c) Multiple Capacities 10 (d) Committee Powers 10 (e) Allocation of Fiduciary Responsibility 11 (f) Claims 13 (g) Fiduciary Compensation 14 (h) Plan Expenses 14 (i) Fiduciary Insurance 14 (j) Indemnification 14 3 PARTICIPATION IN THE PLAN 15 (a) Initial Eligibility 15 (b) Measuring Service 16 (c) Termination and Requalification 17 (d) Special Rule for Rollovers 17 (e) Termination of Membership 17 4 MEMBER AND PARTICIPATING COMPANY CONTRIBUTIONS 18 (a) Salary Reduction Contributions 18 (b) Salary Reduction Contribution Limitations 18 (c) Salary Reduction Account 20 (d) Compliance with Salary Reduction Contributions Discrimination Tests 20 (e) Participating Company Matching Contributions 24 (f) Matching Account 24 (g) Compliance with Participating Company Matching Contributions Discrimination Tests 25 (h) Profit Sharing Contributions 28 (i) Profit Sharing Account 30 (j) Rollovers 30 (k) Voluntary Contributions 31 (l) Payroll Taxes 31 (m) Deductibility 31 (n) Supplemental Participating Company Contributions 32 iv AIRGAS, INC. 401(k) PLAN (Amended and Restated Effective January 1, 1997) (Revised) TABLE OF CONTENTS Section Page 5 MAXIMUM CONTRIBUTIONS AND BENEFITS 35 (a) Defined Contribution Limitation 35 (b) Combined Limitation 36 (c) Combined Limitation Computation 36 (d) Definition of "Compensation" for Code Limitations 37 (e) Transition Provision 39 6 ADMINISTRATION OF FUNDS 40 (a) Investment Control 40 (b) Parent Company Stock 40 (c) Member Elections 40 (d) No Member Election 41 (e) Facilitation 41 (f) Valuations 41 (g) Allocation of Gain or Loss 41 (h) Bookkeeping 42 7 BENEFICIARIES AND DEATH BENEFITS 43 (a) Designation of Beneficiary 43 (b) Beneficiary Priority List 43 (c) Proof of Death 44 (d) Divorce 44 8 BENEFITS FOR MEMBERS 45 (a) Retirement Benefit 45 (b) Death Benefit 45 (c) Termination of Employment Benefit 45 (d) Vesting 45 9 DISTRIBUTION OF BENEFITS 46 (a) Commencement 46 (b) Benefit Forms 47 (c) Deferred Payments 48 (d) Withholding 48 (e) Compliance with Code Requirements 48 (f) Distribution Limitations 48 (g) Rollover Election 49 v AIRGAS, INC. 401(k) PLAN (Amended and Restated Effective January 1, 1997) (Revised) TABLE OF CONTENTS Section Page 10 HARDSHIP AND IN-SERVICE DISTRIBUTIONS 51 (a) General Rule 51 (b) Need 51 (c) Satisfaction of Need 52 (d) Limitations 53 (e) Accounting 53 11 LOANS 54 (a) Availability 54 (b) Minimum Requirements 54 (c) Accounting 56 12 TITLE TO ASSETS 57 13 AMENDMENT AND TERMINATION 58 (a) Amendment 58 (b) Termination 58 (c) Conduct on Termination 58 14 LIMITATION OF RIGHTS 60 (a) Alienation 60 (b) Qualified Domestic Relations Order Exception 60 (c) Employment 60 15 MERGERS, CONSOLIDATIONS OR TRANSFERS OF PLAN ASSETS 62 (a) General Rule 62 (b) Protected Benefits 62 (c) Vesting 62 (d) Special In-Service Hardship Distribution Provisions 62 (e) Special In-Service Age 59-1/2 Distribution Provisions 63 (f) Special In-Service Age 55 Distribution Provision 63 (g) Installment Settlement 63 (h) Limitations on In-Service Distributions 64 (i) Annuity Settlements 64 vi AIRGAS, INC. 401(k) PLAN (Amended and Restated Effective January 1, 1997) (Revised) TABLE OF CONTENTS Section Page 16 PARTICIPATION BY RELATED ENTITIES 69 (a) Commencement 69 (b) Termination 69 (c) Single Plan 69 (d) Delegation of Authority 69 17 TOP-HEAVY REQUIREMENTS 70 (a) General Rule 70 (b) Calculation of Top-Heavy Status 70 (c) Definitions 70 (d) Combined Benefit Limitation 73 (e) Vesting 73 (f) Minimum Contribution 73 18 MISCELLANEOUS 75 (a) Incapacity 75 (b) Reversions 75 (c) Employee Data 76 (d) In Writing Requirement 76 (e) Doubt as to Right to Payment 76 (f) Inability to Locate Distributee 76 (g) Estoppel of Members and Their Beneficiaries 77 (h) Law Governing 77 (i) Pronouns 77 (j) Interpretation 77 1 1. DEFINITIONS (a) "Accrued Benefit" shall mean on any date of determination the value of a Member's share of the Fund. (b) "Administrator" or "Plan Administrator" shall mean the entity, individual or group of individuals designated pursuant to subsection 2(a) to discharge the statutory responsibilities of a plan administrator under ERISA. As of the Restatement Effective Date, the Company is the Plan Administrator acting directly or through its subsidiary, Airgas Management, Inc. (c) "Annual Additions" shall mean the sum for any Limitation Year of (i) employer contributions, (ii) employee contributions, (iii) forfeitures and (iv) amounts described in sections 415(l) and 419A(d) of the Code, which are (A) allocated to an account which provides medical benefits under section 401(h) or 419(e) of the Code and (B) treated as "Annual Additions" to the account of a Member under such provisions of the Code. "Annual Additions" shall include excess contributions as defined in section 401(k)(8)(B) of the Code, excess aggregate contributions as defined in section 401(m)(6)(B) of the Code and excess deferrals as described in section 402(g) of the Code, regardless of whether such amounts are distributed or forfeited. "Annual Additions" shall not include (i) rollover contributions (as defined in sections 402(c), 403(a)(4), 403(b)(8) and 408(d)(3) of the Code) or (ii) employee contributions to a simplified employee pension plan which are excludable from gross income under section 408(k)(6) of the Code. (d) "Board of Directors" shall mean the Board of Directors of the Company or any committee or delegee thereof designated in accordance with subsection 2(e)(ii). (e) "Break in Service" shall mean for any Employee any Plan Year in which he is not credited with more than 500 Hours of Service. (f) "Code" shall mean the Internal Revenue Code of 1986, as amended, and the same as may be further amended from time to time. 2 (g) "Committee" shall mean the individual or group of individuals designated pursuant to subsection 2(b) to control and manage the operation and administration of the Plan to the extent set forth herein. (h) "Company" shall mean Airgas, Inc. (i) "Compensation" shall mean the total taxable income, other than items excluded in he next sentence, paid to an Employee for services by a Participating Company during a Plan Year, plus amounts which an Employee elects to have withheld from his remuneration for services under this Plan or a plan which meets the requirements of section 125 of the Code. "Compensation" shall not include (i) bonuses, (ii) income from exercise of stock options, receipt or vesting of restricted stock grants, exercise of stock appreciation rights or similar equity-based compensation arrangements, (iii) deferred compensation, (iv) severance pay, (v) accrued vacation pay paid in one lump sum after termination of employment, (vi) tuition reimbursements, (vii) car allowances, (viii) moving expenses, (ix) expense reimbursements, (x) employer contributions to the Plan, (xi) the value of welfare benefits or perquisites, or (xii) similar items (whether or not includible in gross income). Notwithstanding the foregoing, "Compensation" for an Employee covered by the collective bargaining agreement between Midwest Carbide Corporation and the Oil, Chemical and Atomic Workers International Union, Keokuk Local No. 6-249, shall mean the Employee's basic hourly rate of pay for a Pay Period multiplied by the Hours of Service for which he was paid for such Pay Period. "Compensation" with respect to any Member for any Plan Year shall be limited to $150,000 (or an increased amount permitted in accordance with a cost of living adjustment under section 415(d) of the Code). 3 (j) "Employee" shall mean each and every person employed by a Participating Company or a Related Entity. The term "Employee" shall also include a person who is a "leased employee" (within the meaning of section 414(n)(2) of the Code) with respect to a Participating Company or a Related Entity except that no person who is a "leased employee" shall be eligible to participate in this Plan or be deemed an "Employee" for purposes of eligibility to participate. (k) "Entry Date" shall mean the first day of each calendar month of each Plan Year. (l) "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and the same as may be further amended from time to time. (m) "Fiduciary" shall mean a person who, with respect to the Plan, (i) exercises any discretionary authority or discretionary control respecting management of the Plan or exercises any authority or control with respect to management or disposition of the Plan's assets, (ii) renders investment advice for a fee or other compensation, direct or indirect, with respect to any monies or other property of the Plan, or has any authority or responsibility to do so, or (iii) has any discretionary authority or discretionary responsibility in the administration of the Plan. (n) "Fund" shall mean the assets of the Plan. All Investment Categories shall be part of the Fund. (o) "Hour of Service" (i) General Rule. "Hour of Service" shall mean each hour (A) for which an Employee is directly or indirectly paid, or entitled to payment, by a Participating Company or a Related Entity for the performance of duties or (B) for which back pay, irrespective of mitigation of damages, has been either awarded or agreed to by a Participating Company or a Related Entity. These hours shall be credited to the Employee for the period or 4 periods in which the duties were performed or to which the award or agreement pertains irrespective of when payment is made. The same hours shall not be credited under both (A) and (B) above. (ii) Paid Absences. An Employee shall also be credited with one "Hour of Service" for each hour for which the Employee is directly or indirectly paid, or entitled to payment, by a Participating Company or a Related Entity for reasons other than the performance of duties or absence due to vacation, holiday, illness, incapacity, disability, layoff, jury duty or authorized leave of absence for a period not exceeding one year for any reason in accordance with a uniform policy established by the Committee; provided, however, not more than 501 "Hours of Service" shall be credited to an Employee under this subsection 1(o)(ii) on account of any single, continuous period during which the Employee performs no duties and provided, further, that no credit shall be given if payment (A) is made or due under a plan maintained solely for the purpose of complying with applicable worker's compensation, unemployment compensation or disability insurance laws or (B) is made solely to reimburse an Employee for medical or medically related expenses incurred by the Employee. (iii)Military. An Employee shall also be credited with one "Hour of Service" for each hour during which the Employee is absent on active duty in the military service of the United States under leave of absence granted by a Participating Company or a Related Entity or when required with respect to qualified military service by the Uniform Services Employment and Reemployment Rights Act of 1994 and section 414(u) of the Code, provided he returns to employment with a Participating Company or a Related Entity within 90 days after his release from active duty or within such longer period during which his right to reemployment is protected by law. (iv)Equivalencies. If, for Plan purposes, an Employee's records are kept on other than an hourly basis as described above, the Committee, according to uniform 5 rules applicable to a class of Employees or Members, may apply the following equivalencies for purposes of crediting "Hours of Service": Basis Upon Which Records Credit Granted to Individual if Individual Earns are Maintained One or More Hours of Service During Period Shift Actual hours for full shift Day 10 Hours of Service Week 45 Hours of Service Semi-Monthly Payroll Period 95 Hours of Service Months of Employment 190 Hours of Service (v) Miscellaneous. For purposes of this subsection 1(o), the regulations issued by the Secretary of Labor at 29 CFR 2530.200b- 2(b) and (c) are incorporated by reference. Nothing herein shall be construed as denying an Employee credit for an "Hour of Service" if credit is required by separate federal law. (p) "Investment Category" shall mean any separate investment fund which is made available under the terms of the Plan. (q) "Investment Manager" shall mean any Fiduciary (other than a Trustee) who: (i) has the power to manage, acquire, or dispose of any asset of the Plan; (ii) is: (A)registered as an investment advisor under the Investment Advisers Act of 1940; (B)a bank, as defined in that Act; or (C)an insurance company qualified to perform services described in subsection 1(q)(i) above under the laws of more than one state; and (iii)has acknowledged in writing that he is a Fiduciary with 6 respect to the Plan. (r) "Limitation Year" shall mean the consecutive twelve-month period commencing on January 1st and ending on December 31st. (s) "Matching Account" shall mean the portion of the Member's Accrued Benefit derived from Participating Company contributions under subsection 4(e) hereof and the corresponding provisions of the Plan as heretofore effective, adjusted as provided in subsection 4(f). (t) "Member" shall mean each and every Employee of a Participating Company who satisfies the requirements for participation under Section 3 hereof and each other person who has an Accrued Benefit held under the Plan. (u) "Normal Retirement Date" shall mean the date on which a Member attains age 65. (v) "Parent Company Stock" shall mean Airgas, Inc. common stock. (w) "Participating Company" shall mean each Related Entity with respect to the Company which adopts this Plan pursuant to Section 16. The term shall also include the Company, unless the context otherwise requires. (x) "Payroll Period" shall mean a weekly, bi-weekly, semi- monthly or monthly pay period or such other standard pay period of a Participating Company applicable to the class of Employees of which an individual is a part. (y) "Period of Service" shall mean the period of time commencing on the date on which an Employee first is credited with an Hour of Service or, if applicable, on the date following a Period of Severance of one year or more on which an Employee first is credited with an Hour of Service provided he requalifies for participation under subsection 3(c), and ending on the next following Severance Date. A Period of Severance of less than one year shall be included in a Period of Service for all purposes. 7 (z) "Period of Severance" shall mean the period of time commencing on an Employee's Severance Date and ending on the date on which the Employee first again is credited with an Hour of Service, exclusive of periods during which an Employee is on an unpaid leave pursuant to the Family and Medical Leave Act of 1993. (aa) "Plan" shall mean the Airgas, Inc. 401(k) Plan as amended and restated as set forth herein effective January 1, 1997, and the same as may be amended from time to time. (ab) "Plan Year" shall mean the consecutive twelve- month period commencing on January 1st and ending on December 31st. (ac) "Profit Sharing Account" shall mean the portion of the Member's Accrued Benefit derived from contributions made under subsection 4(h) hereof and the corresponding provisions of the Plan as heretofore effective, adjusted as provided in subsection 4(i). (ad) "Related Entity" shall mean (i) all corporations which are members with a Participating Company in a controlled group of corporations within the meaning of section 1563(a) of the Code, determined without regard to sections 1563(a)(4) and (e)(3)(C) of the Code, (ii) all trades or businesses (whether or not incorporated) which are under common control with a Participating Company as determined by regulations promulgated under section 414(c) of the Code, (iii) all trades or businesses which are members of an affiliated service group with a Participating Company within the meaning of section 414(m) of the Code and (iv) any entity required to be aggregated with a Participating Company under regulations prescribed under section 414(o) of the Code (to the extent provided in such regulations); provided, however, for purposes of Section 5, the definition shall be modified to substitute the phrase "more than 50%" for the phrase "at least 80%" each place it appears in section 1563(a)(1) of the Code. Furthermore, for purposes of crediting Hours of Service for eligibility to participate, employment 8 as a "leased employee," within the meaning of section 414(n) of the Code, of a Participating Company or a Related Entity shall be treated as employment for a Participating Company or a Related Entity. For purposes of subsections 3(a) and 3(b) governing Hours of Service for purposes of eligibility to participate, an entity the stock or assets of which a Participating Company acquires shall be deemed a "Related Entity" for periods prior to such acquisition for persons who become Employees incident to such acquisition. In any other case, an entity is a "Related Entity" only during those periods in which it is included in a category described in this subsection. (ae) "Restatement Effective Date" shall mean January 1, 1997 (af) "Rollover Account" shall mean the portion of the Member's Accrued Benefit derived from contributions made under subsection 4(j)(i) hereof and the corresponding provisions of the Plan as heretofore effective, adjusted as provided in subsection 4(j)(ii). (ag) "Salary Reduction Account" shall mean the portion of the Member's Accrued Benefit derived from contributions made under subsection 4(a) hereof and the corresponding provisions of the Plan as heretofore effective, adjusted as provided in subsection 4(c). (ah) "Service" shall mean the sum of an Employee's Periods of Service. (ai) "Severance Date" shall mean the earliest of the date an Employee quits, is discharged (or severed, if later), retires, dies or otherwise has an absence which causes him to cease to be an Employee. An Employee who terminates employment to enter the military service of the United States shall not suffer a "Severance Date" as of such date or any future date unless and until permitted by section 414(u) of the Code and shall receive credit for Hours of Service and Service for his entire period of absence. However, if the Employee does not return to employment with a Participating Company or Related Entity within the time prescribed by law, then the date he terminated employment shall be his Severance Date. 9 (aj) "Supplemental Participating Company Contribution" means an amount contributed by the Participating Companies to the Fund pursuant to Section 4 of the Plan. (ak) "Trust Agreement" shall mean the agreement or agreements between the Company and a Trustee under which all or a portion of the Fund is held. (al) "Trustee" shall mean such person, persons or corporate fiduciary designated pursuant to subsection 6(a) to manage and control all or a portion of the Fund pursuant to the terms of the Plan and a Trust Agreement. (am) "Valuation Date" shall mean any business day the New York Stock Exchange is open for trading and such other dates as the Committee may specify from time to time. With respect to a Member's Accrued Benefit, the business day of initial investment of new contributions or liquidation of a Member's investment credited to an Investment Category for reinvestment or distribution shall be the "Valuation Date" for purposes of determining the amount of investment, reinvestment or distribution. (an) "Year of Service for Eligibility" shall mean a consecutive twelve-month measuring period specified in the Plan in which an Employee is credited with 1,000 Hours of Service or more. 10 2. ADMINISTRATION OF THE PLAN (a) ERISA Reporting and Disclosure by Administrator. The Company, through its Board of Directors, may designate a Plan Administrator. If no individual or group of individuals is designated or serving, the Company shall be the Administrator. The Administrator shall file all reports and distribute to Members and beneficiaries reports and other information required under ERISA or the Code and perform such duties as are assigned to the Administrator by the Plan or delegated to the Administrator by the Committee. (b) Committee. The Company, through its Board of Directors, shall designate a Committee which shall have the authority to control and manage the operation and administration of the Plan. If the Committee consists of more than two members, it shall act by majority vote. The Committee may (i) delegate all or a portion of the responsibilities of controlling and managing the operation and administration of the Plan to one or more persons, including the Administrator, and (ii) appoint agents, investment advisers, counsel, physicians or other representatives to render advice with regard to any of its responsibilities under the Plan. The Board of Directors may remove, with or without cause, the Committee or any Committee member. The Committee may remove, with or without cause, any delegate or adviser designated by it. (c) Multiple Capacities. Any person may serve in more than one fiduciary capacity. (d) Committee Powers. The responsibility to control and manage the operation and administration of the Plan shall include, but shall not be limited to, the performance of the following acts: (i) the filing of all reports required of the Plan, other than those which are the responsibility of the Administrator; (ii)the distribution to Members and beneficiaries of all reports 11 and other information required of the Plan, other than reports and information required to be distributed by the Administrator; (iii)the keeping of complete records of the administration of the Plan; (iv) the promulgation of rules and regulations for administration of the Plan and establishment of a procedure to determine the qualified status of a domestic relations order; and (v) the interpretation of the Plan, including the determination of any questions of fact arising under the Plan and the making of all decisions required by the Plan. The Committee's interpretation of the Plan and any actions and decisions taken in good faith by the Committee based on its interpretation shall be final and conclusive. The Committee may correct any defect, or supply any omission, or reconcile any inconsistency in the Plan in such manner and to such extent as shall be expedient to carry the Plan into effect and shall be the sole judge of such expediency. (e) Allocation of Fiduciary Responsibility. The Board of Directors, the Administrator, the Committee, each Trustee and each Investment Manager (if any) possess certain specified powers, duties, responsibilities and obligations under the Plan's governing instruments. It is intended under this Plan that each Fiduciary be responsible solely for the proper exercise of its own functions and that each not be responsible for any act or failure to act of another, unless otherwise responsible as a breach of its fiduciary duty or for breach of duty by another Fiduciary under ERISA's rules of co-fiduciary responsibility. In general: 12 (i) the Board of Directors is responsible for appointing and removing the Administrator, the Committee, each Trustee and each Investment Manager (if any); for amending or terminating the Plan, each Trust Agreement, and each asset management agreement (if any); and transferring the responsibility for any function from or to a particular Fiduciary; (ii) the Board of Directors may delegate any power or duty it has under the Plan or a Trust Agreement, including, but not limited to, amending the Plan or a Trust Agreement, to a committee of the Board of Directors, to any officer or Employee of the Company or a Related Entity or to any other person or entity, in which case such delegee and not the Board of Directors, shall be responsible for exercise of the delegated functions; (iii)the Committee is the Named Fiduciary (within the meaning of ERISA) for the Plan and is responsible for administering the Plan, for exercising the powers granted to it under subsections 2(b) and 2(d) and for providing a procedure for carrying out a funding policy and method consistent with the objectives of the Plan and the requirements of Title I of ERISA including, but not limited to, selecting or establishing Investment Categories for the Plan as provided for in Section 6, unless the Board of Directors establishes a funding policy or delegates the responsibility to establish a funding policy to another Fiduciary; (iv) the Administrator is responsible for discharging the statutory duties of a plan administrator under ERISA and the Code and such duties that the Committee delegates to the Administrator or the Plan specifically assigns to the Administrator; and (v) each Trustee and each Investment Manager (if any) is responsible for the management and control of the portion of the Fund over which it has 13 control to the extent provided in its Trust Agreement or asset management agreement, respectively. (f) Claims. If, pursuant to the rules, regulations or other interpretations of the Plan, the Committee denies the claim of a Member or beneficiary for benefits under the Plan, the Committee shall provide written notice, within 90 days after receipt of the claim, setting forth in a manner calculated to be understood by the claimant: (i) the specific reasons for such denial; (ii) the specific reference to the Plan provisions on which the denial is based; (iii)a description of any additional material or information necessary to perfect the claim and an explanation of why such material or information is needed; and (iv) an explanation of the Plan's claim review procedure and the time limitations of this subsection applicable thereto. A Member or beneficiary whose claim for benefits has been denied may request review by the Committee of the denied claim by notifying the Committee in writing within 60 days after receipt of the notification of claim denial. As part of said review procedure, the claimant or his authorized representative may review pertinent documents and submit issues and comments to the Committee in writing. The Committee shall render its decision to the claimant in a manner calculated to be understood by the claimant not later than 60 days after receipt of the request for review, unless special circumstances require an extension of time, in which case decision shall be rendered as soon after the sixty-day period as possible, but not later than 120 days after receipt of the request for review. The decision on review shall state the specific reasons therefor and the specific Plan references on which it is based. 14 (g) Fiduciary Compensation. The Committee or a Committee member, delegate, or adviser who already receives full-time pay from a Participating Company or a Related Entity shall serve without compensation from the Plan for his services as such, but he shall be reimbursed pursuant to subsection 2(h) for any reasonable expenses incurred by him in the administration of the Plan. The Committee or a Committee member, delegate, or adviser who is not already receiving full- time pay from a Participating Company may be paid such reasonable compensation as shall be agreed upon. (h) Plan Expenses. All expenses of administration of the Plan shall be paid out of the Fund unless paid by the Company or a Member. According to uniform rules, the Committee may charge expenses to a particular Investment Category, a particular Member's Accrued Benefit or a particular Member if the Committee determines that such allocation of expense or charge is desirable for the equitable administration of the Plan. (i) Fiduciary Insurance. If the Committee so directs, the Plan shall purchase insurance to cover the Plan from liability or loss occurring by reason of the act or omission of a Fiduciary provided such insurance permits recourse by the insurer against the Fiduciary in the case of a breach of a fiduciary obligation by such Fiduciary. (j) Indemnification. The Company shall indemnify and hold harmless to the maximum extent permitted by its by-laws each Fiduciary who is an Employee or who is an officer or director of a Participating Company or any Related Entity from any claim, damage, loss or expense, including litigation expenses and attorneys' fees, resulting from such person's service as a Fiduciary of the Plan provided the claim, damage, loss or expense does not result from the Fiduciary's gross negligence or intentional misconduct. 15 3. PARTICIPATION IN THE PLAN (a) Initial Eligibility (i) Salary Reduction Contributions. Each and every Employee of a Participating Company who is not excluded under subsection 3(a)(iv) shall be eligible to make contributions under subsection 4(a) as of the first Entry Date after the date the Employee first is credited with an Hour of Service. (ii) Matching Contributions. Each and every Employee of a Participating Company not excluded under subsection 3(a)(iv) shall be eligible and shall qualify to be allocated matching contributions for Payroll Periods commencing after the date such Employee is credited with one Year of Service for Eligibility. (iii) Profit Sharing Contributions. Each and every Employee of a Participating Company not excluded under subsection 3(a)(iv) shall be eligible to be allocated profit sharing contributions, if any, made by the Participating Company which employs him for a Plan Year ending after the date such Employee is credited with one Year of Service for Eligibility. (iv) Excluded Employees. Notwithstanding the foregoing provisions of this subsection, (A)no Employee whose terms and conditions of employment are determined by a collective bargaining agreement between employee representatives and a Participating Company shall be eligible to participate unless such collective bargaining agreement provides to the contrary, in which case such Employee shall be eligible to participate only to the extent provided in such agreement upon compliance with such provisions for eligibility and participation as such agreement shall provide; except that no Employee who has selected, or in the future selects, a union shall become ineligible 16 during the period between his selection of the union and the execution of the first collective bargaining agreement which covers him; (B)no Employee who is a summer student, co- operative student or student intern hired on an "as needed" or temporary basis shall be eligible to participate; (C)no Employee who is hired as a temporary or occasional Employee or in a temporary position shall be eligible to participate; (D) no Employee who is a non-resident alien and who receives no earned income (within the meaning of section 911(d)(2) of the Code) from a Participating Company which constitutes income from sources within the United States (within the meaning of section 861(a)(3) of the Code) shall be eligible to participate; (E)no person who is an Employee by reason of the second sentence of subsection 1(j) shall be eligible to participate; and (F)no person a Participating Company determines is not its Employee for purposes of federal income tax withholding shall be eligible to participate, regardless of whether an administrative agency or court rules that such person is a Participating Company's employee for any purpose. (b) Measuring Service. For purposes of measuring service to satisfy the eligibility provisions of subsections 3(a)(ii) and (iii), the Year of Service for Eligibility computation period shall begin with the date on which the Employee first is credited with an Hour of Service; provided, however, if an Employee is credited with less than 1,000 Hours of Service in such measuring period, then subsequent measuring periods shall begin with the January 1st next following the Employee's date of hire and continue on a Plan Year basis thereafter. 17 (c) Termination and Requalification. An Employee who has satisfied an applicable service requirement of subsection 3(a) and who subsequently becomes ineligible for any reason shall requalify for participation on the date on which he is next credited with an Hour of Service in an eligible job classification under subsection 3(a); provided, however, if the Employee has a Break in Service with respect to a Plan Year, he shall not be eligible under subsection 3(a)(ii) or (iii) for matching contributions or profit sharing contributions until he again satisfies the service requirement applicable thereto. (d) Special Rule for Rollovers. An Employee of a Participating Company who will be eligible to participate in the Plan after satisfying the service requirement of subsection 3(a)(i) may make a contribution to the Plan under subsection 4(i) on or after the date he first is credited with an Hour of Service. An Employee who makes a contribution under subsection 4(i) shall become a Member on the date of his contribution; however, such individual shall not be considered to be a Member for purposes of the remainder of Section 4 until he satisfies the applicable service requirements of subsection 3(a). (e) Termination of Membership. An Employee who becomes a Member shall remain a Member as long as he has an Accrued Benefit held under the Plan. 18 4. MEMBER AND PARTICIPATING COMPANY CONTRIBUTIONS (a) Salary Reduction Contributions. Each Employee who becomes eligible to participate under subsection 3(a)(i) may contribute any even multiple of 1.0% of his Compensation, but not more than 15% (or such other percentage as may be applicable to a class of Members covered by a specific collective bargaining agreement) of his Compensation, for a Payroll Period, as he shall elect in a manner prescribed by the Committee. The initial election to contribute may be effective as of the first day of any calendar month. Such contribution shall be accomplished through direct reduction of Compensation in each Payroll Period that the election is in effect. For purposes of the Code, such contribution shall be deemed to be made by the Member's employer. A Member may elect to increase, reduce or terminate his contributions from time to time. All such elections shall be made in a manner and shall become effective on the date prescribed therefor by the Committee. Contributions made by Participating Companies under this subsection shall be made at such times as the Company determines and shall be allocated to the Salary Reduction Accounts of the Members from whose Compensation the contributions were withheld in an amount equal to the amount withheld. (b) Salary Reduction Contribution Limitations. Contributions under subsection 4(a) shall be limited as provided below: (i) Exclusion Limit. The maximum amount of contribution which any Member may make in any calendar year under subsection 4(a) is $9,500 (or such increased annual amount resulting from a cost of living adjustment pursuant to sections 402(g)(5) and 415(d)(1) of the Code), reduced by the amount of elective deferrals by such Member under all other plans, contracts or arrangements of any Participating Company or Related Entity. If the contribution under subsection 4(a) for a Member for any calendar year exceeds $9,500 (or such increased annual amount resulting from an adjustment described above), the Committee shall direct the Trustee to distribute the excess amount (plus any income 19 and minus any loss allocable to such amount) to the Member not later than the April 15th following the close of such calendar year. If (A) a Member participates in another plan which includes a qualified cash or deferred arrangement, (B) such Member contributes in the aggregate more than the exclusion limit under this Plan and the corresponding provisions of the other plan and (C) the Member notifies the Committee not later than the March 1st following the close of such calendar year of the portion of the excess the Member has allocated to this Plan, then the Committee may direct the Trustee to distribute to the Member not later than April 15th following the close of such calendar year the excess amount (plus any income and minus any loss allocable to such amount) which the Member allocated to this Plan. A Member shall be deemed to have given the notification described in (C) above if the excess results from contributions solely to this Plan or plans sponsored by Related Entities. (ii) Discrimination Test Limits. The Committee may limit the maximum amount of contribution for Members who are "highly compensated employees" (as defined below) to the extent it determines that such limitation is necessary to keep the Plan in compliance with section 401(a)(4) or section 401(k)(3) of the Code. Any limitation shall be effective for all Payroll Periods following the announcement of the limitation. For purposes of Section 4 of the Plan, the term "highly compensated employee" for a Plan Year shall mean an Employee who is described in either or both of the following groups: (A)an Employee who was a 5% owner, as defined in section 416(i)(1) of the Code, at any time during the current Plan Year or last preceding Plan Year; or (B)an Employee who receives "compensation" (as defined below) in excess of $80,000 (or an increased amount resulting from a cost of living 20 adjustment) during the preceding Plan Year and was in the "top-paid group" (as defined below) for the preceding Plan Year. For purposes hereof, the following rules and definitions shall apply: (C)The "top-paid" group consists of the top 20% of Employees ranked on the basis of "compensation" received during the year. For purposes of determining the number of Employees in the "top-paid" group, Employees described in section 414(q)(5) of the Code and Q & A 9(b) of section 1.414(q)-1T of the regulations thereunder are excluded. (D)"Compensation" is compensation within the meaning of section 415(c)(3) of the Code and for the 1997 Plan Year also includes elective or salary reduction contributions to a cafeteria plan, cash or deferred arrangement or tax-sheltered annuity under sections 125, 402(e)(3), 402(h)(3) and 403(b) of the Code. (E)Employers aggregated under section 414(b), (c), (m), or (o) of the Code are treated as a single employer. (c) Salary Reduction Account. Each Member's salary reduction contributions, as adjusted for investment gain or loss and income or expense, constitute such Member's Salary Reduction Account. A Member shall at all times have a nonforfeitable interest in the portion of his Accrued Benefit derived from his Salary Reduction Account. (d) Compliance with Salary Reduction Contributions Discrimination Tests (i) Rule. In no event shall the "average deferral percentage" (as defined below) for Members who are "highly compensated employees" in a testing group for any Plan Year bear a relationship to the "average deferral percentage" for Members who are not "highly compensated employees" in such testing group which does not satisfy either subsection 4(d)(i)(A) or (B) below. The test shall be separately performed for each testing group. Each 21 group of Members who participate in the Plan pursuant to a collective bargaining agreement shall be a separate testing group and all other Members shall be a separate testing group. (A)The requirement shall be satisfied for a Plan Year if the "average deferral percentage" for the Plan Year for the group of Members who are "highly compensated employees" for the Plan Year is not more than the "average deferral percentage" for the preceding Plan Year of all Members who are not "highly compensated employees" for the preceding Plan Year multiplied by 1.25. (B)The requirement shall be satisfied for a Plan Year if (1) the excess of the "average deferral percentage" for the Plan Year for the Members who are "highly compensated employees" for the Plan Year over the "average deferral percentage" for the preceding Plan Year of all Members who are not "highly compensated employees" for the preceding Plan Year is not more than two percentage points (or such lower amount as may be required by applicable regulations under the Code) and (2) the "average deferral percentage" for the Plan Year for Members who are "highly compensated employees" for the Plan Year is not more than the "average deferral percentage" for the preceding Plan Year of all Members who are not "highly compensated employees" for the preceding Plan Year multiplied by two (or such lower multiple as may be required by applicable regulations under the Code). (C) The Plan may test using the "average deferral percentage" for non-highly compensated employees for the current Plan Year rather than the preceding Plan Year if the Administrator so elects. The Administrator may only revoke such an election in accordance with rules promulgated by the Secretary of the Treasury. For the 1997 Plan Year, the Administrator elected to use the percentage for the current (1997) Plan Year rather than the percentage for the preceding Plan Year. For the 1998 Plan Year, the Administrator elected to use the percentage for the preceding Plan Year. (ii)Qualified Nonelective Contributions or Refunds. 22 If the relationship of the "average deferral percentages" does not satisfy subsection 4(d)(i) for any Plan Year, the Participating Companies may make "qualified nonelective contributions" (within the meaning of the regulations promulgated under section 401(k) of the Code) in an equal dollar amount for all or a class of eligible "nonhighly compensated employees". Such contributions shall be treated for all purposes of the Plan as contributions made by a Member under subsection 4(a) for the Plan Year for which they are made and shall be a part of the Member's Salary Reduction Account, except that such contributions may not be distributed under subsection 10(d)(ii). If the Participating Companies do not make such contributions or such contributions do not result in satisfaction of subsection 4(d)(i), then the Committee shall direct the Trustee to distribute the "excess contribution" (as defined below) for such Plan Year (plus any income and minus any loss allocable thereto for the Plan Year in which the contributions were made as determined under the Plan's method for allocating income and loss) within twelve months after the close of the Plan Year to the "highly compensated employees" on the basis of the amount of contributions attributable to each until the "excess contribution" is eliminated. The portion of the "excess contribution" attributable to a "highly compensated employee" is determined by reducing the dollar amount of contributions paid over to the Fund on behalf of "highly compensated employees", starting with the highest dollar amount of such contributions, until the "excess contribution" is eliminated. The amount of "excess contributions" to be distributed shall be reduced by excess deferrals previously distributed for the taxable year ending in the same Plan Year and excess deferrals to be distributed for a taxable year shall be reduced by excess contributions previously distributed for the Plan Year beginning in such taxable year. Any refund made to a Member in accordance with this subsection shall be withdrawn from his Salary Reduction Account. (iii)Additional Definitions. For purposes of this subsection 4(d), the term "Member" shall mean each Employee eligible to make contributions under subsection 23 4(a) at any time during a Plan Year. The "average deferral percentage" for a specific group of Members for a Plan Year shall be the average of the "actual deferral percentage" for each Member in the group for such Plan Year. The "actual deferral percentage" for a particular Member for a Plan Year shall be the ratio of the amount of contributions made under subsection 4(a) no later than twelve months after the close of the relevant Plan Year for such Member out of amounts that would have been received by him in the Plan Year but for his election under subsection 4(a) and which are allocated to the Member on or before the last day of the Plan Year without regard to participation or performance of services thereafter to the Member's "compensation" for such Plan Year. For this purpose, "compensation" means compensation for service performed for a Participating Company which is currently includable in gross income or which is excludable from gross income pursuant to an election under a qualified cash or deferred arrangement under section 401(k) of the Code or a cafeteria plan under section 125 of the Code; provided, however, the Company may elect to limit compensation for all Members to amounts paid during the portion of the Plan Year during which the Member was eligible to participate in the Plan or use any definition of compensation permissible under section 414(s) of the Code and the regulations thereunder. The "excess contribution" for any Plan Year is the excess of the aggregate amount of contributions paid over to the Fund pursuant to subsection 4(a) on behalf of "highly compensated employees" for such Plan Year over the maximum amount of such contributions permitted for "highly compensated employees" under subsection 4(d)(i). (iv) Aggregation of Contributions. The "actual deferral percentage" for any Member who is a "highly compensated employee" for the Plan Year and who is eligible to make elective contributions excludable from income under sections 401(k) and 402(a)(8) of the Code to any plan maintained by a Participating Company or a Related Entity shall be determined as if all such contributions were made under this Plan. (v) Aggregation of Plans. In the event that this Plan satisfies the 24 requirements of section 401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of section 401(a)(4) or 410(b) of the Code only if aggregated with this Plan, then subsection 4(d)(i) shall be applied by determining the "actual deferral percentages" of Members as if all such plans were a single plan. (vi) Testing Alternatives. To the extent permitted by the Code, the Plan may treat contributions made under subsection 4(a) as contributions made under subsection 4(e), and vice versa, to facilitate satisfaction of any applicable nondiscrimination requirement. (e) Participating Company Matching Contributions (i) Amount. Each Participating Company shall contribute with respect to each Member employed by it who is eligible under subsection 3(a)(ii) with respect to a Plan Year an amount set by the Board of Directors and communicated to Members prior to the first day of such Plan Year. Pending such action, the amount shall be equal to the lesser of (A) 50% of the Member's salary reduction contribution for each Payroll Period commencing after he has completed a Year of Service for Eligibility or (B) 2% of the Member's Compensation for such Payroll Period. No Member covered by a collective bargaining agreement shall be eligible for a contribution under this subsection unless the collective bargaining agreement covering him so provides, in which case the rate and amount of matching contributions shall be as provided in the collective bargaining agreement. (ii) Payment Date. The Participating Companies shall pay over to the Fund all contributions required under this subsection no later than the due date, including extensions, for filing the Participating Companies' federal income tax returns for the taxable year ended coincident with or immediately following the end of the Plan Year with respect to which such contributions are to be made. (f) Matching Account. The Participating Company contributions allocated to a Member under subsection 4(e) and the corresponding provisions of the Plan as heretofore effective, all as adjusted for the investment gain or loss and income or expense, constitute 25 the Member's Matching Account. A Member shall at all times have a nonforfeitable interest in the portion of his Accrued Benefit derived from his Matching Account. (g) Compliance with Participating Company Matching Contributions Discrimination Tests (i) Rule. In no event shall the "average contribution percentage" (as defined below) for Members who are "highly compensated employees" for any Plan Year bear a relationship to the "average contribution percentage" for Members who are not "highly compensated employees" which does not satisfy either subsection 4(g)(i)(A) or (B) below. The requirement of this subsection shall not apply to Members who participate in this Plan pursuant to a collective bargaining agreement, and any such Members shall be excluded from the testing group. (A)The requirement shall be satisfied for a Plan Year if the "average contribution percentage" for the Plan Year for the group of Members who are "highly compensated employees" for the Plan Year is not more than the "average actual contribution percentage" for the preceding Plan Year of all Members who are not "highly compensated employees" for the preceding Plan Year multiplied by 1.25. (B)The requirement shall be satisfied for a Plan Year if (1) the excess of the "average contribution percentage" for the Plan Year for the Members who are "highly compensated employees" for the Plan Year over the "average contribution percentage" of all Members who are not "highly compensated employees" for the preceding Plan Year is not more than two percentage points (or such lower amount as may be required by applicable regulations under the Code) and (2) the "average contribution percentage" for the Plan Year for Members who are "highly compensated employees" for the Plan Year is not more than the "average contribution percentage" for the preceding Plan Year of all Members who are not 26 "highly compensated employees" for the preceding Plan Year multiplied by two (or such lower multiple as may be required by applicable regulations under the Code). (C)The Plan may test using the average contribution percentage for nonhighly compensated employees for the current Plan Year rather than the preceding Plan Year if the Administrator so elects. The Administrator may only revoke such an election in accordance with rules promulgated by the Secretary of the Treasury. For the 1997 Plan Year, the Administrator elected to use the percentage for the current (1997) Plan Year rather than the percentage for the preceding Plan Year. For the 1998 Plan Year, the Administrator elected to use the percentage for the preceding Plan Year. (ii) Refund. If the relationship of the "average contribution percentages" does not satisfy subsection 4(g)(i) for any Plan Year, then the Committee shall direct the Trustee to distribute the "excess aggregate contribution" (as defined below) for such Plan Year (plus any income and minus any loss allocable thereto for the Plan Year in which the contributions were made as determined under the Plan's method for allocating income and loss) within twelve months after the close of the Plan Year to the "highly compensated employees" on the basis of the amount of contributions attributable to each until the "excess aggregate contribution" is eliminated. The portion of the "excess aggregate contribution" attributable to a "highly compensated employee" is determined by reducing the dollar amount of contributions paid over to the Fund on behalf of the "highly compensated employees", starting with the highest dollar amount of such contributions, until the "excess aggregate contribution" is eliminated. Any refund made to a Member in accordance with this subsection shall be drawn from his Matching Account. (iii)Additional Definitions. For purposes of this subsection 4(g), the term "Member" shall mean each Employee not covered by a collective bargaining agreement eligible to receive a matching contribution under subsection 4(e) at any time during a Plan Year. 27 The "average contribution percentage" for a specific group of Members for a Plan Year shall be the average of the "actual contribution percentage" for each Member in the group for such Plan Year. The "actual contribution percentage" for a particular Member for a Plan Year shall be the ratio of the sum of (A) the amount of contributions made under subsection 4(e) no later than twelve months after the close of the Plan Year for such Member which are allocated to the Member on or before the last day of the Plan Year without regard to participation or performance of services thereafter, (B) elective contributions of a nonhighly compensated employee which are permitted to be treated as matching contributions under regulations promulgated under section 401(m) of the Code and (C) after-tax employee contributions which are Annual Additions to the Member's "compensation" for such Plan Year. For this purpose, "compensation" means compensation for service performed for a Participating Company which is currently includable in gross income or which is excludable from gross income pursuant to an election under a qualified cash or deferred arrangement under section 401(k) of the Code or a cafeteria plan under section 125 of the Code; provided, however, the Company may elect to limit compensation for all Members to amounts paid during the portion of the Plan Year during which the Member was eligible to participate in the Plan or use any definition of compensation permissible under section 414(s) of the Code and the regulations thereunder. The "excess aggregate contribution" for any Plan Year is the excess of the aggregate amount of matching contributions paid over to the Fund pursuant to subsection 4(e) on behalf of "highly compensated employees" for such Plan Year over the maximum amount of such matching contributions permitted for "highly compensated employees" under subsection 4(g)(i). (iv) Aggregation of Contributions. The "actual contribution percentage" for any Member who is a "highly compensated employee" for the Plan Year and who is eligible to make after-tax contributions to any plan subject to section 415 of the Code maintained by a Participating Company or a Related Entity or to have employer matching 28 contributions within the meaning of section 401(m)(4)(A) of the Code allocated to his account under two or more plans described in section 401(a) of the Code that are maintained by a Participating Company or a Related Entity shall be determined as if all such contributions were made under this Plan and each other plan. (v) Aggregation of Plans. In the event that this Plan satisfies the requirements of section 401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of section 401(a)(4) or 410(b) of the Code only if aggregated with this Plan, then subsection 4(g)(i) shall be applied by determining the "actual contribution percentages" of Members as if all such plans were a single plan. (vi) Aggregate Limit -- Multiple Use of Alternative Limitation. The provisions of section 1.401(m)-2(b) of the regulations under section 401(m) of the Code are hereby incorporated by reference. If the limitation thereof is exceeded, it shall be corrected through reduction of the "actual contribution percentage" in the manner specified in subsection 4(g)(iii) with respect to "highly compensated employees" eligible under both subsection 4(a) and subsection 4(e) of the Plan. (vii)Testing Alternatives. To the extent permitted by the Code, the Plan may treat contributions made under subsection 4(e) as contributions made under subsection 4(a), and vice versa, to facilitate satisfaction of any applicable nondiscrimination requirement. (h) Profit Sharing Contributions (i) Amount. For each Plan Year each Participating Company may make contributions to the Fund in such amounts as the Company, in its absolute discretion, shall determine; provided, however, the aggregate contribution for a Plan Year shall not exceed any applicable limitation of Section 4 or 5. The Company shall either (A) designate the 29 payment in writing to the Trustee as a payment on account of its taxable year which ends coincident with or next following such Plan Year or (B) claim such payment as a deduction on its federal income tax return for such taxable year. The Participating Companies shall pay the contribution, if any, for a Plan Year on or before the date (including any extensions thereof) on which they are required to file their federal income tax returns for the taxable year which ends coincident with or next following such Plan Year. (ii) Allocation of Contributions. As of the last day of each Plan Year, the Committee shall allocate to the Profit Sharing Account of each eligible Member a portion of the amount, if any, contributed to the Fund in respect of such Plan Year by the Participating Company employing him on the last day of such Plan Year. Eligible Members shall be limited to Employees who (A) have satisfied the eligibility requirements of subsection 3(a)(iii), (B) are employed by a Participating Company on the last day of the Plan Year and (C) are not excluded under subsection 3(a)(iv). The Committee shall allocate the amount among eligible Members employed by a contributing Participating Company on the last day of the Plan Year in the ratio that each such Member's Compensation for the Plan Year bears to the Compensation of all eligible Members for such Plan Year. Notwithstanding the foregoing, for the 1997 Plan Year the contribution of Sierra Airgas shall be allocated to Members who were employed by it on both the first and last day of the Plan Year and who were credited with 1,000 Hours of Service in such Plan Year and for the 1998 Plan Year and subsequent Plan Years, the contribution of Airgas Northern California and Nevada shall be allocated to Members who were (A) employed on the first day of the Plan Year either by it or an entity merged or consolidated with it during the Plan Year, (B) employed on the last day of the Plan Year by it and (C) credited with 1,000 Hours of Service during the Plan Year. Sixty percent of the contribution made by Sierra Airgas for 1997 and by Airgas Northern California and Nevada thereafter, shall be allocated in proportion to Compensation, as described above, and 40% shall be allocated in 30 proportion to years of service where a Member is credited with one year for each calendar year, including years prior to the date the Plan became effective, in which he is credited with 1,000 Hours of Service. (iii)Collective Bargaining Units. Notwithstanding subsections 4(h)(i) and (ii) above, each Participating Company shall make any formula profit sharing contribution required by a collective bargaining agreement in accordance with the terms thereof. Such contribution shall be allocated among Members eligible under the terms of the applicable collective bargaining agreement as provided therein. (i) Profit Sharing Account. The Participating Company contributions allocated to a Member under subsection 4(h) and the corresponding provisions of the Plan as heretofore effective, all as adjusted for investment gain or loss and income or expense, constitute the Member's Profit Sharing Account. A Member shall at all times have a nonforfeitable interest in the portion of his Accrued Benefit derived from his Profit Sharing Account. (j) Rollovers 31 (i) Contributions. Each Employee eligible under subsection 3(e) and each Member actively employed by a Participating Company may contribute to the Fund an amount constituting an "eligible rollover distribution" from a "qualified trust," both within the meaning of section 402(c)(4) of the Code, from a previous employer's retirement plan (or an individual retirement account consisting solely of an "eligible rollover distribution" from a "qualified trust"). (ii) Rollover Account. Each Member's contributions under subsection 4(j)(i) and the corresponding provisions of the Plan as heretofore effective, all as adjusted for investment gain or loss and income or expense, constitute such Member's Rollover Account. A Member shall at all times have a nonforfeitable interest in the portion of his Accrued Benefit derived from his Rollover Account. (iii)Refunds. If an Employee makes a contribution under this subsection 4(j) which the Committee subsequently determines is not eligible for contribution under section 402 of the Code, then the Committee shall take such corrective action as the Committee determines is necessary or appropriate under applicable law. (k) Voluntary Contributions. A Member shall not be permitted to make contributions to the Plan other than as permitted under subsection 4(a) or 4(j). (l) Payroll Taxes. The Participating Companies shall withhold from the Compensation of the Members and remit to the appropriate government agencies such payroll taxes and income withholding as the Company determines is or may be necessary under applicable statutes or ordinances and the regulations and rulings thereunder. (m) Deductibility. All Participating Company contributions are expressly conditioned upon their deductibility for federal income tax purposes. Nondeductible contributions shall be abated and to the extent permitted by applicable law, refunded, starting with contributions made under subsection 4(h), then 4(e) and finally 4(a). 32 (n) Supplemental Participating Company Contributions. Notwithstanding any provision of the Plan to the contrary, the following provisions shall govern the treatment of Supplemental Participating Company Contributions. (i) Frequency and Amount. For each Plan Year, the Participating Companies shall make a Supplemental Participating Company Contribution in an amount fixed by resolution of the Board of Directors adopted on or before the last day of the Company's taxable year that ends within such Plan Year, to be allocated as provided in subsection 4(n)(ii). (ii) Allocation Method. The Supplemental Participating Company Contribution shall be allocated among each individual who is both an Employee and a Member on the first day of the Plan Year as follows: (A) The Supplemental Participating Company Contribution shall be allocated during the Plan Year as contributions under subsections 4(a) and 4(e) to the Salary Reduction Account and Matching Account of each eligible Member pursuant to the allocation provisions of subsections 4(a) and 4(e) of the Plan. (B) Second, the balance of the Supplemental Participating Company Contribution remaining after the allocation in subsection 4(n)(ii)(A), if any, shall be allocated as an additional matching contribution under subsection 4(e) on the last day of the Plan Year to the Matching Account of each eligible Member in the employ of a Participating Company on the last day of the Plan Year in the ratio that such Member's contributions under subsection 4(a) during the Plan Year bears to the contributions under subsection 4(a) of all such eligible Members during the Plan Year. (C) The Committee shall reduce the proportionate allocation under subsection 4(n)(ii)(B) to highly compensated employees (as defined in section 414(q) of the Code) to the extent necessary to comply with the provisions of section 401(a)(4) or 401(m) of the Code and the regulations thereunder. 33 (D) The Supplemental Participating Company Contribution allocated as matching contributions to the Member's Matching Account pursuant to subsection 4(n)(ii)(B) shall be treated in the same manner as matching contributions for all purposes of the Plan. Notwithstanding any other provision of the Plan to the contrary, any allocation to a Member's Salary Reduction Account shall be made under subsection 4(a) or this subsection, as appropriate, but not both subsections. Similarly, any allocation to a Member's Matching Account shall be made under subsection 4(e) or this subsection, as appropriate, but not both subsections. Notwithstanding any other provision of the Plan to the contrary, the amount allocated to a Member under (A) through (D) above may be subject to an adjustment as may be determined necessary to prevent contributions made by or on behalf of a Member for a Plan Year to exceed the maximum allowable under section 415 of the Code. (iii) Timing, Medium and Posting. The Participating Companies shall make the Supplemental Participating Company Contribution in cash, in one or more installments without interest, at any time during the Plan Year, and for purposes of deducting such Contribution, not later than the Company's federal tax return due date, including extensions, for its taxable year that ends within such Plan Year. The Supplemental Participating Company Contribution shall be held in a suspense account until allocated. Such suspense account shall not participate in the allocation of investment gains, losses, income and deductions of the Fund as a whole, but shall be invested separately at the direction of the Committee and all gains, losses, income and deductions attributable to such investment shall be applied to pay Plan fees and expenses and, thereafter, to reduce matching contributions. (iv) Deduction Limitation. In no event shall the Supplemental Participating Company Contribution, when aggregated with other contributions 34 for the Company's taxable year that ends within such Plan Year, exceed the amount deductible by the Participating Companies for federal income tax purposes for such taxable year. 35 5. MAXIMUM CONTRIBUTIONS AND BENEFITS (a) Defined Contribution Limitation. In the event that the amount allocable to a Member from contributions to the Fund with respect to any Plan Year would cause the Annual Additions allocated to any Member under this Plan plus the Annual Additions allocated to such Member under any other plan maintained by a Participating Company or a Related Entity to exceed for any Limitation Year the lesser of (i) $30,000 (or, if greater, one-fourth of the dollar limitation in effect under subsection 415(b)(1)(A) of the Code for such Limitation Year) or (ii) 25% of such Member's compensation (as defined in subsection 5(d)) for such Limitation Year, then such amount allocable to such Member shall be reduced by the amount of such excess to determine the actual amount of the contribution allocable to such Member with respect to such Plan Year. If the excess amount results from a reasonable error in determining the amount of contribution that may be made under subsection 4(a) without violating the limitation of this subsection, then the excess amount with earnings attributable thereto shall be refunded to the Member. If the excess amount results (i) from the allocation of forfeitures, (ii) a reasonable error in estimating a Member's annual compensation (as defined in subsection 5(d)) or (iii) under other limited facts and circumstances that the Commissioner of Internal Revenue finds justify the availability of the remedy next following, the excess amount with earnings attributable thereto allocable to a Member's Accrued Benefit shall be held in a suspense account and shall be used to reduce contributions allocable to the Member for the next Limitation Year (and succeeding Limitation Years as necessary) provided the Member is covered by the Plan as of the end of the Limitation Year. However, if the Member is not covered by the Plan as of the end of the Limitation Year, then the excess amount shall be held unallocated in a suspense account and shall be allocated, after adjustment for investment gains or losses, among all Employees eligible to make contributions under subsection 4(a) for such Limitation Year as an equal percentage of their Compensation for such Limitation Year. No excess amount may be distributed 36 to a Member or former Member. (b) Combined Limitation. In addition to the limitation of subsection 5(a), if a Participating Company or a Related Entity maintains or maintained a defined benefit plan and the amount required to be contributed to the Fund with respect to any Plan Year would cause the aggregate amount allocated to any Member under all defined contribution plans maintained by any Participating Company or Related Entity to exceed the maximum allocation as determined in subsection 5(c), then such amount required to be contributed with respect to such Member shall be reduced by the amount of such excess to determine the actual amount of the contribution with respect to such Member for such Plan Year. Notwithstanding the foregoing, if an excess amount is contributed with respect to any Member, then the excess allocation shall be reallocated or held in a suspense account in accordance with subsection 5(a). The limitation of this subsection shall be applied to the Member's benefit from the defined benefit plan prior to reduction of the Member's Annual Additions under this Plan. (c) Combined Limitation Computation. The maximum allocation is the amount of Annual Additions which may be allocated to a Member's benefit without permitting the sum of the defined benefit plan fraction (as hereinafter defined) and the defined contribution plan fraction (as hereinafter defined) from exceeding 1.0 for any Limitation Year. The defined benefit plan fraction applicable to a Member for any Limitation Year is a fraction, the numerator of which is the projected annual benefit of the Member under the plan determined as of the close of the Limitation Year and the denominator of which is the lesser of (i) the product of 1.25 multiplied by the maximum then permitted dollar amount of straight life annuity payable under the defined benefit plan maximum benefit provisions of the Code and (ii) the product of 1.4 multiplied by the maximum permitted amount of straight life annuity, based on the Member's 37 compensation, payable under the defined benefit plan maximum benefit provisions of the Code. For purposes of this subsection 5(c), a Member's projected annual benefit is equal to the annual benefit, expressed in the form of a straight life annuity, to which the Member would be entitled under the terms of the defined benefit plan based on the assumptions that (i) the Member will continue employment until reaching his normal retirement age under the plan (or current age, if later) at a rate of compensation equal to that for the Limitation Year under consideration and (ii) all other relevant factors used to determine benefits under the plan for the Limitation Year under consideration will remain constant for future Limitation Years. The defined contribution plan fraction applicable to a Member for any Limitation Year is a fraction, the numerator of which is the sum of the Annual Additions for all Limitation Years allocated to the Member as of the close of the Limitation Year and the denominator of which is the sum of the lesser, separately determined for each Limitation Year of the Member's employment with a Participating Company or Related Entity, of (i) the product of 1.25 multiplied by the maximum dollar amount of Annual Additions which could have been allocated to the Member under the Code for such Limitation Year and (ii) the product of 1.4 multiplied by the maximum amount, based on the Member's compensation, of Annual Additions which could have been allocated to the Member for such Limitation Year. (d) Definition of "Compensation" for Code Limitations. For purposes of the limitations on the allocation of Annual Additions to a Member and maximum benefits under a defined benefit plan as provided for in this Section 5, "compensation" for a Limitation Year shall mean the sum of amounts paid by a Participating Company or a Related Entity to the Member with respect to personal services rendered by the Member during the Limitation Year plus (i) amounts received by the Member (A) through accident or health insurance or under an accident or health plan maintained or contributed to by a Participating Company or a Related Entity and which are includable in the gross income of the Member, (B) through a plan 38 contributed to by a Participating Company or a Related Entity providing payments in lieu of wages on account of a Member's permanent and total disability, or (C) as a moving expense allowance paid by a Participating Company or a Related Entity and which are not deductible by the Member for federal income tax purposes; (ii) the value of a non-statutory stock option granted by a Participating Company or a Related Entity to the Member to the extent included in the Member's gross income for the taxable year in which it was granted; and (iii) the value of property transferred by a Participating Company or a Related Entity to the Member which is includable in the Member's gross income due to an election by the Member under section 83(b) of the Code. "Compensation" shall not include (i) contributions made by a Participating Company or a Related Entity to a deferred compensation plan to the extent that, before application of the limitations of section 415 of the Code to the plan, such contributions are not includable in the Member's gross income for the taxable year in which contributed, (ii) Participating Company or Related Entity contributions made on behalf of a Member to a simplified employee pension plan to the extent they are deductible by the Member under section 219(b) of the Code, (iii) distributions from a deferred compensation plan (except from an unfunded nonqualified plan when includable in gross income), (iv) amounts realized from the exercise of a nonqualified stock option, or when restricted stock (or property) held by a Member either becomes freely transferable or is no longer subject to a substantial risk of forfeiture, (v) amounts realized from the sale, exchange or other disposition of stock acquired under a qualified or incentive stock option, and (vi) other amounts which receive special tax benefits, such as premiums for group term life insurance (to the extent excludable from gross income) or Participating Company or Related Entity contributions towards the purchase of an annuity contract described in section 403(b) of the Code. Notwithstanding the foregoing, for Plan Years beginning after December 31, 1997, elective deferrals as defined in section 402(g)(3) of the Code and any amount which is contributed or deferred by a Participating Company at the election 39 of an Employee and which is not included in gross income of the Employee by reason of section 125 or 457 of the Code shall be included in "compensation". (e) Transition ProvisionTransition Provision. Notwithstanding the foregoing provisions of this Section 5, the benefit of a Member on January 1, 1987 under a defined benefit pension plan shall not be less than it was on December 31, 1986 by reason of the reduction in the dollar limit of section 415(b) of the Code which then became effective. However, amounts in excess of the limitation by reason of changes in the terms and conditions of a defined benefit pension plan made after May 5, 1986 shall not be preserved. 40 6. ADMINISTRATION OF FUNDS (a) Investment Control. Pursuant to the terms of the Trust Agreement, the management and control of the assets of the Plan shall be vested in the Trustee designated from time to time by the Company through its Board of Directors; provided, however, the Company through its Board of Directors may appoint one or more Investment Managers to manage, acquire or dispose of any assets of the Plan. The Committee shall instruct the Trustee or an Investment Manager to establish Investment Categories for selection by the Members and may at any time add to or delete from the Investment Categories. (b) Parent Company Stock. The Committee shall establish an Investment Category consisting solely of Parent Company Stock. All dividends or other distributions with respect thereto shall be applied to purchase additional Parent Company Stock. The Trustee may acquire Parent Company Stock from any source, including the public market, in private transactions, from the Company's treasury shares or from authorized but unissued shares. A Member may elect in accordance with subsection 6(c) that all or a portion of his Accrued Benefit be applied to purchase Parent Company Stock. A Member shall have the right to direct the Trustee to vote Parent Company Stock allocated to him in accordance with procedures established under the Trust Agreement. (c) Member Elections. In accordance with rules established by the Committee, each Member shall have the right to designate the Investment Category or Categories in which new contributions allocated to such Member and prior balances are invested. Any designation or change in designation of Investment Category shall be made in such manner and be subject to such frequency limitations as the Committee shall from time to time specify. The designation or change shall become effective as of the date specified by the Committee on or after which it is received. Any election of Investment Category by any Member shall, on its effective date, cancel any prior election. The right to elect Investment 41 Categories as set forth herein shall be the sole and exclusive investment power granted to Members. The Committee may limit the right of a Member (i) to increase or decrease his contributions to a particular Investment Category, (ii) to transfer amounts to or from a particular Investment Category or (iii) to transfer amounts between particular Investment Categories, if such limitation is required by the rules establishing an Investment Category or necessary to facilitate administration of the Plan. In accordance with subsection 2(d), the Committee may promulgate separate accounting and administrative rules to facilitate the establishment or maintenance of an Investment Category. (d) No Member Election. If a Member does not make a written election of Investment Category, the Committee shall direct that all amounts allocated to such Member be invested in the Investment Category which, in the opinion of the Committee, best protects principal. (e) Facilitation. Notwithstanding any instruction from any Member for investment of funds in an Investment Category as provided for herein, the Trustee shall have the right to hold uninvested or invested in a short-term investment fund any amounts intended for investment or reinvestment until such time as investment may be made in accordance with the Plan and the Trust Agreement. (f ) Valuations. The Fund and each Investment Category shall be valued at fair market value as of each Valuation Date. (g) Allocation of Gain or Loss. The Trustee may maintain accounts for each Member's investment in each Investment Category. If such separate accounts are not maintained, then any increase or decrease in the market value of each Investment Category of the Fund since the preceding Valuation Date, as computed pursuant to subsection 6(f), and all accrued income or expense and realized profit or loss shall be added to or deducted from the account of each Member in the ratio that each Member's account in such Investment Category at the prior 42 Valuation Date adjusted on a uniform basis to reflect contributions and withdrawals during the valuation period bears to the total of all such adjusted accounts in such Investment Category; provided, however, such allocation for the first period following the establishment of an Investment Category shall be made based on the ratio that the amount allocated to each Member in such Investment Category in the period bears to the total amount allocated to such Investment Category in the period. (h) Bookkeeping. The Committee shall direct that separate bookkeeping accounts be maintained to reflect each Member's Salary Reduction Account, elective contributions under subsection 4(a), Matching Account, Profit Sharing Account and Rollover Account. 43 7. BENEFICIARIES AND DEATH BENEFITS (a) Designation of Beneficiary. Each Member shall have the right to designate one or more beneficiaries and contingent beneficiaries to receive any benefit to which such Member may be entitled hereunder in the event of the death of the Member prior to the complete distribution of such benefit by filing a written designation with the Committee on the form prescribed by the Committee. Such Member may thereafter designate a different beneficiary at any time by filing a new written designation with the Committee. Notwithstanding the foregoing, if a married Member designates a beneficiary other than his spouse, such designation shall not be valid unless the spouse consents thereto in writing witnessed by a notary public or authorized representative of the Plan. A spouse's consent given in accordance with the Committee's rules shall be irrevocable by the spouse with respect to the beneficiary then designated by the Member unless the Member makes a new beneficiary designation. Any written designation shall become effective only upon its receipt by the Committee or its designee. If the beneficiary designated pursuant to this subsection dies on or before the commencement of distribution of benefits and the Member fails to make a new designation, then his beneficiary shall be determined pursuant to subsection 7(b). Notwithstanding the above, to the extent provided in a qualified domestic relations order (within the meaning of section 414(p) of the Code) the former spouse of the Member may be treated as the spouse of the Member for purposes of this subsection, and the current spouse will not be treated as the Member's spouse for such purposes. (b) Beneficiary Priority List. If (i) a Member omits or fails to designate a beneficiary, (ii) no designated beneficiary survives the Member or (iii) the Committee determines that the Member's beneficiary designation is invalid for any reason, then the death benefits shall be paid to the Member's surviving spouse, or if the Member is not survived by his spouse, then to the Member's estate. If the Member's designated 44 beneficiary dies after the Member but before distribution of benefits, then the death benefits shall be paid to the beneficiary's estate. (c) Proof of Death. The Committee may, as a condition precedent to making payment to any beneficiary, require that a death certificate, burial certificate or other evidence of death acceptable to it be furnished. (d) Divorce. If a Member designates his spouse as beneficiary and subsequent to making the designation a decree of divorce is issued which terminates the Member's marriage to such spouse, then the Member's prior beneficiary designation shall be invalid and, unless the Member makes a new designation, the Member shall be treated as having died without designating a beneficiary. 45 8. BENEFITS FOR MEMBERS The following are the only post-employment benefits provided by the Plan: (a) Retirement Benefit (i) Valuation. Each Member who retires on or after his Normal Retirement Date shall be entitled to a retirement benefit equal to 100% of the Member's Accrued Benefit on the Valuation Date as of which his Accrued Benefit is liquidated for distribution. Distribution will be made at the time and the manner provided by Section 9. (ii) Late Retirement. A Member who continues employment beyond his Normal Retirement Date shall continue to participate in the Plan. (b) Death Benefit. In the event of the death of a Member, 100% of the Member's Accrued Benefit on the Valuation Date after his death as of which his Accrued Benefit is liquidated for distribution shall constitute his death benefit and shall be distributed pursuant to Sections 7 and 9 (i) to his designated beneficiary or (ii) if no designation of beneficiary is then in effect, to the beneficiary determined pursuant to subsection 7(b). (c) Termination of Employment Benefit. In the event a Member terminates employment with all Participating Companies and all Related Entities for reasons other than those covered by subsections 8(a) and 8(b) above, the Member shall be entitled to receive a benefit equal to 100% of his Accrued Benefit on the Valuation Date on which his Accrued Benefit is liquidated for distribution. Distributions shall be made at the time and in the manner provided by Section 9. (d) Vesting. A Member shall have a nonforfeitable right to his Accrued Benefit at all times. 46 9. DISTRIBUTION OF BENEFITS (a) Commencement (i) Vested and Retirement Benefits. Generally, vested and retirement benefits shall be paid as soon after the Member's termination of employment as is administratively feasible, but not sooner than 30 days after the Member receives the notice required by section 1.411(a)-11(c) of the regulations under section 411(a)(11) of the Code unless the Member receives written notice that he has a right to a period of at least 30 days after receipt of the notice to consider whether or not to elect a distribution and affirmatively elects after receipt of the notice to accept a distribution rather than elect the rollover provided for under subsection 9(g). In addition, if the Member's nonforfeitable Accrued Benefit exceeds $3,500, distribution of benefits shall not begin unless the Member consents to such distribution in writing within the 90-day period ending on the date on which the notice required under section 411(a)(11) of the Code is given. If the Member does not consent to the distribution, his Accrued Benefit shall be retained in the Fund. Distribution shall commence as soon as administratively feasible after the Member's request for distribution or, if earlier, the date on which the Member is required to receive distribution under subsection 9(a)(ii). For purposes of the $3,500 threshold with respect to distributions made on or after March 22, 1999, if the present value of the Accrued Benefit at the time of any distribution exceeds $3,500, the present value of the Accrued Benefit at any subsequent time will be deemed to exceed $3,500. For Plan Years beginning on or after January 1, 1998, "$5,000" is substituted for "$3,500", each place "$3,500" appears in this subsection. (ii) Limitation and Required Commencement Date. In no event other than with the written consent of the Member shall the payment of benefits commence later than the 60th day after the close of the Plan Year in which the latest of the following occurs: (A)The Member's Normal Retirement Date; 47 (B)The Member's termination of employment; or (C)The tenth anniversary of the year in which the Member first commenced participation in the Plan. Furthermore, distribution of benefits must commence on or before the April 1st of the calendar year following the calendar year in which the Member attains age 70-1/2 or terminates employment, whichever is later; provided, however, if a Member is a 5% owner (as defined in section 416 of the Code) with respect to the Plan at any time during the Plan Year ending in the calendar year in which he attained age 70-1/2, then distribution of benefits must commence no later than the April 1st of the calendar year following the calendar year in which the Member attains age 70-1/2. Distribution required under the preceding sentence shall be made in one lump sum if the Member's Severance Date has occurred. (iii) Death Benefits. The Plan shall pay a Member's death benefit as soon after such time as the Member's beneficiary requests, but not later than the December 31st of the calendar year in which occurs the fifth anniversary of the Member's death or, if the Member's beneficiary is the Member's spouse, the date on which the Member would have attained age 70-1/2, if later. (b) Benefit Forms. All benefits distributed under Section 8 shall be paid in one lump sum. If a portion of a Member's Accrued Benefit is invested in an Investment Category holding Parent Company Stock, the Member may direct that the portion of his Accrued Benefit so held be distributed to him in kind, except that the value of a fractional share shall be distributed in cash. 48 (c) Deferred Payments. If the payment of benefits is to be deferred, the undistributed value of the benefit shall be retained in the Fund subject to the administrative provisions of the Plan and the Trust Agreement. (d) Withholding. All distributions under the Plan are subject to federal, state and local tax withholding as required by applicable law as in effect from time to time. (e) Compliance with Code Requirements. All forms of benefit distributions and required benefit commencement dates shall be subject to and in compliance with section 401(a)(9) of the Code and the regulations thereunder, including the minimum distribution incidental benefit requirement. Unless the Member irrevocably elects to the contrary at the time required distributions under section 401(a)(9) of the Code begin, required minimum distributions made before the Member's Severance Date shall be based on the life expectancy of the Member, as determined under the Code, without recalculation. The provisions of section 401(a)(9) of the Code and the regulations thereunder, including proposed regulation sections 1.401(a)(9)-1 and 2, shall override any provision of the Plan inconsistent therewith. (f) Distribution Limitations. Amounts contributed pursuant to subsection 4(a) of the Plan shall not be distributed earlier than upon occurrence of one of the following events: (i) The Member's retirement, death, disability or separation from service (within the meaning of sections 401(a) and (k) of the Code); (ii) The termination of the Plan without establishment or maintenance of another defined contribution plan (other than an ESOP or SEP); (iii)The Member's attainment of age 59-1/2 or suffering hardship; (iv) The sale or other disposition by a Participating Company to an unrelated corporation of substantially all of the assets used in a trade or business, but only 49 with respect to employees who continue employment with the acquiring corporation and provided the acquiring corporation does not maintain the Plan after the disposition; and (v) The sale or other disposition by a Participating Company of its interest in a subsidiary to an unrelated entity but only with respect to employees who continue employment with the subsidiary and provided the acquiring entity does not maintain the Plan after the disposition. Subsections 9(f)(ii), (iv) and (v), above, apply only if the distribution is in the form of a lump sum. Subsections 9(f)(iv) and (v), above, apply if the transferor corporation continues to maintain the Plan. This subsection 9(f) shall not be construed as giving a Member a right to a distribution not otherwise expressly provided for by another subsection of the Plan. (g) Rollover Election. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a "distributee's" election under this subsection, a "distributee" may elect, at the time and in the manner prescribed by the Committee, to have any portion of an "eligible rollover distribution" paid directly to an "eligible retirement plan" specified by the "distributee" in a "direct rollover". For purposes of this subsection, the definitions specified below shall apply: (i) Eligible Rollover Distribution. An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under section 401(a)(9) of the Code; any hardship distribution described in section 401(k)(2)(B)(i)(IV) of the Code made after December 31, 1999; and the portion of any distribution that is not includible in gross income 50 (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (ii) Eligible Retirement Plan. An eligible retirement plan is an individual retirement account described in section 408(a) of the Code, an individual retirement annuity described in section 408(b) of the Code, an annuity plan described in section 403(a) of the Code, or a qualified trust described in section 401(a) of the Code, that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or an individual retirement annuity. (iii)Distributee. A distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's spouse who is the alternate payee under a qualified domestic relations order, as defined in section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. (iv) Direct Rollover. A direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee. 51 10. HARDSHIP AND IN-SERVICE DISTRIBUTIONS (a) General Rule (i) Rollover. A Member may receive an in-service distribution of all or a portion of his Rollover Account. (ii) Hardship. A Member shall have the right to receive an in-service distribution from his Rollover Account and Salary Reduction Account on account of hardship. A distribution is on account of hardship only if the distribution both (A) is made on account of an immediate and heavy financial need of the Member and (B) is necessary to satisfy such financial need. (iii) Age 59-1/2. A Member who has attained age 59- 1/2 may receive an in-service distribution from his Rollover Account and Salary Reduction Account without regard to hardship. (iv) Age 70-1/2. A Member who has attained age 70-1/2 may receive an in-service distribution of all or any portion of his Accrued Benefit. (b) Need. A distribution shall be deemed to be made on account of an immediate and heavy financial need of the Member if the distribution is on account of (i) medical expenses described in section 213(d) of the Code incurred or to be incurred by the Member, the Member's spouse or any dependent of the Member (as defined in section 152 of the Code); (ii) purchase (excluding mortgage payments) of a principal residence for the Member; (iii) payment of tuition and related educational fees, including room and board expenses, for the next twelve months of post- secondary education for the Member, the Member's spouse, child or any dependent of the Member (as defined in section 152 of the Code); (iv) the need to prevent the eviction of the Member from his principal residence or foreclosure on the mortgage of the Member's principal residence; or (v) such other reason as the Commissioner of Internal Revenue specifies as a deemed immediate and heavy financial need through the publication of regulations, 52 revenue rulings, notices or other documents of general applicability. (c) Satisfaction of Need. A distribution shall be deemed to be necessary to satisfy an immediate and heavy financial need of a Member only if all of the requirements or conditions set forth below are satisfied or agreed to by the Member, as appropriate. (i) Amount. The distribution is not in excess of the amount of the immediate and heavy financial need of the Member, which amount shall be deemed to include anticipated federal, state and local income taxes and penalties. (ii) Other Sources. The Member has obtained all distributions, other than hardship distributions, and all nontaxable loans currently available under all plans subject to section 415 of the Code maintained by any Participating Company or Related Entity. (iii) Suspension. The Member's elective contributions under this Plan and each other deferred compensation plan (within the meaning of regulations under section 401(k) of the Code) maintained by a Participating Company or a Related Entity in which the Member participates shall be suspended for twelve full calendar months after receipt of the distribution. (iv) Contribution Limitation. The Member does not (and is not permitted to) make elective contributions under this Plan or any other plan maintained by a Participating Company or a Related Entity for the year immediately following the taxable year of the hardship distribution in excess of the applicable limit under section 402(g) of the Code for such next taxable year reduced by the amount of the Member's elective contributions for the taxable year of the hardship distribution. 53 (d) Limitations. (i) Hardship. Distributions on account of hardship shall be limited to the sum of (A) the Member's Rollover Account, (B) the Member's elective contributions under subsection 4(a) and (C) income credited to the Member's Salary Reduction Account as of December 31, 1988. (ii) Other Distributions. A Member shall be permitted only one in-service distribution per Plan Year under subsection 10(a). (e) Accounting. A distribution under subsection 10(a)(ii) or (iii) shall be charged first against the Member's Rollover Account and then against the Member's Salary Reduction Account. The Committee may prescribe rules with respect to the order of Investment Category from which the distribution shall be paid. 54 11. LOANS (a) Availability. The Committee shall direct that a bona fide loan be made from the Fund to any Member who requests the same, provided the Member (i) pays any application or processing fee which the Committee uniformly charges with respect to loan requests and (ii) on the date the loan would be disbursed is employed by a Participating Company or Related Entity or is a party in interest (as defined in ERISA) with respect to the Plan. All such loans shall be subject to the requirements of this Section which shall be deemed to include written rules prescribed by the Committee from time to time with respect to loans. Eligibility for and the rules with respect to loans shall be uniformly applied. (b) Minimum Requirements. Loans shall be subject to the following rules: (i) Principal Amount. The principal amount of the loan to a Member may not be less than $1,000 and may not exceed, when added to the outstanding balance of all other loans to the Member from the Plan, the lesser of (A) $50,000, reduced by the excess of the highest outstanding balance of loans to the Member from the Plan during the one-year period ending on the day before the date on which such loan was made over the outstanding balance of loans to the Member from the Plan on the date on which such loan is made or (B) 50% of the Member's nonforfeitable Accrued Benefit on the date on which the loan is made. (ii) Maximum Term. The term of the loan may not exceed five years; however, if the Member uses the loan proceeds to acquire his principal residence, the term may be thirty years. If a Member's employment with all Participating Companies and Related Entities terminates for any reason, the loan shall be due and payable on the last day of the calendar quarter following the calendar quarter in which employment terminated; provided, however, in the case of a disposition of a Participating Company or substantially all the assets of a trade or business, the Committee, according to a uniform rule applicable to all Members 55 affected by the transaction, may permit Members to continue to amortize the loan. (iii) Interest Rate. The interest rate shall be a rate charged by commercial lenders for comparable loans on the date the loan request is approved, as determined by the Committee. (iv) Repayment. The loan shall be repaid over its term in level installment payments corresponding to the Member's payroll period. As a condition precedent to approval of the loan, the Member shall be required to authorize payroll withholding in the amount of each installment for all periods he is employed by a Participating Company. Notwithstanding the foregoing, the loan repayment of a Member who is in qualified military service within the meaning of section 414(u) of the Code shall be suspended to the extent permitted by section 414(u) of the Code. (v) Collateral. The loan shall be secured by 50% of the Member's nonforfeitable Accrued Benefit. (vi) Distribution of Accrued Benefit. If the nonforfeitable portion of a Member's Accrued Benefit is to be distributed prior to the Member's payment of all principal and accrued interest due on any loan to such Member, the distribution shall include as an offset the amount of unpaid principal and interest due on the loan and the note shall be distributed. (vii) Notes. All loans shall be evidenced by a note containing such terms and conditions as the Committee shall require. (viii) Multiple Loans. A Member shall be permitted only one outstanding loan at any time. (ix) Fees. The Committee may adopt a rule pursuant to subsections 2(h) and 11(a) of the Plan imposing a reasonable fee on a Member who borrows under this Section 11 for processing his loan application, preparing his loan documentation or administering his loan. 56 (c) Accounting. The principal amount of any loan shall be drawn first from the Member's Rollover Account, then from the Member's Profit Sharing Account, then from the Member's Matching Account and finally from the Member's Salary Reduction Account. The Committee may prescribe rules with respect to the order of Investment Categories from which the distribution shall be paid. The loan shall be treated as a separate Investment Category of the borrowing Member. All payments of principal and interest with respect to such loan shall be credited to the borrowing Member, with repayment of principal credited to the Member's Accounts in reverse order from the Accounts withdrawn. The repayment shall be invested in accordance with the Member's current election for new contributions. 57 12. TITLE TO ASSETS No person or entity shall have any legal or equitable right or interest in the contributions made by any Participating Company, or otherwise received into the Fund, or in any assets of the Fund, except as expressly provided in the Plan. 58 13. AMENDMENT AND TERMINATION (a) Amendment. The provisions of this Plan may be amended by the Board of Directors (or its delegee as authorized by subsection 2(e)) from time to time and at any time in whole or in part, provided that no amendment shall be effective unless the Plan as so amended shall be for the exclusive benefit of the Members and their beneficiaries, and that no amendment shall operate to deprive any Member of any rights or benefits accrued to him under the Plan prior to such amendment. (b) Termination. While it is the Company's intention to continue the Plan in operation indefinitely, the Company nevertheless expressly reserves the right by action of the Board of Directors to terminate the Plan in whole or in part or discontinue contributions. Any such termination, partial termination or discontinuance of contributions shall be effected only upon condition that such action is taken as shall render it impossible for any part of the corpus of the Fund or the income therefrom to be used for, or diverted to, purposes other than the exclusive benefit of the Members and their beneficiaries. (c) Conduct on Termination. If the Plan is to be terminated at any time, the Company shall give written notice to the Trustee which shall thereupon revalue the assets of the Fund and the accounts of the Members as of the date of termination, partial termination or discontinuance of contributions and, after discharging and satisfying any obligations of the Plan, shall allocate all unallocated assets to the Accrued Benefits of the Members at the date of termination, partial termination or discontinuance of contributions in accordance with subsection 6(g). Upon termination, partial termination or discontinuance of contributions, the Accrued Benefits of Members affected thereby shall remain fully vested and shall not thereafter be subject to forfeiture in whole or in part. The Committee shall instruct the Trustee to continue to control and manage the Fund for the benefit of Members to whom distributions will be made at the time and in the manner provided in Section 9. Notwithstanding the foregoing, incident to a termination or a 59 discontinuance of contributions, the Company may amend the Plan and the Trust Agreement to provide for distribution of Accrued Benefits to each affected Member provided such distribution does not violate any applicable provision of subsection 9(f) of the Plan or section 401(a) or 401(k) of the Code. 60 14. LIMITATION OF RIGHTS (a) Alienation. None of the payments, benefits or rights of any Member shall be subject to any claim of any creditor of such Member and, in particular, to the fullest extent permitted by law, shall be free from attachment, garnishment, trustee's process, or any other legal or equitable process available to any creditor of such Member. No Member shall have the right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments which he may expect to receive, contingently or otherwise, under this Plan, except the right to designate a beneficiary or beneficiaries in accordance with the Plan. This subsection shall not apply to (i) voluntary and revocable assignments within the meaning of the regulations under section 401(a)(13) of the Code, (ii) offsets permitted by section 401(a)(13)(C) of the Code for amounts a Member is required to pay by order, judgment, settlement or the like, (iii) the pledging of a Member's Accrued Benefit as security for a loan made to such Member under Section 11, (iv) the enforcement of a federal tax levy made pursuant to section 6331 of the Code or (v) the collection by the United States on a judgment resulting from an unpaid tax assessment. (b) Qualified Domestic Relations Order Exception. Subsection 14(a) shall not apply to the creation, assignment or recognition of a right to any benefit payable with respect to a Member under a qualified domestic relations order within the meaning of section 414(p) of the Code. Notwithstanding Sections 8-10, distribution to an alternate payee pursuant to a qualified domestic relations order shall be made (i) at the time specified in such order or (ii), if the order permits, as soon after the Committee approves the order as is administratively feasible provided such distribution is permitted under applicable provisions of the Code. (c) Employment. Neither the establishment of the Plan, nor any modification thereof, nor the creation of any fund, trust or account, nor the payment of any benefit shall be construed as giving any Member or Employee, or any person whomsoever, any legal or equitable right against any Participating Company, the Trustee or the Committee unless 61 such right shall be specifically provided for in the Trust Agreement or the Plan or conferred by affirmative action of the Company or the Committee in accordance with the terms and provisions of the Plan or as giving any Member or Employee the right to be retained in the employ of any Participating Company. All Members and other Employees shall remain subject to discharge to the same extent as if the Plan had never been adopted. 62 15. MERGERS, CONSOLIDATIONS OR TRANSFERS OF PLAN ASSETS (a) General Rule. In the case of any Plan merger or Plan consolidation with, or transfer of assets or liabilities of the Plan to, any other plan, each Member in the Plan must be entitled to receive a benefit immediately after the merger, consolidation, or transfer (if the Plan were then to terminate) which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer (if the Plan had been terminated). (b) Protected Benefits. Each Member who had an account (the "Transferred Account") (i) in a plan which merges with and into this Plan or (ii) a plan which transfers an account into this Plan without providing the Member the option to receive a distribution, shall have all of the benefits, rights or features provided by the transferor plan which are protected under section 411(d)(6) of the Code with respect to the Transferred Account. The Committee shall provide for separate recordkeeping for a Member's Transferred Account and such additional subaccounts as may be necessary to comply with the requirements of this subsection. Except to the extent necessary to comply with the requirements of this subsection, all Transferred Accounts shall be subject to the general provisions of the Plan applicable to the type of account to which they would have been credited had the amounts initially been contributed to this Plan. (c) Vesting. All Transferred Accounts shall be 100% nonforfeitable, subject to valuation adjustment. (d) Special In-Service Hardship Distribution Provisions. All Transferred Accounts from the plans listed below shall be available for in- service distribution for hardship in accordance with the Plan's general rules applicable to distributions under subsection 10(a)(ii) but subject to spousal consent requirements, if applicable, under 63 subsection 15(i)(vi): Acetylene Gas Company Retirement Plan. Carbonic Industries Corporation 401(k) Plan. Ia-Tech Sales Co. 401(k) Profit Sharing Plan. National Welding Supply Co. 401(k) Salary Reduction Plan. Industrial Gas Products & Supply, Inc. Profit Sharing Plan. (e) Special In-Service Age 59-1/2 Distribution Provisions. All Transferred Accounts from the plans listed below shall be eligible for in- service distributions in accordance with the Plan's rules applicable to distributions under subsection 10(a)(iii) but subject to spousal consent requirements, if applicable, under subsection 15(i)(vi): Acetylene Gas Company Retirement Plan. Carbonic Industries Corporation 401(k) Plan. National Welding Supply Co. 401(k) Salary Reduction Plan. Rutland Tool & Supply Co., Inc. Profit Sharing/401(k) Plan. (f) Special In-Service Age 55 Distribution Provision. A Member with a Transferred Account consisting of employer contributions and earnings thereon from the Industrial Gas Products & Supply, Inc. Profit Sharing Plan shall be eligible for an in-service distribution from such Transferred Account in accordance with the Plan's rules applicable to distributions under subsection 10(a)(iii). (g) Installment Settlement. All Transferred Accounts from the plans listed below may, at the election of the Member, but subject to spousal consent requirements, if applicable, under section 15(i)(vi) be distributed by payment in monthly, quarterly or annual installments over a fixed reasonable period of time, not exceeding the life expectancy of the Member, or the joint life and last survivor expectancy of the Member and his beneficiary. Distributions under this subsection shall be subject to the minimum distribution requirements of 64 section 401(a)(9) of the Code and the regulations thereunder, including the minimum distribution incidental death benefit requirement: Acetylene Gas Company Retirement Plan. Carbonic Industries Corporation 401(k) Plan. Ia-Tech Sales Co. 401(k) Profit Sharing Plan. Rutland Tool & Supply Co., Inc. Profit Sharing/401(k) Plan. Kendeco Supply Co., Inc. Profit Sharing & 401(k) Plan. Industrial Gas Products & Supply, Inc. Profit Sharing Plan. (h) Limitations on In-Service Distributions. The portion of each Member's Transferred Account attributable to "qualified nonelective contributions" and "qualified matching contributions" (within the meaning of the regulations under the Code), if any, shall not be available for any in-service distribution otherwise permitted under the Plan. (i) Annuity Settlements. A Member's Transferred Account from the plans listed below may be distributed in a form of annuity settlement permitted under subsection 15(i)(vi) and shall be subject to the distribution limitations and special rules set forth below: Acetylene Gas Company Retirement Plan. Carbonic Industries Corporation 401(k) Plan. Ia-Tech Sales Co. 401(k) Profit Sharing Plan. National Welding Supply Co. 401(k) Salary Reduction Plan. Rutland Tool & Supply Co., Inc. Profit Sharing/401(k) Plan. Langdon Oxygen Company, Inc. Employees 401(k) Profit Sharing Plan. Kendeco Supply Co., Inc. Profit Sharing & 401(k) Plan. A Member's Transferred Account from the Carbonic Industries Corporation 401(k) Plan shall be subject to the spousal consent requirements of this subsection 15(i) only if the Member is 65 married as described in subsection 15(i)(i) and elects an annuity form of settlement other than a joint and survivor annuity with his spouse as at least a 50% contingent annuitant, in which case this subsection 15(i) shall only apply to such election. (i) Married Member. If (A) a Member is married to his then spouse for at least one year on the date on which benefit payments are to commence and (B) his nonforfeitable Accrued Benefit exceeds $5,000, his Transferred Account will be distributed in the form of a joint and survivor annuity with his spouse as survivor annuitant, with the survivor annuity in an amount not less than 50% or more than 100% of the amount payable to the Member, unless the Member, with the written consent of his spouse witnessed by a notary public or an authorized Plan representative in a manner prescribed by the Committee, elects a straight life annuity for his life or an alternate form of settlement permitted by the Plan. Further, no total or partial distribution of a Member's Transferred Account may be made after the annuity starting date where the present value of the Member's Accrued Benefit immediately before the annuity starting date exceeds $5,000 unless the Member and his spouse (or where the Member has died, the surviving spouse) consent in writing witnessed by a notary public or a representative of the Plan in a manner prescribed by the Committee prior to such distribution. The Committee shall furnish to such Member a written notification of the availability of the election hereunder at least 90 days before the Member's anticipated benefit commencement date or, if a Member notifies the Committee of his intent to terminate employment less than 90 days before the proposed benefit commencement date, as soon after the Member notifies the Committee as is administratively feasible. The notification shall explain the terms and conditions of the joint and survivor annuity described above and the effect of electing not to take such annuity. The Member may, within a period of 90 days after receipt of the written notification or such longer period as the Committee may uniformly make available, complete the election. The Member may revoke an election not to 66 take the joint and survivor annuity described above or choose again to take such annuity at any time and any number of times within the applicable election period. If a Member requests additional information within 60 days after receipt of the notification of election, the minimum election period shall be extended an additional 60 days following his receipt of such additional information. (ii) Single Member. If (A) a Member is single or has not been married to his then spouse for at least one year on the date on which benefit payments are to commence and (B) his nonforfeitable Accrued Benefit exceeds $5,000, benefits will be distributed in the form of a straight life annuity for the Member's life unless the Member elects an alternate form of settlement permitted by the Plan in accordance with the election procedures described in subsection (i) above. (iii) Annuity Purchases. If benefits are to be paid in a form of an annuity, the Committee shall direct the Trustee to apply the Member's Transferred Account to purchase an appropriate nontransferable annuity contract and to deliver it to the Member. (iv) Spousal Death Benefit. If the Member's beneficiary is the Member's surviving spouse, the Member's Transferred Account shall be used to purchase a straight life annuity for the spouse's life commencing as soon after the Member's date of death as is administratively feasible unless the spouse elects a lump sum settlement or approximately equal installment payments over the spouse's life expectancy (or a specified shorter period) commencing not later than the date on which the Member would have attained age 70-1/2 or, if later, as soon after the Member's date of death as is administratively feasible. (v) Special Beneficiary Designation Provisions. Notwithstanding subsection 7(a), if a married Member designates a beneficiary other than his 67 spouse for his Transferred Accounts, such designation shall not be valid (i) unless the spouse consents thereto in writing witnessed by a notary public or authorized representative of the Plan and (ii) the Member attained age 35 on or before the first day of the Plan Year in which the spouse waived the benefit. Further, the Committee shall provide to the Member within the "applicable period" a written explanation of the terms and conditions of the death benefit described above and the rights of the Member's spouse with respect to the designation of an alternate beneficiary. For purposes of this subsection "applicable period" shall mean whichever of the following periods ends last: (A)the period beginning with the first day of the Plan Year in which the Member attains age 32 and ending with the close of the Plan Year preceding the Plan Year in which the Member attains age 35; (B)a reasonable period after the Member commences participation in the Plan; or (C)in the case of a Member who separates from service before attaining age 35, the period beginning one year before and ending one year after such separation from service. (vi) Alternate Forms of Settlement. Subject to the spousal consent requirements described above, a Member may elect that his Transferred Account be distributed in the form of a lump sum settlement as provided under the Plan, in installments if available under subsection 15(h) or in the form of a joint and survivor annuity or period certain and life annuity with a contingent annuitant other than his spouse. Distributions under this subsection shall be subject to the minimum distribution requirements of section 401(a)(9) of the Code and the regulations thereunder, including the minimum distribution incidental death benefit requirement. (vii) Loans and In-Service Distributions. 68 A married Member may not either pledge his Transferred Account as security for a loan from the Plan or receive an in- service distribution from his Transferred Account, in accordance with the generally applicable rules of the Plan and the special provisions of this Section 15, without the prior written consent of his spouse witnessed by a notary public or authorized Plan representative in a manner prescribed by the Committee. 69 16. PARTICIPATION BY RELATED ENTITIES (a) Commencement. Any entity which is a Related Entity with respect to the Company shall be deemed to adopt this Plan and the accompanying Trust Agreement effective as of the date the Committee permits its Employees to make contributions under subsection 4(a). (b) Termination. The Company may, by action of the Board of Directors, determine at any time that any such Participating Company shall cease participation in the Plan or withdraw and establish a separate plan and fund. And such withdrawal shall be effected by a duly executed instrument delivered to the Trustee instructing the Trustee to segregate the assets of the Fund allocable to the Employees of such Participating Company and pay them over to the separate fund. The participation of any Participating Company and its Employees shall automatically cease when such Participating Company ceases to be a Related Entity unless the Committee expressly provides to the contrary. If a Participating Company's participation in this Plan terminates for any reason, the Accrued Benefits of Members employed by it shall be retained in the Plan unless the Committee otherwise directs, subject to the Plan's generally applicable benefit distribution provisions. (c) Single Plan. The Plan shall at all times be administered and interpreted as a single plan for the benefit of the Employees of all Participating Companies. (d) Delegation of Authority. Each Participating Company hereby acknowledges that the Company has all the rights and duties thereof under the Plan and the Trust Agreement, including the right to amend the same. 70 17. TOP-HEAVY REQUIREMENTS (a) General Rule. For any Plan Year in which the Plan is a top-heavy plan or included in a top-heavy group, as determined under subsection 17(b), the special requirements of this Section shall apply to Members not covered by a collective bargaining agreement. (b) Calculation of Top-Heavy Status. The Plan shall be a top-heavy plan (if it is not included in an "aggregation group") or a plan included in a top-heavy group (if it is included in an "aggregation group") with respect to any Plan Year if the sum as of the "determination date" of the "cumulative accounts" of "key employees" for the Plan Year exceeds 60% of a similar sum determined for all "employees," excluding "employees" who were "key employees" in prior Plan Years only. (c) Definitions. For purposes of this Section 17, the following definitions shall apply to be interpreted in accordance with the provisions of section 416 of the Code and the regulations thereunder. (i) "Aggregation Group" shall mean the plans of a Participating Company or a Related Entity included below within the following categories: (A)each such plan in which a "key employee" is a participant including a terminated plan in which a "key employee" was a participant within the five-years ending on the "determination date"; (B)each other such plan which enables any plan in subsection (A) above to meet the requirements of section 401(a)(4) or 410 of the Code; and (C)each other plan not required to be included in the "aggregation group" which the Company elects to include in the "aggregation group" in accordance with the "permissive aggregation group" rules of the Code if such group would 71 continue to meet the requirements of sections 401(a) and 410 of the Code with such plan being taken into account. (ii) "Cumulative Account" for any "employee" shall mean the sum of the amount of his accounts under this Plan plus all defined contribution plans included in the "aggregation group" (if any) as of the most recent valuation date for each such plan within a twelve-month period ending on the "determination date," increased by any contributions due after such valuation date and before the "determination date" plus the present value of his accrued benefit under all defined benefit pension plans included in the "aggregation group" (if any) as of the "determination date." For a defined benefit plan, the present value of the accrued benefit as of any particular "determination date" shall be the amount determined under (A) the method, if any, that uniformly applies for accrual purposes under all plans maintained by the Participating Companies and all Related Entities, or (B) if there is no such method, as if such benefit accrued not more rapidly than under the slowest accrual rate permitted under the fractional accrual rule of section 411(b)(1)(C) of the Code, as of the most recent valuation date for the defined benefit plan, under actuarial equivalent factors specified therein, which is within a twelve- month period ending on the "determination date." For this purpose, the valuation date shall be the date for computing plan costs for purposes of determining the minimum funding requirement under section 412 of the Code. "Cumulative accounts" of "employees" who have not performed services for any Participating Company or a Related Entity for the five-year period ending on the "determination date" shall be disregarded. An "employee's" "cumulative account" shall be increased by the aggregate distributions during the five-year period ending on the "determination date" made with respect to him under any plan in the aggregation group. Rollovers and direct plan-to-plan transfers to this Plan or to a plan in the "aggregation group" shall be included in an "employee's" "cumulative account" unless the transfer is initiated by the "employee" and made from a plan maintained by an employer which is not a Participating 72 Company or a Related Entity. (iii)"Determination Date" shall mean with respect to any Plan Year the last day of the preceding Plan Year. (iv) "Employee" shall mean any person (including a beneficiary thereof) who has or had an accrued benefit held under this Plan or a plan in the "aggregation group" including this Plan at any time during the current or any one of the four preceding Plan Years. Any "employee" other than a "key employee" described in subsection 17(c)(v) shall be considered a "non-key employee" for purposes of this Section 17. (v) "Key Employee" shall mean any "employee" or former "employee" (including a beneficiary thereof) who is, at any time during the Plan Year, or was, during any one of the four preceding Plan Years any one or more of the following: (A)an officer of a Participating Company or a Related Entity whose compensation (as defined in subsection 5(d)) exceeds 50% of the dollar limitation in effect under section 415(b)(1)(A) of the Code, unless 50 other such officers (or, if lesser, a number of such officers equal to the greater of three or 10% of the "employees") have higher annual compensation; (B)one of the ten persons employed by a Participating Company or a Related Entity both having annual compensation (as defined in subsection 5(d)) greater than the limitation in effect under section 415(c)(1)(A) of the Code, and owning (or considered as owning within the meaning of section 318 of the Code) the largest interests (but at least more than a 0.5% interest) in the Participating Companies and all Related Entities. For purposes of this subsection (B), if two "employees" have the same interest, the one with the greater compensation shall be treated as owning the larger interest; 73 (C)any person owning (or considered as owning within the meaning of section 318 of the Code) more than 5% of the outstanding stock of all Participating Companies or Related Entities or stock possessing more than 5% of the total combined voting power of such stock; (D)a person who would be described in subsection (C) above if 1% were substituted for 5% each place the same appears in subsection (C) above, and who has annual compensation of more than $150,000. For purposes of determining ownership under this subsection, section 318(a)(2)(C) of the Code shall be applied by substituting 5% for 50%. (d) Combined Benefit Limitation. For purposes of the calculation of the combined limitation of subsection 5(c), "1.0" shall be substituted for "1.25" each place the same appears in that subsection. (e) Vesting. The Member's Accrued Benefit shall be nonforfeitable. (f) Minimum Contribution. Minimum Participating Company contributions for a Member who is not a "key employee" shall be required in an amount equal to the lesser of 3% of compensation (as defined in subsection 5(d)) or the highest percentage of such compensation limited to $150,000 (or an increased amount resulting from a cost of living adjustment under section 415(d) of the Code) contributed for any "key employee" under subsections 4(a) and 4(d). For purposes of meeting the minimum contribution requirement, employer social security contributions and elective contributions on behalf of "employees" other than "key employees" shall be disregarded. Each "non-key employee" of a Participating Company who has not separated from service at the end of the Plan Year and who has satisfied the eligibility requirements of subsection 3(a) shall receive any minimum contribution provided under this Section 17 without regard to (i) whether he is credited with 1,000 Hours of Service in the Plan Year, (ii) earnings level for the Plan Year or (iii) 74 whether he elects to make contributions under subsection 4(a). If an "employee" participates in both this Plan and another defined contribution plan maintained by a Participating Company or a Related Entity, the minimum benefit shall be provided under the other plan. Furthermore, if an "employee" participates in both this Plan and a defined benefit plan maintained by a Participating Company or a Related Entity, the minimum benefit shall be provided under the defined benefit plan. 75 18. MISCELLANEOUS (a) Incapacity. If the Committee receives a copy of a certified court order, or other binding legal certification, that a person entitled to receive any benefit payment is under a legal disability or is incapacitated in any way so as to be unable to manage his financial affairs, the Committee shall direct that payments be made to such person's legally appointed guardian or other representative. Any payment of a benefit in accordance with the provisions of this subsection shall be a complete discharge of any liability to make such payment. (b) Reversions. In no event, except as provided herein, shall the Trustee return to a Participating Company any amount contributed by it to the Plan. (i) Mistake of Fact. In the case of a contribution made by a good faith mistake of fact, the Trustee shall return the erroneous portion of the contribution, without increase for investment earnings, but with decrease for investment losses, if any, within one year after payment of the contribution to the Fund. (ii) Deductibility. To the extent deduction of any contribution determined by the Company to be deductible is disallowed, the Trustee shall return that portion of the contribution, without increase for investment earnings but with decrease for investment losses, if any, for which deduction has been disallowed within one year after the disallowance of the deduction. (iii)Limitation. No return of contribution shall be made under this subsection which adversely affects the Plan's qualified status under regulations, rulings or other published positions of the Internal Revenue Service or reduces a Member's Accrued Benefit below the amount it would have been had such contributions not been made. (iv) Compliance Refunds. This subsection shall not preclude refunds made in accordance with subsection 4(b)(i), 4(d)(ii), 4(g)(ii), 4(j)(iii) or 5(a). (c) Employee Data. The Committee, the Trustee 76 or the Administrator may require that each Employee provide such data as it deems necessary upon his becoming a Member in the Plan. Each Employee, upon becoming a Member, shall be deemed to have approved of and to have acquiesced in each and every provision of the Plan for himself, his personal representatives, distributees, legatees, assigns, and beneficiaries. (d) In Writing Requirement. Unless otherwise required by law, a requirement that a transaction or consent under the Plan be "in writing" may, at the discretion of the Plan Administrator, be effected through an interactive telephone system or by other types of electronic communication. (e) Doubt as to Right to Payment. In the event that at any time any doubt exists as to the right of any person to any payment hereunder or the amount or time of such payment (including, without limitation, any case of doubt as to identity, or any case in which any notice has been received from any other person claiming any interest in amounts payable hereunder, or any case in which a claim from other persons may exist by reason of community property or similar laws), the Committee shall be entitled, in its discretion, to direct the Trustee to hold such sum as a segregated amount in trust until such right or amount or time is determined or until order of a court of competent jurisdiction, or to pay such sum into court in accordance with appropriate rules of law in such case then provided, or to make payment only upon receipt of a bond or similar indemnification (in such amount and in such form as is satisfactory to the Committee). (f) Inability to Locate Distributee. Notwithstanding any other provision of the Plan, in the event that the Committee cannot locate any person to whom a payment is due under this Plan, the benefit in respect of which such payment is to be made shall be forfeited at such time as the Committee shall determine in its sole discretion (but in all events prior to the time such benefit would otherwise escheat under any applicable state law); provided, that such benefit shall be reinstated if such person subsequently makes a valid claim for such benefit. 77 (g) Estoppel of Members and Their Beneficiaries. The Participating Companies, Committee and Trustee may rely upon any certificate, statement or other representation made to them by any Employee, Member or beneficiary with respect to age, length of service, leave of absence, date of cessation of employment, marital status, or other fact required to be determined under any other provisions of this Plan, and shall not be liable on account of the payment of any moneys or the doing of any act in reliance upon any such certificate, statement or other representation. Any such certificate, statement or other representation made by an Employee or Member shall be conclusively binding upon such Employee or Member and his beneficiary, and such Employee, Member or beneficiary shall thereafter and forever be estopped from disputing the truth and correctness of such certificate, statement or other representation. Any such certificate, statement or other representation made by a Member's beneficiary shall be conclusively binding upon such beneficiary and such beneficiary shall thereafter and forever be estopped from disputing the truth and correctness of such certificate, statement or other representation. (h) Law Governing. This Plan shall be construed, administered and applied in a manner consistent with the laws of the Commonwealth of Pennsylvania where those laws are not superseded by federal law. (i) Pronouns. The use of the masculine pronoun shall be extended to include the feminine gender wherever appropriate. (j) Interpretation. The Plan is a profit sharing plan including a qualified, tax exempt trust under sections 401(a) and 501(a) of the Code and a qualified cash or deferred arrangement under section 401(k)(2) of the Code. The Plan shall be interpreted 78 in a manner consistent with its satisfaction of all requirements of the Code applicable to such a plan. IN WITNESS WHEREOF, and as evidence of the adoption of this Plan by the Company, it has caused the same to be signed by its officers thereunto duly authorized, and its corporate seal to be affixed hereto, this 20th day of August, 1999. AIRGAS, INC. Attest: /S/ Todd R. Craun By: /S/ Scott M. Melman Todd R. Craun Scott M. Melman General Counsel and Secretary Vice President, Chief Financial Officer (Corporate Seal) EX-11 4 EXHIBIT 11 EXHIBIT 11 AIRGAS, INC. EARNINGS PER SHARE CALCULATIONS
Three Months Ended Six Months Ended September 30, September 30, (In thousands, except per share amounts) 1999 1998 1999 1998 Weighted Average Shares Outstanding: Basic shares outstanding 69,700 70,000 69,800 70,100 Stock options - incremental shares 1,300 1,600 1,200 1,600 Contingently issuable shares 200 100 200 100 Diluted shares outstanding 71,200 71,700 71,200 71,800 Net earnings $18,912 $10,480 $27,997 $21,755 Basic earnings per share $ .27 $ .15 $ .40 $ .31 Diluted earnings per share $ .27 $ .15 $ .39 $ .30
EX-27 5 ART. 5 FDS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999
5 1000 6-MOS MAR-31-2000 SEP-30-1999 0 0 206,279 6,483 157,418 386,323 1,034,201 304,390 1,680,289 187,027 835,015 726 0 0 488,569 1,680,289 766,782 766,782 404,114 705,379 0 0 28,218 50,315 21,728 28,587 0 0 (590) 27,997 .40 .39
EX-27 6 ART. 5 AMENDED FDS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998
5 1000 6-MOS MAR-31-1999 SEP-30-1998 0 0 201,719 5,886 165,863 395,738 977,317 262,175 1,720,031 211,089 906,356 717 0 0 437,464 1,720,031 797,365 797,365 427,647 732,145 0 0 30,526 37,501 15,746 21,755 0 0 0 21,755 .30 .29
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