-----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, WTvyJczH4fMi9fFS9CwTWnqGI8QQIpILCW2qZhb0owaB8nOIwWASU2PVDEAcO0Qa MvkSrBdKvZneMFDsWGQMtA== 0000950109-97-002319.txt : 19970321 0000950109-97-002319.hdr.sgml : 19970321 ACCESSION NUMBER: 0000950109-97-002319 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 19970320 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIRGAS INC CENTRAL INDEX KEY: 0000804212 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-CHEMICALS & ALLIED PRODUCTS [5160] IRS NUMBER: 560732648 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-23651 FILM NUMBER: 97559795 BUSINESS ADDRESS: STREET 1: 100 MATSONFORD RD STE 550 STREET 2: 5 RADNOR CORPORATE CENTER CITY: RADNOR STATE: PA ZIP: 19087 BUSINESS PHONE: 2156875253 MAIL ADDRESS: STREET 1: 5 RADNOR CORPORATE CENTER, STE 550 STREET 2: 100 MATSONFORD ROAD CITY: RADNOR STATE: PA ZIP: 19087 S-4 1 FORM S-4 As filed with the Securities and Exchange Commission on March 20, 1997 Registration No. 333-______ ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-4 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 --------- AIRGAS, INC. (Exact name of registrant as specified in its charter) Delaware 9999 56-0732648 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number) incorporation or organization) Classification Code Number)
259 Radnor-Chester Road, Suite 100, Radnor, Pennsylvania 19087-5240 (Name, address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ANDREW R. CICHOCKI, ASSISTANT VICE PRESIDENT-CORPORATE DEVELOPMENT AIRGAS, INC. 259 Radnor-Chester Road, Suite 100 Radnor, Pennsylvania 19087-5240 (610) 687-5253 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------ With a copy to: NANCY D. WEISBERG, ESQUIRE McCAUSLAND, KEEN & BUCKMAN 259 Radnor-Chester Road, Suite 160 Radnor, Pennsylvania 19087-5240 (610) 341-1000 ------------------ Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. ------------------ If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [_] CALCULATION OF REGISTRATION FEE
============================================================================================================================== Proposed Maximum Proposed Maximum Amount of Title of Securities Amount Being Offering Aggregate Registration Being Registered Registered Price Per Share Offering Price Fee - ------------------------------------------------------------------------------------------------------------------------------ Common Stock, $.01 par value........ 1,688,236 Shares $ 9.58 /(1)/ $ 16,173,301 /(1)/ $4,901 ==============================================================================================================================
/(1)/ Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(f), based upon the book value of the shares of Class A Common Stock and Class B Common Stock of Carbonic Industries Corporation, less an estimate of the cash to be paid by the Registrant. - -------------------------------------------------------------------------------- The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. AIRGAS, INC. Cross Reference Sheet Showing Location in Prospectus of Information Required by Form S-4
REGISTRATION STATEMENT ITEM LOCATION IN PROSPECTUS -------------------------------------------------------- ------------------------------------------- - ------------------------------------------------------------------------------------------------------------- A. Information About the Transaction 1. Forepart of Registration Statement and Outside Front Cover Page of Prospectus......... Front Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus.................................. Inside Front and Outside Back Cover Pages 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Information.................. Investment Considerations 4. Terms of the Transaction....................... Summary of Proxy Statement/Prospectus; The Merger 5. Pro Forma Financial Information................ Summary of Proxy Statement/Prospectus; Unaudited Pro Forma Financial Information 6. Material Contacts with the Company Being Acquired................................. Background and Related Matters 7. Additional Information Required for Re-offering by Persons and Parties Deemed to be Underwriters...................... * 8. Interests of Named Experts and Counsel......... Legal Opinions; Experts 9. Disclosure of Commission Position on Indemnification for Securities Act Liabilities.................................... * B. Information About the Registrant 10. Information with Respect to S-3 Registrants.... * 11. Incorporation of Certain Information by Reference................................... * 12. Information with Respect to S-2 or S-3 Registrants................................ * 13. Incorporation of Certain Information by Reference................................... *
AIRGAS, INC. Cross Reference Sheet Showing Location in Prospectus of Information Required by Form S-4
REGISTRATION STATEMENT ITEM LOCATION IN PROSPECTUS -------------------------------------------------------- ------------------------------------------- 14. Information with Respect to Registrants Other than S-2 or S-3 Registrants............. Summary of Proxy Statement/Prospectus; Investment Considerations; The Merger; Price Range of Common Stock; Dividend Policy; Airgas; Airgas -- Selected Financial Data; Airgas -- Management's Discussion and Analysis of Financial Condition and Results of Operations; Unaudited Pro Forma Financial Information; Index to Financial Statements; Airgas -- Airgas Common Stock C. Information About the Company Being Acquired 15. Information with Respect to S-3 Companies..... * 16. Information with Respect to S-2 or S-3 Companies.............................. * 17. Information with Respect to Companies Other than S-2 or S-3 Companies............... Summary of Proxy Statement/Prospectus; Investment Considerations; The Merger; CIC; CIC -- Selected Financial Data; CIC -- CIC Management's Discussion and Analysis of Financial Condition and Results of Operations; Unaudited Pro Forma Financial Information; Index to Financial Statements D. Voting and Management Information 18. Information if Proxies, Consents or Authorizations are to be Solicited............ Summary of Proxy Statement/Prospectus; The Special Meeting; The Merger -- Dissenters' Rights; The Merger -- Interests of Certain Persons in the Merger; Airgas -- Management of Airgas; Airgas -- Executive Compensation; Airgas -- Principal Stockholders of Airgas; CIC -- Principal Stockholders of CIC 19. Information if Proxies, Consents or Authorizations are not to be Solicited........ *
CARBONIC INDUSTRIES CORPORATION 3700 Crestwood Parkway, Suite 200 Duluth, Georgia 30136-5583 April __, 1997 Dear Shareholders: A Special Meeting of Shareholders of Carbonic Industries Corporation ("CIC") will be held at the offices of Osburn, Henning and Company at 617 East Colonial Drive, Orlando, Florida on May ___, 1997 at 1:00 p.m. At the Special Meeting, you will be asked to consider and vote upon the approval of an Agreement and Plan of Merger ("Merger Agreement") pursuant to which CIC will be merged into a wholly-owned subsidiary of Airgas, Inc. (the "Airgas Subsidiary"). If the merger (the "Merger") is consummated, each outstanding share of CIC Class A common stock, no par value (the "Class A Common") will be converted into and exchanged for the right to receive an amount of Airgas common stock, par value $0.01 per share ("Airgas Common Stock") equal to $43 in value (valued as described below), $43 in cash or a combination thereof, at the shareholder's election, subject to proration and certain other limitations more fully described in the enclosed Prospectus and Proxy Statement (including that shareholders who own more than 500 shares of Class A Common, or who own 500 or fewer shares but received such shares after March 12, 1997 from someone who owned more than 500 shares on March 12, 1997, may not elect to receive cash for more than 45% of the value of their Class A Common). In addition, if the Merger is consummated, each share of CIC Class B Common Stock, no par value ("Class B Common"), will be converted into and exchanged for the right to receive $205 in cash or an amount of Airgas Common Stock equal to $205 in value (valued as described below), with 55% of such consideration to be paid in Airgas Common Stock and 45% to be paid in cash, but also subject to proration and certain other limitations as more fully described in the enclosed Prospectus and Proxy Statement. For purposes of calculating the number of shares of Airgas Common Stock which you will receive if the Merger is consummated, a share of Airgas Common Stock is valued at $_______. This works out to approximately __________ shares of Airgas Common Stock for each share of Class A Common and __________ shares of Airgas Common Stock for each share of Class B Common. Please also note that, unless you own 500 or fewer shares of Class A Common (and did not receive those shares after March 12, 1997 directly or indirectly from someone who owned more than 500 shares on March 12, 1997), 55% of the consideration you will receive for your CIC Common Stock (all in shares of Airgas Common Stock) will be held in escrow for up to two years from the time the Merger closes to cover certain indemnification obligations and to support the tax treatment of this transaction. If you wish to receive any cash for your shares of Class A Common, you must follow the procedures set forth in the Form of Cash Election/Transmittal Letter, enclosed with the Proxy Statement/Prospectus, and described under "Important Notice." You should also return the enclosed Continuity of Interest Certificate prior to the closing of the Merger. The purpose of this Certificate is to support the tax treatment of the Merger. Details of the Merger are set forth in the accompanying Proxy Statement/Prospectus, which you should read carefully and which contains a more complete discussion of these matters. Your Board of Directors has unanimously approved the Merger and believes that the Merger is in the best interests of CIC and its shareholders and therefore unanimously recommends a vote FOR the Merger. The Merger must be approved by each of a majority of the outstanding shares of Class A Common and a majority of the outstanding shares of Class B Common. All shareholders are cordially invited to attend the Special Meeting in person. Whether or not you plan to attend the meeting, please complete, date, sign and promptly return your proxy card in the enclosed envelope (which requires no postage if mailed in the United States). If you attend the meeting, you may vote in person if you wish, even though you have previously returned your proxy. It is important that your shares be represented and voted at the Special Meeting. Sincerely, J. Vernon Hinely Chairman of the Board and President CARBONIC INDUSTRIES CORPORATION 3700 Crestwood Parkway, Suite 200 Duluth, Georgia 30136-5583 ----------------------- NOTICE OF SPECIAL MEETING OF SHAREHOLDERS ----------------------- To the Shareholders: Notice is hereby given that a Special Meeting of Shareholders of Carbonic Industries Corporation ("CIC") will be held on May ___, 1997 at 1:00 p.m., at the offices of Osburn, Henning and Company, 617 East Colonial Drive, Orlando, Florida for the following purposes: To consider and vote upon an Agreement and Plan of Merger dated March 12, 1997 (the "Merger Agreement") pursuant to which (i) CIC would be merged (the "Merger") into a wholly-owned subsidiary of Airgas, Inc. ("Airgas"), a Delaware corporation; (ii) holders of shares of CIC Class A Common Stock, no par value (the "Class A Common") (other than holders who perfect dissenters' rights), would receive for each share of Class A Common outstanding, at each holder's election, subject to proration and other limitations set forth in the Merger Agreement, either (a) shares of Airgas Common Stock, par value $.01 per share (the "Airgas Common Stock"), or (b) cash for up to 45% of the value of their shares of Class A Common; and (iii) holders of shares of CIC Class B Common Stock, no par value (the "Class B Common") (other than holders who perfect dissenter's rights), would receive shares of Airgas Common Stock for 55% of the value of their shares of Class B Common and, subject to proration, cash for 45% of the value of their shares of Class B Common. In addition, outstanding options to acquire CIC Common Stock would be assumed by Airgas and would be exercisable for shares of Airgas Common Stock, in accordance with the provisions of the Merger Agreement. Shareholders of CIC have the right to dissent from the Merger and demand that if the Merger is consummated, they will be paid the "fair value" of their shares of CIC Common Stock, determined as of the close of business on the day prior to the Special Meeting (exclusive of any appreciation or depreciation in anticipation of the Merger). The right of any shareholder to receive such "fair value" payment is contingent on strict compliance with the requirements of the applicable provisions of Florida law, which are attached as Appendix B to the Proxy Statement/ Prospectus. Only holders of record of Class A Common and Class B Common at the close of business on April ___, 1997 will be entitled to notice of, and to vote at, the Special Meeting and any adjournments thereof. Prior to the actual voting thereof, a proxy may be revoked by the person executing such proxy by filing with the Executive Vice President of CIC an instrument of revocation, by duly executed proxy bearing a later date or by voting in person at the Special Meeting. By Order of the Board of Directors Julian K. Dominick, Secretary April __, 1997 IMPORTANT NOTICE PROXY: TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO COMPLETE, - ----- DATE AND SIGN (EXACTLY AS YOUR NAME APPEARS THEREON) THE ENCLOSED PROXY, AND RETURN IT PROMPTLY TO CARBONIC INDUSTRIES CORPORATION IN THE POSTAGE PAID ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. YOUR PROXY CAN BE WITHDRAWN BY YOU AT ANY TIME BEFORE IT IS VOTED. CONTINUITY OF INTEREST CERTIFICATE: YOU SHOULD ALSO RETURN TO CARBONIC - ---------------------------------- INDUSTRIES CORPORATION IN THE ENCLOSED POSTAGE PAID ENVELOPE, TOGETHER WITH YOUR PROXY, THE CONTINUITY OF INTEREST CERTIFICATE. IF CIC DOES NOT RECEIVE CONTINUITY OF INTEREST CERTIFICATES FROM PERSONS WHO WILL DEPOSIT SHARES INTO THE LOCKUP/ESCROW FUND REPRESENTING AT LEAST 50% OF THE MERGER CONSIDERATION, THE MERGER MAY NOT BE COMPLETED. CASH ELECTION/TRANSMITTAL LETTER: IF YOU ARE A HOLDER OF SHARES OF CLASS A - -------------------------------- COMMON, YOU MUST RETURN THE ENCLOSED FORM OF CASH ELECTION/TRANSMITTAL LETTER AND IF YOU ARE A HOLDER OF SHARES OF CLASS B COMMON, YOU MUST RETURN THE ENCLOSED CLASS B TRANSMITTAL LETTER WITH YOUR STOCK CERTIFICATES REPRESENTING CIC COMMON STOCK TO THE BANK OF NEW YORK, 101 BARCLAY STREET, NEW YORK, NEW YORK 10286 IN THE SEPARATE ENVELOPE PROVIDED TO RECEIVE ANY MERGER CONSIDERATION. IF YOU ARE A HOLDER OF SHARES OF CLASS A COMMON AND YOU WANT TO RECEIVE ANY (UP TO 45%) OF YOUR MERGER CONSIDERATION IN CASH INSTEAD OF AIRGAS COMMON STOCK, YOU NEED TO INDICATE THAT IN THE FORM OF CASH ELECTION/TRANSMITTAL LETTER, AND SEND IT (WITH ALL OF YOUR STOCK CERTIFICATES) TO THE BANK OF NEW YORK, 101 BARCLAY STREET, NEW YORK, NEW YORK 10286 IN THE SEPARATE ENVELOPE PROVIDED FOR RECEIPT NO LATER THAN THE CLOSE OF BUSINESS ON _______________, 1997. THE FORM OF CASH ELECTION/TRANSMITTAL LETTER ALSO PROVIDES THAT YOU WILL RECEIVE AIRGAS COMMON STOCK FOR YOUR REMAINING SHARES OF CLASS A COMMON. AIRGAS, INC. PROSPECTUS ---------- ======================= CARBONIC INDUSTRIES CORPORATION PROXY STATEMENT --------------- This Prospectus of Airgas, Inc. ("Airgas"), a Delaware corporation, relates to up to 1,688,236 shares of Airgas Common Stock, par value $.01 per share (the "Airgas Common Stock"), to be issued in connection with the proposed merger (the "Merger") of Carbonic Industries Corporation ("CIC") into a newly formed, wholly-owned subsidiary of Airgas (the "Airgas Subsidiary"), with Airgas Subsidiary surviving the Merger, in accordance with the Agreement and Plan of Merger dated as of March 12, 1997, by and among Airgas, Airgas Subsidiary and CIC (the "Merger Agreement"). This Prospectus also serves as a proxy statement of CIC in connection with the solicitation of proxies by its Board of Directors for use at the Special Meeting of shareholders of CIC to be held on May __, 1997 at 1:00 p.m. at the offices of Osburn, Henning and Company, 617 East Colonial Drive, Orlando, Florida. This Proxy Statement/Prospectus, with accompanying form of proxy, is first being mailed to the CIC shareholders on or about ____________, 1997. Upon consummation of the Merger, all outstanding shares of CIC Class A Common Stock, no par value (the "Class A Common") will be converted into the right to receive, at each holder's election, subject to proration and other limitations described herein, shares of Airgas Common Stock or cash for up to 45% of the value of a holder's shares, provided that holders of 500 or fewer shares of Class A Common will not be subject to the 45% limitation unless the shares were transferred of record to such holder after March 12, 1997 by a person or entity who owned of record on March 12, 1997 more than 500 shares of Class A Common (such shares not subject to the 45% limitation are hereinafter referred to as the "De Minimis Shares"), and all outstanding shares of CIC Class B Common Stock, no par value (the "Class B Common"), will be converted into shares of Airgas Common Stock for 55% of the value of the Class B Common and, subject to proration, into cash for 45% of the value of the Class B Common (all such Airgas Common Stock and cash into which the Class A Common and the Class B Common are converted into the right to receive, collectively, the "Merger Consideration"). Except for the De Minimis Shares, the Merger Consideration payable to a CIC shareholder will be reduced by 0.25% for fees and expenses related to the Merger and the Lockup/Escrow Agreement (the "Lockup/Escrow Fee"). See "Summary - Merger Consideration" and "The Merger - Conversion of Shares and Fractional Shares." THE AIRGAS SECURITIES TO BE OFFERED IN CONNECTION WITH THE MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT AND PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The information included herein with respect to Airgas and its subsidiaries and affiliates was supplied by Airgas, and the information concerning CIC and its affiliates included herein was supplied by CIC. Holders of CIC Common Stock should carefully consider the information set forth under "Investment Considerations." The date of this Proxy Statement and Prospectus is April __, 1997. PROXY STATEMENT/PROSPECTUS -------------- Carbonic Industries Corporation Special Meeting of Shareholders -- May ___, 1997 ---------------- TABLE OF CONTENTS
Page ---- Available Information................................. Summary of Proxy Statement/Prospectus................. Price Range of Common Stock........................... Dividend Policy....................................... Investment Considerations............................. The Special Meeting................................... Purpose of the Meeting; Date, Time and Place of Meeting........................ Record Date and Outstanding Shares Proxies and Vote Required.................... Solicitation of Proxies...................... Background and Related Matters........................ Background................................... CIC's Reasons for the Merger; Recommendation of the Board of Directors............... Airgas' Reasons for the Merger............... The Merger............................................ Effect of Merger............................. Conversion of Shares and Fractional Shares Election Procedures.......................... Continuity of Interest Certificates CIC Employee Options......................... Board of Directors and Management of Airgas Following the Merger...................... Lock-Up/Escrow Agreement..................... Representations and Warranties; Covenants and Agreements............................ Conditions Precedent to Consummation of the Merger; Waiver........................ Termination and Amendment.................... Interests of Certain Persons in the Merger................................ Certain Federal Income Tax Consequences of the Merger................ Accounting Treatment......................... Expenses of the Merger....................... Resales of Airgas Common Stock by Former CIC Shareholders............................ Dissenters' Rights........................... Comparison of Stockholders' Rights Unaudited Pro Forma Financial Information Unaudited Pro Forma Combined Condensed Balance Sheet..................................... Unaudited Pro Forma Combined Condensed Statements of Operations.......................... Notes to Unaudited Pro Forma Combined Condensed Financial Statements.............................. Airgas ............................................. Selected Financial Data...................... Management's Discussion and Analysis of Financial Condition and Results of Operations................................ Business..................................... Properties................................... Litigation................................... Management of Airgas......................... Executive Compensation....................... Principal Stockholders of Airgas............. Airgas Common Stock.......................... Airgas Preferred Stock....................... Stock Purchase Rights........................ CIC ............................................. Business..................................... Selected Financial Data ..................... CIC Management's Discussion and Analysis of Financial Condition and Results of Operations.................... Principal Stockholders of CIC................ Experts............................................... Legal Opinions........................................ Index to Financial Statements ........................ Appendices: Appendix A -- Merger Agreement Appendix B -- Florida Dissenters' Rights
No person has been authorized to give any information or to make any representations not contained in this Proxy Statement/Prospectus in connection with the solicitation made hereby and, if given or made, such information or representations should not be relied upon as having been authorized. This Proxy Statement/Prospectus does not constitute an offer to sell, or a solicitation of an offer to purchase, any securities other than the shares of Airgas Common Stock covered by this Proxy Statement/Prospectus, or an offer to sell, or the solicitation of an offer to purchase, in any jurisdiction where, or to any person to whom it is unlawful to make such an offer or solicitation. Neither the delivery of this Proxy Statement/Prospectus nor any distribution of the securities to which this Proxy Statement/Prospectus relates shall, under any circumstances, create any implication that there has been no change in the facts set forth herein since the date hereof. 2 AVAILABLE INFORMATION Airgas is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC"). Such reports, proxy statements and other information filed by Airgas can be inspected and copied at the public reference facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's Regional Offices located at 7 World Trade Center, 13th Floor, New York, New York 10048 and at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be obtained from the Public Reference Section of the SEC at room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The SEC maintains a World Wide Web site on the Internet at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. Such reports can also be inspected at the offices of the New York Stock Exchange at 20 Broad Street, 17th Floor, New York, New York 10005. Airgas has filed with the SEC a Registration Statement pursuant to the Securities Act of 1933, as amended (the "Securities Act"), with respect to the shares of Airgas Common Stock offered by the Prospectus which is part of this Proxy Statement/Prospectus. This Proxy Statement/Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the SEC. Reference is hereby made to the Registration Statement and to the exhibits listed therein, which can be inspected at the public reference facilities of the SEC referenced above, and copies of which can be obtained from the SEC at prescribed rates as indicated above. 3 - -------------------------------------------------------------------------------- SUMMARY OF PROXY STATEMENT/PROSPECTUS The following is a brief summary of certain information contained elsewhere in this Proxy Statement/Prospectus. This summary does not contain a complete statement of all material features of the proposals to be voted on and is qualified in its entirety by the more detailed information and financial statements contained in this Proxy Statement/Prospectus and its Appendices. Shareholders are urged to read this Proxy Statement/Prospectus and the accompanying exhibits in their entirety. The Companies Airgas Airgas is the largest independent distributor of industrial, medical and specialty gases and related equipment in North America. Airgas' distribution business is conducted through over 600 locations throughout North America. Principal products distributed include: nitrogen, oxygen, argon, helium, acetylene, carbon dioxide, nitrous oxide, hydrogen and welding gases and a variety of medical and specialty gases as well as a wide selection of name-brand welding equipment, accessories and industrial protective equipment ("hardgoods"). In connection with its gas distribution business, Airgas rents industrial gas cylinders and bulk storage tanks to its customers. Airgas also distributes industrial safety equipment and other industrial equipment and supplies through its Airgas Direct Industrial ("ADI") segment. Airgas also manufactures and sells acetylene gas as part of its distribution business. In addition to its distribution business, Airgas operates four manufacturing businesses which produce carbon products, calcium carbide, nitrous oxide and carbon dioxide. Airgas' principal business strategies include continued profitable growth through an active acquisition program, selective expansion of its product lines and providing high value-added products and services at the lowest possible cost to its customers. Airgas intends to broaden its product line by taking advantage of its broad distribution network, and through additional acquisitions by its ADI division. In addition, product line additions have included returnable containers, specialty gases and additional hardgoods (such as industrial safety products, fire protection products and industrial coatings). Airgas believes the selective addition of complementary product offerings will enable it to better serve its diverse, expanding customer base. CIC CIC is engaged in the production and distribution of liquid carbon dioxide and solid carbon dioxide (dry ice) and the rental of carbon dioxide equipment. CIC acquires carbon dioxide from natural sources and as a byproduct of various manufacturing processes, and then - -------------------------------------------------------------------------------- 4 refines and processes it for distribution in bulk quantities in 19 states, principally located east of the Mississippi River. CIC rents storage tanks and related applications equipment to its carbon dioxide customers as an ancillary service to its carbon dioxide supply business. On a volume basis, CIC believes it is one of the four largest suppliers in the United States of carbon dioxide in its various forms. The Meeting A Special Meeting of holders of CIC Common Stock will be held on May __, 1997 at 1:00 p.m. at the offices of Osburn, Henning and Company, 617 East Colonial Drive, Orlando, Florida. CIC has fixed the close of business on April __, 1997 as the record date for determining shareholders entitled to notice of and to vote at the meeting. See "Voting and Proxies." Purposes of the Meeting The purpose of the CIC Special Meeting is to consider and vote upon a proposal to approve the Merger Agreement and the Merger pursuant to which CIC will be merged into the Airgas Subsidiary, with the Airgas Subsidiary surviving the Merger. Vote Required The affirmative vote of the holders of a majority of the outstanding shares of Class A Common and the affirmative vote of the holders of a majority of the outstanding shares of Class B Common is required to approve the Merger Agreement and the Merger. Each share of Class A Common and Class B Common entitles the holder to one vote. The directors and executive officers of CIC, who hold approximately 18% of the outstanding Class A Common and approximately 80% of the outstanding Class B Common, have advised CIC that they presently intend to vote their shares in favor of the Merger Agreement and the Merger, although they are not required to do so. See "The Special Meeting - Proxies and Votes Required." Recommendation and Reasons The Board of Directors of CIC unanimously recommends a vote FOR the adoption and approval of the Merger Agreement and the Merger. 5 The Board of Directors of CIC believes that the Merger is in the best interests of the shareholders of CIC. The CIC Board of Directors believes that the Merger will provide CIC with the capital and other resources necessary to exploit expansion opportunities and grow its business, and that the Merger Consideration can represent a potentially valuable return for the shareholders' investment in CIC Common Stock. In addition, the exchange of CIC Common Stock for Airgas Common Stock or cash will benefit CIC's shareholders by providing them with liquidity after the expiration of the Lockup/Escrow Agreement with respect to the escrowed shares because Airgas Common Stock is publicly traded. See "Background and Related Matters -- CIC's Reasons for the Merger." The Merger - General When the Merger becomes effective, CIC will be merged with and into Airgas Subsidiary, with Airgas Subsidiary surviving the Merger. In the Merger, CIC shareholders (other than shareholders who perfect dissenters' rights) will receive, at each holder's election, subject to proration and other limitations, either the Stock Consideration (as defined herein) or the Cash Consideration (as defined herein) for each share of CIC Common Stock outstanding. In addition, outstanding CIC options will be assumed by Airgas and become exercisable for shares of Airgas Common Stock in accordance with the Class A Exchange Ratio (as defined herein). Merger Consideration The following Merger Consideration will be payable to the CIC shareholders after the payment of the Lockup/Escrow Fee (which will not apply to the De Minimis Shares): Class A Common. Each share of Class A Common will be converted into the -------------- right to receive, at each holder's election but subject to proration and other limitations, either (i) $43 in shares of Airgas Common Stock (the "Class A Stock Consideration") or (ii) $43 in cash (the "Class A Cash Consideration") (with the limitation that cash may be elected only for up to 45% of the value of the holder's shares, except that the 45% limitation will not apply to the De Minimis Shares). The Class A Stock Consideration will be equal to that number of shares of Airgas Common Stock equal to the quotient of (a) $43.00 divided by (b) $_______("the Average Airgas Price"). The foregoing quotient, which is _________ is defined as the "Class A Exchange Ratio." The Average Airgas Price was determined in accordance with the Merger Agreement by averaging the closing sales price of the Airgas Common Stock for the five consecutive trading days beginning on and including __________, 1997. The right of the holders of Class A Common to elect to receive cash for up to 45% of the value of their shares of Class A Common will be subject to proration and other limitations 6 described more fully in this Proxy Statement/Prospectus and in the Merger Agreement, which provide generally that the total amount of the Merger Consideration paid in cash (assuming that any dissenters are being paid fully in cash) (the "Aggregate Cash Consideration") cannot exceed the total amount of the Merger Consideration paid in shares of Airgas Common Stock (the "Aggregate Stock Consideration"), although a holder's percentage of Merger Consideration being paid as Class A Cash Consideration will not be reduced more than two percentage points. Class B Common. Each share of Class B Common will be converted into $205 -------------- in shares of Airgas Common Stock (the "Class B Stock Consideration") or $205 in cash (the "Class B Cash Consideration"). The Class B Stock Consideration will be equal to that number of shares of Airgas Common Stock equal to the quotient of (a) $205.00 divided by (b) $_________ ("the Average Airgas Price"). The foregoing quotient, which is ____________, is defined as the "Class B Exchange Ratio." Each holder of shares of Class B Common will receive the Class B Stock Consideration for 55% of the value of such holder's shares of Class B Common subject to proration, but not above 57%. Each holder of shares of Class B Common will receive (subject to proration, but not below 43%), the Class B Cash Consideration for 45% of the value of such holder's shares of Class B Common. The Class A Stock Consideration and the Class B Stock Consideration are sometimes collectively referred to herein as the "Stock Consideration" and the Class A Cash Consideration and the Class B Cash Consideration are sometimes collectively referred to herein as the "Cash Consideration." Fluctuations in Merger Consideration. On April __, 1997, the most recent ------------------------------------ practicable date prior to the date of this Proxy Statement/Prospectus, the closing sale price of the Airgas Common Stock on the New York Stock Exchange, Inc. (the "NYSE") was $____ per share. The market price of the Airgas Common Stock will depend on, and is expected to fluctuate with, among other things, the performance of Airgas, conditions (economic or otherwise) affecting the industrial gas and equipment distribution industries, interest rates, market conditions and other factors that generally influence the prices of securities. Election Procedures The Merger Agreement provides that each holder of Class A Common has the right, subject to the proration and other limitations described herein, to submit a request specifying the number of shares of Class A Common owned by such holder which such holder desires to have converted into either (i) shares of Airgas Common Stock or (ii) cash. All elections must be made on the Form of Cash Election/Transmittal Letter (the "Form of Cash Election"), a copy of which is being mailed with this Proxy Statement/Prospectus, and must be received and accepted by the Cash Election Deadline, which is May __, 1997 [no later than 5 business days preceding the Closing Date]. The purpose of the election procedure is to permit holders of Class A Common to express their preferences for the type of consideration they wish to receive in the Merger, provided that, except for the De Minimis Shares, a holder's Class A Cash Consideration cannot exceed 45% of the value of each holder's shares of Class A Common, and the Aggregate Cash Consideration cannot exceed the Aggregate Stock Consideration (i.e. more 7 than 50% of the Merger Consideration). Failure of a holder of shares of Class A Common to complete properly and to return the Form of Cash Election to the Exchange Agent (as defined herein) by the Cash Election Deadline, or failure to comply with the election procedures described in this Proxy Statement/Prospectus and Form of Cash Election, will cause all of such holder's shares of Class A Common to be converted into the Class A Stock Consideration without regard to the preference of such holder. Forms of Cash Election will be irrevocable upon receipt by the Exchange Agent, unless amendment or withdrawal is permitted in its sole and absolute discretion. Regulatory Approvals Assuming receipt of the approval of the Merger by CIC's shareholders, the Merger will be consummated promptly upon the satisfaction or waiver of the conditions of the Merger. Conditions to the Merger; Termination and Amendment There are various conditions to the respective obligations of Airgas and CIC to consummate the Merger, including approval of the Merger by the shareholders of CIC and that assertion of dissenters' rights does not exceed 10% of the issued and outstanding shares of Class A Common. Except with respect to shareholder approval and other matters required by law, each of the parties to the Merger Agreement may, at its option, waive compliance with any condition to its obligation to consummate the Merger. See "The Merger -- Conditions Precedent to the Consummation of the Merger; Waiver." The Merger Agreement may be terminated at any time prior to consummation of the Merger by mutual consent of the Boards of Directors of Airgas and CIC. In addition, the Merger Agreement may be terminated by either Airgas or CIC under certain conditions, including if the Merger is not consummated by August 31, 1997. Certain amendments to the Merger Agreement may be made by the mutual consent of Airgas and CIC at any time prior to the consummation of the Merger. See "The Merger -- Termination and Amendment." Interests of Certain Persons in the Merger A condition to the consummation of the Merger is that certain officers of CIC enter into employment agreements with Airgas which include noncompete provisions. Additionally, all outstanding options to purchase CIC Common Stock will vest upon consummation of the Merger. The President of CIC and/or companies owned by his sons will have an option to purchase CIC's dry ice operations in Miami and Jacksonville, Florida. 8 On December 1, 1996, Airgas acquired the pipeline that supplies natural carbon dioxide to CIC's natural source facility in Star, Mississippi. This source of carbon dioxide gas is one of two major sources of supply for CIC. In July 1996 (before the acquisition by Airgas was completed), CIC amended its supply contract to increase the supply of carbon dioxide it receives from the pipeline. Under the contract, CIC has the right to purchase natural carbon dioxide at prices set forth in the contract, based in part on the volume of carbon dioxide purchased, until July 1, 2016. See "The Merger - Interests of Certain Persons in the Merger." Lockup/Escrow Agreement The Merger Agreement provides that 55% (subject to adjustment up to 57% in the event of the proration of the Cash Consideration) of each CIC shareholder's Merger Consideration (other than with respect to the De Minimis Shares) issuable to the shareholders after the payment of the Lockup/Escrow Fee will be paid in shares of Airgas Common Stock and held pursuant to the Lockup/Escrow Agreement. Such shares may be used to satisfy indemnification claims of up to $5,000,000 (after giving effect to a $500,000 deductible) made within one year of the Closing Date arising as a result of a breach of the representations, warranties and covenants made in the Merger Agreement or related documents (except that certain claims, including those for broker fees or those based on fraud, are not subject to the deductible or the limitation), for any decrease in tax benefits to the Airgas Subsidiary resulting from an adjustment with respect to tax returns filed by CIC on or prior to the Closing Date and for certain other matters specified in the Merger Agreement. Even if no such claims are made, the Airgas Common Stock will be held pursuant to the Lockup/Escrow Agreement for a period of up to two years, to help support the favorable tax treatment described herein. See "The Merger - Lockup/Escrow Agreement." Effective Time of the Merger The Merger will become effective on the date that the Certificate of Merger is filed with the Secretary of the State of Delaware, provided that Articles of Merger are filed with the Florida Department of State in accordance with Florida law. These filings are expected to occur on the date of the Closing of the Merger. Federal Income Tax Consequences Consummation of the Merger is conditioned upon the receipt of an opinion of counsel to Airgas stating that the Merger will be a tax-free reorganization for federal income tax purposes and that no gain or loss will be recognized by the shareholders of CIC on the exchange of their shares of CIC Common Stock for shares of Airgas Common Stock (other than with respect to cash received by those CIC shareholders receiving Cash Consideration and pursuant to dissenters' rights). The tax opinion to be received is subject to various assumptions and qualifications and is not binding on the Internal Revenue Service. 9 In general, if pursuant to the Merger (i) a holder exchanges all of the shares of CIC Common Stock owned by it solely for shares of Airgas Common Stock, it will not recognize any gain or loss, and (ii) a holder exchanges all of the shares of CIC Common Stock owned by it for a combination of shares of Airgas Common Stock and cash, it will recognize gain equal to the lesser of (A) the amount of cash received and (B) the difference between (1) the sum of the cash received and the fair market value of the Airgas Common Stock received and (2) its adjusted tax basis in the shares of CIC Common Stock surrendered. CIC shareholders who receive cash pursuant to dissenters' rights will recognize gain or loss, if any, for federal tax purposes. CIC SHAREHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISERS REGARDING THE TAX CONSEQUENCES OF THE MERGER WITH RESPECT TO THEIR OWN PARTICULAR CIRCUMSTANCES, INCLUDING THE APPLICABILITY OF VARIOUS STATE AND LOCAL TAX LAWS. See "The Proposed Merger -- Certain Federal Income Tax Consequences of the Merger," "The Merger -- Dissenters' Rights" and "The Merger - -- Election Procedures." Accounting Treatment The Merger will be accounted for under the purchase method of accounting in accordance with generally accepted accounting principles, whereby the purchase price will be allocated based on the fair value of the assets acquired and the liabilities assumed. See "The Merger -- Accounting Treatment." Dissenters' Rights Each holder of CIC Common Stock who dissents from the Merger is entitled to the rights and remedies of dissenting shareholders provided in the applicable Florida statutes, subject to compliance with the procedures set forth therein. A copy of such statutory provisions, as in effect on the date of this Proxy Statement/Prospectus, is attached to this Proxy Statement/Prospectus as Appendix B, and a summary thereof is set forth under "The Merger-Dissenters' Rights." Listing The shares of Airgas Common Stock to be issued in the Merger will be authorized for listing and trading on the NYSE. Stock Prices and Dividends Airgas. On October 28, 1996, the last trading day before the proposed ------ Merger was first announced, the closing sale price of Airgas Common Stock on the NYSE, as reported by the NYSE Composite Tape, was $22.375 per share. Airgas has not paid any cash dividends on its Common Stock since inception and no cash dividends are anticipated in the foreseeable future. 10 CIC. CIC is a private company, and, accordingly, no established public --- trading market exists for the CIC Common Stock. CIC has generally paid an annual dividend of varying amounts. See "Market Price of Common Stock" and "Dividend Policy." Comparative per Share Data The following financial information reflects comparative per share information relating to unaudited net earnings per share, book value per share and cash dividends declared for (i) Airgas and CIC on a historical basis, (ii) on a pro forma basis assuming the Merger had been effected for the periods indicated and (iii) on a pro forma basis equivalent to one share of CIC Common Stock. The information shown below should be read in conjunction with the historical consolidated financial statements of Airgas and CIC including the respective notes thereto, and the unaudited pro forma combined condensed financial statements, including the notes thereto, appearing elsewhere in this Proxy Statement/Prospectus. See "UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS" and "INDEX TO FINANCIAL STATEMENTS." The pro forma equivalent per share value of CIC Common Stock on any date equals the Average Airgas Price, multiplied by the Class A Exchange Ratio for the Class A Common and the Class B Exchange Ratio for the Class B Common.
Fiscal Year Ended ------------------------------------------------------------------------------------------------- CIC Class A CIC Class B CIC Class A CIC Class B Airgas. Common Common Airgas Common Common March 31, December 31, December 31, March 31, December 31, December 31, 1996 1995 1995 1996 1995 Equivale 1995 Equivalent Historical Historical Historical Pro Forma(1) Pro Forma(2) Pro Forma(2) ---------- ---------- ---------- ------------ ------------ ------------ Net earnings per share $ 0.60 $ 2.07 $ 2.07 $ 0.59 $ 0.76 $ 3.33 Book value per share $ 3.57 $ 15.79 $ 15.79 $ n/a (3) $ n/a (3) $ n/a (3) Cash dividends declared per share $ 0 $ 0.50 $ 0.50 $ 0 $ 0 $ 0
Nine Months Ended ----------------------------------------------------------------------------------------------------- CIC Class A CIC Class B CIC Class A CIC Class B Airgas Common Common Airgas Common Common December 31, September 30, September 30, December 31, September 30, September 30, 1996 1996 1996 1996 1996 Equivale 1996 Equivalent Historical Historical Historical Pro Forma(1) Pro Forma(2) Pro Forma(2) ---------- ---------- ---------- ------------ ------------ ------------ Net earnings per share $ 0.49 $ 2.12 $ 2.12 $ 0.49 $ 0.63 $ 2.76 Book value per share $ 5.23 $ 17.91 $ 17.91 $ 5.51 $ 7.11 (4) $ 31.06(4) Cash dividends declared per share $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
11 - -------------- (1) The per share amounts used in the pro forma calculations were computed by adding the number of shares of Airgas Common Stock to be issued in the Merger to the actual weighted average number of outstanding shares of Airgas Common Stock for the respective periods. (2) The Airgas pro forma financial information has been prepared assuming that (i) the Merger occurred at the beginning of the respective periods, (ii) 60% of the value of the Class A Common and 55% of the value of the Class B Common was converted into Airgas Common Stock, respectively, and (iii) the Average Airgas Price was $20.00, the Class A Exchange Ratio was 2.15 and the Class B Exchange Ratio was 10.25. (3) A pro forma balance sheet is presented for December 31, 1996 only. (4) The equivalent pro forma book value per share of Class A Common excludes an assumed $17.20 Cash Consideration per share based on a 60% conversion into Airgas Common Stock. The equivalent pro forma book value per share of Class B Common excludes an assumed $92.25 Cash Consideration per share based on a 55% conversion into Airgas Common Stock. The comparative pro forma per share data above assumes that 60% of the value of the Class A Common and 55% of the value of the Class B Common is converted into Airgas Common Stock, respectively. The table below shows the comparable pro forma per share data assuming the conversion of 90% of the value of the Class A Common and 55% of the Class B Common into Airgas Common Stock, respectively.
Fiscal Year Ended Nine Months Ended ----------------------------------------- ---------------------------------------------- Class A Class B Class A Class B Airgas. Common Common Airgas Common Common March 31, December 31, December 31, December 31, September 30, September 30, 1996 1995 Equivalent 1995 Equivalent 1996 1996 Equivalent 1995 Equivalent Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma --------- --------- --------- --------- --------- --------- Net earnings per share $ 0.60 $1.16 $3.38 $0.49 $0.95 $2.76 Book value per share n/a n/a n/a $5.62 $10.87 $31.68
12 PRICE RANGE OF COMMON STOCK The Airgas Common Stock is listed on the NYSE (ticker symbol: ARG). The following table sets forth, for each quarter during the last two fiscal years and through March 17, 1997, the high and low closing sales price as reported by the NYSE.
High Low ---- --- 1995 Fiscal Year (1) -------------------- First Quarter ................................ $13.82 $10.32 Second Quarter................................ 14.25 11.75 Third Quarter................................. 14.94 10.25 Fourth Quarter................................ 13.25 9.82 1996 Fiscal Year (1) -------------------- First Quarter................................. $13.88 $12.50 Second Quarter................................ 15.00 13.31 Third Quarter................................. 16.63 15.69 Fourth Quarter................................ 20.06 19.81 1997 Fiscal Year ---------------- First Quarter................................. $22.38 $18.75 Second Quarter ............................... 25.50 17.38 Third Quarter................................. 27.13 21.13 Fourth Quarter (through March 17)....................... 24.50 17.50
------------------------------------------- (1) Adjusted to reflect a two-for-one stock split effective on April 15, 1996 (See Note 9 to Airgas' consolidated financial statements). On October 28, 1996, the last trading day prior to the public announcement of the proposed Merger, the closing sale price of the Airgas Common Stock on the NYSE was $22.375. On March 17, 1997, there were approximately 12,000 holders of record of the Airgas Common Stock, and the closing sale price was $20.875. CIC is privately held and there is no established market for the CIC Common Stock. CIC's management believes that the Class A Common has generally been purchased and sold at book value, which was approximately $17.91 at September 30, 1996. To CIC's management's knowledge, there have been no transactions in Class B Common, except two recent charitable gifts of 2,500 shares each by Mr. W. Herbert Hinely and Mr. J. Vernon Hinely. As of March 12, 1997, there were approximately 262 holders of Class A Common and four holders of Class B Common. 13 DIVIDEND POLICY Airgas Airgas has never paid cash dividends. The present policy of Airgas is to retain earnings to provide funds for the operation and expansion of its business and not to pay cash dividends on its Common Stock. Any payment of future dividends and the amounts thereof will depend upon Airgas' earnings, financial condition, loan covenants, capital requirements and other factors deemed relevant by the Board of Directors (see note 8 to Airgas' Consolidated Financial Statements). CIC The following dividends have been declared and paid on CIC Common Stock:
Year Dividends Per Share Date Paid ---- ------------------- --------- 1994 $ 0.50 January 1995 1995 $ 0.50 January 1996 1996 $ 0.75 January 1997
CIC's loan agreements contain covenants which, among other things, limit the payment of dividends. INVESTMENT CONSIDERATIONS Integration of Operations The benefits anticipated from the acquisition of CIC will not be achieved fully unless its operations are successfully integrated into those of Airgas. Furthermore, Airgas' acquisition strategy could place significant demands on its management and financial resources. CIC shareholders should consider the potential adverse impact that could result from Airgas' failure to effectively integrate CIC and other companies acquired into the operations of Airgas. Continued Ability to Grow Airgas' significant growth in recent years has resulted in large part from its many acquisitions of independent gas distributors, and its ability to sustain such a rate of growth in the future will depend principally on management's continued ability to identify prospective companies for acquisition and management's further ability to negotiate favorable acquisition terms. Such efforts will be affected by factors, many of which are outside of Airgas' control, such as competition among buyers for such distributors and the ability of Airgas to obtain financing for such acquisitions on favorable terms. In making their decision, CIC shareholders are urged to consider that there can be no assurance as to the 14 continued availability of prospective acquisition candidates or of Airgas' ability to complete such transactions on favorable terms. Dependence on Key Personnel Airgas' success in recent years (including its growth strategy) is largely attributable to the efforts of certain key personnel and in particular its Chairman and Chief Executive Officer, Peter McCausland. There can be no assurance of such personnel's continued association with Airgas. Departure of any such officers (and, in particular, Mr. McCausland) would likely have a material adverse impact on the operations of Airgas and the price of the Airgas Common Stock. Interests of Certain Persons in the Merger Certain officers and directors of CIC will receive certain benefits as a result of the Merger in addition to those which will result from the receipt of the Merger Consideration in exchange for CIC Common Stock and the assumption by Airgas of such persons' options to purchase CIC Common Stock. It is anticipated that certain officers and other employees of CIC will enter into employment agreements with Airgas or Airgas Subsidiary. In addition, J. Vernon Hinely and/or companies owned by his sons will have an option to purchase CIC's dry ice operations in Miami and Jacksonville, Florida. On December 1, 1996, Airgas acquired the pipeline that supplies natural carbon dioxide to CIC's natural source facility in Star, Mississippi. This source of carbon dioxide gas is one of two major sources of supply for CIC. In July 1996 (before the acquisition by Airgas was completed), CIC amended its supply contract to increase the supply of carbon dioxide it receives from the pipeline. Under the contract, CIC has the right to purchase natural carbon dioxide at prices set forth in the contract, based in part on the volume of carbon dioxide purchased, until July 1, 2016. See "The Merger - Interests of Certain Persons in the Merger." Indemnification; Lockup/Escrow Agreement After payment of the Lockup/Escrow Fee, 55% of each CIC shareholders' Merger Consideration (subject to adjustment up to 57% in the event of proration in the payment of the Cash Consideration), which is the portion of the Merger Consideration as to which cash may not be elected or paid, will be deposited with a lockup/escrow agent pursuant to the terms of the Lockup/Escrow Agreement for up to two years, or, in certain instances, longer. The CIC shareholders will indemnify Airgas to the extent of up to $5,000,000 (after giving effect to a $500,000 deductible) of the Merger Consideration deposited with the lockup/escrow agent against claims made by Airgas within one year of the Closing Date with respect to certain losses or damages resulting from a breach by CIC of any warranty, representation or covenant in connection with the Merger Agreement or any related document, for any decrease in tax benefits to the Airgas Subsidiary resulting from an adjustment with respect to any tax returns filed by CIC on or prior to the Closing Date and for certain other matters specified in the Merger Agreement. Limited types of claims may not be subject to the deductible or the $5,000,000 cap. If indemnification claims are successfully made by Airgas, the CIC shareholders may not receive a portion of the Merger Consideration deposited by them with the lockup/escrow agent. Another purpose of the Lockup/Escrow Agreement is to support the tax treatment of the Merger described herein. See "The Merger - Lockup/Escrow Agreement." 15 Shareholder Rights Under Delaware Law If the Merger is consummated, holders of shares of CIC Common Stock will become holders of Airgas Common Stock, which will result in their rights as stockholders being governed by Delaware law. A discussion of the material differences between the rights of holders of CIC Common Stock under Florida law and Airgas Common Stock under Delaware law is set forth in "The Merger - Comparison of Stockholders' Rights." Fluctuations in Market Price of Airgas Common Stock The market value of Airgas Common Stock after the completion of the Merger will depend upon, and is expected to fluctuate with, among other things, the performance of Airgas, conditions (economic or otherwise) affecting the industrial gas distribution and industrial equipment distribution industries, interest rates, market conditions and other factors that generally influence the prices of securities. The Average Airgas Price was established at $________ pursuant to the Merger Agreement. Between the time at which this price was determined and the time at which the CIC shareholders actually receive their Stock Consideration, the market value of Airgas Common Stock may fluctuate so that the value of the shares of Airgas Common Stock to be received as consideration in the Merger by the CIC shareholders may be greater or less than the Average Airgas Price. In particular, Stock Consideration that is subject to the Lockup/Escrow Agreement which will (except in the case of holders of De Minimis Shares) be at least 55% but no more than 57% of a CIC shareholder's Merger Consideration, will be held pursuant to the Lockup/Escrow Agreement for as long as two years from the date of the Merger, or, in certain instances, longer, during which time the market value of the Airgas Common Stock may rise and fall but the CIC shareholders will not be able to sell those shares. See "The Merger - Lockup/Escrow Agreement." Related to this point, if Airgas is entitled to indemnification pursuant to the Merger Agreement, such indemnification will be satisfied from the shares of Airgas Common Stock that are subject to the Lockup/Escrow Agreement (subject generally to a $500,000 deductible and a $5,000,000 cap). Because such shares of Airgas Common Stock will be valued at the Average Airgas Price for purposes of satisfying indemnification claims, satisfaction of indemnification claims using Airgas Common Stock that has a market value of more than the Average Airgas Price at the time of satisfaction will result in the CIC shareholders paying more to satisfy the indemnification claim than the actual amount of the claim. Similarly, however, satisfaction of indemnification claims using Airgas Common Stock that has a market value of less than the Average Airgas Price at the time of satisfaction will result in the CIC shareholders paying less to satisfy the claim than the actual amount of the claim. THE SPECIAL MEETING Purpose of the Meeting; Date, Time and Place of Meeting The CIC Special Meeting will be held on May ___, 1997 at 1:00 p.m., at the offices of Osburn, Henning and Company, 617 East Colonial Drive, Orlando, Florida. The purpose of the Special Meeting is to consider and vote upon a proposal to approve the Merger Agreement and the Merger. 16 Record Date and Outstanding Shares Shareholders of record of CIC Common Stock at the close of business on May __, 1997 (the "CIC Record Date") are entitled to notice of and to vote at the CIC Special Meeting. On the CIC Record Date, _________ shares of Class A Common and _________ shares of Class B Common were outstanding and entitled to vote at the Special Meeting. Each share of Class A Common and each share of Class B Common entitles the holder to one vote. The presence, in person or by proxy, of holders of a majority of the Class A Common and the holders of a majority of the Class B Common will constitute a quorum for purposes of the meeting. Abstentions will be treated as present for purposes of determining the presence of a quorum. Proxies and Votes Required Approval of the Merger Agreement and the Merger requires the affirmative vote of a majority of the outstanding shares of Class A Common and the affirmative vote of a majority of the outstanding shares of Class B Common, each class voting separately. Shares of CIC Common Stock which are represented by properly executed proxies, unless such proxies shall have previously been properly revoked, will be voted in accordance with the instructions indicated in such proxies. If no contrary instructions are indicated, such shares will be voted FOR approval of the Merger Agreement and the Merger. Because the approval of the Merger Agreement and the Merger by CIC shareholders requires the affirmative vote of a majority of the outstanding shares of Class A Common and the affirmative vote of a majority of the outstanding shares of Class B Common, failure to submit a proxy and an abstention will have the same effect as a vote against approval of the Merger Agreement and the Merger. The Special Meeting may be adjourned to another date and/or place for any proper purpose including, without limitation, for the purpose of soliciting additional proxies. Any CIC shareholder may revoke a proxy at any time before it is voted by filing with CIC an instrument revoking the proxy or by returning a duly executed proxy bearing a later date, or by attending the Special Meeting and voting in person. Any such filing should be made to the attention of John A. Toepke, Executive Vice President, Carbonic Industries Corporation, 3700 Crestwood Parkway, Suite 200, Duluth, Georgia 30136-5583. Presence at the Special Meeting will not revoke a shareholder's proxy unless the shareholder votes in person. CIC SHAREHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS. CIC STOCK CERTIFICATES SHOULD BE FORWARDED TO THE EXCHANGE AGENT ONLY WITH THE FORM OF CASH ELECTION/TRANSMITTAL LETTER OR CLASS B TRANSMITTAL LETTER INCLUDED WITH THIS PROXY STATEMENT/PROSPECTUS. SEE "MERGER-ELECTION PROCEDURES" FOR INFORMATION ABOUT RETURNING YOUR STOCK CERTIFICATES. The directors and executive officers of CIC, who currently own in the aggregate approximately 18% of the outstanding Class A Common and 80% of the outstanding Class B Common, have advised CIC that they presently intend to vote their shares in favor of the Merger Agreement and the Merger, although they are not required to do so. See "The Merger -- Dissenters' Rights." 17 Solicitation of Proxies CIC will bear the costs of solicitation of proxies for its Special Meeting. In addition to solicitation by mail, directors, officers and employees of CIC may solicit proxies from its shareholders by telephone, telegram or in person. Such persons will not receive additional compensation for such solicitation. BACKGROUND AND RELATED MATTERS Background From time to time, and on various occasions, during approximately the past 10 years, members of Airgas' management, including Peter McCausland, Chairman and Chief Executive Officer, have spoken and visited with the members of CIC management, specifically, J. Vernon Hinely, Chairman and President, for the purpose of expressing interest in exploring a possible business combination of Airgas and CIC. Such discussions were general in nature and each resulted in CIC expressing reluctance to engage in any serious discussions with Airgas. During 1995, the Board of Directors of CIC began informal discussions of ways to maximize shareholder value in light of developments in CIC's business and operations. Major factors affecting this discussion included the success of the joint venture facility with Arcadian Corporation at Augusta, Georgia, the initiation of discussions with Arcadian Corporation for the expansion of the joint venture's operations, the expansion of operations at the Star, Mississippi production facility and the apparent course of multi-district anti-trust litigation involving CIC's major competitors. At the November 16, 1995 CIC board meeting, the directors of CIC asked that management explore strategic options for CIC. During December 1995, Mr. Hinely became ill and required major heart surgery. This fact and the resulting limitation of his participation in CIC affairs during his recuperation, as well as continuing developments in the factors mentioned above, caused the Board of Directors to focus even more closely on exploring strategic options. At the April 2, 1996 CIC board meeting, the directors considered information concerning several options, including increasing dividends, an initial public offering of CIC's capital stock, a leveraged recapitalization, a sale of CIC or a merger with another company. All of the directors of CIC were also serving as directors of Tomco\2\ Equipment Company ("Tomco"), a former subsidiary of CIC which was "spun off" as of December 31, 1992. The Board of Directors of CIC was aware that, while not precisely identical, the stockholders of the two companies were substantially similar. In a meeting also held on April 2, 1996, the Tomco Board also considered strategic options for that company, in part with awareness of the possible correlations between such options for both Tomco and CIC. As a result of these meetings and discussions, on April 22, 1996, Mr. Hinely contacted John Winn, President of Southeast Airgas, Inc. in Atlanta, Georgia (an Airgas subsidiary) to determine if Airgas might have an interest in acquiring Tomco. 18 On May 1, 1996, Mr. Hinely, who also is Chairman of the Board of Tomco, accompanied by Jack Toepke, Executive Vice President of CIC and President of Tomco, met with Mr. Winn and Les Graff, Assistant Vice President-Corporate Development of Airgas, in Atlanta. As a result of this meeting, Tomco management was instructed to provide Airgas with appropriate financial data and profile information regarding Tomco. Sandra Fowler Hurt, Treasurer of CIC and Vice President - Finance of Tomco, prepared and compiled this information, which was delivered to Airgas. Airgas signed a Confidentiality Agreement at the same time. On July 23, 1996, Mr. Toepke and Ms. Fowler Hurt met with Mr. Winn and Andrew Cichocki, Assistant Vice President of Corporate Development of Airgas, in Atlanta. At this meeting, Airgas indicated that it would have no interest in acquiring Tomco without also acquiring CIC. Subsequently, Ms. Fowler Hurt prepared similar financial and profile information regarding CIC for presentation to Airgas. On August 16, 1996. Mr. Hinely and Mr. Toepke met with Gordon Keen, Vice President of Corporate Development of Airgas, Mr. Winn, now director of Carbon Dioxide Development for Airgas, and Mr. Cichocki to deliver the CIC information and to initiate discussions relative to Airgas' interest in acquiring CIC. It was decided at this time that Tomco would not be part of these discussions. Airgas executed a Confidentiality Agreement and CIC provided Airgas with a presentation of financial and other information compiled for the purpose of allowing Airgas to evaluate CIC. During late August and early September 1996, CIC provided Airgas with additional information about its business, and CIC and Airgas executives held telephone conversations on numerous occasions. On September 13, 1996, Mr. Hinely and Mr. Toepke met with Brian Haley, President, and Bill Mathews, Vice President of Finance, both of Holox, LTD, of Norcross, Georgia in their corporate offices to deliver identical information regarding CIC for their review and interest. Mr. Haley had previously indicated some interest in CIC and the carbon dioxide industry to Mr. Hinely. Holox is a regional industrial gas manufacturer, distributor and competitor of Airgas, but is not in the carbon dioxide business. Holox is a United States subsidiary of Hoek's Machine - en Zuurstoffabriek N.V., which trades on the Amsterdam Stock Exchange but does not list American Depository Receipts (ADRs) in the United States. Holox signed a Confidentiality Agreement with respect to the CIC information it received. On September 18, 1996, Mr. Hinely and Mr. Toepke met with Mr. Keen, Mr. Winn and Mr. Cichocki in Atlanta. At this meeting, Airgas presented a formal written proposal to acquire CIC, including a detailed term sheet. Other information, including an assumption of debt analysis, the terms of a noncompetition agreement with Mr. Hinely and the terms of consulting agreements for Mr. Hinely, Mr. Toepke and Ms. Fowler Hurt were also presented. On October 16, 1996, Mr. Hinely and Mr. Toepke met again with Mr. Haley and Mr. Matthews of Holox, LTD. At this meeting, Mr. Haley indicated that he had been unsuccessful in getting Holox's parent company to consider a formal offer for CIC, and that they would need more time to see if an offer would be forthcoming. On October 22, 1996, Mr. Hinely and Mr. Toepke met with Peter McCausland, Chief Executive Officer of Airgas, Mr. Keen, Mr. Winn and Mr. Cichocki in Atlanta. Mr. Hinely and Mr. Toepke proposed certain amendments to the original Airgas proposal, which included the valuation of CIC shares, the tax 19 consequences of a merger, various employment and non-competition issues, and the the possibility of a transfer of all the dry ice customers in Jacksonville and Miami to Florida Carbonic Inc. of Orlando, Florida, a business owned by Mr. Hinely's sons, with the present profits of the two dry ice operations split between CIC and Florida Carbonic Inc. Mr. McCausland countered this proposal with slightly different terms set forth in a Letter of Intent the following day. On October 24, 1996, the Board of Directors of CIC held a telephonic meeting to consider the Letter of Intent presented by Airgas. The Board authorized Mr. Hinely and Mr. Toepke to pursue the transaction, subject to certain modifications. Immediately following this meeting, Mr. Hinely, Mr. Toepke and other CIC representatives met telephonically with Messrs. Keen and Cichocki to discuss changes to the Letter of Intent. On October 25, 1996, Mr. Hinely and Mr. Toepke met with representatives of Jefferson Pilot Life Insurance Company ("Jefferson Pilot") in Greensboro, North Carolina, to inform Jefferson Pilot of the Airgas offer. Jefferson Pilot is CIC's primary lender and its single largest shareholder. During the next three days, numerous telephone conversations were held between the representatives of CIC and Airgas and a revised Letter of Intent was presented to CIC by Airgas. On October 28, 1996, the Letter of Intent was signed by Mr. Hinely and his brother, Herbert Hinely, on behalf of CIC and themselves as the holders of all Class B CIC Common Stock. Airgas issued a press release announcing the signing of the Letter of Intent on October 29 and Mr. Hinely mailed a notice of the event to all the CIC shareholders immediately thereafter. On November 21, 1996, the CIC Board of Directors met and reaffirmed the earlier decision to proceed with the transaction in accordance with the revised Letter of Intent. Beginning in November 1996, Airgas management visited CIC's offices and operating locations on numerous occasions to conduct its due diligence investigation of CIC and Airgas' attorneys provided CIC with a draft of the proposed Merger Agreement on November 20, 1996. Thereafter, representatives of CIC and Airgas held detailed negotiations about the Merger Agreement, including, but not limited to, financial structure, treatment of stock options, scope of representations and warranties, indemnification, certain employee benefits and management compensation. On December 9, 1996, at a regular meeting of Airgas' Board of Directors, Airgas' management reported on the progress of negotiations and due diligence. Following discussions, the Airgas Board of Directors authorized management to conclude negotiations and execute the Merger Agreement. On February 20, 1997, the CIC Board of Directors elected Robert F. Harkrider to the Board of Directors to fill the vacancy left by W. Herbert Hinely, who passed away in December 1996. On February 25, 1997, the CIC Board of Directors held a special meeting to discuss the progress of the Merger negotiations and the proposed terms of the Merger Agreement. After discussions focusing on issues related to the determination of the Airgas Average Price, the Board authorized management to continue its negotiations and to finalize the Merger Agreement in accordance with the Board's instructions. On March 12, 1997, the Board of Directors of CIC held a special meeting of the Board to consider the proposed terms of the transaction. At this meeting, members of CIC's management, together with its legal advisers, discussed again the strategic rationale for the Merger, the proposed terms of the Merger and the potential benefits and disadvantages of the proposed transaction to CIC and its shareholders. At the 20 conclusion of this meeting, the Board of Directors unanimously adopted the Merger Agreement, resolved that the Merger Agreement and the actions contemplated thereby should be submitted to the shareholders of CIC for approval with the Board's recommendation, and authorized the officers of CIC to execute the Merger Agreement, which was executed on March 12, 1997. CIC's Reasons for the Merger; Recommendation of the Board of Directors At its March 12, 1997 meeting, the CIC Board determined that the Merger is advisable and in the best interests of CIC and its shareholders, and unanimously approved the Merger and the Merger Agreement. The Board of Directors unanimously recommends that the CIC shareholders vote FOR approval of the Merger Agreement. The Board considered the following factors, which are not set forth in any particular order of importance, in making its determination. 1. Mr. Vernon Hinely, CIC's founder, President and Chairman of the Board of Directors, has, for health-related reasons, temporarily limited some of his active participation in CIC's affairs. Mr. Hinely has been one of the most significant driving forces behind CIC's successes and has extensive experience, knowledge and repute within the carbon dioxide industry. The Board believes it would be extremely difficult to replace Mr. Hinely should he be required to scale back his involvement with CIC, but that, if CIC were part of the larger operations of Airgas, there is greater likelihood of attracting additional strong new leadership than were CIC to undertake the task alone. 2. CIC is currently experiencing growth, and the Board and management anticipates that there will be a continuing need for additional capital to maintain that growth and take advantage of other growth opportunities. In particular, the AC Industries joint venture is experiencing significant success and expansion of AC Industries is underway. Additionally, CIC recently negotiated a new agreement at its Star, Mississippi natural-source facility that allows CIC to take significant quantities of additional raw carbon dioxide from the pipeline. The latter agreement was completed before Airgas acquired the pipeline source in December 1996. In addition, partly as a result of certain anti-trust litigation involving a number of CIC's major competitors, the Board believes that CIC is developing, and has the potential to develop, expanded and additional relationships with major carbon dioxide customers, both within and beyond CIC's current market areas. The Board believes that Airgas has greater access to capital than does CIC, which would enable CIC to exploit these opportunities efficiently and economically. The Board believes that the businesses of the companies are compatible and that, accordingly, a business combination of CIC and Airgas will allow the combined entity to exploit the possibilities for significant growth in the carbon dioxide industry and achieve an improved competitive position under current market conditions. 3. Airgas is a publicly traded company, which will provide CIC shareholders who receive Airgas stock greater liquidity than they currently have with CIC Common Stock and an equity interest in a larger company. 4. The Board believes that the consideration to be paid for the CIC Common Stock will, for many CIC shareholders, represent a significant return on their initial investment in the stock. The opportunity for shareholders to receive a tax-free exchange of CIC Common Stock for Airgas Common Stock for federal income tax purposes should be of considerable value to many CIC shareholders. 21 5. The Board believes that the Merger offers a favorable return on investment for CIC shareholders in consideration of all the circumstances. Airgas originally proposed a total consideration for all the outstanding CIC Common Stock of approximately $56.4 million, of which approximately $37 million (66%) would be paid for Class A Common (assuming the exercise of all options to acquire Class A Common), approximately $5.1 million (10%) for Class B Common and approximately $14.2 million (25%) would be by the assumption by Airgas of CIC debt. The Board negotiated an increase of approximately $1.8 million, all of which was allocated to the Class A Common (assuming exercise of the above mentioned options). This results in a price per share of $43.00 per share for Class A Common and $205.00 per share for Class B Common. The holders of the Class B Common, some of whom also hold Class A Common, will receive a total of approximately $5.1 million for all of their Class B Common. They will also receive an additional amount of approximately $3.1 million for all of their Class A Common (assuming their outstanding options to acquire Class A Common are exercised prior to the Merger) for an aggregate consideration to those shareholders of approximately $8.2 million (14.1%) of the total consideration. The Board concluded that this consideration, which was proposed by Airgas and which represents Airgas' assessment of the relative value of the two classes of stock, was appropriate for the following reasons: (a) The $43.00 price per share for Class A Common represents a substantial premium over its September 30, 1996 book value, $17.91. Management believes Class A Common has historically been purchased and sold at book value, with one or two exceptions. (b) Management believes that much of the Class A Common carries its original tax basis of less than $2.00 per share in the hands of its holders; thus a tax-free exchange for federal tax purposes may represent a substantial benefit to many shareholders when compared to a currently taxable transaction at the same nominal share value. (c) The holders of Class B Common are entitled, under the terms of CIC's articles of incorporation, to elect a majority of the Board of Directors and thus control the Board of Directors. In addition, it is the view of the Board of Directors that the holders of Class B Common, under the terms of Florida law, must vote on significant corporate actions (including the Merger) as a separate class. This means that Class B Common has special rights that are consistent with a higher price per share, or a "control premium." 6. Management had approached what CIC considered the most likely candidates for an acquisition, Airgas and Holox. The other possible candidate, Holox, has not submitted a specific acquisition proposal. Even if a proposal had been submitted by Holox, because that company is foreign-owned, any proposal was unlikely to be advantageous enough to outweigh the benefits of a tax-free transaction with a company whose shares were more readily tradable. In making its decision, the CIC Board also considered as negative factors that subsequent to the Merger CIC shareholders will no longer receive a dividend with respect to their stock, since historically Airgas has not paid dividends on its Common Stock, and that by virtue of the Merger and the characteristics of Airgas' capital structure, the CIC shareholders would have a minority voting interest in the combined enterprise. There were no other material factors considered by the CIC Board in reaching its decision. In view of the wide variety of factors considered in connection with its evaluation of the Merger, the Board 22 of Directors did not find it practicable to, and did not, quantify or otherwise attempt to assign relative weights to the specific factors considered in reaching its decision. For the reasons set forth above, CIC's Board of Directors voted unanimously to approve the Merger Agreement and the Merger and unanimously recommends that the holders of CIC Common Stock vote FOR approval of the Merger Agreement and the Merger. Airgas' Reasons for the Merger The Board of Directors of Airgas has unanimously approved the Merger Agreement and the Merger and, for the reasons set forth below, believes that the Merger is in the best interests of Airgas and its stockholders. The Board believes that the Merger will significantly expand growth opportunities for each of CIC and Airgas within the carbon dioxide industry, and the Board believes CIC's established presence in the carbon dioxide industry will complement Airgas' national distribution network. In reaching the conclusion, the Airgas Board of Directors considered a number of factors including the following: 1. Airgas has an established distribution network for cylinder gases throughout the United States and Southern Canada. Using that network, Airgas already is a distributor of carbon dioxide gases in small quantities (small bulk, beverage mini-bulk, cylinder gases and dry ice). Airgas currently purchases carbon dioxide from various producers, including CIC in the Southeastern United States, and redistributes the product to small-quantity users. Airgas currently has no production capability. The Board considered CIC's established production capabilities and production technology as a natural complement to Airgas' distribution capabilities. The Board considered that CIC would give Airgas the ability to independently source carbon dioxide, and possibly negotiate contractual supply agreements with other carbon dioxide producers in order to meet a portion of Airgas' demands for carbon dioxide throughout the United States. CIC would also bring to Airgas applications technologies and expertise in the food industry (specifically refrigeration, freezing and packaging) that would potentially allow Airgas to accelerate its growth in the carbon dioxide business outside of its current focus on traditional welding applications. 2. The complementary nature of CIC's and Airgas' businesses would provide expanded growth opportunities for both companies. CIC would be able to leverage Airgas' expansive customer base to gain access to a large number of potential new customers, an opportunity CIC does not currently possess on its own. Additionally, a combination of Airgas and CIC would provide Airgas with additional growth opportunities through potential acquisitions of regional bulk carbon dioxide distribution companies as well as large beverage distribution businesses. 3. CIC is a strong, well managed, highly profitable company that has successfully demonstrated consistent growth in a highly competitive industry. CIC would bring to Airgas a highly qualified team of managerial talent and an entrepreneurial history. J. Vernon Hinely, CIC's Chairman and President, is highly respected in the carbon dioxide industry and would bring to Airgas a measure of immediate credibility within the field. 4. The Airgas Board considered the potential increase in stockholder value that could result from the strength and growth opportunities of the combined companies. Although the Merger would 23 result in a minor dilution to Airgas' earnings per share in the first year of combined operations, the future expected accretion in earnings and cash flow, as well as an opportunity for accelerated growth, would make the Merger an attractive transaction for Airgas. After taking into consideration all of the factors set forth above, each of which was considered by Airgas' Board to support the Board's approval of the Merger, the Board of Directors determined that the Merger was in the best interests of the stockholders of Airgas. In reaching this determination, the Airgas Board considered numerous factors, including those listed above, as well as the terms and conditions of the Merger Agreement and information with respect to the financial condition, business operations and prospects of CIC, on both an historical and prospective basis. In view of the wide variety of factors considered in connection with its evaluation of the Merger, the Board of Directors did not find it practicable to, and did not, quantify or otherwise attempt to assign relative weights to the specific factors considered in reaching its decision. THE MERGER This section of the Proxy Statement/Prospectus is not a complete explanation or description of the Merger Agreement. It is qualified in its entirety by reference to the complete text of the Merger Agreement, a copy of which is attached to this Proxy Statement/Prospectus as Appendix A. Effect of Merger The Merger Agreement provides that when the Merger becomes effective the separate existence of CIC will cease and it will be merged with and into Airgas Subsidiary, with Airgas Subsidiary as the surviving corporation. Airgas Subsidiary has been formed solely for the purpose of effecting the Merger, has conducted no business and has no material assets or obligations other than the Merger Agreement. All of the properties, rights, privileges and powers of Airgas Subsidiary and CIC will be vested or continue to be vested in Airgas Subsidiary and be subject to all of the obligations of the Airgas Subsidiary and CIC. If the Merger Agreement is approved by the CIC shareholders, the Merger will be effective on the date that the Certificate of Merger is filed with the Secretary of the State of Delaware, provided that Articles of Merger are filed with the Department of State of Florida (the "Effective Time"). The foregoing filings are expected to be made on the Closing Date. It is currently expected that the Merger will occur during the quarter ending June 30, 1997. Either party may terminate the Merger Agreement if the Merger has not occurred on or before August 31, 1997. Conversion of Shares and Fractional Shares At the Effective Time, each outstanding share of Class A Common (other than shares as to which dissenters' rights have been perfected under Chapter 607 of the FBCA) will be converted, subject to proration and other limitations described herein, at the election of the holder, into the right to receive (i) the Class A Stock Consideration or (ii) the Class A Cash Consideration, and each outstanding share of 24 Class B Common will be converted into the right to receive (i) the Class B Stock Consideration or (ii) the Class B Cash Consideration. Class A Common. Each share of Class A Common will be converted into the -------------- right to receive, at each holder's election but subject to proration and other limitations, as described below, either the Class A Stock Consideration or the Class A Cash Consideration. The Class A Stock Consideration will be equal to that number of shares of Airgas Common Stock equal to the quotient of $43.00 divided by $__________ (the Class A Exchange Ratio). The right of holders of Class A Common to elect to receive the Class A Cash Consideration in the amount of $43.00 for each share of Class A Common in lieu of Class A Stock Consideration will be subject to proration and other limitations described herein and in the Merger Agreement, which provide generally that (i) the Class A Cash Consideration to be received by each holder cannot exceed 45% of the value of each of such holders' shares of Class A Common and (ii) the Aggregate Cash Consideration cannot exceed the Aggregate Stock Consideration (i.e. more than 50% of the Merger Consideration with allowance made for dissenters' rights, if any); although the proration and other limitations do not apply to the De Minimis Shares, as to which a holder may elect to receive 100% of his or her Merger Consideration in Class A Cash Consideration. Class B Common. Each share of Class B Common will be converted into the -------------- Class B Stock Consideration or the Class B Cash Consideration. The Class B Stock Consideration will be equal to that number of shares of Airgas Common Stock equal to the quotient of $205.00 divided by $__________________ (the Class B Exchange Ratio). The Class B Cash Consideration will be equal to $205.00 for each share of Class B Common. Each holder of shares of Class B Common will receive, the Class B Cash Consideration for 45% of the value of such holder's shares of Class B Common and the Class B Stock Consideration for 55% of his or her Class B Common, subject to the proration described below. Proration. The Aggregate Cash Consideration cannot exceed the Aggregate --------- Stock Consideration (i.e. more than 50% of the Merger Consideration). If the Aggregate Cash Consideration does not exceed the Aggregate Stock Consideration, each share of Class A Common for which a valid Cash Election is received, up to 45% of the value of a holder's shares of Class A Common, will be converted in the Merger into the right to receive the Class A Cash Consideration and 45% of the value of the Class B Common will be converted into the right to receive the Class B Cash Consideration. However, if the Aggregate Cash Consideration would (but for the adjustment in the following sentence) exceed the Aggregate Stock Consideration, the holder's percentage of Merger Consideration being paid as Cash Consideration will be reduced pro rata on a basis proportionate with the other CIC shareholders' cash percentage until the Aggregate Stock Consideration is equal to or exceeds the Aggregate Cash Consideration, provided that a holder's percentage of Cash Consideration cannot be reduced by more than two percentage points and that this proration does not apply to the De Minimis Shares. The Exchange Agent will distribute the Stock Consideration for any shares of CIC Common Stock which are not fully converted into the right to receive the Cash Consideration. In the event that between the date of the Merger Agreement and the Effective Time, the number of issued and outstanding shares of Airgas Common Stock is changed into a different number of shares or a different class of shares as a result of a stock split, reverse stock split, stock dividend, spin-off, 25 extraordinary dividend, recapitalization, reclassification or other similar transaction with a record date within such period, the Stock Consideration and the Cash Consideration will be appropriately adjusted. AS A RESULT OF THE PRORATION AND OTHER LIMITATIONS DESCRIBED HEREIN AND IN THE MERGER AGREEMENT, HOLDERS OF SHARES OF CLASS A COMMON WHO ELECT TO RECEIVE THE CASH CONSIDERATION MAY RECEIVE SHARES OF AIRGAS COMMON STOCK OR THE CASH CONSIDERATION IN AMOUNTS THAT MAY VARY FROM THE AMOUNTS SUCH HOLDERS ELECT TO RECEIVE. SUCH HOLDERS WILL NOT BE ABLE TO CHANGE THE AMOUNTS OF AIRGAS COMMON STOCK OR THE CASH CONSIDERATION ALLOCATED TO THEM. Fluctuations in Merger Consideration. On April __, 1997, the most ------------------------------------ recent practicable date prior to the date of this Proxy Statement/Prospectus, the closing sale price of the Airgas Common Stock on the NYSE was $____ per share. The market price of the Airgas Common Stock will depend on, and is expected to fluctuate with, among other things, the performance of Airgas, conditions (economic or otherwise) affecting the industrial gas and equipment distribution industries, interest rates, market conditions and other factors that generally influence the prices of securities. See "Investment Considerations - Fluctuations in Market Price of Airgas Common Stock." Fractional Shares. No fractional shares of Airgas Common Stock will be ----------------- issued in connection with the Merger. The number of shares of Airgas Common Stock issued to each CIC shareholder will be rounded up to the nearest whole number of shares. Election Procedures Elections. The Merger Agreement provides that each holder of shares of --------- Class A Common (other than treasury stock and shares that are owned by CIC, which shares will be cancelled and retired, without consideration, at the Effective Time, and shares as to which dissenters' rights have been exercised in accordance with and subject to the provisions of the FBCA) has the right, subject to the proration and other limitations described below, to submit a request specifying the number of shares of Class A Common owned by such holder, up to 45% of the value of each holder's shares, which such holder desires to have converted into cash in an amount equal to the Class A Cash Consideration (except that such prorations and limitations do not apply to the De Minimis Shares, as to which a 100% Cash Election may be made) (the "Cash Election"). All Cash Elections must be made on the Form of Cash Election, a copy of which is being mailed simultaneously with this Proxy Statement/Prospectus, and must be received and accepted by the Cash Election Deadline. Additional copies of the Form of Cash Election will be available upon request from the Bank of New York, which will be serving as the Exchange Agent (the "Exchange Agent"), by calling ______________. The purpose of the Cash Election is to permit holders of shares of Class A Common to express their preferences for the type of consideration they wish to receive in the Merger, provided that (i) holders do not have the right to request Cash Consideration for more than 45% of the value of their shares of Class A Common (except with respect to the De Minimis Shares) and (ii) the Aggregate Cash Consideration cannot exceed the Aggregate Stock Consideration. As discussed below, subject to the 26 proration and other limitations described herein, Cash Elections made by holders of Class A Common will be honored in issuing the Class A Cash Consideration after the Effective Time. ALTHOUGH THERE CAN BE NO ASSURANCE THAT A HOLDER OF SHARES OF CLASS A COMMON WHO DESIRES TO RECEIVE THE CASH CONSIDERATION WILL RECEIVE SUCH CONSIDERATION TO THE FULL EXTENT REQUESTED, A HOLDER OF SHARES OF CLASS A COMMON HAVING A PREFERENCE FOR THE CASH CONSIDERATION SHOULD MAKE AN ELECTION BECAUSE SHARES AS TO WHICH AN ELECTION HAS NOT BEEN MADE WILL RECEIVE THE STOCK CONSIDERATION IN THE MERGER. NEITHER THE CIC BOARD OF DIRECTORS NOR THE AIRGAS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO WHETHER THE SHAREHOLDERS SHOULD ELECT TO RECEIVE THE CASH CONSIDERATION OR THE STOCK CONSIDERATION IN THE MERGER. EACH SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION WITH RESPECT TO SUCH ELECTION. Failure of a holder of shares of Class A Common to complete properly and to return the Form of Cash Election to the Exchange Agent by the Cash Election Deadline, or failure to comply with the election procedures described in this Proxy Statement/Prospectus and the Form of Cash Election (including the instructions thereto), will cause all of such holder's shares of Class A Common to be converted into the Class A Stock Consideration without regard to the preference of such holder. Completing the Form of Cash Election. To make a proper Cash Election, a ------------------------------------ holder of shares of Class A Common must have delivered to the Exchange Agent at the address specified in the Form of Cash Election, prior to the Cash Election Deadline, a Form of Cash Election properly completed in accordance with the instructions thereon and signed by the record holder of the shares of Class A Common as to which such election is being made. Irrevocability of Cash Elections. Forms of Cash Election will become -------------------------------- irrevocable upon receipt by the Exchange Agent, unless the Exchange Agent, in its sole discretion, permits their amendment or withdrawal. However, all Cash Elections will be revoked automatically if the Exchange Agent is notified in writing by Airgas or CIC that the Merger Agreement has been terminated. Other Rules. Airgas and CIC have the right to make rules, not ----------- inconsistent with the terms of the Merger Agreement, governing the validity of any Form of Cash Election, the manner and extent to which Cash Elections are to be taken into account in making the determinations required by the Merger Agreement, the issuance and delivery of certificates for Airgas Common Stock for shares of CIC Common Stock converted into such stock in the Merger and the payment of cash for shares of Class A Common converted into the right to receive the Cash Consideration in the Merger. Delivery of CIC Common Stock Certificates. Certificates representing ----------------------------------------- the shares of Class A Common and shares of Class B Common to be converted into the right to receive the Merger Consideration should be surrendered by the Class A Common holders together with a completed and signed Form of Cash Election and the Class B Common holders together with the Class B Transmittal Letter, copies of which are enclosed with this Proxy Statement/Prospectus, as applicable. Delivery of Merger Consideration. Promptly after the later of the -------------------------------- Effective Time and the delivery by a holder of the certificates representing the CIC Common Stock and the Form of Cash 27 Election or Class B Transmittal Letter, as applicable, to the Exchange Agent, the Exchange Agent will distribute to the holder certificates representing the number of shares of Airgas Common Stock (excluding the shares subject to the Lockup/Escrow Agreement) into which the shares of CIC Common Stock were converted, plus cash in the amount of the Cash Consideration into which such holder's shares were converted (provided that a holder of Class A Common has made a valid Cash Election). The Exchange Agent will also deliver to the lockup/escrow agent certificates representing shares of Airgas Common Stock subject to the Lockup/Escrow Agreement and will deliver to the CIC Shareholders' Agent Committee (as defined below) the Lockup/Escrow Fee of 0.25% of each CIC shareholder's Merger Consideration to be placed in the Fees & Expenses Fund. The fund will be used to cover fees, costs, expenses and contingencies arising under the Lockup/Escrow Agreement and any other related agreement. To the extent that any monies in the fund are not used to satisfy such costs and expenses, they will be distributed to the former CIC shareholders, on a pro rata basis. Until surrendered, each outstanding certificate that represented shares of CIC Common Stock prior to the Effective Time will be deemed for all corporate purposes to evidence the right to receive the Merger Consideration into which such shares of CIC Common Stock have been converted, but will not entitle the holder to receive dividends or other distributions from Airgas or to vote such shares. Continuity of Interest Certificates Receipt of Continuity of Interest Certificates from CIC shareholders who will deposit shares of Airgas Common Stock into the Lockup/Escrow Fund which in the aggregate represent not less than 50% of the Merger Consideration is a condition to the consummation of the Merger. Holders of CIC Common Stock should return their completed and executed Continuity of Interest Certificates to CIC, together with their proxies, but in any event prior to the Closing of the Merger. If CIC does not receive such certificates, the Merger may not be consummated. The purpose of the certificate is to support the tax treatment of the Merger described herein. CIC Employee Options Effective upon consummation of the Merger, Airgas will assume options to acquire CIC Common Stock granted pursuant to CIC's Incentive Stock Option Plan, outstanding at the Effective Time (the "CIC Stock Options"). Thereafter, the former CIC Stock Options will, by virtue of the Merger, become exercisable to purchase (i) that number of shares of Airgas Common Stock, rounded up to the nearest whole share, determined by multiplying (x) the number of shares of CIC Common Stock subject to such option immediately prior to the Effective Time by (y) the Class A Exchange Ratio and (ii) at an exercise price per share equal to the exercise price per share pursuant to the CIC Stock Option divided by the Class A Exchange Ratio (rounded up or down to the nearest cent). After the Effective Time, each of such options will be fully vested and exercisable. Board of Directors and Management of Airgas Following the Merger The directors and executive officers of Airgas will continue in such capacities following the Merger. J. Vernon Hinely and John A. Toepke will continue to serve as executive officers of the Airgas Subsidiary, although they will not serve as executive officers of Airgas. See "Airgas - Management." 28 Neither Airgas nor CIC is aware of any material relationships between Airgas or its directors or executive officers and CIC or its directors or executive officers, except as contemplated by the Merger Agreement, or as described herein. See "-- Interests of Certain Persons in the Merger." Lockup/Escrow Agreement Except with respect to the De Minimis Shares, the Exchange Agent will deposit with the lockup/escrow agent (the "Lockup/Escrow Agent") on behalf of each CIC shareholder Airgas Common Stock valued at 55% (subject to adjustment up to 57% if the Cash Consideration is prorated) of such CIC shareholder's Merger Consideration after the reduction for the Lockup/Escrow Fee, which Airgas Common Stock will be placed in the "Lockup/Escrow Fund." For a Class A Common holder electing the maximum amount of Class A Cash Consideration, this means that his entire Class A Stock Consideration is placed in the Lockup/Escrow Fund (to the extent a Class A Common holder elects to receive more stock and less cash, his Class A Stock Consideration in excess of 55% (or up to 57% if prorated) is paid directly to him). All shares of Class B Stock Consideration will be deposited with the Lockup/Escrow Agent. The purpose of the Lockup/Escrow Fund is twofold: first, to support the tax treatment of the Merger described herein (the "Tax Purpose") and second, to provide a source for satisfaction of indemnification claims by Airgas or its affiliates (the "Indemnification Purpose"). Tax Purpose. Unless the Tax Purpose of the Lockup/Escrow Fund is ----------- earlier terminated as described below, no CIC shareholder will receive any of his portion of the Lockup/Escrow Fund until the second anniversary of the Effective Time. As soon as practicable after such date, each CIC shareholder's portion of the Lockup/Escrow Fund will be distributed to him to the extent it is not required to cover pending indemnification claims. The CIC shareholders will have the right to vote and receive dividends with respect to the Airgas Common Stock held in the Lockup/Escrow Fund. The Lockup/Escrow Agreement, however, prohibits the sale, assignment, pledge or other transfer by a CIC shareholder of his Airgas Common Stock while it is held in the Lockup/Escrow Fund. The Tax Purpose of the Lockup Escrow Fund will terminate prior to the second anniversary of the Effective Time if the parties obtain a legal opinion that an early distribution will not affect the tax treatment of the Merger described herein. Indemnification Purpose. Shares held in the Lockup/Escrow Fund may be ----------------------- used to satisfy indemnification claims up to $5,000,000 (after giving effect to a $500,000 deductible, except that certain claims, including for broker fees or those based on fraud are not subject to the deductible or $5,000,000 limitation). Any claim for indemnification will be offset or reduced by insurance proceeds received by Airgas or CIC as provided in the Merger Agreement. Claims not made by Airgas within one year of the date of the Closing will be forfeited. Timely claims that are not resolved at the time the Tax Purpose terminates will result in a portion of the Lockup/Escrow Fund sufficient to cover such claim (subject to any applicable cap and deductible) being held in the Lockup/Escrow Fund until resolution of such claim. At such time, shares not used to satisfy such claim will be distributed to the CIC shareholders. CIC Shareholders' Agent Committee Upon the CIC shareholders' approval of the Merger Agreement, a shareholders' agent committee, initially consisting of J. Vernon Hinely, John A. Toepke and Jonathan I. Wax (together with any successors, the "CIC Shareholders' Agent Committee") will be entitled to act on behalf of the CIC 29 shareholders in certain respects. The CIC Shareholders' Agent Committee will, among other things, act as the CIC shareholders' representative with regard to any claims for indemnification and may pay indemnification claims and certain fees and expenses related to the administration of the Merger Agreement and the Lockup/Escrow Agreement using the Fees and Expenses Fund or the Airgas Common Stock held pursuant to the Lockup/Escrow Agreement, all in accordance with the terms of the Merger Agreement and the Lockup/Escrow Agreement. The CIC Shareholders' Agent Committee will be empowered to endorse over any stock certificates held pursuant to the Lockup/Escrow Agreement to pay indemnification claims and to supplement the Fees and Expenses Fund. Representations and Warranties; Covenants and Agreements The Merger Agreement and certain documents delivered in connection with the Merger Agreement contain representations, warranties, covenants and agreements by CIC and Airgas regarding, among other things, the accuracy and completeness of certain information supplied in connection with the Merger. The Merger Agreement also provides that between the date of the Merger Agreement and the Effective Time CIC will conduct its business only in the ordinary and usual course of business and it will not, without Airgas' written consent, among other things, issue any securities; except in accordance with prior practice, pay any dividends; redeem or purchase any of its capital stock; amend its Articles of Incorporation or Bylaws; increase the compensation payable to officers or employees (except for increases in the ordinary course of business consistent with past practices); enter into or amend any material agreements relating to borrowing of money, except as may be necessary in order to consummate the Merger or in the ordinary course of business; without providing notice to Airgas, enter into agreements in excess of $100,000 each; transfer any intellectual property, except in the ordinary course of business; make any material acquisitions of assets except in the ordinary course of business; or guarantee the obligations of others except for negotiable instruments endorsed in the ordinary course of business. Conditions Precedent to the Consummation of the Merger; Waiver The respective obligations of CIC and Airgas to consummate the Merger are subject to a number of conditions, including (a) receipt by CIC of any necessary approvals of its shareholders in accordance with applicable law; (b) the absence of any order of a court, any statute, rule or regulation or proceeding before any court or governmental or regulatory authority that prevents or challenges consummation of the Merger; (c) the receipt of any permits, authorizations, approvals or consents necessary from third parties or governmental bodies; (d) the performance by CIC and Airgas of their obligations under the Merger Agreement and the accuracy in all material respects of the representations and warranties of CIC and Airgas contained therein; (e) the receipt of opinions of counsel to CIC and Airgas with respect to the organization, good standing and capital stock of CIC and Airgas, the validity and binding effect of the Merger, and other legal matters, including an opinion of counsel to Airgas with respect to certain tax matters; (f) the execution of employment agreements by two former executive officers of CIC; (g) the effectiveness of the Registration Statement of which this Proxy Statement/Prospectus is a part; (h) the absence of any material adverse change in the financial condition, results of operations or business of CIC or Airgas between March 12, 1997 through the Effective Time and (i) the receipt of Continuity of Interest Certificates in form and substance satisfactory to Airgas and the CIC Shareholders' Agent Committee from owners of such number of shares subject to the Lockup/Escrow Agreement which in the aggregate represent no less than 50% of the Merger Consideration. 30 It will not be known until immediately prior to the Effective Time whether all of the above conditions will have been satisfied. Except with respect to shareholder approval and other matters required by law, each of the parties to the Merger Agreement may, at its option, waive compliance with any condition to its obligation to consummate the Merger. Termination and Amendment The Merger Agreement may be terminated at any time prior to the Effective Time, before or after its adoption by the shareholders of CIC (a) by mutual consent of Airgas and CIC; (b) by either Airgas or CIC if the Merger has not been consummated by August 31, 1997; (c) by either Airgas or CIC if any representation or warranty has been breached by the other party in any material respect; (d) by Airgas or CIC if any condition to the other party's obligations to effect the Merger has not been met or waived; or (e) by either Airgas or CIC if any court has issued an order prohibiting the Merger. The Merger Agreement may be amended by the mutual consent of Airgas and CIC at any time; provided, however, that after approval by CIC's shareholders, no amendment may be made which under Florida law requires further approval by the shareholders of CIC without such further approval, such as amendments that (a) reduce or change the form of composition of the consideration which the CIC shareholders would be entitled to receive or (b) alter or change any term or condition that would result in a material adverse effect on the CIC shareholders. Interests of Certain Persons in the Merger At the closing of the Merger, Airgas will enter into employment agreements with J. Vernon Hinely and John A. Toepke. Under the new employment agreements, J. Vernon Hinely will serve as the Chairman, and John A. Toepke will serve as Executive Vice President, of the Airgas Subsidiary. The agreements contain confidentiality and non-competition agreements and permit the Airgas Subsidiary to terminate the employee's employment with cause. In the event that the employment is terminated without cause, the employee is entitled to severance benefits equivalent to the compensation he would have received for the remaining term of the agreement. All outstanding options to purchase CIC Common Stock will vest upon consummation of the Merger. Mr. Hinely and Mr. Toepke own options to acquire 15,000 and 10,000 shares of Class A Common, respectively. In addition, J. Vernon Hinely and/or companies owned by his sons will have an option to purchase CIC's dry ice operations in Miami and Jacksonville, Florida. If exercised, the purchasing company will pay a cash purchase price, enter in to a five-year liquid carbon dioxide supply contract with Airgas and grant Airgas a right of first refusal to acquire it or substantially all of its assets. On December 1, 1996, Airgas acquired the pipeline that supplies natural carbon dioxide to CIC's natural source facility in Star, Mississippi. This source of carbon dioxide gas is one of two major sources of supply for CIC. In July 1996 (before the acquisition by Airgas was completed), CIC amended its supply contract to increase the supply of carbon dioxide it receives from the pipeline. Under the contract, CIC has the right to purchase natural carbon dioxide at prices set forth in the contract, based in part on the volume of carbon dioxide purchased, until July 1, 2016. 31 Certain Federal Income Tax Consequences of the Merger The following discussion is a summary of certain material U.S. federal income tax consequences of the Merger to a shareholder of CIC that holds its shares of CIC Common Stock as a capital asset (a "Holder"). The discussion is based on laws, regulations, rulings and decisions in effect in the date hereof, all of which are subject to change (possibly with retroactive effect) and differing interpretations. This discussion is for general information only, and does not address all aspects of federal taxation and does not address aspects of federal income taxation that may be applicable to a Holder subject to special treatment under the Code (including banks, tax-exempt organizations, insurance companies, dealers in securities or foreign currency, and holders who are not U.S. persons (as defined in section 7701(a)(30) of the Code). In addition, the discussion does not address the state, local or foreign tax consequences of the Merger. EACH HOLDER OF CIC COMMON STOCK IS URGED TO CONSULT ITS TAX ADVISER WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE MERGER. Consummation of the Merger is conditioned upon the receipt by CIC of the opinion of McCausland, Keen & Buckman, counsel to Airgas, dated as of the Effective Time, substantially to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, the Merger will be treated as a "reorganization" within the meaning of Section 368(a) of the Code. If CIC is unable to obtain an opinion from tax counsel because of a concern that the Merger would not satisfy the "continuity of interest" requirement for reorganization treatment, the number of shares of Airgas Common Stock to be issued in the Merger will be increased to the minimum extent necessary to enable such opinion(s) to be issued and the amount of Cash Consideration will be reduced accordingly. Under the Merger Agreement there are certain limitations on the number of shares of Airgas Common Stock that Airgas would be required to issue. See "--Election Procedures." Exchange of CIC Common Stock. As discussed below, the U.S. federal ---------------------------- income tax consequences of the Merger to a Holder generally will depend on whether the Holder exchanges its CIC Common Stock for cash, Airgas Common Stock, or a combination thereof. Exchange Solely for Airgas Common Stock. If pursuant to the Merger, a --------------------------------------- Holder exchanges all of the shares of CIC Common Stock actually owned by it solely for shares of Airgas Common Stock, such Holder will not recognize any gain or loss. The aggregate adjusted tax basis of the shares of Airgas Common Stock received in that exchange will be equal to the aggregate adjusted tax basis of the shares of CIC Common Stock surrendered therefor, and the holding period of such Airgas Common Stock will include the period during which such shares of CIC Common Stock were held. If the Holder has differing bases or holding periods in respect of its shares of CIC Common Stock, it should consult its tax adviser prior to the exchange with regard to identifying the bases or holding periods of the particular shares of Airgas Common Stock received in the exchange. Exchange for Airgas Common Stock and Cash. If pursuant to the Merger, a ----------------------------------------- Holder exchanges all of the shares of CIC Common Stock actually owned by it for a combination of Airgas Common Stock and cash, such holder will realize gain or loss equal to the difference between (i) the sum of cash and 32 the fair market value of Airgas Common Stock received and (ii) its adjusted tax basis in the shares of CIC Common Stock surrendered. Such gain will only be recognized to the extent of the cash received, however, and no loss will be recognized on the exchange. For this purpose, gain or loss must be calculated separately for each identifiable block of shares surrendered in the exchange, and a loss realized on one block of shares cannot be used to offset a gain realized on another block of shares. Any recognized gain will generally be long-term capital gain if the Holder's holding period with respect to the stock is more than one year, and otherwise will be short-term capital gain. If, however, the cash received has the effect of the distribution of a dividend, the gain would be treated as a dividend to the extent of the Holder's ratable share of CIC's accumulated earnings and profits. See "Possible Treatment of Cash as a Dividend." The 0.25% of each holder's Merger Consideration that is deposited into the Fees and Expenses Fund will be treated as cash and taxed accordingly. The aggregate tax basis of Airgas Common Stock received by a Holder that exchanges its shares of CIC Common Stock for a combination of Airgas Common Stock and cash pursuant to the Merger will be equal to the aggregate adjusted tax basis of the shares of CIC Common Stock surrendered therefor, decreased by the cash received and increased by any recognized gain (whether capital gain or ordinary income). The holding period of such Airgas Common Stock will include the holding period of the shares of CIC Common Stock surrendered therefor. If a Holder has differing bases or holding periods in respect of its shares of CIC Common Stock, it should consult its tax adviser prior to the exchange to identify the particular shares of CIC Common Stock to be surrendered in the exchange and the particular bases or holding periods of the particular shares of Airgas Common Stock it receives in the exchange. Possible Treatment of Cash as a Dividend. In general, the determination ---------------------------------------- of whether the gain recognized in the exchange will be treated as capital gain or dividend income depends upon whether and to what extent the exchange reduces the Holder's deemed percentage stock ownership of Airgas. For purposes of this determination, the Holder is treated as if it first exchanged all of its shares of CIC Common Stock solely for Airgas Common Stock and then Airgas immediately redeemed (the "Deemed Redemption") a portion of such Airgas Common Stock in exchange for the cash the holder actually received. The gain recognized in the exchange followed by a Deemed Redemption will be treated as capital gain if the Deemed Redemption is (i) "substantially disproportionate" with respect to the holder or (ii) "not essentially equivalent to a dividend." The Deemed Redemption, generally, will be "substantially disproportionate" with respect to a Holder if the percentage described in (ii) below is less than 80% of the percentage described in (i) below. Whether the Deemed Redemption is "not essentially equivalent to a dividend" with respect to a Holder will depend upon the Holder's particular circumstances. At a minimum, however, in order for the Deemed Redemption to be "not essentially equivalent to a dividend," the Deemed Redemption must result in a "meaningful reduction" in the Holder's deemed percentage stock ownership of Airgas. In general, that determination requires a comparison of (i) the percentage of the outstanding stock of Airgas that the Holder is deemed actually and constructively to have owned immediately before the Deemed Redemption and (ii) the percentage of the outstanding stock of Airgas that is actually and constructively owned by the Holder immediately after the Deemed Redemption. In applying the foregoing tests, a stockholder is deemed to own stock owned and, in some cases, constructively owned by certain family members, certain estates and trusts of which the Holder is a beneficiary, certain affiliated entities, and stock subject to an option actually or constructively owned by the Stockholder or such other persons. As these rules are complex, each Holder that may be subject to these rules should consult its tax adviser. The Internal 33 Revenue Service has ruled that a relatively minor reduction in the percentage stock ownership of a minority stockholder in a publicly held corporation whose relative stock interest is minimal and who exercises no control with respect to corporate affairs is a "meaningful reduction." Accordingly, in most circumstances, gain recognized by a Holder that exchanges its shares of CIC Common Stock for a combination of Airgas Common Stock and cash generally will be long-term capital gain or loss if the Holder's holding period with respect to the stock is more than one year, and otherwise will be short-term capital gain. Backup Withholding. Unless a Holder complies with certain reporting or ------------------ certification procedures or is an "exempt recipient" (i.e., in general, corporations and certain other entities), the Holder may be subject to withholding tax of 31% with respect to any cash payments received pursuant to the Merger. A foreign Holder should consult its tax adviser with respect to the application of withholding rules to it with respect to any cash payments received pursuant to the Merger. Federal Income Tax Information for CIC Optionholders. The assumption or ---------------------------------------------------- substitution of a compensatory stock option of CIC by Airgas should not generally result in the recognition of gain or loss to the holder thereof. Incentive stock options ("ISOs") of Airgas received in exchange for CIC ISOs should be treated as incentive stock options for purposes of Section 422 of the Code, provided no additional benefit is received by the optionholders in connection with the assumption or substitution of the options by Airgas. If an additional benefit is received, the assumed or substituted option will be treated as a nonstatutory stock option. The optionee should not recognize any ordinary income for federal income tax purposes upon the exercise of an ISO. Upon a sale of Airgas Common Stock, the tax treatment to the optionee will depend primarily upon whether the optionee has met certain holding period requirements at the time of sale. In addition, as discussed below, the exercise of an ISO may subject the optionee to alternative minimum tax liability in the year of exercise. If an optionee exercises an ISO and does not dispose of the shares received within two years of the date of the grant of such option and within one year after transfer of the shares to the optionee, whichever ends later, any gain realized upon disposition will be treated as long-term capital gain, and any loss will be long-term capital loss. If the optionee disposes of the shares either within two years after the date an ISO is granted or within one year after an ISO was exercised, such disposition will be treated as a disqualifying disposition and an amount equal to the lesser of (1) the fair market value of the shares on the date of exercise less the purchase price for said shares or (2) the amount realized on the disposition less the purchase price for said shares, will be taxed as ordinary income in the taxable year in which the disposition occurs. Any such ordinary income will increase the optionee's tax basis for purposes of determining gain or loss on the sale or exchange of such shares. The excess, if any, of the amount realized upon disposition of shares over the basis of such shares will be treated as short-term or long-term capital gain, as the case may be, and any loss realized upon the disposition will be treated as a capital loss. The exercise of an ISO may subject an optionee to alternative minimum tax liability in the year of exercise because the excess of the fair market value of the shares at the time an ISO is exercised over the option price is an adjustment in determining an optionee's alternative minimum taxable income for 34 such year. Consequently, an optionee may be obligated to pay alternative minimum tax in the year the optionee exercises an ISO. An optionee who makes a disqualifying disposition of shares acquired upon exercise of an ISO must still treat such excess as an adjustment in determining alternative minimum taxable income. In the case of a disqualifying disposition which occurs after the year of exercise, an individual would be required to recognize alternative minimum tax in the year of exercise and ordinary income in the year of such disqualifying disposition in an amount determined under the rule described above. In addition, an optionee's alternative minimum tax liability is affected by the availability of a special credit, a basis adjustment and other complex rules. If an optionee receives a nonstatutory stock option, upon the exercise of such option the optionee will recognize ordinary income for federal income tax purposes measured by the excess, if any, of the then fair market value of the Airgas Common Stock at the date of exercise over the option exercise price. Upon a sale of any Airgas Common Stock acquired pursuant to the exercise of a nonstatutory stock option, the difference between the sales price and the optionee's basis in the shares will be treated as a long-term capital gain or loss if the optionee's holding period with respect to the stock is more than one year, and otherwise will be short term capital gain or loss. The optionee's tax basis for determination of gain or loss upon any subsequent disposition of shares acquired upon the exercise of a nonstatutory stock option will be the amount paid for such shares plus any ordinary income recognized as a result of the exercise of such option. THE FOREGOING DISCUSSION IS ONLY A SUMMARY OF THE MORE SIGNIFICANT EFFECTS OF THE U.S. FEDERAL INCOME TAX LAWS UPON THE MERGER CONSIDERATION TO BE RECEIVED IN THE MERGER, AND THE AIRGAS OPTIONS AND AIRGAS COMMON STOCK ISSUABLE UPON EXERCISE OF THE AIRGAS OPTIONS AND DOES NOT PURPORT TO BE COMPLETE. REFERENCE SHOULD BE MADE TO THE APPLICABLE PROVISIONS OF THE CODE AND THE INCOME TAX REGULATIONS PROMULGATED THEREUNDER. IN ADDITION, THIS SUMMARY DOES NOT DISCUSS THE PROVISIONS OF THE INCOME TAX LAWS OF ANY STATE OR FOREIGN COUNTRY IN WHICH AN OPTIONEE MAY RESIDE. EACH OPTIONEE SHOULD CONSULT WITH SUCH OPTIONEE'S OWN ADVISER CONCERNING THE FEDERAL (AND ANY STATE OR LOCAL) INCOME TAX CONSEQUENCES, INCLUDING THE APPLICABILITY OF ALTERNATIVE MINIMUM TAX TO THE OPTIONEE'S CIRCUMSTANCES. Accounting Treatment The Merger is to be accounted for under the purchase method of accounting in accordance with generally accepted accounting principles, whereby the purchase price will be allocated based on the fair value of the assets acquired and the liabilities assumed. Such allocations will be based upon valuations that have not been finalized. The excess of such purchase price over the amounts so allocated will be recorded as goodwill. See "Unaudited Pro Forma Financial Information." 35 Expenses of the Merger Airgas and CIC will pay their respective costs in connection with the Merger. If for any reason the Merger is not consummated and the Merger Agreement is terminated, each party shall bear the expenses incurred by it in connection with the proposed Merger. Airgas estimates that the maximum amount of funds required to pay the Cash Consideration will be approximately $18,405,000 Resales of Airgas Common Stock by Former CIC Shareholders Airgas Common Stock acquired by persons who may be deemed to be CIC affiliates may be resold in transactions permitted by Rule 145 under the Securities Act, pursuant to an effective registration statement under the Securities Act or in transactions exempt from registration. Rule 145, as currently in effect, imposes restrictions on the manner in which such affiliates may make resales and also on the quantity of resales which such affiliates, and others with whom they may act in concert, may make within any three-month period. Persons who may be deemed to be affiliates of CIC include officers, directors and certain of the larger holders of CIC's Common Stock. CIC shareholders who are not deemed to be affiliates of CIC or Airgas may sell their Airgas Common Stock without restriction. Dissenters' Rights Each shareholder of CIC Common Stock is entitled to dissent from the Merger and obtain payment of the Fair Value of his shares of CIC Common Stock pursuant to Sections 607.1301, 607.1302 and 607.1320 of the FBCA, copies of which are attached hereto as Appendix B. Any shareholder who does not timely and completely comply with the provisions of the FBCA will be bound by the terms of the Merger Agreement and will be entitled to receive Airgas Common Stock or cash, or a combination thereof, as applicable, as provided in the Merger Agreement. The term ("Fair Value") means the value of shares of CIC Common Stock as of the close of business on the day prior to the date on which the shareholder vote authorizing the Merger is taken (the Special Meeting), exclusive of any appreciation or depreciation in anticipation of the Merger (unless exclusion would be inequitable). The Fair Value of the CIC Common Stock may be more or less than the consideration that a holder of such stock would be entitled to receive in the Merger. The following is a summary of the procedures to be followed by CIC shareholders who wish to dissent from the Merger. It does not purport to be a complete statement of the proceedings to be followed by CIC shareholders desiring to exercise dissenters' rights of appraisal. In the event of a conflict between this summary and the provisions of the FBCA, the FBCA shall prevail. Because exercise of such rights requires strict adherence to the statutory provisions referred to in this summary, each CIC shareholder who may desire to exercise such rights should adhere to the provisions of such laws and consult with such holder's legal advisers. (1) Pursuant to Section 607.1320 of the FBCA, any shareholder who wishes to assert dissenters' rights (i) must deliver to CIC prior to the shareholders' vote on the Merger written notice of his intent to demand payment of the Fair Value for his shares if the Merger is effectuated (a "Notice of 36 Intent"), and (ii) must not vote his shares in favor of the Merger. A proxy or vote against the Merger does not constitute a Notice of Intent. A shareholder may dissent as to less than all the shares registered in his name. If he does so, the shares as to which he dissents and the other shares will be treated as though they were registered in the names of different shareholders. (2) Within ten days of the shareholder approval of the Merger, the Airgas Subsidiary, as the surviving corporation in the Merger (the "Surviving Corporation"), will give written notice of such approval to each shareholder who timely filed a Notice of Intent. (3) Within twenty days after the giving of such notice to such shareholders, each shareholder electing to assert dissenters' rights shall file with the Surviving Corporation a notice of such election stating his name and address, the number, classes and series of shares as to which he dissents, and a demand for payment of the Fair Value of his shares (a "Notice of Election"). Any shareholder filing a Notice of Election is required to deposit his share certificates with the Surviving Corporation simultaneously with filing the Notice of Election. Once a shareholder has filed a Notice of Election he is no longer entitled to vote or exercise any of the other rights of a shareholder. The Notice of Election may be withdrawn in writing by the shareholder at any time before the Surviving Corporation makes the offer of payment described below; once the offer of payment is made, a Notice of Election to dissent may not be withdrawn unless the Surviving Corporation consents. (4) Within ten days after the expiration of the period in which shareholders electing to assert dissenters' rights must file the Notice of Election, or within ten days after the Merger is effected, whichever is later, the Surviving Corporation will make a written offer to pay each dissenter a specified price deemed by the Surviving Corporation to be the Fair Value of his shares. The offer of payment will be accompanied by a recent balance sheet of CIC and a profit and loss statement covering the twelve-month period ending as of such balance sheet. (5) If the dissenter accepts the Surviving Corporation's offer within 30 days of its making, the Surviving Corporation shall pay him for his shares within 90 days after the making of the offer or the consummation of the Merger (whichever is later), and he shall cease to have any interest in those shares thereafter. (6) If the Surviving Corporation fails to make a timely offer, or if it makes the offer and the dissenting shareholder fails to accept the offer within 30 days thereafter, then the Surviving Corporation, within 30 days after receipt of a written demand from any dissenting shareholder given within 60 days after the Merger, shall, or at its election at any time within such 60 days, may file an action in any court of competent jurisdiction in Broward County, Florida, requesting that the Fair Value of the shares be determined by the court. If the Surviving Corporation fails to institute such a proceeding, then any dissenting shareholder may file such an action in the name of the Surviving Corporation. Each shareholder whose demand remains unsettled shall be made a party to the proceeding and shall be entitled to judgment for the amount which the court finds to be the Fair Value of his shares. The court may appoint one or more appraisers to receive evidence and recommend a decision on the question of Fair Value. (7) The court shall determine all costs of the proceeding, including the compensation of appraisers appointed by the court, but not including fees and expenses of attorneys and experts of the 37 parties. Such costs shall be assessed against the Surviving Corporation, except that the court may assess the costs against all or some of the dissenters to whom the Surviving Corporation made an offer of payment, in amounts the court finds equitable, to the extent the court finds any dissenters acted arbitrarily, vexatiously or not in good faith in failing to accept the Surviving Corporation's offer. If the Fair Value of the shares is determined to be materially higher than the amount the Surviving Corporation offered to pay or if no offer was made, the court may award any dissenting shareholder such sum that the court determines is reasonable compensation to any attorney or expert employed by the dissenting shareholder in the proceeding. (8) Notwithstanding the foregoing, a shareholder will not be entitled to be paid the Fair Value of his shares, and will have all his rights as a shareholder reinstated as of the date of filing of his Notice of Election, including any rights to intervening distributions or dividends and to payment of the consideration that would otherwise be payable to such shareholder as provided in the Merger Agreement, if (i) his Notice of Election is withdrawn as provided above, (ii) the Merger is abandoned, rescinded or the shareholders revoke the authority to effect it, (iii) no petition for a determination of Fair Value by a court is made within 60 days after the Merger, or (iv) the court determines that such shareholder is not entitled to dissenters' rights. Airgas shareholders will not have dissenters' rights in connection with the Merger. Comparison of Shareholders' Rights The rights of Airgas stockholders are governed by Airgas' Amended and Restated Certificate of Incorporation (the "Airgas Certificate"), Airgas' Bylaws, and by the DGCL. The rights of CIC shareholders are currently governed by the CIC Articles of Incorporation, CIC's Bylaws, and by the FBCA. After the Merger, the rights of CIC shareholders who receive Airgas Common Stock in the Merger will thereafter be governed by the Airgas Certificate, Airgas' Bylaws, and by the DGCL. The following discussion describes the material differences in the rights of stockholders of Airgas and shareholders of CIC. Board of Directors; Removal; Filling Vacancies ---------------------------------------------- Airgas. Article III, Section 1 of the Airgas Bylaws provides that the ------ number of directors which shall comprise the full Board of Directors of the corporation shall consist of no less than seven and no more than thirteen members, as shall be fixed by resolution of the Board of Directors. There are currently nine members on the Airgas Board of Directors. The Airgas Bylaws, pursuant to Article III, Section 4, provide that the entire Board of Directors or any individual Director may be removed without cause from office by the holders of 67% of the combined voting power of the then outstanding shares entitled to vote, subject to any rights of holders of any preferred stock. Vacancies in the Board of Directors may be filled by a majority of the remaining Directors in office, though less than a quorum, or by a sole remaining Director. CIC. Article VII of CIC's Articles of Incorporation requires CIC to --- have not less than three directors and to have an odd number of directors. Article II, Section 1 of CIC's Bylaws fixes the number of directors at seven, one of which must be resident of the State of Florida. Article III of CIC's Articles 38 of Incorporation stipulates that the holders of Class B Common are entitled to elect a majority of the Board of Directors. Any director may be removed by the shareholders at any time, with or without cause. Vacancies on CIC's Board may be filled, pursuant to Section 9 of Article II of CIC's Bylaws, by a majority of the directors then in office, and such chosen director shall hold office until his successor is duly elected or qualified. Action by Written Consent; Special Meetings ------------------------------------------- Airgas. The Airgas Certificate provides that Airgas stockholders may ------ not act by written consent without a stockholders' meeting for which notice of such meeting has been provided to Airgas stockholders. Special meetings of Airgas stockholders may be called at any time and for any purposes but only by the Board of Directors pursuant to a resolution approved by the Board or pursuant to the request of holders of 33% of the combined voting power of the then outstanding shares entitled to vote. CIC. Action by the shareholders of CIC may only be taken at a meeting --- of the shareholders. Section 3 of Article I of the CIC Bylaws provides that special meetings of the shareholders may be called for any purpose by a majority of the Board of Directors or, if shareholders may be called for any purposes by a majority of the Board of Directors or, if requested in writing, by shareholders holding at least 50% of the outstanding capital stock. Vote Required for Certain Transactions -------------------------------------- DGCL. Under the DGCL, a merger, consolidation or sale of all or ---- substantially all of a corporation's assets generally must be approved by the stockholders of each constituent corporation by the affirmative vote of the holders of a majority of the outstanding shares entitled to vote on the transaction. Stockholders of the surviving corporation need not approve the merger if: (i) the corporation's certificate of incorporation will not be amended as a result of the merger; (ii) each share of the corporation's stock outstanding immediately prior to the effective date of the merger will be an identical outstanding or treasury share of the corporation after the effective date of the merger; and (iii) either no shares of the corporation's common stock and no securities convertible into such stock will be issued pursuant to the merger or the authorized unissued shares or treasury shares of the corporation's common stock to be issued pursuant to the merger do not exceed 20% of the shares of the corporation's common stock outstanding immediately prior to the effective date of the merger. FBCA. In connection with the approval of proposed mergers and share ---- exchanges, the FBCA generally requires the affirmative vote of a majority of all votes entitled to be cast on the plan for such transaction by all shares entitled to vote on the plan, voting as a single group, and the affirmative vote of a majority of the votes entitled to be cast by holders of shares of each voting group entitled to vote as a group under the corporation's articles of incorporation. Unless the articles of incorporation or the Board of Directors requires a greater vote or a vote by voting groups, the sale of all or substantially all of the assets of a corporation must be approved by the affirmative vote of a majority of all the votes entitled to be cast on the matter. Under the FBCA, stockholders of the surviving corporation need not approve a merger if: (i) the articles of incorporation of the corporation will not differ from its articles before the merger (except for certain amendments permitted under the FBCA without shareholder approval); (ii) each share of stock of the corporation outstanding immediately before the effective date of the merger is to be an identical outstanding share immediately after the merger; and (iii) the number 39 and kind of shares outstanding immediately after the merger; plus the number and kind of shares issuable as a result of the merger and by conversion of securities issued pursuant to the merger or the exercise of rights and warrants issued pursuant to the merger, will not exceed the total number and kind of shares of the surviving corporation authorized by its articles of incorporation immediately before the merger. Both the DGCL and the FCBA permit corporations to require higher votes for approval of the transactions described above in their articles of incorporation or bylaws. Business Combinations --------------------- Airgas. The Airgas Certificate provides that any "Business Combination" ------ (hereinafter referred to as an "Airgas Business Combination") involving Airgas and a person who beneficially owns, directly or indirectly, 20% or more of Airgas' capital stock (an "Airgas Interested Stockholder") entitled to vote generally for the election of directors ("Voting Stock") must be approved by the affirmative vote of not less than sixty-seven percent (67%) of the Voting Stock (the "Airgas Voting Requirement"). The Airgas Voting Requirement does not apply if the majority of the Disinterested Directors (defined as a member of the Board of Directors of Airgas, other than the Airgas Interested Stockholder, who was a director prior to the time the Interested Stockholder became an Interested Stockholder, or any director who was recommended for election by the Disinterested Directors) approve the Airgas Business Combination or certain conditions regarding price and procedure have been satisfied. CIC . The CIC Certificate and its Bylaws do not provide for a "Business --- Combination" provision. DGCL. Section 203 of the DGCL, which is applicable to Airgas as a ---- Delaware corporation, provides that, subject to certain exceptions specified therein, a corporation shall not engage in any business combination with any "interested stockholder" for a three-year period following the date that such stockholder becomes an interested stockholder unless (i) prior to such date, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; (ii) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding shares held by directors who are also officers and employee stock purchase plans in which employee participants do not have the right to determine confidentially whether plan shares will be tendered in a tender or exchange offer); or (iii) on or subsequent to such date, the business combination is approved by the board of directors of the corporation and by the affirmative vote at an annual or special meeting, and not by written consent, of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder. Except as specified in Section 203 of the DGCL, an interested stockholder is defined to include (a) any person that is the owner of 15% or more of the outstanding voting stock of the corporation or is an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation, at any time within three years immediately prior to the relevant date and (b) the affiliates and associates of any such person. Under certain circumstances, Section 203 of the DGCL may make it more difficult for a person who would be an "interested stockholder" to effect various business combinations with a corporation for a three-year period, although the corporation's certificate of incorporation or stockholders may elect to exclude a corporation from the restrictions imposed thereunder. 40 FBCA. Section 607.0901 of the FBCA, informally known as the "Affiliated ---- Transactions Statute," provides that the approval of the holders of two-thirds (2/3) of the voting shares of a company, other than the shares owned by an Interested Shareholder (as defined below), would be required to effectuate certain transactions, including without limitation a merger, consolidation, sale of assets, sale of shares, liquidation or dissolution of the corporation, and reclassification of securities involving a corporation and an Interested Shareholder (an "Affiliated Transaction"). An "Interested Shareholder" is defined as the beneficial owner of 10% of the voting shares outstanding. The foregoing special voting requirement is in addition to the vote required by any other provision of the FBCA or a corporation's articles of incorporation. The special voting requirement does not apply in any of the following four circumstances: (i) the Affiliated Transaction is approved by a majority of the corporation's disinterested directors; (ii) the Interested Shareholder has owned 80% of the corporation's voting stock for five years: (iii) the Interested Shareholder owns more than 90% of the corporation's voting shares; (iv) the corporation has not had more than 300 shareholders of record at any time during the three years preceding the announcement of the event; (v) the corporation is an investment company registered under the Investment Company Act of 1940; or (vi) all of the following conditions are met: (a) the cash and fair value of other consideration to be paid per share to all holders of voting shares equals the highest per share price calculated pursuant to various methods set forth in Section 607.0901; (b) the consideration to be paid in the Affiliated Transaction is in the same form as previously paid by the Interested Shareholder; (c) during the portion of the three years proceeding the announcement date that the Interested Shareholder has been an Interested Shareholder, except as approved by a majority of the disinterested directors, there shall have been no default in payment of preferred stock dividends, no decrease in annual stock dividends, no increase in annual dividends necessary to reflect any transaction which has the effect of reducing outstanding stock, no increase in the voting shares owned by the Interested Shareholder, and no benefit to the Interested Shareholder from loans, guaranties or other financial assistance or tax advantages provided by the corporation. This requirement is not applicable to the Merger because, as provided by Section 607.0901, a majority of CIC's "disinterested" directors have approved the Merger, the Merger Agreement and the transactions contemplated thereby. Section 607.0902 of the FBCA, known informally as the "Florida Control Share Acquisition Statute," provides that the voting rights to be accorded Control Shares (as defined below) of a Florida corporation that has (i) 100 or more shareholders; (ii) its principal place of business, its principal office or substantial assets in Florida, and (iii) either (a) more than 10% of its shareholders residing in Florida, (b) more than 10% of its shares owned by Florida residents or (c) 1,000 shareholders residing in Florida, must be approved by a majority of each class of voting securities of the corporation before the Control Shares will be granted any voting rights. "Control Shares" are defined in the FBCA to be shares of the issuing corporation owned by such person, that would entitle such person to exercise, either directly or indirectly, voting power within any of the following ranges; (1) 20% or more but less than 33% of all voting power of the corporation's voting securities, (2) 33% or more but less than a majority of all voting power of the corporation's voting securities or (3) a majority or more of all of the voting power of the corporation's voting securities. A "Control Share Acquisition" is defined in the FBCA as an acquisition, either directly or indirectly, by any person of ownership of, or the power to direct the exercise of voting power with respect to, outstanding Control Shares. Section 607.0902 also indicates that, if provided in the articles of incorporation or bylaws of a corporation, Control Shares may be redeemed by the corporation for fair value in certain circumstances. Finally, unless otherwise provided in a corporation's 41 articles of incorporation or bylaws prior to a Control Share Acquisition, in the event Control Shares are accorded full voting rights and the acquiring person has acquired Control Shares with a majority or more of all voting power, all shareholders shall have dissenters' rights. This requirement is not applicable to the Merger because, as provided by Section 607.0902, (a) the transaction was unanimously approved by the CIC Board, and )(b) the transaction will be consummated pursuant to a statutory merger and CIC is a party to the Merger Agreement. Amendment of Certificate of Incorporation, Articles of Incorporation -------------------------------------------------------------------- and Bylaws - ---------- Airgas. Articles 5 and 6 of the Airgas Certificate provide that the ------ amendment or repeal of such articles shall require the affirmative vote of the holders of at least 67% of the voting power of the outstanding shares of capital stock entitled to vote generally for directors. In addition, so long as any shares of Non-Voting Preferred Stock are outstanding, if an amendment would change the rights and preferences of the Non-Voting Preferred Stock, Article 4 may not be amended without the approval of the holders of a majority of the outstanding shares of Non-Voting Preferred Stock voting as a class. Article 8 of the Airgas Certificate provides that, except as described above, the Airgas Certificate may be amended, altered or repealed as authorized by the DGCL and in the Airgas Certificate. Pursuant to the DGCL, Airgas' Certificate may be amended if the Board of Directors adopts a resolution setting forth the proposed amendment, declares its advisability and calls a stockholders' meeting for consideration of such amendment. At the meeting, the amendment must be approved by a majority of the outstanding shares entitled to vote. Article IX of Airgas' Bylaws provides that the Bylaws may be amended or repealed by the vote of holders of a majority of the outstanding shares entitled to vote, except that amendment of Article III (relating to Directors) requires the affirmative vote of the holders of 67% of the voting power of all outstanding shares entitled to vote generally in the election of directors. Article IX also provides that, subject to the DGCL and the Airgas Certificate, the Board of Directors may adopt, amend or repeal the Bylaws. CIC. Pursuant to the FBCA, a majority of the shareholders entitled to --- vote must approve amendments to the articles of incorporation, except for certain types of amendments that the corporation's board of directors may adopt without shareholder approval, unless precluded from doing so in the corporation's articles of incorporation. Article X of CIC's Articles of Incorporation requires each amendment to the Articles of Incorporation to be approved by the Board of Directors and by a majority of the stock entitled to vote thereon, unless all directors and shareholders sign a statement indicating their intention that a certain amendment be made. Article VIII of the CIC Bylaws provides that the CIC Bylaws may be amended, altered, repealed or added to by the affirmative vote of the shareholders representing two-thirds of the capital stock Indemnification --------------- Airgas. Article VII of Airgas' Bylaws provide indemnification by Airgas ------ to the full extent permitted by law, under the DGCL, to any director or officer of Airgas who is made or threatened to be made a party to any action or proceeding by reason of their position. Airgas' Certificate and Bylaws provide for the limitation of the liability of its directors, in accordance with the DGCL, to Airgas or its 42 stockholders for monetary damages for breach of fiduciary duty except where such exemption is not permitted under the DGCL. CIC. CIC's Bylaws do not provide for indemnification by CIC of CIC's --- directors or officers. However, under Section 607.0850 of the FBCA, a director, officer, employee or agent of CIC is entitled to indemnification if he has been successful in defense of any proceeding made against him by reason of his position except where such indemnification is not permitted by the FBCA. Before such indemnification can be paid, it must be determined to be permissible by a corporation's Board of Directors, a committee of the Board composed of two or more directors not a party to the proceeding, by independent legal counsel or by the shareholders. The party seeking indemnification may apply to the court conducting the proceeding, the circuit court or a court of competent jurisdiction for indemnification or advancement of expenses or both if the corporation fails to so provide. CIC may not indemnify its directors and officers with respect to any action, suit, or proceeding by or in the right of CIC where the person has been adjudged to be liable for negligence or misconduct in the performance of his duty to CIC unless indemnity is deemed proper by the court in which the action or suit was brought. Subject to limited exceptions, section 607.0831 of the FBCA exonerates directors from personal liability for monetary damages for any vote, decision, statement or failure to act, regarding corporate policy or management. Other Items ----------- Airgas. Article 7 of the Airgas Certificate provides for the prevention ------ of the payment of greenmail by requiring that the holders of at least a majority of the combined voting power of the Airgas Voting Stock, voting as a single class, approve any direct or indirect purchase or other acquisition by Airgas of any voting stock of any class from any Airgas Interested Stockholder. Airgas has adopted a preferred stock purchase rights plan. See "Airgas - Description of Capital Stock - Rights Agreement." CIC. CIC has not adopted a stock purchase rights plan. --- 43 UNAUDITED PRO FORMA FINANCIAL INFORMATION The following Unaudited Pro Forma Combined Condensed Balance Sheet at December 31, 1996, and the Unaudited Pro Forma Combined Condensed Statements of Earnings for the year ended March 31, 1996 and the nine months ended December 31, 1996 combine information for Airgas and CIC and include unaudited pro forma adjustments as described in the accompanying notes. The Unaudited Pro Forma Combined Condensed Statements of Earnings give effect to the proposed Merger as if it had occurred at April 1, 1995 for the year ended March 31, 1996 and April 1, 1996 for the nine months ended December 31, 1996. The Unaudited Pro Forma Combined Condensed Balance Sheet gives effect to the Merger as if it had occurred at December 31, 1996. The Pro Forma Combined Condensed Financial Statements are based on historical financial statements of Airgas and CIC, giving effect to the Merger, and applying the purchase method of accounting and the assumptions and adjustments as discussed in the accompanying notes to the Pro Forma Combined Condensed Financial Statements. These Pro Forma Combined Condensed Financial Statements are based upon (i) for Airgas: the audited consolidated financial statements as of March 31, 1996 and for the year then ended and the unaudited consolidated financial statements as of December 31, 1996 and for the nine months then ended, and (ii) for CIC: the audited financial statements as of December 31, 1995 and for the year then ended and the unaudited financial statements as of September 30, 1996 and for the nine months then ended. These statements are based, and should be read in conjunction with, the historical financial statements of Airgas and CIC which are included elsewhere in this Proxy Statement. The unaudited pro forma adjustments described in the accompanying notes are based upon preliminary estimates and certain assumptions that Airgas' management believes are reasonable in such circumstances. The pro forma data are presented for information purposes only and are not necessarily indicative of the actual operating results or financial position that would have occurred had the Merger been consummated at the dates indicated, nor are they necessarily indicative of future operating results or financial position. 44 UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(Amounts in Thousands) December 31, 1996 ----------------- Carbonic Airgas, Inc. Industries Corp. Pro Forma December 31, 1996 September 30, 1996 Adjustments Notes (Historical) (Historical) (Note 1) Ref. Pro Forma ------------ ------------ -------- ---- --------- Cash and cash equivalents............. $ - $ 655 $ (655) $ - Accounts receivable, net.............. 144,907 4,905 - 149,812 Inventories........................... 132,060 1,232 - 133,292 Prepaid expenses and other current assets...................... 45,825 2,160 47,985 ---------- ------- --------- ----------- 322,792 8,952 (655) 331,089 Plant & equipment, net................ 536,284 16,445 18,668 571,397 Goodwill, net......................... 293,654 204 10,369 304,227 Investments and other noncurrent assets................... 132,951 5,638 (101) 138,488 ---------- -------- --------- ----------- 1,285,681 31,239 28,281 1,345,201 ========== ======== ========= =========== Current portion of long- term debt........................... 18,974 1,988 (1,988) 18,974 Accounts payable, trade............... 56,613 3,300 - 59,913 Accrued expenses and other current liabilities................. 89,571 1,416 100 91,087 ---------- ---------- --------- ----------- 165,158 6,704 (1,888) 169,974 Long-term debt........................ 631,094 6,951 19,151 (2) 657,196 Other noncurrent liabilities.......... 36,039 - - 36,039 Deferred income taxes................. 95,453 2,250 - 97,703 Stockholders' equity.................. 357,937 15,334 11,018 (3) 384,289 ---------- -------- --------- ----------- $1,285,681 $ 31,239 $ 28,281 $1,345,201 ========== ========= ========= ===========
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements. 45 UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF EARNINGS
(Amounts in Thousands) Year Ended March 31, 1996 ------------------------- Carbonic Airgas, Inc. Industries Corp. March 31, 1996 December 31, 1995 Pro Forma Notes Operating Data (Historical) (Historical) Adjustments Ref. Pro Forma - -------------- ------------- ------------ ----------- ---- --------- Net sales.............................. $ 838,144 $ 41,970 $ - $ 880,114 Cost of products sold (excluding depreciation, depletion and amortization)................... 419,491 23,671 - 443,162 Selling, distribution and administrative expenses.............. 279,906 12,523 - 292,429 Depreciation, depletion and amortization......................... 45,762 3,048 1,248 (4) 50,058 --------- --------- -------- --------- Total costs and expenses............... 745,159 39,242 1,248 785,649 --------- --------- -------- --------- Operating income....................... 92,985 2,728 (1,248) 94,465 Interest expense, net.................. (24,862) (886) (835) (5) (26,583) Other income, net ..................... 782 1,216 - 1,998 Minority interest...................... (663) - - (663) ----------- --------- -------- --------- Earnings before income taxes........... 68,242 3,058 (2,083) 69,217 Income taxes........................... 28,522 1,284 (748) (6) 29,058 --------- ---------- --------- --------- Net earnings........................... $ 39,720 $ 1,774 $ (1,335) $ 40,159 ========= ========== ========= ========= Earnings per share .................... $ 0.60 $ 2.07 (7) $ 0.59 ========== ========== ========== Weighted average shares 66,215 1,317 (7) 67,532 ========== ========= =========
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements. 46 UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF EARNINGS
(Amounts in Thousands) Nine Months Ended December 31, 1996 ----------------------------------- Carbonic Airgas, Inc. Industries Corp. December 31, 1996 September 30, 1996 Pro Forma Notes Operating Data (Historical) (Historical) Adjustments Ref. Pro Forma - -------------- ------------ ------------ ----------- ----- --------- Net sales............................ $850,013 $34,530 $ - $ 884,543 Cost of products sold (excluding Depreciation, depletion and amortization).................. 447,782 19,110 - 466,892 Selling, distribution and Administrative expenses............ 270,722 10,086 - 280,808 Depreciation, depletion and amortization.................... 45,801 2,200 969 (4) 48,970 --------- --------- ------ --------- Total costs and expenses............. 764,305 31,396 969 796,670 --------- --------- ------ --------- Operating income..................... 85,708 3,134 (969) 87,873 Interest expense..................... (28,419) (576) (823) (5) (29,818) Other income, net ................... 572 575 - 1,147 Minority interest.................... (558) - - (558) ----------- ------------ ---------- --------- Earnings before income taxes......... 57,303 3,133 (1,792) 58,644 Income taxes......................... 23,883 1,316 (691) (6) 24,508 ----------- ------------ ---------- --------- Net earnings......................... $ 33,420 $ 1,817 $ (1,101) $ 34,136 ========= ======== ========= ========= Earnings per share $ 0.49 $ 2.12 (7) $ 0.49 ========= ========= ========= Weighted average shares 68,200 1,317 (7) 69,517 ========= ========= ==========
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements. 47 NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (1) The cost of the acquisition of CIC Common Stock is assumed to be approximately $59.5 million. Assuming that (a) 60% of the value of the Class A Common is converted into Airgas Common Stock, and 40% of the value of Class A Common is converted to cash and (b) 55% of the value of Class B Common is converted to Airgas Common Stock and 45% of the value of Class B Common is converted to cash, the components of the total purchase price are (i) $24.3 million of Airgas Common Stock exchanged for 60% of the value of Class A Common and 55% of the value of Class B Common, (ii) $16.6 million of cash exchanged for 40% of the aggregate value of Class A Common and 45% of the value of Class B Common, (iii) $2.1 million of additional paid-in capital from 72,000 CIC stock options assumed by Airgas and (iv) the assumption of CIC debt and other liabilities which total $16.5 million. For purposes of these Pro Forma Combined Condensed Financial Statements, it is assumed that 1,214,000 shares of Airgas Common Stock will be issued to CIC shareholders for the value of CIC Common Stock, and 103,000 shares will be issued for the CIC stock options assumed by Airgas. The actual cash and Airgas Common Stock will be determined in accordance with the Merger Agreement between Airgas and CIC, but is not expected to be materially different from the assumption made here. Assuming 90% of the value of the Class A Common and 55% of the Class B Common are converted into Airgas Common Stock, 1,751,000 shares of Airgas Common Stock will be issued to CIC shareholders. Pro forma adjustments to the Combined Condensed Balance Sheet include (a) eliminating the equity accounts of CIC, (b) recording additional equity for the issuance of Airgas Common Stock and assumption of the CIC stock options, (c) recording of the debt borrowed and the cash decrease resulting from funding the cash portion of the purchase price, (d) recording the assumed payables and other accrued expenses of CIC, (e) adjusting the CIC fixed assets to their fair market values and (f) establishing a value for goodwill for the purchase price in excess of the fair value of the assets acquired. The pro forma adjustments to the Combined Condensed Balance Sheet assume that the merger occurred on December 31, 1996. For the purposes of these Pro Forma Combined Condensed Financial Statements, the fair market values of the fixed assets acquired are estimated. The actual fair market values will be determined by independent appraisers and may be more or less than the costs estimated here. Subsequent to the acquisition, Airgas will apply the appraised values and more fully evaluate the assets acquired, and, as a result, the allocation of purchase price may change. (2) A reconciliation of the pro forma adjustment to long-term debt is as follows, assuming 40% of the value of the Class A Common and 45% of the value of Class B Common are converted into cash. 48 Cash consideration paid in the Merger $16,618 Estimated long-term debt pay-off at Closing 3,088 Estimated transaction costs 100 Historical CIC cash balance at September 30, 1996 (655) ------- $19,151 =======
(3) A reconciliation of the pro forma adjustment to stockholders' equity is as follows, assuming 60% of the value of the CIC Class A Common and 55% of the value of the CIC Class B Common is converted to Airgas Common Stock respectively, based on an assumed $20.00 per share market value:
(In thousands) -------------- Market value of Airgas Common Stock issued in the Merger $24,284 CIC equity acquired (15,334) In the money value of CIC stock options assumed by Airgas 2,068 -------- Pro forma stockholders' equity adjustment $11,018 ========
The following pro forma adjustments to the Combined Condensed Statements of Earnings assume that the Merger occurred on April 1, 1995 for the year ended March 31, 1996, and April 1, 1996 for the nine months ended December 31, 1996, respectively. (4) Depreciation and amortization expenses have been increased to reflect the purchase accounting adjustments related to the acquired fixed assets and goodwill. Goodwill is amortized over 40 years. (5) Interest expense has been adjusted to reflect the debt incurred in financing the business acquisition at Airgas' effective interest rate. (6) Income taxes have been adjusted to reflect Airgas' effective tax rate. (7) Pro forma per share data is calculated using the pro forma net earnings divided by the pro forma weighted average shares which include (a) 1,214,000 shares of Airgas Common Stock issued to CIC shareholders and (b) 103,000 shares from the exercise of the right per the Merger Agreement to convert all CIC options to Airgas Common Stock. The calculation of the pro forma shares issued assume 60% of the value of the Class A Common and 55% of the Class B Common are converted into Airgas Common Stock, at an Average Airgas Price of $20.00 per share. Earnings per share amounts were determined using the treasury stock method. The treasury stock method assumes the exercise of all dilutive outstanding options and the use of the aggregate proceeds therefrom to acquire outstanding Airgas Common Stock. 49 AIRGAS Selected Financial Data Selected financial data for Airgas is presented in the table below and should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and Airgas' Consolidated Financial Statements.
(amounts in thousands except per share data): Nine months ended Years Ended March 31, (5) December 31, ---------------------------------------------------------- -------------------- 1996 1995 1994 1993 1992 1996 1995 ---- ---- ---- ---- ---- ---- ---- Operating Results: Net sales.................................... $838,144 $687,983 519,349 $410,771 $351,491 $850,013 $601,851 Depreciation, depletion & amortization(2)......................... 45,762 36,868 30,571 28,045 23,670 45,801 33,519 Operating income............................. 92,985 72,600 48,667 34,367 26,316 85,708 67,165 Interest expense, net........................ 24,862 17,625 12,486 11,403 12,838 28,419 17,760 Income taxes(1).............................. 28,522 23,894 16,027 10,811 7,718 23,883 20,963 Net earnings................................. 39,720 31,479 20,290 12,469 7,292 33,420 28,606 Earnings Per Share(3): Primary: Net earnings ............................... $ .60 $ .48 $ .31 $ .20 $ .14 $ .49 $ .43 Fully Diluted: Net earnings................................ $ .60 $ .48 $ .31 $ .19 $ .13 $ .49 $ .43 March 31, (5) December 31, -------------------------------------------------------- ------------ 1996 1995 1994 1993 1992 1996 ---- ---- ---- ----- ---- ---- Balance Sheet Data: Working capital........................... $ 81,588 $ 54,084 $ 47,071 $ 40,253 $ 39,425 $ 157,634 Total assets.............................. 883,642 645,637 514,897 399,477 338,218 1,285,681 Current portion of long-term debt......... 12,179 11,780 10,304 9,923 10,026 18,974 Long-term debt............................ 385,832 259,970 205,311 158,629 151,098 631,094 Other non-current liabilities............. 34,490 11,116 6,635 762 675 32,892 Stockholders' equity(4)................... 236,209 189,652 156,867 127,571 104,931 357,937
- ---------------- (1) Airgas retroactively adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" as of April 1, 1992. (2) Effective April 1, 1993, Airgas changed its estimate of the useful lives of its acetylene and high pressure cylinders from 20 to 30 years. This change was made to better reflect the estimated periods during which these assets will remain in service. The change had the effect of reducing depreciation 50 expense in 1994 by approximately $3.1 million and increasing net earnings by $1.9 million or $.03 per share. (3) See notes 3 and 9 to Airgas' Consolidated Financial Statements for information regarding earnings per share calculations and adjustment for the stock split effective April 15, 1996. (4) Airgas has not paid any dividends on its common stock. (5) During the fiscal years 1992 through 1996, Airgas acquired 121 distributors. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Review - Overview - Nine Months Ended December 31, 1996 Airgas' financial results for the nine months ended December 31, 1996 reflect growth compared with the comparable period last year. Net sales of $850 million, net earnings of $33.4 million and earnings per share of $.49 represent increases over the prior period of 41%, 17% and 14%, respectively. Net sales increased during the nine months compared to the prior period primarily as a result of the acquisition of 58 distribution companies since April 1, 1995 and an increase in same-store distribution sales of approximately 4%. The increase in net earnings was primarily due to an increase in gross profits from higher same-store distribution sales. Offsetting Airgas' earnings growth was dilution associated with recent distribution acquisitions start-up, costs of new distribution branches, Airgas' 45% joint venture investment in National Welders Supply, Inc. ("National Welders"), and the start-up of ADI. Airgas' growth strategy through acquisitions continued through the nine-month period. During the current fiscal year, Airgas has acquired industrial gas distributors with annual sales of approximately $90 million. In addition, Airgas formed a new segment, ADI, through two acquisitions, IPCO Safety Products Company ("IPCO") and Rutland Tool & Supply Co., Inc. ("Rutland"), which have aggregate annual sales of approximately $120 million. On October 29, 1996, Airgas announced that it had signed a letter of intent to acquire CIC, the fourth largest producer of carbon dioxide in the United States, in a merger scheduled for completion during the first quarter of fiscal 1998. CIC will be merged into a newly-formed subsidiary of Airgas in exchange for a combination of Airgas' Common Stock and cash. In December 1996, Airgas acquired Shell Land & Energy Company's interest in unitized leases producing carbon dioxide, including Shell's 183 mile pipeline (the "Jackson Dome" properties). Airgas intends to continue to grow through acquisitions while exploring ways to leverage its broad geographic presence by selling additional products and services to existing customers through its network of more than 600 distribution locations in 41 states, Canada and Mexico. Recent product line additions have included returnable containers, specialty gases and additional hardgoods (such as industrial supplies, safety products and coatings). Airgas believes the selective addition of complementary products will enable it to better serve its diverse, expanding customer base. 51 After tax cash flow (net earnings plus depreciation, amortization and deferred income taxes) increased 22% to $86.4 million compared to $71.0 million in the comparable nine-month period in the prior year. After tax cash flow per share increased by 19% to $1.27 from $1.08 for the comparable nine-month period last year. After tax cash flow is an important measurement of Airgas' ability to repay debt through operations and provides Airgas with the ability to pursue investment alternatives such as acquisitions and the repurchase of Airgas' Common Stock. In a separate matter, as announced on December 23, 1996, Airgas was the victim of a fraudulent breach of contract by a third party supplier related to purchases of refrigerant R-12. Immediately upon discovering the fraud, Airgas launched an intense effort to recover funds paid to the supplier and/or recover product. Based on limited information currently available, Airgas is unable to quantify the probable amount of the loss or recovery which may be associated with the fraud. Airgas believes the maximum pre-tax loss, including associated costs of the investigation and before considering any recoveries, will not exceed $23 million, however, the minimum estimate is immaterial. At December 31, 1996, prepaid and other current assets includes $23.7 million of costs associated with the fraud. Airgas believes there will be recoveries of assets related to the fraud, including cash in bank accounts frozen under restraining orders, recovery of product paid for and not delivered, net assets of the refrigerant supplier which breached the contract and insurance proceeds under Airgas' and the refrigerant supplier's policies. The aggregate recovery amount, and the timing of recording various portions thereof, is subject to change, even in the near term, as additional assets are identified, additional claims are asserted or the market value of restrained assets fluctuates. Airgas will continue to vigorously pursue all possible sources of recovery. Airgas anticipates that it will record a charge to earnings during the fourth quarter ending March 31, 1997, pending a full investigation of the facts and information pertaining to the loss and potential remedies. On February 12, 1997, Airgas filed a complaint seeking damages with respect to such loss. See "--- Litigation." Results of Operations: Nine Months Ended December 31, 1996 Compared to the Nine Months Ended December 31, 1995 Net sales increased 41% during the nine months ended December 31, 1996 compared to the prior year:
(in thousands) 1996 1995 Increase --------- --------- -------------- Distribution.............................. $753,998 $575,156 $178,842 Direct Industrial......................... 66,445 -- 66,445 Manufacturing............................. 29,570 26,695 2,875 ------ ------ ----- $850,013 $601,851 $248,162 ======== ======== =========
For the nine months ended December 31, 1996, Distribution sales increased approximately $150 million resulting from the acquisition of 58 distributors since April 1, 1995 and approximately $29 million from same-store sales growth. Airgas estimates that had all acquisitions during the nine months ended December 31, 1996 been consummated on April 1, 1996, Distribution sales for 1996 would have 52 been approximately $27 million higher. The increase in same-store Distribution sales of approximately 4% was a result of growth in all three product groups: gases, hardgoods and rent. The growth was attributable to strong sales of lower margin hardgoods combined with selective price increases, Airgas' gas sales initiatives related to small bulk and specialty gases, and continued growth in rental income. Airgas believes its same-store sales growth is slightly understated since it does not reflect Airgas' decision to cease unprofitable sales to certain customers and other sales lost during acquisition consolidation and integration activity. Airgas estimates same-store sales based on a comparison of current period sales to the prior period's sales, adjusted for acquisitions. Future same-store sales growth is dependent on the economy and Airgas' ability to expand markets for new and existing products and to increase prices. Management believes Airgas' broad customer base and geographic diversity help to reduce the adverse effects of an economic downturn on Airgas. Sales related to Airgas' ADI segment increased approximately 14% during the nine months ended December 31, 1996 compared to historical sales results of the prior year. Sales for Airgas' Manufacturing segment increased 11% during the nine months ended December 31, 1996 as a result of the acquisition of the Jackson Dome properties, increased sales of composite electrode paste and export sales of calcined coal. The increase in Distribution gross profit of approximately $82 million compared to the prior period resulted from acquisitions which contributed approximately $67 million and from same-store gross profit growth of approximately $15 million. The same-store gross profit growth is attributable to expansion of gross margins through selective price increases and better buying through national purchasing programs combined with increased sales of lower margin hardgoods, increased sales of gases related to Airgas' small bulk and specialty gases programs and growth in cylinder and other equipment rental income. Compared to the prior year, Airgas' distribution gross margin of 49.7% is down 130 basis points primarily due to industrial gas distribution acquisitions which have an average gross margin of approximately 45%, and sales of lower margin hardgoods. Selling, distribution and administrative expenses as a percentage of gross profits remained unchanged at 67% compared to the prior year. Operating costs associated with the consolidation and integration of acquisitions, start-up of new distribution branches and start-up of ADI have been partially offset by lower business insurance costs as a result of improved loss experience rates and claims management and an insurance rebate. Until such acquisitions and start-up activity is completed, Airgas expects that it will continue to incur additional operating expenses. Operating income increased 28% during the nine months ended December 31, 1996 compared to the prior year:
(in thousands) 1996 1995 Increase -------- ------- -------- Distribution.............................. $77,895 $62,042 $15,853 Direct Industrial......................... 2,172 -- 2,172 Manufacturing............................. 5,641 5,123 518 -------- ------- -------- $85,708 $67,165 $18,543 ======== ======= ========
53 The Distribution operating income margin decreased 50 basis points to 10.3% compared to the same period in the prior year. The decrease was primarily the result of recent industrial gas distribution acquisitions which have operating margins averaging around 8%. Subject to the effects of future acquisitions and the economy, Airgas believes that its distribution operating income margin should improve as acquisitions are integrated. The operating income margin related to the ADI segment was 3.3%. Airgas believes that its ADI operating income margin will improve as sales programs are developed and implemented and upon the realization of the cost savings related to more efficient warehousing and shipping. Manufacturing operating income increased $518 thousand compared to the prior year primarily as a result of the acquisition of the Jackson Dome properties, a strong demand for carbon products offset by a shift in sales more towards lower margin exports of calcined coal versus domestic coal sales and slightly lower nitrous oxide sales. Interest expense, net, increased $10.7 million compared to the prior year primarily as a result of the increase in average outstanding debt associated with the acquisition of distribution businesses acquired since April 1, 1995 and interest costs associated with Airgas' investment in National Welders Supply, offset by slightly lower interest rates. As discussed in "Liquidity and Capital Resources" below, Airgas has hedged floating interest rates under certain borrowings with interest rate swap agreements. Income tax expense represented 41.7% of pre-tax earnings in the nine months ended December 31, 1996 compared to 42.3% in the prior year. The decrease in the effective income tax rate was a result of state tax planning strategies which were implemented late in fiscal 1996, offset by an increase in the effective rate for non-deductible goodwill from recent acquisitions. Financial Review - Overview - 1996 Fiscal Year Ended March 31, 1996 Airgas' financial results for the year ended March 31, 1996 reflect substantial growth compared to 1995. Net sales of $838 million, net earnings of $39.7 million and earnings per share of $.60 represent increases over 1995 of 22%, 26% and 25%, respectively. Airgas also finished 1996 with a record year for acquisitions by completing the acquisition of 42 distributors with aggregate annual sales of approximately $186 million and forming six new hubs. This follows 25 acquisitions in 1995 with aggregate annual sales of approximately $108 million. Airgas intends to continue to actively participate in the consolidation taking place in the fragmented industrial gas distribution market by acquiring independent gas distributors. In seeking to acquire distributors, Airgas anticipates competition from industrial gas producers and from certain other independent distributors. Airgas believes that it is well positioned to acquire distributors because of its extensive distribution network, its well-organized acquisition program, flexibility in structuring acquisitions to meet Sellers' needs and its ability to offer sellers and their employees a continuing management role in a decentralized entrepreneurial environment. During 1996, same-store sales, a comparison of current period sales to the prior period's sales, adjusted for acquisitions, increased 2% compared to the prior year. Airgas' same-store sales growth rate has historically followed the real gross domestic product annual growth rate as published by the U.S. 54 Department of Commerce. Weaker economic conditions compared to the prior year, combined with inclement weather, held down same-store sales growth in 1996. Management believes its same-store sales growth is slightly understated since it does not reflect Airgas' decision to cease unprofitable sales to certain customers and other sales lost during the consolidation and integration of acquisitions. Future same-store sales growth is primarily dependent on the economy and, to a lesser extent, Airgas' ability to expand markets for new and existing products and to increase prices. Management believes Airgas' broad customer base and geographic diversity help to reduce the adverse effects of an economic downturn on Airgas. Also, management believes that the gas portion of its distribution business is somewhat resistant to an economic downturn since: 1) gases frequently represent a fixed cost of operations that do not necessarily decline with production levels; 2) gases are required for maintenance and renovation activities which tend to increase during an economic downturn; 3) industries less subject to the effects of an economic downturn are major purchasers of gases; and 4) gas purchases often represent a small portion of typical user's overall cost of operation and, therefore, do not typically represent a large cost-cutting item. Management further believes that sales of certain lower margin non- consumable hardgoods equipment, such as welding machines, are more likely to be adversely impacted during a downturn in the economy and, conversely, are typically the fastest to rebound during an economic recovery. Sales in 1996 related to gases and rent represent 51% or $408.7 million of total distribution net sales. Bulk and specialty gas sales have increased due to the success of gas marketing programs. In order to support and grow its specialty gas business, Airgas has established 22 specialty gas mini-labs which benefit customers by providing them with certain specialty gas products in their local market. In connection with its hardgoods business, which accounted for 49% or $392.8 million of total distribution net sales, Airgas is focused on improving profitability by reducing its investment in inventories through the consolidation of vendors, and the negotiation of favorable pricing based on national purchasing arrangements. Airgas has recently undertaken initiatives to further develop its industrial gas customer base to selectively include customers which require large volume supplies of gases, such as nitrogen. For these customers, Airgas will enter into long-term supply contracts and will construct air separation plants near the customer's facility or facilities. Airgas has entered into agreements with two customers and is constructing two air separation plants which will begin production during fiscal 1998. In addition, terms related to the agreements provide for additional sales of cylinder gases and supplies. Airgas remains focused on cash flow growth. Historically, operations have generated sufficient cash flow to finance Airgas' operating requirements while borrowings have been incurred largely to finance acquisitions. Over the past three years, cash flow from operations has totaled approximately $230 million. This strong cash flow has helped fund Airgas' investment in acquisitions, excluding debt assumed, and capital expenditures which, for the past three years totaled $333.3 million and $99.3 million, respectively. At March 31, 1996, Airgas had unused availability of $205.0 million of unsecured lines of credit. Airgas' debt-to-equity ratio of 1.69 at March 31, 1996 increased compared to the prior year's ratio of 1.43 primarily as a result of acquisitions completed during 1996 combined with the purchase of treasury stock. 55 Results of Operations: 1996 Compared to 1995 Net sales increased 22% in 1996 compared to 1995:
(in thousands) 1996 1995 Increase -------- --------- --------- Distribution.............................. $801,552 $654,381 $147,171 Manufacturing............................. 36,592 33,602 2,990 -------- -------- -------- $838,144 $687,983 $150,161 ======== ======== ========
For the year ended March 31, 1996, distribution sales increased approximately $133 million resulting from the acquisition of 66 distributors of industrial, medical and specialty gases and related equipment since April 1, 1994 and approximately $14 million from same-store sales growth. Airgas estimates that had all acquisitions during the year ended March 31, 1996 been consummated on April 1, 1995, distribution sales for the year ended March 31, 1996 would have increased by an additional $100 million. The increase in same-store sales of approximately 2% was the result of slightly higher prices based on selected price increases to certain customers and increased volume within its gas, rental and hardgoods businesses. During 1996, Airgas' same-store sales increased 3% in the first quarter, 2% in the second and third quarters and 1% in the fourth quarter. Excluding the impact of the inclement weather, Airgas estimates same-store sales growth during the fourth quarter would have been approximately 2%. Airgas estimates same-store sales based on a comparison of current period sales to the prior period's sales, adjusted for acquisitions. Sales for Airgas' manufacturing operations increased 9% during the year ended March 31, 1996 compared to the prior year, primarily as a result of an increase in the volume of lower margin exports and increased demand for carbon products and nitrous oxide. The increase in distribution gross profit of $72.6 million over 1995 was attributable to increases associated with acquisitions of $62.7 million and same-store gross profit growth of $9.9 million. The majority of the $9.9 million same-store gross profit growth was derived from volume growth in gas and increases in cylinder rent. Higher gas volumes were partially attributable to the success of gas marketing programs, principally small bulk and specialty gases. On a same-store basis, distribution gross margins increased an estimated 0.3% compared to 1995 primarily due to improved rent gross margins combined with slightly higher margins in gases and hardgoods. Increased volumes of lower margin bulk gases partially offset the gas margin improvements. Selling, distribution and administrative expenses decreased as percentage of sales to 33.4% in 1996 compared to 34.3% in 1995. The decrease was a result of acquisition consolidation efforts and lower operating costs, such as a reduction in business insurance costs through improved claims management and reduced incident rates. In addition, certain operating costs, such as occupancy costs, are relatively fixed and do not increase proportionately with the increase in same-store sales. Partially offsetting these improvements were normal salary increases and slightly higher distribution costs. 56 Operating income increased 28% in 1996 compared to 1995:
(in thousands) 1996 1995 Increase ------- ------- -------- Distribution.............................. $86,130 $66,521 $19,609 Manufacturing............................. 6,855 6,079 776 ------- ------- ------- $92,985 $72,600 $20,385 ======= ======= =======
Distribution operating income as a percentage of net distribution sales increased to 10.7% for the year ended March 31, 1996 compared to 10.2% in 1995. The increase in distribution operating income in 1996 was the result of the increase in gross profits from higher same-store sales, improved gross profit margins and operating income provided by acquisitions. Manufacturing operating income increased $776 thousand in 1996 compared to 1995 due to strong demand for carbon products and nitrous oxide, and lower production and delivery costs related to calcium carbide and nitrous oxide business, partially offset by an increase in lower margin sales of carbon products. Interest expense, net, increased $7.2 million in 1996 compared to 1995 primarily as a result of the increase in average outstanding debt associated with the acquisition of industrial gas distributors since April 1, 1994, interest costs associated with the repurchase of Airgas common stock and slightly higher interest rates, partially offset by an increase in positive cash flow. As discussed in "Liquidity and Capital Resources" below, Airgas has hedged floating interest rates under certain borrowings with interest rate swap agreements. Income tax expense represented 41.8% of pre-tax earnings in 1996 compared to 43.2% in 1995. The decrease in the effective income tax rate was primarily due to an increase in pre-tax earnings relative to permanent differences and as a result of the implementation of certain tax planning strategies. Net earnings increased 26% to $39.7 million or $.60 per share in 1996 from $31.5 million or $.48 per share in 1995. After tax cash flow increased 21% to $96.4 million from $79.9 million in 1995. Results of Operations: 1995 Compared to 1994 Net sales increased 32% in 1995 compared to 1994:
(in thousands) 1995 1994 Increase -------- -------- -------- Distribution.............................. $654,381 $486,836 $167,545 Manufacturing............................. 33,602 32,513 1,089 -------- -------- -------- $687,983 $519,349 $168,634 ======== ======== ========
In 1995, distribution sales increased approximately $136 million resulting from the acquisition of 40 industrial gas distributors since April 1, 1993 and approximately $32 million from same-store sales. Based on unaudited historical pro forma data, Airgas estimates that had all 1995 acquisitions been consummated on April 1, 1994, distribution sales for 1995 would have been approximately $49 million higher. The increase in same-store sales of approximately 5% is primarily the result of increased volume 57 of hardgoods sales and increases in gas and rental businesses. Airgas estimates same-store sales based on a comparison of current period sales to the prior period's sales, adjusted for acquisitions. Hardgoods and gas volumes have primarily increased as a result of the general improvement in the economy and certain gas marketing programs. Same-store sales have also increased slightly as a result of price increases initiated during 1995 and 1994 Airgas believes that sales of hardgoods are adversely impacted during a recession, and conversely, are typically the fastest to rebound during an economic recovery. Sales for Airgas' manufacturing operations increased slightly compared to 1994 primarily as a result of an increase in the volume of lower margin products. Compared to 1994, distribution gross profit increases associated with acquisitions totaled an estimated $69 million. Gross profits associated with distribution same-store sales growth are estimated to total $16 million. The same-store gross profit growth is attributable to increased hardgoods volumes combined with improved gross margins resulting from Airgas' national purchasing arrangements, success of gas marketing programs and improved gas and rental gross margins due to price increases to customers. On a same-store basis, considering the impact of the change in Airgas' sales mix slightly towards lower margin hardgoods sales, distribution gross margins increased an estimated .6% compared to 1994. Selling, distribution and administrative expenses as a percentage of sales decreased to 34.3% compared to 34.8% in 1994. The decrease is a result of acquisition consolidation efforts and from controlling certain operating costs, such as business insurance through improved claims management and reduced incident rates. Through improved billing and collection efforts, Airgas has also reduced its bad debt expense and lowered its accounts receivable days sales outstanding to 44 days compared to 49 days at March 31, 1994. In addition, certain operating costs, such as occupancy costs, are relatively fixed even though Airgas' same-store sales increased over 1994. Partially offsetting these improvements were normal salary increases. Operating income increased 49% in 1995 compared to 1994:
(in thousands) Increase 1995 1994 (Decrease) -------- -------- -------- Distribution.............................. $66,521 $42,399 $24,122 Manufacturing............................. 6,079 6,268 (189) -------- -------- -------- $72,600 $48,667 $23,933 ======== ======== ========
Distribution operating income as a percentage of net distribution sales increased to 10.2% compared to 8.7% in 1994. The increase in distribution operating income in 1995 was a result of the increase in gross profits from higher same-store sales, operating income provided by acquisitions and improved gross profit margins. 58 Manufacturing operating income decreased $189 thousand compared to the prior year due to a product shift towards lower margin export sales of carbon products, slightly lower profits from the sale of calcium carbide combined with higher raw material costs, principally ammonium nitrate, for the Airgas' nitrous oxide plants. Interest expense, net, increased $5.1 million compared to 1994 primarily as a result of the increase in average outstanding debt associated with the acquisition of industrial gas distributors since April 1, 1993 combined with slightly higher interest rates. As discussed in "Liquidity and Capital Resources" below, Airgas has hedged floating interest rates under certain borrowings with interest rate swap agreements. Income tax expense represented 43.2% of pre-tax earnings in 1995 compared to 44.1% in 1994. The decrease in the effective income tax rate is primarily due to an increase in pre-tax earnings relative to permanent differences. Net earnings increased 55% to $31.5 million or $.48 per share in 1995 from $20.3 million or $.31 per share in 1994. After tax cash flow (net earnings plus depreciation, amortization and deferred income taxes) increased 35% to $79.9 million from $59.1 million in 1994. After tax cash flow is an important measurement of Airgas' ability to repay debt through operations and provides Airgas with the ability to pursue investment alternatives such as acquisitions and the repurchase of Airgas stock. Liquidity and Capital Resources Airgas has primarily financed its operations, capital expenditures, stock repurchases, and acquisitions with borrowings, the issuance of common stock and funds provided by operating activities. Cash flows from operating activities totaled $38.5 million for the nine months ended December 31, 1996. Depreciation, depletion and amortization represented $45.8 million of cash flows from operating activities. Working capital components of cash flow increased $41.2 million as a result of an increase in accounts receivable associated with higher same-store sales, an increase in inventory levels to meet increased hardgoods and gas sales volumes and an increase in prepaid expenses and other current assets. Prepaid expenses and other current assets include $23.7 million of costs associated with the fraudulent breach of contract related to refrigerant R-12 purchases. The increase in other assets and liabilities, net, primarily relates to amounts paid in connection with securing product supply agreements. Days-sales outstanding and distribution hardgoods days supply of inventory improved slightly compared to March 31, 1996 levels. Total inventories have increased primarily as a result of an increase in distribution inventories of $6.5 million to support sales growth, and gases of $10 million associated with specialty gas sales initiatives. Cash used by investing activities totaled $250.8 million which was primarily comprised of $48.1 million for capital expenditures, $169.1 million related to acquisitions and $34.2 million related to Airgas' investment in unconsolidated affiliates ($27.9 related to the joint venture with National Welders and $6.3 million related to foreign investments). Airgas' use of cash for capital expenditures was attributable to the continued assimilation of certain acquisitions requiring capital expenditures for combining cylinder fill plants, improving truck 59 fleets and purchasing cylinders in order to return cylinders which were rented from third parties. Additionally, capital expenditures include the purchase of cylinders and bulk tanks necessary to facilitate gas sales growth. Airgas estimates that its maintenance capital expenditures are approximately 2% of net sales. Airgas considers the replacement of existing capital assets to be maintenance capital expenditures. Airgas has recently undertaken initiatives to further develop its industrial gas customer base to selectively include customers which require large volume supplies of gases, such as nitrogen. For these customers, Airgas plans to enter into long-term supply contracts in conjunction with air separation plants which will be built near the customer's facility or facilities. Airgas has entered into agreements with two customers which requires the construction of two air separation plants which will begin production during fiscal 1998. Upon completion, as lessee, Airgas intends to lease the plants under long-term operating leases. Financing activities provided cash of $212.4 million with total debt outstanding increasing by $252.1 million from March 31, 1996. Funds borrowed in connection with the acquisition of distribution businesses and Airgas' investment in National Welders and other foreign investments, totaled $203.3 million. Airgas' primary source of borrowing is a $500 million unsecured revolving credit facility with various commercial banks which matures on September 30, 2001. At December 31, 1996, Airgas had approximately $357 million in borrowings under the facility and approximately $84 million committed under letters of credit, resulting in unused availability under the facility of approximately $59 million. On August 8, 1996, Airgas commenced a medium term note program pursuant to a registration statement filed with the Securities and Exchange Commission on July 15, 1996, which provides for the issuance of its securities with an aggregate public offering price of up to $450 million. In September 1996, Airgas issued the following long-term debt under the medium term note program: $100 million of unsecured notes due September 2006 bearing interest at a fixed rate of 7.75%; $50 million of unsecured notes due September 2001 bearing interest at a fixed rate of 7.15%. In March 1997, Airgas issued $75 million of unsecured notes due March 2004 at a fixed rate of 7.14% The proceeds from the medium term note issuances were used to repay bank debt. Airgas has a C$50 million Canadian credit facility (US$37 million) with various commercial banks which matures on November 14, 1998. At December 31, 1996, Airgas had approximately C$42 million (US$31 million) in borrowings outstanding under the facility, resulting in unused availability under the facility of approximately C$8 million (US$6 million). Airgas also has unsecured line of credit agreements with various commercial banks. At December 31, 1996, these agreements totaled $50 million, under which Airgas had no borrowings outstanding. At December 31, 1996, the effective interest rate related to outstanding borrowings under all credit lines was approximately 6.04%. Airgas' loan agreements contain covenants which include the maintenance of a minimum equity level and maintenance of certain financial ratios. 60 In managing interest rate exposure, principally under Airgas' floating rate revolving credit facilities, Airgas has entered into 21 interest rate swap agreements during the period from June 1992 through December 31, 1996. The swap agreements are with major financial institutions and aggregate $324 million in notional principal amount at December 31, 1996. Approximately $205 million of the notional principal amount of the swap agreements require fixed interest payments based on an average effective rate of 6.53% for remaining periods ranging between 1 and 8 years. Five swap agreements require floating rates ($119.5 million notional amount at 5.75% at December 31, 1996). Under the terms of seven of the swap agreements, Airgas has elected to receive the discounted value of the counterparty's interest payments upfront. At December 31, 1996, approximately $19.7 million of such payments were included in other liabilities. Airgas continually monitors its positions and the credit ratings of its counterparties, and does not anticipate nonperformance by the counterparties. Airgas will continue to look for appropriate acquisitions and expects to fund such acquisitions, future capital expenditure requirements and commitments related to foreign investments primarily through the use of cash flow from operations, debt, Common Stock for certain acquisition candidates and other available sources. In connection with the acquisition of Rutland, Airgas issued approximately 3.4 million shares of its Common Stock, including approximately 2.4 million treasury shares. On October 29, 1996, Airgas announced that it signed a letter of intent to acquire CIC. In the proposed transaction, CIC will be merged into a newly-formed subsidiary of Airgas in exchange for a combination of Airgas' Common Stock and cash, and is expected to close during the first quarter of fiscal 1998. Subsequent to December 31, 1996, Airgas acquired industrial gas distribution businesses with aggregate annual sales of approximately $12 million. Pursuant to a 1,600,000 share repurchase program, approved in December 1996 by the Board of Directors, Airgas purchased 14,700 shares of Airgas Common Stock during the quarter ended December 31, 1996. Subsequent to December 31, 1996 and through March 11, 1997, Airgas repurchased an additional 630,000 shares, leaving a total of 970,000 shares available under the repurchase program. Airgas' treasury shares will be used to fund acquisitions and employee benefit programs and will be acquired in open market transactions, from time-to-time, depending on market conditions. Airgas does not currently pay dividends. Other New Accounting Pronouncements In the first quarter of fiscal 1997, Airgas adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The statement requires the recognition of an impairment loss for an asset held for use when the estimate of undiscounted future cash flows expected to be generated by the asset is less than its carrying amount. Measurement of the impairment loss is based on fair value of the asset. 61 Management believes that the adoption of this statement did not have a material impact on earnings, financial condition or liquidity of Airgas. Airgas accounts for stock options according to the provisions of Accounting Principles Board Opinion 25 (APB 25), "Accounting for Stock Issued to Employees." In October 1995, the Financial Accounting Standards Board issued FASB Statement No. 123, "Accounting for Stock-Based Compensation." The new standard defines a fair value method of accounting for stock options and similar equity instruments. Companies may elect to continue to use existing accounting rules or adopt the fair value method for expense recognition. Companies that elect to continue to use existing accounting rules are required to provide pro-forma disclosures of net income and earnings per share assuming the fair value method was adopted. Airgas has elected to continue to use existing accounting rules. Accordingly, Airgas will present the required pro-forma disclosure provisions for its fiscal year ending March 31, 1997. As Airgas will continue to account for stock-based compensation using the intrinsic value method, this statement will not have a material impact on earnings, financial condition or liquidity of Airgas. In June 1996, the Financial Accounting Standards Board issued SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". This statement provides accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities based on consistent application of a financial-components approach that focuses on control. It distinguishes transfers of financial assets that are sales from transfers that are secured borrowings. Under the financial-components approach, after a transfer of financial assets, an entity recognizes all financial and servicing assets it controls and liabilities it has incurred and derecognizes financial assets it no longer controls and liabilities that have been extinguished. The financial-components approach focuses on the assets and liabilities that exist after the transfer. If a transfer does not meet the criteria for a sale, the transfer is accounted for as a secured borrowing with pledge of collateral. This statement is effective for transfer and servicing of financial assets and extinguishments of liabilities for fiscal years beginning after December 15, 1996 and is to be applied prospectively. Management believes that the adoption of this statement will not have a material impact on earnings, financial condition or liquidity of Airgas. In October 1996, the American Institute of Certified Public Accountants issued Statement of Position 96-1 (SOP), which prescribes generally accepted accounting principles for environmental remediation liabilities. This SOP more specifically identifies future, long-term monitoring and administration expenditures as remediation liabilities that need to be accrued on the balance sheet as an existing obligation. This SOP is effective for fiscal years beginning after December 15, 1996. Management believes that the adoption of this statement will not have a material impact on earnings, financial condition or liquidity of Airgas. Forward-looking Statements This Proxy Statement/Prospectus contains forward-looking statements. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, there are certain important factors that could cause Airgas' actual results to differ materially from those included in such forward-looking statements. Some of the important factors which could cause actual results to differ materially from those projected include, but are not limited to: Airgas' ability to continue to identify, 62 complete and integrate strategic acquisitions to enter new markets and expand existing business (including CIC); continued availability of financing to provide additional sources of funding for future acquisitions; Airgas' ability to consolidate and integrate new acquisitions; capital expenditure requirements and foreign investments; the effects of competition from independent distributors and vertically integrated gas producers on products and pricing, growth and acceptance of new product lines through Airgas' sales and marketing programs; changes in product prices from gas producers and name-brand manufacturers and suppliers of hardgoods; uncertainties regarding accidents or litigation which may arise in the ordinary course of business; Airgas' ability to recover assets in connection with the fraudulent breach of contract related to refrigerant R-12 purchases; 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. Airgas 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 Airgas. Business General Airgas classifies its operations in three business segments: distribution, direct industrial and manufacturing. Sales for Airgas were $838, $688 and $519 million in fiscal 1996, 1995, and 1994, respectively. Sales were $850 and $602 million for the nine months ended December 31, 1996 and 1995, respectively Distribution sales represented 96% of total sales and 93% of Airgas' operating income in fiscal 1996, and represented 89% of the total sales and 91% of operating income for the nine months ended December 31, 1996. Financial information by business segment can be found in note 20 to Airgas' consolidated financial statements for the three years ended March 31, 1996 and "-- Management's Discussion and Analysis of Financial Condition and Results of Operations" for the nine months ended December 31, 1996 and 1995, respectively. The distribution business is conducted through approximately 600 locations in 41 states, Canada and Mexico. Principal products distributed include: industrial, medical and specialty gases and a wide selection of name-brand welding equipment, accessories and industrial protective equipment ("hardgoods"), including electrode holders, welding wire, cable lugs and connectors, hard hats, welding helmets, hearing protectors, goggles, face shields, safety glasses, welding machines and electrodes. In connection with the distribution of gases, Airgas rents industrial gas cylinders and bulk storage tanks to its customers. Additionally, acetylene gas is manufactured and sold as part of Airgas' distribution business. Since its formation, Airgas' strategy has been to expand through the acquisition of independent distributors. Airgas believes that it is the largest distributor of industrial, medical and specialty gases and related equipment in North America. During the 1997 fiscal year, Airgas acquired IPCO and Rutland . IPCO and Rutland provide additional product lines and management talent to form the base for Airgas' industrial distribution segment, ADI. Manufacturing operations include the production of carbon products, calcium carbide, nitrous oxide and carbon dioxide. 63 The Distribution Business Industry Background. The industrial gas distribution market is broad ------------------- and includes customers from most major industries. Airgas sells nitrogen, oxygen, argon, helium, acetylene, carbon dioxide, nitrous oxide, hydrogen and welding gases and a variety of medical and specialty gases to a diverse customer base. Gases are distributed and stored in industrial gas cylinders and bulk storage tanks. Hardgoods sold through its distribution network include: protective equipment, such as hard hats, welding helmets, goggles, face shields and protective glasses; welding machines and welding consumables; and accessories, such as electrodes, electrode holders and cable connectors. The United States market for industrial gases is approximately $6.5 billion annually. Sales to major users of industrial gases that have the capacity to accept large bulk shipments or pipeline deliveries are generally serviced directly by industrial gas producers and account for approximately $3.5 billion of such market. Historically, industrial gas producers have focused on this segment of the market, which is capital intensive. The remaining $3.0 billion of annual industrial gas sales are made to small bulk users and cylinder gas customers. These small bulk users and cylinder gas customers are also believed to purchase approximately $3.5 billion of hardgoods annually. Small bulk users and cylinder gas customers are served by a fragmented distribution system of approximately 1,000 distributors, the majority of which are independently owned. Airgas concentrates on the small bulk, cylinder gas, welding and protective equipment segment of the market. This segment is less capital intensive, in part, because of the long useful lives of the fixed assets, principally cylinders. Airgas Strategy Acquisition Program. Since May 1986, Airgas has ----------------------------------- acquired over 225 distributors of industrial gas and related equipment. These distributors are organized into five operating divisions with approximately 600 locations in 41 states, Canada and Mexico. The five operating divisions provide Airgas with a national distribution network that is unique to the industry. In addition, on June 28, 1996, based on the terms of a joint venture agreement, Airgas acquired 45% of the voting capital stock of National Welders, a major distributor of industrial, medical and specialty gases and related equipment based in Charlotte, North Carolina. The purpose of the joint venture is to carry on the business of NWS, enhanced by its association with Airgas and its financial, purchasing and national marketing strengths, and to pursue acquisition opportunities in the area currently served by National Welders. Airgas' principal business strategy is to continue to expand its distribution network through a program of acquiring independent distributors. The industrial gas distribution industry continues to undergo a consolidation process which Airgas believes will continue to present it with opportunities to acquire industrial gas distributors. Airgas believes that its principal competitive advantages in acquiring distributors are its extensive distribution network, its well-organized acquisition program, flexibility in structuring acquisitions to meet sellers' needs and ability to offer sellers and their employees a continuing management role in a decentralized entrepreneurial environment. In seeking to acquire distributors, Airgas competes with industrial gas producers and other independent distributors. Airgas has made investments in industrial gas operations in Poland and India. At December 31, 1996, the total investment in these foreign operations was less than 1% of total assets. Airgas will 64 continue to evaluate foreign industrial gas opportunities, although its principal focus remains on North American expansion. Airgas has financed distributor acquisitions primarily with internally generated funds and debt. Airgas has been able to obtain debt financing due, in part, to its ability to generate cash flow from operating activities and the long useful lives and relatively stable market values of the fixed assets, principally cylinders. Operating Policies. Airgas believes that its operations are best ------------------ managed at the local level by entrepreneurial, incentive-driven executives with backgrounds principally in the industrial gas industry. The president of each distribution subsidiary is typically a former owner or key employee of the acquired business or an experienced executive recruited by management. The continuity afforded by retaining the key employees of an acquired business combined with local management is essential because Airgas' distribution business is local in nature and is dependent upon satisfied repeat customers. Customer Base. The majority of Airgas' gases are generally stored in ------------- bulk tanks at Airgas' cylinder fill plants and are pumped into cylinders for distribution to customers or, in the case of bulk customers, in tanker trucks or tube trailers for delivery into bulk tanks at the customer's business location. Airgas emphasizes sales to cylinder and small bulk gas customers. The distribution of industrial gases historically has been to customers engaged in the business of welding and metal fabrication. In order to better serve these customers, industrial gas distributors have traditionally sold hardgood items through their distribution branch locations. As certain sectors of the economy have grown, such as the electronics and chemicals industries, and as new applications for gases have developed, the customer base of the gas distribution business has broadened significantly to include businesses in almost every major industry, from medical and high technology to consumer and basic industries. For example, the food and beverage industry uses carbon dioxide and nitrogen; the electronics industry uses oxygen, nitrogen, argon, and hydrogen; the healthcare industry uses oxygen, nitrogen, and nitrous oxide; and the chemical and fiber industries use nitrogen. Specialty gases, which are used in numerous industries and in electronic and laboratory applications, include rare gases, high- purity gases, and blended multi-component gas mixtures. Airgas helps service its specialty gas customers through its 22 specialty gas mini-labs which operate in 17 states. Airgas anticipates continuing growth in this product area. The principal drivers for market growth include: (1) environmental regulations, such as the Clean Air Act, water testing and pollution remediation and testing and monitoring; (2) quality control services using in-line chromatography and spectrography to analyze samples; and (3) the growth of environmental, research and clinical laboratories. Airgas has also concentrated its efforts in the small bulk gas market. The primary gases that Airgas sells in bulk are liquid oxygen, nitrogen, argon, and carbon dioxide, and gaseous hydrogen, helium and nitrogen. Airgas charges customers rent for the use of bulk tanks and tube trailers which are placed on the customer's property Airgas believes there are growth opportunities in marketing to these small bulk customers, which it can serve more effectively than industrial gas producers. Airgas has recently undertaken initiatives to further develop its industrial gas customer base to selectively include customers which require large volume supplies of gases, such as nitrogen. For these 65 customers, Airgas will enter into a long-term supply contract and will construct an air separation plant near the customer's facility or facilities. Airgas has entered into agreements with two customers and is constructing two air separation plants which will begin production during fiscal 1998. In addition, terms related to the agreements provide for additional sales of cylinder gases and supplies. Airgas' same-store sales, a comparison of current period sales to the prior period's sales, adjusted for acquisitions, has historically followed the real gross domestic product annual growth rate as published by the Commerce Department. Management believes Airgas' broad customer base and geographic diversity help to reduce the adverse effects of an economic downturn on Airgas. Also, management believes that the gas portion of its distribution business is somewhat resistant to economic downturns due to the following factors: 1) gases frequently represent a fixed cost of operations that do not necessarily decline with production levels; 2) gases are required for maintenance and renovation activities which tend to increase during an economic downturn; 3) industries less subject to the effects of an economic downturn, such as the medical field, are major purchasers of gases; and 4) gas purchases often represent a small portion of a typical user's overall cost of operation and, therefore, do not typically represent a large cost-cutting item. Management further believes that sales of certain lower margin non- consumable hardgoods equipment, such as welding machines, are more adversely impacted during a downturn in the economy and are typically the fastest to rebound during an economic recovery. Products. Gases distributed by Airgas include oxygen, nitrogen, -------- hydrogen, argon, helium, acetylene, carbon dioxide, nitrous oxide and specialty gases. In addition to gases, Airgas distributes a wide selection of name-brand hardgoods, including electrode holders, welding wire, cable lugs and connectors, hard hats, welding helmets, hearing protectors, goggles, face shields, safety glasses, welding machines and electrodes. Of Airgas' fiscal 1996 sales from distribution, approximately 51% represent sales of gases and rentals of cylinders and bulk tanks, and 49% represent hardgood sales. Of distribution sales for the nine months ended December 31, 1996, 50% represent sales of gases and rent, and 50% represent hardgood sales. Airgas intends to strategically broaden its product line in order to increase sales in existing locations and to take advantage of its distribution network. Recent product line additions have included returnable containers, specialty gases and additional hardgoods (such as industrial safety products and coatings). Airgas believes the selective addition of complementary product offerings through its distribution network and ADI will enable it to better serve its diverse, expanding customer base. Suppliers. Airgas purchases industrial, medical and specialty gases --------- pursuant to requirements contracts from all four of the major producers of industrial gases in the United States and three regional producers. Airgas believes that if a contractual arrangement with any supplier of gases were terminated, it would be able to locate alternative sources of supply without significant cost increases and with no disruption of service. Airgas purchases hardgoods from name-brand manufacturers and suppliers. For certain products, Airgas has negotiated favorable pricing based on national purchasing arrangements and is reducing its investment in hardgood inventories by consolidating vendors. 66 Direct Industrial Business During the 1997 fiscal year, Airgas acquired IPCO and Rutland, which have aggregate annual sales of $120 million. IPCO and Rutland provide additional product lines and management talent to form the base for the Company's industrial distribution segment, ADI. IPCO is a distributor of safety, industrial and environmental supplies, and utilizes a system of regional warehouses and telemarketing centers to market its products. Rutland is a distributor of industrial tools, MRO supplies and welding and safety equipment, and markets its products through direct mail, catalogs and monthly flyers. ADI's objective is to facilitate the growth of safety products and other industrial supplies through the Airgas distribution network. Airgas' strategy is to acquire additional industrial distribution companies with a focus on increasing same-store sales of new industrial product lines through both the acquired businesses and its existing distribution network. Manufacturing and Related Businesses Nitrous Oxide. Airgas produces nitrous oxide which is used in various ------------- medical and commercial applications. Nitrous oxide is used as an anesthetic in the medical and dental fields, as a propellant in the packaged food business and is utilized in the manufacturing process of certain high technology electronic industries. Airgas' nitrous oxide manufacturing facilities are located in Yazoo City, Mississippi and Donora, Pennsylvania. Carbon Products. Airgas manufactures carbon electrode paste, carbon --------------- ramming paste and electrically calcined anthracite ("ECA") at its manufacturing facility located in Keokuk, Iowa. Airgas is the nation's primary manufacturer of carbon electrode paste which is used as a consumable electrode in the production of special alloy steel, nickel and other metals. ECA is used as an ingredient in carbon mixes used in the aluminum industry and as an additive in the production of certain metals. Sales of electrode paste and ECA are conducted through a marketing organization which owns more than five percent of Airgas' outstanding common stock. Calcium Carbide. Airgas is a partner with Elkem Metals Company --------------- ("Elkem") in a joint venture (Elkem-American Carbide Company) which primarily sells calcium carbide which is used in the production of acetylene gas. Airgas and Elkem receive certain fees, based on net sales, for acting as agents for the joint venture. Additionally, as general manager of the joint venture, Elkem receives a management fee based on net sales. Airgas operates a manufacturing facility in Pryor, Oklahoma which sells calcium carbide to the joint venture. Carbon Dioxide. On December 1, 1996, Airgas acquired interests in -------------- unitized leases producing carbon dioxide in the Northeast Jackson Dome area of Mississippi and an attached 183-mile carbon dioxide pipeline stretching from the Northeast Jackson Dome area to White Castle, Louisiana. The pipeline services three major liquid carbon dioxide producers (including CIC) and a major methanol producer, each pursuant to a long-term supply contract, as well as a group of enhanced oil recovery fields. 67 Competition Each of the major business areas in which Airgas participates is highly competitive. Some competitors are larger than Airgas and have greater resources. Airgas' industrial gas distribution operations compete with independent distributors and vertically integrated gas producers such as Air Products and Chemicals, Inc., Praxair, Inc., Liquid Air Corporation of America, BOC Gases Group and others, all of which have distribution operations. Airgas also purchases industrial gases pursuant to requirements contracts from all four of the above major producers of industrial gases. Competition in the distribution market is based on customer service, prompt delivery, price, consistent product quality, attention to safety procedures, and employee and customer training in the uses of gases and hardgoods. Airgas believes its decentralized system allows competitive decisions to be made on the local level which results in reduced costs and/or improved service. In addition, Airgas' size allows it to realize economies of scale in purchasing, training, marketing and information systems. Regulatory and Environmental Matters The businesses of Airgas' subsidiaries are subject to federal and state laws and regulations adopted for the protection of the environment and the health and safety of employees and users of Airgas' products. Airgas has programs for the operation and design of its facilities to achieve compliance with applicable environmental rules and regulations. Airgas believes that it is in compliance in all material respects with such laws and regulations. Expenditures for environmental purposes during the fiscal year ended March 31, 1996 and the nine months ended December 31, 1996 were not material. Insurance Airgas' policy is to obtain liability and property insurance coverage that is currently available at what management determines to be a fair and reasonable price. As of December 31, 1996, Airgas had a liability insurance limit of $100 million. The liability insurance is subject to per-occurrence deductible amounts of $1 million for product liability, general liability and workers' compensation claims, and approximately $500 thousand for motor vehicle liability. The nature of Airgas' business may subject it to product and general liability lawsuits. To the extent that Airgas is subject to claims which exceed its liability insurance coverages, such suits could have a material adverse effect on Airgas' financial position, results of operations or liquidity. Employees On December 31, 1996, Airgas employed approximately 6,500 people of whom approximately 6% were covered by collective bargaining agreements. Airgas believes it has good relations with its employees and has not experienced a strike or work stoppage in the past 10 years. 68 Patents, Trademarks and Licenses Airgas holds trademark registrations for "Airgas", "Dyna-Switch" and "Va-Weld", and a patent registration for the purification of acetonitrile. Airgas believes that its businesses as a whole are not materially dependent upon any single patent, trademark or license. Properties Airgas has offices, manufacturing and distribution facilities in 41 states, Canada and Mexico. The principal executive offices of Airgas are located in leased space in Radnor, Pennsylvania. Airgas' manufacturing segment produces carbon products at its Keokuk, Iowa, facility; calcium carbide at its Pryor, Oklahoma, facility; and nitrous oxide at its Donora, Pennsylvania and Yazoo City, Mississippi facilities. Manufacturing facility utilization, based on market demand, has ranged from 65% to 100%. The Keokuk and Pryor facilities are owned by Airgas. The Donora plant is located on property leased through the year 2006. The Yazoo City property is owned by Airgas; however, it will revert to the local municipality if the plant terminates operations. The Keokuk, Pryor and Donora facilities are pledged as collateral under Industrial Development Board revenue bonds (see note 8 to Airgas' consolidated financial statements.). Airgas' distribution segment conducts business from its locations in 41 states, Canada and Mexico. These locations are either owned or are leased from third parties or from employees of Airgas who were previous owners of businesses acquired on terms consistent with commercial rental rates prevailing in the surrounding rental market. 17 distribution locations in 12 states have acetylene manufacturing plants. Airgas' acetylene plants operate at approximately 60% of capacity. Airgas believes that its facilities are adequate for its present needs and that its properties are generally in good condition, well maintained and suitable for their intended use. Litigation Airgas and its subsidiaries are parties to pending legal proceedings arising out of their business operations. The proceedings involve claims for personal injuries, breach of contract, product warranty and product design, and claims involving employee relations and certain administrative proceedings. Except as discussed below, management does not believe that the eventual outcome of any litigation to which Airgas or its subsidiaries are parties would have a material adverse effect on the consolidated financial position, results of operations or liquidity. On July 26, 1996, Praxair, Inc. ("Praxair") filed suit against Airgas in the Circuit Court of Mobile County, Alabama. The complaint alleges 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 Airgas in connection with Airgas' formation of a joint venture with National Welders. Praxair is seeking compensatory damages in excess of $100 million and punitive damages. On February 24, 1997, the court entered an order denying 69 Airgas' motion to dismiss for forum non conveniens. Airgas has filed a petition for writ of mandamus with the Alabama Supreme Court requesting that the lower court's order be vacated or set aside. Airgas believes that Praxair's claims are without merit and intends to defend vigorously against such claims. On September 9, 1996, Airgas filed suit against Praxair in the Court of Common Pleas of Philadelphia County, Pennsylvania. The complaint alleges breach of contract, fraud, conversion and misappropriation of trade secrets with respect to an agreement between Praxair and Airgas, pursuant to which Praxair induced Airgas to provide Praxair valuable information and conclusions developed by Airgas concerning CBI Industries, Inc. ("CBI") in exchange for Praxair's promise not acquire CBI without Airgas' participation. Airgas has alleged that it became entitled, pursuant to such agreement, to acquire certain of CBI's assets having a value in excess of $800 million. Airgas is seeking compensatory and punitive damages. On January 2, 1997, the court entered an order overruling Praxair's preliminary objections to Airgas' complaint and ordering Praxair to file an answer to the complaint. Praxair has since filed an answer and asserted various defenses. On February 12, 1997, Airgas filed a lawsuit in the United States District Court for the Southern District of Georgia against Discount Auto Parts, Inc. ("Discount"), an employee of Discount, and certain other business and individual defendants, alleging that Discount and the other defendants engaged in racketeering activity involving the fraudulent sale of smuggled and counterfeit R-12 refrigerant gas. Airgas' complaint alleges that the racketeering activity of the defendants caused damages to Airgas in an amount not less than $20 million. The complaint seeks treble damages under the Federal RICO and Georgia RICO statutes, as well as monetary damages under other counts alleging fraud, conspiracy and related wrongful conduct. On December 23, 1996, Airgas had reported that it had been a victim of a fraudulent breach of contract by a supplier. That incident was part of the racketeering activity alleged in the lawsuit filed. Management of Airgas Directors and Executive Officers The directors and executive officers of Airgas are as follows:
Name Age Position - ---- --- -------- Peter McCausland (1)...................... 47 Chairman of the Board and Chief Executive Officer John A.H. Shober.......................... 63 Director Merril L. Stott........................... 68 Director Argeris N. Karabelas, Ph.D. .............. 44 Director Erroll C. Sult ........................... 69 Director Robert E. Naylor, Jr...................... 64 Director Robert L. Yohe............................ 60 Director W. Thacher Brown.......................... 49 Director Frank B. Foster, III...................... 62 Director Hermann Knieling.......................... 58 President and Chief Operating Officer E. Pat Baker.............................. 57 Division President - Eastern Division Alfred B. Crichton........................ 49 Division President - Western Division
70 Kenneth A. Keeley......................... 56 Division President - Northern Division Ronald B. Rush............................ 53 Division President - Southern Division William A. Rice, Jr....................... 50 Division President - Industrial Distribution and Purchasing Thomas C. Deas, Jr........................ 46 Vice President & Chief Financial Officer Gordon L. Keen, Jr........................ 52 Vice President - Corporate Development William E. Sanford........................ 36 Executive Vice President - Sales and Marketing Thomas Mason.............................. 63 Senior Vice President Scott M. Melman........................... 40 Vice President - Chief Administrative Officer Rudi G. Endres............................ 53 Vice President - International Samuel H. Goldstein....................... 37 Vice President - Chief Information Officer
- ------------------ (1) Member of the Board of Directors Mr. McCausland has been a Director of Airgas since June 1986, the Chairman of the Board and Chief Executive Officer of Airgas since May 1987, President from June 1986 to August 1988, and from April 1, 1993 to November 30, 1995, and Chairman and Chief Executive Officer of US Airgas since its organization in February 1982. From January 1982 until June 1990, Mr. McCausland was a partner in the law firm of McCausland, Keen & Buckman, Radnor, Pennsylvania, which provides legal services to Airgas. Mr. Shober is a director of Betz Dearborn,, Inc., Anker Coal Group, Inc., Charter Power Systems, Inc., Ensign Bickford Industries, Inc., First Reserve Corporation and MIBRAG mbH, as well as a Member of the Board of Managers of Pennsylvania Hospital, a Member of the Board of Trustees of Eisenhower Exchange Fellowships, Inc. and director of the YMCA of Philadelphia and vicinity. Mr. Shober has served as a director of Airgas since 1990. Mr. Stott has been providing management consulting services to Airgas since April 1, 1994. Prior to that, he was the Director of Management Development for Airgas from April 1, 1993 to March 31, 1994, was President from April 1, 1991 to March 31, 1993, and was Vice President-Operations from August 1988 to March 31, 1991. Mr. Stott has served as a director of Airgas since 1993. Dr. Karabelas has been the President of SmithKline Beecham Pharmaceuticals' North American division since 1993. Prior to 1993, he held a variety of marketing and sales positions at SmithKline Beecham, a healthcare company, including Senior Vice President of Marketing from 1990 to 1993. From 1989 to 1990, Dr. Karabelas was CEO of Cytotherapeutics, a biotechnology company. Prior to that, he was an Assistant Professor of Industrial Pharmacy and Pharmacokinetics at the Massachusetts College of Pharmacy. Dr. Karabelas has served as a director of Airgas since August 1996. Mr. Sult has been the President of National Welders Supply Co., Inc., a major independent producer and distributor of industrial gases, welding supplies and related equipment in North Carolina, South Carolina, Georgia and Virginia, since 1987, and was Executive Vice President for more than five years prior thereto. Mr. Sult has served as a director of Airgas since 1988. 71 Mr. Naylor retired from the Rohm & Haas Company, a specialty chemical manufacturer, in December 1995. For ten years prior to his retirement, he had been Group Vice President and a director of Rohm & Haas Company. Mr. Naylor has served as a director of Airgas since 1992. Mr. Yohe is an independent investor, corporate director and advisor. He was Vice Chairman of Olin Corporation and a member of its Board of Directors until 1994. Mr. Yohe is a Director of Betz Dearborn, Inc., Calgon Carbon Corporation and The Middleby Corporation. He also is a trustee of Lafayette College. Mr. Yohe has served as a director of Airgas since 1994. Mr. Brown has been the Chairman, President and a director of 1838 Investment Advisors, Inc., an investment management company, and President of 1838 Investment Advisors, L.P., since July 1988, and has been President of 1838 Investment Advisors Funds since 1995. He is a director of the 1838 Bond Debenture Trading Fund Inc., the 1838 Investment Advisors Funds and The Harleysville Mutual Insurance Company, and was a Senior Vice President and a director of Drexel Burnham Lambert Incorporated for more than four years prior to 1988. Mr. Brown has been a director of Airgas since 1989. Mr. Foster has been Chairman of DBH Associates, a venture capital/consulting firm, since 1989. He was President and CEO of Diamond-Bathurst Inc., a publicly-held manufacturer of glass containers, from 1975 until he founded DBH. He also serves as a director of Contour Packaging, U.S. Precision Glass, Fragrance Impressions, Ltd., Carr-Lowrey Glass Company and 1838 Investment Advisors Funds. Mr. Foster has been a director of Airgas since 1986. Mr. Knieling has been the President and Chief Operating Officer of Airgas since December 1, 1995. Mr. Knieling served as Division President - Southern Division from April 1, 1995 to November 30, 1995 and as Division President - Eastern Division from February 3, 1993 to March 1995. Mr. Knieling served as a Regional Vice President from June 1990 to February 1993 and as resident of Gulf States Airgas from June 1989 to February 1993. Mr. Knieling owned and operated an industrial gas distributor which was sold to Airgas in 1989. Also, Mr. Knieling served in various capacities for Hoechst AG during a period of 18 years, and, prior to his leaving Hoechst in 1982 was President and Chief Executive Officer of its subsidiary, MG Burdett Gas Products Company. Mr. Baker has been Airgas' Division President - Eastern Division since April 1, 1995. Mr. Baker served as a Regional Vice President from May 1991 to February 1993 and President of Southwest Airgas since the acquisition of Southwest Airgas (formerly West Texas Welders Supply), in October 1988, to March 1995. Prior to joining Airgas, Mr. Baker was President and owner of West Texas Welders Supply from August 1981 to October 1988. Mr. Crichton has been Airgas' Division President - Western Division since February 3, 1993. Mr. Crichton served as a Regional Vice President from May 1991 to February 1993 and as President of Sierra Airgas since the acquisition of Sierra Airgas (formerly Moore Bros.) in January 1987. Mr. Crichton was employed by Union Carbide Industrial Gases (UCIG) from 1969 through 1986, and prior to joining Moore Bros., was President of a subsidiary of UCIG. Mr. Keeley has been Airgas' Division President - Northern Division since December 1, 1995. Mr. Keeley served as the Division President - Central Division from February 3, 1993 to November 30, 72 1995, as a Regional Vice President from April 1989 to February 1993 and as President of Michigan Airgas from March 1984 to March 1989. Prior to 1984, Mr. Keeley owned and operated an industrial gas distributor which was sold to Airgas. Mr. Rush has been Airgas' Division President - Southern Division since December 1, 1995. Mr. Rush served as President of Sooner Airgas from June 1, 1991 to November 30, 1995 and as Vice President of Sales for Southwest Airgas from September 1990 to May 31, 1991. Mr. Rice has been Airgas' Division President - Industrial Distribution and Purchasing since April 1, 1995 and served as Vice President - Purchasing from August 1, 1993 to March 1995. Until August 1993, Mr. Rice was President of Virginia Welding Supply, which was acquired by Airgas in July 1992. Mr. Rice has over 20 years of industry experience and serves on the boards of various companies. Mr. Deas has been the Vice President & Chief Financial Officer since February 17, 1997. From March 1996 to February 1997, Mr. Deas served as Chief Financial Officer of Maritrans, Inc., a New York Stock Exchange listed shipping company headquartered in Philadelphia. Prior to that, Mr. Deas served for 18 years in various positions at Scott Paper Company, a manufacturer of tissue products, including Vice President, Treasury and Assistant Treasurer from October 1988 to February 1996. Mr. Keen has been the Vice President - Corporate Development since January 1, 1992. From January 1982 until December 1991, Mr. Keen was a partner in the law firm of McCausland, Keen & Buckman, Radnor, Pennsylvania, which provides legal services to Airgas. Mr. Sanford has been Airgas' Executive Vice President since December 1, 1995 and Vice President - Sales and Marketing since February 3, 1993. Mr. Sanford served as President of Cascade Airgas from March 1989 to February 1993. From May 1984 to February 1989 Mr. Sanford served as Vice President -- Sales and Marketing for Midwest Carbide. Mr. Mason has been Senior Vice President since December 1, 1995. Mr. Mason served as Assistant to the Chairman from January 1993 to November 1995. Prior to that, Mr. Mason served as Executive Vice President of Airgas from March 1990 until January 1993 and served as President from August 1988 until February 1990. Mr. Melman has been Vice President - Chief Administrative Officer since April 1, 1995. Mr. Melman served as Vice President - Corporate Controller from August 1994 to March 1995 and Corporate Controller from August 1986 to July 1994. Prior to joining Airgas, Mr. Melman was the Controller for Integrated Circuit Systems, Inc. from November 1983 to July 1986, and prior to joining Integrated Circuit Systems, Inc., was a Tax Manager for KPMG Peat Marwick LLP. Mr. Endres has been Vice President - International since January 1993. Mr. Endres served as Vice President - Marketing from July 1991 until December 1992. From February 1987, Mr. Endres served as General Manager and Vice President for the western region of Airgas. Prior to joining Airgas, Mr. Endres served for 18 years in various positions nationally and internationally for Messer Griesheim, a major producer of industrial gases headquartered in Germany. His last position was Vice President for Specialty Gases and Chemicals at MG Industries in Valley Forge, PA. 73 Mr. Goldstein has been the Vice President and Chief Information Officer of Airgas since September 9, 1996. He joined Airgas from KPMG Peat Marwick LLP (KPMG) where he served as a National Service Leader for their Consulting Division since June 1991. Prior to 1991, he was a Senior Manager at KPMG. Mr. Goldstein held a variety of consulting positions at Coopers & Lybrand LLP from June 1986 to July 1989. Compensation of Directors Directors (other than those who are employees of Airgas) are paid an annual retainer of $9,000 plus a fee of $1,000 for each Board or Committee meeting attended, and are entitled to participate in the 1989 Non-Qualified Stock Option Plan for Directors (Non-Employees) (the "Directors' Plan"). Under the Directors' Plan, on the date of each annual meeting of stockholders, continuing directors are granted options to purchase 8,000 shares of Airgas' Common Stock at an exercise price equal to the fair market value on the date of grant. The options are exercisable immediately and have terms of 10 years. Messrs. Brown, Foster, Hoak, Naylor, Shober, Sult, Stott and Yohe each received options to acquire 5,000 shares adjusted to reflect the 2-for-1 stock split in April 1996 (after they each waived their right to options to acquire 3,000 shares) in fiscal 1996. The Chairman of the Audit Committee and the Nominating and Compensation Committees also receive an additional $3,000 annual retainer. Directors are also reimbursed for their travel expenses for attendance at Board and Committee meetings. From April 1, 1995, through March 31, 1996, Mr. Stott was paid $10,000 for consulting services he rendered to Airgas. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities and Exchange Act of 1934 requires Airgas' officers and directors, and persons who own more than ten percent of a registered class of Airgas' equity securities, to file reports of ownership and changes in ownership of the securities with the SEC and the NYSE. Such persons are also required to furnish Airgas with copies of all Section 16(a) forms they file. Airgas knows of no greater than ten percent stockholders, other than one person who is an officer and director. Based solely on its review of the copies of the forms received by it with respect to the 1996 fiscal year, or written representations from certain reporting persons that no Forms 5 were required, Airgas believes that all of its officers and directors complied with all filing requirements applicable to them, except with respect to one late filing of a Form 4 to report the sale of 353 shares of Airgas' Common Stock by E. Pat Baker in August 1995, which Form 4 was filed in September 1996, two weeks late. Additionally, 215 shares of Airgas' Common Stock acquired by Mr. Baker on March 31, 1995, pursuant to Airgas' 1994 Stock Purchase Plan was inadvertently omitted from Mr. Baker's Form 3. The acquisition of shares was made one day before the date on which Mr. Baker became an executive officer for purposes of Section 16(a). Upon discovery of the error, an amendment was promptly filed. 74 Executive Compensation The following table sets forth certain information concerning the compensation paid during the fiscal years ended March 31, 1996, 1995 and 1994 to Airgas' Chief Executive Officer and each of Airgas' four other most highly compensated executive officers based on salary and bonus earned during the 1996 fiscal year. Summary Compensation Table
Annual Compensation Long Term Compensation ----------------------------------------------- ------------------------------------------------------ Other Annual Securities All Other Name and Principal Fiscal Compensation Restricted Underlying LTIP Compensation Position Year Salary($) Bonus($) (1) Stock Awards Options(#) Payouts ($)(1) -------- ---- --------- -------- ------------ ------------ ---------- ------- ------------ Peter McCausland 1996 $ 500,000 $ 497,500 (1) None 144,000 None $ 6,066 (2) Chairman and 1995 325,000 580,280 None 216,000 None 5,766 Chief Executive Officer 1994 325,000 575,000 None 272,000 None 4,558 Hermann Knieling 1996 163,333 71,000 (1) None 34,000 None 8,513 (3) President and Chief 1995 120,000 64,733 None 40,400 None 6,900 Operating Officer 1994 115,000 50,700 None 51,200 None 5,600 Britton H. Murdoch 1996 159,500 72,500 (1) None 32,000 None 7,727 (5) Vice President- 1995 153,000 85,000 None 40,400 None 7,692 Finance (4) 1994 147,500 68,300 None 51,200 None 6,082 Kenneth A. Keeley 1996 150,556 55,000 (1) None 32,000 None 8,316 (6) Division President- 1995 152,062 64,733 None 40,400 None 8,125 Central 1994 145,000 49,500 None 51,200 None 6,488 Gordon L. Keen, Jr. 1996 127,700 76,000 (1) None 20,000 None 6,641 (7) Vice President- 1995 123,600 60,800 None 24,400 None 6,062 Corporate Development 1994 123,000 50,200 None 32,000 None 5,048
- ---------------------- (1) Amount does not exceed the lesser of $50,000 or 10% of total salary and bonus. (2) Consists of $5,718 of employer matching contributions and additional discretionary contributions based on the profitability of Airgas under Airgas' 401(k) Plan, and the value of life insurance premiums of $348 paid for the benefit of Mr. McCausland. (3) Consists of $7,109 of employer matching contributions and discretionary contributions based on the profitability of Airgas under Airgas' 401(k) Plan and the value of life insurance premiums of $1,404 paid for the benefit of Mr. Knieling. (4) Mr. Murdoch resigned from his position with the Company in September, 1996. (5) Consists of $7,595 of employer matching contributions and additional discretionary contributions based on the profitability of Airgas under Airgas' 401(k) Plan, and the value of life insurance premiums of $132 paid for the benefit of Mr. Murdoch. (6) Consists of $7,416 of employer matching contributions and additional discretionary contributions based on the profitability of Airgas under Airgas' 401(k) Plan and the value of life insurance premiums of $900 paid for the benefit of Mr. Keeley. 75 (7) Consists of $6,065 of employer matching contributions and additional discretionary contributions based on the profitability of Airgas under Airgas' 401(k) Plan and the value of life insurance premiums of $576 paid for the benefit of Mr. Keen. Option Grants During 1996 Fiscal Year The following table provides information related to options granted to the named executive officers during fiscal 1996. does not have any outstanding stock appreciation rights.
Potential Realization Value at Assumed Annual Rates of Stock Price Appreciation Individual Grants for Option Term (1) ---------------------------------------------------------------------------------------- ----------------------------------------- % of Total No. of Securities Options Underlying Granted to Options Employees in Exercise Expiration Name Granted (#)(2) Fiscal Year Price ($/Sh) Date 0%($)(3) 5%($)(3) 10%($)(3) --------------------- ----------------- ------------- ------------ ---------- ---------- ---------- ----------- Peter McCausland 72,000 7.4% $13.32 May 22, 2005 $ 0 $603,135 $1,528,463 72,000 7.4 17.31 May 22, 2005 0 315,855 1,241,183 Hermann Knieling 16,000 1.6 13.32 May 22, 2005 0 134,030 339,658 16,000 1.6 17.31 May 22, 2005 0 70,190 275,818 2,000 .2 13.32 May 22, 2005 0 16,754 42,457 Britton H. Murdoch 16,000 1.6 13.32 May 22, 2005 0 134,030 339,658 16,000 1.6 17.31 May 22, 2005 0 70,190 275,818 Kenneth A. Keeley 16,000 1.6 13.32 May 22, 2005 0 134,030 339,658 16,000 1.6 17.31 May 22, 2005 0 70,190 275,818 Gordon L. Keen, Jr. 10,000 1.0 13.32 May 22, 2005 0 83,769 212,287 10,000 1.0 17.31 May 22, 2005 0 43,868 172,387
- ------------------------------------- (1) These amounts, based on assumed appreciation rates of 0%, 5% and 10% prescribed by the Securities and Exchange Commission rules, are not intended to forecast possible future appreciation, if any, of Airgas' stock price. (2) Options to acquire shares of Common Stock, which become exercisable in four equal annual installments beginning May 22, 1996. (3) No gain to the Optionees is possible without an increase in stock price, which will benefit all stockholders. If the named executive officers realize the appreciated values based on the 5% and 10% appreciation rates set forth in the table, total stockholder value will have appreciated by approximately $584 million and $1.481 billion, respectively, and the value of the named executive officers' appreciation will be approximately 0.3% of the total stockholders' appreciation. Potential stock price appreciation to all stockholders is calculated based on a total of 64,265,320 shares of Common Stock outstanding on June 10, 1996, and a price of $14.46 per share, the weighted average exercise price of options granted in fiscal 1996 referred to in the table above. 76 Aggregated Option Exercises During 1996 Fiscal Year and Fiscal Year-End Option Values The following table provides information related to employee options and warrants exercised by the named executive officers during fiscal 1996 and the number and value of such options held at fiscal year-end.
Number of Securities Underlying Value of Unexercised Unexercised Options In-the-Money Options at Fiscal Year-End(#) at Fiscal Year-End($)(2) Shares Acquired Value ------------------------- --------------------------- Name on Exercise (#) Realized ($)(1) Exercisable Unexercisable Exercisable Unexercisable - ------------------- --------------- --------------- ----------- ------------- ------------ ------------- Peter McCausland ---- ---- 802,000 526,000 12,892,390 5,007,730 Hermann Knieling 14,600 155,908 71,500 95,900 1,003,837 770,496 Britton H. Murdoch 48,000 550,080 157,700 97,900 2,533,427 823,696 Kenneth A. Keeley 360,000 4,219,120 212,900 93,900 3,503,867 757,376 Gordon L. Keen, Jr. ---- ---- 272,100 60,300 3,268,090 517,330
(1) Represents the difference between the option exercise price and the market value on the date of exercise. (2) Value based on the closing price of $19.88 per share on March 31, 1996, less the option exercise price. Termination of Employment and Change in Control Arrangement Airgas has agreed that upon Mr. McCausland's termination of employment or change in control of Airgas, he is entitled to a payment equal to two times annual salary, the continuation of health insurance and other employee benefits for a three-year period and automatic vesting of all previously granted stock options. Certain Transactions As a condition to the amendment in January 1991 of warrants held by Mr. McCausland, Mr. McCausland exercised warrants and the Company agreed to provide financing assistance, including a guarantee of a bank loan in the principal amount of $1,116,695, to Mr. McCausland, the proceeds of which were used by Mr. McCausland to purchase shares under certain of the warrants. The loan was guaranteed by the Company until July 23, 1993 and was repaid by Mr. McCausland on September 9, 1993. In addition, the Company has agreed to guarantee an individual loan for, or to lend to Mr. McCausland directly, the amount of taxes, if any, which may be payable by reason of the warrant exercise. On February 28, 1994, Alfred B. Crichton, Division President-Western Division, William Sanford, Vice President - Marketing, E. Pat Baker, Division President-Eastern Division, Rudi G. Endres, Vice President-International, and Mr. Knieling elected to exchange minority equity interests they 77 held in subsidiaries of Airgas for 15,463, 17,610, 3,805, 27,366 and 7,951 shares, respectively, of Airgas Common Stock pursuant to Exchange Rights Agreements entered into between Airgas and such persons. Pursuant to the agreements, Airgas' Board of Directors designated February 28, 1994 as an exchange date. The number of shares of Airgas Common Stock issued in exchange was determined based on a valuation of the subsidiary's shares on September 30, 1993, as reviewed by an independent appraiser, and the market price of Airgas Common Stock as of November 1, 1993. McClain Corporation ("McClain"), Woodstock, Illinois, whichwas the beneficial owner of more than five percent of Airgas' Common Stock, is the exclusive sales agent of a subsidiary of Airgas for the sale and marketing of certain products, including electrically calcined anthracite and electrode paste, under a sales agency agreement which was renewed by the parties in October 1993 for a ten-year term (the "Sales Agency Agreement"). The Sales Agency Agreement provides for the payment of commissions to McClain equal to 5% of the sales for all Company products sold under the Sales Agency Agreement by McClain. During the fiscal years ended March 31,1994, 1995 and 1996, Midwest Carbide, a wholly-owned subsidiary of Airgas, paid McClain $515,000, $543,000 and $685,000, respectively, pursuant to the Sales Agency Agreement. Airgas believes the amounts paid to McClain are not inconsistent with industry practices. Airgas leases two properties from Mr. Knieling under two leases that expire in fiscal 1997. During fiscal 1994, 1995 and 1996, Airgas made rental payments to Mr. Knieling in the aggregate amounts of $64,200, $70,000 and $64,800, respectively. The leases were executed in connection with the purchase by Airgas of Mr. Knieling's business prior to his employment by Airgas. Airgas believes that the terms of the leases are no less favorable than could have been obtained in arms-length transactions with unaffiliated third parties. In fiscal 1994, National Welders, of which Mr. Sult was the President, paid $1,107,219 to a joint venture of Airgas for the purchase of calcium carbide. In fiscal 1995 and 1996, National Welders paid $546,000 and $495,000, respectively, to Airgas for the purchase of nitrous oxide and $1,209,000 and $987,000, respectively, to a joint venture of Airgas for the purchase of calcium carbide. In addition, during fiscal 1996, National Welders paid $109,000 to Airgas for the purchase of specialty gases. On June 28, 1996, Airgas acquired, pursuant to the terms of a joint venture agreement, 45% of the voting capital stock of National Welders for cash and notes totaling approximately $47.6 million. In connection with the agreement, during the three-year period beginning on July 1, 2006, the major shareholders of National Welders have the right to cause National Welders to redeem their National Welders preferred stock for either $58.1 million in cash or to exchange such preferred stock for approximately 2.38 million shares of Airgas Common Stock. Airgas believes that the terms of the transactions are no less favorable than could have been obtained in arms-length transactions with unaffiliated third parties. Airgas leases cylinders from William A. Rice, Jr., Division President - Industrial Distribution and Purchasing, of Airgas, under a capital lease continuing through December 1997. The lease was executed in connection with the purchase by Airgas of Mr. Rice's business prior to his employment by Airgas. During its 1995 and 1996 fiscal years, Airgas made principal and interest payments totaling $174,000 in each such year under the cylinder lease. Airgas believes that the terms of the lease are no less favorable than could have been obtained in arms-length transactions with unaffiliated third parties. In April 1995, Airgas made a $110,000 loan to William E. Sanford, Vice President - Sales and Marketing, to assist in the payment of taxes incurred as a result of Mr. Sanford's exchange of an interest 78 in a subsidiary for Airgas' Common Stock. The loan had an annual interest rate of 9%, and principal and interest were due and payable on demand. Mr. Sanford repaid the principal amount in full plus interest of $7,975 in December 1995. In fiscal 1995, Mr. Knieling received a $250,000 contingent payment from Airgas in connection with Airgas' acquisition of a company owned by Mr. Knieling. Principal Stockholders of Airgas The following table sets forth certain information, according to information supplied to Airgas regarding the number and percentage of shares of Airgas' Common Stock beneficially owned on December 31, 1996 (i) by each person who is the beneficial owner of more than 5% of the Common Stock; (ii) by each nominee for director and director (who is a nominee or continuing director); (iii) by each executive officer named in the Summary Compensation Table; and (iv) by all directors and executive officers of Airgas as a group. Unless otherwise indicated, the stockholders listed possess sole voting and investment power with respect to the shares listed.
Amount and Nature of Percentage of Name of Beneficial Owner Beneficial Ownership/(1)/ Shares Outstanding ------------------------ -------------------- ------------------ Peter McCausland 612 East Gravers Lane Wyndmoor, PA................................ 9,593,380 /(2)(3)(4)/ 13.8 Erroll C. Sult.............................. 85,600 /(2)/ * W. Thacher Brown............................ 110,000 /(2)(5)/ * Frank B. Foster, III........................ 59,600 /(2)/ * John A. H. Shober........................... 60,000 /(2)/ * Merril L. Stott............................. 206,984 /(2)(4)(6)/ * Robert E. Naylor, Jr........................ 32,000 /(2)/ * Robert L. Yohe.............................. 19,000 /(2)/ * Argeris N. Karabelas, Ph.D.................. 4,600 /(2)/ * Kenneth A. Keeley........................... 533,677 /(2)(4)(7)/ * Gordon L. Keen, Jr.......................... 354,299 /(2)(4)/ * Hermann Knieling............................ 217,606 /(2)(4)/ * Thomas W. Smith 323 Railroad Avenue Greenwich, CT 06830......................... 3,695,600 /(8)/ 5.4
79 Edward J. McAree 323 Railroad Avenue Greenwich, CT 06830......................... 3,698,000 /(8)/ 5.4 Thomas N. Tryforos 323 Railroad Avenue Greenwich, CT 06380......................... 3,696,392 /(8)/ 5.4 Firstar Investment Research and Management Company 777 E. Wisconsin Avenue Milwaukee, Wisconsin 53202.................. 3,435,750 /(9)/ 5.0 Firstar Corporation 777 E. Wisconsin Avenue Milwaukee, Wisconsin 53202.................. 3,435,750 /(9)/ 5.0 Putnam Investments, Inc. One Post Office Square Boston, Massachusetts 02109................. 4,827,786 /(10)/ 7.1 The Capital Group Companies, Inc. 333 South Hope Street Los Angeles, California 90071............... 4,064,300 /(11)/ 6.0 Capital Research and Management Company 333 South Hope Street Los Angeles, California 90071 4,064,300 /(11)/ 6.0 All directors and executive officers as a group (21 persons).................... 12,410,774 /(1)(2)(3)(4)(5)(6)(7)/ 17.5 - -------------------------
* Less than 1% of the outstanding Common Stock /(1)/ Includes all options and other rights to acquire shares exercisable on or within 60 days of December 31, 1996. Each of the amounts beneficially owned have been adjusted to reflect a 2-for-1 stock split of Airgas' Common Stock effective on April 15, 1996. /(2)/ Includes the following number of shares of Common Stock which may be acquired by certain directors and executive officers through the exercise of options which were exercisable as of December 31, 1996 or became exercisable within 60 days of that date: Mr. McCausland, 1,044,000 shares; Mr. Hoak, 42,000 shares; Mr. Sult, 62,000 shares; Mr. Brown, 54,000 shares; Mr. Foster, 46,000 shares; Mr. Shober, 46,000 shares; Mr. Stott, 22,000 shares; Mr. Naylor, 30,000 shares; Mr. Karabelas, 4,000 shares; Mr. Keeley, 249,800 shares; Mr. Keen, 84,200 shares; Mr. Knieling, 108,900 shares; Mr. Yohe, 14,000 shares; and all directors and executive officers as a group, 2,459,420 shares. /(3)/ Investment and/or voting power with respect to 2,279,880 of such shares are shared with, or under the control of, members of Mr. McCausland's immediate family, and 90,558 shares are held by a charitable foundation of which Mr. McCausland is an officer and director. 80 /(4)/ Includes the following shares of Common Stock held under Airgas' 401(k) Plan as of November 30, 1996: Mr. McCausland, 32,450 shares; Mr. Stott, 4,184 shares; Mr. Keeley, 18,189 shares; Mr. Keen, 824 shares; Mr. Knieling, 10,331 shares; and all executive officers as a group, 140,434 shares. /(5)/ Includes 8,000 shares owned by members of Mr. Brown's immediate family. /(6)/ Includes 180,800 shares owned in a living trust of which Mr. Stott and his spouse are co-trustees and their children are the beneficiaries. /(7)/ Includes 253,084 shares owned in a living trust, of which Mr. Keeley is both trustee and beneficiary and 2,200 shares held in a partnership, the partners of which are Mr. Keeley and his two sons. /(8)/ Messrs. Smith, McAree and Tryforos jointly reported on a Schedule 13D, dated February 11, 1994, (upon which Airgas has relied in making this disclosure) that in their capacities as investment managers for certain managed accounts consisting of three private investment limited partnerships (of which each is a general partner) and an employee profit sharing plan of a corporation of which Mr. Smith is the sole stockholder (and for which each of them is a trustee) they had the following voting and investment power for shares of the Common Stock: Messrs. Smith, McAree and Tryforos each have shared voting and dispositive power for 3,695,600 shares; Mr. McAree has sole voting and dispositive power for 2,400 shares; and Mr. Tryforos has sole voting and dispositive power for 792 shares. /(9)/ Firstar Investment Research and Management Company ("FIRMC") reported on Schedule 13G, dated February 13, 1996 (upon which Airgas has relied in making this disclosure) that it had sole voting power for 1,252,400 shares, shared voting power for 2,014,050 shares, sole dispositive power for 1,416,000 shares and shared dispositive power for 2,019,750 shares. FIRMC is a subsidiary of Firstar Corporation, as reported in a Schedule 13G filed by Firstar Corporation, dated February 13, 1996, upon which Airgas has relied in making this disclosure. Firstar Corporation reported that it had sole voting power for 2,882,200 shares, shared voting power for 389,950 shares, sole dispositive power for 3,045,800 shares and shared dispositive power for 389,950 shares. /(10)/ Putnam Investments, Inc. ("PI"), a wholly-owned subsidiary of Marsh & McLennon Companies, Inc., wholly owns Putnam Investment Management, Inc. and The Putnam Advisory Company, Inc. (collectively, the "Putnam Group"). The Putnam Group together filed a Schedule 13G dated January 29, 1996, upon which Airgas has relied in making this disclosure. Each of the members of the Putnam Group are considered beneficial owners in the aggregate of 4,827,786 shares, or 7.54% of shares outstanding, of Airgas' voting common stock, which shares were acquired for investment purposes by the Putnam Group for certain of their advisory clients. /(11)/ Capital Research and Management Company ("Capital Research"), a registered investment adviser, is a wholly-owned subsidiary of The Capital Group Companies ("Capital Group"). Capital Research and Capital Group reported that they have sole dispositive power and therefore beneficially own 4,064,300 shares as the result of Capital Research acting as investment adviser to various investment companies. Capital Research and Capital Group together filed a Schedule 13G dated February 22, 1997, upon which Airgas has relied in making this disclosure. Airgas Common Stock Airgas has the authority to issue 200,000,000 shares of common stock, par value $.01 per share. At December 31, 1996, Airgas had outstanding 68,470,317 shares of common stock. 81 The following description of the Airgas Common Stock sets forth certain general terms and provisions of the Airgas Common Stock. The statements below describing the Airgas Common Stock are in all respects subject to and qualified in their entirety by reference to the applicable provisions of Airgas's Amended and Restated Certificate of Incorporation and Bylaws. Holders of the Airgas Common Stock will be entitled to receive dividends when, as and if declared by the Board of Directors of Airgas, out of assets legally available therefor. Upon any liquidation, dissolution or winding up of Airgas, holders of Airgas Common Stock will be entitled to share equally and ratably in any assets available for distribution to them, after payment or provision for payment of the debts and other liabilities of the Company and the preferential amounts owing with respect to any outstanding preferred stock. The Airgas Common Stock possesses ordinary voting rights for the election of director and in respect of other corporate matters, with each share entitling the holder thereof to one vote. Holders of shares of Airgas Common Stock do not have preemptive rights, which means they have no right to acquire any additional shares of Airgas Common Stock that may be issued by Airgas at a subsequent date. The Airgas Common Stock will, when issued, be fully paid and nonassessable and will not be subject to preemptive or similar rights. As a corporation under the laws of the State of Delaware, Airgas is subject to Section 203 of the DGCL, which restricts certain business combinations between Airgas and an "interested stockholder" (in general, a stockholder owning 15% or more of Airgas's outstanding voting stock) or such stockholder's affiliates or associates for a period of three years following the date on which the stockholder becomes an "interested stockholder." The restrictions do not apply if (i) prior to an interested stockholder becoming such, the Board of Directors approves either the business combination or the transaction in which the stockholder becomes an interested stockholder, (ii) upon consummation of the transaction in which such stockholder becomes an interested stockholder, such interested stockholder owns at least 85% of the voting stock of Airgas outstanding at the time the transaction commenced (excluding shares owned by certain employee stock ownership plans and persons who are both directors and officers of Airgas), or (iii) on or subsequent to the date an interested stockholder becomes such, the business combination is both approved by the Board of Directors and authorized at an annual or special meeting of Airgas's stockholders (and not by written consent) by the affirmative vote of at least 662/3% of the outstanding voting stock not owned by the interested stockholder. Airgas's Amended and Restated Certificate of Incorporation also includes a provision requiring the affirmative vote of at least 67% of the outstanding voting stock for certain business combinations involving an interested stockholder, except under the circumstances provided therein. for purposes of such provisions, an "interested stockholder" means generally a stockholder owning 20% or more of the outstanding voting stock of Airgas or an affiliate of Airgas that, at any time within the two year period preceding the related business combination, held 20% of the outstanding voting stock of Airgas. In addition, Airgas's Amended and Restated Certificate of Incorporation requires the affirmative vote of a majority of the outstanding shares of capital stock of Airgas for the purchase by Airgas of its equity securities (as defined in such Amended and Restated Certificate of Incorporation) from any interested stockholder (as defined in the preceding sentence) who has beneficially owned such securities for less than a two year period. Airgas Preferred Stock Airgas's Amended and Restated Certificate of Incorporation authorizes the issuance of 20,000,000 shares of preferred stock ("Preferred Stock") with such designations, rights and preferences as may be determined from time to time by the Airgas Board. Accordingly, the Airgas Board is empowered, 82 without stockholder approval, to issue Preferred Stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of the Airgas Common Stock. The Preferred Stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of Airgas. Airgas is also authorized to issue 30,000 shares of Non-Voting Preferred Stock, none of which are outstanding. If issued, holders of the Non-Voting Preferred Stock would be entitled to annual, cumulative dividends of $6.00 per share for the first four years and $8.00 per share thereafter. Although Airgas has no commitments as of the date of this Proxy Statement/Prospectus to issue any shares of Preferred Stock, there can be no assurance that Airgas will not do so in the future. Stock Purchase Rights On August 1, 1988, the Airgas Board of Directors declared a dividend distribution of one preferred share purchase right (a "Right") for each outstanding share of Airgas Common Stock. The distribution was payable on August 12, 1988 to stockholders of record on that date. Each Right entitles the registered stockholder to purchase from Airgas a unit consisting of one one-hundredth of a share (a "Unit") of the Series A Junior Participating Preferred Shares, par value $.01 per share, of Airgas (the "Preferred Shares"), or a combination of securities and assets of equivalent value, at a purchase price of $65.00 per Unit, subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement, dated as of August 1, 1988 (the "Rights Agreement"), between the Company and The Philadelphia National Bank as Rights Agent. Under the terms of the Rights Agreement, the Rights were distributed as a dividend at the rate of one Right for each share of Airgas Common Stock held as of the close of business on August 12, 1988. Airgas stockholders did not receive certificates for the Rights, but the Rights are part of each share of Airgas Common Stock. The number of Rights outstanding is subject to adjustment under certain circumstances and all Rights expire on August 1, 1988. Each Right entitles the holder to buy 1/100th of a Preferred Share at an exercise price of $65.00. Each Preferred Share fraction was designed to be substantially equivalent in voting and dividend rights to one share of Airgas Common Stock. The Rights will be exercisable and will trade separately from the Airgas Common Stock only if a person or group acquires beneficial ownership of 20% (or 30% in the case of Peter McCausland) or more of the Airgas Common Stock or commences a tender or exchange offer that would result in such a person or group owning 30% or more of the Airgas Common Stock. Only when one or more of these events occurs will stockholders receive certificates for the Rights. If any person actually acquires 35% or more of Airgas Common Stock, other than through a tender or exchange offer for all shares of Airgas Common Stock that provides a fair price and other terms for such shares, or if a 20% or more stockholder (30% in the case of Peter McCausland) engages in certain "self-dealing" transactions or engages in a merger or other business combination in which Airgas survives and the Airgas Common Stock remains outstanding, the other stockholders will be able to exercise the Rights and buy Airgas Common Stock having twice the value of the exercise price of the Rights. Additionally, if Airgas is involved in certain other mergers where its shares are exchanged or certain major sales of its assets occur, stockholders will be able to purchase the other party's common stock in an amount equal to twice the value of the exercise price of the Rights. Upon the occurrence of any of these events, the Rights will no longer be exercisable for Preferred Shares. 83 Airgas may redeem the Rights at $.02 per Right at any time until the tenth day following a public announcement that a person has acquired a 20% ownership position in Airgas Common Stock (30% in the case of Peter McCausland). Airgas in its discretion may extend the period during which it can redeem the Rights. CIC Business General. CIC is engaged in the production and distribution of liquid ------- carbon dioxide and solid carbon dioxide (dry ice) and the rental of carbon dioxide equipment. CIC was incorporated in Florida in 1965, under the name Florida Carbonic Manufacturing Company. In 1972, CIC changed its name to Carbonic Industries Corporation. CIC's principal executive offices are located at 3700 Crestwood Parkway, Suite 200, Duluth, Georgia 30136. Sales for CIC were approximately $42 million, $35 million and $30 million in 1995, 1994 and 1993, respectively. Sales for the nine months ended September 30, 1996 and 1995 were $35 million and $31 million, respectively. Sales of carbon dioxide (liquid carbon dioxide and dry ice) represented 94% of total sales and 82% of operating income in 1995, and represented 95% of total sales and 88% of operating income for the nine months ended September 30, 1996. On a volume basis, CIC believes it is one of the four largest suppliers in the United States of carbon dioxide in its various forms. The other major carbon dioxide producers in the United States are the BOC Group, Praxair, Inc. and Air Liquide. Similar to other merchant carbon dioxide producers, CIC's customers use carbon dioxide in refrigeration, freezing, food processing and beverage carbonation, chemical processing, crude oil recovery, metal fabrication and agricultural fumigations. CIC acquires carbon dioxide from natural sources and as a byproduct of various manufacturing processes, and then refines and processes it into liquid and dry ice forms before marketing and selling it in bulk quantities. CIC markets and sells carbon dioxide products in 19 states, principally located east of the Mississippi River. CIC rents liquid carbon dioxide storage tanks and related applications equipment to its customers as an ancillary service to its carbon dioxide supply business. Revenues from the equipment rental business represent less than three percent of CIC's total revenues. CIC is a party to an agreement dated January 14, 1994 with Arcadian LCD Corporation ("Arcadian") forming a 50%/50% joint venture known as AC Industries. AC Industries operates a single 500 ton per day plant which produces liquefied carbon dioxide from unpurified carbon dioxide gas purchased from an affiliate of Arcadian. A 650 ton per day expansion project is underway and scheduled for completion in July 1997. CIC markets all the inventory produced by AC Industries under a marketing agreement. AC Industries is managed and operated by employees of CIC and Arcadian under various expense reimbursement agreements. Suppliers. Success in the carbon dioxide business is dependent to a --------- significant extent on access to adequate and reliable supplies of the gas. CIC currently obtains unprocessed carbon dioxide from five suppliers, two of which (AC Industries and Airgas' carbon dioxide facility located in Jackson, Mississippi) supply 85% of CIC's needs. See "The Merger -- Interests of Certain Persons in the 84 Merger." CIC has long-term supply contracts with each of its suppliers that require the purchase of specified minimum amounts of carbon dioxide, but generally these contracts do not obligate the suppliers to continue to produce carbon dioxide or to supply specified minimum quantities to CIC. Generally CIC purchases carbon dioxide from these suppliers at fixed prices with provisions for cost escalation. These contractual provisions have not historically had a material adverse affect on CIC's ability to maintain its sources of supply. CIC believes it has good relationships with each of its suppliers and that its access to supplies of carbon dioxide is secure. Customers. In 1996, fifteen customers accounted for approximately 22% --------- of CIC's revenues. Although the loss of any one of these customers would have an adverse impact on CIC's business in the short term, CIC believes it would be able to replace the lost business fairly quickly and that it would not suffer any long term material adverse impact. Facilities and Equipment. In addition to its principal executive ------------------------ offices, CIC operates nine production facilities and 17 distribution and warehousing facilities, primarily in the eastern United States. AC Industries operates another production facility in Georgia. Generally CIC owns the buildings and equipment that are associated with its production facilities, and has a lease with the source of carbon dioxide for land adjacent to the source to house the production facility. The lease typically runs for the term of the supply contract and is for a nominal amount of rent. Distribution and warehousing facilities are owned or leased on short-term standard business leases which CIC believes can generally be replaced with similar facilities, if necessary, without any material adverse effect on CIC. CIC has operating leases for the use of railroad tank cars, tractors and trucks with terms that range from three to ten years. Employees. CIC employed approximately 270 employees at March 1, 1997. --------- The employees are not subject to a collective bargaining agreement. Management of CIC considers its relations with its employees to be good. Selected Financial Data Selected financial data for CIC is presented in the table below and should be read in conjunction with CIC's Management's Discussion and Analysis of Financial Condition and Results of Operations and CIC's Financial Statements.
Nine Months Years Ended December 31, Ended September 30, ---------------------------------------------------------------------- 1995 1994 1993 1992/(1)/ 1991/(1)/ 1996 1995 ---- ---- ---- --------- --------- ---- ---- Operating Results: Net sales..................... $41,970,110 $34,640,562 $29,899,054 $28,959,174 $28,050,540 $34,530,000 $31,111,000 Depreciation & amortization... 3,047,922 3,052,242 3,154,391 3,283,424 3,121,347 2,200,000 2,225,000 Operating income.............. 2,727,787 2,421,517 1,156,184 1,755,228 1,457,915 3,134,000 2,367,000 Interest expense, net......... 885,920 715,564 622,271 691,985 743,772 576,000 692,000 Income taxes.................. 1,284,580 1,032,351 16,462 566,019 273,472 1,316,000 990,000 Net earnings.................. 1,773,854 1,326,318 14,999 724,680 291,147 1,817,000 1,365,000 Earnings per share: Primary: Net earnings................ 2.07 1.55 .02 .85 .34 2.12 1.60
85 Fully Diluted: Net earnings................ 2.07 1.55 .02 .85 .34 2.12 1.60 Balance Sheet Data: Working capital............... 2,879,928 1,991,698 2,459,892 2,192,276 1,534,093 2,248,000 Total assets.................. 28,081,227 27,742,308 23,480,429 24,784,590 26,663,820 31,239,000 Current portion of long-term debt............. 1,386,669 1,251,885 1,128,983 1,104,930 1,119,344 1,988,000 Long-term debt................ 6,240,438 7,480,583 6,657,737 7,608,263 8,713,192 6,951,000 Stockholders' equity.......... 13,516,461 12,157,369 11,246,326 11,219,525 10,794,108 15,334,000 - -----------------
(1) The Company spun-off a wholly owned subsidiary effective January 1, 1993. The 1992 and 1991 selected financial data above has been restated to give effect to the spin-off as if it had taken place on January 1, 1991. CIC Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Review Overview - Nine Months Ended September 30, 1996 CIC's financial results for the nine months ended September 30, 1996 reflect substantial growth compared to the same period for 1995. Net sales of approximately $35 million, net earnings of $1.8 million and earnings per share of $2.12 represent increases over 1995 of 11%, 33%, and 33%, respectively. During the nine months ended September 30, 1996, carbon dioxide sales increased 13% compared to the same period in the prior year. CIC intends to enter into an agreement to modify its long term supply contract with Arcadian LCD Corporation and to construct a plant addition at the AC Industries facility to begin production in fiscal year 1997. This long term supply agreement will provide for additional carbon dioxide sales by CIC. Additional railcars were received during the nine months ended September 30, 1996, bringing the fleet to 162. The total fleet of liquid carbon dioxide transport trailers has increased to 54 with the addition of 20 new units. This additional capacity will ensure a continued supply to the current customer base and allow for growth with the AC Industries expansion. Historically, operations have generated sufficient cash flow to finance CIC's operating activities. CIC has financed major production facility expansions with long-term debt borrowings. In 1996, the Company incurred additional debt of $2.5 million related to purchases of liquid carbon dioxide transport trailers and a storage receiver. In addition, CIC has made a capital contribution of $2 million to fund the planned production plant expansion at AC Industries. The total commitment required by CIC in connection with this plant expansion is approximately $5.1 million. At September 30, 1996 CIC had unused availability of $1.5 million on a secured line of credit. CIC's debt to equity ratio at September 30, 1996 increased to 58.3% compared to 56.4% at December 31, 1995. 86 Net sales increased 11% during the nine months ended September 30, 1996 compared to the prior year: (in thousands)
September 30, September 30, Increase 1996 1995 (Decrease) ------------- ------------ ---------- Carbon dioxide $32,812 $29,073 $3,739 Equipment sales & rental 1,718 2,038 ( 320) ------- ------- ------ $34,530 $31,111 $3,419 ======= ======= ======
For the nine months ended September 30, 1996, carbon dioxide sales increased approximately $4 million, or 13%. The increase in sales was primarily attributable to the growth in the customer base. Sales of equipment and rental revenue decreased 16%. This decrease was attributable to a 24% decrease in equipment sales and a 13% decrease in service revenue associated with renting and servicing equipment. The increase in gross profit of approximately $2 million was attributable to the increase in sales revenue. Partially offsetting this was the additional cost associated with the increase in railcar lease commitments. Gross profit as a percentage to sales for the nine months ended September 30, 1996 was 45% compared to 43% for the same period in the prior year. Distribution, selling, and general and administrative expenses remained at 35% of sales for the nine months ending September 30, 1996 compared to the same period in 1995. Lower operating costs as a percent to sales were achieved as a result of sales growth which did not increase operating costs proportionately. Offsetting these improvements were the increase in distribution cost as a result of the purchase of additional liquid carbon dioxide transport trailers. Operating income increased 32% during the nine months ended September 30, 1996 compared to the prior year: (in thousands)
September 30, September 30, Increase 1996 1995 (Decrease) ------------ ------------- ---------- Carbon dioxide $2,753 $1,974 $779 Equipment sales & rental 381 393 (112) ------ ------ ---- $3,134 $2,367 $767 ====== ====== ====
Carbon dioxide operating income as a percentage of net sales increased to 7.9% for the nine months ending September 30, 1996 compared to 6.3% for the same period in the prior year. The increase in carbon dioxide operating income in 1996 was a result of the increase in the sales base while replacing lower gross margin accounts with higher gross margin accounts. The volume of carbon dioxide sold decreased 10%. Equipment sales and rental operating income decreased as a percentage of net sales to 1.1% for the nine months ended September 30, 1996 compared to 1.3% for the prior period. The decrease was attributable to the decrease in rental income partially offset by higher margins on sale of equipment. 87 Interest expense decreased $139 thousand in 1996 compared to 1995 primarily as a result of converting debt associated with plant expansion to term financing, partially offset by the increase in debt for capital expenditure purchases. Equity in earnings of AC Industries decreased to $535 thousand for the nine months ended September 30, 1996 from $608 thousand in 1995. The reduction in earnings in 1996 resulted from a scheduled, temporary shutdown for routine maintenance by the carbon dioxide gas supplier to AC Industries. Equity in earnings of AC Industries represented 17% of pre-tax earnings in 1996 compared to 26% in the prior period. Income tax expense is estimated at 42% of pre-tax earnings in the nine months ended September 30, 1996 and 1995. Net earnings increased 33% to $1.8 million or $2.12 per share in 1996 from $1.4 million or $1.60 per share in 1995. After tax cash flow (net earnings plus depreciation, amortization, deferred income taxes, and distribution from AC Industries, less earnings from AC Industries) increased 24% to $4.2 million in 1996 from $3.4 million in 1995. Financial Review Overview - Fiscal Year Ended December 31, 1995 CIC's financial results for the year ended December 31, 1995 reflect substantial growth compared to 1994. Net sales of approximately $42 million, net earnings of $1.8 million and earnings per share of $2.07 represent increases over 1994 of 21%, 34% and 34%, respectively. Attainment of the 1995 results were largely attributable to the availability of liquid carbon dioxide for the first full fiscal year from AC Industries and also the general shortage of supply within the carbon dioxide industry. AC Industries was created on January 14, 1994 with initial liquid carbon dioxide production beginning June 30, 1994. During 1995, carbon dioxide sales increased 22% compared to the prior year. During 1995, production plant modifications were in progress in several locations, for the purpose of improving production capacity at such locations: the Jacksonville, Florida plant was rebuilt, increasing CIC's dry ice production at that location to 4.75 tons per hour; the Star, Mississippi production plant and the Augusta, Georgia plant were both modified to increase condensing capacity. In addition, additional railcars were ordered, to bring the fleet to 162, and the total fleet of liquid carbon dioxide transport trailers was increased to 54, with the addition of 20 new units on order. Historically, operations have generated sufficient cash flow to finance CIC's operating activities. CIC has financed major production facility expansions with long-term debt borrowings. In 1995, CIC incurred additional debt of $4.3 million related to the construction of the Augusta, Georgia dry ice production facility and the investment in AC Industries. CIC received a commitment letter for $6.6 million for the financing of 20 liquid carbon dioxide transport trailers and a production plant expansion at AC Industries during the year ended December 31, 1995. At December 31, 1995, CIC had unused availability of $1.5 million on a secured line of credit. CIC's debt to equity ratio at December 31, 1995 decreased to 56.4% compared to 84.2% in the prior year. 88 Results of Operations: 1995 Compared to 1994 Net sales increased 21% in 1995 compared to 1994: (in thousands)
1995 1994 Increase ---- ---- -------- Carbon dioxide $39,355 $32,331 $7,024 Equipment sales & rental 2,615 2,310 305 ------- ------- ------ $41,970 $34,641 $7,329 ======= ======= ======
For year ended December 31, 1995, carbon dioxide sales increased approximately $7 million, or 22%. The increase in carbon dioxide sales was primarily a result of increased carbon dioxide supply from AC Industries production facility. Sales of equipment and rental revenue increased 13%. This increase was attributable to an 18% increase in equipment sales and a 63% increase in service revenue associated with renting and selling equipment. The increase in gross profit of approximately $3.1 million was attributable to the increase in sales revenue. CIC was able to improve its cost of production for 1995 compared to the prior year due to the long term supply contract with AC Industries. Partially offsetting these savings was the additional cost associated with the increase in railcar lease commitments. Gross profit as a percentage of sales remained at 44% for December 31, 1995 compared to the prior year. Distribution, selling and general and administrative expenses remained at 37% of sales for the year ended December 31, 1995 compared to December 31, 1994. CIC increased the volume of carbon dioxide distributed by 36% for the year ended December 31, 1995 compared to the prior year. Lower operating costs as a percent to sales were achieved as a result of sales growth which did not increase operating costs proportionately. Offsetting these improvements were insurance adjustments for audits, retrospective premiums and losses absorbed by CIC through deductibles and self-insurance. Operating income increased 13% in 1995 compared to 1994: (in thousands)
1995 1994 Increase ---- ---- -------- Carbon dioxide $2,225 2,041 184 Equipment sales & rental 503 381 122 ------ ------ -------- $2,728 $2,422 $306 ====== ====== ========
Carbon dioxide operating income as a percentage of net sales decreased to 5.3% for the year ended December 31, 1995 as compared to 5.9% for the prior year. The decrease in carbon dioxide operating income in 1995 was a result of the increase in operating lease commitments of railcars and tractors to support the growth in the sales base. 89 Equipment sales and rental operating income increased as a percentage of net sales to 1.2% for the year ended December 31, 1995 compared to 1.1% for the prior year. The increase was attributable to the lower cost of maintaining rental equipment partially offset by lower margins on sale of equipment. Interest expense increased $57 thousand in 1995 compared to 1994 primarily as a result of the additional debt associated with production plant expansions. Equity in earnings of AC Industries increased to $843 thousand in 1995 from $336 in 1994. AC Industries began initial production on June 30, 1994. Equity in earnings of AC Industries represented 27.6% of pre-tax earnings in 1995 compared to 14.2% in the prior year. Income tax expense represented 42% of pre-tax earnings in 1995 compared to 43.8% in 1994. The decrease in effective income tax rate was primarily due to the impact of temporary differences between the amounts used for financial reporting purposes and such amounts recognized for tax purposes. Net earnings increased 34% to $1.8 million or $2.07 per share in 1995 from $1.3 million or $1.55 per share in 1994. After tax cash flow (net earnings plus depreciation, amortization, deferred income taxes, and distribution from AC Industries, less earnings from AC Industries) increased 19% to $5.0 million in 1995 from $4.2 million in 1994. Results of Operations: 1994 Compared to 1993 Net sales increased 16% in 1994 compared to 1993: (in thousands)
1994 1993 Increase ---- ---- -------- Carbon dioxide $32,331 $27,993 $4,338 Equipment sales & rental 2,310 1,906 404 ------- ------- ------ $34,641 $29,899 $4,742 ======= ======= ======
In 1994, carbon dioxide sales increased approximately $4.3 million, or 15%. The increase in sales was primarily due to the increase in the availability of carbon dioxide supply for six months in 1994 from the start-up of AC Industries production beginning June 30, 1994. Sales of equipment and rental revenue increased 21%. This increase was due to a 97% increase in equipment sales and a 56% increase in service revenue associated with renting and selling equipment. Compared to 1993, gross profit increased approximately $2.5 million. The gross profit on carbon dioxide increased from 44% to 46% due to the availability of liquid carbon dioxide supply from AC Industries. Gross profit as a percentage to sales increased from 43% to 44% for the year ending December 31, 1994. Distribution, selling, and general and administrative expenses as a percentage of sales decreased to 37% compared to 39% for the prior year. This reduction is primarily due to spreading certain operating costs that are relatively fixed over a larger sales base. 90 Operating income increased 110% in 1994 compared to 1993: (in thousands)
1994 1993 Increase ---- ---- -------- Carbon dioxide $2,041 $ 864 $1,177 Equipment sales & rental 381 292 89 ------ ------ ------ $2,422 $1,156 $1,266 ====== ====== ======
Carbon dioxide operating income as a percentage of net sales increased to 5.9% compared to 2.9% for the prior year. The increase in gross profit in 1994 was a result of the increase in sales base and a lower cost of sales resulting from the availability of liquid carbon dioxide from AC Industries production plant. Equipment sales and rental operating income increased as a percentage of net sales to 1.1% compared to 1.0% for the prior year. The increase was attributable to an increase in sales volume partially offset by lower margins on those sales. Interest expense increased $136 thousand primarily as a result of the increase in outstanding debt associated with production plant expansions. Equity in earnings of AC Industries; contributed an increase of $336 thousand to net earnings over 1993. AC Industries began initial production on June 30, 1994. Equity in earnings of AC Industries represented 14.2% of pre-tax earnings for 1994. Income tax expense represented 43.8% of pre-tax earnings in 1994 compared to 52.3% in 1993. The decrease in effective income tax rate was primarily due to the impact of temporary differences between the amounts used for financial reporting purposes and such amounts recognized for tax purposes. Net earnings increased substantially from the prior year to $1.3 million or $1.55 per share in 1994 from $15 thousand or $.02 per share in 1993. After tax cash flow (net earnings plus depreciation, amortization, deferred income taxes, and distribution from Joint Venture, less earnings from Joint Venture) increased 48.8% to $4.2 million from $2.8 million in 1993. Liquidity and Capital Resources CIC has primarily financed its operations and capital expenditures with funds provided by operating activities and with borrowings. Cash flows from operating activities totaled $2.3 million for the nine months ended September 30, 1996, after adding back depreciation and amortization totaling $2.2 million. Working capital components of cash flow decreased $1.2 million as a result of an increase in prepaid expenses and other receivables, partially offset by an increase in accrued expenses. Days-sales outstanding had decreased to 37 days as of September 30, 1996 compared to 48 days for the same period in 1995. 91 Cash used in investing activities totaled $4.8 million for the nine months ended September 30, 1996 which was primarily comprised of $3.5 million for capital expenditures and contribution of capital to AC Industries of $2.0 million, offset by a $700 thousand distribution from AC Industries. CIC's use of capital expenditures beyond maintenance capital expenditures was to invest in vehicles and equipment to support the growth in the sales base. CIC estimates that its maintenance capital expenditures are approximately 5% of net sales. CIC considers the replacement of existing capital assets to be maintenance capital expenditures. Financing activities provided cash of $884 thousand for the nine months ended September 30, 1996 with total debt outstanding increasing by $1.3 million from December 31, 1995. CIC paid $428 thousand in dividends in 1996 and 1995. The CIC Board of Directors declared a dividend in November 1995 that was paid on January 2, 1996. CIC has a secured line of credit with a commercial bank for $1.5 million. At September 30, 1996, CIC had no outstanding borrowings under this line. In January 1997, CIC increased this line of credit to $3 million. As of March 19, 1997, there were no outstanding borrowings under this line. In addition, in February 1997, CIC borrowed $2 million from a commercial bank, which is due May 22, 1997. At September 30, 1996 the effective interest rate related to outstanding borrowings under all credit agreements was approximately 10.1%. CIC's loan agreements contain covenants which include the maintenance of a minimum equity level, minimum working capital, maintenance of certain financial ratios, restrictions on additional borrowings and operating lease commitments, and limitations on dividends. CIC will continue to look for opportunities to expand its product supply in order to expand its sales base. CIC expects to fund these capital expenditure requirements primarily through the use of cash flow and debt. Forward-looking Statements The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this Proxy Statement/Prospectus contains statements regarding CIC that are forward-looking, such as statements relating to business development activities, plant expansion, future capital expenditures, financing sources and availability and the effects of regulation and competition. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements. These risks and uncertainties include, but are not limited to, uncertainties affecting the carbon dioxide business generally (such as the effects of competition from other distributors and producers, variations in sources and reliability of supply and changes in pricing), possible environmental liabilities, risks relating to the self-insurance of certain aspects of CIC's business, risks relating to leverage and debt service and the effects of changes in the economy on both a national and international basis. New Accounting Pronouncements In the first quarter of fiscal 1996, CIC adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The statement requires the recognition of an impairment loss for an asset held for use when the estimate of undiscounted future cash flows expected to 92 be generated by the asset is less than its carrying amount. Measurement of the impairment loss is based on fair value of the asset. Management believes that the adoption of this statement did not have a material impact on earnings, financial condition or liquidity of CIC. CIC accounts for stock options according to the provisions of Accounting Principles Board Opinion 25 (APB 25), "Accounting for Stock Issued to Employees." In October 1995, the Financial Accounting Standards Board issued SFAS Statement No. 123, "Accounting for Stock-Based Compensation." The new standard defines a fair value method of accounting for stock options and similar equity instruments. Companies may elect to continue to use existing accounting rules or adopt the fair value method for expense recognition. Companies that elect to continue to use existing accounting rules are required to provide pro forma disclosures of net income and earnings per share assuming the fair value method was adopted. CIC has elected to continue to use existing accounting rules. Accordingly, CIC will present the required pro forma disclosure provisions for its fiscal year ending December 31, 1996. As CIC will continue to account for stock-based compensation using the intrinsic value method, this statement will not have a material impact on earnings, financial condition or liquidity of CIC. In October 1996, the American Institute of Certified Public Accountants issued Statement of Position (SOP) 96-1, which prescribes generally accepted accounting principles for environmental remediation liabilities. This SOP more specifically identifies future, long-term monitoring and administration expenditures as remediation liabilities that need to be accrued on the balance sheet as an existing obligation. This SOP is effective for fiscal years beginning after December 15, 1996. Management believes that the adoption of this statement will not have a material impact on earnings, financial condition or liquidity of CIC. Principal Stockholders The following table sets forth, as of March 1, 1997, certain information with respect to ownership of the outstanding CIC Common Stock by (i) all persons known to CIC to own beneficially more than 5% of the outstanding CIC Common Stock, (ii) each director of CIC, (iii) each executive officer of CIC, and (iv) all directors and executive officers of CIC as a group. Unless otherwise indicated, to CIC's knowledge, each listed stockholder has sole voting and investment power over all shares listed.
Name and Address Shares of CIC Common of Beneficial Owner Stock Beneficially Owned Percent of Class ------------------- ------------------------ ---------------- Class A Class B Class A Class B ------- ------- ------- ------- Jefferson Pilot Life Insurance Co. 250,000 0 30.05% 0% P.O. Box 20407 Greensboro, NC 27420 J. Vernon Hinely,(1) 55,318/(2)//(3)/ Chairman and President 10,000/(4)/ 6.53% 40% 1473 Montcalm Street Orlando, FL 32806 Estate of W. Herbert Hinely 18,219/(1)/ 10,000 2.19% 40% (former Director) 9200 S. Kilgore Orlando, FL 32811
93
Name and Address Shares of CIC Common of Beneficial Owner Stock Beneficially Owned Percent of Class ------------------- ------------------------ ---------------- Class A Class B Class A Class B ------- ------- ------- ------- John A. Toepke, 40,500/(3)/(5)/ 0 0% Director, Executive Vice President 4.81% 3700 Crestwood Parkway Duluth, GA 30136 Julian K. Dominick 1,330 0 * 0% Director, Secretary 170 E. Washington Orlando, Fl 32801 David W. Fike 12,703/(3)/(6)/ 0 1.51% 0% Vice President, Operations 3700 Crestwood Parkway Duluth, GA 30136 Sandra Fowler Hurt 9,000/(3)/(7)/ 0 1.07% 0% Treasurer 3700 Crestwood Parkway Duluth, GA 30136 W. Lamar Lightsey 4,600 0 * 0% Director 105 Wendover Road Greenwood, SC 29649 Thomas E. Matthews 8,750 0 1.05% 0% Director 4401 Joseph Drive Lithonia, GA 30058 Robert F. Harkrider 4,000(8) * 0% Director 2093 Gatlin Avenue Orlando, Florida 32806 Jonathan I. Wax 151 0 * 0% Director 2214 Bohler Road Atlanta, GA 30327 Heirs of Michael F. Coyne/(9)/ 118,500 0 14.24% 0% c/o Kevin K. Coyne 228 Camino del Lago Atherton, CA 94027 All Executive Officers and Directors as a Group/(10)/ 154,571 20,000 17.69% 80%
94 - ------------------ * Less than one percent. (1) Mr. J. Vernon Hinely acts as administrator of his brother's, W. Herbert Hinely's, estate and consequently exercises voting control over the shares held by the estate. (2) Includes 20,035 shares of Class A Common owned by Bonnie L. Hinely, Mr. Hinely's wife, over which she exercises sole voting and investment power. Also includes options to acquire 15,000 shares of Class A Common granted to Mr. Hinely. Does not include shares held by Mr. Hinely's brother's estate, over which he exercises voting power. (3) Options are currently 20% vested but will become fully vested immediately prior to a change in control, including the consummation of the Merger. (4) All of the Class B Common is owned jointly by Mr. and Mrs. Hinely and they share voting and investment power as to this stock. (5) Includes 3,294 shares held by Freda Hanson-Toepke, Mr. Toepke's wife, who exercises sole voting and investment power over these shares. Includes options to acquire 10,000 shares of Class A Common granted to Mr. Toepke. (6) Includes 125 shares each owned by David W. Fike GGMA Torrence N. Fike and David W. Fike GGMA Adam N. Fike, over which Mr. Fike exercises sole voting and investment power. The remaining 4,453 shares are owned jointly with Judith A. Fike, Mr. Fike's wife, and they share investment and voting power with respect to these shares. Also includes options to acquire 8,000 shares of Class A Common. (7) Consists of options to acquire 5,000 shares of Class A Common held by Ms. Fowler Hurt and options to acquire 4,000 shares of Class A Common held by Robert E. Hurt, Ms. Fowler Hurt's husband. (8) All shares are owned jointly with Arline T. Harkrider, Mr. Harkrider's wife, and they share investment and voting power with respect to their shares. 2,500 shares of Class B Common owned by Church of Christ at South Bumby, Inc., of which Mr. Harkrider serves as pastor, are not included. (9) Includes shares held by 28 trusts and individuals, all heirs of Michael F. Coyne. CIC management believes these shares may be deemed to be beneficially owned by all of the heirs acting as a group. (10) Includes shares held by the estate of W. Herbert Hinely and options held by executive officers and directors. EXPERTS The consolidated financial statements and schedule of Airgas as of March 31, 1996 and 1995, and for each of the years in the three-year period ended March 31, 1996, included herein and elsewhere in the Registration Statement have been included herein and in the Registration Statement in reliance upon the report 95 of KPMG Peat Marwick LLP, independent certified public accountants, and upon the authority of said firm as experts in accounting and auditing. The financial statements of CIC as of December 31, 1995 and 1994 and for each of three years in the period ended December 31, 1995 included herein and elsewhere in the Registration Statement have been included herein and in the Registration Statement in reliance upon the report of Osburn, Henning and Company, independent certified public accountants, and upon the authority of said firm as experts in accounting and auditing. LEGAL OPINIONS The validity of the Airgas Common Stock to be issued in connection with the Merger will be passed upon for Airgas by McCausland, Keen & Buckman, Radnor, Pennsylvania. As of March 14, 1997, certain shareholders of McCausland, Keen & Buckman beneficially owned 50,410 shares of Airgas Common Stock. The material federal income tax consequences of the Merger to CIC's shareholders will be passed upon by McCausland, Keen & Buckman. 96 INDEX TO FINANCIAL STATEMENTS INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES Airgas, Inc. and Subsidiaries: - ------------------------------ Independent Auditors' Report................................................................. F-3 Consolidated Balance Sheets at March 31, 1996 and 1995....................................... F-4 Consolidated Statements of Earnings for the Years Ended March 31, 1996, 1995 and 1994.............................................................. F-5 Consolidated Statements of Stockholders' Equity for the Years Ended March 31, 1996, 1995 and 1994.................................................. F-6 Consolidated Statements of Cash Flows for the Years Ended March 31, 1996, 1995 and 1994.............................................................. F-8 Notes to Consolidated Financial Statements for the Years Ended March 31, 1996, 1995 and 1994............................................................... F-10 Consolidated Balance Sheets at December 31, 1996 (unaudited) and March 31, 1996............................................................................... F-29 Consolidated Statements of Earnings for the Nine Months Ended December 31, 1996 and 1995 (unaudited)..................................................... F-31 Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 1996 and 1995 (unaudited)............................................... F-32 Notes to Consolidated Financial Statements for the Nine Months Ended December 31, 1996 and 1995 (unaudited)................................................ F-33
F-1 Carbonic Industries Corporation: Independent Auditors' Report......................................................................... F-38 Balance Sheets at December 31, 1995 and 1994......................................................... F-39 Statements of Income for the Years Ended December 31, 1995, 1994 and 1993............................................................................ F-41 Statements of Stockholders' Equity for the Years Ended December 31, 1995, 1994 and 1993................................................................... F-41 Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993............................................................................ F-42 Notes to Financial Statements for the Years Ended December 31, 1995, 1994 and 1993........................................................................... F-43 Balance Sheets at September 30, 1996 and December 31, 1995 (unaudited) .............................. F-50 Statements of Income for the Nine Months Ended September 30, 1996 and 1995 (unaudited)............................................................ F-52 Statements of Cash Flows for the Nine Months Ended September 30, 1996 and 1995 (unaudited)...................................................... F-53 Notes to Financial Statements for the Nine Months Ended September 30, 1996 and 1995 (Unaudited)..................................................................... F-54
F-2 INDEPENDENT AUDITORS' REPORT The Board of Directors Airgas, Inc.: We have audited the consolidated financial statements of Airgas, Inc. and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Airgas, Inc. and subsidiaries as of March 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 1996, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth thereon. Philadelphia, Pennsylvania KPMG PEAT MARWICK LLP May 9, 1996 F-3 AIRGAS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 31, (In thousands, except per share amounts) 1996 1995 - ---------------------------------------- ---- ---- ASSETS (Note 8) Current Assets Trade receivables, less allowances for doubtful accounts of $3,396 in 1996 and $4,161 in 1995 . . . . . .$120,811 $ 93,423 Inventories (Note 4) . . . . . . . . . . . . . . . . . . . 86,162 65,947 Prepaid expenses and other current assets. . . . . . . . . 11,601 10,467 ------- ------- Total current assets. . . . . . . . . . . . . . . . . 218,574 169,837 ------- ------- Plant and Equipment, at cost (Note 5). . . . . . . . . . . 586,328 464,983 Less accumulated depreciation. . . . . . . . . . . . . . (147,451) (118,715) ------- ------- Plant and equipment, net . . . . . . . . . . . . . . . . 438,877 346,268 ------- ------- Other Non-current Assets (Note 6) . . . . . . . . . . . . . 60,948 41,388 Goodwill, net of accumulated amortization of $19,552 in 1996 and $15,094 in 1995. . . . . . . . . . 165,243 88,144 ------- ------- $883,642 $645,637 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Current portion of long-term debt (Note 8) . . . . . . . .$ 12,179 $ 11,780 Accounts payable, trade. . . . . . . . . . . . . . . . . . 52,528 43,782 Accrued expenses and other current liabilities (Note 7). . 72,279 60,191 ------- ------ Total current liabilities . . . . . . . . . . . . . . 136,986 115,753 ------- ------- Long-Term Debt (Note 8). . . . . . . . . . . . . . . . . . 385,832 259,970 Deferred Income Taxes (Note 13). . . . . . . . . . . . . . 88,400 67,540 Other Non-current Liabilities. . . . . . . . . . . . . . . 34,490 11,116 Minority Interest in Subsidiaries (Note 19). . . . . . . . 1,725 1,606 Commitments and Contingencies (Note 17) Stockholders' Equity (Note 9) Common Stock, par value $.01 per share, 200,000 shares authorized, 66,314 and 63,002 shares issued in 1996 and 1995, respectively . . . . . . . . . . . . . . . 663 630 Capital in Excess of Par Value . . . . . . . . . . . . . . 91,512 61,820 Retained Earnings. . . . . . . . . . . . . . . . . . . . . 173,360 133,640 Cumulative Translation Adjustments . . . . . . . . . . . . (410) (469) Treasury Stock, 2,355 and 472 common shares at cost in 1996 and 1995, respectively. . . . . . . . . . . . . . (28,916) (5,969) ------- ------- Total stockholders' equity. . . . . . . . . . . . . . 236,209 189,652 ------- ------- $883,642 $645,637 ======= =======
See accompanying notes to consolidated financial statements. F-4 AIRGAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS
Years Ended March 31, (In thousands, except per share amounts) ------------------------------ - --------------------------------------- 1996 1995 1994 ---- ---- ---- Net Sales Distribution . . . . . . . . . . . . . . . . $801,552 $654,381 $486,836 Manufacturing . . . . . . . . . . . . . . . 36,592 33,602 32,513 ------- ------- ------- Total net sales . . . . . . . . . . . . 838,144 687,983 519,349 ------- ------- ------- Costs and Expenses Cost of products sold (excluding depreciation and amortization) Distribution . . . . . . . . . . . . . . . 395,370 320,800 238,429 Manufacturing. . . . . . . . . . . . . . . 24,121 22,076 20,741 Selling, distribution and administrative expenses . . . . . . . . . . . . . . . . . 279,906 235,639 180,941 Depreciation and amortization. . . . . . . . 45,762 36,868 30,571 ------- ------- ------- Total costs and expenses. . . . . . . . 745,159 615,383 470,682 ------- ------- ------- Operating Income Distribution . . . . . . . . . . . . . . . . 86,130 66,521 42,399 Manufacturing. . . . . . . . . . . . . . . . 6,855 6,079 6,268 ------- ------- ------- Total operating income . . . . . . . . . 92,985 72,600 48,667 Interest expense, net (Note 11). . . . . . . (24,862) (17,625) (12,486) Other income, net (Note 12). . . . . . . . . 782 1,067 453 Minority interest (Note 19). . . . . . . . . (663) (669) (317) ------- ------- ------- Earnings before income taxes. . . . . 68,242 55,373 36,317 Income taxes (Note 13) . . . . . . . . . . . 28,522 23,894 16,027 ------- ------- ------- Net earnings. . . . . . . . . . . . . $ 39,720 $ 31,479 $ 20,290 ======= ======= ======= Earnings Per Share (Notes 3 and 9) . . . . . $ .60 $ .48 $ .31 ------- ------- ------- Weighted average shares. . . . . . . . . . . 66,215 65,525 64,780
See accompanying notes to consolidated financial statements. F-5 AIRGAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended March 31, 1996, 1995 and 1994 ----------------------------------------- Shares of Capital in Common Stock Common Excess of (In thousands) $.01 Par Value Stock Par Value - -------------- -------------- ------ ---------- Balance--April 1, 1993 . . . . . . . . . 31,999.6 $320 $46,966 Two-for-one stock split (Note 9) . . . . 31,999.6 320 (320) Net earnings . . . . . . . . . . . . . . Foreign currency translation adjustment. Stock warrants and options exercised . . 1,568.8 16 3,477 Tax benefit associated with exercise of stock options and warrants (Note 13) 3,590 Shares issued upon acquisition of minority interests (Note 19). . . . . . 166.7 1 1,739 Shares issued in connection with Employee Stock Purchase Plan (Note 14). 59.5 1 549 -------- --- ------ Balance--March 31, 1994. . . . . . . . . 65,794.2 $658 $56,001 Net earnings . . . . . . . . . . . . . . Foreign currency translation adjustment. Retirement of treasury stock . . . . . . (3,754.4) (37) (1,445) Purchase of treasury stock (Note 9). . . Issuance of stock in connection with acquisitions . . . . . . . . . . . 123.2 1 1,436 Stock warrants and options exercised . . 538.9 5 1,265 Tax benefit associated with exercise of stock options and warrants (Note 13) 1,859 Shares issued in connection with Employee Stock Purchase Plan (Note 14). 300.2 3 2,704 -------- --- ------ Balance--March 31, 1995. . . . . . . . . 63,002.1 $630 $61,820 Net earnings . . . . . . . . . . . . . . Foreign currency translation adjustment. Purchase of treasury stock (Note 9). . . Issuance of stock in connection with acquisitions . . . . . . . . . . . 843.7 9 11,435 Stock warrants and options exercised . . 1,841.6 17 3,705 Tax benefit associated with exercise of stock options and warrants (Note 13) 7,613 Shares issued upon acquisition of minority interests (Note 19). . . . . . . . . . 258.1 3 3,547 Shares issued in connection with Employee Stock Purchase Plan (Note 14). 368.2 4 3,392 -------- --- ------ Balance--March 31, 1996. . . . . . . . . 66,313.7 $663 $91,512 ======== === ======
F-6 AIRGAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - (Continued)
Years Ended March 31, 1996, 1995 and 1994 ----------------------------------------- Cumulative Retained Translation Treasury (In thousands) Earnings Adjustments Stock - -------------- --------- ----------- -------- Balance--April 1, 1993 . . . . . . . . . $81,871 $(104) $(1,482) Two-for-one stock split (Note 9). . . . . Net earnings. . . . . . . . . . . . . . . 20,290 Foreign currency translation adjustment . (367) Stock warrants and options exercised. . . Tax benefit associated with exercise of stock options and warrants (Note 13). Shares issued upon acquisition of minority interests (Note 19) . . . . . . Shares issued in connection with Employee Stock Purchase Plan (Note 14) . ------- ---- ----- Balance--March 31, 1994 . . . . . . . . . $102,161 $(471) $(1,482) Net earnings. . . . . . . . . . . . . . . 31,479 Foreign currency translation adjustment . 2 Retirement of treasury stock. . . . . . . 1,482 Purchase of treasury stock (Note 9) . . . (5,969) Issuance of stock in connection with acquisitions. . . . . . . . . . . . Stock warrants and options exercised. . . Tax benefit associated with exercise of stock options and warrants (Note 13). Shares issued in connection with Employee Stock Purchase Plan (Note 14) . ------- ---- ------ Balance--March 31, 1995 . . . . . . . . . $133,640 $(469) $(5,969) Net earnings. . . . . . . . . . . . . . . 39,720 Foreign currency translation adjustment . 59 Purchase of treasury stock (Note 9) . . . (22,947) Issuance of stock in connection with acquisitions. . . . . . . . . . . . Stock warrants and options exercised. . . Tax benefit associated with exercise of stock options and warrants (Note 13). Shares issued upon acquisition of minority interests (Note 19) . . . . . . Shares issued in connection with Employee Stock Purchase Plan (Note 14) . ------- ---- ------ Balance--March 31, 1996 . . . . . . . . . $173,360 $(410) $(28,916) ======= === ======
See accompanying notes to consolidated financial statements. F-7 AIRGAS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) Years Ended March 31, 1996 1995 1994 ---- ---- ---- Cash Flows From Operating Activities Net earnings . . . . . . . . . . . . . . . . . . $39,720 $31,479 $20,290 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization . . . . . . . . 45,762 36,868 30,571 Deferred income taxes . . . . . . . . . . . . . 10,868 11,549 8,189 Equity in earnings of unconsolidated affiliates . . . . . . . . . . . . . . . . . (1,428) (840) (1,258) Gain on sale of investment in CBI Industries, Inc. . . . . . . . . . . . . . -- (560) -- (Gain)/Loss on sale of plant and equipment. . . (12) 110 (63) Minority interest in earnings . . . . . . . . 663 669 317 Stock issued for employee benefit plan expense. . . . . . . . . . . . . . . . . . . 3,396 2,707 550 Changes in assets and liabilities, excluding effects of business acquisitions: Trade receivables, net. . . . . . . . . . . (5,300) (1,179) (5,444) Inventories . . . . . . . . . . . . . . . . (2,509) (1,874) 1,626 Prepaid expenses and other current assets . (960) 198 (546) Accounts payable, trade . . . . . . . . . . (1,461) 2,934 3,799 Accrued expenses and other current liabilities. . . . . . . . . . . . . . . . 4,485 1,332 4,548 Other assets and liabilities, net . . . . . (1,202) (3,441) (4,804) ------ ------ ------ Net cash provided by operating activities. 92,022 79,952 57,775 Cash Flows From Investing Activities ------ ------ ------ Capital expenditures . . . . . . . . . . . . . . (41,236) (36,712) (21,318) Proceeds from sale of plant and equipment. . . . 3,968 2,563 1,914 Business acquisitions, net of cash acquired. . .(153,605) (86,342) (93,375) Purchase of investment in CBI Industries, Inc. . -- (17,026) -- Proceeds from sale of investment in CBI Industries, Inc. . . . . . . . . . . . . . . . -- 17,892 -- Other, net . . . . . . . . . . . . . . . . . . . 860 116 (287) ------- ------ ------ Net cash used by investing activities. . . .(190,013) (119,509) (113,066) Cash Flows From Financing Activities ------- ------ ------ Proceeds from borrowings . . . . . . . . . . . . 692,414 394,193 195,292 Repayment of debt. . . . . . . . . . . . . . . .(594,931) (359,253) (150,844) Financing costs. . . . . . . . . . . . . . . . . (136) (230) (6) Repurchase of treasury stock . . . . . . . . . . (22,947) (5,969) -- Exercise of options and warrants . . . . . . . . 3,722 1,270 3,493 Net overdraft. . . . . . . . . . . . . . . . . . 4,068 4,591 2,459 Other financing activities . . . . . . . . . . . 15,745 4,960 5,120 ------- ------ ------ Net cash provided by financing activities. . 97,935 39,562 55,514 ------- ------ ------ Effects of discontinued activities, net. . . . . 56 (5) (223) ------- ------ ------
F-8 Cash Increase (Decrease) . . . . . . . . . . . . -- -- -- Cash--beginning of year. . . . . . . . . . . . . -- -- -- ------ ------ ------ Cash--End of Year. . . . . . . . . . . . . . . . $ -- $ -- $ -- ====== ====== ======
For supplemental cash flow disclosures see Note 18. See accompanying notes to consolidated financial statements. F-9 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Presentation The consolidated financial statements include the accounts of Airgas, Inc. and subsidiaries (the "Company"). Unconsolidated affiliates are accounted for on the equity method and generally consist of 20-50% owned operations where control does not exist or is considered temporary. The excess of the cost of these affiliates over the Company's share of their net assets at the acquisition date is being amortized over 20 to 40 years. Significant intercompany accounts and transactions are eliminated. The Company has made estimates and assumptions relating to the reporting of assets and liabilities and disclosure of contingent assets and liabilities to prepare these statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. (b) Inventories Inventories are stated at the lower of cost or market with cost for approximately 81% and 77% percent of the inventories at March 31, 1996 and 1995, respectively, determined by the first-in, first-out (FIFO) method. Cost for the remainder of inventories was determined using the last-in, first-out (LIFO) method. (c) Plant and Equipment Plant and equipment are stated at cost. Depreciation is provided on the straight-line basis over the estimated useful lives of the related assets. Effective April 1, 1993, the Company changed its estimate of the useful lives of its acetylene and high pressure cylinders from 20 to 30 years. This change was made to better reflect the estimated periods during which these assets will remain in service. The change had the effect of reducing depreciation expense in 1994 by approximately $3.1 million and increasing net earnings by $1.9 million or $.03 per share. The Company changed the estimated useful life of cylinders as a result of thorough studies and analyses. The studies considered technological advances in cylinders, empirical data obtained from cylinder manufacturers and other industry experts and experience gained from the Company's maintenance of a cylinder population of approximately two million cylinders. In the first quarter of fiscal 1997, the Company will adopt SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The statement requires the recognition of an impairment loss for an asset held for use when the estimate of undiscounted future cash flows expected to be generated by the asset is less than its carrying amount. Measurement of the impairment loss is based on fair value of the asset. Management believes that the adoption of this statement will not have a material impact on earnings, financial condition or liquidity of the Company. F-10 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued) (d) Other Assets Costs related to the acquisition of long-term debt are deferred and amortized over the term of the related debt. Costs and payments pursuant to noncompetition arrangements entered into in connection with business acquisitions are amortized over the terms of the arrangements which are principally over 5 years. On an ongoing basis, management reviews the valuation and amortization of intangible assets. (e) Goodwill Goodwill represents costs in excess of net assets of businesses acquired and is amortized on a straight-line basis over the expected periods to be benefited, which currently ranges from 20 to 40 years. The Company assesses the recoverability of this intangible asset by determining whether the amortization of the goodwill balance over its remaining life can be recovered through projected undiscounted future cash flows. (f) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (g) Foreign Currency Translation The functional currency of the Company's foreign operations is the applicable local currency. The translation of foreign currencies into U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using average exchange rates during each reporting period. The gains or losses, net of applicable deferred income taxes, resulting from such translations are included in stockholders' equity. Gains and losses arising from foreign currency transactions are reflected in the consolidated statements of earnings as incurred. (h) Concentrations of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of trade receivables. Concentrations of credit risk are limited due to the Company's large number of customers and their dispersion across many industries. Credit terms granted to customers are generally net 30 days. F-11 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (i) Revenue Recognition Sales are recorded upon shipment to the customer. (j) Financial Instruments In hedging interest rate exposure, the Company enters into interest rate swap agreements. These instruments are not entered into for trading purposes and the Company has the ability and intent to hold these instruments to maturity. The Company only uses non-leveraged instruments. When interest rates change, the difference to be paid or received is accrued and recognized as interest expense over the life of the agreement. The fair values of the Company's financial instruments are estimated based on quoted market prices for the same or similar issues. The carrying amounts for accounts receivable, accounts payable and current portion of long-term debt approximate fair value because of the short-term maturity of these financial instruments. (k) Reclassification Certain reclassifications have been made in previously issued financial statements to conform to the current presentation. (2) ACQUISITIONS The Company has acquired businesses primarily engaged in the distribution of industrial, medical and specialty gases and related equipment . Acquisitions have been recorded using the purchase method of accounting, and, accordingly, results of their operations have been included in the Company's consolidated financial statements since the effective dates of the respective acquisitions. 1996 - During 1996, the Company purchased 42 businesses. The largest of these acquisitions and their effective dates included Tech-Weld, Inc. (April 3, 1995), Trinity Welding Supply, Inc. (May 1, 1995), Red-D-Arc, Limited (June 29, 1995), Capital Welding Supply, Inc. (August 1, 1996), Langdon Oxygen Company (October 5, 1995), Acetylene Gas Company (January 1, 1996), Iatech Sales Co. (January 1, 1996), Welders Equipment Company (February 1, 1996) and Braun Welding Supply, Inc. (March 1, 1996). The aggregate purchase price for these acquisitions amounted to approximately $164 million. The purchase price for the remaining 33 businesses amounted to approximately $73 million. 1995--During 1995, the Company purchased 25 businesses. The largest of these acquisitions and their effective dates included The Jimmie Jones Company (August 1, 1994) and Post Welding Supply (November 1, 1994). The aggregate purchase price for these acquisitions amounted to approximately $83 million. The purchase price for the remaining 23 businesses amounted to approximately $44 million. F-12 AIRGAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 1994--During 1994, the Company purchased 18 businesses. The largest of these acquisitions and their effective dates included General Welding Supply Co. (July 1, 1993), PDI Western Distributing Group, Inc. (July 1, 1993), Phoenix Northeast Distributors Group, Inc. (September 1, 1993) and certain operations of The BOC Group, Inc. (February 1, 1994). The aggregate purchase price for these acquisitions amounted to approximately $90 million. The purchase price for the remaining 14 businesses amounted to approximately $31 million. In connection with the above business acquisitions, the total purchase price, fair value of assets acquired, cash paid and liabilities assumed were as follows:
Years Ended March 31, --------------------------- (In thousands) 1996 1995 1994 - -------------- ---- ---- ---- Cash paid . . . . . . . . . . . . . . . . . . $141,916 $ 82,258 $ 89,782 Issuance of Airgas common stock . . . . . . . 11,443 775 -- Notes issued to sellers . . . . . . . . . . . 27,820 11,340 5,808 Notes payable assumed and capital leases. . . 4,073 9,067 4,276 Other liabilities assumed and accrued acquisition costs. . . . . . . . . . . . . . 51,505 23,376 20,806 ------ ------ ------ Total purchase price allocated to assets acquired. . . . . . . . . . . . . . . . . . $236,757 $126,816 $120,672 ======= ======= =======
Also, as discussed in note 19, the Company has accounted for the acquisition of subsidiary minority interests in 1996, 1995 and 1994 using the purchase method of accounting. In connection with certain acquisitions, the Company is required to make future payments to sellers based on future earnings of the acquired business in excess of predetermined amounts. Such payments, if any, are capitalized as an additional cost of the acquisition. Amounts payable under contingent payment terms continue through 1997 and are limited to $2.1 million. To-date, the Company has made aggregate payments of $1.1 million under these contingent terms. In addition, certain other acquisitions require the issuance of Airgas common stock if the Airgas common stock price at certain dates during 1999 is less than a previously established price. The purchase price for business acquisitions and minority interests were allocated to the assets acquired and liabilities assumed based on their estimated fair values. Costs in excess of net assets acquired (goodwill) for 1996, 1995 and 1994 amounted to $81.3 million, $40.8 million and $9.9 million, respectively. The following presents unaudited estimated pro forma operating results as if the 1996 and 1995 acquisitions had been consummated on April 1, 1994. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisitions been made as of April 1, 1994 or of results which may occur in the future. F-13
Years Ended March 31, --------------------- (In thousands except per share amounts) 1996 1995 - --------------------------------------- ---- ---- Net sales . . . . . . . . . . . . . . . . . . . $938,877 $911,818 Net earnings. . . . . . . . . . . . . . . . . . 36,229 25,700 Earnings per share: . . . . . . . . . . . . . . .54 .39
Subsequent to March 31, 1996, the Company has acquired ten distribution businesses with annual sales of approximately $105 million for an aggregate purchase price of approximately $96 million. (3) EARNINGS PER SHARE Primary and fully diluted earnings per share amounts were determined using the Treasury Stock method. (4) INVENTORIES Inventories consist of:
March 31, ----------------------- (In thousands) 1996 1995 - -------------- ---- ---- Finished goods. . . . . . . . . . . . . . . . . . . $85,626 $65,693 Raw materials . . . . . . . . . . . . . . . . . . . 1,879 1,315 ------ ------ 87,505 67,008 Less reduction to LIFO cost . . . . . . . . . . . . (1,343) (1,061) ------ ------ $86,162 $65,947 ====== ======
(5) PLANT AND EQUIPMENT The major classes of plant and equipment, at cost, are as follows:
March 31, ----------------------- (In thousands) 1996 1995 - -------------- ---- ---- Land and land improvements . . . . . . . . . . . . $ 20,066 $ 17,571 Buildings and leasehold improvements . . . . . . . 58,153 43,714 Machinery and equipment, including cylinders . . . 472,868 376,284 Transportation equipment . . . . . . . . . . . . . 33,724 25,944 Construction in progress . . . . . . . . . . . . . 1,517 1,470 ------- ------- $586,328 $464,983 ======= =======
Depreciation and amortization of plant and equipment charged to operations amounted to $32.0 million, $26.3 million and $21.1 million in 1996, 1995 and 1994, respectively. F-14 (6) OTHER NONCURRENT ASSETS Other noncurrent assets include:
March 31, ----------------------- (In thousands) 1996 1995 - -------------- ---- ---- Investment in unconsolidated affiliates (Note 10). $ 9,332 $ 5,473 Noncompete agreements and other intangible assets, at cost, net of accumulated amortization of $46.7 million in 1996 and $37.4 million in 1995 . . . . . . . . . . . . 47,530 31,955 Other assets. . . . . . . . . . . . . . . . . . . . 4,086 3,960 ------ ------ $60,948 $41,388 ====== ======
(7) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities include:
March 31, ----------------------- (In thousands) 1996 1995 - -------------- ---- ---- Cash overdraft. . . . . . . . . . . . . . . . . . . $15,706 $11,638 Insurance payable and related reserves. . . . . . . 5,297 6,304 Customer cylinder deposits. . . . . . . . . . . . . 7,058 6,242 Other accrued expenses and current liabilities. . . 44,218 36,007 ------ ------ $72,279 $60,191 ====== ======
The cash overdraft is attributable to the float of the Company's outstanding checks. (8) INDEBTEDNESS (a) Long-term debt consists of the following:
March 31, ----------------------- (In thousands) 1996 1995 - -------------- ---- ---- Revolving credit borrowings . . . . . . . . . . . . $314,804 $202,585 Senior subordinated notes . . . . . . . . . . . . . 20,000 27,857 Acquisition notes . . . . . . . . . . . . . . . . . 50,392 26,532 Industrial Development Board revenue bonds. . . . . 2,491 3,450 All other notes, at various rates and maturities. . 10,324 11,326 ------- ------- Total long-term debt. . . . . . . . . . . . . . . . 398,011 271,750 Less current installments . . . . . . . . . . . . . (12,179) (11,780) ------- ------- Long-term debt, excluding current installments. . . $385,832 $259,970 ======= =======
F-15 During 1996, the Company amended and increased its unsecured revolving credit facility with various commercial banks from $250 million to $375 million, and converted the facility to a five-year revolver maturing on August 10, 2000. The revolving credit facility also provides for the issuance of letters of credit up to $150 million. Under the terms of the revolving credit facility, interest is payable quarterly. At March 31, 1996, $66 million of money market based borrowings were outstanding under the revolving credit facility with effective rates of 5.57%. At March 31, 1996, $105 million of Libor based borrowings were outstanding under the revolving credit facility with effective rates of 5.98%. At the Company's option, borrowings under the revolving credit facility may be prime based, Libor based or Certificate of Deposit based in each case plus an applicable margin. The Company has an additional $100 million unsecured line of credit with a group of commercial banks which matures in July 1997 and provides for borrowings at the Libor rate plus an applicable margin ($100 million outstanding at 5.76% as of March 31, 1996). The Company intends to terminate its $100 million facility in conjunction with an anticipated increase in the Company's $375 million revolving credit facility in September 1996, which will have terms and conditions similar to its existing $375 million facility. The Company has a CDN $50 million Canadian credit facility ($37 million U.S.) with various commercial banks which matures on November 14, 1998. At March 31, 1996, the Company had approximately CDN $33 million ($24 million U.S.) in borrowings outstanding under the facility, resulting in unused availability under the facility of approximately CDN $17 million ($13 million U.S.). The Company also has unsecured line of credit agreements with various commercial banks. At March 31, 1996, these agreements totaled $60 million, under which the Company had aggregate outstanding borrowings of $19 million, at 5.61%. Senior subordinated notes with an original face value aggregating $55 million require semi-annual interest payments at 11.375%. Equal annual principal payments of $4.3 million for $12.8 million of the senior subordinated notes continue through August 1998 and equal annual principal payments of $3.6 million for $7.2 million of the senior subordinated notes continue through July 1997. Acquisition notes represent notes issued to sellers of businesses acquired and are repayable in periodic installments including interest at an average rate of 7.5%. Some acquisition notes require balloon payments which are included in the aggregate maturity schedule. Industrial development revenue bonds have variable interest rates ranging from 60% to 75% of the prime rate. The bonds mature at various dates between 1996 and 2006. Certain bonds are redeemable at the option of the issuer. The bonds are secured by mortgages on certain plant and equipment. Certain of the Company's credit facility agreements contain restrictive covenants which include the maintenance of a minimum equity level, maintenance of certain financial ratios and restrictions on additional borrowings and dividend payments. F-16 The aggregate maturities of long-term debt for the five years ending March 31, 2002 and thereafter are as follows (in thousands):
Years Ending March 31, Aggregate Maturity ---------------------- ------------------ 1997 . . . . . . . . . . . . . . . . . . . $ 12,179 1998 . . . . . . . . . . . . . . . . . . . 126,121 1999 . . . . . . . . . . . . . . . . . . . 37,204 2000 . . . . . . . . . . . . . . . . . . . 12,017 2001 . . . . . . . . . . . . . . . . . . . 200,754 2002 and thereafter. . . . . . . . . . . . 9,736 ------- $398,011 =======
The fair value of long term debt as of March 31, 1996 was approximately $400 million based on current rates offered to the Company by financial institutions for similar type instruments. (b) Swap Agreements In managing interest rate exposure, principally under the Company's floating rate revolving credit facilities, the Company has entered into 18 interest rate swap agreements during the period from June 1992 through March 31, 1996, including two forward starting swaps. The interest rate swap agreements are with major financial institutions having a total notional principal amount of $224 million at March 31, 1996. Approximately $205 million of the swap agreements require fixed interest payments based on an average effective rate of 6.53% for remaining periods ranging between 1 and 8 years. The remaining $19 million of swap agreements require floating rates (5.53% at March 31, 1996). The effect of the swap agreements was to increase interest expense $1.3 million and $1.2 million in 1996 and 1995, respectively. Under the terms of seven of the swap agreements, the Company has elected to receive the discounted value of the counterparty's interest payments upfront. At March 31, 1996, approximately $23 million of such payments were included in other liabilities. The Company continually monitors its positions and the credit ratings of its counterparties, and does not anticipate nonperformance by the counterparties. The fair market value of these swaps was $2.9 million below their carry value at March 31, 1996. F-17 The aggregate maturities of the Company's interest rate swaps by type of swap for the five years ending March 31, 2001 and thereafter are as follows (in thousands):
Notional Principal Amounts ---------------------------- Years Ending March 31, Pay-Fixed Receive-Fixed ---------------------- --------- ------------- 1997 . . . . . . . . . . . . . $ 0 $ 0 1998 . . . . . . . . . . . . . 30,000 0 1999 . . . . . . . . . . . . . 12,500 7,500 2000 . . . . . . . . . . . . . 26,179 12,000 2001 . . . . . . . . . . . . . 66,178 0 2002 and thereafter. . . . . . 70,000 0 ------- ------ $204,857 $19,500 ======= ======
(9) STOCKHOLDERS' EQUITY (a) Common Stock On March 22, 1996, the Company's Board of Directors declared a two-for-one stock split to stockholders of record on April 1, 1996, payable on April 15, 1996. Stock options and other rights to acquire the Company's common stock reflect the split. The Statements of Stockholders' Equity have been restated to account for the stock split as if it had occurred on April 1, 1993. All references to the number of shares, except shares authorized, reflect the stock split. (b) Preferred Stock and Redeemable Preferred Stock The Company is authorized to issue 20 million shares of preferred stock. At March 31, 1996 and 1995, no shares were outstanding. The preferred stock may be issued from time to time by the Board of Directors in one or more series, and the Board of Directors is authorized to fix the dividend rights and terms, conversion rights, voting rights, rights and terms of redemption, liquidation preferences, and any other rights, preferences, privileges and restrictions of any series of Preferred Stock, and the number of shares constituting each such series and designation thereof. Additionally, the Company is authorized to issue 30,000 shares of redeemable preferred stock. At March 31, 1996 and 1995, no shares were outstanding. (c) Treasury Stock The Company's Board has approved a four million share common stock repurchase program. Through March 31, 1996, the Company purchased 2.4 million shares of the Company's common stock at an aggregate cost of $28.9 million. The impact of the stock repurchases on earnings per share amounts was immaterial for 1996. The future purchase of common stock is dependent on prevailing market conditions. (d) Stock Options The Company has a stock option plan for officers and key employees and has reserved 14,080,000 shares under this plan. Options are granted on terms and F-18 conditions determined by a committee of the Board of Directors. At March 31, 1996, 3,774,546 options were available for issuance. The following table summarizes the activity of the plan during the three years ended March 31, 1996:
Number Price Per of Shares Share ---------- --------- March 31, 1994 Outstanding, beginning of year . . . . . . . . 5,033,292 $1.46 - $3.49 Granted. . . . . . . . . . . . . . . . . . . . 1,339,320 6.32 - 8.57 Exercised. . . . . . . . . . . . . . . . . . . (1,055,408) 1.46 - 3.49 Expired. . . . . . . . . . . . . . . . . . . . (66,304) 1.83 - 6.32 March 31, 1995 Outstanding, beginning of year . . . . . . . . 5,250,900 1.46 - 8.57 Granted. . . . . . . . . . . . . . . . . . . . 1,004,600 11.32 - 14.71 Exercised. . . . . . . . . . . . . . . . . . . (424,060) 1.46 - 7.89 Expired. . . . . . . . . . . . . . . . . . . . (2,500) 3.30 - 6.32 March 31, 1996 Outstanding, beginning of year . . . . . . . . 5,828,940 1.83 - 14.71 Granted. . . . . . . . . . . . . . . . . . . . 974,020 11.44 - 17.31 Exercised. . . . . . . . . . . . . . . . . . . (589,010) 1.83 - 11.32 Expired. . . . . . . . . . . . . . . . . . . . (14,490) 3.30 - 13.32 Outstanding, end of year . . . . . . . . . . . 6,199,460 $ 1.83 -$17.31
The Company maintains a stock option plan covering Directors who are not employees which has 800,000 shares reserved. At March 31, 1996, 400,000 options were available for issuance. The following table summarizes the activity of the plan during the three years ended March 31, 1996:
Number Price Per of Shares Share ---------- --------- March 31, 1994 Outstanding, beginning of year . . . . . . . . 248,000 $2.10 - $4.16 Granted. . . . . . . . . . . . . . . . . . . . 56,000 8.57 Exercised. . . . . . . . . . . . . . . . . . . (32,000) 2.10 - 2.21 March 31, 1995 Outstanding, beginning of year . . . . . . . . 272,000 2.10 - 8.57 Granted. . . . . . . . . . . . . . . . . . . . 40,000 13.82 March 31, 1996 Outstanding, beginning of year . . . . . . . . 312,000 2.10 - 13.82 Granted. . . . . . . . . . . . . . . . . . . . 40,000 13.50 Outstanding, end of year . . . . . . . . . . . 352,000 $2.10 - $13.82
(e) Stock Purchase Warrants The Company and the Chairman of the Company were parties to a Stock and Warrant Issuance Agreement, as amended (the "Warrant Agreement"), which was entered into in connection with the Company's acquisition of US Airgas, Inc., of which the Chairman was the majority shareholder, in May 1986. Pursuant to the Warrant Agreement, the Chairman received warrants to purchase a total of 14,127,432 shares of the Company's common stock. Subsequent to the grant dates, F-19 the Chairman transferred warrants to purchase 2,976,800 shares of common stock to employees of the Company and to certain other individuals. As of May 1, 1996, all warrants had been exercised or had expired. The following table summarizes the activity of the stock purchase warrants during the three years ended March 31, 1996.
Number Price Per of Shares Share ---------- --------- March 31, 1994 Outstanding, beginning of year . . . . . . . . 2,105,680 $1.68 - $2.19 Exercised. . . . . . . . . . . . . . . . . . . (481,400) 1.76 - 2.19 March 31, 1995 Outstanding, beginning of year . . . . . . . . 1,624,280 1.68 - 2.19 Exercised. . . . . . . . . . . . . . . . . . . (114,800) 1.76 - 2.19 March 31, 1996 Outstanding, beginning of year . . . . . . . . 1,509,480 1.76 - 2.19 Exercised. . . . . . . . . . . . . . . . . . . (1,252,568) 1.76 - 2.19 Cancelled. . . . . . . . . . . . . . . . . . . (12,712) Outstanding, end of year . . . . . . . . . . . 244,200 $1.76 - $2.19
(f) Shareholder Rights Plan Under the terms of a Shareholder Rights Plan, preferred share purchase rights were distributed during 1988 as a dividend at the rate of one right for each common share. The number of rights outstanding is subject to adjustment under certain circumstances and all rights expire on August 1, 1998. The rights are not exercisable until a person or entity acquires twenty percent of the Company's common stock. Each right will entitle the holder to buy $16.25 worth of the Company's common stock at an exercise price of $8.13. (g) Stock-Based Compensation The Company accounts for stock options according to the provisions of Accounting Principles Board Opinion 25 (APB 25), "Accounting for Stock Issued to Employees." In October 1995, the Financial Accounting Standards Board issued FASB Statement No. 123, "Accounting for Stock-Based Compensation." The new standard defines a fair value method of accounting for stock options and similar equity instruments. Companies may elect to continue to use existing accounting rules or adopt the fair value method for expense recognition. Companies that elect to continue to use existing accounting rules will be required to provide pro-forma disclosures of net income and earnings per share assuming the fair value method was adopted. The Company will elect to continue to use existing accounting rules. The new statement is effective for fiscal years beginning after December 15, 1995. Accordingly, the Company will adopt the provisions in the first quarter of fiscal 1997 and present the required pro-forma disclosure provisions for its fiscal year ending March 31, 1997. As the Company will continue to account for stock-based compensation using the intrinsic value method, this statement will not have a material impact on earnings, financial condition or liquidity of the Company. (10) INVESTMENT IN UNCONSOLIDATED AFFILIATES F-20 At March 31, 1996, the Company's investment in unconsolidated affiliates totaled $9.3 million and includes Elkem-American Carbide Company (U.S.), Poligaz SA (Poland) and Bhoruka Gases, Ltd. (India). The Company's share of earnings from unconsolidated affiliates was $1.4 million, $840 thousand and $1.3 million for the years ended March 31, 1996, 1995 and 1994, respectively. (11) INTEREST EXPENSE, NET Interest expense, net, consists of:
Years Ended March 31, --------------------------- (In thousands) 1996 1995 1994 - -------------- ---- ---- ---- Interest expense. . . . . . . . . . . . . . . $25,854 $18,476 $13,189 Interest and finance charge income. . . . . . (992) (851) (703) ------ ------ ------ $24,862 $17,625 $12,486 ====== ====== ====== (12) OTHER INCOME, NET Other income, net, consists of: Years Ended March 31, --------------------------- (In thousands) 1995 1994 1993 - -------------- ---- ---- ---- Gain on sale of investment in CBI Industries, Inc. . . . . . . . . . . . . . . $ -- $ 560 $ -- Other income, net . . . . . . . . . . . . . . 782 507 453 ----- ----- --- $ 782 $ 1,067 $ 453 ===== ===== === (13) INCOME TAXES Pre-tax earnings were derived from the following sources: Years Ended March 31, --------------------------- (In thousands) 1996 1995 1994 - -------------- ---- ---- ---- United States . . . . . . . . . . . . . . . . $66,810 $54,239 $35,621 Foreign . . . . . . . . . . . . . . . . . . . 1,432 1,134 696 ------ ------ ------ $68,242 $55,373 $36,317 Income tax expense consisted of: Years Ended March 31, --------------------------- (In thousands) 1996 1995 1994 - -------------- ---- ---- ---- Current: Federal . . . . . . . . . . . . . . . . . $14,657 $ 9,997 $ 6,515
F-21
Foreign . . . . . . . . . . . . . . . . . 699 573 326 State . . . . . . . . . . . . . . . . . . 2,298 1,775 997 ------ ------ ------ 17,654 12,345 7,838 ------ ------ ------ Deferred: Federal . . . . . . . . . . . . . . . . . . 9,660 9,829 6,827 Foreign . . . . . . . . . . . . . . . . . . 34 47 61 State . . . . . . . . . . . . . . . . . . . 1,174 1,673 1,301 ------ ------ ------ 10,868 11,549 8,189 ------ ------ ------ $28,522 $23,894 $16,027 ====== ====== ====== Significant differences between taxes computed at the federal statutory rate and the provision for income taxes were: Years Ended March 31, --------------------------- 1996 1995 1994 ---- ---- ---- Taxes at U.S. federal statutory rate . . . . . . 35.0% 35.0% 35.0% Increase in income taxes resulting from: State income taxes, net of federal benefit . . . 3.3 4.0 4.1 Increase in statutory rate on deferred tax items -- -- 4.5 Amortization of non-deductible goodwill. . . . 1.8 1.8 2.3 Adjustment of federal and state accruals . . . . -- -- (4.5) Other, net . . . . . . . . . . . . . . . . . . . 1.7 2.4 2.7 ---- ---- ---- 41.8% 43.2% 44.1% ==== ==== ==== The significant components of deferred income tax expense attributable to earnings for the years ended March 31, 1996, 1995 and 1994 are as follows: Years Ended March 31, --------------------------- (In thousands) 1996 1995 1994 - -------------- ---- ---- ---- Deferred tax expense (exclusive of the effects of other components listed below). . $10,868 $11,549 $ 8,189 Adjustments to deferred tax assets and liabilities for enacted changes in tax laws and rates. . . . . . . . . . . . . . . . . . -- -- 663 Adjustment of federal and state accruals. . . -- -- (663) ------ ----- ----- $10,868 11,549 $ 8,189 ====== ====== =====
F-22 The tax effects of cumulative temporary differences that gave rise to the significant portions of the deferred tax liability and deferred tax asset were as follows:
March 31, ----------------------- (In thousands) 1996 1995 ______________ ---- ---- Deferred Tax Assets: - -------------------- Inventories . . . . . . . . . . . . . . . . . . $ 1,396 $ 1,368 Accounts Receivable . . . . . . . . . . . . . . 553 885 Deferred Rental Income. . . . . . . . . . . . . 809 880 Insurance Reserves. . . . . . . . . . . . . . . 1,339 1,791 Other Reserves. . . . . . . . . . . . . . . . . 2,487 2,296 AMT Credit Carryforwards. . . . . . . . . . . . 2,184 3,079 Other . . . . . . . . . . . . . . . . . . . . . 1,151 1,185 ----- ------ 9,919 11,484 ----- ------ Deferred Tax Liabilities: - ------------------------- Property and equipment. . . . . . . . . . . . . (91,371) (70,787) Intangible Assets . . . . . . . . . . . . . . . (605) (2,734) Other . . . . . . . . . . . . . . . . . . . . . (3,412) (286) ----- ------ (95,388) (73,807) ------ ------ Net Deferred Tax Liability . . . . . . . . . . . $(85,469) $(62,323) ====== ======
The Company has recorded tax benefits amounting to $7.6 million, $1.9 million and $3.6 million in 1996, 1995 and 1994, respectively, resulting from the exercise of stock options and warrants. This benefit has been recorded in capital in excess of par value. The Internal Revenue Service is currently conducting an examination of the Company's federal income tax returns for the years ended March 31, 1993 and 1994. Management believes that the results of this examination will not have a material effect on the Company's earnings, financial condition, or liquidity. (14) BENEFIT PLANS (a) Pension and Profit Sharing Plans The Company has a defined contribution 401(k) plan covering substantially all full-time employees. Under the terms of the plan, the Company makes matching contributions up to two percent of participants' wages plus additional discretionary profit sharing contributions based upon the profitability of the Company. Amounts expensed under the plan for 1996, 1995 and 1994 were $5.1 million, $4.7 million and $3.3 million, respectively. During 1993, the Company authorized termination of two defined benefit pension plans effective December 31, 1992. At December 31, 1995, the plans' projected benefit obligations approximate the plans' net assets available for benefits. The settlement of the vested benefit obligations by the purchase of F-23 nonparticipating annuity contracts or lump-sum payments for covered employees is not expected to result in a significant gain or loss. Certain subsidiaries of the Company participate in multi-employer pension plans which provide defined benefits to union employees. Contributions are made to the plans in accordance with negotiated labor contracts. The Company has not taken any action to terminate or withdraw from these plans. Management believes that the Company's liability, if any, for multi-employer plan withdrawal liability will not have a material effect on the Company's financial position, results of operations, or liquidity. Amounts expensed under these plans for 1996, 1995 and 1994 were $482 thousand, $418 thousand and $227 thousand, respectively. (b) Employee Stock Purchase Plan The Company has established an employee stock purchase plan (the "Plan") to encourage and assist employees to acquire an equity interest in the Company. The Plan is authorized to issue 2 million shares of common stock. Generally, employees may elect to have 1 to 15 percent of their gross pay withheld to buy Airgas, Inc. common stock at 85 to 95 percent of the market value depending upon base salary levels. Market value under the Plan is either the employees' enrollment date market value or the quarterly purchase date market value, whichever is lower. An employee may lock-in a purchase price for up to 27 months. The Plan is designed to comply with the requirements of section 423 of the Internal Revenue Code. Under the Plan, 368,194, 300,204 and 59,470 shares were issued at an average purchase price of $9.22, $9.02 and $9.00 per share during 1996, 1995 and 1994, respectively. (c) Other Employee Benefits The Company sponsors a multi-employer postretirement medical benefit plan for certain employees of one subsidiary under a collective bargaining agreement. In accordance with SFAS 106 "Employers Accounting for Postretirement Benefits Other Than Pensions" and APB Opinion No. 16 "Business Combinations", the postretirement benefit obligation was recorded at the acquisition date. The net postretirement benefit expense was $98 thousand and $88 thousand for the years ended March 31, 1996 and 1995, respectively. The Company's unfunded accumulated postretirement benefit obligation was $896 thousand and $837 thousand at March 31, 1996, and 1995, respectively. In determining the accumulated postretirement benefit obligation, the discount rate used to estimate the actuarial present value of other postretirement benefits was 7.50% and 8.25% at March 31, 1996 and 1995, respectively. The assumed rate of increase in the health care cost trend rate for employees less than age 65 was 8.25% and 9.75% for March 31, 1996 and 1995, declining gradually to 5.25% and 6.0%, respectively, over the next four years. For employees 65 and older, the assumed rate of increase was 6.16% and 6.62% for March 31, 1996 and 1995, declining gradually to 5.25% and 5.5%, respectively, over the next four years. A 1% increase in the healthcare cost trend rate would have increased net postretirement benefit expense approximately $18 thousand and the APBO approximately $139 thousand at March 31, 1996. F-24 (15) RELATED PARTIES The Chairman and Vice President -- Corporate Development, were partners in the law firm which provides legal services to the Company. During the years ended March 31, 1996, 1995 and 1994, fees paid to the law firm totaled $754 thousand, $525 thousand, and $551 thousand, respectively. The Company is a party to a sales agency agreement for the sale of carbon products with a company which is a greater than five percent stockholder and a director of that company is also a former director of the Company. The sales agency agreement expires in October 2003. During the years ended March 31, 1996, 1995 and 1994, the Company paid $685 thousand, $543 thousand and $515 thousand, respectively, under this agreement. A member of the Company's board of directors is the president of a regional producer and distributor of industrial gases and related equipment in the Southeastern United States. During the years ended March 31, 1996, 1995 and 1994, this company paid $987 thousand, $914 thousand and $1.1 million, respectively, to a joint venture of the Company for the purchase of calcium carbide. In addition, this company paid $604 thousand and $546 thousand to the Company for other gas purchases in 1996 and 1995, respectively. (16) LEASES The Company leases certain distribution facilities and equipment under long-term operating leases with varying terms. Most leases contain renewal options and in some instances, purchase options. Rentals under these long-term leases (exclusive of real estate taxes, insurance, and other expenses payable under the terms of the leases) for the years ended March 31, 1996, 1995 and 1994, amounted to $17.8 million, $14.5 million and $9.7 million, respectively. Additionally, the Company leases certain operating facilities from employees of the Company who were previous owners of businesses acquired at market rates. The Company entered into certain operating leases for real estate with a trust established by a commercial bank. The trust is committed to purchase real estate properties up to an aggregate amount of $25 million. The trust holds title to the properties and leases the properties to the Company. The rental payments are based on Libor plus an applicable margin and the cost of the property acquired by the trust. The Company has entered into interest rate swap agreements in a notional principal amount of $10 million to hedge the effects of fluctuations in the Libor based rental rate. At the expiration of the leases in 1999, the Company has the option to purchase the real properties at fair value or assist in the sale of the properties to a third party. The Company has guaranteed a portion of the debt outstanding against these properties in the event the proceeds of a sale are not sufficient to cover the trust's investment in the properties. At March 31, 1996, the Company had a contingent guarantee of approximately $7.6 million related to leased facilities. The Company has also entered into certain operating leases for cylinders and bulk tanks. At the expiration of the leases in 1998, the Company has the option to purchase equipment at a fixed price, assist in the sale of the equipment to third parties, or renew the lease for a period of one year. The Company has guaranteed a portion of the cost of the equipment in the event the proceeds of a sale are not sufficient to cover the lessor's investment in the equipment. At March 31, 1996, the Company had a contingent guarantee of $2.8 million related to equipment under such leases. F-25 At March 31, 1996, future minimum lease payments under noncancellable operating leases are as follows:
(in thousands) ------------ 1997 . . . . . . . . . . . . . . . . . . $17,248 1998 . . . . . . . . . . . . . . . . . . 15,264 1999 . . . . . . . . . . . . . . . . . . 12,845 2000 . . . . . . . . . . . . . . . . . . 10,319 2001 . . . . . . . . . . . . . . . . . . 7,424 2002 and thereafter. . . . . . . . . . . 16,435 ------ $79,535 ======
(17) COMMITMENTS AND CONTINGENCIES The Company is involved in various legal and regulatory proceedings which have arisen in the ordinary course of its business and have not been finally adjudicated. These actions, when ultimately concluded and determined, will not, in the opinion of management, have a material adverse effect upon the Company's consolidated financial position, results of operations or liquidity. (18) CASH FLOWS Cash paid for interest expense and income taxes was as follows:
Years Ended March 31, --------------------------- (In thousands) 1996 1995 1994 - -------------- ---- ---- ---- Interest . . . . . . . . . . . . . . . . . . . $25,107 $19,011 $13,502 Income taxes (net of refunds). . . . . . . . . 10,325 11,411 5,333 ====== ====== ======
The total purchase price, fair value of assets acquired, cash paid and liabilities assumed for business acquisitions is described in note 2. During 1996 and 1995, the Company entered into capital lease obligations for approximately $912 thousand and $3.7 million, respectively. During 1995, the Company retired 3.8 million shares of treasury stock. (19) MINORITY INTEREST IN SUBSIDIARIES Minority interests in subsidiaries represent the minority shareholders' proportionate share of the equity and the results of operations of certain subsidiaries. Under the terms of exchange rights agreements between the Company and minority shareholders, the Company, under certain circumstances, may require or permit exchange of the minority interests of a subsidiary for common stock of the Company. The agreements provide the minority shareholders with the right to exchange their subsidiary shares for common stock of the Company at certain exchange dates designated by the Board of Directors. Each exchange will be based on the fair value of the subsidiary's shares and the market price of the Company's common stock as of a valuation date designated by the Board of Directors. F-26 On August 31, 1995 and February 28, 1994, in connection with optional exchanges, certain minority shareholders elected to exchange their minority interests for an aggregate of 258,116 and 166,732 shares of common stock, respectively. The market price of the Company's common stock on August 31, 1995 and February 28, 1994 was $13.75 and $10.438 per share, respectively . The acquisition of the minority interests has been recorded using the purchase method of accounting. During 1996, 1995 and 1994, the Company sold minority interests in certain of its subsidiaries to employees based on the estimated fair market value of the subsidiary shares. These sales of subsidiary shares were accounted for as capital transactions and, therefore, no gain or loss was recorded. (20) SUMMARY BY BUSINESS SEGMENT The Company, through its subsidiaries, is principally engaged in two related businesses: 1) the distribution of industrial, medical and specialty gases, and related equipment and 2) the manufacture of products for the industrial gas and metals industries. Industrial, medical and specialty gases are distributed through the Company's subsidiaries which operate in five divisions with locations in 38 states, Canada and Mexico. The industrial gas distribution market is broad and includes most major industries. Products manufactured by the Company include nitrous oxide, a gas with applications in the medical, food packaging and certain high technology electronic industries and calcium carbide and carbon products for the production of acetylene gas and for the non-ferrous metal industry.
(In thousands) Distribution Manufacturing Total - -------------- ------------ ------------- ----- 1996 Net sales . . . . . . . . . . . . . . . $801,552 $ 36,592 $838,144 Operating income . . . . . . . . . . . . 86,130 6,855 92,985 Assets . . . . . . . . . . . . . . . . . 846,129 37,513 883,642 Depreciation and amortization. . . . . . 44,386 1,376 45,762 Additions to plant and equipment excluding business acquisitions. . . . . 39,755 1,481 41,236 1995 Net sales. . . . . . . . . . . . . . . . 654,381 33,602 687,983 Operating income . . . . . . . . . . . . 66,521 6,079 72,600 Assets . . . . . . . . . . . . . . . . . 613,320 32,317 645,637 Depreciation and amortization. . . . . . 35,548 1,320 36,868 Additions to plant and equipment excluding business acquisitions. . . . . 35,961 751 36,712 1994 Net sales . . . . . . . . . . . . . . . 486,836 32,513 519,349 Operating income . . . . . . . . . . . . 42,399 6,268 48,667 Assets . . . . . . . . . . . . . . . . . 487,701 27,196 514,897 Depreciation and amortization. . . . . . 29,101 1,470 30,571 Additions to plant and equipment excluding business acquisitions. . . . . 20,515 803 21,318
F-27 (20) SUMMARY BY BUSINESS SEGMENT - (continued) Corporate operating expenses are allocated between the Company's distribution and manufacturing business segments based on relative sales dollars. (21) SUPPLEMENTARY INFORMATION (UNAUDITED) Summary By Quarter This table summarizes the unaudited results of operations for each quarter of 1996 and 1995:
(In thousands, except per share data) First Second Third Fourth - ------------------------------------- ----- ------ ----- ------ 1996 Net sales . . . . . . . . . . . . . . . $194,272 $199,030 $208,549 $236,293 Operating income. . . . . . . . . . . . 22,037 22,144 22,984 25,820 Net earnings. . . . . . . . . . . . . . 9,454 9,335 9,817 11,114 Net earnings per share (1), (2):. . . . $ .15 $ .14 $ .15 $ .17 1995 Net sales . . . . . . . . . . . . . . . $159,462 $164,986 $174,112 $189,423 Operating income. . . . . . . . . . . . 15,701 17,115 18,577 21,207 Net earnings. . . . . . . . . . . . . . 6,789 7,460 7,790 9,440 Net earnings per share (1), (2):. . . . $ .10 $ .11 $ .12 $ .14
- ------------------ (1) Earnings per share calculations for each of the quarters are based on the weighted average number of shares outstanding in each period. Therefore, the sum of the quarters do not necessarily equal the full year earnings per share. (2) See notes 3 and 9 to the Company's consolidated financial statements for information regarding earnings per share calculations and adjustment for the stock split effective April 15, 1996. F-28 AIRGAS, INC. CONSOLIDATED BALANCE SHEETS (In thousands)
December 31, March 31, 1996 1996 (Unaudited) ------------- -------- ASSETS - -------------------------------------------- Current Assets Trade receivables, less allowances for doubtful accounts of $4,578 at December 31, 1996 and $3,396 at March 31, 1996 $ 144,907 $120,811 Inventories 132,060 86,162 Prepaid expenses and other current assets 45,825 11,601 --------- ------- Total current assets 322,792 218,574 --------- ------- Plant and Equipment, at cost 712,492 586,328 Less accumulated depreciation and amortization (176,208) (147,451) --------- ------- Plant and equipment, net 536,284 438,877 Other Non-current Assets 132,951 60,948 Goodwill, net of accumulated amortization of $24,956 at December 31, 1996 and $19,552 at March 31, 1996 293,654 165,243 --------- ------- Total assets $1,285,681 $883,642 ========= =======
See accompanying notes to consolidated financial statements. F-29 AIRGAS, INC. CONSOLIDATED BALANCE SHEETS (CONTINUED) (In thousands, except per share amounts)
December 31, March 31, 1996 1996 (Unaudited) ----------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current Liabilities Current portion of long-term debt $ 18,974 $ 12,179 Accounts payable, trade 56,613 52,528 Accrued expenses and other current liabilities 89,571 72,279 --------- ------- Total current liabilities 165,158 136,986 --------- ------- Long-Term Debt 631,094 385,832 Deferred Income Taxes 95,453 88,400 Other Non-current Liabilities 32,892 34,490 Minority Interest in Subsidiaries 3,147 1,725 Stockholders' Equity Common stock $.01 par value, 200,000 shares authorized, 68,485 and 66,314 shares issued at December 31, 1996 and March 31, 1996, respectively 687 663 Capital in excess of par value 151,170 91,512 Retained earnings 206,780 173,360 Cumulative translation adjustment (384) (410) Treasury stock, 15 and 2,355 common shares at cost at December 31, 1996 and March 31, 1996, respectively (316) (28,916) --------- ------- Total stockholders' equity 357,937 236,209 --------- ------- Total liabilities and stockholders' equity $1,285,681 $ 883,642 ========= =======
See accompanying notes to consolidated financial statements. F-30 AIRGAS, INC. CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In thousands, except per share amounts)
Nine Months Ended Nine Months Ended December 31, 1996 December 31, 1995 ----------------- ----------------- Net sales: Distribution $753,998 $575,156 Direct Industrial 66,445 - Manufacturing 29,570 26,695 ------- ------- Total net sales 850,013 601,851 ------- ------- Costs and expenses: Cost of products sold (excluding depreciation, depletion and amortization) Distribution 378,888 281,849 Direct Industrial 49,450 - Manufacturing 19,444 17,372 Selling, distribution and administrative expenses 270,722 201,946 Depreciation, depletion and amortization 45,801 33,519 ------- ------- Total costs and expenses 764,305 534,686 ------- ------- Operating income: Gas Distribution 77,895 62,042 Direct Industrial 2,172 - Manufacturing 5,641 5,123 ------- ------- 85,708 67,165 Interest expense, net (28,419) (17,760) Other income, net 564 656 Equity in earnings of unconsolidated affiliates 8 - Minority interest (558) (492) ------- ------- Earnings before income taxes 57,303 49,569 Income taxes 23,883 20,963 ------- ------- Net earnings $ 33,420 $ 28,606 ======= ======= Earnings per share $ .49 $ .43 ======= ======= Weighted average common and common equivalent shares 68,200 65,800 ======= =======
See accompanying notes to consolidated financial statements. F-31 AIRGAS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
Nine Months Ended Nine Months Ended December 31, 1996 December 31, 1995 ------------------ ------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 33,420 $ 28,606 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation, depletion and amortization 45,801 33,519 Deferred income taxes 7,165 8,874 Equity in earnings of unconsolidated affiliates (988) (1,036) (Gain) Loss on sale of plant and equipment 214 (202) Minority interest in earnings 558 492 Stock issued for employee benefit plan 3,720 2,459 Changes in assets and liabilities, excluding effects of business acquisitions: Trade receivables, net (854) (418) Inventories (15,877) (2,291) Prepaid expenses and other current assets (29,567) (3,710) Accounts payable, trade (5,805) (9,727) Accrued expenses and other current liabilities 10,872 3,091 Other assets and liabilities, net (10,196) (1,505) ------- ------- Net cash provided by operating activities 38,463 58,152 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (48,080) (28,680) Proceeds from sale of plant and equipment 1,585 2,871 Business acquisitions, net of cash acquired(169,096) (48,681) Investment in unconsolidated affiliates (34,196) - Dividends from joint venture 1,055 652 Other, net (2,085) (366) ------- ------- Net cash used by investing activities (250,817) (74,204) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 801,048 443,106 Repayment of debt (588,333) (406,857) Financing costs (1,793) (75) Repurchase of treasury stock (316) (22,947) Exercise of options and warrants 2,846 3,490 Net overdraft (1,098) (665) ------- ------- Net cash provided by financing activities 212,354 16,052 ------- ------- CHANGE IN CASH $ 0 $ 0 Cash - beginning of period 0 0 ------- ------- Cash - end of period $ 0 $ 0 ======== ========
See accompanying notes to consolidated financial statements. F-32 AIRGAS, INC. 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 accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to interim financial statements. 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 year ended March 31, 1996. The financial statements reflect, in the opinion of management, all adjustments (normal recurring adjustments) necessary to present fairly the Company's consolidated balance sheets at December 31, 1996 and March 31, 1996; the consolidated statements of earnings for the three and nine months ended December 31, 1996 and 1995; and the consolidated statements of cash flows for the nine months ended December 31, 1996 and 1995. The interim operating results are not necessarily indicative of the results to be expected for an entire year. (2) ACQUISITIONS ------------ From April 1, 1996 to December 31, 1996, the Company acquired twenty businesses engaged in the distribution of industrial, medical and specialty gases and welding supplies and two distributors of safety and industrial tools and supplies, with aggregate annual sales of approximately $220 million. The aggregate purchase price, including amounts related to non-competition and confidentiality agreements, amounted to approximately $292 million and includes cash and real estate acquired of $1.7 million and $4.8 million, respectively. Included in the aggregate purchase price is the issuance of approximately 3.4 million shares of the Company's common stock, (which includes approximately 2.4 million shares which were issued out of treasury stock), issued in connection with the September 1996 acquisition of Rutland Tool & Supply Co., Inc. ("Rutland"). Acquisitions have been recorded using the purchase method of accounting, and, accordingly, results of their operations have been included in the Company's consolidated financial statements since the effective dates of the respective acquisitions. On October 29, 1996, the Company announced that it signed a letter of intent to acquire Carbonic Industries Corporation ("Carbonic Industries"). In the proposed transaction, Carbonic Industries will be merged into a newly-formed subsidiary of the Company in exchange for a combination of the Company's common stock and cash, and is expected to close during April 1997. F-33 AIRGAS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (Unaudited) (3) INVENTORIES ----------- Inventories consist of: (In thousands)
December 31, March 31, 1996 1996 ----------- -------- Finished goods $132,423 $ 85,626 Raw materials 1,176 1,879 ------- ------- 133,599 87,505 Less reduction to LIFO cost ( 1,539) (1,343) ------- ------- $132,060 $ 86,162 ======= =======
(4) PLANT AND EQUIPMENT ------------------- The major classes of plant and equipment are as follows: (In thousands)
December 31, March 31, 1996 1996 ------------- --------- Land and land improvements $ 21,830 $ 20,066 Building and leasehold improvements 64,663 58,153 Machinery and equipment, including cylinders 583,942 472,868 Transportation equipment 39,369 33,724 Construction in progress 2,688 1,517 ------- ------- $712,492 $586,328 ======= =======
F-34 AIRGAS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (Unaudited) (5) OTHER NON-CURRENT ASSETS ----------------------- Other non-current assets include: (In thousands)
December 31, March 31, 1996 1996 ------------- --------- Investment in unconsolidated affiliates $ 63,560 $ 9,332 Noncompete agreements and other intangible assets, at cost, net of accumulated amortization of $55.7 million at December 31, 1996 and $46.7 million at March 31, 1996 56,877 47,530 Other assets 12,514 4,086 ------- ------- $132,951 $ 60,948 ======= =======
Investment in unconsolidated affiliates at December 31, 1996 includes the Company's investment of approximately $47.6 million in cash and notes related to the June 28, 1996 purchase of 45% of the voting capital stock of National Welders Supply Company, Inc. As of December 31, 1996, the investment in unconsolidated affiliates includes goodwill of approximately $30 million which is being amortized into income over 40 years. (6) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES ---------------------------------------------- Accrued expenses and other current liabilities include: (In thousands)
December 31, March 31, 1996 1996 ------------- --------- Cash overdraft $ 14,608 $ 15,706 Insurance payable and related reserves 6,202 5,297 Customer cylinder deposits 8,353 7,058 Other accrued expenses and current liabilities 60,408 44,218 ------- ------- $ 89,571 $ 72,279 ======= =======
F-35 AIRGAS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (Unaudited) (7) INDEBTEDNESS ------------ On August 8, 1996, the Company commenced a medium-term note program pursuant to a registration statement filed with the Securities and Exchange Commission on July 15, 1996, which provides for the issuance of its securities with an aggregate public offering price of up to $450 million. In September 1996, the Company issued the following long-term debt under the medium term note program: (a) $100 million of unsecured notes due September 2006 bearing interest at a fixed rate of 7.75%; and (b) $50 million of unsecured notes due September 2001 bearing interest at a fixed rate of 7.15%. The proceeds from the medium term note issuances were used to repay bank debt. In connection with the issuance of the notes, the Company entered into three reverse interest rate swap agreements. (8) EARNINGS PER SHARE ------------------ Earnings per share amounts were determined using the treasury stock method. This method assumes the exercise of all dilutive outstanding options and warrants and the use of the aggregate proceeds therefrom to acquire the Company's outstanding common stock. (9) COMMITMENTS AND CONTINGENCIES ----------------------------- The Company is involved in various legal proceedings which have arisen in the ordinary course of its business and have not been finally adjudicated. These actions, when ultimately concluded and determined, will not, in the opinion of management, have a material adverse effect upon the Company's financial condition, results of operations or liquidity. On July 26, 1996, Praxair, Inc. ("Praxair") filed suit against the Company in the Circuit Court of Mobile County, Alabama. The complaint alleges tortious interference with business or contractual relations with respect to Praxair's Right of First Refusal contract with National Welders Supply Company, Inc. ("National Welders") by the Company in connection with the Company's formation of a joint venture with the majority shareholders of National Welders. Praxair is seeking compensatory damages in excess of $100 million and punitive damages. The Company believes that Praxair's claims are without merit and intends to defend vigorously against such claims. (10) FRAUDULENT BREACH OF CONTRACT ----------------------------- On December 23, 1996, the Company announced that it was the victim of a fraudulent breach of contract by a third party supplier related to purchases of refrigerant R-12. Immediately upon discovering the fraud, the Company launched an intense effort to recover funds paid to the supplier and/or recover product. Based on limited information currently available, the Company is unable to quantify the probable amount of the loss or recovery which may be associated with the fraud. The Company believes the maximum pre-tax loss, including associated costs of the investigation and before considering any recoveries, will not exceed $23 million, however, the minimum estimate is immaterial. At December 31, 1996, prepaid expenses and other current assets F-36 AIRGAS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (Unaudited) include $23.7 million of costs associated with the fraud. The Company believes there will be recoveries of assets related to the fraud, including cash in bank accounts frozen under restraining orders, recovery of product paid for and not delivered, net assets of the refrigerant supplier which breached the contract and insurance proceeds under the Company's and the refrigerant supplier's policies. The aggregate recovery amount, and the timing of recording various portions thereof, is subject to change, even in the near term, as additional assets are identified, additional claims are asserted or the market value of restrained assets fluctuates. The Company will continue to vigorously pursue all possible sources of recovery. The Company anticipates that it will record a charge to earnings during the fourth quarter ending March 31, 1997, pending a full investigation of the facts and information pertaining to the loss and potential remedies. On February 12, 1997, the Company filed a lawsuit in the United States District Court for the Southern District of Georgia against Discount Auto Parts, Inc. ("Discount"), an employee of Discount, and certain other business and individual defendants, alleging that Discount and the other defendants engaged in racketeering activity involving the fraudulent sale of smuggled and counterfeit R-12 refrigerant gas. The Company's complaint alleges that the racketeering activity of the defendants caused damages to The Company in an amount not less than $20 million. The complaint seeks treble damages under the Federal RICO and Georgia RICO statutes, as well as monetary damages under other counts alleging fraud, conspiracy and related wrongful conduct. The incident described above on December 23, 1996 was part of the racketeering activity alleged in the lawsuit filed. F-37 Independent Auditors' Report To the Stockholders and Board of Directors Carbonic Industries Corporation We have audited the accompanying balance sheets of Carbonic Industries Corporation as of December 31, 1995 and 1994, and the related statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Carbonic Industries Corporation as of December 31, 1995 and 1994, and the results of its operations and cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. OSBURN, HENNING AND COMPANY Orlando, Florida February 16, 1996 F-38 Carbonic Industries Corporation Balance Sheets ASSETS
============================================================================================================================== December 31, 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------ CURRENT ASSETS Cash and cash equivalents $ 2,296,223 $ 1,249,711 Trade receivables, less allowance for doubtful accounts, 1995 - $100,000; 1994 - $100,000 5,143,772 4,578,550 Other receivable - 900,000 Inventories 1,056,366 924,361 Prepaid expenses 192,198 181,505 Prepaid income taxes 265,697 111,927 - ------------------------------------------------------------------------------------------------------------------------------ Total current assets 8,954,256 7,946,054 - ------------------------------------------------------------------------------------------------------------------------------ PROPERTY AND EQUIPMENT Land 862,876 862,876 Buildings and improvements 5,086,024 5,004,153 Plant machinery and equipment 16,730,209 16,523,539 Transportation equipment 3,787,863 3,153,326 Receivers and related equipment 10,298,002 10,421,521 Dry ice shipping containers 1,988,278 1,665,728 Other equipment and furniture 2,811,565 2,083,609 - ------------------------------------------------------------------------------------------------------------------------------ 41,564,817 39,714,752 Less accumulated depreciation 26,519,323 23,987,359 - ------------------------------------------------------------------------------------------------------------------------------ 15,045,494 15,727,393 - ------------------------------------------------------------------------------------------------------------------------------ OTHER ASSETS Investment in joint venture 3,201,592 3,258,162 Unamortized intangible assets (net of accumulated amortization of $859,419 in 1995 and $795,907 in 1994) 480,709 423,342 Cash value of life insurance and deposits 306,676 294,857 Note receivable 92,500 92,500 - ------------------------------------------------------------------------------------------------------------------------------ 4,081,477 4,068,861 - ------------------------------------------------------------------------------------------------------------------------------ $28,081,227 $27,742,308 ==============================================================================================================================
F-39 Carbonic Industries Corporation LIABILITIES AND STOCKHOLDERS' EQUITY
============================================================================================================================== December 31, 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------ CURRENT LIABILITIES Note payable $ - $ 1,500,000 Current maturities of long-term debt 1,386,669 1,251,885 Accounts payable 3,557,143 2,029,979 Accrued wages 337,706 306,445 Other accrued expenses 339,324 332,126 Dividends payable 428,029 427,563 Income taxes payable 25,457 106,358 - ------------------------------------------------------------------------------------------------------------------------------ Total current liabilities 6,074,328 5,954,356 - ------------------------------------------------------------------------------------------------------------------------------ LONG-TERM DEBT, less current maturities 6,240,438 7,480,583 - ------------------------------------------------------------------------------------------------------------------------------ DEFERRED INCOME TAXES, noncurrent 2,250,000 2,150,000 - ------------------------------------------------------------------------------------------------------------------------------ COMMITMENTS AND CONTINGENCIES (Note 12) - ------------------------------------------------------------------------------------------------------------------------------ STOCKHOLDERS' EQUITY Common stock: "Class A", $2 stated value; 2,000,000 shares authorized; 831,059 and 830,126 shares issued and outstanding in 1995 and 1994, respectively 1,662,118 1,660,252 "Class B", $2 stated value; 25,000 shares authorized, issued and outstanding 50,000 50,000 Additional paid-in capital 1,372,675 1,361,274 Retained earnings 10,431,668 9,085,843 - ------------------------------------------------------------------------------------------------------------------------------ 13,516,461 12,157,369 - ------------------------------------------------------------------------------------------------------------------------------ $28,081,227 $27,742,308 ==============================================================================================================================
The Notes to Financial Statements are an integral part of these statements. F-40 Carbonic Industries Corporation Statements of Income
Years Ended December 31, 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------------ Sales $41,970,110 $34,640,562 $29,899,054 - ------------------------------------------------------------------------------------------------------------------------------------ Cost of sales 23,671,245 19,418,034 17,127,373 - ------------------------------------------------------------------------------------------------------------------------------------ Gross profit 18,298,865 15,222,528 12,771,681 - ------------------------------------------------------------------------------------------------------------------------------------ Operating expenses: Distribution 10,735,964 8,341,069 7,204,190 Selling 1,361,173 1,236,092 1,132,517 General and administrative 3,473,941 3,223,850 3,278,790 - ------------------------------------------------------------------------------------------------------------------------------------ Total operating expenses 15,571,078 12,801,011 11,615,497 - ------------------------------------------------------------------------------------------------------------------------------------ Operating income 2,727,787 2,421,517 1,156,184 Nonoperating income (expense) - net 330,647 (62,848) (1,124,723) - ------------------------------------------------------------------------------------------------------------------------------------ Income before income taxes 3,058,434 2,358,669 31,461 Income taxes 1,284,580 1,032,351 16,462 - ------------------------------------------------------------------------------------------------------------------------------------ Net income $ 1,773,854 $ 1,326,318 $ 14,999 ==================================================================================================================================== ==================================================================================================================================== Earnings per common share $ 2.07 $ 1.55 $ .02 ====================================================================================================================================
Statements of Stockholders' Equity
Years Ended December 31, 1995, 1994 and 1993 - ------------------------------------------------------------------------------------------------------------------------------------ Common Stock Additional ----------------------------- Paid-in Retained "Class A" "Class B" Capital Earnings ----------------------------------------------------------------------- Balance, January 1, 1993 $1,656,520 $ 50,000 $1,340,916 $ 8,172,089 Issuance of 933 shares of common stock 1,866 - 9,936 - Net income - - - 14,999 - ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1993 1,658,386 50,000 1,350,852 8,187,088 Issuance of 933 shares of common stock 1,866 - 10,422 - Net income - - - 1,326,318 Dividends - - - (427,563) - ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1994 1,660,252 50,000 1,361,274 9,085,843 Issuance of 933 shares of common stock 1,866 - 11,401 - Net income - - - 1,773,854 Dividends - - - (428,029) - ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1995 $1,662,118 $ 50,000 $1,372,675 $10,431,668 ====================================================================================================================================
The Notes to Financial Statements are an integral part of these statements. F-41 Carbonic Industries Corporation Statements of Cash Flows
Years Ended December 31, 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------------------------- Cash Flows From Operating Activities Net income $1,773,854 $1,326,318 $ 14,999 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 2,950,913 2,948,031 3,050,180 Amortization 97,009 104,211 104,211 Bad debts 33,058 75,818 2,259 (Gain) on disposal of property and equipment (274,474) (277,027) (32,143) Equity in earnings of joint venture (843,431) (335,728) -- Other 13,267 12,297 11,802 Change in assets and liabilities: (Increase) in trade receivables (598,280) (1,180,955) (272,507) (Increase) in inventories (132,005) (125,388) (155,298) Decrease (increase) in prepaid expenses (10,693) (112,197) (118,129) Decrease (increase) in prepaid income taxes (153,770) 163,358 -- Increase in accounts payable and accrued expenses 1,565,623 406,167 351,173 Increase (decrease) in income taxes payable (80,901) 106,358 (75,690) Increase (decrease) in deferred income taxes 100,000 (35,000) (360,000) - ---------------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 4,440,170 3,076,263 2,520,857 - ---------------------------------------------------------------------------------------------------------------------------------- Cash Flows From Investing Activities Increase in other receivable -- (700,000) (200,000) Proceeds from disposal of property and equipment 480,809 346,472 254,106 Purchase of property and equipment (2,475,349) (4,017,827) (1,310,829) Contribution of capital to joint venture -- (323,155) -- Distributions from joint venture 900,000 173,155 -- Purchase of other assets (11,818) (12,791) (14,184) - ---------------------------------------------------------------------------------------------------------------------------------- Net cash (used in) investing activities (1,106,358) (4,534,146) (1,270,907) - ---------------------------------------------------------------------------------------------------------------------------------- Cash Flows From Financing Activities Dividends paid (427,563) -- (319,972) Proceeds from (payments on) note payable (1,500,000) 1,500,000 -- Proceeds from long-term debt 2,700,000 -- 182,000 Principal payments on long-term debt (2,905,361) (1,826,685) (1,108,473) Cash reserved for debt -- -- (500,000) Release of cash reserved for debt -- 2,000,000 -- Debt issue costs incurred (154,376) -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities (2,287,300) (1,673,315) (1,746,445) - ---------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in Cash and Cash Equivalents 1,046,512 215,432 (496,495) Cash and Cash Equivalents, Beginning 1,249,711 1,034,279 1,530,774 - ---------------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents, Ending $2,296,223 $1,249,711 $1,034,279 ================================================================================================================================== Supplemental Disclosures of Cash Flow Information Cash payments for: Interest $ 884,404 $ 918,331 $ 786,823 ================================================================================================================================== Income taxes $1,419,218 $ 813,585 $ 540,872 ================================================================================================================================== Noncash Investing and Financing Activities (See Note 6)
The Notes to Financial Statements are an integral part of these statements. F-42 Carbonic Industries Corporation Notes to Financial Statements - ------------------------------------------------------------------------------ Note 1. Nature of Business and Significant Accounting Policies Nature of Business: Carbonic Industries Corporation ("The Company") is engaged in the manufacture and sale of carbon dioxide products. The Company operates primarily in the Eastern United States, with additional operations in Texas and Arkansas. Significant Accounting Policies: Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those reported. Cash and cash equivalents: The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Inventories (in part): Inventories are valued at the lower of cost or market on the first-in, first-out basis. Property and equipment: Property and equipment are recorded at cost and depreciated using the straight-line method over the following estimated useful lives:
Buildings and improvements 5 - 20 years Plant machinery and equipment 5 - 20 years Transportation equipment 3 - 10 years Receivers and related equipment 5 - 20 years Dry ice shipping containers 5 years Other equipment and furniture 5 - 10 years
Depreciation expense amounted to $2,950,913, $2,948,031 and $3,050,180 for the years ended December 31, 1995, 1994 and 1993, respectively. Investment in joint venture (in part): The investment in joint venture is accounted for by use of the equity method. Unamortized intangible assets (in part): All intangible assets are being amortized over their estimated useful lives using the straight-line method. Goodwill represents costs in excess of net assets of businesses acquired and is amortized on a straight-line basis over the expected periods to be benefited, which currently ranges from 15 to 40 years. The Company assesses the recoverability of these intangible assets by determining whether the amortization of the goodwill balance over its remaining life can be recovered through projected undiscounted future cash flows. Income taxes (in part): Income taxes are provided based on financial statement income before income taxes. Deferred income taxes reflect the impact of temporary differences between the amounts of assets and liabilities recognized for financial statement purposes and such amounts recognized for tax purposes. These deferred income taxes are measured by applying the provisions of currently enacted tax laws. Earnings per common share: Earnings per common share are determined by dividing net income by the weighted average number of common shares outstanding, after giving effect to potentially dilutive stock options. The number of common shares used in computing earnings per common share was 855,359 in 1995, 854,429 in 1994 and 853,592 in 1993. Financial Instruments: The carrying amounts of accounts receivable, accounts payable, and current maturities of long-term debt approximate fair value because of the short-term maturity of these financial instruments. F-43 Note 1. Nature of Business and Significant Accounting Policies (continued) Reclassifications: Certain amounts in the 1994 and 1993 financial statements have been reclassified to conform to the 1995 financial statements presentation.
================================================================================================================================ Note 2. Inventories Inventories consist of the following: December 31, 1995 1994 ---------------------------------------------------------------------------------------------------------- Materials $ 624,277 $ 571,478 Finished goods 432,089 352,883 ---------------------------------------------------------------------------------------------------------- $1,056,366 $ 924,361 ========================================================================================================== ================================================================================================================================
Note 3. Investment in Joint Venture On January 14, 1994, the Company entered into an agreement with Arcadian LCD Corporation to form a 50/50 joint venture named AC Industries (the Joint Venture). The Joint Venture was formed to build, own and operate a 500 ton per day carbon dioxide liquefaction plant in Augusta, Georgia. The Joint Venture is managed and operated by employees of the joint venturers under various expense reimbursement agreements. The carbon dioxide liquefaction plant was built by Tomco2 Equipment Company (Tomco2) (see Note 10). At December 31, 1994, the Joint Venture owed Tomco2 $276,377, representing final payment for construction of the plant. The Joint Venture's primary customer is the Company. During 1995 and 1994, the Company purchased carbon dioxide totaling $4,010,691 and $1,593,279, respectively, from the Joint Venture. At December 31, 1995 and 1994, the Company owed the Joint Venture $653,959 and $246,660, respectively, related to these purchases. At December 31, 1995 and 1994, the Joint Venture owed the Company $77,388 and $115,724, respectively, for reimbursement of expenses incurred on the Joint Venture's behalf. Distributions from the Joint Venture amounted to $900,000 and $173,155 for the years ended December 31, 1995 and 1994, respectively. Summary information on the Joint Venture as of and for the years ended December 31, 1995 and 1994 is as follows:
1995 1994 ---------------------------------------------------------------------------------------------------------- Current assets $1,749,567 $1,500,965 Property, plant and equipment, net 5,051,366 5,713,629 Other assets -- 28,311 ---------------------------------------------------------------------------------------------------------- Total assets 6,800,933 7,242,905 Current liabilities 397,745 726,581 ---------------------------------------------------------------------------------------------------------- Net assets $6,403,188 $6,516,324 ========================================================================================================== Net sales $5,655,065 $2,674,221 ========================================================================================================== Net income $1,686,864 $ 671,458 ==========================================================================================================
F-44 - -------------------------------------------------------------------------------- Note 4. Unamortized Intangible Assets Unamortized intangible assets consist of the following:
Original Amortization December 31, Cost Period 1995 1994 ---------------------------------------------------------------------------------------------------------- Business acquisition costs $ 49,168 15 years $ 16,736 $ 20,014 Debt issue costs 327,322 5 - 12 years 201,426 71,841 Non-compete agreements 50,000 3 - 5 years - 2,500 Patent rights 9,178 17 years - 248 Customer lists 81,394 5 - 15 years 14,500 22,070 Goodwill 823,066 15 - 40 years 248,047 306,669 ---------------------------------------------------------------------------------------------------------- $1,340,128 $480,709 $423,342 ==========================================================================================================
- -------------------------------------------------------------------------------- Note 5. Note Payable The Company has a $1,500,000 line of credit with SunTrust Bank. This line of credit has an interest rate of prime, (8.5% for the years ended December 31, 1995 and 1994), is collateralized by trade receivables and inventory and expires May 31, 1996. At December 31, 1995 and 1994, the Company had an outstanding balance due of $0 and $1,500,000, respectively, on this line of credit. - -------------------------------------------------------------------------------- Note 6. Long-Term Debt Long-term debt consists of the following:
Payment December 31, Collateral Terms 1995 1994 ---------------------------------------------------------------------------------------------------------- Jefferson-Pilot Life Most Insurance Company Company (Stockholder) (A) Assets (1) $ 3,300,000 $ 3,850,000 Jefferson-Pilot Life Most Insurance Company Company (Stockholder) (A) Assets (2) 4,140,741 - Florida College Star, MS (Stockholder) (B) Project (3) - 2,500,000 SunTrust Bank (A) Terre Haute, IN (4) - 83,310 Project Arcadian Fertilizer, Investment in L.P. (B) Joint Venture (5) - 2,073,628 Other debt Various (6) 186,366 225,530 ---------------------------------------------------------------------------------------------------------- 7,627,107 8,732,468 Current Maturities 1,386,669 1,251,885 ---------------------------------------------------------------------------------------------------------- Long-Term Maturities $ 6,240,438 $ 7,480,583 ==========================================================================================================
F-45 Note 6. Long-Term Debt (continued) (1) Term loan agreement dated October 23, 1989. Quarterly interest payments at 11%. Quarterly principal payments of $137,500, beginning February 1, 1992. Note matures November 1, 2001. This loan is guaranteed by Tomco2 Equipment Company (see Note 10). (2) Senior secured notes dated May 12, 1995. Quarterly principal payments of $159,256 plus 10.5% interest beginning September 30, 1995. Notes mature March 31, 2002. (3) Promissory note dated February 18, 1987 and amended December 20, 1989. 8.25% interest only payments due quarterly. Principal due April 1, 1995. Beginning January 1, 1990, the Company was required to reserve $250,000 cash on a semi-annual basis to meet this principal obligation. Florida College waived the requirement for any cash debt reserve at December 31, 1994. On May 31, 1995 this note, net of $900,000 of loans receivable from Florida College, was liquidated out of the gross proceeds of the new Jefferson-Pilot debt. (4) Promissory note with monthly principal payments of $27,778 ending on March 1, 1995. Interest at two- thirds (2/3) of the prime rate. (5) Promissory note with three semi-annual principal payments due beginning December 15, 1994 and ending December 15, 1995. 11% interest payments due monthly. Original loan of $2,772,433 was invested in the Joint Venture by Arcadian Fertilizer, L.P. for the benefit of the Company. (6) Other debt consists of two notes with interest rates at 9% and 10%, respectively. These notes mature October 4, 1997 and July 23, 1999, respectively. (A) These loan agreements contain restrictive covenants which include the maintenance of a minimum equity level, maintenance of certain financial ratios and restrictions on additional borrowings and dividend payments. (B) On March 23, 1995, the Company obtained a commitment from Jefferson-Pilot Life Insurance Company to purchase $4,300,000 of 10.5% senior secured notes to be issued by the Company in 1995. The Company used the proceeds of these notes to pay the Florida College and Arcadian Fertilizer, L.P. short-term debts described above. Therefore, $4,300,000 of these two debts were reclassified at December 31, 1994 from current liabilities to noncurrent liabilities. Principal payment requirements subsequent to December 31, 1995 are as follows: 1996 - $1,386,669; 1997 - $1,305,375; 1998 -$1,204,153; 1999 - $1,197,576; 2000 - $1,187,037; thereafter - $1,346,297. Total interest cost amounted to $971,043 for 1995, $913,822 for 1994, and $778,130 for 1993 including $737,625, $653,698, and $721,760, respectively, incurred on the above stockholder debt. The carrying value of long-term debt at December 31, 1995 approximates its fair value based on borrowing rates available to the Company for loans of similar terms and maturities. - -------------------------------------------------------------------------------- Note 7. Nonoperating Income (Expense) - Net Nonoperating income (expense) - net consists of the following:
Year Ended December 31, 1995 1994 1993 -------------------------------------------------------------------------------------------------------- Equity in earnings of joint venture $ 843,431 $ 335,728 $ - Interest income 85,123 198,258 155,859 Interest expense (971,043) (913,822) (778,130) Gain on disposal of property and equipment 274,474 277,027 32,143 Settlement of lawsuit (A) - - (575,000) Other income 98,662 39,961 40,405 -------------------------------------------------------------------------------------------------------- $ 330,647 $ (62,848) $(1,124,723) --------------------------------------------------------------------------------------------------------
(A) In November 1993, the Company agreed to settle a lawsuit arising from a customer's claim that it purchased defective equipment from the Company. F-46 - -------------------------------------------------------------------------------- Note 8. Income Taxes Income taxes consist of the following components:
Year Ended December 31, 1995 1994 1993 ---------------------------------------------------------------------------------------------------------- Current: Federal $1,001,230 $ 892,018 $ 309,428 State 183,350 175,333 67,034 ---------- ---------- ---------- 1,184,580 1,067,351 376,462 ---------- ---------- ---------- Deferred: Federal 83,000 (29,000) (298,000) State 17,000 (6,000) (62,000) ---------- ---------- ---------- 100,000 (35,000) (360,000) ---------------------------------------------------------------------------------------------------------- $1,284,580 $1,032,351 $ 16,462 ----------------------------------------------------------------------------------------------------------
Significant differences between taxes computed at the federal statutory rate and the provision for income taxes are:
Year Ended December 31, 1995 1994 1993 ---------------------------------------------------------------------------------------------------------- Taxes at U.S. federal statutory rate 34.0% 34.0% 34.0% Increase in income taxes resulting from: State income taxes, net of federal benefit 4.3 4.7 10.6 Non-deductible expenses and other, net 3.7 5.1 7.7 ---------------------------------------------------------------------------------------------------------- 42.0% 43.8% 52.3% ==========================================================================================================
The tax effects of cumulative temporary differences that gave rise to the noncurrent deferred tax liability are as follows:
December 31, ------------ 1995 1994 ---------------------------------------------------------------------------------------------------------- Deferred tax liabilities: Property and equipment $1,902,000 $2,019,000 Investment in joint venture 348,000 131,000 ---------------------------------------------------------------------------------------------------------- Deferred tax liability $2,250,000 $2,150,000 ========================================================================================================== - ------------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- Note 9. Retirement Plan The Company has a 401(k) retirement plan which provides benefits for substantially all employees of the Company who meet length of service requirements. Under the plan, qualified non-elective contributions are made by the Company. Additional annual contributions may be made by the Company at the discretion of the Board of Directors. Company contributions to the plan during 1995, 1994, and 1993 amounted to $197,939, $156,664, and $89,538, respectively. - -------------------------------------------------------------------------------- Note 10. Related Party Transactions The Company purchases inventory and equipment from Tomco\2\ Equipment Company (Tomco\2\), an entity related to the Company through substantially the same ownership and officers. These purchases amounted to $1,757,225 in 1995, $3,324,347 in 1994 and $1,138,633 in 1993. F-47 Accounts payable includes $330,379 and $292,858 at December 31, 1995 and 1994, respectively, owed to Tomco2. The other receivable at December 31, 1994 consists of loans to Florida College. These loans bear interest at 8.25% and were liquidated in 1995. - -------------------------------------------------------------------------------- Note 11. Concentrations Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and trade receivables. The Company places its temporary cash investments with high quality financial institutions. Concentrations of credit risk with respect to trade receivables are limited due to the Company's large number of customers, their dispersion across many industries and geographies and generally short payment terms. The Company's manufacturing process includes the purchase of unprocessed carbon dioxide. This unprocessed carbon dioxide is obtained from suppliers, usually as a by-product of the supplier's manufacturing process (the source). As of December 31, 1995, the Company obtains this unprocessed carbon dioxide from six suppliers, two of which supply 80% of the Company's needs. Although the Company has long-term purchase contracts with these suppliers, the contracts allow the suppliers to cancel the contracts if they elect to close the source. - -------------------------------------------------------------------------------- Note 12. Commitments and Contingencies Product Purchase Agreements: The Company has various purchase agreements for certain amounts of carbon dioxide. Purchases under these agreements for 1995, 1994 and 1993 totaled $8,745,000, $5,909,000 and $4,182,000, respectively. Most of these agreements have escalation clauses based on changes in the producer price index. The following schedule summarizes the future minimum payments required under these agreements that have initial or remaining noncancellable terms of one year or more as of December 31, 1995:
Year Ending December 31, 1996 $ 2,882,000 1997 2,266,000 1998 1,760,000 1999 1,760,000 2000 1,760,000 Later years 22,880,000 ---------------------------------------------------------- Total minimum payments required $33,308,000 ==========================================================
Included in the above minimum payments is $31,680,000 due to A.C. Industries and the Company's joint venture partner (see Note 3). Operating Lease Agreements: The Company has various long-term operating lease agreements for the use of office/warehouse facilities, railroad tank cars, trucks, tractors and other equipment. Some of the truck and tractor leases also call for additional rental amounts based on miles driven. Total rental expense in 1995, 1994 and 1993 amounted to $3,233,000, $2,502,000 and $2,386,000, respectively. The following schedule summarizes the future minimum rental payments required under operating leases that have initial or remaining noncancellable lease terms of one year or more as of December 31, 1995:
Year Ending December 31, 1996 $ 3,111,000 1997 3,051,000 1998 2,982,000 1999 2,337,000 2000 1,643,000 Later years 3,938,000 ---------------------------------------------------------- Total minimum payments required $17,062,000 ==========================================================
F-48 Litigation: At December 31, 1995, a lawsuit which alleges violations of anti-trust laws is pending against the Company. This lawsuit alleges damages approximating $9,000,000 against the Company and several of the Company's competitors. The Company and its competitors are vigorously contesting this lawsuit. Management believes that ultimate liabilities, if any, resulting from this lawsuit will not materially affect the financial position or results of operations of the Company and, therefore, no provision for loss has been made in the accompanying financial statements. - -------------------------------------------------------------------------------- Note 13. Capital Stock The shares of "Class A" and "Class B" common stock are substantially identical in rights, except that the owners of the "Class B" shares have the right to elect a majority of the Board of Directors. - -------------------------------------------------------------------------------- Note 14. Stock Option Plan On November 17, 1994, the Company's Board of Directors approved a stock option plan. The plan provides for the granting of incentive stock options and nonqualified stock options to purchase 100,000 shares of the Company's "Class A" common stock to directors, officers and other key employees at a price not less than the fair market value on the date the option is granted. Options become exercisable ratably over a five year period from the date of grant, unless accelerated by a change of control in the Company's ownership. Options expire ten years after the date of grant, unless accelerated by termination of employment. During 1995, the Board of Directors granted stock options for 71,000 shares with option prices of $14.22 to $15.79 per share. No stock options were exercisable at December 31, 1995. - -------------------------------------------------------------------------------- Note 15. Spin-Off of Subsidiary During 1992, the Company's Board of Directors approved the "spin-off" effective January 1, 1993 of the Company's wholly owned subsidiary, Tomco2 Equipment Company (Tomco2). As a result of the "spin-off", the Company's stockholders received one share of "Class A" or "Class B" common stock in Tomco2 for each share of "Class A" or "Class B" stock held. F-49 Carbonic Industries Corporation Balance Sheets ASSETS Unaudited
==================================================================================================================================== September 30, December 31, 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ CURRENT ASSETS Cash and cash equivalents $ 655,000 $ 2,296,223 Trade receivables, less allowance for doubtful accounts, September 30, 1996 - $100,000; December 31, 1995 - $100,000 4,905,000 5,143,772 Other receivable 1,118,000 -- Inventories 1,232,000 1,056,366 Prepaid expenses 1,042,000 192,198 Prepaid income taxes -- 265,697 - ------------------------------------------------------------------------------------------------------------------------------------ Total current assets 8,952,000 8,954,256 - ------------------------------------------------------------------------------------------------------------------------------------ PROPERTY AND EQUIPMENT Land 863,000 862,876 Buildings and improvements 5,006,000 5,086,024 Plant machinery and equipment 17,596,000 16,730,209 Transportation equipment 5,545,000 3,787,863 Receivers and related equipment 11,089,000 10,298,002 Dry ice shipping containers 2,085,000 1,988,278 Other equipment and furniture 2,904,000 2,811,565 - ------------------------------------------------------------------------------------------------------------------------------------ 45,088,000 41,564,817 Less accumulated depreciation 28,643,000 26,519,323 - ------------------------------------------------------------------------------------------------------------------------------------ 16,445,000 15,045,494 - ------------------------------------------------------------------------------------------------------------------------------------ OTHER ASSETS Investment in joint venture 5,037,000 3,201,592 Unamortized intangible assets (net of accumulated amortization of $934,000 at September 30, 1996 and $859,419 at December 31, 1995) 405,000 480,709 Cash value of life insurance and deposits 307,000 306,676 Note receivable 93,000 92,500 - ------------------------------------------------------------------------------------------------------------------------------------ 5,842,000 4,081,477 - ------------------------------------------------------------------------------------------------------------------------------------ $31,239,000 $28,081,227 ====================================================================================================================================
F-50 Carbonic Industries Corporation LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
==================================================================================================================================== September 30, December 31, 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ CURRENT LIABILITIES Current maturities of long-term debt $ 1,988,000 $ 1,386,669 Accounts payable 3,300,000 3,557,143 Accrued wages 461,000 337,706 Other accrued expenses 812,000 339,324 Dividends payable -- 428,029 Income taxes payable 143,000 25,457 - ------------------------------------------------------------------------------------------------------------------------------------ Total current liabilities 6,704,000 6,074,328 - ------------------------------------------------------------------------------------------------------------------------------------ LONG-TERM DEBT, less current maturities 6,951,000 6,240,438 - ------------------------------------------------------------------------------------------------------------------------------------ DEFERRED INCOME TAXES, noncurrent 2,250,000 2,250,000 - ------------------------------------------------------------------------------------------------------------------------------------ COMMITMENTS AND CONTINGENCIES - ------------------------------------------------------------------------------------------------------------------------------------ STOCKHOLDERS' EQUITY Common stock: "Class A", $2 stated value; 2,000,000 shares authorized; 831,059 shares issued and outstanding 1,662,000 1,662,118 "Class B", $2 stated value; 25,000 shares authorized, issued and outstanding 50,000 50,000 Additional paid-in capital 1,373,000 1,372,675 Retained earnings 12,249,000 10,431,668 - ------------------------------------------------------------------------------------------------------------------------------------ 15,334,000 13,516,461 - ------------------------------------------------------------------------------------------------------------------------------------ $31,239,000 $28,081,227 ====================================================================================================================================
The Notes to Financial Statements are an integral part of these statements. F-51 Carbonic Industries Corporation Statements of Income (Unaudited)
Nine Months ended September 30, 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Sales $34,530,000 $31,111,000 - ------------------------------------------------------------------------------------------------------------------------------------ Cost of sales 19,110,000 17,656,000 - ------------------------------------------------------------------------------------------------------------------------------------ Gross profit 15,420,000 13,455,000 - ------------------------------------------------------------------------------------------------------------------------------------ Operating expenses: Distribution 8,490,000 7,411,000 Selling 1,063,000 1,040,000 General and administrative 2,733,000 2,637,000 - ------------------------------------------------------------------------------------------------------------------------------------ Total operating expenses 12,286,000 11,088,000 - ------------------------------------------------------------------------------------------------------------------------------------ Operating income 3,134,000 2,367,000 Nonoperating income (expense) - net (1,000) (12,000) - ------------------------------------------------------------------------------------------------------------------------------------ Income before income taxes 3,133,000 2,355,000 Income taxes 1,316,000 990,000 - ------------------------------------------------------------------------------------------------------------------------------------ Net income $1,817,000 $1,365,000 ==================================================================================================================================== ==================================================================================================================================== Earnings per common share $2.12 $1.60 ====================================================================================================================================
The Notes to Financial Statements are an integral part of these statements. F-52
Carbonic Industries Corporation Statements of Cash Flows (Unaudited) Nine Months Ended September 30, 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Cash Flows From Operating Activities Net income $ 1,817,000 $ 1,365,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 2,124,000 2,156,000 Amortization 76,000 69,000 Bad debts - 36,000 Equity in earnings of joint venture (535,000) (608,000) Other 28,000 1,288,000 Change in assets and liabilities: Decrease (Increase) in trade receivables 210,000 (1,778,000) (Increase) in inventories (176,000) (178,000) (Increase) in prepaid expenses (1,968,000) (361,000) Decrease in prepaid income taxes 265,000 112,000 Increase in accounts payable and accrued expenses 339,000 942,000 Increase (decrease) in income taxes payable 118,000 (31,000) - ------------------------------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 2,298,000 3,012,000 - ------------------------------------------------------------------------------------------------------------------------------------ Cash Flows From Investing Activities Purchase of property and equipment (3,523,000) (1,734,000) Contribution of capital to joint venture (2,000,000) - Distributions from joint venture 700,000 400,000 - ------------------------------------------------------------------------------------------------------------------------------------ Net cash (used in) investing activities (4,823,000) (1,334,000) - ------------------------------------------------------------------------------------------------------------------------------------ Cash Flows From Financing Activities Dividends paid (428,000) (428,000) Proceeds from (payments on) note payable - (1,500,000) Proceeds from long-term debt 2,530,000 2,700,000 Principal payments on long-term debt (1,218,000) (2,129,000) Debt issue costs incurred - (152,000) - ------------------------------------------------------------------------------------------------------------------------------------ Net cash provided by (used in) financing activities 884,000 (1,509,000) - ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in Cash and Cash Equivalents (1,641,000) 169,000 Cash and Cash Equivalents, Beginning 2,296,000 1,250,000 - ------------------------------------------------------------------------------------------------------------------------------------ Cash and Cash Equivalents, Ending $655,000 $1,419,000 - ------------------------------------------------------------------------------------------------------------------------------------ Supplemental Disclosures of Cash Flow Information Cash payments for: Interest $720,000 $769,000 - ------------------------------------------------------------------------------------------------------------------------------------ Income taxes $1,173,000 $915,000 - ------------------------------------------------------------------------------------------------------------------------------------
The Notes to Financial Statements are an integral part of these statements. F-53 Carbonic Industries Corporation Notes to Financial Statements (Unaudited) - -------------------------------------------------------------------------------- Note 1. Nature of Business and Significant Accounting Policies Carbonic Industries Corporation (the "Company") is engaged in the manufacture and sale of carbon dioxide products. The Company operates primarily in the Eastern United States, with additional operations in Texas and Arkansas. The accompanying financial statements have been prepared in accordance with generally accepted accounting principles applicable to interim financial statements. 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 financial statements for the year ended December 31, 1995. The financial statements reflect, in the opinion of management, all adjustments (normal recurring adjustments) necessary to present fairly the Company's balance sheets at September 30, 1996 and December 31, 1995; the statements of income for the nine months ended September 30, 1996 and 1995; and the statements of cash flows for the nine months ended September 30, 1996 and 1995. The interim operating results are not necessarily indicative of the results to be expected for an entire year. - -------------------------------------------------------------------------------- Note 2. Inventories Inventories consist of the following:
September 30, December 31, 1996 1995 ------------------------------------------------------------------ Materials $ 699,000 $ 624,277 Finished goods 533,000 432,089 ------------------------------------------------------------------ $1,232,000 $1,056,366 ------------------------------------------------------------------
- -------------------------------------------------------------------------------- Note 3. Unamortized Intangible Assets Unamortized intangible assets consist of the following:
Original Amortization September 30, December 31, Cost Period 1996 1995 --------------------------------------------------------------------------------------------------- Business acquisition costs $ 49,168 15 years $ 14,000 $ 16,736 Debt issue costs 327,322 5 - 12 years 177,000 201,426 Customer lists 81,394 5 - 15 years 10,000 14,500 Goodwill 823,066 15 - 40 years 204,000 248,047 --------------------------------------------------------------------------------------------------- $1,280,950 $405,000 $480,709 ---------------------------------------------------------------------------------------------------
F-54 Carbonic Industries Corporation Notes to Financial Statements (Unaudited) - -------------------------------------------------------------------------------- Note 4. Long-Term Debt New long-term debt borrowings consist of the following:
September 30, Collateral Payment Terms 1996 ---------------------------------------------------------------------------------------------------------- SunTrust Bank Vehicles (1) $ 964,000 SunTrust Bank Vehicles & Receiver (2) $ 1,430,000
(1) Term loan agreement dated April 1, 1996. Monthly principal and interest payments of $35,000 at 8.25% interest. Note matures April 1, 1999. (2) Term loan agreement dated September 18, 1996. Monthly principal and interest payments of $29,000 at 8.25% interest. Note matures October 2, 2001. - -------------------------------------------------------------------------------- Note 5. Commitments and Contingencies At September 30, 1996, a lawsuit which alleges violations of anti-trust laws is pending against the Company. This lawsuit alleges damages approximating $9,000,000 against the Company and several of the Company's competitors. The Company and its competitors are vigorously contesting this lawsuit. Management believes that ultimate liabilities, if any, resulting from this lawsuit will not materially affect the financial position or results of operations of the Company and, therefore, no provision for loss has been made in the accompanying financial statements. - -------------------------------------------------------------------------------- Note 6. Subsequent Event On March 12, 1997, the Board of Directors of the Company approved a Merger Agreement, subject to shareholder approval, in which Airgas, Inc. would exchange common stock and cash for all of the issued and outstanding common stock of the Company and the Company will be merged with and into a wholly-owned subsidiary of Airgas, Inc. - -------------------------------------------------------------------------------- F-55 Appendix A ================================================================================ AGREEMENT AND PLAN OF MERGER BY AND AMONG AIRGAS, INC., AIRGAS CARBONIC INDUSTRIES, INC. AND CARBONIC INDUSTRIES CORPORATION DATED AS OF MARCH 12, 1997 ================================================================================ TABLE OF CONTENTS ----------------- PAGE(S) ARTICLE 1 THE MERGER................................................................ 1 1.1 The Merger..................................................... 1 1.2 Closing Date and Location...................................... 1 1.3 Closing Deliveries and Actions................................. 1 1.4 Effects of the Merger.......................................... 2 1.5 Certificate of Incorporation................................... 2 1.6 By-Laws........................................................ 2 1.7 Directors and Officers of the Surviving Corporation............ 2 1.8 Tax Status of the Merger....................................... 3 1.9 Amendment...................................................... 3 ARTICLE 2 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE PARTIES; EXCHANGE OF CERTIFICATES.................................. 3 2.1 Certain Definitions........................................... 3 2.2 Effect on Capital Stock....................................... 4 2.3 Class A Cash Election Procedure............................... 7 2.4 Dissenting Shares............................................. 8 2.5 CIC Stock Options............................................. 8 2.6 Payments to Exchange Agent.................................... 9 2.7 CIC Shareholder Deliveries.................................... 10 2.8 Payments to CIC Shareholders.................................. 10 2.9 Adjustments to Cash Merger Consideration...................... 11 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF CIC..................................... 12 3.1 Organization and Good Standing................................ 12 3.2 Capitalization................................................ 12 3.3 Articles of Incorporation and Bylaws.......................... 13 3.4 Directors, Officers and Employees............................. 13 3.5 Corporate Approval............................................ 13 3.6 Consents and Approvals; No Violations......................... 13 3.7 Binding Obligation............................................ 14 3.8 Interest in Competitors....................................... 14 3.9 Personal Property............................................. 14 3.10 Inventories................................................... 15 3.11 Real Property................................................. 15 3.12 Accounts and Notes Receivable................................. 16 3.14 Insurance Policies............................................ 16 i 3.14 Leases, Contracts, Etc........................................ 16 3.15 Patents, Etc.................................................. 18 3.16 Labor Contracts, Employment Contracts and Employee Benefit Plans............................................... 19 3.17 Litigation.................................................... 19 3.18 Franchises, Permits and Licenses.............................. 20 3.19 Customers and Suppliers....................................... 20 3.20 Stock Records, Etc............................................ 20 3.21 Taxes......................................................... 20 3.22 Financial Information......................................... 21 3.23 Absence of Undisclosed Liabilities............................ 21 3.24 Absence of Certain Changes.................................... 21 3.25 Conditions Affecting the Company.............................. 22 3.26 No Brokers.................................................... 22 3.27 Compliance with Laws.......................................... 22 3.28 Banks, Etc.................................................... 22 3.29 Transactions with Related Parties............................. 23 3.30 Disclosures................................................... 23 3.31 No Material Omission.......................................... 23 3.32 No Reliance on Forecasts...................................... 23 3.33 Express Disclaimer............................................ 23 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF AIRGAS AND SUB............................................................ 24 4.1 Organization and Standing; Power and Authority................. 24 4.2 Capitalization................................................. 24 4.3 Corporate Approval............................................. 24 4.4 Consents and Approvals; No Violations.......................... 25 4.5 Binding Obligation............................................. 25 4.6 Consents....................................................... 26 4.7 Obligations; Absence of Violation.............................. 26 4.8 Disclosure..................................................... 26 4.9 SEC Reports.................................................... 26 4.10 Absence of Material Adverse Change............................. 27 4.11 No Reliance on Forecasts....................................... 27 4.12 Express Disclaimer............................................. 27 ARTICLE 5 COVENANTS CONCERNING CONDUCT AND TRANSACTIONS PRIOR TO MERGER.............................................. 27 EFFECTIVE TIME 5.1 Access......................................................... 27 5.2 Operations of CIC.............................................. 28 5.3 Financial Statements........................................... 29 5.4 Confidentiality and Nondisclosure.............................. 30 ii ARTICLE 6 FURTHER AGREEMENTS........................................................ 31 6.1 Expenses....................................................... 31 6.2 Shareholders' Meeting or Consents.............................. 31 6.3 No Solicitation................................................ 32 6.4 News Releases.................................................. 32 6.5 SEC Filing..................................................... 32 6.6 Certain Employee Matters....................................... 33 6.8 NYSE Listing................................................... 33 6.9 Rule 145....................................................... 33 6.12 Hinely Office Furniture and Fixtures........................... 34 ARTICLE 7 INDEMNIFICATION........................................................... 34 7.1 Indemnification................................................ 34 7.2 Procedures for Claims.......................................... 35 7.3 Third Party Claims............................................. 36 7.4 Limitations on Indemnification Rights.......................... 37 7.5 Satisfaction of Indemnification Obligations.................... 38 7.6 Other Rights and Remedies Not Affected......................... 38 7.7 Survival of Representations, Warranties and Covenants.......... 38 7.8 Consent as to Representation................................... 38 ARTICLE 8 SHAREHOLDERS' AGENT COMMITTEE............................................. 39 8.1 Appointment and Acceptance..................................... 39 8.2 Authorization.................................................. 39 8.3 Fees & Expenses Fund........................................... 40 8.4 Procedural Matters............................................. 41 8.5 Reliance....................................................... 41 8.6 Successors..................................................... 41 8.7 Survival of Authorizations..................................... 41 8.8 Certain Limitations............................................ 42 8.9 Indemnification................................................ 42 8.10 No Implied Agency or Partnership............................... 42 8.11 Expenses....................................................... 42 ARTICLE 9 CONDITIONS TO OBLIGATION TO CLOSE......................................... 42 9.1 Conditions Precedent to Obligations of CIC..................... 42 9.2 Conditions Precedent to Obligations of Airgas and Sub.......... 44 9.3 Conditions to Obligations of Airgas, Sub and CIC............... 45 iii 9.4 Post-Closing Actions............................................ 45 ARTICLE 10 TERMINATION AND ABANDONMENT; REMEDIES..................................... 46 10.1 Termination and Abandonment..................................... 46 10.2 Effect of Abandonment and Termination........................... 47 ARTICLE 11 MISCELLANEOUS PROVISIONS.................................................. 47 11.1 Good Faith...................................................... 47 11.2 Entire Agreement; Amendment..................................... 47 11.3 Waivers......................................................... 47 11.4 Notices......................................................... 47 11.5 Governing Law................................................... 49 11.6 Attribution of Knowledge........................................ 50 11.7 General Definitions............................................. 50 11.8 Certain Rules of Construction................................... 56 11.9 Time of the Essence; Computation of Time........................ 57 11.10 Severability.................................................... 57 11.11 No Joint Venture................................................ 57 11.12 Absence of Third Party Beneficiary Rights....................... 57 iv EXHIBITS: -------- Exhibit 1.3(a) ................ Certificate of Merger (Delaware) Exhibit 1.3(b) ................ Articles of Merger (Florida) Exhibit 2.2(b) ................ Lockup/Escrow Agreement Exhibit 2.5(b) ................ CIC Stock Option Conversion Exhibit 6.6(b) ................ Accrued Vacation Exhibit 6.7 ................ Terms of Sale of Jacksonville and Miami Dry Ice Operations Exhibit 9.1(e) ................ Opinion of McCausland, Keen & Buckman Exhibit 9.2(e) ................ Opinion of Sutherland, Asbill & Brennan, L.L.P. Exhibit 9.3(g) ................ Tax Opinion of McCausland, Keen & Buckman Exhibit 11.4 ................ CIC Shareholders' Agent Committee CIC DISCLOSURE SCHEDULE ----------------------- AIRGAS DISCLOSURE SCHEDULE -------------------------- v AGREEMENT AND PLAN OF MERGER BY AND AMONG AIRGAS, INC. AND AIRGAS CARBONIC INDUSTRIES, INC. AND CARBONIC INDUSTRIES CORPORATION This is an AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of March 12, 1997 by and among AIRGAS, INC. ("Airgas"), a Delaware corporation, AIRGAS CARBONIC INDUSTRIES, INC. , a Delaware corporation ("Sub") and CARBONIC INDUSTRIES CORPORATION, a Florida corporation (the "CIC"), with respect to the acquisition of CIC by Airgas through the merger of CIC with and into Sub (the "Merger"), and by which such parties, in consideration of the mutual representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound, agree as follows: ARTICLE 1 THE MERGER ---------- 1.1 The Merger. Upon the terms and subject to the conditions set forth in ---------- this Agreement and in accordance with the applicable provisions of the Delaware General Corporation Law, as amended (the "DGCL"), and the Florida Business Corporation Act, as amended (the "FBCA" ), respectively, CIC shall be merged with and into Sub. 1.2 Closing Date and Location. The closing of the Merger (the "Closing") ------------------------- will take place at the offices of Sutherland, Asbill & Brennan, 999 Peachtree Street, N.E., Atlanta, Georgia 30309-3996, on the latest to occur of (a) May 1, 1997, (b) the fifth (5th) business day after the later of (i) the date of a meeting of holders of record of issued and outstanding CIC Common Stock ("CIC Shareholders") held to approve the Merger and (ii) the date that the last of the conditions set forth in Article 9 is satisfied or waived or (c) at such other time and place and on such other date as Airgas and CIC shall mutually agree. The Merger shall become effective as of the close of business on the date the filings are made pursuant to Section 1.3(d) (the time the Merger becomes effective being the "Merger Effective Time"). The date on which the Merger Effective Time occurs is the "Closing Date." 1.3 Closing Deliveries and Actions. The Closing shall consist of the ------------------------------ parties providing to each other such proof or indication of satisfaction of the conditions set forth in Article 9 as they may have reasonably requested and, subject to the satisfaction of such conditions (or waiver by the party entitled to waive such conditions), the following: (a) the certificates, letters and opinions required by Article 9 shall be delivered, 1 (b) the appropriate officers of Sub and CIC shall execute and deliver a Certificate of Merger ("Certificate of Merger") and Articles of Merger ("Articles of Merger") meeting the requirements of DGCL (S)252 and FBCA (S)607.1105, respectively, and in substantially the form of Exhibits 1.3(a) and 1.3(b), respectively, (c) Airgas shall deliver the Merger Consideration to the Exchange Agent as provided in Section 2.6 and (d) the parties shall file the Certificate of Merger and Articles of Merger with the Delaware and Florida Secretaries of State, respectively. None of the foregoing actions shall be deemed to have been taken unless and until all of them have been taken (and the Articles of Merger and Certificate of Merger shall not be filed until all of such other actions are taken). After the Closing, payments shall be made to CIC Shareholders in accordance with Section 2.8. 1.4 Effects of the Merger. The Merger shall have the effects set forth in --------------------- Article 2 and in the DGCL and the FBCA. Without limiting the foregoing, at the Merger Effective Time: (a) CIC shall merge with and into Sub; (b) the separate existence of CIC shall cease; (c) the stock that is to be converted pursuant to Article 2 shall be converted as provided in Article 2; (d) the former holders of such stock are entitled only to the rights provided in Article 2 or rights under FBCA (S)607.1302 (subject to FBCA (S)607.1320); and (e) the Merger shall otherwise have the effect provided under the applicable laws of the States of Delaware and Florida (including DGCL (S)252 and FBCA (S)607.1106). 1.5 Certificate of Incorporation. The certificate of incorporation of ---------------------------- Sub, the surviving corporation, as in effect immediately prior to the Merger Effective Time shall continue thereafter to be Sub's certificate of incorporation until amended in accordance with applicable law. 1.6 By-Laws. The by-laws of Sub, the surviving corporation, as in ------- effect immediately prior to the Merger Effective Time shall continue to be Sub's by-laws thereafter until amended in accordance with such by-laws and applicable law. 1.7 Directors and Officers of the Surviving Corporation. The directors --------------------------------------------------- and officers of Sub immediately prior to the Merger Effective Time shall, from and after the Merger Effective Time, be the directors and officers, respectively, of Sub until their successors shall have been duly elected or appointed or qualified or until their earlier death, resignation or removal in accordance with Sub's Certificate of Incorporation and by-laws and any applicable contracts; provided, however, that J. Vernon Hinely will be the Chairman of the Board of Sub and John A. Toepke will be an Executive Vice President of Sub from and after the Merger Effective Time, each until his successor shall have been duly elected or appointed or qualified or until his death, resignation or removal in accordance with Sub's by-laws and applicable contracts. 2 1.8 Tax Status of the Merger. The Merger is intended to be a ------------------------ reorganization within the meaning of IRC(S)(S) 368(a)(1)(A) and (a)(2)(D), respectively, and this Agreement is intended to be a "plan of reorganization" within the meaning of the regulations promulgated under IRC (S)(S) 368(a)(1)(A) and (a)(2)(D). Neither CIC, Airgas nor Sub shall take any position inconsistent with such intention. 1.9 Amendment. This Agreement may be modified or amended in any --------- manner at any time and from time to time prior to the Merger Effective Time by the boards of directors of CIC, Airgas and Sub in accordance with Section 11.2 without any action by the shareholders of CIC, Airgas or Sub; provided, however, that no modification or amendment that (a) reduces or changes the form or composition of the consideration which the CIC Shareholders shall be entitled to receive pursuant to this Agreement may be made after approval of this Agreement by the CIC Shareholders without the CIC Shareholders' further approval (except to the extent specifically authorized by the CIC Shareholders in connection with approving this Agreement), (b) alters or changes any term or condition in this Agreement that would result in a material adverse effect on the holders of any class or series of shares of any party hereto without the approval of such shareholders, or (c) alters or changes any term of the certificate of incorporation of Sub without the approval of the shareholder of Sub. ARTICLE 2 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE PARTIES; EXCHANGE OF CERTIFICATES ------------------------ 2.1 Certain Definitions. ------------------- (a) Aggregate Class A Merger Consideration. The "Aggregate Class A -------------------------------------- Merger Consideration" is determined by adding (i) $35,775,699 plus (ii) the amount determined by multiplying $43 by the number of Exercised Option Shares. (b) Aggregate Class B Merger Consideration. The "Aggregate Class B -------------------------------------- Merger Consideration" is $5,125,000. (c) Average Airgas Price. "Average Airgas Price" means the average -------------------- closing sales price of Airgas Common Stock on the New York Stock Exchange ("NYSE"), as reported by the Wall Street Journal for the five (5) consecutive ------------------- trading days beginning on and including the business day immediately following the Form S-4 Effective Date. (d) Class A Divisor. The "Class A Divisor" is the number of shares of --------------- CIC Class A Common Stock that are issued and outstanding immediately prior to the Merger Effective Time. (e) Class A Share Value. The "Class A Share Value" is an amount ------------------- determined by dividing (i) the Aggregate Class A Merger Consideration by (ii) the Class A Divisor. 3 (f) Class B Divisor. The "Class B Divisor" is the number of shares of --------------- CIC Class B Common Stock that are issued and outstanding immediately prior to the Merger Effective Time. (g) Class B Share Value. The "Class B Share Value" is an amount ------------------- determined by dividing (i) the Aggregate Class B Merger Consideration by (ii) the Class B Divisor. (h) Exercised Option Shares. "Exercised Option Shares" means the ----------------------- number of shares of CIC Class A Common Stock into which CIC Stock Options (as defined in Section 2.8 below) are converted after the date of this Agreement and before the Merger Effective Time. (i) Form S-4 Effective Date. "Form S-4 Effective Date" means the date ----------------------- as of which the Registration Statement to be filed with the SEC pursuant to this Agreement shall have been declared effective by the SEC. 2.2 Effect on Capital Stock. As of the Merger Effective Time, by virtue ----------------------- of the Merger and without any action on the part of the holders of the issued and outstanding shares of CIC Common Stock or of any shares of capital stock of Sub: (a) Capital Stock of Sub. All issued and outstanding shares of Sub -------------------- capital stock shall continue to be issued and outstanding after the Merger Effective Time. (b) Conversion of Class A CIC Common Stock. Each share of CIC Class A -------------------------------------- Common Stock that is issued and outstanding immediately prior to the Merger Effective Time (other than shares to be canceled pursuant to Section 2.2(e) and Dissenting Shares (as hereinafter defined)) shall be converted into the following: (i) Cash for Fees & Expenses Fund: One quarter of one percent ----------------------------- (0.25%) of the Class A Share Value (the "Class A F & E Amount") to become part of the Fees & Expense Fund as an integral part of the conversion of CIC Common Stock pursuant to this Article 2, to be held and disbursed by the CIC Shareholders' Agent Committee as provided in Article 8; provided, however, that this clause (i) does not apply to shares of CIC Class A Common Stock that are owned (of record as of the date of this Agreement) by any person who owns (of record as of the date of this Agreement) five hundred (500) or fewer such shares in the aggregate ("De Minimis Shares"); and either (ii) Cash: if a share of CIC Class A Common Stock is subject to a ---- valid Cash Election, then it shall be converted into the right to receive an amount of cash equal to the Class A Share Value minus (except in the case of De Minimis Shares) the Class A F & E Amount; or (iii) Airgas Common Stock: if a share of CIC Class A Common Stock ------------------- is not subject to a valid Cash Election, then it will be converted into that number of shares of Airgas Common Stock determined by dividing (A) an amount determined by subtracting (except in the case 4 of De Minimis Shares) the Class A F & E Amount from the Class A Share Value by (B) the Average Airgas Price; provided, however, that: (1) No Fractional Shares: the aggregate number of shares of -------------------- Airgas Common Stock into which shares of CIC Class A Common Stock owned by each CIC Shareholder shall be converted shall, if not a whole number, be rounded up to the next whole number of Shares of Airgas Common Stock (such CIC Shareholder's "Class A Stock Consideration"); (2) Lockup/Escrow Shares: an amount of each CIC -------------------- Shareholder's Class A Stock Consideration (rounded for each such CIC Shareholder up to the next whole number of shares of Airgas Common Stock) equal to fifty-five percent (55%) (subject to adjustment as provided in Section 2.9) of the number of shares of Airgas Common Stock into which such CIC Shareholder's shares of CIC Class A Common Stock would be converted pursuant to this clause (iii), assuming for purposes of this clause (2) that each such CIC Shareholder shall not have made any Cash Election or contribution to the Class A F & E Amount, shall be held and disbursed pursuant to the Lockup/Escrow Agreement in substantially the form of Exhibit 2.2(b) (the "Lockup/Escrow Agreement"), the execution of such agreement by the CIC Shareholders' Agent Committee being evidence of the implementation of the foregoing as an integral part of the conversion of the CIC Common Shares pursuant to this Article 2; provided, however, that this clause (2) shall not apply to De Minimis Shares; and (3) Other Airgas Common Stock: a CIC Shareholder's remaining ------------------------- Class A Stock Consideration not subject to clause (2) shall be delivered to such CIC Shareholder in accordance with the provisions of this Agreement; all subject to the rights and obligations of the CIC Shareholders' Agent Committee as set forth in Article 8 of this Agreement (and without limiting the foregoing, the CIC Shareholders' Agent Committee, whose power and authority are set forth in Article 8, is established pursuant to this Article 2 as an integral part of the manner and basis of converting the CIC Common Stock). (c) Conversion of CIC Class B Common Stock. Each share of CIC Class B -------------------------------------- Common Stock that is issued and outstanding immediately prior to the Merger Effective Time (other than shares to be canceled pursuant to Section 2.2(e) hereof and Dissenting Shares) shall be converted into the right to receive the following: (i) Cash for Fees & Expenses Fund: One quarter of one percent ----------------------------- (0.25%) of the Class B Share Value (the "Class B F&E Amount") to become part of the Fees & Expense Fund as an integral part of the conversion of CIC Common Stock pursuant to this Article 2 to be held and disbursed by the CIC Shareholders' Agent Committee as provided in Article 8; and either 5 (ii) Cash: to the extent that such share, together with other ---- shares of CIC Class B Common Stock owned by a holder, equals forty-five percent (45%) (subject to adjustment as provided in Section 2.9) of such holder's CIC Class B Common Stock (rounded down to the nearest whole number of such holder's CIC Class B Common Stock), the right to receive an amount of cash equal to the Class B Share Value minus the Class B F&E Amount; or (iii) Airgas Common Stock: to the extent not covered by clause ------------------- (ii) above, that number of shares of Airgas Common Stock determined by dividing (A) the amount determined by subtracting the Class B F&E Amount from the Class B Value (B) by the Average Airgas Price; provided, however, that: (1) No Fractional Shares: the aggregate number of shares of -------------------- Airgas Common Stock into which shares of CIC Class B Common Stock owned by each CIC Shareholder shall be converted shall, if not a whole number, be rounded up to the next whole number of shares of Airgas Common Stock (such CIC Shareholder's "Class B Stock Consideration") and; (2) Lockup/Escrow Shares: each CIC Shareholder's Class B -------------------- Stock Consideration shall be held and disbursed pursuant to the Lockup/Escrow Agreement, the execution of such agreement by the CIC Shareholders' Agent Committee being evidence of the implementation of the foregoing integral part of the conversion of the CIC Common Shares pursuant to this Article 2; all subject to the rights and obligations of the CIC Shareholders' Agent Committee as set forth in Article 8 of this Agreement (and without limiting the foregoing, the CIC Shareholders' Agent Committee, whose power and authority are set forth in Article 8, is established pursuant to this Article 2 as an integral part of the manner and basis of converting the CIC Common Stock). (d) Other. At the Merger Effective Time, all shares of CIC Common ----- Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any shares of CIC Common Stock shall cease to have any rights with respect thereto, except the right to receive the consideration set forth in this Article 2 (the "Merger Consideration") for each share of CIC Common Stock held by such holder. Without limiting the foregoing, any certificates delivered to CIC after the Merger Effective Time shall be delivered to the Exchange Agent and treated as a delivery pursuant to Section 2.7. (e) Cancellation of Certain Shares of CIC Common Stock. All shares of -------------------------------------------------- CIC Common Stock, if any, that are owned, directly or indirectly, by CIC as of the Merger Effective Time shall be canceled and retired and shall cease to exist and no Merger Consideration shall be delivered in exchange therefor. (f) Recapitalizations, Etc. If any recapitalization, ----------------------- reclassification, merger, consolidation, split-up or reverse stock split with respect to Airgas Common Stock occurs after the 6 date of this Agreement and prior to the Merger Effective Time, then an appropriate adjustment to the Merger Consideration to be issued in the Merger shall be made. 2.3 Class A Cash Election Procedure. ------------------------------- (a) Generally. Each CIC Class A Shareholder (other than holders of --------- CIC Common Stock to be canceled as set forth in Section 2.2(e) and Dissenting Shares) shall have the right to specify in a request made in accordance with the provisions of this Section 2.3 (herein called a "Cash Election") the percentage (not in excess of forty-five percent (45%), rounded down so that the election applies to the next lower whole share and subject to adjustment as provided in Section 2.9, the "Maximum Cash Percentage") of his shares of CIC Class A Common Stock that he desires to have converted into the right to receive cash in the Merger; provided, however, that the foregoing Maximum Cash Percentage limitation does not apply to De Minimis Shares. (b) Distribution of Forms. CIC shall include a document in form and --------------------- substance agreed to by CIC and Airgas (the "Form of Cash Election/Transmittal Letter") with the distribution to the CIC Shareholders of the Proxy Statement/Prospectus (as defined in Section 3.30). The Form of Cash Election/Transmittal Letter will be designed among other things to permit the CIC Class A Shareholders to exercise their right to make a Cash Election prior to the Cash Election Deadline (as defined below). Airgas shall use all reasonable efforts to make available on a prompt basis a Form of Cash Election/Transmittal Letter to any CIC Class A Shareholder who requests such form following the initial mailing of the Forms of Cash Election/Transmittal Letters and prior to the Cash Election Deadline. (c) Delivery of Cash Elections. Any Cash Election shall have been -------------------------- made properly only if The Bank of New York (the "Exchange Agent") shall have received, by 5:00 p.m. local time in New York, New York on the date of the Cash Election Deadline, a Form of Cash Election/Transmittal Letter properly completed and signed. As used herein, "Cash Election Deadline" means the date mutually agreed to in writing by Airgas and CIC (the "Cash Election Deadline Letter") as the last day on which Forms of Cash Election/Transmittal Letters will be accepted; provided, however, that such date shall be a business day no later than five (5) business days prior to the Closing Date; provided, further, that Airgas shall have the right to set a later date of, or to extend, the Cash Election Deadline so long as such later date is no later than the Closing Date. (d) Limitations on Cash Election. Any Cash Election that requests ---------------------------- that more than the Maximum Cash Percentage of the CIC Class A Shareholder's CIC Class A Common Stock be converted into cash shall be deemed a request that the Maximum Cash Percentage be converted into cash. (e) Irrevocable. Each Form of Cash Election/Transmittal Letter shall ----------- become irrevocable upon receipt by the Exchange Agent (unless the Exchange Agent, in its sole and absolute discretion, permits its amendment or withdrawal). 7 (f) Rules. Airgas and CIC (before the Merger) or the Shareholders' ----- Agent Committee (after the Merger) shall jointly have the right to make rules and decisions (whether or not covered by such rules), not inconsistent with the terms of this Agreement, governing the validity of the Forms of Cash Election/Transmittal Letters. 2.4 Dissenting Shares. Notwithstanding anything in this Agreement to the ----------------- contrary, but only to the extent required by Chapter 607 of the FBCA, shares of CIC Common Stock that are issued and outstanding immediately prior to the Merger Effective Time and are held by CIC Shareholders who dissent from the Merger ("Dissenting Shares") shall not be converted into the right to receive Merger Consideration, but shall instead become the right to receive such consideration as may be determined to be due such holder of Dissenting Shares ("Dissenting Shareholder") pursuant to Chapter 607 of the FBCA; provided, however, that if any Dissenting Shareholder fails to establish and perfect such shareholder's entitlement to dissenters' rights as provided by Chapter 607 of the FBCA, then such Dissenting Shareholder shall forfeit dissenters' rights with respect to such Dissenting Shares and such shares shall thereupon be deemed to have been converted into the Merger Consideration to which such Dissenting Shares would otherwise have been converted pursuant to Section 2.2, subject to all other terms and conditions of this Agreement as if such CIC Shareholder had not dissented or attempted to dissent (including the requirement that such CIC Shareholder make the Shareholder Deliveries and that a portion of such Merger Consideration may be deliverable to the Lockup/Escrow Agent) (as such term is defined in the Lockup/Escrow Agreement). CIC shall give Airgas prompt notice of any written notices of any demand received by CIC for an appraisal of CIC Common Stock, and CIC shall undertake in good faith to keep Airgas reasonably informed of any other negotiations and proceedings with respect to demands for dissenters' rights under Chapter 607 of the FBCA. CIC will not, except with the prior written consent of Airgas, settle or offer to settle any such demand. 2.5 CIC Stock Options. ----------------- (a) Generally. At the Merger Effective Time, by virtue of the Merger --------- and without any further action on the part of Airgas, CIC or the holder of any unexpired and unexercised option to purchase shares of CIC Common Stock granted under the CIC 1994 Stock Option Plan (a "CIC Stock Option"), each CIC Stock Option shall be assumed by Airgas in such manner that Airgas is a corporation "assuming a stock option in a transaction to which IRC (S) 424(a) applied" within the meaning of IRC (S) 424 (or to the extent that IRC (S) 424 does not apply to any such CIC Stock Options, would be such a corporation were IRC (S) 424 applicable to such CIC Stock Options). (b) Specifically. Without being limited by the foregoing, at the ------------ Merger Effective Time, by virtue of the Merger and without any further action on the part of Airgas, CIC or the holder of any CIC Stock Option, each CIC Stock Option shall automatically become exercisable for that number of shares of Airgas Common Stock equal to the number of shares of Airgas Common Stock that would have been issued in the Merger with respect to such CIC Stock Option had such option (assuming full vesting) been exercised immediately prior to the Merger Effective Time (rounded up to the nearest whole number of shares of Airgas Common Stock), assuming no Cash Election and no 8 contribution to the Fees & Expense Fund and (ii) at a price per share of Airgas Common Stock equal to the per share option exercise price specified in the CIC Stock Option multiplied by a fraction, the numerator of which is the Average Airgas Price and the denominator of which is Forty Three Dollars ($43) (with the result rounded to the nearest whole cent). An example of the number of shares of Airgas Common Stock issuable after the Merger pursuant to the CIC Stock Options in accordance with the terms hereof is set forth in Exhibit 2.5(b). (c) Other Effects. At the Merger Effective Time, by virtue of the ------------- Merger and without any further action on the part of Airgas, CIC or any holder of any CIC Stock Option: (i) all references to CIC in the CIC Stock Option Plan shall be deemed to refer to Airgas; (ii) Airgas shall assume the CIC 1994 Stock Option Plan and all of CIC's obligations with respect to the CIC Stock Options, as so amended by virtue of the foregoing; and (iii) Airgas shall issue to each holder of any outstanding CIC Stock Option a document evidencing the foregoing assumption by Airgas. It is the intention of the parties that the CIC Stock Options assumed by Airgas will qualify as incentive stock options as defined in IRC (S) 422 to the extent that they so qualified immediately prior to the Merger Effective Time. (d) Registration Requirements. With respect to each share of Airgas ------------------------- Common Stock underlying the CIC Stock Options assumed pursuant to the foregoing, Airgas shall file and use its best efforts to keep current a registration statement on Form S-8 or other appropriate form for as long as any such option remains outstanding. 2.6 Payments to Exchange Agent. At or prior to the Closing, Airgas shall -------------------------- make the following deliveries to the Exchange Agent in trust for the benefit of the CIC Shareholders (and Airgas shall cause the Exchange Agent to make the corresponding deliveries to the CIC Shareholders and the Lockup/Escrow Agent, as applicable, promptly after the Closing): (a) Cash Merger Consideration. An amount of cash equal to the total ------------------------- amount of cash consideration due to the CIC Shareholders as determined pursuant to Section 2.2 above; (b) Airgas Common Shares -- For Lockup/Escrow. Airgas share ----------------------------------------- certificates made in the respective names of the CIC Shareholders, each for the respective number of shares of Airgas Common Stock into which such CIC Shareholder's shares of CIC Common Stock shall have been converted and are subject to the Lockup/Escrow as provided in Section 2.2 above ("Lockup/Escrow Shares"); and (c) Airgas Common Shares -- For CIC Shareholders. Airgas share -------------------------------------------- certificates made in the respective names of the CIC Shareholders, each for the respective number of shares of Airgas Common Stock into which such CIC Shareholder's shares of CIC Common Stock shall have been converted and are not subject to the Lockup/Escrow as provided in Section 2.2 above ("Non-Lockup Shares"). 9 2.7 CIC Shareholder Deliveries. No CIC Shareholder shall be entitled -------------------------- to receive consideration pursuant to this Agreement unless and until the following deliveries are made to the Exchange Agent (the "Shareholder Deliveries"): (a) Transmittal Letter. In the case of a CIC Class A Shareholder, a ------------------ Form of Cash Election/Transmittal Letter, and in the case of a CIC Class B Shareholder, a transmittal letter in form and substance agreed to by CIC and Airgas (the "Class B Transmittal Letter "), in each case duly executed by such CIC Shareholder (such deliveries, collectively, the "Transmittal Letters"); (b) Share Certificates, Etc. Share certificates representing the CIC ------------------------ Common Stock in the name of such CIC Shareholder (or an affidavit reasonably satisfactory to Airgas regarding the loss, theft or destruction of such share certificates). 2.8 Payments to CIC Shareholders. As soon as practicable after the later ---------------------------- of (a) the Merger Effective Time or (b) its receipt of a CIC Shareholder's Specified Deliveries (even if such receipt occurs after the second anniversary of the Closing), the Exchange Agent shall make the following distributions with respect to such CIC Shareholder and if such deliveries are made with respect to a portion of such CIC Shareholder's CIC Common Stock, the distribution shall be made with respect to those shares): (a) Cash to the CIC Shareholder. To such CIC Shareholder, a bank --------------------------- check or wire transfer, as requested by such CIC Shareholder in its Cash Election (or if not so specified, a bank check), in an amount equal to the cash consideration into which such CIC Shareholder's CIC Common Stock was converted pursuant to Section 2.2. In no event shall the holder of any surrendered certificates be entitled to receive interest on any of the cash consideration to be received in the Merger that is paid within a reasonable time after such payment is due. (b) Airgas Common Shares to the CIC Shareholder. To such CIC ------------------------------------------- Shareholder, a share certificate representing the number of Non-Lockup Shares into which such CIC Shareholders' shares of CIC Common Stock were converted in the Merger pursuant to Section 2.2. (c) Airgas Common Shares to the Lockup/Escrow Agent. To the ----------------------------------------------- Lockup/Escrow Agent, a share certificate representing the number of Lockup/Escrow Shares into which each CIC Shareholders' shares of CIC Common Stock were converted in the Merger pursuant to Section 2.2. (d) Class A F&E Amount and Class B F&E Amount. To the CIC ----------------------------------------- Shareholders' Agent Committee, cash in the amount of the Class A F&E Amount and the Class B F&E Amount in amounts determined in accordance with Section 2.2. (e) Transfers; Escheat. If a check is to be issued, wire transfer ------------------ made payable or Airgas Common Stock certificate is to be issued in the name of a person other than the person in whose name the certificates for the shares of CIC Common Stock surrendered for exchange therefor are registered, it shall be a condition of the exchange that the person requesting such exchange shall 10 pay to the Exchange Agent any transfer or other taxes required by reason of issuance of such check, wire transfer or stock certificates to a person other than the registered holder of the certificates surrendered, or shall establish to the reasonable satisfaction of the Exchange Agent that such tax has been paid or is not applicable. Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto shall be liable to a CIC Shareholder for any amount paid to a public official pursuant to any applicable abandoned property, escheat or similar law. (f) Dividends; Distributions. No dividends or distributions that have ------------------------ been declared will be paid to persons entitled to receive certificates for shares of Airgas Common Stock until such persons surrender their certificates for shares of CIC Common Stock (or an affidavit reasonably satisfactory to Airgas regarding the loss, theft or destruction of such share certificates), at which time all such dividends shall be paid. In no event shall the persons entitled to receive such dividends be entitled to receive interest on such dividends that are paid within a reasonable time after such payment is due. No interest shall be payable on cash payments made pursuant to this Article 2 within a reasonable time after such payment is due. 2.9 Adjustments to Cash Merger Consideration. Notwithstanding anything in ---------------------------------------- this Agreement to the contrary, if the Cash Elections (treating Dissenting Shares as if a valid one hundred percent (100%) Cash Election were made with respect to such shares) plus cash paid to CIC Class B Shareholders would otherwise result in the Aggregate Cash Consideration exceeding the Aggregate Stock Consideration, then each CIC Shareholders' Unadjusted Cash Percentage will be decreased pro rata on a basis proportionate with all of the other CIC Shareholders' Unadjusted Cash Percentages until the Aggregate Stock Consideration is equal to or exceeds the Aggregate Cash Consideration; provided, however, that no CIC Shareholder's Adjusted Cash Percentage shall be more than two percentage points lower than his Unadjusted Cash Percentage; and provided further that Cash Elections with respect to DeMinimis Shares are not subject to any adjustment. If a CIC Class A Shareholder's Unadjusted Cash Percentage is adjusted pursuant to the foregoing, then the percentage of his Class A Stock Consideration subject to the Lockup/Escrow Agreement pursuant to Section 2.2 (b)(iii)(2) (using the same assumptions set forth therein) shall be increased by an amount equal to the amount determined by subtracting his Adjusted Cash Percentage from his Unadjusted Cash Percentage. As an illustration, if a Class A CIC Shareholders' Cash Election is reduced from forty-five percent (45%) to forty-four percent (44%), then his lockup/escrow percentage will increase from fifty-five percent (55%) to fifty-six percent (56%). The following definitions are used in this Section 2.9: (a) "Adjusted Cash Percentage" means the percentage of a CIC Shareholders' portion of the Aggregate Merger Consideration that is payable to him promptly after the Closing in cash after any adjustments provided in this Section 2.9. (b) "Aggregate Cash Consideration" means the amount of Aggregate Merger Consideration payable promptly after the Closing in cash pursuant to this Agreement. 11 (c) "Aggregate Merger Consideration" means, collectively the Aggregate Class A Merger Consideration and the Aggregate Class B Merger Consideration. (d) "Aggregate Stock Consideration" means the amount of Aggregate Merger Consideration payable promptly after the Closing in Airgas Common Stock pursuant to this Agreement. (e) "Unadjusted Cash Percentage" means, in the case of a CIC Class A Shareholder, the otherwise valid cash percentage elected pursuant to his Cash Election and, in the case of a CIC Class B Shareholder, forty-five percent (45%). ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF CIC ------------------------------------- CIC represents to Airgas and Sub as follows: 3.1 Organization and Good Standing. CIC is a corporation duly organized, ------------------------------ validly existing and in good standing under the corporation laws of the State of Florida, and CIC has full corporate power and corporate authority to carry on its business as such business is now being conducted. Except as set forth in Section 3.1 of the CIC Disclosure Schedule, CIC is qualified as a foreign corporation in accordance with the corporate laws of all jurisdictions in which the failure to so qualify would have a material adverse effect on CIC. Except as set forth in Section 3.1 of the CIC Disclosure Schedule, CIC has no subsidiaries or more than five percent (5%) equity or other ownership interest in any entity. 3.2 Capitalization. CIC's authorized capital stock consists solely of -------------- 2,000,000 shares of Class A Common Stock, no par value, of which no more than 903,993 shares, on a fully-diluted basis, will be issued and outstanding on the Closing Date, and 25,000 shares of Class B Common Stock, no par value, of which 25,000 shares, on a fully-diluted basis, will be issued and outstanding on the Closing Date. Each of the outstanding shares of capital stock of CIC was validly issued and is fully paid and non-assessable on the date hereof, and was issued in compliance with all applicable federal and state laws concerning the issuance of securities. Except as set forth in Section 3.2 of the CIC Disclosure Schedule, CIC has not reserved any shares of capital stock for issuance and there are no outstanding options, warrants, restricted stock awards, warrants, calls, commitments or rights of any character to purchase or otherwise acquire from CIC shares of capital stock of any class, no outstanding securities of CIC that are convertible into shares of capital stock of CIC of any class, and no outstanding options, warrants or rights to purchase from CIC any such convertible securities (collectively, "Rights"). The names and addresses of, and number of shares held by, all shareholders of CIC and the names, addresses and interest (including, if applicable, vesting status, exercise price and date of grant) of all holders of Rights, all as reflected in CIC's records, are set forth in Section 3.2 of the CIC Disclosure Schedule. Except as set forth in Section 3.2 of the CIC Disclosure Schedule, CIC does not have any outstanding contractual or other obligation to repurchase, redeem or otherwise acquire any outstanding shares of its capital stock. 12 3.3 Articles of Incorporation and Bylaws. Attached to Section 3.3 of the ------------------------------------ CIC Disclosure Schedule are (a) a copy of the Articles of Incorporation of CIC, as currently in effect, certified as of a recent date by the Secretary of State of the State of Florida, and (b) a copy of the By-laws of CIC, as currently in effect. 3.4 Directors, Officers and Employees. Section 3.4 of the CIC Disclosure --------------------------------- Schedule lists each current director and officer of CIC. CIC has provided Airgas with a list or lists of each director, officer and employee of CIC whose wages and salaries (including commissions and bonuses, but excluding contributions to plans in which he participates) paid to him in the year ended December 31, 1996 exceeded $50,000, showing each such person's name, position, and such compensation for such year. 3.5 Corporate Approval. Subject to obtaining the necessary approvals ------------------ of the CIC Shareholders, CIC has the necessary corporate power and authority to execute, deliver and perform this Agreement and each other document to be executed and delivered by CIC pursuant to this Agreement (collectively, the "CIC Delivered Documents"). The execution, delivery and performance by CIC of this Agreement and each CIC Delivered Document have been, or will have been prior to the Closing Date, duly authorized by CIC's Board of Directors, and, subject to such authorization, the approval of the CIC Shareholders and the filing of the Certificate of Merger and Articles of Merger pursuant to Section 1.3, and no other corporate proceeding on the part of CIC is necessary for the execution, delivery and performance of this Agreement by CIC. 3.6 Consents and Approvals; No Violations. Except as set forth in ------------------------------------- Section 3.6 of the CIC Disclosure Schedule, neither the execution, delivery nor performance of this Agreement will (a) conflict with or result in any breach of any provision of the Articles of Incorporation or By-laws of CIC, (b) require any filing with, or permit, authorization, consent or approval of, any Governmental Entity (i) except where the failure to obtain such permits, authorizations, consents or approvals or to make such filings would not have a material adverse effect on CIC and would not, or would not be reasonably likely to, materially impair the ability of CIC to consummate the Merger or the other transactions contemplated hereby, and (ii) except for any filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the Securities Act of 1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the state securities or "blue sky" laws, state takeover laws, and the filing and recordation of the Certificate of Merger and the Articles of Merger pursuant to Section 1.3, (c) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, guarantee, other evidence of indebtedness, lease, license, contract, agreement or other instrument or obligation to which CIC is a party or by which any of its properties or assets may be bound and that is listed (or required to be listed) in the CIC Disclosure Schedule, or (d) violate any applicable law applicable to CIC or any of its properties or assets, except in the case of clauses (c) and (d) for violations, breaches or defaults which would not have a material adverse effect on CIC. 13 3.7 Binding Obligation. The CIC Delivered Documents when executed ------------------ and delivered by CIC, have been or will be, as the case may be, duly and validly executed and delivered by CIC. This Agreement and each document and instrument to be executed and delivered by CIC pursuant hereto constitutes or will constitute a legal, valid and binding obligation of CIC, enforceable in accordance with their respective terms, except to the extent that its enforceability may be subject to limitations imposed by general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity) and to the effect of applicable bankruptcy, reorganization, insolvency, moratorium and similar laws of general application relating to or affecting creditors' rights, including the effect of statutory or other laws regarding fraudulent conveyances and preferential transfers; provided, however, that the Certificate of Merger and the Articles of Merger will not be effective until filed with the Delaware and Florida Secretaries of State, respectively. 3.8 Interest in Competitors. Except as disclosed in Section 3.8 of the ----------------------- CIC Disclosure Schedule, to CIC's knowledge, no officer or director of CIC owns more than five percent (5%) of any equity or other interest in any entity which engages in any business, nor directly or indirectly engages in any business, which is competitive with the business of CIC. 3.9 Personal Property. Except as listed in Section 3.9 of the CIC ----------------- Disclosure Schedule, CIC owns or leases all of the machinery, equipment, vehicles, furniture, fixtures, cylinders, tanks, bulk storage vessels, and other tangible personal property (a) that CIC currently uses in the conduct of its business and (b) that is listed in that certain depreciation schedule attached to Section 3.9 of the CIC Disclosure Schedule, except that no representation or warranty is made as to the property listed in categories 16065 (furniture and fixtures), 16066 (tools) and 16068 (dry ice boxes) other than there is an adequate number of dry ice boxes to operate the business consistent with CIC's past practices (the property covered by clause (a) or (b), excluding the exceptions, is referred to as the "Subject Property"). Except as listed in Section 3.9 of the CIC Disclosure Schedule, the Subject Property is in working order and operating condition, subject to normal wear and tear and maintenance in the ordinary course of business and CIC has good, valid and unencumbered title thereto (subject only to such security interests or other encumbrances as are listed in Section 3.9 of the CIC Disclosure Schedule and Permitted Liens). Such property is in the possession of CIC or its customers (or such customer's customers) and, if not in CIC's possession is held pursuant to binding agreements obligating CIC's customer to return or reimburse CIC for such property. Except as set forth in Section 3.9 of the CIC Disclosure Schedule, the demurrage and rental records for CIC's bulk storage vessels and other equipment in the possession of customers have been kept in accordance with good industry practice and are substantially complete and accurate, and all of the tanks, bulk storage vessels and other equipment reflected on such records are either in the possession of CIC's customers or those customers are liable to CIC for the value or return of the tanks, bulk storage vessels and other equipment reflected thereon. Section 3.9 of the CIC Disclosure Schedule identifies all bulk storage vessels and other property, if any, used in CIC's business and not owned or leased by CIC. Except as set forth in Section 3.9 of the CIC Disclosure Schedule, all material customer disputes relating to CIC's right to collect revenue for the cylinders and/or bulk storage vessels leased to customers are promptly investigated by CIC and adjustments are made currently to CIC's records. 14 3.10 Inventories. Except as set forth in Section 3.10 of the CIC ----------- Disclosure Schedule, all inventories held by CIC in its business are useable or saleable in the ordinary course, have been recorded on a first-in first-out basis, consist solely of inventories of the kind and quality regularly used or produced in CIC's business, and are good and merchantable. 3.11 Real Property. All real property currently owned by or leased to ------------- CIC is listed in Section 3.11 of the CIC Disclosure Schedule (individually and collectively the "Real Property"). All real property previously owned or leased by CIC after December 31, 1984 is listed in Section 3.11 of the CIC Disclosure Schedule (individually and collectively the "Previous Locations"). To CIC's knowledge, the current use of each parcel of Real Property is in compliance with all applicable zoning ordinances (or variances therefrom) and other governmental regulations, and CIC has not received any written or, to CIC's knowledge, any other form of notice of any uncorrected violation of housing, building, safety or fire ordinances. To CIC's knowledge, there are no unpaid assessments for any public improvements, nor has CIC received any written or, to CIC's knowledge, any other form of notice from an appropriate Governmental Entity of intention to make any public improvements for which CIC may be assessed directly or by reason of a leasehold interest or otherwise. Except as set forth in Section 3.11 of the CIC Disclosure Schedule, CIC has not installed asbestos in any buildings, structures or appurtenances. Except as set forth in Section 3.11 of the CIC Disclosure Schedule, the Real Property has not been used, and the Previous Locations during the period of CIC's ownership or occupancy thereof, were not used by CIC, any third party acting on behalf of, or at the direction of CIC (a "Directed Third Party"), or, to the knowledge of CIC, by any other third party for the generation, manufacture, storage or disposal of, and there has not been transported to or from the Real Property, or during the period of CIC's ownership or occupancy thereof the Previous Locations, by CIC, any Directed Third Party, or, to the knowledge of CIC, by any other third party, any Hazardous Substances or Wastes (as those terms are hereinafter defined), except in compliance with all applicable laws; to CIC's knowledge, there are no Hazardous Substances or Wastes present on or under or emanating from the Real Property in violation of applicable laws; there has been no Contamination (as hereinafter defined) at the Real Property during the period of CIC's ownership or occupancy thereof at the Previous Locations, by CIC, any Directed Third Party, or, to CIC's knowledge, by any other third party; there has been no unlawful use of the Real Property, by CIC, any Directed Third Party nor, to CIC's knowledge, by any other third party, that may, under any applicable law, require any closure or cessation of the use of the Real Property assuming its current use or impose upon CIC, its successors or assigns, any monetary obligations; CIC has not been identified by any Governmental Entity or individual in any pending or, to CIC's knowledge, threatened action, litigation, proceeding or investigation as a responsible party or potentially responsible party for any liability for disposal or release of any Hazardous Substances or Wastes; no lien or superlien has been recorded or, to CIC's knowledge, threatened against the Real Property or (to CIC's knowledge) the Previous Locations for any liability in connection with any environmental contamination; neither the Real Property nor, to CIC's knowledge, the Previous Locations have been listed on either the National Priorities List, as defined in CERCLA, or any state listing of hazardous sites; and, to CIC's knowledge, the Real Property is in material compliance with all currently applicable laws relating to environmental, health and safety matters. Except as disclosed in Section 3.11 of the CIC Disclosure Schedule, there are no underground storage tanks at the Real Property 15 and any underground tanks previously removed from the Real Property were removed and any environmental contamination associated with such tanks was remediated in each case in material compliance with all then applicable laws. For the purposes of this Agreement: (a) the term "Contamination" shall mean the uncontained presence of Hazardous Substances at the Real Property, or arising from the Real Property, which may require remediation under any applicable law which in the case of the Real Property, is in effect at the Closing Date and, in the case of the Previous Locations, was in effect during the period of CIC's ownership or occupancy thereof; (b) the term "Hazardous Substances" shall mean any flammables, explosives, radioactive materials, asbestos, ureaformaldehyde, hazardous wastes, toxic substances or any other elements or compounds designated as a "hazardous substance," "pollutant" or "contaminant" in the Hazardous Waste Laws; (c) "Hazardous Waste Laws" shall mean the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. (S) 9600 et seq., ------ or in the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6991 et seq., or any other applicable federal, state or local law or regulation; and - ------ (iv) "Wastes" shall mean any hazardous wastes, residual wastes, solid wastes or other wastes as those terms are defined in the Hazardous Waste Laws. 3.12 Accounts and Notes Receivable. Except as set forth in Section ----------------------------- 3.12 of the CIC Disclosure Schedule, all accounts and notes receivable of CIC relating to its business arose in the ordinary and usual course of its business and, subject to the allowance for doubtful accounts reflected on CIC's December 31, 1996 financial statements (the "Doubtful Accounts Allowance"), are good and collectible (net of the Doubtful Accounts Allowance) within 180 days of the Closing Date, without recourse to legal action. 3.13 Insurance Policies. All of CIC's current policies of insurance ------------------ are listed in Section 3.13 of the CIC Disclosure Schedule. Except as set forth in Section 3.13 of the CIC Disclosure Schedule, with respect to such policies: (a) premiums currently due and payable have been paid; (b) CIC is in compliance in all material respects with all requirements that, if not complied with, could be reasonably expected to result in a termination of any of such policies; (c) to CIC's knowledge, such policies are sufficient for compliance by CIC with all requirements of applicable law and of all agreements listed in Section 3.14 of the CIC Disclosure Schedule to which CIC is a party; and (d) have a stated term that extends through the Closing Date. No claim has been made on any such policies since December 31, 1995 except as noted in Section 3.13 of the CIC Disclosure Schedule. 3.14 Leases, Contracts, Etc. ---------------------- (a) Indebtedness. Section 3.14 of the CIC Disclosure Schedule lists ------------ all promissory notes, instruments and other documents and contracts (collectively, the "Debt Instruments") relating to (i) any indebtedness of CIC for borrowed money, (ii) any indebtedness of CIC by way of capital leases, lease-purchase arrangements and all conditional sales contracts, chattel mortgages and other security arrangements with respect to personal property owned or used by CIC (and the amounts of such indebtedness), and (iii) all loans of money or commitments to loan money to any past or present officers, employees, directors, consultants or shareholders of CIC (specifically excluding entertainment, travel and similar advances made in the ordinary course of business). 16 (b) Guaranties. Section 3.14 of the CIC Disclosure Schedule lists all ---------- contracts making CIC liable (whether by guaranty, suretyship agreement, indemnification agreement or contribution agreement), or obligating it in any way to provide funds in respect of, or obligating it to guarantee, serve as surety for or assume, any debt, dividend or other liability or obligation of any Person (except endorsements made in the ordinary course of business in connection with the deposit of items for collection) (collectively, the "Guaranties"). (c) Leases. Section 3.14 of the CIC Disclosure Schedule lists each ------ written or oral lease, sublease, rental contract or similar contract, pursuant to which CIC leases, subleases, holds, rents or is entitled to the use of any real or personal property, either as lessee or tenant, except those which (i) can be canceled by CIC upon ninety (90) or fewer days' notice without penalty, the acceleration of rent or the exercise of an option to purchase the leased property or (ii) involve an annual rental of $12,000 or less. (d) Certain Other Material Contracts Section 3.14 of the CIC -------------------------------- Disclosure Schedule lists each contract of the type listed in clauses (i) through (xii) below to which CIC is a party or bound or to which it or its properties and assets are subject, whether written or oral, and each and every amendment, modification or supplement to any of them (individually a "Material Contract" and collectively, the "Material Contracts"); provided, however, that such list may omit Debt Instruments, Guaranties, Leases, Intellectual Property Licenses, Insurance Policies and employee-related matters disclosed in the CIC Disclosure Schedule (or not required to be disclosed in the CIC Disclosure Schedule): (i) entered into not in the ordinary course of business; (ii) having a remaining noncancellable term of one (1) year or more and involving the purchase or sale of goods or services the value of which aggregates or is reasonably expected to aggregate One Hundred Thousand ($100,000) or more per year; (iii) requiring CIC to purchase a specified part or all of its goods or services from any one or more parties, except those which (i) can be canceled by CIC upon ninety (90) or fewer days' notice without penalty or acceleration of payments, or (ii) involve an annual amount of $12,000 or less; (iv) for Leases (as defined in Section 3.14(c) above, except substitute "lessor or landlord" for "lessee or tenant") by CIC of its property, except those for cylinders, tanks, bulk storage vessels and/or dry ice boxes entered into in the ordinary course of business; 17 (v) restricting or limiting the right or ability of CIC to compete, whether by restricting territories, customers or otherwise, in any line of business not prohibited by its Articles of Incorporation; (vi) providing for a joint venture or partnership agreement with any other person; (vii) in which the payments are based on results or involving royalties based on sales or production; (viii) in which CIC grants any Person a lien evidenced by a properly filed or recorded financing statement, mortgage, deed of trust or other similar instrument (other than a Permitted Lien) on any property or asset of CIC, including any factoring agreement for the assignment of accounts receivable; (ix) for the construction or modification of any building or structure or for the incurrence of any other capital expenditure involving payments of more than fifteen thousand dollars ($15,000); (x) with any independent contractors, sales agents, resellers, distributors or representatives; (xi) which require any political or charitable contributions; or (xii) which in any respect grant a power of attorney. The Debt Instruments, Guaranties, Leases and Material Contracts listed in Section 3.14 of the CIC Disclosure Schedule are referred to herein as the "Scheduled Contracts." Copies of all of the written Scheduled Contracts have been made available to Airgas, and, except as set forth in Section 3.14 of the CIC Disclosure Schedule, each is a binding agreement and contains the entire agreement of the parties thereto with respect to the subject matter thereof. Except as set forth in Section 3.14 of the CIC Disclosure Schedule, CIC is not, and to CIC's knowledge, no other party is, in default under any such Scheduled Contract nor has any event occurred which, after the giving of notice or the passage of time, or both, would constitute a default under any such Scheduled Contract which default or event would have a material adverse effect on CIC. 3.15 Patents, Etc. Except as set forth in Section 3.15 of the CIC ------------ Disclosure Schedule: (a) CIC has no patents, trademarks, trade names, copyrights, or applications therefor, nor any licenses, assignments or agreements with others relating thereto (excluding those for computer software having a purchase price of less than $1,000 per application); (b) none of the persons listed in Section 11.6 currently has reason to believe that another person has a valid claim that CIC is infringing on a patent, 18 trademark, trade name or copyright in the conduct of CIC's business as such business is currently being conducted; and (c) to CIC's knowledge, CIC has the full right to use its corporate name and all trade names in all places where CIC now does business. 3.16 Labor Contracts, Employment Contracts and Employee Benefit Plans. ---------------------------------------------------------------- Section 3.16 of the CIC Disclosure Schedule lists the bonus, pension, profit sharing, or retirement income, stock purchase, stock option, employment, hospitalization insurance or similar agreements, plans or practic es, formal or informal, covering any of the employees of CIC, or under which CIC has any present or future obligation or liability or under which any current or former employee of CIC has any present or future rights or benefits ("Employee Plans") but such term does not include workers' compensation arrangements or payroll practices (such as overtime, jury duty and the like) or fringe benefits not involving more than $100 for any such benefit per person per year (such as expense accounts or newspaper, magazine, newsletter or journal subscriptions). With respect to each Employee Plan provided by CIC which is an Employee Pension Benefit Plan, as defined in Section 3.2 of the Employment Retirement Income Security Act of 1974, as amended ("ERISA"), which is intended to be qualified within the meaning of IRC (S) 401(a) ("Pension Plan"), except as disclosed in Section 3.16 of the CIC Disclosure Schedule, a copy of the latest available summary plan description, Internal Revenue Service ("IRS") determination letter, and IRS Form 5500 for the most recent year have been made available to Airgas. Except as set forth in Section 3.16 of the CIC Disclosure Schedule, (a) each Pension Plan has been determined by the IRS to be qualified as to form, (b) to CIC's knowledge, each Employee Plan has been operated and administered in accordance with the requirements of ERISA and the IRC, (c) to CIC's knowledge no Employee Plan nor any trustee or administrator thereof has engaged in a "prohibited transaction" (as defined in ERISA (S) 406 or in IRC (S) 4975) which would subject such Employee Plan, any trust created thereunder, any trustee or administrator thereof, or any party dealing with any Employee Plan to the liability set forth in ERISA (S) 409(a) or to the tax or penalty on prohibited transactions imposed by ERISA (S) 502 or IRC (S) 4975, (d) CIC is not and has never been a party to a Multi-Employer Plan and CIC has no current or due "withdrawal liability" with respect to any such Multi-Employer Plan, (e) CIC is not a party to any collective bargaining agreement or other labor union or similar agreement, (f) CIC is not the subject of or, to CIC's knowledge, threatened by any strike or, to CIC's knowledge, other organized labor disturbance by any group of employees, and, to CIC's knowledge, no attempt or plan to organize CIC's employees is threatened or contemplated and (g) there are not any reported material pending claims against CIC under workmen's compensation, occupational safety and health, ERISA or similar applicable laws. 3.17 Litigation. Except as set forth in Section 3.17 of the CIC ---------- Disclosure Schedule, (a) there is no litigation, proceeding or governmental investigation pending or, to CIC's knowledge, threatened against, or relating to, CIC or its employees (in connection with CIC's business), CIC's properties or business, or the transactions contemplated by this Agreement, that could be reasonably expected to have a material adverse effect on CIC (other than those with respect to which CIC gives notice to Airgas as required by Section 2.4) and (b) CIC is not operating under, subject to, or in default with respect to any order, judgment, injunction or decree of arbitrator or Governmental Entity. 19 3.18 Franchises, Permits and Licenses. Section 3.18 of the CIC -------------------------------- Disclosure Schedule contains a list of all material franchises, permits, licenses, approvals and other authorizations from federal, state and local Governmental Entities held by CIC in connection with its business as presently conducted, and there are no additional material franchises, permits, licenses, approvals or authorizations necessary for the conduct of CIC's business as presently conducted; provided, however, that the foregoing does not require disclosure of state and local business or similar licenses required of businesses generally. 3.19 Customers and Suppliers. CIC has made available to Airgas a ----------------------- complete list of all of CIC's customers with whom CIC has done business during the twelve months ended December 31, 1996. Except as set forth in Section 3.19 of the CIC Disclosure Schedule: (a) none of CIC's customers accounted for more than 5% of CIC's revenues during such period; (b) no customer whose purchases during 1996 represented more than 1% of CIC's operating revenues (net of returns), during 1996 or supplier (representing $100,000 or more in purchases by CIC in 1996) of CIC has given CIC written (or, to CIC's knowledge, any other form of) notice that such customer or supplier, as the case may be, intends to terminate or modify its relationship with CIC; (c) CIC has not engaged in any forward selling or granted any unusual sales or terms of sale to any customer which are currently applicable; and (d) there are no customer prepayments or deposits. 3.20 Stock Records, Etc. CIC's stock records and minute books that ------------------ have been made available to Airgas are all of those of which CIC is aware, and nothing has been removed from them by CIC to conceal information from Airgas. 3.21 Taxes. Except as set forth in Section 3.21 of the CIC Disclosure ----- Schedule: (a) CIC has prepared and filed all foreign, federal, state, county and local income, excise, withholding, property, sales, use, franchise and other tax returns and related information (including information returns) required to be filed up to and including the date hereof ("Covered Tax Returns"), in accordance with applicable law, and has paid in full all taxes, interest, penalties, assessments or deficiencies thereon which have become due pursuant to such returns or pursuant to any assessment which has become payable or otherwise ("Tax" or "Taxes") , subject to any extension granted for the filing of any return or for the payment of any Tax; (b) all such returns are true and correct; (c) all monies required to be withheld by CIC for income taxes, social security and other payroll Taxes have been collected or withheld, and either paid to the respective Governmental Entities, set aside in accounts for such purpose, or accrued, reserved against and entered upon its books and CIC is not liable for any taxes or penalties for failure to comply with any of the foregoing; (d) there are no unresolved material deficiencies for Taxes claimed, proposed or assessed by any Governmental Entity; (e) Section 3.21 of the CIC Disclosure Schedule lists all federal, state and/or local audits, investigations, claims and/or assessments with respect to Taxes of CIC since January 1, 1992; (f) there is no audit, investigation, claim or assessment pending or, to CIC's knowledge, threatened against CIC for any alleged deficiency in any Tax; and (g) there are no waivers or extensions of statutory periods of limitation in effect with respect to any Taxes of CIC. Section 3.21 of the CIC Disclosure Schedule lists all federal income tax returns for the three fiscal years ended December 31, 1993, 1994 and 1995 that have been provided or made available to Airgas. 20 3.22 Financial Information. Attached to Section 3.22 of the CIC --------------------- Disclosure Schedule are (a) CIC's audited balance sheets and related statements of income, stockholders' equity and changes in cash flow for the three fiscal years ended December 31, 1993, 1994, and 1995 and (b) CIC's internally-prepared (unaudited) balance sheets and related statements of income, stockholders' equity and changes in cash flow for the twelve (12) month period ended December 31, 1996 (the "Financial Statements"). Except as set forth in Section 3.22 of the CIC Disclosure Schedule, the Financial Statements (including the notes thereto) (i) are in accordance with the books and records of CIC, (ii) the audited Financial Statements present fairly, in all material respects, the financial position of CIC as of the specified balance sheet date and the results of its operations and cash flows for the periods then ended in conformity with generally accepted accounting principles consistently applied and contain an unqualified report of CIC's independent public accountants, and (iii) the unaudited December 31, 1996 balance sheets and related statements of income were generally prepared in accordance with the practices used by CIC in 1996 for other such interim financial statements. 3.23 Absence of Undisclosed Liabilities. Except (a) as and to the ---------------------------------- extent expressly reflected or specifically reserved against in the Financial Statements (which reserves are adequate, appropriate and reasonable and are disclosed in Section 3.23 of the CIC Disclosure Schedule), (b) as disclosed in Section 3.23 of the CIC Disclosure Schedule, (c) for liabilities not of the type required to be reflected or disclosed in a balance sheet (or the notes to it) that exist solely by reason of the mere existence of contracts or plans listed (or not required to be listed) in the CIC Disclosure Schedule, and (d) for trade payables and similar ordinary and necessary liabilities arising in the ordinary course of business, and (e) liabilities not required to be disclosed pursuant to the other representations and warranties in this Agreement, to CIC's knowledge, CIC has no liabilities of any nature, whether absolute, accrued, contingent or otherwise and whether due or to become due which have had or could reasonably be expected to have a material adverse effect on the assets owned, leased or currently used by CIC or on CIC's business, financial condition or results of operation. 3.24 Absence of Certain Changes. Except as set forth in Section 3.24 -------------------------- of the CIC Disclosure Schedule, since September 30, 1996, there has not been: (a) Any material adverse change in the assets, equity, liabilities, earnings or business of CIC; (b) Any damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting the business or properties of CIC; (c) Any reorganization, declaration, setting aside or payment of any dividend or other distribution in respect of any of CIC's capital stock, or any direct or indirect redemption, purchase or other acquisition by CIC of any such stock; 21 (d) Any increase in the compensation payable or to become payable by CIC to any of its salaried employees or any increase in bonus payment or arrangement made to or with any such employees, except in the ordinary course of CIC's business; (e) Any transfer by CIC of any of its assets or any interests therein, or any encumbering of any such assets or interests, other than (i) the sale of inventory in the ordinary course of CIC's business, loans or leases of cylinders, tanks, bulk storage vessels and dry ice boxes in the ordinary course of CIC's business, as permitted in this Agreement or (ii) otherwise in the ordinary course of business or Permitted Liens; or (f) Any capital expenditures or capital contributions, except for those previously committed, for those appropriate to repair, maintain or replace equipment as CIC determines, for those made in accordance with CIC's budget, and for those otherwise incurred in the ordinary course of CIC's business. 3.25 Conditions Affecting the Company. Except as set forth in Section -------------------------------- 3.25 of the CIC Disclosure Schedule, the persons listed in Section 11.6 have not formed a conclusion in light of facts actually known to them that any conditions that exist with respect to CIC's markets, products, facilities, personnel or raw material supplies which would materially adversely affect CIC's business or prospects, other than such conditions as may be generally known to the public or to the industry in which CIC participates or may affect the industry in which CIC participates as a whole. 3.26 No Brokers. All negotiations relative to this Agreement and the ---------- transactions contemplated hereby have been carried on by CIC with Airgas without the intervention of any person as a result of any act of CIC (and, to CIC's knowledge, without the intervention of any other person) in such manner as to give rise to any valid claim against any of the parties hereto for a brokerage commission, finder's fee or other like payment. 3.27 Compliance with Laws. Except as set forth in Section 3.27 of the -------------------- CIC Disclosure Schedule, CIC has complied and is in compliance, in all material respects, with all applicable laws applicable to CIC's business and assets the failure to comply with which has had, or could be reasonably expected to have, a material adverse effect on the assets owned, leased or currently used by CIC or on CIC's business, financial condition or results of operations, and there is no outstanding notice of any uncorrected material violation of any such applicable law; provided, however, that the foregoing does not apply to the extent that the act or omission or fact or circumstance that constitutes a breach is covered by a more specific representation or warranty or a representation or warranty as to such acts or omissions or facts and circumstances is specifically disclaimed. 3.28 Banks, Etc. Section 3.28 of the CIC Disclosure Schedule lists ---------- the name of each bank, savings and loan association, or other financial institution with which CIC has accounts (including a general description of the account, such as operating or payroll), certificates of deposit or safe deposit boxes, the appropriate account numbers, and the name of all persons authorized to draw thereon or to have access thereto. 22 3.29 Transactions with Related Parties. Except as set forth in --------------------------------- Section 3.29 of the CIC Disclosure Schedule, neither any present officer, director or, to CIC's knowledge, shareholder of CIC, nor any affiliate of such officer, director or, to CIC's knowledge, shareholder, is currently a party to any transaction with CIC, including any agreement providing for the employment of, furnishing of services by, rental of assets from or to, otherwise requiring payments to, any such officer, director, shareholder or affiliate other than the payment of normal salaries, wages, bonuses, director fees and reimbursements of ordinary expenses. 3.30 Disclosures. To CIC's knowledge, none of the information ----------- supplied by CIC or its authorized representatives in writing expressly for inclusion (and so included or relied on for information included) in (a) a Registration Statement on Form S-4 to be filed with the SEC by Airgas for the purpose of registering the shares of Airgas Common Stock to be issued pursuant to the Merger (the "Registration Statement") or (b) the Proxy Statement/Prospectus included in the Registration Statement (the "Proxy Statement/Prospectus"), at the respective times that (i) the Registration Statement becomes effective, (ii) the Proxy Statement/Prospectus is mailed to shareholders and (iii) any meeting of shareholders (and any adjournment thereof) is held to consider, or written consents are effective with respect to approval of, the Merger, as such Proxy Statement/Prospectus or Registration Statement is then amended or supplemented, shall contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. 3.31 No Material Omission. To CIC's knowledge, no representation or -------------------- warranty by CIC in this Agreement either (a) contains any untrue statement of a material fact or (b) omits to state a fact necessary to make such representation or warranty (giving full effect to any dollar, time or other limitation specified in, and only with respect to the subject matter contained in, such representation or warranty) not materially misleading. The foregoing does not impose any obligation to disclose the implication of disclosed facts. 3.32 No Reliance on Forecasts. In the negotiation and consideration ------------------------ of the transactions contemplated by this Agreement, CIC and its Board of Directors have not relied upon any information or documents concerning Airgas and its business or financial results except: (i) information and documents that are publicly available, (ii) representations and warranties made by Airgas in this Agreement, and (iii) disclosure of interim financial results made pursuant to this Agreement. In the course of negotiations, Airgas and CIC exchanged information regarding hypothetical situations, based on various assumptions, of the results of operations of the combined companies and possible market prices for the Airgas Common Stock. CIC makes no (and expressly disclaims any) representation or warranty regarding any such hypothetical situations provided by it, including those that may contain forecasts or projections of its future operating results, and CIC disclaims reliance on any such hypothetical situations provided by Airgas or third parties. 3.33 Express Disclaimer. No representation or warranty is made by CIC ------------------ except as set forth in this Article 3. 23 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF AIRGAS AND SUB ------------------------------------------------ Airgas and Sub hereby jointly and severally represent and warrant to CIC as follows: 4.1 Organization and Standing; Power and Authority. Airgas and Sub ---------------------------------------------- are corporations duly organized, validly existing and in good standing under the laws of the State of Delaware and have the full corporate power and corporate authority to carry on their respective businesses, as they are now being conducted, and to execute, deliver and perform this Agreement, and each document to be executed and delivered by Airgas and/or Sub pursuant to this Agreement. Airgas and Sub are each qualified as a foreign corporation in all jurisdictions in which the failure so to qualify would have a material adverse effect on Airgas or Sub, taken as a whole. Except as set forth in Section 4.1 of the Airgas Disclosure Schedule, Airgas has no subsidiaries or equity or other interest in any entity. Sub is a newly-formed entity which has not conducted any business and, except as set forth herein, has incurred no liabilities. 4.2 Capitalization. As of February 6, 1997, the authorized capital -------------- of Airgas consisted of 200,000,000 shares of common stock, $.01 par value per share, of which 68,217,251 shares have been validly issued and are outstanding, fully paid and nonassessable, and 20,000,000 shares of preferred stock and 30,000 shares of redeemable preferred stock, none of which is issued and outstanding on the date hereof. The authorized capital stock of Sub consists of 1,000 shares of common stock, par value $.01 per share, of which 100 shares have been validly issued and are outstanding, fully paid and nonassessable on the date hereof. As of February 6, 1997, there were options outstanding to acquire 6,689,820 shares of Airgas Common Stock pursuant to the Airgas Option Plan. Each such option has been duly authorized, and the shares of Airgas Common Stock issuable upon exercise of the options, when issued and paid for in accordance with the Airgas Option Plan, will be validly issued, fully paid and nonassessable. Except as set forth in Section 4.2 of the Airgas Disclosure Schedule or as described above, Airgas has not reserved any shares of capital stock for issuance and there are no outstanding options, restricted stock awards, warrants, calls, commitments or rights of any character to purchase or otherwise to acquire from Airgas shares of capital stock of any class, no outstanding securities of Airgas that are convertible into shares of capital stock of Airgas of any class, and no outstanding options, warrants or rights to purchase from Airgas any of such convertible securities. 4.3 Corporate Approval. ------------------ (a) Each of Airgas and Sub has the necessary corporate power and authority to execute, deliver and perform this Agreement and each other document to be executed and delivered by it pursuant to this Agreement (collectively, the "Airgas/Sub Delivered Documents"). The execution, delivery and performance of this Agreement and of the Airgas/Sub Delivered Documents have been duly authorized by the respective Boards of Directors of Airgas and Sub, as the case may be (which authorizations shall not have been modified prior to the Closing Date and shall be in full force and effect on the Closing Date), and no other corporate proceeding on the part of Airgas or Sub 24 is necessary for the execution, delivery and performance of this Agreement by Airgas and Sub. Subject to the filing of the Certificate of Merger and Articles of Merger pursuant to Section 1.3, the performance by each of Airgas and Sub of their respective obligations hereunder and under the Airgas/Sub Delivered Documents does not violate any provision of the Certificate of Incorporation or the By-Laws of either Airgas or Sub or the applicable rules and regulations of the NYSE, the stock exchange on which the Airgas Common Stock is publicly traded. (b) Airgas Common Stock - Valid Issuance. The shares of Airgas Common ------------------------------------ Stock to be issued to each holder of CIC Common Stock in connection with the Merger will be duly authorized, validly issued, fully paid and nonassessable, and, upon the effectiveness of the Registration Statement to be filed by Airgas with the SEC pursuant to this Agreement, will be issued in compliance with the Securities Act. From and after the Merger Effective Time, the assumption by Airgas of the CIC Options pursuant to Section 2.5 will be duly authorized and the shares that will be issuable upon exercise of such options, pursuant to the terms set forth in Section 2.5 and the Airgas Option Plan, will be duly authorized, validly issued, fully paid, and nonassessable. A sufficient number of shares have been reserved under Airgas' Option Plan to provide for the assumption of the CIC Options. 4.4 Consents and Approvals; No Violations. Except as set forth in ------------------------------------- Section 4.4 of the Airgas Disclosure Schedule, neither the execution, delivery nor performance of this Agreement will (a) conflict with or result in any breach of any provision of the Certificate of Incorporation or By-laws or similar organizational documents of Airgas or Sub, (b) require any filing with, or permit, authorization, consent or approval of, any Governmental Entity (i) except where the failure to obtain such permits, authorizations, consents or approvals or to make such filings would not have a material adverse effect on Airgas or Sub and would not, or would not be reasonably likely to, materially impair the ability of Airgas or Sub to consummate the Merger or the other transactions contemplated hereby and (ii) except for all filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the Securities Act, the Exchange Act, the state securities or "blue sky" laws and the filing and recordation of the Certificate of Merger and Articles of Merger as required by the DGCL and the FBCA, (c) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, guarantee, other evidence of indebtedness, lease, license, contract, agreement or other instrument or obligation to which Airgas or Sub is a party or by which any of their properties or assets may be bound or (d) violate any applicable law applicable to Airgas or Sub or any of their properties or assets, except in the case of clauses (c) and (d) for violations, breaches or defaults which would not have a material adverse effect on Airgas or Sub. 4.5 Binding Obligation. The Airgas/Sub Delivered Documents, when ------------------ executed and delivered by Airgas and/or Sub (as applicable) have been or will be, as the case may be, duly and validly executed and delivered by Airgas and Sub. This Agreement and each Airgas/Sub Delivered Document constitutes or will constitute a legal, valid and binding obligation of Airgas and Sub (as applicable), enforceable in accordance with its respective terms, except to the extent that its 25 enforceability may be subject to limitations imposed by general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity) and to the effect of applicable bankruptcy, reorganization, insolvency, moratorium and similar laws of general application relating to or affecting creditors' rights, including, the effect of statutory or other laws regarding fraudulent conveyances and preferential transfers, provided, however, that the Certificate of Merger and the Articles of Merger will not be effective until filed with the Delaware and Florida Secretaries of State, respectively. 4.6 Consents. Neither Airgas nor Sub is subject to any applicable -------- law or other restriction that would prevent the consummation of this Agreement that would require the consent of any third party to the consummation of this Agreement or any of the transactions contemplated hereby or, to the knowledge of Airgas or Sub, that would result in any penalty, forfeiture or termination which would be materially adverse to Airgas or Sub as a result of such consummation, other than the consents described in Section 4.6 of the Airgas Disclosure Schedule. 4.7 Obligations; Absence of Violation. Sub has no obligations other --------------------------------- than those contemplated by this Agreement. Neither the execution, delivery nor performance of this Agreement constitutes a violation or default under, or conflicts with, or will result in the creation of any encumbrances on any of the assets owned by Airgas or Sub under, any term or provision of the respective Certificate of Incorporation or Bylaws of Airgas or Sub, or any agreement, including, any contract, license, commitment, lease, instrument, arrangement or understanding to which Airgas or Sub is a party or to which Airgas, Sub or any of their respective property is subject, or by which Airgas, Sub or any of their respective property is bound, where such encumbrance would be materially adverse to Airgas or Sub. 4.8 Disclosure. To Airgas' knowledge, none of the information ---------- supplied by Airgas or its authorized representatives in writing expressly for inclusion (and so included or relied on for information included) in (a) this Agreement, (b) the Registration Statement and (c) the Proxy Statement/Prospectus at the respective times that (i) the Registration Statement becomes effective, (ii) the Proxy Statement/Prospectus is mailed and (iii) any meeting of shareholders (and any adjournment thereof) is held to consider, or written consents are effective with respect to approval of, the Merger, as such Proxy Statement/Prospectus or Registration Statement is then amended or supplemented, shall contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Registration Statement and Proxy Statement/Prospectus will comply in all material respects as to form with applicable provisions of the Securities Act and the Exchange Act. 4.9 SEC Reports. Airgas (a) has furnished CIC with copies of its ----------- Annual Report on Form 10-K for the fiscal year ended March 31, 1996, Quarterly Reports on Form 10-Q for the quarters ended June 30, 1996 and September 30, 1996 and all other reports or registration statements filed by Airgas with the SEC under applicable laws, rules and regulations since March 31, 1996 (all such reports and registration statements being herein collectively called the "SEC Filings"), each as filed with the SEC; each such SEC Filing when it became effective or was filed with the SEC, as the case 26 may be, complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and the rules and regulations of the SEC thereunder and each SEC Filing did not on the date of effectiveness or filing, as the case may be, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of circumstances under which they were made, not misleading. Airgas has made all filings required to be made under the Exchange Act for the twelve (12) months prior to the date hereof. 4.10 Absence of Material Adverse Change. Other than as set forth in ---------------------------------- Section 4.10 of the Airgas Disclosure Schedule, since September 30, 1996, there has been (a) no event, circumstance or change which would constitute a material adverse change in the business, assets, condition or results of operations of Airgas; and (b) no claim, action, suit, proceeding or investigation which would have a material adverse effect on the condition of Airgas. 4.11 No Reliance on Forecasts. In the negotiation and consideration ------------------------ of the transactions contemplated by this Agreement, Airgas, Sub and their respective Boards of Directors have not relied upon any information or documents concerning CIC and its business or financial results except: (i) representations and warranties made by CIC in this Agreement and (ii) disclosure of interim financial results made pursuant to this Agreement. In the course of negotiations, Airgas and CIC exchanged information regarding hypothetical situations, based on various assumptions, of the results of operations of the combined companies and possible market prices for the Airgas Common Stock. Neither Airgas nor the Sub makes any (and expressly disclaims any) representation or warranty regarding any such hypothetical situations provided by it, including those that may contain forecasts or projections of its future operating results, and Airgas and Sub each disclaim reliance on any such hypothetical situations provided by CIC or third parties. 4.12 Express Disclaimer. No representation or warranty is made by Airgas ------------------ or Sub except as set forth in this Article 4. ARTICLE 5 COVENANTS CONCERNING CONDUCT AND TRANSACTIONS PRIOR TO MERGER EFFECTIVE TIME ------------------------------------------- 5.1 Access. ------ (a) To CIC. Between the date of this Agreement and the Merger ------ Effective Time, CIC will provide Airgas full access to the offices, books, records, officers, directors and key employees of CIC during normal business hours and upon reasonable notice, and will furnish, and use its diligent efforts to cause its independent accountants to furnish, such financial and operating data and other information with respect to the business and properties of CIC as Airgas may reasonably request, including all contracts, licenses, agreements and arrangements with clients, customers, vendors, lessors, licensors and suppliers of CIC; provided however, that nothing in this Agreement requires that CIC disclose to Airgas any information (such as price lists) that it reasonably thinks could, in Airgas' possession, have a material adverse effect on CIC if the Closing does not occur; and 27 provided further that Airgas shall conduct its review of CIC's business so as not to interfere unnecessarily with CIC's ongoing business operations. (b) To Airgas. Between the date of this Agreement and the Merger --------- Effective Time, Airgas will provide CIC full access to the offices, books, records, officers, directors and key employees of Airgas during normal business hours and upon reasonable notice, and will furnish and use its diligent efforts to cause its independent accountants to furnish, such financial and operating data and other information with respect to the business and properties of Airgas as CIC may reasonably request, including all contracts, licenses, agreements and arrangements with clients, customers, vendors, lessors, licensors and suppliers of Airgas; provided, however, that nothing in this Agreement requires that Airgas disclose to CIC any information (such as price lists) that it reasonably thinks could, in CIC's possession, have a material adverse effect on Airgas if the Closing does not occur; and provided further that CIC shall conduct its review of the Airgas' business so as not to interfere unnecessarily with Airgas' ongoing business obligations. 5.2 Operations of CIC. ----------------- (a) Generally. Between the date of this Agreement and the Merger --------- Effective Time, except reasonably required to carry out its obligations hereunder, or otherwise with Airgas' consent, CIC (i) will conduct its operations only according to its ordinary and usual course of business and (ii) will use its good faith efforts to preserve its business organization, to preserve its present relationships with its customers, suppliers, licensors, licensees, representatives, agents, consultants, key employees and any other persons having material business relations with it (but the foregoing does not limit CIC's right to make changes that it deems appropriate), to maintain its regular property maintenance program, and to maintain its current insurance policies in respect of its business and properties. (b) Specifically. Between the date of this Agreement and the Merger ------------ Effective Time, except as expressly contemplated by this Agreement, as otherwise reasonably required to carry out its obligations hereunder, and except as set forth in Exhibit 5.2, and without limiting the generality of paragraph (a) of this Section 5.2, CIC will not: (i) issue any capital stock, bonds or other corporate securities or debt instruments, or issue or grant any options, restricted stock awards, warrants or other rights to subscribe for or purchase any capital stock or any securities convertible into or exchangeable for capital stock, except pursuant to the terms and provisions of CIC Options outstanding as of the date hereof, (ii) except in accordance with prior practice, declare, set aside, or pay any dividend or distribution with respect to its capital stock, (iii) directly or indirectly redeem, purchase or otherwise acquire any of its capital stock, (iv) effect a split, reclassification or other change in or of any of its capital stock, (v) amend its Articles of Incorporation or Bylaws, (vi) grant any increase in the compensation payable or to become payable by CIC to officers or employees of CIC, except for pay raises, bonuses (other than the payment of bonuses consistent with the disclosure in Section 3.16 of the CIC Disclosure Schedule), commissions, profit sharing distributions and 401(k) matching payments made in the ordinary course of business consistent with CIC's practice prior to the date of this Agreement, (vii) except as may be necessary in order to consummate the transactions 28 contemplated by this Agreement or for draws under existing lines of credit in the ordinary course of business, enter into or amend any material agreement, mortgage, loan, security or other agreement relating to the borrowing or lending of money or extension of credit except in the ordinary course of business, (viii) except for negotiable instruments endorsed in the ordinary course of business, directly or indirectly guarantee or agree to guarantee the obligations of others, (ix) without providing notice to Airgas, enter into any agreement, contract or commitment not in the ordinary course of business, or enter into any agreement, contract or commitment in the ordinary course of business in excess of $100,000, (x) place or allow to be placed on any of its assets or properties any encumbrance (other than Permitted Liens), (xi) cancel any material indebtedness owing to CIC or any material claims that CIC may possess or waive any rights of substantial value except for write-downs and write-offs of receivables and inventory in the ordinary course of business, (xii) sell, assign or transfer any intellectual property, except in the ordinary course of business, (xiii) sell or otherwise dispose of any interest in real property or personal property other than in the ordinary course of business, (xiv) commit any act or omit to do any act that will or reasonably could be expected to cause a material breach of any material agreement, license, contract or commitment, (xv) violate in any material respect, any applicable law (which violation would be reasonably expected to have a material adverse effect on CIC's assets, financial condition or results of operations), (xvi) make or authorize any capital expenditures except those previously committed, those as may be necessary for repair, maintenance or replacement, those in accordance with its budget or those disclosed in Section 3.14 of the CIC Disclosure Schedule, (xvii) acquire a material amount of assets except in the ordinary course of business, (xviii) engage in any activity or transaction or incur any obligation (by conduct or otherwise) that would be reasonably expected to have a material adverse effect on its business and operations, (xix) make any loan or advance to any shareholder, officer, employee or director of CIC or any relative or affiliate of any of the foregoing other than credit terms extended in the ordinary course of business; or (xx) enter into or agree to enter into any transaction with or for the benefit of any officer, employee or director or any relative or affiliate of any of the foregoing (except for transactions with Tomco\\2\\ Equipment Company, Florida Carbonic, Inc. and Dry Ice Sales, Inc. in the ordinary course of business and consistent with past practice). 5.3 Financial Statements. Until the Merger occurs, CIC shall, within -------------------- thirty (30) days after the end of each month following the date of this Agreement, deliver to the other party its consolidated balance sheet as of the end of such month and the related consolidated statements of operations and cash flows of CIC, for such month and for the period from the beginning of the current fiscal year to the end of such month, setting forth in each case in comparative form the figures for the corresponding periods of the previous fiscal year (such financial statements are referred to herein as "Interim Financial Statements"). The chief financial officer of CIC, shall certify upon delivery that except as set forth in such certificate the Interim Financial Statements (i) are in accordance with the books and records of CIC, (ii) present fairly the financial condition and results of operations of CIC, as of the dates and for the periods indicated, subject to the limitations arising from its historical 29 practices) and (iii) have been prepared in accordance with CIC's accounting principles consistently applied for such statements. 5.4 Confidentiality and Nondisclosure. --------------------------------- (a) Generally. Solely in connection with the due diligence --------- investigations necessary to consummate the Merger pursuant to this Agreement, Airgas, Sub and CIC have disclosed and expect to continue to disclose Confidential Information (as herein defined) to the other parties to the transaction. (b) Confidential Information. For purposes of this Section 5.4, ------------------------ "Confidential Information" means any information, technical data or know-how, including that which relates to research, products, software, services, developments, inventions, processes, specifications, designs, drawings, diagrams, engineering, marketing techniques, documentation, customer information, pricing information, procedures, data, concepts, financial information and employee files disclosed by the disclosing party, which is designated in writing to be confidential or proprietary, or if given orally, is confirmed promptly in writing as having been disclosed as confidential or proprietary. Confidential Information does not include information, technical data or know-how which: (i) is in the possession of the receiving party at the time of disclosure as shown by the receiving party's files and records immediately prior to the time of disclosure (and the receiving party has provided the other party with written notice of such prior possession either prior to the execution and delivery of this Agreement or if the receiving party later becomes aware of (through disclosure by the other party or otherwise) some aspect of the Confidential Information as to which it had prior possession, promptly upon its becoming aware of such Confidential Information), (ii) before or after the time of disclosure becomes part of the public knowledge or literature, not as a result of any inaction or action of the receiving party, (iii) is approved for release by the disclosing party; or (iv) the receiving party demonstrates that the Confidential Information is required by applicable law to be disclosed, but then [A] only to the extent disclosure is required and [B] after giving the other party such notice of such obligation so that it may seek a protective order or other similar or appropriate relief, and the receiving party shall also undertake in good faith to have such disclosed Confidential Information treated confidentially consistent with the terms of this Section. (c) Restricted Use. Each party to this Agreement agrees not to use -------------- the Confidential Information of any party for its own use or for any purpose, except as set forth in Section 5.4(a) above. Each party further agrees not to copy, alter, modify, disassemble, reverse engineer or decompile any item of the Confidential Information unless permitted in writing by the disclosing party. (d) Nondisclosure. Each party agrees not to disclose the Confidential ------------- Information to any third parties or to any of its employees except those employees, advisers and attorneys who have a need to know the Confidential Information for the purposes described in Section 5.4(a), but only if they are provided a copy of, and agree in writing for the benefit of the other party to be bound by the restrictions and obligations of, this Section 5.4 (or a letter to such effect approved by the other 30 party); and the receiving party will enforce such obligations against such other persons or entities. Each of the parties further agrees that it shall protect the confidentiality of, and take all necessary steps to prevent disclosure of, the Confidential Information to prevent it from falling into the public domain or the possession of unauthorized persons and to advise the other party in writing of any misappropriation or misuse by any person of such Confidential Information of which it may become aware. (e) Return. Any materials or documents which are furnished by the ------ disclosing party, and all copies thereof, will be returned by the receiving party promptly following the earlier of (i) the termination of this Agreement or (ii) receipt of a written request for the return of such information. (f) No License or Warranty. No license is granted to any party hereto ---------------------- under any patents, copyrights or other proprietary rights by the disclosure of any information hereunder, nor is any warranty made as to such information. (g) Remedies. Each party understands and agrees that, because of the -------- unique nature of the Confidential Information, the disclosing party will suffer immediate, irreparable harm in the event the receiving party fails to comply with any of its obligations under this Section 5.4, that monetary damages will be inadequate to compensate the disclosing party for such breach, and that the disclosing party shall have the right to enforce the provisions of this Section 5.4 by injunctive or other equitable remedies. Each party waives any requirement that a party undertaking to enforce any provision of this Section 5.4 must post a bond or take any similar action as a condition to making such claim. ARTICLE 6 FURTHER AGREEMENTS ------------------ 6.1 Expenses. Except as otherwise provided in this Agreement, Airgas -------- and CIC will pay their own respective expenses (excluding the expenses of any shareholder) incurred in preparing for, entering into and carrying out this Agreement and consummating the transactions contemplated hereby, whether or not the Merger is consummated. 6.2 Shareholders' Meeting or Consents. The Board of Directors of CIC --------------------------------- shall recommend to the CIC Shareholders the approval of this Agreement and the transactions contemplated hereby; and shall include such recommendation in the Proxy Statement/Prospectus; provided, however, that CIC may withdraw, modify or change such recommendation to the extent that the Board of Directors of CIC determines, after having received the advise of outside legal counsel to CIC, that the failure to withdraw, modify or change such recommendation is reasonably likely to result in a breach of the Board of Directors' fiduciary duties under applicable law. To permit shareholder consideration and approval of the Merger, CIC shall cause to be duly called a special meeting of the CIC Shareholders (the "CIC Special Meeting") to be held as promptly as practicable after the Registration Statement is declared effective for the purpose of obtaining the shareholder approval required in connection with 31 the transactions contemplated hereby . CIC agrees that, except if and to the extent permitted by applicable law, it will not hold such CIC Special Meeting or solicit proxies to vote thereat or written consents in lieu thereof until the Registration Statement has been declared effective. 6.3 No Solicitation. From the date hereof until the earlier of (i) --------------- the termination of this Agreement pursuant to Article 9 or the (ii) the Merger Effective Time, neither CIC nor any of its officers, directors, employees, representatives, agents, affiliates nor any investment banker, attorney or accountant retained by CIC, shall, directly or indirectly, solicit, participate in any way in discussions or negotiations with, or provide any information to or enter into any agreement with, any corporation, partnership, person or other entity or group (other than Airgas or any affiliate or an associate of Airgas) concerning any merger, sale of any material portion of CIC's assets not in the ordinary course of business, sale of shares of capital stock or similar transactions involving the acquisition of CIC. CIC shall promptly notify Airgas in writing of any such inquiry, contact or proposal (including successive inquiries, contacts or proposals) and shall in such notice indicate the identity of the person and the terms and conditions of any inquiry, contact or proposal, including price. 6.4 News Releases. Except as may be otherwise required for ------------- compliance with applicable securities laws, neither Airgas nor CIC shall issue or approve any news release or other public announcement concerning the Merger without the prior approval of the other (which shall not be unreasonably withheld or delayed), except (a) as may be required by applicable law, including the rules, regulations or practices of the SEC or the NYSE or (b) in connection with notifying its shareholders of this Agreement or the transactions contemplated hereby. If a public statement is required to be made by applicable law, the party making such statement shall be entitled to include explanatory information or commentary in addition to required information . The parties shall consult with each other in advance to the extent reasonably practicable as to the contents and timing of the public statement. Without limiting the foregoing, Airgas shall be given prior notice of any general announcement or general notice to CIC's employees concerning the transactions contemplated by this Agreement. 6.5 SEC Filing. Airgas and CIC shall (together or pursuant to an ---------- allocation of responsibility to be agreed upon between them) (i) prepare and file with the SEC as soon as practicable the Proxy Statement/Prospectus and the Registration Statement, (ii) respond to comments of and furnish all information requested or required by the SEC, (iii) use their diligent efforts to have such Registration Statement (with the Proxy Statement/Prospectus included therein) promptly declared effective by the SEC, (iv) take all such action as may be required under state blue sky or securities laws in connection with the transactions contemplated by this Agreement and (v) take all other reasonable actions that may be necessary to satisfy any requirements imposed in connection with the Merger by federal or state securities laws or regulations or any other applicable laws. 32 6.6 Certain Employee Matters. ------------------------ (a) Continued Employment. Except as otherwise provided in Subsection -------------------- (c) below, each employee who continues as an employee of CIC after the Closing will be covered under Airgas' benefits plans for comparable employees. Without limiting the foregoing and subject to Subsection (c) below, all time such employees have been employed by CIC shall be counted for eligibility participation, vesting and (except for defined benefit pension plans) benefit accrual purposes under all of Airgas' employee benefit plans. (b) Vacation. Airgas shall cause Sub to continue to recognize all -------- accrued but unused vacation for employees of CIC as disclosed in Exhibit 6.6(b). Airgas shall cause Sub to give each employee credit for prior years of service with CIC for purposes of calculating vacation that may be received pursuant to Sub's vacation policy that may be in effect from time to time after Closing and will waive any eligibility requirements of such policy with respect to such employees. (c) Group Insurance Plans. Airgas will cause Sub to continue CIC's --------------------- group insurance plans in their current form for CIC's employees on the Closing Date and continue such plans in such form until it has arranged for such employees to participate in another plan maintained by Airgas (and Airgas shall obtain the waiver of the waiting period for participation in such plan, first day at work requirement and any restrictions and limitations on pre-existing medical conditions under such plan for employees participating in and covered immediately prior to the Merger Effective Time by CIC's group insurance plans). (d) 401(k) Plan. Airgas shall cause Sub to make contributions and ----------- other decisions for the current plan year under CIC's 401(k) plan disclosed in Section 3.16 of the CIC Disclosure Schedule in accordance with the 1996 practices (consistent with the plan documents and applicable law). Airgas shall cause CIC to make distributions from the 401(k) plan to terminated employees in accordance with the plan documents and applicable law but otherwise as soon as is practicable. 6.7 Certain Assets. Commencing on the Closing Date and continuing -------------- until the first anniversary of the Closing Date, J. Vernon Hinely (and/or Florida Carbonic, Inc. and/or Dry Ice Sales, Inc.) shall have an option to acquire the assets and business of CIC's dry ice operations (including customer lists and all related assets and the right to hire local dry ice employees, but excluding real property) in Miami and/or Jacksonville, Florida in accordance with the terms of Exhibit 6.7. 6.8 NYSE Listing. Prior to the Closing Date, Airgas shall use its ------------ best efforts to cause to be authorized for listing on the NYSE (subject only to official notice of issuance) the shares of Airgas Common Stock to be issued as Merger Consideration pursuant to this Agreement and the shares of Airgas Common Stock issuable pursuant to the exercise after the Merger of the CIC Stock Options. 6.9 Rule 145. Airgas covenants for a period of two years (or such -------- shorter period as shall be required to permit sales of the Airgas Common Stock) following the Merger Effective Time that 33 it will file any reports required to be filed by it under the Securities Act and the Exchange Act, and the rules and regulations adopted by the SEC thereunder (or, if Airgas is not required to file such reports, it will, upon the request of any holder of shares of Airgas Common Stock issued in connection with the Merger, make publicly available other information so long as it is necessary to permit sales under Rule 145 under the Securities Act but only if Airgas otherwise makes such information publicly available) and that it will take such further action as any holder of Airgas Common Stock issued in connection with the Merger may reasonably request, all to the extent required from time to time to enable such shareholders to sell shares of Airgas Common Stock within the limitation of the exemptions provided by (a) Rule 145 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. 6.10 Insurance. Airgas acknowledges that certain insurance policies --------- that were obtained on behalf of both CIC and Tomco\\2\\ Equipment Company ("Tomco\\2\\") contain provisions for retroactive premium and dividend adjustments. Such policies may continue to have retroactive adjustments that will need to be allocated between CIC and Tomco\\2\\ before and after the Closing. The parties agree for each other's benefit and for the benefit of Tomco\\2\\ that such allocations will be made fairly, consistent with CIC and Tomco\\2\\'s prior practice, and that any credits due to Tomco\\2\\ will be paid promptly by CIC. 6.11 Release of Tomco Collateral. Airgas agrees for the benefit of --------------------------- Tomco\\2\\ that it (a) shall in good faith undertake to obtain the release by Jefferson-Pilot Life Insurance Company of all liens and security interests in Tomco\\2\\'s assets that secure CIC's obligations to Jefferson-Pilot (which obligations are listed in section 3.14 of the CIC Disclosure Schedule), (b) shall in good faith undertake to file or cause the filing of all UCC termination statements, terminations of mortgages and other similar documents necessary to evidence such release in the public records and (c) if such releases are not obtained and evidence of terminations not so filed, shall indemnify, defend and hold Tomco\\2\\ harmless against any liability, loss, cost or expense, including attorneys' fees and expense arising as a result of or in connection with such liens and security interests. 6.12 Hinely Office Furniture and Fixtures. Airgas does hereby agree ------------------------------------ to notify J. Vernon Hinely at least 30 days prior to disposition of any of the furniture and fixtures currently in his office in Orlando, Florida (the "Office Furniture") and, if he gives counter notice within such 30-day period electing to purchase some or all of the Office Furniture, to sell him each such elected item of the Office Furniture at its then-depreciated book value. ARTICLE 7 INDEMNIFICATION --------------- 7.1 Indemnification. If the Closing occurs, then from and after the --------------- Merger Effective Time, to the extent and as provided in this Article 7, Airgas, Sub and their respective executive officers and directors (all such persons who are entitled to indemnification are hereinafter referred to individually as an "Indemnified Person" and collectively as "Indemnified Persons") shall be indemnified and held harmless by the CIC Shareholders (the "Indemnifying Persons") from and against any and all 34 damages, claims losses, liabilities and expenses, including, without limitation, reasonable legal, accounting and other expenses (the "Damages"): (a) arising out of any breach of a representation, warranty or covenant of CIC contained in this Agreement or any of the CIC Delivered Documents; (b) arising from any failure to make filings if such were required pursuant to the matter disclosed in Item I of Section 3.27 of the CIC Disclosure Schedule; (c) relating to any additional investigation and/or remediation as a result of the former presence of two USTs at 1300 Bellwood Road; (d) relating to any additional investigation and/or remediation as a result of the former presence of two USTs at 2502 NW 38th Street, Miami, Florida; and (e) for any decrease in any tax benefits ("Tax Benefits") otherwise available to Sub for any taxable period ending after the Closing Date by reason of an adjustment with respect to any return for Taxes filed by CIC on or prior to the Closing Date in an amount equal to the aggregate net difference between the actual tax liability of Sub (or its assignee) and the tax liability that would have been incurred by Sub (or its assignee) if any such Tax Benefits had not been reduced in the aggregate). 7.2 Procedures for Claims. The Indemnified Persons' rights to be --------------------- indemnified under this Article 7 shall be subject to the following procedures: (a) Notice of Claim. If an Indemnified Person shall in good faith --------------- have any claim for Damages, Airgas shall promptly give notice thereof to the Shareholders' Agent Committee and the Lockup/Escrow Agent, including a brief description of the facts upon which such claim is based and the quantifiable nature of the Damages (a "Notice of Claim"). (b) Notice of Objection. If the Shareholders' Agent Committee desires ------------------- in good faith to dispute a claim for indemnification, or a portion thereof, it shall notify Airgas and the Lockup/ Escrow Agent in writing of its objections thereto (a "Notice of Objection") within thirty (30) days following its receipt of a Notice of Claim. If the Shareholders' Agent Committee does not make a Notice of Objection within such thirty (30) days period, then the subject Notice of Claim shall be satisfied as provided in Section 7.5 below. (c) Arbitration. If, within sixty (60) days after Airgas' receipt of ----------- a Notice of Objection, Airgas and the Shareholders' Agent Committee shall not have reached agreement as to the claim in question, then the claim for indemnification shall be submitted to and settled by arbitration as provided below (it being expressly understood and agreed that if such Notice of Objection is duly given, it is the intention of the parties and the Shareholders' Agent Committee that 35 any such claim shall be resolved by arbitration as provided in this section). Arbitration shall be by a single arbitrator experienced in the matters at issue and selected by Airgas and the Shareholders' Agent Committee in accordance with the Commercial Arbitration Rules of the American Arbitration Association as then in effect (the "Rules"). The arbitration shall be held in such place in the Atlanta, Georgia metropolitan area as may be specified by the arbitrator (or any place agreed to by Airgas, the Shareholders' Agent Committee and the arbitrator), and shall be conducted in accordance with the Rules and (regardless of any other choice of law provision in this Agreement) the United States Arbitration Act (9 U.S.C. (S)(S) 1-16) to the extent not inconsistent with this Agreement (and the "Expedited Procedures" set forth in the Rules shall be applicable to any disputes involving less than $50,000). The decision of the arbitrator will be final and binding upon the parties, and judgment upon the arbitrator's decision may be entered in any court of competent jurisdiction. (d) Release of Claim. Notwithstanding any other provision of this ---------------- Section 7.2, Airgas may at any time assume full control over and responsibility for any claim by giving notice to the Shareholders' Agent Committee and the Lockup/Escrow Agent withdrawing the Notice of Claim and waiving its indemnification rights with respect to the subject claim. 7.3 Third Party Claims. ------------------ (a) Notice of Third Party Claim. Within fifteen (15) days after --------------------------- receipt of notice of commencement of any action by any third party evidenced by service of process or other legal pleading, or with reasonable promptness after the assertion in writing of any claim by a third party, Airgas shall give the Shareholders' Agent Committee written notice thereof together with a copy of such claim, process or other legal pleading (a "Notice of Third Party Claim"), and the Shareholders' Agent Committee shall have the obligation to undertake the defense, settlement, compromise or other disposition thereof through a legal representative of the Shareholders' Agent Committee's own choosing. Airgas and its counsel shall have the right to be present at the negotiation, defense and settlement of such action or claim, and any settlement or compromise of any such action or claim shall be subject to the approval of Airgas which approval shall not be unreasonably withheld or delayed. (b) Defense by Airgas. In the event that the Shareholders' Agent ----------------- Committee by the thirtieth (30th) day after receipt of a Notice of Third Party Claim (or, if earlier, by the tenth day preceding the day on which an answer or other pleading must be served in order to prevent judgment by default in favor of the person asserting such claim) does not elect to defend against such claim, Airgas will have the right to undertake the defense, compromise or settlement of such claim on behalf of and for the account and risk of the Indemnifying Person subject to the right of the Shareholders' Agent Committee to approve (which approval shall not be unreasonably withheld or delayed) any compromise or settlement and to assume, on behalf of the Indemnifying Persons, the defense of such claims at any time prior to settlement, compromise or final determination thereof; and provided further, that if the Shareholders' Agent Committee submits to Airgas a bona fide settlement offer from the third party claimant of any Third Party Claim (which settlement offer shall include as an unconditional term of it the release by the claimant or the plaintiff to Airgas from all liability in respect of such claim) and Airgas refuses to consent to such settlement, then thereafter the Shareholders' 36 Agent Committee's liability to Airgas for indemnification with respect to such third party claim shall not exceed the settlement amount included in such bona fide settlement offer, and Airgas shall either assume the defense of such third party claim or pay the Shareholders' Agent Committee's reasonable attorney's fees and other out-of-pocket costs incurred thereafter in continuing the defense of such third party claim. Notwithstanding the forgoing, Airgas shall have the right to retain control of the defense of any third party action or claim described in Section 7.2(a) which (i) involves potential Damages in excess of the amount determined by subtracting (A) the sum of all Final Determinations (as defined in the Lockup/Escrow Agreement) plus the potential Damages in such third party action from (B) $5,000,000 or (ii) could reasonably be expected to materially adversely affect Airgas or its operations. In such event, the Shareholders' Agent Committee and its counsel shall have the right to be present at the negotiation, defense and settlement of such action or claim, and any settlement or compromise of any such action or claim shall be subject to the approval of the Shareholders' Agent Committee, which approval shall not be unreasonably withheld or delayed. 7.4 Limitations on Indemnification Rights. ------------------------------------- (a) Outside Date for Claims. No claim for indemnification pursuant to ----------------------- this Article 7 shall be made unless a Notice of Claim with respect to such is given in compliance with Section 7.2(a) on or prior to the Termination Date (as defined herein). (b) Offset for Insurance Proceeds. Any claim for Damages hereunder ----------------------------- shall be offset or reduced by the amount of any third party insurance proceeds as to which there is no reimbursement or comparable obligation received by the Indemnified Person for such Damages. (c) Deductible. The Indemnified Persons shall be entitled to ---------- indemnification pursuant to this Article 7 only to the extent that the aggregate amount of indemnified Damages exceeds $500,000 (the "Deductible"); provided, however, that the foregoing limitation shall not apply to any Damages arising as a result of disclosure or failure to disclose that a party demonstrates was solely for the purpose of misleading the other party or a breach of the representation and warranty in Section 3.26. (d) Cap. The Indemnified Persons shall only be entitled to --- indemnification pursuant to this Article 7 for up to $5,000,000 in Damages after giving effect to the Deductible (except that such cap shall not apply to any Damages arising as a result of a breach of the representation and warranty in Section 3.26). (e) Lockup/Escrow as Sole Source. The Lockup/Escrow shall be the sole ---------------------------- and exclusive source for the satisfaction of such indemnification rights. No CIC Shareholder shall have any liability or obligation with respect to such indemnification rights except through the application of his Lockup/Escrow Shares as provided herein and in the Lockup/Escrow Agreement. (f) Mitigation of Damages. The Indemnified Person shall act in good --------------------- faith and in a commercially reasonable manner to mitigate any Damages it may suffer. 37 (g) Third Party Claims. The Indemnified Person may not make a claim ------------------ for Damages arising out of a third party claim unless the third party has made its claim in writing. (h) Knowledge of Breaches. No Indemnified Person shall be --------------------- indemnified, or have any other recovery, for Damages arising from any inaccuracy in, or a breach of, any representation, warranty, covenant or agreement by CIC if Airgas had actual knowledge at or before the Closing that such representation, warranty, covenant or agreement was inaccurate or breached. For purposes of this Section 7.4(h), Airgas shall be deemed to have actual knowledge of any such facts actually known to any of Andrew R. Cichocki, John T. Winn, III or Thomas Mason after (i) a meeting (telephonic or otherwise) of them (and Airgas' attorneys representing it in this transaction) devoted to a review of this Agreement and their due diligence reports and (ii) a discussion with an individual who could reasonably be expected to have knowledge of or familiarity with such facts. 7.5 Satisfaction of Indemnification Obligations. Subject to the ------------------------------------------- procedures and limitations set forth in this Article 7 and to the provisions of the Lockup/Escrow Agreement, claims for Damages shall be satisfied by the Lockup/Escrow Agent as provided in the Lockup/Escrow Agreement. 7.6 Other Rights and Remedies Not Affected. If the Merger is consummated -------------------------------------- as contemplated herein, this Article 7 and the Lockup/Escrow Agreement shall set forth the sole and exclusive remedy and recourse (and corresponding liability for the CIC Shareholders) of any Indemnified Person for Damages or any other claim, cause of action or right of any nature against CIC or the CIC Shareholders in connection with this Agreement, and the consummation of the Merger and the transactions contemplated hereby and thereby; provided, however, in the event of fraud by CIC or any CIC Shareholder in connection with this Agreement and the consummation of the Merger and the transactions contemplated hereby and thereby, then the indemnification rights of the Indemnified Person under this Article 7 are independent of and in addition to such rights and remedies as the Indemnified Person may have at law or in equity or otherwise, including without limitation the right to seek specific performance, rescission or restitution, none of which rights or remedies shall be affected or diminished hereby. 7.7 Survival of Representations, Warranties and Covenants. All ----------------------------------------------------- representations, warranties and agreements in this Agreement or in any document delivered pursuant to this Agreement shall survive the Closing for a period of one (1) year following the Closing Date (the "Termination Date") and, thereafter, to the extent a good faith claim is made prior to the Termination Date (but only as to those representations, warranties and agreements (or portions thereof) claimed to have been breached), until such claim is finally determined or settled. 7.8 Consent as to Representation. AIRGAS AND SUB EACH ACKNOWLEDGE THAT ---------------------------- THE LAW FIRM OF SUTHERLAND, ASBILL & BRENNAN, L.L.P. IS EXPECTED, AFTER THE MERGER, TO REPRESENT THE CIC SHAREHOLDERS AND THE CIC SHAREHOLDERS' AGENT COMMITTEE IN CONNECTION WITH THIS AGREEMENT AND AGREES THAT IT SHALL BE ENTITLED TO REPRESENT THE CIC SHAREHOLDERS AND THE CIC SHAREHOLDERS' AGENT COMMITTEE IN ANY DISPUTES THAT ARISE 38 CONCERNING THIS AGREEMENT OR ANY OTHER AGREEMENT TO BE DELIVERED PURSUANT TO THIS AGREEMENT AND WAIVES ANY CONFLICT OF INTEREST THAT MAY RESULT FROM ITS REPRESENTING CIC UNDER THIS AGREEMENT OR OTHERWISE. ARTICLE 8 SHAREHOLDERS' AGENT COMMITTEE ----------------------------- 8.1 Appointment and Acceptance. As an integral component of the -------------------------- conversion of CIC Common Stock pursuant to Article 2 and in order to facilitate the consummation of the transactions contemplated by this Agreement and resolution of matters after the Closing between Airgas, Sub and the CIC Shareholders, each of J. Vernon Hinely, John A. Toepke, and Jonathan I. Wax and the successors of each of them, acting as provided in this Agreement, are hereby irrevocably constituted and appointed by each CIC Shareholder as his attorney- in-fact and agent in his name, place and stead in connection with the transactions contemplated by this Agreement (collectively, the "CIC Shareholders' Agent Committee"), and acknowledges that such appointment, being a component of the conversion of the CIC Common Stock and being relied upon by Airgas and the Lockup/Escrow Agent, is coupled with a interest. By executing and delivering this Agreement under the heading "CIC Shareholders' Agent Committee," each of such individuals hereby (a) accepts his appointment and authorization to act as a member of the CIC Shareholders' Agent Committee as attorney-in-fact and agent on behalf of the CIC Shareholders in accordance with the terms of this Agreement, and (b) agrees to perform his obligations under, and otherwise comply with, this Agreement. 8.2 Authorization. Each CIC Shareholder fully and completely, ------------- without restriction: (a) Execution and Delivery of Agreements. Authorizes and directs the ------------------------------------ CIC Shareholders' Agent Committee: (i) to prepare, finalize, modify, approve and authorize all exhibits, schedules and other attachments to any CIC Delivered Document and such approval and authorization may be conclusively evidenced by the signature of any member of the CIC Shareholders' Agent Committee, (ii) to deliver to Airgas on his behalf as provided in this Agreement his share certificates representing his CIC Common Stock, a Transmittal Letter relating to such CIC Common Stock duly endorsed by him, and all other materials to be delivered in connection with this Agreement, (iii) to execute, deliver, and to accept delivery of, on his behalf, the Lockup/Escrow Agreement and the other agreements, instruments and documents to be, or as, delivered by or on behalf of the CIC Shareholders pursuant to this Agreement, (iv) to execute, deliver, and to accept delivery of, on his behalf such amendments as may be deemed by the CIC Shareholders' Agent Committee in its sole discretion to be appropriate under any CIC Delivered Document, (v) to endorse his certificates representing Airgas Common Stock delivered pursuant to this Agreement and/or execute a stock transfer power in his name with respect to the Airgas Common Stock represented by such certificates to facilitate and implement the actions contemplated by the Lockup/Escrow Agreement and this Agreement and (vi) to execute and deliver, and to accept delivery of, on his behalf such agreements, instruments and other documents as may be deemed by the CIC 39 Shareholders' Agent Committee in its sole discretion to be appropriate under any CIC Delivered Document; (b) Notices & Determinations. Agrees to be bound by all notices ------------------------ received, by all agreements and determinations made, and by all agreements, instruments and other documents executed and delivered by the CIC Shareholders' Agent Committee under any CIC Delivered Document; (c) Disputes & Consents. Authorizes the CIC Shareholders' Agent ------------------- Committee: (i) to dispute or to refrain from disputing any claim made by Airgas under any CIC Delivered Document; (ii) to negotiate and compromise any dispute which may arise under, and to exercise or refrain from exercising remedies available under any CIC Delivered Document and to sign any releases or other documents with respect to such dispute or remedy; (iii) to waive any condition contained in any CIC Delivered Document; (iv) to give any and all consents under any CIC Delivered Document; and (v) to give such instructions and to do such other things and refrain from doing such other things as the CIC Shareholders' Agent Committee in its sole discretion deems necessary or appropriate to carry out the provisions of any CIC Delivered Document; and (d) Payments - Receipt & Disbursements. Authorizes and directs the ---------------------------------- CIC Shareholders' Agent Committee: (i) to receive any payments made to the CIC Shareholders or to the CIC Shareholders' Agent Committee on the CIC Shareholders' behalf pursuant to any CIC Delivered Document, (ii) to invest such funds pending their disbursement in such manner as the CIC Shareholders' Agent Committee in its sole discretion deems appropriate, and (iii) to disburse to the CIC Shareholders payments made to the CIC Shareholders' Agent Committee under any CIC Delivered Document (specifically including the Lockup/Escrow Agent) in accordance with their percentage interest in the Merger Consideration (excluding DeMinimis Shares) (their "Interests"), but only after (A) payment of any accountants', attorneys' and others' fees and expenses incurred by or on behalf of the CIC Shareholders in connection with any CIC Delivered Document and (B) withholding such amount from any distribution (including from any distribution of Airgas Common Stock pursuant to the Lockup/Escrow Agreement, the CIC Shareholders' Agent being authorized to sell a portion of such shares on a prorata basis to convert them into cash) as the CIC Shareholders' Agent Committee, in its sole and absolute discretion, deems reasonable to pay such costs and expenses that it thinks may be incurred after the Closing relating to potential disputes arising with respect to indemnification or other obligations of the CIC Shareholders under any CIC Delivered Document or this Agreement (such amounts to be held in, and disbursed from, the Fees & Expenses Fund as described in Section 2.2). 8.3 Fees & Expenses Fund. The Fees and Expenses Fund shall be held by the -------------------- CIC Shareholders' Agent Committee in an interest-bearing account in a bank and shall be used to pay fees, costs, expenses and contingencies under any CIC Delivered Document and those incurred in representing the CIC Shareholders with respect to other matters arising out of any CIC Delivered Document. The CIC Shareholders' Agent Committee may from time-to-time distribute to the CIC Shareholders in accordance with their Interests amounts in the Fees & Expenses Fund that the CIC 40 Shareholders' Agent Committee, in its sole and absolute discretion, determines are in excess of the amounts necessary to pay fees, costs, expenses and contingencies under any CIC Delivered Document. 8.4 Procedural Matters. ------------------ (a) Meetings and Written Consents. Actions by the CIC Shareholders' ----------------------------- Agent Committee shall be made either (i) at a meeting (which can be conducted by a telephone call) or (ii) by written consent. (b) Required Vote or Signatures. Decisions of the CIC Shareholders' --------------------------- Agent Committee at a meeting may be made only if two of the three members are participating, and decisions shall require the affirmative vote of two members. Written consents shall be effective when signed by all members of the CIC Shareholders' Agent Committee. 8.5 Reliance. Each of the CIC Shareholders hereby expressly acknowledges -------- and agrees (a) that the CIC Shareholders' Agent Committee is authorized to act on his behalf notwithstanding any dispute or disagreement among the CIC Shareholders and (b) that Airgas, the Lockup/Escrow Agent and any other person shall be entitled to rely on any and all actions taken (or not taken) by the CIC Shareholders' Agent Committee under any CIC Delivered Document that appear to have been taken in accordance with this Agreement without any duty of inquiry as to the genuineness of the writing or other communication and without any obligation of inquiry of any of the CIC Shareholders. 8.6 Successors. If a member of the CIC Shareholders' Agent Committee ---------- resigns or ceases to function in his capacity as such for any reason whatsoever, then the other members shall promptly appoint a successor and give notice to Airgas and the Lockup/Escrow Agent; provided, however, that if for any reason no successor has been appointed within thirty (30) days, then the CIC Shareholders who own (or owned) at least fifty-one percent (51%) of the Interests may appoint a successor; and provided, further, that if for any reason no successor has been appointed pursuant to the foregoing provision within forty-five (45) days, then any member of the CIC Shareholders' Agent Committee may petition a court of competent jurisdiction for appointment of a successor. The CIC Shareholders may at any time and for any reason remove any one or more members of the CIC Shareholders' Agent Committee by written consent of the CIC Shareholders who own (or owned immediately prior to the Merger Effective Time) at least fifty-one percent (51%) of the Interests and may contemporaneously therewith appoint a successor or successors by such written consent. The appointment of a successor pursuant to the foregoing shall be by a written instrument (i) that is signed by the requisite number of persons or by a judge or clerk of a court competent jurisdiction and (ii) that sets forth the explanation of how such persons satisfy the foregoing voting requirements, and promptly thereafter a copy of such instrument shall be given to Airgas and the other members of the CIC Shareholders' Agent Committee. 8.7 Survival of Authorizations. EACH CIC SHAREHOLDER: (A) INTENDS FOR THE -------------------------- AUTHORIZATION AND AGREEMENTS IN THIS AGREEMENT TO REMAIN IN FORCE IF 41 HE SUBSEQUENTLY BECOMES MENTALLY OR PHYSICALLY DISABLED OR INCOMPETENT; (B) DOES HEREBY AUTHORIZE SUCH RECORDINGS AND FILINGS OF THIS AGREEMENT AS ANY PERSON DEEMS APPROPRIATE; AND (C) DOES HEREBY DIRECT THAT NO FILING OF ANY INVENTORY OR POSTING OF A SURETY BOND SHALL BE REQUIRED OF ANY PERSON. 8.8 Certain Limitations. No member of the CIC Shareholders' Agent ------------------- Committee shall have any liability whatsoever (whether at law, in equity or otherwise) to any CIC Shareholder for any act or omission relating to this Agreement except such that arises from gross negligence or willful misconduct. 8.9 Indemnification. The CIC Shareholders hereby jointly and severally --------------- agree to indemnify and hold each of the members of the CIC Shareholders' Agent Committee harmless for any and all liability, loss, cost, damage or expense (including attorneys' fees and expenses) reasonably incurred or suffered as a result of the performance of his duties under any CIC Delivered Document or this Agreement, except such that arises from gross negligence or willful misconduct. 8.10 No Implied Agency or Partnership. No party other than the CIC -------------------------------- Shareholders' Agent Committee is the agent or representative of any other party. Except as provided with respect to the CIC Shareholders' Agent Committee, nothing in this Agreement shall be construed to make a party liable to any other person for or on account of any claim or act or omission of any other party. Nothing in this Agreement shall be construed to create a partnership or joint venture among the parties. 8.11 Expenses. No member of the CIC Shareholders' Agent Committee is -------- entitled to any fee for his activities pursuant to this Agreement, but each shall be reimbursed from the Fees & Expenses Fund (to the extent it has sufficient funds) or by the CIC Shareholders for his reasonable expenses (including attorneys' fees and expenses) actually incurred in connection with his performance of his duties in accordance with this Agreement. ARTICLE 9 CONDITIONS TO OBLIGATION TO CLOSE --------------------------------- 9.1 Conditions Precedent to Obligations of CIC. The obligation of CIC to ------------------------------------------ effect the Merger is subject to the satisfaction or waiver, at or prior to the Closing, of each of the following conditions: (a) The representations and warranties made by Airgas and Sub in this Agreement shall be true and correct in all material respects when made and on and as of the Closing Date as though such representations and warranties were made on and as of such date (except for changes in the ordinary course of Airgas' and Sub's business, or as otherwise permitted by this Agreement, after the date of this Agreement); 42 (b) Airgas and Sub shall have performed in all material respects and be in compliance in all material respects with all covenants, agreements and undertakings required to be performed or complied with by Airgas and Sub pursuant to this Agreement. (c) No material adverse change shall have occurred or, to CIC's or Airgas' knowledge, been threatened (and no condition, event or development shall have occurred or, to CIC's or Airgas' knowledge, been threatened involving a prospective change) in the condition of Airgas taken as a whole between the date of this Agreement and the Closing Date. (d) Airgas and Sub shall have delivered to CIC a certificate, dated as of the Closing Date and executed by a duly authorized officer of each of Airgas and Sub, certifying to CIC's satisfaction the conditions specified in Sections 9.1(a), and 9.1(b) and 9.1(c) of this Agreement. (e) CIC shall have received from 1 McCausland, Keen & Buckman, counsel to Airgas, an opinion, dated as of the Closing Date, in substantially the form set forth as Exhibit 9.1(e). (f) Airgas shall have delivered to CIC a certificate dated as of the Closing Date, and executed by the officers of Airgas, that to its knowledge none of the information supplied by Airgas or its authorized representatives in writing expressly for inclusion (and so included or relied on for information included), in the Registration Statement as then amended or supplemented, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (g) The CIC Shareholders shall have approved this Agreement and the Merger in accordance with the FBCA and the Articles and By-laws of CIC after the Registration Statement on Form S-4 has been declared effective and distributed to the CIC Shareholders, in accordance with applicable law. (h) Sub shall have executed and delivered a five-year employment and non-competition agreement to J. Vernon Hinely in form and substance as agreed to by Airgas and CIC (the "Hinely Employment Agreement"). (i) Sub shall have executed and delivered a three-year employment and non-competition agreement to John A. Toepke in form and substance as agreed to by Airgas and CIC (the "Toepke Employment Agreement"). (j) Sub shall have executed and delivered a three-year employment and non-competition agreement to Forest D. Templeton in form and substance as agreed to by Airgas and CIC (the "Templeton Employment Agreement"). 43 (k) Sub shall have executed and delivered a three-year employment and non-competition agreement to Sandra Fowler Hurt in form and substance as agreed to by Airgas and CIC (the "Fowler Hurt Employment Agreement"). (l) The shares of Airgas Common Stock to be issued in the Merger shall have been authorized for listing on the NYSE subject only to official notice of issuance. 9.2 Conditions Precedent to Obligations of Airgas and Sub. The ----------------------------------------------------- obligations of Airgas and Sub to effect the Merger are subject to the satisfaction or waiver, prior to or at the Closing, of each of the following conditions: (a) The representations and warranties made by CIC in this Agreement shall be true and correct in all material respects when made and on and as of the Closing Date as though such representations and warranties were made on and as of each date (except for changes in the ordinary course of CIC's business, or otherwise permitted by this Agreement, after the date of this Agreement); (b) CIC shall have performed in all material respects and be in compliance in all material respects with all covenants, agreements and undertakings required to be performed or complied with by CIC pursuant to this Agreement. (c) No material adverse change shall have occurred (and no condition, event or development shall have occurred involving a prospective material adverse change) in the condition of CIC taken as a whole between the date of this Agreement and the Closing Date. (d) CIC shall have delivered to Airgas and Sub a certificate, dated as of the Closing Date and executed by a duly authorized officer of CIC, certifying to the satisfaction of the conditions specified in Sections 9.2(a), 9.2(b) and 9.2(c) of this Agreement. (e) Airgas and Sub shall have received from Sutherland, Asbill & Brennan, L.L.P., counsel to CIC, an opinion dated as of the Closing Date, in substantially the form set forth as Exhibit 9.2(e). (f) CIC shall have delivered to Airgas and Sub a certificate, dated as of the Closing Date and executed by CIC, that to CIC's knowledge none of the information supplied by CIC or its authorized representatives in writing expressly for inclusion (and so included or relied on for information included) in the Registration Statement as then amended or supplemented, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (g) The Hinely Employment Agreement and the Toepke Employment Agreement shall have been executed and delivered by the respective individuals named therein. 44 9.3 Conditions to Obligations of Airgas, Sub and CIC. The obligations of ------------------------------------------------ Airgas, Sub and CIC to effect the Merger are also subject to the satisfaction or waivers (subject to applicable law), prior to or at the Closing, of each of the following conditions: (a) The Merger and this Agreement shall have been approved and adopted by the CIC Shareholders in accordance with applicable law and dissenters' rights with respect to no more than ten percent (10%) of the issued and outstanding shares of CIC Class A Common Stock (and no shares of CIC Class B Common Stock) shall have been properly asserted in accordance with the FBCA (and not have been forfeited in accordance with the FBCA). (b) All permits, approvals and consents of any Governmental Entity or other person or entity necessary or appropriate for consummation of the Merger, (including those listed in Section 3.6 of the CIC Disclosure Schedule and Section 4.4 of the Airgas Disclosure Schedule) shall have been obtained, and there shall not be any pending action or proceeding commenced by or before any Governmental Entity that challenges the issuance of such permits, approvals or consents. (c) There shall not be in effect any order or decision of a court of competent jurisdiction, any statute, rule or regulation or any pending action, suit or proceeding before any Governmental Entity that prevents or challenges the Merger. (d) On the Closing Date there shall not be a stop order in effect with respect to the Registration Statement. (e) The Lockup/Escrow Agreement shall have been executed by the parties thereto. (f) Continuity of interest certificates in form and substance satisfactory to Airgas and the CIC Shareholders' Agent Committee have been received from owners of such number of Lockup/Escrow Shares which in the aggregate represent no less than fifty percent (50%) of the Aggregate Merger Consideration. (g) CIC and the CIC Shareholders shall have received from Airgas' counsel, McCausland, Keen & Buckman, an opinion that the Merger constitutes a tax-free reorganization under the IRC and as to certain other matters in substantially the form of Exhibit 9.3(g). 9.4 Post-Closing Actions. If, at any time or from time to time after the -------------------- Merger Effective Time, Airgas shall determine that any further conveyance, assignment or other document or any further action is necessary or desirable to carry out the purposes of this Agreement, the officers and directors of CIC (including those in office prior to the Merger Effective Time) and the CIC Shareholders shall at Airgas' expense execute and deliver all such instruments and take all such actions as Airgas may reasonably determine to be necessary or advisable in order to carry out the purposes of this Agreement. 45 ARTICLE 10 TERMINATION AND ABANDONMENT; REMEDIES ------------------------------------- 10.1 Termination and Abandonment. This Agreement may be terminated --------------------------- and the Merger abandoned at any time before the Closing Date, whether before or after adoption or approval of this Agreement by the Boards of Directors of Airgas and CIC, or the shareholders of CIC, under any one or more of the following circumstances: (a) by the mutual consent of Airgas, Sub and CIC; (b) by either Airgas or CIC if the Merger shall not have been consummated by August 31, 1997 and no action has been brought to enforce the performance of this Agreement; (c) by Airgas by notice to CIC given on or before the seventh business day following the Form S-4 Effective Date that it is terminating because the Average Airgas Price is less than $19; (d) by CIC by notice to Airgas given on or before the seventh business day following the Form S-4 Effective Date that it is terminating because the Average Airgas Price is more than $27; (e) by either Airgas or CIC, if any court of competent jurisdiction in the United States, or other United States Governmental Entity shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and unappealable; (f) by Airgas, if any of the conditions set forth in Sections 9.2(a), (b) or (c) have not been complied with or performed in any material respect on or before the Closing Date (or the date that would otherwise be the Closing Date had such conditions been complied with), or if any of the deliveries to be made by CIC at the Closing are not made by CIC on the date that would otherwise have been the Closing Date were all other conditions satisfied or waived; provided, however, that if such noncompliance, nonperformance or failure to deliver can be cured or eliminated, then Airgas shall not terminate under this subsection (e) unless and until (i) it has given CIC written notice that noncompliance or nonperformance has occurred, specifying the nature of same and the action required to cure same and (ii) CIC shall not have cured or eliminated such noncompliance or nonperformance within fifteen (15) days after such notice is received; (g) by CIC, if any of the conditions set forth in Sections 9.1 have not been complied with or performed in any material respect on or before the Closing Date (or the date that would otherwise be the Closing Date had such conditions been complied with), or if any of the deliveries to be made by Airgas or Sub at the Closing are not made by Airgas or Sub (as applicable) on the date that would otherwise have been the Closing Date were all other conditions satisfied or waived; provided, however, that if such noncompliance, nonperformance or failure to deliver can be 46 cured or eliminated, then CIC shall not terminate under this subsection (f) unless and until (i) it has given Airgas written notice that noncompliance or nonperformance has occurred, specifying the nature of same and the action required to cure same and (ii) Airgas shall not have cured or eliminated such noncompliance or nonperformance within fifteen (15) days after such notice is received. 10.2 Effect of Abandonment and Termination. In the event this ------------------------------------- Agreement is terminated and the Merger is abandoned as provided in this Article 9, this Agreement shall immediately become wholly void and of no effect, and the parties shall be released from all further obligations hereunder; provided, however, that (a) Section 5.4 of this Agreement shall not be extinguished but shall survive such termination and abandonment and (b) no termination will prejudice any claim either party may have under this Agreement that arises prior to the effective date of such termination. ARTICLE 11 MISCELLANEOUS PROVISIONS ------------------------ 11.1 Good Faith. The parties shall in good faith undertake to ---------- perform their obligations in this Agreement, to satisfy all conditions and otherwise comply in as prompt a manner as is practicable within the terms of this Agreement. 11.2 Entire Agreement; Amendment. This Agreement, including the --------------------------- Exhibits and Disclosure Schedules hereto, the other documents delivered or to be delivered pursuant hereto, and the two page agreement regarding evaluation of a proposed acquisition and confidential information dated August 16, 1996 between Airgas and CIC contain the entire agreement among the parties hereto and supersede all prior oral or written agreements, commitments or understandings with respect to the matters provided for herein. Subject to applicable law and Section 1.9 above, this Agreement may be modified or amended by a writing duly executed by Airgas and CIC, which modification or amendment shall be binding upon all of the parties hereto. This Agreement and the rights and obligations of any party hereunder may not be assigned by any party without the prior written consent of the other parties hereto. All covenants, agreements, representations, warranties and indemnities in this Agreement by and on behalf of any of the parties hereto shall bind and inure to the benefit of their respective successors and permitted assigns. 11.3 Waivers. No failure or delay on the part of any party in ------- exercising any power, right or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power preclude any other or further exercise thereof, or the exercise of any other right or power under this Agreement. 11.4 Notices. Each notice, communication and delivery under this ------- Agreement: (a) shall be made in writing signed by the party making it; (b) shall specify the section of this Agreement to which its relates; (c) shall either be delivered in person or by telecopier or nationally recognized next business day delivery service; (d) unless given in person, shall be given to the address specified below; (e) shall be deemed given (i) if delivered in person, on the dated delivered, (ii) if sent by telecopier, on the date transmitted or (iii) if sent by nationally recognized next business day delivery service (with 47 costs prepaid), on the first business day after so sent; and (f) shall be deemed received (i) if delivered in person, on the date of personal delivery, (ii) if telecopied, on the day transmitted or (iii) if sent by nationally recognized next business day delivery service, on the first business day after so sent. The addresses and requirements for copies are as follows: (i) if to Airgas and/or Sub: Airgas, Inc. Radnor Court 259 Radnor-Chester Road, Suite 100 Radnor, Pennsylvania 19087-5240 Attention: Peter McCausland Telecopier No.: (610) 687-1052 Confirm No.: (610) 902-4304 with a copy (which shall not constitute notice) to: McCausland, Keen & Buckman Radnor Court 259 Radnor-Chester Road, Suite 160 Radnor, Pennsylvania 19087 Attention: Robert H. Young, Jr. Telecopier No.: (610) 341-1099 or 1098 Confirm No.: (610) 341-1000 (ii) if to CIC: If prior to the Closing: ----------------------- Carbonic Industries Corporation 3700 Crestwood Parkway Suite 200 Duluth, Georgia 30136-5583 Attention: J.A. Toepke Telecopier No.: 770/717-2222 Confirm No.: 770/717-2200 ex. 109 48 and to: Carbonic Industries Corporation 1610 South Division Avenue Orlando, Florida 32805-4755 Attention: J. Vernon Hinely Telecopier No.: 407/841-0330 Confirm No.: 407/843-8534 if after the Closing, to: ------------------------ J. Vernon Hinely 1473 Montcalm Orlando, Florida 32806 407/857-4214 and to: John A. Toepke 1301 Pinehurst Road, P.O. Box 445 Grayson, Georgia 30221-1126 770/978-0299 with a copy whether before or after the Closing (which shall not constitute notice) to: Sutherland, Asbill & Brennan, L.L.P. 999 Peachtree Street, N.E. Atlanta, Georgia 30309-3996 Attention: Thomas B. Hyman, Jr. Telecopier No.: 404/853-8806 Confirm No.: 404/853-8000 (iii) if to the CIC Shareholders' Agent Committee, to the addresses on Exhibit 11.4 or as the members thereof may otherwise advise a party. Each party may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent. 11.5 Governing Law. This Agreement shall be construed and enforced ------------- in accordance with, and the legal relations between the parties shall be governed by the laws of, the State of Delaware (without regard to its rules or principles relating to conflicts of laws) except that the corporate approvals and filings contemplated by this Agreement shall be controlled by the corporate laws of the States of Florida and Delaware, as appropriate. 49 11.6 Attribution of Knowledge. For the purposes of this Agreement ------------------------ the phrases "to CIC's knowledge" or "to its knowledge" and variations of them when used with respect to CIC shall refer to all matters actually known to any of Julian K. Dominick, David W. Fike, Robert F. Harkrider, J. Vernon Hinely, Sandra Fowler Hurt, W. Lamar Lightsey or Thomas E. Matthews, Forest D. Templeton, John A. Toepke or Jonathan I. Wax at the time of the execution and delivery of this Agreement and at Closing. CIC acknowledges that the aforementioned Mr. Fike, Ms. Fowler Hurt, Mr. Templeton, Mr. Toepke and Mr. Wax, with Mr. Hinely present and participating by telephone, met with Terri Wecker of Sutherland, Asbill & Brennan, L.L.P. on March 4, 1996, and during that meeting reviewed and discussed the then most recent draft of Article 3 and the CIC Disclosure Schedule. When any matter was raised at such meeting as to which disclosure may be required pursuant to Article 3 and the people present determined that another individual should be appropriately consulted to provide further information as to such matter, then such individual was so consulted by at least one of the CIC employees present at that meeting with an individual who could reasonably be expected to have knowledge of or familiarity with a matter as to which disclosure may be required as a result of such meeting. 11.7 General Definitions. For purposes of this Agreement: ------------------- "Adjusted Cash Percentage" is defined in Section 2.9(a). ------------------------ "Aggregate Cash Consideration" is defined in Section 2.9(d). ---------------------------- "Aggregate Class A Merger Consideration" is defined in Section 2.1(a). -------------------------------------- "Aggregate Class B Merger Consideration" is defined in Section 2.1(b). -------------------------------------- "Aggregate Merger Consideration" is defined in Section 2.9(c). ------------------------------ "Aggregate Stock Consideration" is defined in Section 2.9(d). ----------------------------- "Airgas" means Airgas, Inc., a Delaware corporation. ------ "Airgas/Sub Delivered Documents" is defined in Section 4.3(a). ------------------------------ "Airgas Common Stock" means the common stock, par value $.01 per share, of ------------------- Airgas. "Airgas Stock Option" is defined in Section 2.5(b). ------------------- "applicable law" means each provision of any constitution, statute, -------------- law, ordinance, code, rule, regulation, decision, order, decree, judgment, release, license, permit, stipulation or other official pronouncement enacted, promulgated or issued by any Governmental Entity. "Articles of Merger" means the Articles of Merger required under (S)1.3. ------------------ 50 "Average Airgas Price" is defined in Section 2.1(c). -------------------- "Cash Election" is defined in Section 2.3(a). ------------- "Cash Election Deadline" is defined in Section 2.3(c). ---------------------- "Cash Election Deadline Letter" is defined in Section 2.3(c). ----------------------------- "CERCLA" is defined in Section 3.11. ------ "Certificate of Merger" means the Certificate of Merger required --------------------- under DGCL (S)1.3. "CIC" means Carbonic Industries Corporation, a Florida corporation. --- "CIC Common Stock" means, collectively, the CIC Class A Common Stock and ---------------- the CIC Class B Common Stock. "CIC Delivered Documents" is defined in Section 3.5. ----------------------- "CIC Shareholders" means the holders of record (determined in each ---------------- case as of the date and time that is consistent with the purposes of the provision in which such term is used) of issued and outstanding CIC Common Stock. "CIC Stock Option" is defined in Section 2.5(a). ---------------- "CIC Class A Common Stock" means the Class A Common Stock, par value ------------------------ $2.00 per share, of CIC. "CIC Class B Common Stock" means the Class B Common Stock, par value ------------------------ $2.00 per share, of CIC. "CIC Shareholders' Agent Committee" is defined in Article 8. --------------------------------- "CIC Special Meeting" is defined in Section 6.2. ------------------- "Class A Divisor" is defined in Section 2.1(d). --------------- "Class A F & E Amount" is defined in Section 2.2(b). -------------------- "Class A Share Value" is defined in Section 2.1(e). ------------------- "Class A Stock Consideration" is defined in Section 2.2(b). --------------------------- 51 "Class B Divisor" is defined in Section 2.1(f). --------------- "Class B F & E Amount" is defined in Section 2.2(c). -------------------- "Class B Share Value" is defined in Section 2.1(g). ------------------- "Class B Stock Consideration" is defined in Section 2.2(c). --------------------------- "Class B Transmittal Letter" is defined in Section 2.7(a). -------------------------- "Closing" means the Closing of the Merger. ------- "Closing Date" is defined in Section 1.2. ------------ "Confidential Information" is defined in Section 5.4(b). ------------------------ "Contamination" is defined in Section 3.11. ------------- "Contract" means any contract of any kind whatsoever, together with -------- all related amendments, modifications, supplements, waivers and consents. "Covered Tax Returns" is defined on Section 3.21. ------------------- "Damages" is defined in Section 7.1. ------- "De Minimis Shares" is defined in Section 2.2(b). ----------------- "Deductible" is defined in Section 7.4(c). ---------- "Debt Instruments" is defined in Section 3.14(a). ---------------- "DGCL" means the Delaware General Corporation Law, as in effect at the ---- time with respect to which it is used. "Directed Third Party" is defined in Section 3.11. -------------------- "Dissenting Shareholder" is defined in Section 2.4. ---------------------- "Dissenting Shares" is defined in Section 2.4. ----------------- "Doubtful Accounts Allowance" is defined in Section 3.12. --------------------------- "Employee Plans" is defined in Section 3.16. -------------- 52 "ERISA" is defined in Section 3.16. ----- "Exchange Act" means the Securities Exchange Act of 1934, as amended. ------------ "Exchange Agent" means The Bank of New York. -------------- "Exercised Option Shares" is defined in Section 2.1(h). ----------------------- "FBCA" means the Florida Business Corporation Act, as in effect at the ---- time with respect to which it is used. "Financial Statements" is defined in Section 3.22. -------------------- "Form of Cash Election/Transmittal Letter" is defined in Section 2.3(b). ---------------------------------------- "Form S-4 Effective Date" is defined in Section 2.1(i). ----------------------- "Fowler Hurt Employment Agreement" is defined in Section 9.1(k). -------------------------------- "Governmental Entity" means any legislative, executive, judicial, ------------------- quasi-judicial or other public authority, agency, department, bureau, division, unit, court or other public body or person. "Guaranties" is defined in Section 3.14(b). ---------- "Hazardous Substances" is defined in Section 3.11. -------------------- "Hazardous Waste Laws" is defined in Section 3.11. -------------------- "Hinely Employment Agreement" is defined in Section 9.1(h). --------------------------- "Indemnified Person" and "Indemnified Persons" is defined in Section 7.1. ------------------ ------------------- "Indemnifying Persons" is defined in Section 7.1. -------------------- "Interim Financial Statements" is defined in Section 5.3. ---------------------------- "Interests" is defined in Section 8.2(d). --------- "IRC" means the Internal Revenue Code of 1986, as amended, and any --- successor statute. "Jefferson-Pilot" is defined in Section 6.11. --------------- 53 "lien" means any mortgage, deed to secure debt, deed of trust, ---- security interest, lien, pledge, charge, encumbrance or adverse claim of any kind whatsoever, any other security arrangement of any nature whatsoever. "Lockup/Escrow Shares" is defined in Section 2.6(b). -------------------- "Lockup/Escrow Agent" is defined in the Lockup/Escrow Agreement. ------------------- "Lockup/Escrow Agreement" is defined in Section 2.2(b). ----------------------- "Material Contract" and "Material Contracts" is defined in Section ----------------- ------------------ 3.14(d). "Maximum Cash Percentage" is defined in Section 2.3(a). ----------------------- "Merger" means the merger of CIC with and into Sub. ------ "Merger Consideration" is defined in Section 2.2(d). -------------------- "Merger Effective Time" means the time the Merger becomes effective as --------------------- determined in accordance with the DGCL and the FBCA. "Non Lockup Shares" is defined in Section 2.6(c). ----------------- "Notice of Claim" is defined in Section 7.2(a). --------------- "Notice of Objection" is defined in Section 7.2(b). ------------------- "Notice of Third Party Claim" is defined in Section 7.3(a). --------------------------- "NYSE" means the New York Stock Exchange. ---- "party" or "parties" means each or all, as appropriate, of the persons ----- ------ who have executed and delivered this Agreement, each permitted successor or assign of a party, and when appropriate to effect the binding nature of this Agreement for the benefit of another party, any other successor or assign of a party. "pending" means that written notice of the act or omission or fact or ------- circumstance with respect to which such term is used has been received by the person with respect to which such term is used. "Pension Plan" is defined in Section 3.16. ------------ 54 "Permit" means any license, permit, authorization or certificate issued ------ by a governmental authority. "Permitted Lien" means any (i) lien described in the Financial -------------- Statements; (ii) lien for Taxes not yet due and payable or which are being contested in good faith by appropriate proceedings and which have been disclosed in Section 3.21 of the CIC Disclosure Schedule (to the extent that such liens or Taxes were not properly accrued on the Financial Statements); (iii) lien imposed by applicable law and incurred in the ordinary course of business for obligations not yet due and payable to landlords, carriers, warehousemen, laborers, materialmen and the like incurred in the ordinary course of business for sums not yet delinquent; (iv) unperfected purchase money security interest existing in the ordinary course of business without the execution of a security agreement; or (v) other liens, encumbrances or restrictions which do not, individually or in the aggregate, have a material adverse effect on CIC's business operations as currently conducted. "Person" means any individual, sole proprietorship, partnership, joint ------ venture, corporation, estate, trust, unincorporated organization, association, limited liability company, institution or other entity, including any that is a governmental authority. "Plan" means any plan, program or policy and all related amendments, ---- modifications, supplements, waivers and consents. "Previous Locations" is defined in Section 3.11. ------------------ "Proxy Statement/Prospectus" is defined in Section 3.30. -------------------------- "Real Property" is defined in Section 3.11. ------------- "Registration Statement" is defined in Section 3.30. ---------------------- "Restriction" means any option, right of refusal or similar right or ----------- other restriction of any nature whatsoever (including any arising from existing or threatened litigation, but excluding transfer restrictions that may arise from federal and/or state security laws). "Rights" is defined in Section 3.2. ------ "Rules" is defined in Section 7.2(c). ----- "Scheduled Contracts" is defined in Section 3.14(d). ------------------- "SEC Filings" is defined in Section 4.9. ----------- "Securities Act" means the Securities Act of 1933, as amended. -------------- 55 "Shareholder Deliveries" is defined in Section 2.7. ---------------------- "Sub" means Airgas Carbonic Industries, Inc., a Delaware corporation --- and wholly-owned subsidiary of Airgas. "Subject Property" is defined in Section 3.9. ---------------- "Subsidiary", when used to determine the relationship of CIC to ---------- another entity, means an entity of which an aggregate of 30% or more of the stock of any class or 30% or more of other ownership interests is owned of record or beneficially by CIC, or by one or more subsidiaries of CIC, or by any combination of CIC and one or more Subsidiaries. "Tax" or "Taxes" is defined in Section 3.21. --- ----- "Tax Benefits" is defined in Section 7.1. ------------ "Templeton Employment Agreement" is defined in Section 9.1(j). ------------------------------ "Termination Date" is defined in Section 7.7. ---------------- "This Agreement" includes this agreement as set forth in this document -------------- and any amendments or other modifications and supplements, and all exhibits, schedules and other attachments, to it. "Threatened" means any act that would cause one reasonably to believe ---------- that the act, omission, fact or circumstance with respect to which such word is used is likely to occur. "Toepke Employment Agreement" is defined in Section 9.1(i). --------------------------- "Tomco\\2\\" is defined in Section 6.10. ---------- "Transmittal Letter" is defined in Section 2.7(a) ------------------ "Unadjusted Cash Percentage" is defined in Section 2.9(e). -------------------------- "Wastes" is defined in Section 3.11. ------ 11.8 Certain Rules of Construction. The following rules of ----------------------------- construction apply to this Agreement: (a) "including" and any other words or phrases of inclusion shall not be construed as terms of limitation, so that references to "included" matters shall be regarded as non-exclusive, non- characterizing illustrations; (b) "copy" or "copies" shall mean that the copy or copies of the material to which it relates are true, correct and complete; (c) when "Article", "Section", "Subsection", "Exhibit" or "Schedule" is capitalized in this Agreement, such shall refer to such item of or to this Agreement unless the context clearly provides otherwise; (d) titles and captions of or in 56 this Agreement and the cover sheet and table of contents of this Agreement are inserted only as a matter of convenience and for reference and in no way define, limit, extend or describe the scope of this Agreement or the intent of any of its provisions; and (e) whenever the context so requires, the singular includes the plural and the plural includes the singular, and the gender of any pronoun includes the other genders. 11.9 Time of the Essence; Computation of Time. Time is of the ---------------------------------------- essence of each and every provision of this Agreement. If the last day for the exercise of any privilege or the discharge of any duty under this Agreement shall fall upon Saturday, Sunday or any public or legal holiday, whether federal or of a state in which the party having such privilege or duty resides or has its principal place of business, then the party having such privilege or duty shall have until 5:00 p.m. local time on the next succeeding regular business day to exercise such privilege or to discharge such duty. 11.10 Severability. If any provision of this Agreement that is not ------------ essential to accomplishing its purposes, will for any reason and to any extent be invalid or unenforceable, the remainder of this Agreement and application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of the void or unenforceable provision. 11.11 No Joint Venture. Nothing contained in this Agreement will be ---------------- deemed or construed as creating a joint venture or partnership between any of the parties. No party is by virtue of this Agreement authorized as an agent, employee or legal representative of any other party. No party will have the power to control the activities and operations of any other and their status is, and at all times, will continue to be, that of independent contractors with respect to each other. No party will have any power or authority to bind or commit any other. No party will holder itself out as having any authority or relationship in contravention of the Section. 11.12 Absence of Third Party Beneficiary Rights. No provisions of ----------------------------------------- this Agreement are intended, nor will be interpreted, to provide or create any third party beneficiary rights or any other rights of any kind in any client, customer, affiliate, shareholder, partner or any party or any other person or entity unless specifically provided otherwise herein, and, except as so provided, however, all provisions thereof will be personal solely between the parties to this Agreement; provided, however, that the CIC Shareholders, and the holders of the CIC Options, to the extent of their right to have such options assumed by substituting therefor options issued pursuant to the Airgas Option Plan, are intended beneficiaries of this Agreement and the documents referenced herein. 57 IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement, or caused this Agreement to be executed on its behalf, as of the date first set forth above. AIRGAS, INC. By: /s/ Andrew R. Cichocki ---------------------- Andrew R. Cichocki Vice President AIRGAS CARBONIC INDUSTRIES, INC. By: /s/ Andrew R. Cichocki ---------------------- Andrew R. Cichocki Vice President CARBONIC INDUSTRIES CORPORATION By: /s/ J. Vernon Hinely -------------------- J. Vernon Hinely Chairman and President THE MEMBERS OF THE SHAREHOLDERS' AGENT COMMITTEE /s/ J. Vernon Hinely -------------------- J. Vernon Hinely /s/ John A. Toepke ------------------ John A. Toepke /s/ Jonathan I. Wax ------------------- Jonathan I. Wax [Certifications are on the following page] 58 Certification of Carbonic Industries Corporation ------------------------------------------------ The undersigned secretary of Carbonic Industries Corporation, the merging corporation, certifies pursuant to Delaware General Corporation Law (S)251(c) that a majority of the shares of its capital stock voted for the adoption of the foregoing Plan and Agreement of Merger. DULY EXECUTED on ____________ __, 1997. ----------------------------- Julian K. Dominick, Secretary Carbonic Industries Corporation Certification of Airgas Carbonic Industries, Inc. ------------------------------------------------- The undersigned secretary of Airgas Carbonic Industries, the surviving corporation, certifies pursuant to Delaware General Corporation Law (S)251(c) that 100% of the shares of its capital stock adopted by written consent pursuant to Delaware General Corporation Law (S)228 the foregoing plan and agreement of merger. DULY EXECUTED on ____________ __, 1997. -------------------------- _______________, Secretary Airgas Carbonic Industries, Inc. * * * * * 59 EXHIBIT 1.3(a) TO CIC/AIRGAS MERGER AGREEMENT ============================ CERTIFICATE OF MERGER OF CARBONIC INDUSTRIES CORPORATION WITH AND INTO AIRGAS CARBONIC INDUSTRIES, INC. ================================ The undersigned corporations do hereby certify: FIRST: That the name and state of incorporation of each of the constituent corporations of the merger are as follows: Name State Of Incorporation ---- ---------------------- Carbonic Industries Corporation Florida Airgas Carbonic Industries, Inc. Delaware SECOND: That an agreement of merger among the parties to the merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the requirements of section 251 of the General Corporation Law of the State of Delaware. THIRD: The name of the surviving corporation of the merger is Airgas Carbonic Industries, Inc. FIFTH: That the executed agreement of merger is on file at the principal place of business of Airgas Carbonic Industries, Inc. the surviving corporation, at 3700 Crestwood Parkway -Suite 200 Duluth, GA 30136-5583. SIXTH: That a copy of the agreement of merger will be furnished by Airgas Carbonic Industries, Inc., the surviving corporation, on request and without cost, to any stockholder of any of the constituent corporation. SEVENTH: This Certificate of Merger shall be effective at 11:59:59 p.m. E._.T. on ______________ __, 1997. DULY EXECUTED, delivered and certified, under seal, by a duly authorized officer of each of the merging corporation and the surviving corporation, respectively, on ___________ ____, 1997. Carbonic Industries Corporation Airgas Carbonic Industries, Inc. By: By: ------------------------- ------------------------- J. Vernon Hinely Andrew R. Cichocki Chairman and President Vice President * * * * * EXHIBIT 1.3(b) TO CIC/AIRGAS MERGER AGREEMENT ============================ ARTICLES OF MERGER OF CARBONIC INDUSTRIES CORPORATION WITH AND INTO AIRGAS CARBONIC INDUSTRIES, INC. ================================ The undersigned corporations do hereby certify with respect to the merger of Carbonic Industries Corporation, a Florida corporation, with and into Airgas Carbonic Industries, Inc., a Delaware corporation, (the "Merger") that: 1. The Plan and Agreement of Merger by and among Airgas, Inc., Airgas Carbonic Industries, Inc. and Carbonic Industries Corporation, dated as of March ___, 1997, is attached to and incorporated into these Articles of Merger as Exhibit A (the "Plan of Merger"). --------- 2. The Plan of Merger was adopted by the sole shareholder of Airgas Carbonic Industries, Inc., the surviving corporation on __________ ___, 1997. 3. The Plan of Merger was adopted by the shareholders of Carbonic Industries Corporation, the merging corporation, on __________ ___, 1997. 4. These Articles of Merger shall be effective at 11:59:59 p.m. E._.T. on ______________ __, 1997. DULY EXECUTED, delivered and certified, under seal, by a duly authorized officer of each of the surviving corporation and the merging corporation, respectively, on ___________ ____, 1997. Airgas Carbonic Industries, Inc. Carbonic Industries Corporation By: By: ---------------------------- ----------------------------- Andrew R. Cichocki J. Vernon Hinely Vice President Chairman and President * * * * * EXHIBIT 2.2(b) TO CIC/AIRGAS MERGER AGREEMENT ================ ================================================================================ CIC/AIRGAS LOCKUP/ESCROW AGREEMENT Dated as of , 1997 ------------ --- ================================================================================ TABLE OF CONTENTS ----------------- ARTICLE 1: BACKGROUND & DEFINITIONS =================================== 1.1 Background.......................................................... 1 ---------- 1.2 Definitions......................................................... 1 ----------- (a) In Merger Agreement............................................ 1 ------------------- (b) Airgas Shares.................................................. 1 ------------- (c) Airgas Stock Value............................................. 1 ------------------ (e) Proportionate Interest......................................... 2 ---------------------- (f) Other.......................................................... 2 ----- 1.3 Certain Rules of Construction....................................... 2 ----------------------------- ARTICLE 2: THE LOCK-UP/ESCROW SHARES ==================================== 2.1 Shares Subject to Agreement......................................... 2 --------------------------- 2.2 Recapitalizations................................................... 2 ----------------- 2.3 Dividends........................................................... 2 --------- 2.4 Voting Rights....................................................... 3 ------------- ARTICLE 3: DISTRIBUTIONS TO AIRGAS AS TO INDEMNIFICATION CLAIMS =============================================================== 3.1 Generally........................................................... 3 --------- (a) Undisputed Indemnification Claim............................... 3 -------------------------------- (b) Agreement...................................................... 3 --------- (c) Arbitration Decision........................................... 3 -------------------- (d) Court Decision................................................. 3 -------------- 3.2 Satisfaction of Final Determinations................................ 4 ------------------------------------ (a) Each CIC Shareholder's Share of Each Final Determination....... 4 -------------------------------------------------------- (b) Satisfaction of Each CIC Shareholder's Share of Final ----------------------------------------------------- Determination................................................. 4 ------------- 3.3 Obligation to Execute and Deliver................................... 4 --------------------------------- ARTICLE 4: DISTRIBUTIONS TO THE CIC SHAREHOLDERS ================================================ 4.1 Early Termination................................................... 4 ----------------- 4.2 At Second Anniversary............................................... 5 --------------------- 4.3 Certain Retained Amounts............................................ 5 ------------------------ (a) To Airgas...................................................... 5 --------- (b) To the CIC Shareholders' Agent Committee....................... 5 ---------------------------------------- 4.4 Distribution to the CIC Shareholders' Agent Committee............... 5 ----------------------------------------------------- ARTICLE 5: DISPOSITION OF SHARES SUBJECT TO, AND RELEASE OF SHARES ================================================================== FROM, THIS AGREEMENT ==================== 5.1 General............................................................. 6 ------- 5.2 Written Request..................................................... 6 --------------- 5.3 Determination of CIC Shareholders' Agent Committee.................. 6 -------------------------------------------------- 5.4 Effect of CIC Shareholders' Agent Committee's Determination......... 6 ----------------------------------------------------------- i 5.5 Conditional Approval of Proposed Disposition...................... 7 -------------------------------------------- 5.6 Release of Lockup/Escrow Shares From this Agreement............... 7 --------------------------------------------------- 5.7 Certain Limitation Until ______________, 1998..................... 7 --------------------------------------------- 5.8 Certain Permitted Transfers....................................... 7 --------------------------- ARTICLE 6: THE LOCK-UP/ESCROW AGENT =================================== 6.1 Powers............................................................ 8 ------ 6.2 Fees, Expenses and Indemnification of the Lockup/Escrow Agent..... 9 ------------------------------------------------------------- 6.3 Records and Reports............................................... 9 ------------------- ARTICLE 7: JUDICIAL PROCEEDINGS =============================== 7.1 Acceptance of Jurisdiction........................................ 10 -------------------------- 7.2 Service of Process................................................ 10 ------------------ 7.3 Non-exclusive..................................................... 10 ------------- ARTICLE 8: MISCELLANEOUS ======================== 8.1 No Limitation; Beneficial Rights.................................. 11 -------------------------------- 8.2 Good Faith; Further Assurances; Cooperation....................... 11 ------------------------------------------- 8.3 Notices........................................................... 11 ------- 8.4 Assignment; Successors in Interest................................ 13 ---------------------------------- (a) By a CIC Shareholder......................................... 13 -------------------- (b) By Airgas.................................................... 13 --------- (c) Binding Nature............................................... 13 -------------- (d) Successors; Ratification..................................... 13 ------------------------ 8.5 Controlling Law; Integration; Amendment; Waiver................... 14 ----------------------------------------------- 8.6 Counterparts...................................................... 14 ------------ * * * * ii CIC/AIRGAS LOCKUP/ESCROW AGREEMENT ======================= THIS IS A LOCKUP/ESCROW AGREEMENT ("this Agreement") by and among Airgas, Inc., a Delaware corporation ("Airgas"), the shareholders of Carbonic Industries Corporation, a Florida corporation ("CIC"), who have adopted this Agreement by submitting the Transmittal Letter in connection with the conversion of their CIC shares pursuant to the Merger Agreement, (as defined below) and which is also established as an integral aspect of the Merger (as defined below) and who are identified on Exhibit A to this Agreement (the "CIC Shareholders"), --------- _________________,/1/ as the Lockup/Escrow Agent (the "Lockup/Escrow Agent"), and J. Vernon Hinely, John A. Toepke and Jonathan I. Wax as the CIC Shareholders' Agent Committee and dated as of _____________ __, 1997/2/, and by which such parties, for good and valuable consideration (the mutuality, adequacy and sufficiency of which are hereby acknowledged), hereby agree as follows: ARTICLE 1: BACKGROUND & DEFINITIONS. =================================== 1.1 Background. Pursuant to that certain merger agreement among Airgas, ---------- Airgas Carbonic Industries, Inc. (a subsidiary of Airgas), and CIC dated as of ___________ __, 1997 (the "Merger Agreement"), Airgas has acquired CIC by merger (the "Merger"). The Merger Agreement provides that a portion of the Airgas Shares (as defined below) to be issued in the Merger shall be delivered to, and held by, the Lockup/Escrow Agent in accordance with this Agreement. 1.2 Definitions. ----------- (a) In Merger Agreement. Capitalized terms in this Agreement have ------------------- the same meaning as in the Merger Agreement, except as specifically provided to the contrary in this Agreement. (b) Airgas Shares. "Airgas Shares" means the $0.01 par value common ------------- stock of Airgas. (c) Airgas Stock Value. "Airgas Stock Value" is $______/share/3/ ------------------ adjusted for any subsequent recapitalization, reclassification, merger, consolidation, split-up or reverse stock split as agreed by Airgas and the CIC Shareholders' Agent Committee. (d) Indemnification Claim. "Indemnification Claim" means a claim for --------------------- indemnification made by Airgas in accordance with Merger Agreement Article 7. - --------------------- /1/To be a bank. /2/To be completed with the Closing Date. /3/To be completed at the Closing. This is the same amount as the "Average Airgas Price" in the Merger Agreement. (e) Proportionate Interest. "Proportionate Interest" means the ---------------------- percentage determined on the basis of the relative number of Lockup/Escrow Shares as set forth in Exhibit A. Such Proportionate Interests may hereafter change as a result of adjustments in accordance with Section 8.4(d), and Airgas and the CIC Shareholders' Agent Committee shall revise Exhibit A from time-to- time to reflect changes pursuant to the foregoing. (f) Other. The parties further agree that: (i) "this Agreement" ----- includes any amendments or other modifications and supplements, and all attachments, to it; (ii) "party," "parties", "parties to this Agreement" and variations of such means each or all, as appropriate, of the persons who have executed and delivered or adopted this Agreement, each permitted successor or assign of such party and, when appropriate to effect the binding nature of this Agreement for the benefit of any other party, any other successor or assign of such a party; and (iii) "person" means any individual, sole proprietorship, partnership, corporation, joint venture, limited liability company, estate, trust, unincorporated organization, association, institution, or other entity or governmental authority. 1.3 Certain Rules of Construction. The following rules of construction ----------------------------- apply to this Agreement: (a) "including" and any other words or phrases of inclusion shall not be construed as terms of limitation, so that references to "included" matters shall be regarded as non-exclusive, non-characterizing illustrations; (b) when "Article", "Section", "Subsection", "Exhibit" or "Schedule" is capitalized in this Agreement, such shall refer to such item of or to this Agreement; (c) titles and captions of or in this Agreement and the cover sheet and table of contents of this Agreement are inserted only as a matter of convenience and for reference and in no way define, limit, extend or describe the scope of this Agreement or the intent of any of its provisions; (d) whenever the context so requires, the singular includes the plural and the plural includes the singular, and the gender of any pronoun includes the other genders; and (e) each attachment to this Agreement is hereby incorporated into this Agreement and is hereby made a part of this Agreement as if set out in full in the first place that reference is made to it. ARTICLE 2: THE LOCK-UP/ESCROW SHARES. ==================================== 2.1 Shares Subject to Agreement. In accordance with Merger Agreement --------------------------- (S)2.8(c), Airgas shall cause the number of Airgas Shares to be delivered to the Lockup/Escrow Agent on behalf of each CIC Shareholder (as determined in accordance with Merger Agreement (S) 2.2) to be delivered to the Lockup/Escrow Agent, and such Airgas Shares shall be held by the Lockup/Escrow Agent pursuant to the terms of this Agreement. 2.2 Recapitalizations. Airgas shall (or it shall cause its transfer ----------------- agent to) deliver directly to the Lockup/Escrow Agent all certificates for shares resulting from recapitalizations, reclassifications, mergers, consolidations, split-ups, stock splits, stock dividends and similar transactions in respect of Lockup/Escrow Shares, and such shall be held in accordance with the provisions of this Agreement. 2.3 Dividends. All dividends (whether in cash or in Airgas Stock, or --------- other property, but excluding distributions covered by Section 2.2) or other income earned or paid on the 2 Lockup/Escrow Shares shall belong to the CIC Shareholders. Airgas shall pay such dividends and/or other earnings directly to the CIC Shareholders contemporaneously with the payment to its other shareholders. 2.4 Voting Rights. Until such time (if any) that Airgas Shares are ------------- distributed to Airgas pursuant to this Agreement, the CIC Shareholders shall retain all voting rights with respect to the Lockup/Escrow Shares, and, for that purpose, the Lockup/Escrow Agent shall execute and deliver to the CIC Shareholders all necessary proxies. ARTICLE 3: DISTRIBUTIONS TO AIRGAS AS TO INDEMNIFICATION CLAIMS. =============================================================== 3.1 Generally. Whenever one of the following shall have occurred: --------- (a) Undisputed Indemnification Claim. Airgas' giving to the -------------------------------- Lockup/Escrow Agent a copy of an Indemnification Claim (i) that (A) specifies the quantifiable nature of the loss sustained by Airgas, (B) states that Airgas is entitled to payment from the Lockup/Escrow Agreement for such Indemnification Claim in accordance with Merger Agreement Article 7 and this Agreement, and (C) states that a copy of such Indemnification Claim has been delivered to the CIC Shareholders' Agent Committee and (ii) as to which the CIC Shareholders' Agent Committee fails to give to the Lockup/Escrow Agent written notice of a good faith objection to payment of such Indemnification Claim within thirty (30) days after the date such copy is deemed received pursuant to Merger Agreement (S)11.4. (b) Agreement. Delivery to the Lockup/Escrow Agent of a certificate --------- signed by Airgas and the CIC Shareholders' Agent Committee specifying an amount to be paid to Airgas to indemnify Airgas in accordance with Merger Agreement Article 7; (c) Arbitration Decision. Delivery to the Lockup/Escrow Agent of a -------------------- written and signed decision of an arbitrator, stating that the decision was made in accordance with Merger Agreement (S)7.2(c) and that the amount stated in such decision is owed to Airgas in accordance with Merger Agreement Article 7; or (d) Court Decision. Delivery to the Lockup/Escrow Agent of a -------------- certified copy of a judgment no longer subject to appeal (as set forth in an opinion of Airgas' lawyers satisfactory to the Lockup/Escrow Agent) directing the payment of an amount from the Lockup/Escrow Shares to Airgas to indemnify Airgas in accordance with Merger Agreement Article 7; (any such undisputed Indemnification Claim, agreement or decision being referred to as a "Final Determination"), then the Lockup/Escrow Agent shall deliver to Airgas in payment of such Final Determination that number of Airgas Shares having a value equal to the specified amount, all as determined in accordance with Section 3.2 below; provided, however, that the aggregate value of the distributions to Airgas pursuant to this Article 3 may not exceed $5,000,000 of Airgas Stock (valued at the Airgas Stock Value) with respect to Final Determinations for breaches of 3 representations, warranties, covenants and agreements in the Merger Agreement excluding Merger Agreement (S) 3.26. 3.2 Satisfaction of Final Determinations. All Final Determinations ------------------------------------ pursuant to Section 3.1 above shall be satisfied as follows: (a) Each CIC Shareholder's Share of Each Final Determination. The -------------------------------------------------------- share of each Final Determination to be borne by each CIC Shareholder shall be determined by multiplying such CIC Shareholder's Proportionate Interest times the amount of the Final Determination (such product, the "CIC Shareholder's Share of the Final Determination"). (b) Satisfaction of Each CIC Shareholder's Share of Final ----------------------------------------------------- Determination. Each CIC Shareholder's Share of each Final Determination ------------- shall be satisfied from his Lockup/Escrow Shares (reduced by such shareholder's share of Final Determinations previously satisfied). In order to effect the foregoing (or if applicable, any distribution pursuant to Article 4), the Lockup/Escrow Agent shall deliver to Airgas a certificate or certificates representing the Lockup/Escrow Shares of each CIC Shareholder for a number of Airgas Shares having a value at least equal to each such CIC Shareholder's Share of the Final Determination. If any such certificate represents more than such CIC Shareholder's Share of the Final Determination, then Airgas shall issue (or shall cause to be issued) a new share certificate representing the balance of the Lockup/Escrow Shares to such CIC Shareholder (without cost to such CIC Shareholder or the Lock-up/Escrow Agent) and shall return it to the Lock-up/Escrow Agent to be held in accordance with this Agreement. 3.3 Obligation to Execute and Deliver. Airgas and the CIC Shareholders' --------------------------------- Agent Committee agree to execute instructions to the Lockup/Escrow Agent in order to carry out the provisions of this Article 3 (and also of Article 4) on a prompt and reasonable basis, all subject to their respective rights and obligations under the Merger Agreement. ARTICLE 4: DISTRIBUTIONS TO THE CIC SHAREHOLDERS. ================================================ 4.1 Early Termination. If a "Termination Tax Opinion" is received, then ----------------- the Lockup/Escrow Agent shall distribute all of the Lockup/Escrow Shares to the CIC Shareholders' Agent Committee; provided, however, that if such opinion is received prior to __________ __, 1998/4/, then the number of Lockup Escrow Shares that are distributed shall be reduced by an amount of the Lockup/Escrow Shares equal to (a) $6,000,000 in value (valued at the Airgas Stock Value) multiplied by a fraction, the numerator of which is the number of Airgas Shares into which CIC Shares were converted in the merger (assuming that the shares converted into cash were converted into Airgas Shares) and the denominator of which is the number of Airgas Shares into which CIC Shares were converted in the merger (assuming that the shares converted into - ----------------- /4/The first anniversary of the Closing Date. 4 cash were converted into Airgas Shares and further assuming that no dissenters rights were exercised), less (b) the amount of any prior distribution of Lockup/Escrow Shares (valued at the Airgas Stock Value) to Airgas in accordance with Article 3. "Termination Tax Opinion" means either (i) a legal opinion from a law firm satisfactory to Airgas and the CIC Shareholders' Agent Committee that the distribution contemplated by this Section 4.1 and any subsequent disposition of the Lockup/Escrow Shares so distributed would not cause the Merger to fail to qualify as a "reorganization" within the meaning of IRC (S) 368(a) or (ii) a legal opinion in the form of Exhibit B from Sutherland, Asbill & Brennan, L.L.P. --------- (or any successor firm). 4.2 At Second Anniversary. On __________ __, 1999/5/, the Lockup/Escrow --------------------- Agent shall distribute the Lockup/Escrow Shares then held by it to the CIC Shareholders' Agent Committee, less an amount of Lockup/Escrow Shares equal in value (valued at the Airgas Stock Value) to the amount of any Indemnification Claim with respect to which there has been no Final Determination. 4.3 Certain Retained Amounts. To the extent Lockup/Escrow Shares, which ------------------------ were due to be distributed to the CIC Shareholders pursuant to Section 4.2, were not so distributed by reason of Indemnification Claims as to which there has been no Final Determination ("Retained Lockup/Escrow Shares"), such Retained Lockup/Escrow Shares shall continue to be held by the Lockup/Escrow Agent pursuant to this Agreement solely with respect to the specific matter covered by each such Indemnification Claim (and not with respect to any other matter or any other Indemnification Claims) until the Lockup/Escrow Agent has received a Final Determination relating to such Retained Lockup/Escrow Shares. Upon receipt of such Final Determination, the Lockup/Escrow Agent shall, as the case may be: (a) To Airgas: distribute to Airgas the amount, if any, of such --------- Retained Lockup/Escrow Shares to which it is entitled pursuant to the Final Determination, in accordance with Sections 3.1 and 3.2; and (b) To the CIC Shareholders' Agent Committee: distribute such ---------------------------------------- balance to the CIC Shareholders' Agent Committee. 4.4 Distribution to the CIC Shareholders' Agent Committee. The ----------------------------------------------------- Shareholders' Agent Committee shall, subject to its rights in Merger Agreement (S) 8.2(d) (and in that connection, Airgas agrees to reissue shares generally in accordance with the last two sentences of Section 3.2 in order to effect the CIC Shareholders' Agent Committee's rights in accordance with Merger Agreement (S) 8.2(d)), distribute to the CIC Shareholders the Lockup/Escrow Shares distributed to it pursuant to the terms of this Article 4; provided, however, that if the CIC Shareholders' Agent Committee directs, the Lockup/Escrow Agent shall distribute such balance directly to the CIC Shareholders on whose behalf such Retained Lockup/Escrow Shares were held. - ------------------- /5/The second anniversary of the Closing Date. 5 ARTICLE 5: DISPOSITION OF SHARES SUBJECT TO, AND RELEASE OF SHARES FROM, ======================================================================== THIS AGREEMENT. ============== 5.1 General. If any CIC Shareholder desires to sell, transfer, give ------- (whether in trust or otherwise), pledge, encumber, hypothecate, or dispose in any fashion of all or any of his, hers or its Airgas Shares held by the Lockup/Escrow Agent subject to this Agreement, such CIC Shareholder, the CIC Shareholders' Agent Committee, Airgas and the Lockup/Escrow Agent shall follow the procedures set forth in this Article. 5.2 Written Request. The CIC Shareholder desiring to engage in any --------------- proposed sale, transfer, gift, pledge, encumbrance, hypothecation, or other disposition of all or any of his Lockup/Escrow Shares subject to this Agreement (a "Proposed Disposition") must submit in writing (in a form reasonably acceptable to the CIC Shareholders' Agent Committee) to the CIC Shareholders' Agent Committee and to Airgas a request for authorization to engage in the Proposed Disposition (the "Request"). The Request shall contain all the details of the Proposed Disposition as the CIC Shareholder in good faith determines the CIC Shareholders' Agent Committee and Airgas might need to make the determination required under Section 5.3, and the CIC Shareholders' Agent Committee and Airgas may require the CIC Shareholder to supplement the Request with additional information that the Lockup/Escrow Agent and Airgas in good faith determine is needed to make the determination required under Section 5.3. 5.3 Determination of CIC Shareholders' Agent Committee. The CIC -------------------------------------------------- Shareholders' Agent Committee and Airgas shall review the Request (and any supplemental information) as promptly as reasonably practicable and shall determine whether or not, in the sole and complete discretion of the CIC Shareholders' Agent Committee and Airgas, there is a meaningful risk that the Proposed Disposition, if consummated, would cause the Merger to fail to qualify as a "reorganization" within the meaning of IRC (S) 368(a). In discharging this duty, the CIC Shareholders' Agent Committee and Airgas, in their sole and complete discretion, may do any, all, or none of the following: (a) consult with expert counsel, with the expense thereof to be paid by the CIC Shareholder making the request; (b) require the CIC Shareholder to make available expert counsel, at the CIC Shareholder's expense, with whom the CIC Shareholders' Agent Committee and Airgas may consult; (c) require the CIC Shareholder's expert counsel to deliver a legal opinion, at the CIC Shareholder's expense and satisfactory to the CIC Shareholders' Agent Committee and Airgas, that the Proposed Disposition, if consummated, would not cause the Merger to fail to qualify as a "reorganization" within the meaning of IRC (S) 368(a); or (d) conditionally approve the Proposed Disposition, including, but not limited to, the imposition of any of the conditions referenced in Section 5.5. Such CIC Shareholder shall also pay the fees and expenses of any counsel retained by the CIC Shareholders' Agent Committee to assist and advise it in its review of the Request. 5.4 Effect of CIC Shareholders' Agent Committee's Determination. If the ----------------------------------------------------------- CIC Shareholders' Agent Committee and Airgas determine that there is no meaningful risk that the Proposed Disposition, if consummated, would cause the Merger to fail to qualify as a "reorganization" within the meaning of IRC (S) 368(a), then the Proposed Disposition shall be approved, subject to whatever conditions (including any of those referenced in Section 5.5) the 6 CIC Shareholders' Agent Committee and Airgas may impose and give notice of such determination to the CIC Shareholder, then such CIC Shareholder may consummate the Proposed Disposition (but no other transaction with respect to the Lockup/Escrow Shares). If the CIC Shareholders' Agent Committee and Airgas fail to determine that there is no such substantial risk, the Proposed Disposition shall not be approved and shall not be consummated. ANY ATTEMPTED DISPOSITION OF AIRGAS SHARES SUBJECT TO THIS AGREEMENT OTHER THAN PURSUANT TO A PROPOSED DISPOSITION THAT IS APPROVED BY THE CIC SHAREHOLDERS' AGENT COMMITTEE AND AIRGAS PURSUANT TO THIS ARTICLE 5 SHALL BE NULL AND VOID AND OF NO FORCE OR EFFECT WHATSOEVER. 5.5 Conditional Approval of Proposed Disposition. The CIC Shareholders' -------------------------------------------- Agent Committee and Airgas may impose any condition to their approval of any Proposed Disposition that the CIC Shareholders' Agent Committee and Airgas decide in their sole and absolute discretion may reduce the risk that the Proposed Disposition could cause the Merger to fail to qualify as a "reorganization" within the meaning of IRC (S) 368(a), including: (a) requiring other parties to the Proposed Disposition to execute and deliver to each of them an instrument setting forth its specific agreement that the Airgas Shares that are the subject of the Proposed Disposition will remain subject to this Agreement after consummation of the Proposed Disposition; (b) requiring that any indebtedness which is to be secured in whole or in part by the Airgas Shares pursuant to the Proposed Disposition provide the lender full recourse against the CIC Shareholder in an event of default; or (c) requiring that the Proposed Disposition occur, or not occur, within a specific time frame. 5.6 Release of Lockup/Escrow Shares From this Agreement. In connection --------------------------------------------------- with any approval of a Proposed Disposition, the CIC Shareholders' Agent Committee and Airgas, in their sole and complete discretion, shall also determine whether the Airgas Shares that are the subject of the Proposed Disposition shall remain subject to the terms and conditions of this Agreement or, if the Proposed Disposition is consummated, shall be released from the terms and conditions of this Agreement. Airgas Shares released from this Agreement shall be delivered by the Lockup/Escrow Agent to the CIC Shareholder on whose behalf such Airgas Shares were held. 5.7 Certain Limitation Until ______________, 1998./6/ Notwithstanding the --------------------------------------------- foregoing, no release of Lockup/Escrow Shares with respect to any CIC Shareholders prior to ________________, 1998 may include a number of Lockup/Escrow Shares equal to the aggregate number of Airgas Shares that would reduce a distribution pursuant to Section 4.1 multiplied by his Proportionate Interest. 5.8 Certain Permitted Transfers. Notwithstanding the foregoing or any --------------------------- other provisions of this Agreement (other than Section 5.7), the CIC Shareholders Agent Committee and Airgas shall approve any proposed sale, transfer, gift, pledge, encumbrance, hypothecation, or other disposition of all or any of his Lockup/Escrow Shares subject to this Agreement (a - ----------------- /6/The first anniversary of the Closing. 7 "Proposed Permitted Disposition") described by any CIC Shareholder in writing (in a form reasonably acceptable to the CIC Shareholders' Agent Committee and Airgas) to the CIC Shareholders' Agent Committee and to Airgas that involves any of the following (the "Permitted Disposition Request"): (a) any transfer by the requesting CIC Shareholder outright or in trust or to any other entity to or for the benefit of himself, his spouse, or any of his lineal descendants (and in determining an individual shareholder's lineal descendants for this purpose, any person adopted according to law at any time shall thereafter for all purposes be treated as a child born to the one who adopts such person); provided, however, that the transferee adopts and joins this Agreement and provides a duly executed coy of a joinder and adoption instrument to Airgas and the CIC Shareholders' Agent Committee; (b) the death of the requesting CIC Shareholder; or (c) the divorce of the requesting CIC Shareholder. The Permitted Disposition Request shall contain all the details of the Proposed Permitted Disposition as the CIC Shareholder in good faith determines the CIC Shareholders' Agent Committee and Airgas might need to confirm the event required under this Section 5.8, and the CIC Shareholders' Agent Committee and Airgas may require the CIC Shareholder to supplement the Permitted Disposition Request with additional information that the Lockup/Escrow Agent and Airgas in good faith determine is needed to make the determination required under this Section. ARTICLE 6: THE LOCK-UP/ESCROW AGENT. =================================== 6.1 Powers. The Lockup/Escrow Agent: ------ (a) may rely upon and shall be protected in relying and acting upon opinions of counsel; (b) undertakes to perform only such duties as are expressly set forth in this Agreement (and no implied covenants, duties or obligations shall bind or be enforceable against the Lockup/Escrow Agent); (c) may rely and shall be protected in acting or refraining from acting upon any written notice, instruction or request furnished to it pursuant to this Agreement and believed by it to be genuine and to have been signed or presented by the proper party or parties and shall not be responsible for (and shall not be under a duty to examine or pass upon) the validity, binding effect, execution or sufficiency of this Agreement or the Merger Agreement or any other agreement, document or instrument delivered pursuant to this Agreement or the Merger Agreement; (d) shall not be liable for any action taken by it in good faith and believed by it to be authorized or within the rights or powers conferred by this Agreement or the Merger Agreement, and may consult with counsel of its choice, and shall have full and complete authori- 8 zation and protection for any action taken or suffered by it pursuant to this Agreement in good faith; (e) may resign and be discharged from his duties or obligations pursuant to this Agreement by giving notice in writing of such resignation to the CIC Shareholders' Agent Committee and Airgas specifying a date thirty (30) days or more after the date of such notice when such resignation shall take effect, whereupon the CIC Shareholders and Airgas shall appoint a new Lockup/Escrow Agent; and (f) in the event of a dispute or disagreement between the Lockup/Escrow Agent and any other person with respect to any Lockup/Escrow Shares which is not resolved or determined to its satisfaction within a reasonable time and which is not the subject of arbitration proceedings or legal proceedings for such resolution or determination, may (i) deposit the Lockup/Escrow Shares or the portion of it subject to such dispute or disagreement with a court of competent jurisdiction and interplead any other person involved in accordance with applicable rules of legal procedure; and thereupon (ii) the Lockup/Escrow Agent shall refuse to comply with any claims or demands of the parties with respect to such dispute or disagreement as long as such dispute or disagreement may continue until (A) the right of the adverse claimants shall have been finally adjudicated or (B) all differences shall have been resolved by agreement of the persons involved and the Lockup/Escrow Agent shall have been notified in writing of such agreement signed by such persons. 6.2 Fees, Expenses and Indemnification of the Lockup/Escrow Agent. The ------------------------------------------------------------- Lockup/Escrow Agent: (a) shall be entitled to a fee as compensation for its services rendered under this Agreement from Airgas and the CIC Shareholders' Agent Committee (fifty percent (50%) each) as set forth in Exhibit C; (b) shall --------- be reimbursed by Airgas and the CIC Shareholders' Agent Committee (fifty percent (50%) each) for its reasonable expenses (including attorneys' fees, costs and expenses) actually incurred or made by it in connection with disputes or controversies arising under this Agreement or in connection with the regular administration of the Lockup/Escrow Shares; and (c) shall be indemnified by Airgas and the CIC Shareholders (fifty percent (50%) each) for, and be held harmless against, any loss, liability, cost or expense (including reasonable attorneys' fees, costs and expenses) actually incurred by the Lockup/Escrow Agent without gross negligence or bad faith on its part in connection with its execution, delivery or performance of this Agreement, including any cost or expense of defending itself against any loss or liability which arises in connection with disputes or controversies arising pursuant to this Agreement. 6.3 Records and Reports. The Lockup/Escrow Agent shall keep full records ------------------- of the administration of the Lockup Shares, which shall record all transactions of the Lockup/Escrow Agent with respect to this Agreement. Such records shall be open to inspection at any time during regular business hours by any other party. Whenever it is deemed necessary or appropriate by Airgas or the CIC Shareholders' Agent Committee (but no more frequently than quarterly) and as of the date of the removal or resignation of the Lockup/Escrow Agent, the Lockup/Escrow Agent shall prepare, within sixty (60) days following such date, an inventory of the Lockup/Escrow Shares and a statement of receipts, disbursements and other transactions effected 9 by it during the period from the last report date to the date of such removal or resignation. Nothing in this Agreement shall deprive the Lockup/Escrow Agent of its right to have its accounts judicially settled, at its expense, if it so desires. The CIC Shareholders and/or the CIC Shareholders' Agent Committee and Airgas shall have the right to make or have made an audit of the Lockup/Escrow Agent's accounts as often as desired (including verification of the securities and assets in it), and for that purpose the Lockup/Escrow Agent shall make all relevant records available at the expense of the requesting person. ARTICLE 7: JUDICIAL PROCEEDINGS. =============================== 7.1 Acceptance of Jurisdiction. Any judicial proceeding, legal or -------------------------- equitable, brought against a party and involving this Agreement or any related document may be brought in any court of competent jurisdiction, state, federal or otherwise, in the State of __________/7/ (the "Jurisdictional Courts"); and, by execution and delivery of this Agreement, each party irrevocably and unconditionally (i) accepts for itself and its properties the nonexclusive jurisdiction and venue of the Jurisdictional Courts and (ii) agrees to be bound by any judgment as to it or its properties rendered by the Jurisdictional Courts and involving this Agreement or any related document. Without limiting the foregoing, each party hereby irrevocably and unconditionally waives, and agrees not to use as a defense, to the fullest extent permitted by applicable law [A] any objection which it may now or hereafter have to the laying of jurisdiction or venue in the Jurisdictional Courts (including any defense that it is not personally subject to the jurisdiction or venue of the Jurisdictional Courts) and [B] any Indemnification Claim that any such forum is an inconvenient forum. 7.2 Service of Process. Service of process in any judicial proceeding, ------------------ legal or equitable, brought against a party and involving this Agreement may be made either in accordance with Section 8.3 or in accordance with applicable law. 7.3 Non-exclusive. Nothing contained in this Agreement shall prevent a ------------- party from bringing any action or exercising any rights against another party, either personally or against any property of such other party, in any other jurisdiction; and initiating such proceeding or taking such action in any other jurisdiction shall not constitute a waiver of the submission made by each of the parties to the personal jurisdiction and venue of the Jurisdictional Courts pursuant to this Section or of the agreement contained in Section 8.6 that the laws of the State of _________/8/ shall govern the rights under this Agreement of each of the parties. The means of obtaining personal jurisdiction and venue and perfecting service of process set forth above are not exclusive but are cumulative and in addition to all other means of obtaining personal jurisdiction and perfecting service of process now or hereafter provided by applicable law. - ----------------- /7/The state where the Lockup/Escrow Agent is located. /8/The state where the Lockup/Escrow Agent is located. 10 ARTICLE 8: MISCELLANEOUS. ======================== 8.1 No Limitation; Beneficial Rights. All beneficial interests in the -------------------------------- Lockup/Escrow Shares are the property of the CIC Shareholders subject only to the specific rights of Airgas set forth in this Agreement and Merger Agreement Article 7. 8.2 Good Faith; Further Assurances; Cooperation. The parties shall in ------------------------------------------- good faith undertake to perform their obligations in this Agreement, and to cause the procedures contemplated by this Agreement to be carried out promptly in accordance with the terms of this Agreement. Each party shall do such things as may be reasonably requested by any other party in order more effectively to implement or carry out the intent of this Agreement. The parties shall cooperate fully with each other and their respective counsel, accountants and other advisors in connection with any actions that are necessary or appropriate as part of their respective obligations or rights under this Agreement, including a party's providing reasonable access to relevant information in its possession or under its control. 8.3 Notices. Each notice, communication and delivery under this ------- Agreement: (a) shall be made in writing signed by the party giving it; (b) shall specify the section of this Agreement pursuant to which given; (c) shall either be delivered in person or by telecopier (but only if a number is set forth below or has been provided in accordance with this Section 8.3), a nationally recognized next business day courier service or Express Mail; (d) unless delivered in person, shall be given to the address specified below; (e) shall be deemed to be given (i) if delivered in person, on the date delivered, (ii) if sent by telecopier, on the date transmitted (if the party giving the notice, or its employee or agent, has no reason to believe that the transmission was not made or received), (iii) if sent by a nationally recognized next business day courier with all costs paid, on the date delivered to such courier service, or (iv) if sent by Express Mail (with postage and other fees paid), on the date mailed; (f) shall be deemed to be received (i) if delivered in person, on the date delivered, (ii) if sent by telecopier, on the date transmitted (if the party giving the notice, or its employee or agent, has no reason to believe that the transmission was not made or received), (iii) if sent by a nationally recognized next business day courier with all costs paid, on the first business day after the date delivered to such courier service, or (iv) if sent by Express Mail (with postage and other fees paid), on the first business day after the date mailed. Such notice shall not be effective unless copies are provided contemporaneously as specified below, but neither the manner nor the time of giving notice to those to whom copies are to be given (which need not be the same as the addressee) shall control the date notice is given or received. The addresses and requirements for copies are as follows: If to Airgas with a copy to: - ------------ -------------- Airgas, Inc. McCausland, Keen & Buckman Suite 100-Radnor Court Suite 160-Radnor Court 259 Radnor-Chester Road 259 Radnor-Chester Road Radnor, Pennsylvania 19087 Radnor, Pennsylvania 19087 Attention: Peter McCausland Attention: Robert H. Young, Jr. Telecopier No.: 610/687-1052 Telecopier No.:610/341-1099 Confirm No.: 610/687-5253 Confirm No.: 610/341-1000 11 If to one or more of the CIC with a copy to: Shareholders, to the address -------------- specified on Exhibit A to this --------- Agreement for such CIC Shareholder, Thomas B. Hyman, Jr. with a copy to (A) anyone specified Sutherland, Asbill & Brennan, L.L.P. on such attachment as to whom a copy 999 Peachtree Street, N.E. is to be given and (B) to the CIC Atlanta, Georgia 30309 Shareholders' Agent Committee (as Telecopier No.: 404/853-8806 provided below) Confirm: 404/853-8098 If to CIC Shareholders' Agent Committee, to: - ------------------------------------------- J. Vernon Hinely Jonathan I. Wax ________________________ 2214 Bohler Road Orlando, FL ______ Atlanta, GA 30327 Telecopier: ___________ Telecopier No.: 404/____________ Confirm: _____________ Confirm: 404/352-2511 and John A. Toepke with a copy to: ________________________ -------------- ____________, GA _______ Telecopier: ___________ Thomas B. Hyman, Jr. Confirm: _____________ Sutherland, Asbill & Brennan, L.L.P. and 999 Peachtree Street, N.E. Atlanta, Georgia 30309-3996 Telecopier No.: 404/853-8806 Confirm: 404/853-8098 If to the Lockup Agent, to: -------------------------- -------------------------- -------------------------- -------------------------- Telecopier: __________ Confirm: _____________ with a copy to: - -------------- - -------------------------- - -------------------------- - -------------------------- Telecopier: __________ Confirm: _____________ Such notice shall be given to such other representative or at such other address as may be designated in a notice given pursuant to the foregoing. If notice is given pursuant to this Section 12 of a permitted successor or assign, then notice shall be given as set forth above to such permitted successor or assign. 8.4 Assignment; Successors in Interest. ---------------------------------- (a) By a CIC Shareholder. Except for any transfer or assignment of -------------------- rights under this Agreement, in whole or in part, upon the death of a CIC Shareholder to the heirs, descendants or beneficiaries of such deceased CIC Shareholder (who take subject to this Agreement) or except as may be determined by the Lockup/Escrow Agent and Airgas in connection with an approved Proposed Disposition of Lockup/Escrow Shares pursuant to Article 5 of this Agreement, no assignment or transfer by operation of law or otherwise, in whole or in part, by a CIC Shareholder of his rights under this Agreement shall be made. (b) By Airgas. Except with the prior written consent of the CIC --------- Shareholders' Agent Committee (which shall not be unreasonably withheld or delayed): (i) no assignment by operation of law or otherwise by Airgas of its rights and obligations under this Agreement shall be made other than to an entity that controls Airgas or is controlled by or is in common control with or a successor to a substantial portion or all of the business of Airgas (but then only if such entity expressly assumes all the obligations and liabilities of Airgas under this Agreement either by operation of law or by specific assumption executed by the assignee); and (ii) no transfer by operation of law or otherwise by Airgas of a substantial part of its business shall be made unless all the obligations and liabilities of Airgas under this Agreement are assumed in connection with such transfer either by operation of law or by specific assumption executed by the transferee. In any such event, Airgas shall remain liable for the performance of all such assigned, transferred and assumed obligations, which liability shall be a primary obligation for full and prompt performance rather than a secondary guarantee of collectibility of damages. (c) Binding Nature. This Agreement shall be binding upon the parties -------------- and their respective legal representatives, heirs, descendants, beneficiaries and assigns (whether or not permitted), shall inure to the benefit of the parties to this Agreement and their respective legal representatives, heirs, descendants, beneficiaries and permitted successors and assigns (and to no other person or entity whatsoever). (d) Successors; Ratification. If there is a successor to a CIC ------------------------ Shareholder, his interest in the Lockup/Escrow Shares as reflected in Exhibit A --------- shall be allocated among his successors as certified to the CIC Shareholders' Agent Committee and Airgas by an appropriate person. Without limiting the foregoing or any other provision of this Agreement and without acknowledging the necessity therefor, the CIC Shareholders shall undertake in good faith to have any heir, descendant, beneficiary, personal representative or other successor or assign of a deceased or incapacitated CIC Shareholder ratify and confirm the agreements and obligations of such CIC Shareholder (including the authority of the Lockup/Escrow Agent) under this Agreement. 13 8.5 Controlling Law; Integration; Amendment; Waiver. This Agreement ----------------------------------------------- is governed by, and shall be construed and enforced in accordance with, the laws of the State of _________/9/ except those that would render such choice of law ineffective, except the right, power and capacity of each CIC Shareholder who is not an individual shall be determined in accordance with and governed by the laws of the state or other jurisdiction where the will, trust agreement or other document that established or created the authority of such shareholder to act was executed. This Agreement (together with the Merger Agreement) supersedes all prior negotiations, agreements and understandings between the parties with respect to its subject matter, constitutes the entire agreement between the parties with respect to its subject matter, and may not be altered or amended except in writing signed by the party against whom the alteration or amendment is to be enforced. The failure of any party at any time or times to require performance of any provision of this Agreement shall in no manner affect the right to enforce the same; and no waiver by any party of any provision (or breach of any provision) of this Agreement, whether by conduct or other wise, in any one or more instances shall be deemed or construed either as a further or continuing waiver of any such provision or breach or as a waiver of any other provision (or of a breach of any other provision) of this Agreement. 8.6 Counterparts. This Agreement may be executed in one or more ------------ counterparts (one counterpart reflecting the signatures of all parties), each of which shall be deemed to be an original, and it shall not be necessary in making proof of this Agreement or its terms to account for more than one of such counterparts. This Agreement may be executed by each party upon a separate copy, and one or more execution pages (and for these purposes, a photocopy of the Transmittal Letters (as defined in the Merger Agreement) shall be sufficient) may be detached from one copy of this Agreement and attached to another copy in order to form one or more counterparts. - ----------------- /9/The state where the Lockup/Escrow Agent is located. 14 DULY EXECUTED and delivered by the parties, under seal, as of ___________ __, 1997. Airgas: Airgas, Inc. - ------ By:__________________________________ Name:__________________________ Title:___________________________ The CIC Shareholders' Agent Committee: - --------------- ---------------------------------- J. Vernon Hinely __________________________________ John A Toepke __________________________________ Jonathan I. Wax The Lockup/Escrow Agent: - ----------------------- ----------------------------------- By:________________________________ Name:______________________________ Title:___________________________ * * * * * 15 EXHIBIT A TO CIC/AIRGAS LOCKUP/ESCROW AGREEMENT ======================= LOCKUP/ESCROW SHARES -------------------- Name, Address & Number of Social Security Number Lockup/Escrow Shares Proportionate Interest - ---------------------- -------------------- ---------------------- [TO BE ADDED PRIOR TO CLOSING] * * * * * 16 EXHIBIT B TO CIC/AIRGAS LOCKUP/ESCROW AGREEMENT ======================= [LETTERHEAD OF SA&B APPEARS HERE] ________ __, 199__ ______________________, as Lockup/Escrow Agent __________________________ __________________________ ________________, __ ______ Airgas, Inc. CIC Shareholders' Agent Committee Suite 100--Radnor Court ________________________________ 259 Radnor-Chester Road ________________________________ Radnor, PA 19087-5240 __________________ _____ _______ Re: Termination Tax Opinion Under the CIC/Airgas Lockup/Escrow Agreement dated ____________ __, 1997 (the "Lockup/Escrow Agreement") Dear Addressees: This letter is being provided to you pursuant to Lockup/Escrow Agreement (S) 4.1 and is intended to be the "Termination Tax Opinion" referred to in that section. A former shareholder of [the personal representative of a former shareholder of] Carbonic Industries Corporation ("CIC") has requested our opinion that the distribution of Airgas, Inc. ("Airgas") common stock (the "Airgas Shares") from the Lockup/Escrow Agreement and the subsequent disposition of any of such Airgas Shares thereby distributed from the Lockup/Escrow Agreement will not cause the merger of CIC with and into a subsidiary of Airgas (the "Merger"), which was effected on __________ __, 1997, to fail to qualify as a reorganization within the meaning of section 368(a) of the Internal Revenue Code of 1986, as amended (the "IRC"). At the time of the Closing, McCausland, Keen & Buckman opined that the Merger did qualify as a reorganization within the meaning of IRC (S) 368(a), and we are relying on such opinion, including the assumption in it ( based in part on the satisfaction of a closing condition in the merger agreement pursuant to which the Merger was effected(the "Merger Agreement")) that CIC shareholders receiving Airgas Shares in the Merger that represented more than fifty percent (50%) of the Aggregate Merger Consideration in the Merger had, at the Merger Effective Time, no plan or intent to sell, exchange or otherwise dispose of any Airgas Shares received in the Merger. We have received a certificate from such requesting person (a copy of which is attached) stating (a) that [describe the facts giving rise to the change in circumstances] and (b) that such factual circumstances arose subsequent to the Merger Effective Time. We have assumed, without 17 Lockup/Escrow Agent, Airgas, Inc. and the CIC Shareholders' Agent Committee ______________ __, 199_ Page 2 investigation, that the facts set forth in such certificate are accurate, but to our actual knowledge, none of such facts is false nor is our reliance on them, under the circumstances, unreasonable. When used in this letter, "to our actual knowledge" means the current conscious awareness of facts or other information by the lawyer in this firm who has signed this letter. Based upon the assumptions set forth above and the attached certificate, it is our opinion that the distribution of the Airgas Shares from the Lockup/Escrow Agreement and the subsequent disposition of such Airgas Shares will not cause the Merger to fail to qualify as a reorganization within the meaning of IRC (S) 368(a). The opinion expressed in this letter [a] is strictly limited to the matters stated in this letter, and without limiting the foregoing, no other opinions are to be implied, [b] without limiting the foregoing, is being rendered solely with respect to the federal income tax consequences of the release and disposition specifically set forth above, and we hereby expressly disclaim any opinion as to the treatment of such release and disposition under the income or other tax laws of any foreign, state or local jurisdiction, and [c] speaks only as of its date; and we are under no obligation, and do not undertake, to advise the Lockup/Escrow Agent, Airgas, the CIC Shareholders' Agent Committee or any other person or entity of changes of law or fact that occur after the date of this letter, even though the change may affect the legal analysis or a legal conclusion in this letter. Except as otherwise indicated in this letter, each capitalized term in this letter has the same meaning as it has as a capitalized term in the Lockup/Escrow Agreement and/or the Merger Agreement unless the context clearly indicates to the contrary. This letter is delivered in connection with the proposed release of the Airgas Shares from the Lockup/Escrow Agreement, may not be relied upon by the addressees for any other purpose or by anyone else for any purpose, and may not be quoted, published or otherwise disseminated, without in each instance our prior written consent. Very truly yours, Sutherland, Asbill & Brennan, L.L.P. By: ________________________ _____________________ a partner 18 EXHIBIT C TO CIC/AIRGAS LOCKUP/ESCROW AGREEMENT ======================= FEES ==== [TO BE OBTAINED FROM LOCKUP/ESCROW AGENT] 19 EXHIBIT 2.5(b) TO CIC/AIRGAS MERGER AGREEMENT ============================ ISO CONVERSIONS --------------- CAVEAT: THIS IS FOR ILLUSTRATIVE PURPOSES ONLY BASED ON A HYPOTHETICAL AVERAGE - ------ -------------------------- AIRGAS PRICE OF $21.50. THE ACTUAL AVERAGE AIRGAS PRICE MAY BE MORE OR LESS THAN $21.50. * * * * *
- ------------------------------------------------------------------------------------------------------------------------- Name of Optionholder Current Option Substituted Airgas Option -------------------------------------------------------------------------------------------------- # Shares Price Total Exchange # Shares Price Total Ratio - ------------------------------------------------------------------------------------------------------------------------- J.V. Hinely 15,000 $14.22 $213,300.00 2.00 30,000 $7.11 $213,300.00 - ------------------------------------------------------------------------------------------------------------------------- John A. Toepke 10,000 $14.22 $142,200.00 2.00 20,000 $7.11 $142,200.00 - ------------------------------------------------------------------------------------------------------------------------- David W. Fike 8,000 $14.22 $113,760.00 2.00 16,000 $7.11 $113,760.00 - ------------------------------------------------------------------------------------------------------------------------- Sandra Fowler Hurt 5,000 $14.22 $ 71,100.00 2.00 10,000 $7.11 $ 71,100.00 - ------------------------------------------------------------------------------------------------------------------------- Forest D. Templeton 5,000 $14.22 $ 71,100.00 2.00 10,000 $7.11 $ 71,100.00 - ------------------------------------------------------------------------------------------------------------------------- Robert E. Hurt, III 4,000 $14.22 $ 56,880.00 2.00 8,000 $7.11 $ 56,880.00 - ------------------------------------------------------------------------------------------------------------------------- Jason C. Bramhall, V 4,000 $14.22 $ 56,880.00 2.00 8,000 $7.11 $ 56,880.00 - ------------------------------------------------------------------------------------------------------------------------- Michael L. Albert 4,000 $14.22 $ 56,880.00 2.00 8,000 $7.11 $ 56,880.00 - ------------------------------------------------------------------------------------------------------------------------- Michael A. Dirth 1,000 $14.22 $ 14,220.00 2.00 2,000 $7.11 $ 14,220.00 - ------------------------------------------------------------------------------------------------------------------------- William G. Allen 1,000 $14.22 $ 14,220.00 2.00 2,000 $7.11 $ 14,220.00 - ------------------------------------------------------------------------------------------------------------------------- Chester A. Harvey 4,000 $14.22 $ 56,880.00 2.00 8,000 $7.11 $ 56,880.00 - ------------------------------------------------------------------------------------------------------------------------- David M. Little 1,000 $14.22 $ 14,220.00 2.00 2,000 $7.11 $ 14,220.00 - ------------------------------------------------------------------------------------------------------------------------- Leonard McConnell 4,000 $14.22 $ 56,880.00 2.00 8,000 $7.11 $ 56,880.00 - ------------------------------------------------------------------------------------------------------------------------- Jerry Stanley 1,000 $14.22 $ 14,220.00 2.00 2,000 $7.11 $ 14,220.00 - ------------------------------------------------------------------------------------------------------------------------- James E. Exum 3,000 $14.22 $ 42,660.00 2.00 6,000 $7.11 $ 42,660.00 - ------------------------------------------------------------------------------------------------------------------------- Anthony Belenchia 1,000 $15.79 $ 15,790.00 2.00 2,000 $7.90 $ 15,790.00 - ------------------------------------------------------------------------------------------------------------------------- Gene Wallace 1,000 $16.45 $ 16,450.00 2.00 2,000 $8.23 $ 16,450.00 - -------------------------------------------------------------------------------------------------------------------------
* * * * * EXHIBIT 6.6(b) TO CIC/AIRGAS MERGER AGREEMENT ============================ ACCRUED VACATION ---------------- The following reports are attached hereto: 1. CIC Vacation Report as of paydate 1/31/97 for employees paid semi- monthly. 2. CIC Vacation Report as of paydate 2/07/97 for employees paid weekly. Vacation days have accrued since the date of the foregoing reports and will continue to accrue until Closing based on the yearly allowances listed on such reports. CIC will cooperate with Airgas to provide updated vacation reports prior to Closing as reasonably requested by Airgas. CIC VACATION REPORT AS OF PAYDATE 1/31/97 EMPLOYEES PAID SEMI-MONTHLY DATE OF HIRE EMPLOYEE NAME VACATION DAYS VACATION DAYS ALLOWED TAKEN 11/15/1964 TOEPKE, JOHN A. 20.0 0.0 08/01/1966 HINELY, J.V. 20.0 0.0 08/01/1967 HOUGHTON, MELBA A. 20.0 0.0 01/15/1968 HARVEY, CHESTER A. 20.0 0.0 06/10/1968 TAYLOR, CLYDE F. 20.0 0.0 12/01/1969 HALEY JR., DAVID E. 10.0 0.0 12/16/1971 ALLEN, WILLIAM G. 20.0 0.0 12/16/1971 LALUMIA, CARL R. 20.0 0.0 12/16/1971 WALKER, DANNY L. 20.0 0.0 07/15/1972 EXUM, JAMES E. 20.0 0.0 03/15/1976 BROOKE, ROBERT K. 20.0 0.0 08/23/1976 PETROSKY, MARY T. 20.0 3.0 10/11/1976 BEASLEY, JAMES W. 20.0 0.0 10/05/1977 SPIGLER, SALLY-ANN C. 20.0 0.0 11/12/1979 WEIS, MICHAEL S. 20.0 0.0 07/09/1981 PARHAM, LARRY M. 20.0 0.0 09/24/1981 LITTLE, DAVID M. 20.0 2.0 11/09/1981 BAXTER, WILLIAM E. 20.0 0.0 01/01/1982 TEMPLETON, FOREST D. 20.0 0.0 07/01/1982 BRAMHALL V., JASON C. 20.0 0.0 04/12/1983 HURT, SANDRA FOWLER 20.0 0.0 04/18/1983 BROWN, BOBBY O. 19.0 2.0 09/19/1983 HURT III, ROBERT E. 19.0 0.0 - -------------------------------------------------------------------------------- Page 1 DATE OF HIRE EMPLOYEE NAME VACATION VACATION DAYS ALLOWED DAYS TAKEN 10/01/1983 FIKE, DAVID W. 20.0 0.0 05/27/1985 MCCONNELL, LEONARD J. 17.0 0.0 07/08/1985 CLENDENEN, DAVID E. 17.0 2.0 11/05/1985 WARNER, JAMES R. 17.0 0.0 01/01/1986 ALBERT, MICHAEL L. 16.0 0.5 05/27/1986 CANIZARES JR., ROLANDO 16.0 0.0 08/01/1986 PATTERSON, RONALD R. 16.0 2.0 04/10/1987 JOYNER, JANE S. 15.0 0.0 06/15/1987 AINSWORTH, STEVEN B. 15.0 0.0 07/20/1987 JORDAN, JIMMY C. 15.0 0.0 09/28/1987 LITTLE, CHARLIE M. 15.0 0.0 12/07/1987 GOFF, DAVID B. 15.0 0.0 07/11/1988 MOORE, REX A. 15.0 0.0 08/09/1988 WARNER II, JAMES R. 15.0 2.0 05/01/1990 THOMAS, JAMES W. 15.0 0.0 09/01/1990 BROOKS JR., FRED 15.0 0.0 04/12/1991 HANSON, LARRY THOMAS 10.0 8.0 06/20/1991 BURLESON, ROBERT MILTON 10.0 0.0 10/01/1991 FARROW, LARRY E. 10.0 0.0 10/01/1991 WALLACE, E. GENE 10.0 0.0 10/21/1991 LUNA, DEBBIE J. 10.0 0.0 01/13/1992 WARTH, DARRIN ANTHONY 10.0 0.0 01/15/1992 DAVIS, ROYCE ROBERT 10.0 0.0 07/06/1992 STANLEY, JERRY 10.0 0.0 07/13/1992 COLLINS, JAMES EDWARD 10.0 0.0 03/01/1993 ACOSTA, RAFAEL E. 10.0 0.0 - -------------------------------------------------------------------------------- Page 2 DATE OF HIRE EMPLOYEE NAME VACATION VACATION DAYS ALLOWED DAYS TAKEN 09/20/1993 DIRTH, MICHAEL A. 10.0 0.0 04/18/1994 BELENCHIA, PAUL ANTHONY 10.0 0.0 05/02/1994 OEXMAN, LANCE W. 10.0 0.0 05/09/1994 ALEXANDER, WILLIAM S. 10.0 0.0 06/01/1994 FEMIANI, FLORA D. 10.0 0.0 06/27/1994 JONES, SHAWN S. 10.0 1.0 07/01/1994 EARHART, ROBERT SCOTT 10.0 0.0 08/14/1994 YOUNG, KIRT B. 10.0 0.0 10/10/1994 RODRIGUEZ-LABARCA, MIGU 10.0 0.0 11/22/1994 HAIRSTON, THOMAS J. 10.0 0.0 01/01/1995 COOKE, STEVEN JOHN 20.0 0.0 10/31/1995 ARCHIBALD, DAVID M. 10.0 0.0 11/21/1995 SMITH, CHRISTOPHER M. 10.0 0.0 04/05/1996 CHILDS, KIMBERLY A. 5.0 0.0 04/30/1996 RECKER, BONNIE D. 10.0 0.0 10/07/1996 CLARK, SHAWN K.*** 5.0 0.0 11/15/1996 BROOKE, MICHAEL P.*** 5.0 0.0 11/15/1996 SEAGROVES JR., HAROLD T.*** 5.0 0.0 ================================================================================ GRAND TOTALS 972.0 22.5 ================================================================================ ***Eligible on anniversary date Page 3 CIC VACATION REPORT AS OF PAYDATE 1/31/97 EMPLOYEES PAID SEMI-MONTHLY DATE OF HIRE EMPLOYEE NAME VACATION VACATION PART DAYS ALLOWED DAYS TAKEN TIME 12/16/1971 CRAWLEY, HORACE M 20.0 0.0 06/25/1974 STANFORD, JOHNNIE A 20.0 0.0 11/15/1976 WALTON, RONALD A 20.0 0.0 10/17/1978 SMITH, LOWELL A 20.0 5.0 03/05/1979 CLEMONS, MICHAEL R 20.0 7.0 04/24/1979 PRITCHER, BOBBY D 20.0 0.0 01/15/1982 BEALE, CARLTON R 20.0 0.0 04/01/1983 NETTLES, CHHARLES B 19.0 0.0 05/16/1983 NASH, SUE B NE 0.0 PT 06/12/1983 DOSS, DAVID L 19.0 0.0 12/12/1983 BROWN, THOMAS C 19.0 0.0 05/14/1984 WYNN, WILLIAM T 18.0 1.0 11/02/1985 SPAULDING, CLARENCE E 17.0 0.0 01/06/1986 MCMULLIN, HENRY L 16.0 0.0 11/03/1986 MICKIE, MILTON H 16.0 0.0 06/27/1987 NORTON, PHILLIP H 15.0 0.0 06/29/1987 OJEDA, MANUEL M 15.0 0.0 07/20/1987 JORDAN, JIMMY C 15.0 0.0 09/14/1987 CLENDENEN, BRUCE A. 15.0 0.0 02/10/1988 JOHNSON, GERALD T. 15.0 0.0 05/03/1988 PARRISH, DAVID P. 15.0 0.0 07/25/1988 PACIFICO JR, PETER P 15.0 0.0 07/28/1988 MCLENDON, ANN W 15.0 0.0 - -------------------------------------------------------------------------------- Page 4 09/17/1988 STEVENS, DONNIE M 15.0 0.0 03/20/1989 KING, CHARLES S 15.0 0.0 04/04/1989 FRANKLIN, MICHAEL 15.0 2.0 04/22/1989 HENDRICK SR, MALVIN L 15.0 1.0 06/13/1989 MARTIN, JAMES E 15.0 1.0 01/02/1990 CAMINERO, ISAAC A 15.0 0.0 01/22/1990 WILLIS, REBECCA M 15.0 0.0 02/19/1990 HENSLEY, JAMES D 15.0 0.0 03/31/1990 ROUSCH, WILLIAM SCOTT 15.0 1.0 04/20/1990 SWEENEY JR, DONALD E NE 0.0 PT 05/14/1990 ALEXANDER, JEFFREY L 15.0 0.0 12/17/1990 EUDY, WANNA ADELLE 15.0 5.0 12/17/1990 IRWIN, WILLIAM R 15.0 0.0 01/07/1991 HOWARD, JAMES BRDLEY 10.0 0.0 01/17/1991 BROWN, JIMMY W. 10.0 0.0 05/20/1991 HACKLER, ELDON GLEN 10.0 0.0 06/19/1991 VERGES, RAUL A 10.0 0.0 07/01/1991 BROOKS III, WILLIAM FRA 10.0 0.0 07/08/1991 HUNTSBERRY, WALTER A 10.0 0.5 07/08/1991 OLIVE, WINFRED G 10.0 0.0 07/12/1991 WADE, WALT LEE 10.0 0.0 08/12/1991 BRANDT, GLENN W 10.0 0.0 12/24/1991 SEAY, CLARENCE EDWARD 10.0 0.0 04/02/1992 STONNELL, WADE RHODES 10.0 0.0 04/06/1992 RANDLE, CHARLIE RAY 10.0 3.0 05/21/1992 DOUTHIT, KENNETH WAYNE 10.0 0.0 06/01/1992 WILLIAMS, H. VALENTINE 10.0 0.0 - -------------------------------------------------------------------------------- Page 5 07/01/1992 SORTWELL, ROBERT GLENN 10.0 1.0 07/05/1992 MACCAULEY, RICHARD E 10.0 0.0 07/24/1992 BUSH, STEVEN CRAIG 10.0 0.0 08/23/1992 BUCHANAN, GILBERT D 10.0 0.0 09/14/1992 LAMKIN, CLYDE M 10.0 0.0 11/04/1992 MYERS, MATTHEW W 10.0 0.0 12/01/1992 SILVA, OMAR 10.0 0.0 01/14/1993 STAFFORD, ERIC E 10.0 0.0 02/01/1993 VATER, REGAN D 10.0 0.0 02/07/1993 DARDEN, HENRY A 10.0 4.0 04/11/1993 WARD, STEVEN L. 10.0 0.0 04/19/1993 DOWNEY JR., RYLIE F 10.0 0.0 05/22/1993 STAFFORD, MICHAEL L 10.0 0.0 05/24/1993 COFFMAN, ROY A 10.0 0.0 06/28/1993 WYNN JR., WILLIAM T 10.0 0.0 08/21/1993 VATER, ROBIN L 10.0 0.0 08/29/1993 HARVEY, WESLEY B 10.0 2.0 09/19/1993 QUICK, HERMAN L 10.0 2.0 10/06/1993 LOWMAN, PAUL M 10.0 0.0 11/14/1993 TUCKER, JAMES D 10.0 1.0 12/06/1993 THOMAS, NATHANIEL 10.0 0.0 01/02/1994 ARRINGTON, DANIEL ANTON 10.0 1.0 02/04/1994 DYSON JR., JOHN P 10.0 0.0 02/13/1994 KIRKENDOLL, D. DAVID* 3.0 0.0 (PT) 04/18/1994 JERRETT, DAVID E 10.0 0.0 05/13/1994 SPEARMAN, CHARLES F 10.0 0.0 05/16/1994 DIETRICH, MARK ALAN 10.0 0.0 - -------------------------------------------------------------------------------- Page 6 05/31/1994 VAUGHN, CHRISTOPHER W 10.0 0.0 06/06/1994 SCHNEIDER, SUSAN M 10.0 0.0 06/08/1994 WILLIS, WENDY R. NE 0.0 TEMP 06/20/1994 DOLLY, DALE ALLEN 10.0 0.0 06/20/1994 HARIG, TERRY L. 10.0 0.0 06/20/1994 O'OPRY, STEVE L 10.0 0.0 06/27/1994 HATFIELD, GERALD W 10.0 0.0 07/02/1994 LUSK, BRIAN K N/E 0.0 (PT) 07/11/1994 CALHOUN, WAYNON D 10.0 0.0 07/11/1994 GRAY, CHARLES R 10.0 0.0 07/11/1994 SPENCE, ROBERT G 10.0 0.0 08/01/1994 RUSSELL JR., JAMES LOWE 10.0 0.0 08/11/1994 MOORE, RANDY L 10.0 0.0 08/14/1994 YOUNG, KIRT B 10.0 0.0 08/15/1994 WILBURN, RANDY 10.0 0.0 08/23/1994 ADAMS, SCOTTIE D 10.0 0.0 08/28/1994 BASS, LUTHER C 10.0 0.0 08/29/1994 REISSIG, TIMOTHY L 10.0 0.0 08/29/1994 WOLFE, RONALD J 10.0 1.5 09/01/1994 LUCAS, JAMES GLENN 10.0 0.0 09/05/1994 DAVIS, LAURIE B 10.0 1.0 09/11/1994 NABORS, DONALD R 10.0 0.0 09/11/1994 STOKES, JOHN W 10.0 0.0 09/20/1994 OSBORN, WILLIAM C. 10.0 0.0 09/21/1994 PEMBROKE, GARY R 10.0 10.0 09/26/1994 BURKE, LEE R 10.0 0.0 09/29/1994 WEED, STEVEN M 10.0 1.0 10/06/1994 CARTER, FRED C 10.0 0.0 - -------------------------------------------------------------------------------- Page 7 10/10/1994 NESBITT, NATHANIEL 10.0 0.0 10/31/1994 HARIG, TODD A 10.0 0.0 11/07/1994 CARSWELL SR., GREGORY 10.0 0.0 11/16/1994 BUTLER, ZANE A. 10.0 0.0 11/28/1994 FINLEY, JAMES R 10.0 1.0 12/07/1994 SHORTRIDGE, LOUIS H 10.0 0.0 12/18/1994 CODY JR., CHARLES NORMA 10.0 1.5 12/19/1994 SMITH, ALFRED J 10.0 2.0 01/03/1995 ROSS, RICHARD 10.0 0.0 01/23/1995 MODE, RAYMOND L 10.0 0.0 01/26/1995 PERRY, RONNIE L 10.0 0.0 02/12/1995 MASONE, ANTHONY A 10.0 0.0 02/14/1995 CROCKER, ROBERT T 10.0 3.0 02/20/1995 BURKE SR., KENNETH B 10.0 0.0 02/20/1995 LYLE, CLYDE J 10.0 0.0 02/20/1995 PREVATTE, ERIC T 10.0 0.0 02/21/1995 CREASY SR., ANTHONY S 10.0 0.0 03/27/1995 SHARPE IV, JOSEPH F 10.0 0.0 04/02/1995 WALLS, TERRY D 10.0 5.0 04/10/1995 HOSLER, NELSON J 10.0 0.0 04/17/1995 JOHNSON, ANDRE 10.0 0.0 05/01/1995 HARPER, LARRY B. 10.0 0.0 05/07/1995 PRITCHER, BRUCE D 10.0 0.0 05/15/1995 BEACH, THOMAS J 10.0 0.0 06/01/1995 VATER, JOSEPH E NE 0.0 PT 06/09/1995 BASS, HENRY CALVIN 10.0 0.0 06/30/1995 STEPHENS, CHARLES M 10.0 0.0 07/09/1995 NELSON, BENJIE K 10.0 0.0 - -------------------------------------------------------------------------------- Page 8 07/12/1995 REIS, DAVID M 10.0 0.0 07/24/1995 WHITLEY, BARRY D 10.0 0.0 07/27/1995 SCUDDER, GENE R. 10.0 0.0 08/03/1995 MARSHALL JR., CORNELIUS 10.0 0.0 08/07/1995 FAVRO, MICHAEL STEPHEN 10.0 0.0 08/23/1995 GAHM, EDWARD W NE 0.0 PT 08/30/1995 GOBER, DAWN D 10.0 0.0 09/11/1995 CASSIDY, ROGER L 10.0 0.0 09/17/1995 BOWDEN, SUZANNE B 10.0 0.0 09/24/1995 BOSWELL, BOBBY T 10.0 0.0 10/01/1995 BARNES, WILLIE 10.0 1.0 10/01/1995 FLOYD JR., CHARLES S 10.0 0.0 10/02/1995 TURBERG, DONA RAE 10.0 0.0 10/09/1995 LANIER JR, RELFERD R 10.0 0.0 10/10/1995 CONNER, LYNDELL 10.0 0.0 12/05/1995 HARDIN, FRANKLIN R 10.0 0.0 12/05/1995 PRINCE, KELLY R 7.0 0.0 PT 01/31/1996 HAMILTON JR., ROBERT J 5.0 0.0 02/12/1996 DILLASHAW, ABBY J** 5.0 0.0 02/18/1996 HARRIS, DENNIS W** 5.0 0.0 02/27/1996 JONES, MARIO D** 5.0 0.0 03/04/1996 BEASLEY JR, JAMES W** 5.0 0.0 03/18/1996 BULLOCK, RODNEY E** 5.0 0.0 04/04/1996 SLONE, TONJA L** 5.0 0.0 04/08/1996 KEEN, WAYNE A** 5.0 0.0 04/22/1996 PRATS, BRENDA A** 5.0 0.0 05/09/1996 EAGLESON, JASON Y** 5.0 0.0 05/13/1996 APPLING, TIMOTHY R** 5.0 0.0 - -------------------------------------------------------------------------------- Page 9 05/26/1996 LEE, GERRICK J** 5.0 0.0 06/10/1996 FRAZIER, JOHNNIE A NE 0.0 PT 06/12/1996 PENA, REYNALDO J** 5.0 0.0 06/16/1996 OGBURN, WALLACE J** 5.0 0.0 06/25/1996 FUSSELL, CARLERANDEL Q** 5.0 0.0 06/25/1996 SPRAGUE, MICHAEL C** 5.0 0.0 07/08/1996 BREWER, SARA I** 5.0 0.0 07/08/1996 CHATHAM, JERALD A NE 0.0 TEMP 07/08/1996 DEWOLF, WALTER DERRICK** 5.0 0.0 07/08/1996 JAQUES, CATHERINE E** 5.0 0.0 07/11/1996 GIVENS, LARRY D** 5.0 0.0 07/14/1996 SHANK, GERMAINE I** 5.0 0.0 07/17/1996 DELI, VERONICA I** 5.0 0.0 07/17/1996 MCCOLLUM, LLOYD N** 5.0 0.0 08/09/1996 FERGUSON, DONALD L** NE 0.0 PT 08/11/1996 TAYLOR, GREGORY K** 5.0 0.0 08/19/1996 EDWARDS, CHARLES L** 5.0 0.0 08/25/1996 BARNETT JR., WILLIAM G** 5.0 0.0 08/28/1996 ALEXANDER, JOSEPH B** 5.0 0.0 08/29/1996 SMITH, CHARLES L** 5.0 0.0 09/29/1996 DARLINGTON, KENNETH** 5.0 0.0 10/02/1996 SCARBOROUGH, JIMMY N** 5.0 0.0 10/20/1996 RUFF, NATHANIEL F** 5.0 0.0 11/05/1996 LUKE, MARVIN L** 5.0 0.0 11/09/1996 CONLEY, HARRY D** 5.0 0.0 11/12/1996 JONES, GREG L** 5.0 0.0 11/13/1996 SMITH, MICHAEL L** 5.0 0.0 - -------------------------------------------------------------------------------- Page 10 11/17/1996 COOPER, JERRY R** 5.0 0.0 11/26/1996 DOWDELL, LAWA A** 5.0 0.0 12/01/1996 DOWNEY, PHIO D** 5.0 0.0 12/09/1996 LAW, TROY A** 5.0 0.0 12/20/1996 MUNSON, JACOB M** 5.0 0.0 12/30/1996 DEAR JR, JAMES E** 5.0 0.0 12/30/1996 GRANTHAM, STEVEN** 5.0 0.0 01/21/1997 RHOADS, DAVID L*** 0.0 0.0 01/27/1997 HANNIGAN, DAWN R*** 0.0 0.0 01/27/1997 WOOD, TIMOTHY R*** 0.0 0.0 01/29/1997 HAYMES, LAURA*** 0.0 0.0 ================================================================================ Grand Totals 1864.0 64.5 ================================================================================ NE=Not Eligible *Eligible 12/1/97 **Eligible on anniversary date ***Eligible anniversary date 1998 Page 11 EXHIBIT 6.7 TO CIC/AIRGAS MERGER AGREEMENT ========================= TERMS OF SALE OF JACKSONVILLE & MIAMI DRY ICE OPERATIONS -------------------------------------------------------- The option is to acquire the assets and business of Carbonic Industries Corporation's dry ice operations (including customer lists, all related assets and the right to hire local dry ice employees, but excluding real property) in Miami or Jacksonville on the following basic terms: 1. The option is exercisable at the election of the holder to: (i) acquire Miami operations only; or (ii) acquire both Jacksonville and Miami operations (i.e., Jacksonville ---- cannot be acquired without Miami). 2. The Jacksonville operations will include the dry ice production facilities ------- and business. 3. Consideration for the Miami operations will be as follows (in addition to items 5 and 6 below): (i) Closing date purchase price = the lesser of book value (of the ------ acquired assets as of the CIC/Airgas merger date) or $100,000; (ii) Contingent purchase price = $-0-; (iii) Real property rental = $2,000/month triple net (term, renewal options, escalators, etc. to be negotiated). 4. Consideration for the Jacksonville operations will be as follows (in addition to items 5 and 6 below): (i) Closing date purchase price = the greater of book value (of the ------- acquired assets as of the CIC/Airgas merger date) or $250,000; (ii) Contingent purchase price = $-0-; (iii) Installment payments = $90,000/year payable on the 1st, 2nd and 3rd anniversaries of the closing (equivalent to 48% of combined 1996 operating income for Jacksonville & Miami); (iv) Real property rental = $3,500/month triple net (term, renewal options, escalators, etc. to be negotiated). 5. The purchaser(s) will execute a 5-year liquid CO\\2\\ requirements contract (commencing as of the closing of the purchase of dry ice operations pursuant to this option) with CIC at competitive prices to be negotiated. 6. When and if there is a closing of a sale of dry ice operations pursuant to this option, Florida Carbonic, Inc. and Dry Ice Sales, Inc. will each enter into a right of first refusal agreement with Airgas for the sale of substantially all of their respective stock or assets. * * * * * EXHIBIT 9.1(e) TO CIC/AIRGAS MERGER AGREEMENT [McCausland, Keen & Buckman Letterhead] ___________, 1997 Carbonic Industries Corporation and its Shareholders 3700 Crestwood Parkway, Suite 200 Duluth, Georgia 30136 Ladies and Gentlemen: This opinion is being furnished to you pursuant to Section 9.1(e) of the Agreement and Plan of Reorganization by and among Airgas, Inc., a Delaware corporation ("Airgas"), Airgas Carbonic Industries, Inc., a Delaware corporation and wholly-owned subsidiary of Airgas ("Sub"), and Carbonic Industries Corporation, a Florida corporation ("CIC"), dated as of March 12, 1997 (the "Reorganization Agreement"). The Reorganization Agreement provides for the acquisition of CIC by Airgas pursuant to a statutory merger of CIC with and into Sub on the terms and conditions set forth in the Reorganization Agreement (the "Merger"). Capitalized terms not defined herein shall have the meanings ascribed to them in the Reorganization Agreement. We have acted as legal counsel to Airgas and Sub in connection with the negotiation, preparation, execution and delivery of the Reorganization Agreement. We have examined Airgas' and Sub's Articles of Incorporation, as amended, CIC's Bylaws, Sub's Bylaws, resolutions of Airgas' and Sub's respective Boards of Directors respecting the Reorganization Agreement, and the transactions contemplated thereby, and such other documents as we deemed necessary or appropriate for the purpose of rendering this opinion. As to the due incorporation and existence in good standing of Airgas and Sub, we are relying upon certificates, instruments and telephonic or telegraphic communications from public and corporate officials. With respect to factual matters, we are relying upon letters furnished to us by officers of Airgas and Sub, as well as the representations and warranties made and expressed by Airgas and Sub in the Reorganization Agreement and other documents delivered by CIC to Airgas and Sub in connection with the Merger, and we have assumed that the same are true, correct and complete as of the dates thereof and hereof. Nothing has come to our attention that would cause us to believe that such certificates Carbonic Industries Corporation and its Shareholders _______________, 1997 Page 2 - -------------------------------------------------------------------------------- and letters furnished to us by officers of Airgas and Sub are not true, correct and complete as of the dates thereof and hereof. In the foregoing examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the authenticity of all documents submitted to us as copies of originals. Except as set forth herein, we have made no independent examination or search of public or corporate records or of factual matters. Our review of the Reorganization Agreement and the agreements, instruments and documents delivered pursuant to the Reorganization Agreement, has been limited to conformity with the matters relating to the corporate laws of the State of Delaware and the United States of America, and we express no opinion concerning conformity of the Reorganization Agreement or any agreement, instrument or other document delivered pursuant to the Reorganization Agreement, with the laws of any jurisdiction other than the State of Delaware and the United States of America. Based upon the foregoing, we are of the opinion that: 1. Airgas and Sub are corporations duly organized, validly existing and in good standing under the laws of the State of Delaware and have the full corporate power and corporate authority to carry on their respective businesses, as they are now being conducted, and to execute and deliver the Reorganization Agreement and the related documents called for therein and to consummate the transactions contemplated thereby. Airgas and Sub are each qualified as a foreign corporation in all jurisdictions in which the failure so to qualify would have a material adverse effect on Airgas or Sub, taken as a whole. 2. The shares of Airgas Common Stock to be issued to the CIC Shareholders pursuant to the Reorganization Agreement, when issued in accordance with the terms of the Reorganization Agreement, and the shares of Airgas Common Stock issuable upon exercise of the Airgas Stock Options issued under Airgas' 1984 Stock Option Plan (the "1984 Plan") in substitution for options to acquire shares of CIC Common Stock, when issued and paid for in accordance with the terms of, and upon exercise of the Airgas Stock Options granted under, the 1984 Plan, will be validly issued, fully paid and nonassessable. 3. Each of Airgas and Sub has the necessary corporate power and authority to enter into the Reorganization Agreement and to carry out their respective obligations thereunder. The execution and delivery of the Reorganization Agreement by Airgas and Sub, the performance Carbonic Industries Corporation and its Shareholders _______________, 1997 Page 3 - -------------------------------------------------------------------------------- by Airgas and Sub of their respective obligations thereunder, and the consummation by Airgas and Sub of the transactions contemplated thereby, have been duly authorized by the respective Boards of Directors of Airgas and Sub, as the case may be (which authorizations have not been modified and are in full force and effect), and no other corporate proceeding on the part of Airgas or Sub is necessary for the execution and delivery of the Reorganization Agreement by Airgas and Sub, and, subject to the filing of the Certificate of Merger and the Articles of Merger pursuant to Section 1.3(b) of the Reorganization Agreement, the performance by each of Airgas and Sub of their respective obligations thereunder and the consummation by Airgas and Sub of the transactions contemplated thereby, does not violate any provision of the Articles of Incorporation or the By-Laws of either Airgas or Sub, or of any law, ordinance, regulation, rule, order, judgment, injunction or decree, does not breach any contract, commitment, lease, agreement, instrument or other restriction, except as described in Schedule 4.6 to the Reorganization Agreement, or to the best of our knowledge, does not result in any penalty, forfeiture to termination which would be materially adverse to Airgas or Sub. 4. No filing, authorization or approval, governmental or otherwise, is necessary to enable Airgas or Sub to enter into, and to perform each of their obligations under, the Reorganization Agreement and the documents referenced therein, except for (i) the filing of the Certificate of Merger and Articles of Merger with the Delaware Secretary of State and Florida Secretary of State, respectively, and (ii) such filings as may be required to comply with federal and state securities laws. 5. The shares of Airgas Common Stock to be issued to each holder of CIC Common Stock in connection with the Merger will be issued in compliance with the Securities Act of 1933, as amended. 6. The Reorganization Agreement has been duly and validly executed and delivered by Airgas and Sub. The Reorganization Agreement and each document and instrument executed by Airgas pursuant thereto constitutes a legal, valid and binding obligation of Airgas, enforceable in accordance with its respective terms, except to the extent that its enforceability may be subject to limitations imposed by general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity) and to the effect of applicable bankruptcy, reorganization, insolvency, moratorium and similar laws of general application relating to or affecting creditors' rights generally, including, without limitation, the effect of statutory or other laws regarding fraudulent conveyances and preferential transfers. Carbonic Industries Corporation and its Shareholders _______________, 1997 Page 4 - -------------------------------------------------------------------------------- 7. Neither the execution and delivery of the Reorganization Agreement nor the consummation of the transactions contemplated thereby constitutes a violation or default under, or conflicts with, or will result in the creation of any lien on any of the assets owned by Airgas or Sub under, any term or provision of the respective Articles of Incorporation or Bylaws of Airgas or Sub, or any material agreement, including, without limitation, any material contract, license, commitment, lease, instrument, arrangement or understanding to which Airgas or Sub is a party or to which Airgas, Sub or any of their respective property is subject, or by which Airgas, Sub or any of their respective property is bound, where such lien would be materially adverse to Airgas or Sub, taken as a whole. We are members of the bar of the Commonwealth of Pennsylvania and accordingly do not express or purport to express any opinions with respect to laws other than the laws of the Commonwealth of Pennsylvania, the General Corporation Law of the State of Delaware and the federal laws of the United States of America. To the extent the laws of other states would apply to any matters that are the subject of this opinion, we have assumed, with your consent, that the laws of such jurisdictions are the same as the laws of Pennsylvania. The opinions expressed herein are rendered solely for the benefit of CIC and may not be relied upon, used or quoted in any manner whatsoever by any other person or entity for any purpose without the prior written consent of an officer of this firm. Very truly yours, McCAUSLAND, KEEN & BUCKMAN By: ____________________________________ James G. Logue, Vice President EXHIBIT 9.2(e) TO CIC/AIRGAS MERGER AGREEMENT ============================ [SA&B Letterhead] [Closing Date] __, 1997 -------------- Airgas, Inc. Suite 100-Radnor Court 259 Radnor-Chester Road Radnor, PA 19087-5240 Re: Certain Matters Relating to Carbonic Industries Corporation ("CIC") Ladies and Gentlemen: We have acted as counsel to CIC in connection with its execution, delivery and performance to date of that certain merger agreement by and among CIC, Airgas, Inc., Airgas Carbonic Industries, Inc. ("Airgas") and dated as of March __, 1997 (the "Merger Agreement") and the Lock-Up/Escrow Agreement (together with the Merger Agreement, the "Transaction Documents") and have participated on behalf of the CIC in connection with the transactions to date contemplated by the Transaction Documents (the "Transaction"). This letter is provided to you at the request of CIC pursuant to Merger Agreement (S)9.2(e). Except as otherwise indicated in this letter, each capitalized term in this letter has the same meaning as it has as a capitalized term in the Merger Agreement unless the context clearly indicates to the contrary. This letter is governed by, and shall be interpreted in accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law (1991) as modified by Annex 1 attached to this letter (which is hereby expressly incorporated into, and made a part of, this letter). As a consequence, this letter is subject to a number of qualifications, exceptions, definitions, limitations on coverage and other limitations, all as more particularly described in the Accord and such Annex 1, and this letter should be read in conjunction with such. The opinions herein are limited to: (i) Georgia law; (ii) to the extent applicable, the corporation laws of the States of Florida and Delaware and such corporation laws shall be deemed to consist solely of the provisions of the Florida Business Corporation Act and General Corporation Law of the State of Delaware, in each case without annotations, appearing in Corporations--Covering ---------------------- Corporation Practice-Procedure-Law published by Prentice Hall Information - ---------------------------------- Services as, respectively, the Florida Business Corporation Act (the "Florida Airgas, Inc. _____________________, 1997 Page 2 Corporation Laws") and the Delaware General Corporation Laws (the "Delaware Corporation Laws"); and (iii) the federal law of the United States. We further call Airgas's attention to the fact that the Merger Agreement provides that it shall be governed by the laws of the State of Delaware, other than approvals of certain corporate approvals and filings which shall be governed by the corporate laws of the State of Florida and the State of Delaware as appropriate. We are not experts on such laws and do not purport to express in this letter our opinions with respect to them, including the enforceability of any contractual choice of law provisions but, rather (and except as set forth in clause (ii) of the first sentence of this paragraph), have assumed that Delaware law is identical in all respects to Georgia law. In connection with this letter, we have reviewed copies of each of the Transaction Documents executed by CIC, and we have reviewed such other documents and given consideration to such matters of law and fact as we have deemed appropriate, in our professional judgment, to render the opinions expressed in this letter. We have relied upon factual representations made by CIC in the Merger Agreement and made by CIC in a certificate of CIC's officers delivered to us ("Officers' Certificate"), in each case without any independent investigation of them, but to our actual knowledge, none of such factual representations is false nor is our reliance on them, under the circumstances, unreasonable. When used in this letter, "to our actual knowledge" means the current conscious awareness of facts or other information by the lawyers in this firm who have signed this letter or who have had active involvement in negotiating the Transaction, preparing the Transaction Documents or this letter, and solely as to information relevant to a particular opinion issue or confirmation regarding a particular factual matter, who are primarily responsible for providing the response concerning that particular opinion issue or confirmation. Based on and subject to the foregoing, we are of the opinion that: 1. CIC, based solely on a Certificate of Existence issued by the Secretary of State of the State of Florida dated ___________ __, 1997 (and we have assumed that it was given on the date of this letter) is duly and validly existing and in good standing under the Florida Corporation Laws. 2. CIC has the corporate power and authority to own or lease its properties and to engage generally in the carbon dioxide manufacture and distribution business. 3. Based solely upon our review of CIC's articles of incorporation, bylaws, corporate minutes and share records and the Officers' Certificate: Airgas, Inc. _____________________, 1997 Page 3 (a) CIC's authorized capital consists of 1,000,000 Class A common shares, par value $2.00 per share, of which 903,993 shares are issued and outstanding and 25,000 Class B common shares, par value $2.00 per share, of which 25,000 shares are issued and outstanding (such issued and outstanding shares being referred to in this letter as the "CIC Shares"); and there are no authorized or outstanding calls, options or other rights, commitments, undertakings or understandings to acquire any CIC Shares or other capital shares or equity interests of CIC or obligations convertible into CIC Shares or other capital shares or other equity interests of any kind or class of CIC or securities of any kind or class of CIC; and (b) no provision of CIC's articles of incorporation or bylaws will prevent any CIC Shareholder from voting his, her or its shares in favor of the Transaction. 4. The execution and delivery by CIC of, and performance on or before the Closing by CIC of its agreements in, the Transaction Documents do not and will not, with lapse of time or giving of notice or both: (a) violate CIC's articles of incorporation or bylaws as in effect on the date of this letter; (b) breach, or result in a default under, any existing obligation of CIC under any agreement to which it is a party and which is listed in the CIC Disclosure Schedule; or (c) breach or otherwise violate any existing obligation of CIC under any court or administrative order, writ, judgment or decree that names CIC and is listed in the CIC Disclosure Schedule. 5. The execution and delivery by CIC of, and performance by CIC of its agreements in, the Transaction Documents neither is prohibited by, nor subjects CIC to a fine, penalty or other similar sanction under, any statute or regulation directly applicable to CIC or the Transaction. 6. If, notwithstanding the parties' choice of the law of the State of Delaware as the governing law of the Transaction Documents, a court were to apply the law of the State of Georgia to it, then (assuming that the law of the State of Delaware is identical in all respects to the law of the State of Georgia) each Transaction Document would be enforceable against CIC Shareholders in accordance with its terms. 7. Upon the filing of the Certificate of Merger with the Secretary of State of the State of Florida and the Secretary of the State of Delaware in accordance with Merger Agreement (S)1.3, the Merger shall become effective, and without limiting the foregoing, CIC Shares shall thereupon be converted as provided in Merger Agreement Article 2. Airgas, Inc. _____________________, 1997 Page 4 The following do not constitute legal opinions but are merely confirmations of factual information known to us, but the following confirmations are subject to all of the assumptions, limitations and qualifications in this letter and its attachments: (a) In reliance on the certificate issued by the Secretary of State of the State of Georgia dated ___________ __, 1997 and attached to this letter, as of _________ __, 1997, CIC was qualified to do business as a foreign corporation and in good corporate standing in the State of Georgia. (b) Except for matters that are set forth in the exhibits or schedules to the Merger Agreement or that involve stated claims against CIC in an amount less than $25,000, to our actual knowledge, since December 31, 1996, we have not given substantive attention in the form of legal consultation or representation with regard to either (i) pending litigation to which CIC is a defendant (including without limitation by reason of counterclaims or cross-claims by others in any litigation by CIC against any party) or (ii) litigation, claims or assessments overtly threatened against CIC (all such terms and phrases having the meaning provided in the American Bar Association Statement of Policy Regarding Lawyers' Responses to Auditors' Requests for Information (December 1975)). (c) In addition, and subject to the exclusions, qualifications and assumptions set forth in this letter and its attachments, we confirm to Airgas that, to our actual knowledge, there are no actions or proceedings against CIC, pending or overtly threatened in writing, before any court, governmental agency or arbitrator which seek to affect the enforceability of any Transaction Document. The opinions and confirmations of facts expressed in this letter [a] are strictly limited to the matters stated in this letter, and without limiting the foregoing, no other opinions or confirmations of facts are to be implied, and [b] speak only as of its date, and we are under no obligation, and do not undertake, to advise Airgas or any other person or entity of changes of law or fact that occur after the date of this letter, even though the change may affect the legal analysis, a legal conclusion or an informational confirmation in this letter. Airgas, Inc. _____________________, 1997 Page 5 This letter is delivered in connection with the consummation of the Transaction, may be relied upon only by Airgas in connection with such matter, may not be relied upon by Airgas for any other purpose or by anyone else for any purpose, and may not be quoted, published or otherwise disseminated, without in each instance our prior written consent. Very truly yours, Sutherland, Asbill & Brennan, L.L.P. By: -------------------------------- Thomas B. Hyman, Jr. a partner TBH/clw Annex 1 to the Letter of SA&B to Airgas with respect to CIC dated ___________ __, 1997 -- Page 1 of 3 ============================================ This Annex is a part of the letter referred to above, and each capitalized term in this Annex has the same meaning as it has as a capitalized term in such letter unless the content clearly indicates to the contrary. PART ONE: DEFINED TERMS: The definition of "Law" in the Accord includes the - ------------------------ constitution of the Opining Jurisdiction. PART TWO: EXCLUDED LEGAL ISSUES: The following modification made to the issues - -------------------------------- excluded by Accord (S)19: 1. Accord (S)19(e) is amended to include the legal issue of filing and notice requirements as to the Hart-Scott-Rodino Act. PART THREE: CERTAIN ASSUMPTIONS: The following modification is made to the - -------------------------------- assumptions of Accord (S)4: 1. Subsection (m) is amended by adding the following at the end of it: ", and potential violations or breaches of or defaults under such contracts are evaluated on the basis that the law of the State of Georgia is the governing law." PART FOUR: THE GENERAL QUALIFICATIONS: - -------------------------------------- 1. Accord (S)13 is amended by adding the following as an equitable principles limitation: (h) requiring consideration of the effect of obstruction, failure to perform or otherwise to act in accordance with an agreement by any person other than CIC. 2. Accord (S)14(a) is amended by adding the following to the end of that subsection: ", including specifically the effect of O.C.G.A. (S)11-1- 102(3)." 3. Accord (S)14(i) is amended by substituting the following: (i) may, in the absence of a waiver or consent by a guarantor, discharge such guarantor as a result of (A) the discharge of the guaranteed obligation, (B) any change in the nature or terms of the guaranteed obligation, (C) any release or compounding with any co-guarantor, (D) any action of a creditor that injures the guarantor or increases the risk to which the guarantor is exposed, including any impairment of collateral for the guaranteed obligation, or (E) any failure by the creditor to comply with the provisions of O.C.G.A. (S)(S)10-7-23 or 10-7-24. Annex 1 to the Letter of SA&B to Airgas with respect to CIC dated ___________ __, 1997 -- Page 2 of 3 ============================================ 4. Accord (S)14 is further amended by adding the following, as to which we express no opinion: (a) the enforceability of provisions purporting to require arbitration of disputes; (b) the enforceability of provisions prohibiting competition, the solicitation or acceptance of customers, of business relationships or of employees, the use or disclosure of information, or other activities in restraint of trade; (c) the enforceability of provisions imposing increased interest rates or late payment charges upon delinquency in payment or default or providing for liquidated damages, or for premiums on prepayment, acceleration, redemption, cancellation, or termination, to the extent any such provisions are deemed to be penalties or forfeitures; (d) the enforceability of waivers or advance consents that have the effect of waiving statutes of limitation, marshaling of assets or similar requirements, or as to the jurisdiction of courts, the venue of actions, the right to jury trial or, in certain cases, notices; (e) the enforceability of provisions that waivers or consents by a party may not be given effect unless in writing or in compliance with particular requirements or that a person's course of dealing, course of performance, or the like or failure or delay in taking actions may not constitute a waiver of related rights or provisions or that one or more waivers may not under certain circumstances constitute a waiver of other matters of the same kind; (f) the effect of a course of dealing, course of performance, or the like, that would modify the terms of an agreement or the respective rights or obligations of the parties under an agreement or the enforceability of provisions permitting modifications of an agreement only in writing; (g) the enforceability of provisions that determinations by a party or party's designee are conclusive; (h) the effect of laws requiring mitigation of damages; (i) the enforceability of provisions permitting the exercise, under certain circumstances, of rights without notice or without providing opportunity to cure failures to perform; Annex 1 to the Letter of SA&B to Airgas with respect to CIC dated ___________ __, 1997 -- Page 3 of 3 ============================================ (j) the effect of agreements as to rights of set off otherwise than in accordance with the applicable law; or (k) enforceability of any provisions of any Transaction Document specifying the governing law of such Transaction Document. * * * * * EXHIBIT 9.3(g) TO CIC/AIRGAS MERGER AGREEMENT [McCausland, Keen & Buckman, Letterhead] ________________, 1997 Airgas, Inc. 259 Radnor-Chester Road, Suite 100 Radnor, Pennsylvania 19087-5240 Carbonic Industries Corporation and its Shareholders 1610 South Division Avenue Orlando, Florida 32805-4755 Ladies and Gentlemen: This opinion is being delivered to you in connection with the Agreement and Plan of Merger (the "Agreement") by and among Airgas, Inc., a Delaware corporation ("Parent"), Airgas Carbonic Industries, Inc., a Delaware corporation ("Sub") and Carbonic Industries Corporation, a Florida corporation ("CIC"), dated March 12, 1997. Pursuant to the Agreement CIC will merge with and into Sub (the "Merger"), and Sub will be the surviving corporation in the Merger. Except as otherwise provided, capitalized terms referred to herein have the meanings set forth in the Merger Agreement. All section references, unless otherwise indicated, are to the Internal Revenue Code of 1986, as amended (the "Code"). We have acted as legal counsel to Parent and Sub in connection with the Merger. As such, and for the purpose of rendering this opinion, we have examined and are relying upon (without any independent investigation or review thereof) the truth and accuracy, at all relevant times, of the statements, covenants, representations and warranties contained in the following documents: 1. The Agreement; 2. The Registration Statement on Form S-4 (File No. 333- ), including the Proxy Statement/Prospectus included therein (the "Registration Statement"; 3. Representations made to us by Parent and Sub in a letter reproduced as Exhibit A hereto; 4. Representations made to us by CIC in a letter reproduced as Exhibit B hereto (the "CIC Representation Letter"); 5. Representations made by certain stockholders of CIC (the "Representative CIC Stockholders") contained in certain continuity of interest certificates delivered by them to Parent pursuant to the closing condition in Section 9.3(f) of the Agreement (the "Continuity of Interest Certificates"), which form of certificate is reproduced as Exhibit C hereto ; and 6. Such other instruments and documents related to the formation, organization and operation of Parent, Sub and CIC or to the consummation of the Merger and the transactions contemplated thereby as we have deemed necessary or appropriate. In connection with rendering this opinion, we have assumed or obtained representations (and are relying thereon, without any independent investigation or review thereof) that: A. Original documents (including signatures) are authentic and documents submitted to us as copies conform to the original documents, and there has been (or will be by the Merger Effective Time) due execution and delivery of all documents where due execution and delivery are prerequisites to effectiveness thereof; B. The Merger will be effective under the laws of the States of Delaware and Florida; C. Based on those certain representations of CIC and the Representative CIC Stockholders as provided in the CIC Representation Letter and Continuity of Interest Certificates, respectively, and the assumptions made in the last and next to last sentences of this Paragraph C, there does not exist as of the Merger Effective Time any plan or intention of CIC stockholders to sell, exchange, or otherwise dispose of a number of shares of Parent common stock received in the Merger that would reduce the CIC stockholders' ownership of Parent common stock to a number of shares having a value, as of the Merger Effective Time, of less than 50 percent of the value of all of the formerly outstanding capital stock of CIC immediately prior to the Merger Effective Time. For this purpose, shares of CIC capital stock exchanged for cash or other property, (including without limitation, cash received pursuant to the perfection of dissenters' rights) will be treated as outstanding CIC capital stock immediately prior to the Merger Effective Time. Moreover for this purpose, shares of CIC capital stock and shares of Parent common stock held by CIC stockholders and otherwise sold, redeemed, or disposed of prior or subsequent to the Merger Effective Time have been and will be considered. D. No outstanding indebtedness of CIC represents equity for tax purposes; no outstanding equity of CIC represents indebtedness for tax purposes; no outstanding indebtedness of CIC represents indebtedness of a CIC stockholder for tax purposes. Based on our examination of the foregoing items and subject to the assumptions, exceptions, limitations and qualifications set forth herein, we are of the opinion that, for federal income tax purposes, the Merger will be a "reorganization" as defined in Section 368(a) of the Code, the exchange of CIC capital stock by the CIC stockholders solely for Parent common stock, subject to the representations expressed below, will be an exchange described in Section 354 of the Code, neither Parent, Sub nor CIC will recognize gain or loss as a result of the Merger, and no gain or loss will be recognized by CIC stockholders for federal income tax purposes with respect to their receipt of Parent Common Stock in exchange for their CIC capital stock. In addition to the assumptions set forth above, this opinion is subject to the exceptions, limitations and qualifications set forth below. 1. This opinion represents and is based upon our best judgment regarding the application of federal income tax laws arising under the Code, existing judicial decisions, administrative regulations and published rulings and procedures. Our opinion is not binding upon the Internal Revenue Service or the courts, and there is no assurance that the Internal Revenue Service will not assert a contrary position. Furthermore, no assurance can be given that future legislative, judicial or administrative changes, on either a prospective or retroactive basis, would not adversely affect the accuracy of the conclusions stated herein. Nevertheless, we undertake no responsibility to advise you of any new developments in the application or interpretation of the federal income tax laws. 2. This opinion addresses only the matters specifically set forth above and does not address any other federal, state, local or foreign tax consequences that may result from the Merger or any other transaction. In particular, we express no opinion regarding (i) whether and the extent to which any CIC stockholder who has provided or will provide services to Parent or Sub will have compensation income under any provision of the Code; (ii) the effects of such compensation income, including but not limited to the effect upon the basis and holding period of the Parent common stock received by any such CIC stockholder in the Merger; (iii) the potential application of the "golden parachute" provisions (sections 280G, 3121(v)(2) and 4999) of the Code, the alternative minimum tax provisions (sections 55, 56 and 57) of the Code or sections 357 and 424 of the Code, or the regulations promulgated thereunder; (iv) the corporate- level post-Merger tax consequences to Parent, Sub or CIC, including without limitation, the survival and/or availability, after the Merger, of any of the federal income tax attributes or elections of CIC and Sub after application of any provision of the Code, as well as the regulations promulgated thereunder and judicial interpretations thereof; (v) the basis of any equity interest in Parent common stock acquired by CIC stockholders in the Merger; (vi) the tax consequences of any transaction in which a right to acquire Parent common stock was received; and (vii) the tax consequences of the Merger as applied to specific stockholders of CIC and/or holders of options or warrants for CIC capital stock. 3. No opinion is expressed as to any transaction other than the Merger as described in the Agreement or to any transaction whatsoever, including the Merger, if all the transactions described in the Agreement are not consummated in accordance with the terms of such Agreement and without waiver or breach of any material provision thereof (including, without limitation the terms and provisions of Sections 9.3 (a) and (f) of the Agreement), or if all of the representations, warranties, statements and assumptions upon which we relied are not true and accurate at all relevant times. In the event any one of the statements, representations, warranties or assumptions upon which we have relied to issue this opinion is incorrect, our opinion might be adversely affected and may not be relied upon. 4. This opinion has been delivered to you for the purpose of satisfying the condition set forth in Section 9.3(g) of the Agreement and is intended solely for your benefit; it may not be relied upon for any other purpose or by any other person or entity, and may not be made available to any other person or entity without our prior written consent. Very truly yours, McCausland, Keen & Buckman By: ------------------------------ Marc S. Maser, Vice President EXHIBIT A TO McCAUSLAND KEEN & BUCKMAN TAX OPINION [Airgas Letterhead] _______________, 1997 McCausland, Keen & Buckman Radnor Court 259 Radnor-Chester Road, Suite 160 Radnor, Pennsylvania 19087-5240 RE: Merger pursuant to Agreement and Plan of Merger (the "Agreement") dated March 12, 1997, by and among Airgas, Inc., a Delaware corporation ("Parent"), Airgas Carbonic Industries, Inc., a Delaware corporation ("Sub") and Carbonic Industries Corporation, a Florida corporation ("CIC") --------------------------------------------------------------- Ladies and Gentlemen: This letter is supplied to you in connection with your rendering of an opinion regarding certain federal income tax consequences of the Merger (as defined in Section 9.3(g) of the Agreement). Unless otherwise defined herein, capitalized terms not defined herein shall have the meanings set forth in the Agreement. A. Representations. After consulting with its counsel and auditors --------------- regarding the meaning of and factual support for the following representations, the undersigned hereby certify and represent that the following facts are true as of the Merger Effective Time: 1. Except as described in the attached schedule, the Merger will be consummated in compliance with the material terms of the Agreement and none of the material terms and conditions therein have been waived or modified and Parent and Sub have no plan or intention to waive or modify further any such material term or condition. 2. The ratio for exchange of shares of capital stock of CIC for common stock of Parent in the Merger was negotiated through arm's length bargaining. Accordingly, the undersigned believes that the fair market value of the Parent common stock and cash consideration to be received by CIC stockholders in the Merger will be approximately equal to the fair market value of the CIC capital stock surrendered by CIC stockholders in exchange therefor. 3. The total fair market value of all consideration other than Parent's common stock received by CIC's stockholders in the Merger (including, without limitation, cash paid to CIC's stockholders perfecting dissenters' rights) will be less than fifty percent (50%) of the aggregate fair market value of CIC's capital stock outstanding immediately prior to the Merger. McCausland, Keen & Buckman March , 1997 Page 2 4. Prior to the Merger, Parent will be in "Control" of Sub. As used herein, "Control" shall consist of direct ownership of stock possessing at least Eighty Percent (80%) of the total combined voting power of all classes of stock entitled to vote and at least Eighty Percent (80%) of the total number of shares of all other classes of stock of Sub. For purposes of determining "Control", a person shall not be considered to own voting stock if rights to vote such stock (or to restrict or otherwise control the voting of such stock) are held by a third party (including a voting trust) other than an agent of such person. 5. The management of Parent and Sub have no knowledge of, and believe that there does not exist any plan or intention by the CIC stockholders to sell, exchange, or otherwise dispose of a number of shares of Parent common stock received in the Merger that would reduce the CIC stockholders' ownership of Parent common stock to a number of shares having a value, as of the date of the Merger, of less than 50 percent of the value of all of the formerly outstanding capital stock of CIC immediately prior to the Merger. For purposes of this representation, shares of CIC capital stock exchanged for cash or other property, (including without limitation, cash received pursuant to the perfection of dissenters' rights) will be treated as outstanding CIC capital stock immediately prior to the Merger. Moreover, shares of CIC capital stock and shares of Parent common stock held by CIC stockholders and otherwise sold, redeemed, or disposed of prior or subsequent to the transaction will be considered in making this representation. In addition, the management of Parent and Sub are not aware of any transfers of CIC capital stock by any holders thereof prior to the Merger Effective Time which were made in contemplation of the Merger. 6. As a result of the Merger, CIC will transfer to Sub at least ninety percent (90%) of the fair market value of the net assets and at least seventy percent (70%) of the fair market value of the gross assets of CIC held by it immediately prior to the Merger. For this purpose, amounts used to pay CIC stockholders perfecting dissenters' rights or to pay reorganization expenses, and all redemptions and distributions (except for regular, normal dividends) made by CIC during the period beginning on the date of commencement of negotiations between Parent and CIC regarding the Merger and ending at the Merger Effective Time (the "Pre-Merger Period") will be considered as assets held by CIC immediately prior to the Merger. 7. The assumption by Sub of the liabilities of CIC pursuant to the Merger is for a bona fide business purpose and the principal purpose of such assumption is not the avoidance of federal income tax on the transfer of assets of CIC to Sub pursuant to the Merger. 8. No liabilities of any person other than CIC will be assumed by Sub or Parent in the Merger, and none of the shares of capital stock of CIC to be surrendered in exchange for Parent common stock in the Merger will be subject to any liabilities. McCausland, Keen & Buckman March , 1997 Page 3 9. Parent has no plan or intention to cause Sub to issue additional shares of stock after the Merger that would result in Parent losing Control of Sub. In addition thereto, Parent has no plan or intention to reaquire any of its stock issued pursuant to the Merger. 10. Except for transfers described in both Section 368(a)(2)(C) of the Internal Revenue Code of 1986, as amended ("Code") and Treas. Reg. (S)1.368- 2(j)(4), Parent has no plan or intention to liquidate Sub, to merge Sub into another corporation or entity, to sell, distribute or otherwise dispose of the stock of Sub, or to cause Sub to sell or otherwise dispose of any its assets except for dispositions made in the ordinary course of business or payment of expenses incurred by Sub pursuant to the Merger. 11. Parent intends that following the Merger, Sub will continue CIC's historic business or use a significant portion of CIC's historic business assets in a business. 12. Parent and Sub will pay their respective expenses, if any, incurred in connection with the Merger. Neither Parent nor Sub will pay any of the expenses of the stockholders of CIC incurred in connection with the Merger. 13. There is no intercorporate indebtedness existing between Parent and CIC or between Sub and CIC that was issued, acquired, or will be settled at a discount. 14. Neither Parent nor Sub is an investment company as defined in Sections 368(a)(2)(F)(iii) and (iv) of the Code. 15. Neither Parent nor Sub is under the jurisdiction of a court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code. 16. No stock of Sub will be issued to the CIC stockholders in the Merger. 17. None of the compensation received by any stockholder-employee of CIC pursuant to any employment, consulting or similar arrangement with Parent or Sub will be separate consideration for, or allocable to, any of his shares of CIC capital stock. None of the shares of common stock of Parent received by any stockholder-employee of CIC pursuant to the Merger are or will be separate consideration for, or allocable to, any such employment, consulting or similar arrangement. The compensation paid to any stockholder-employee of CIC pursuant to any such employment consulting or similar arrangement is or will be for services actually rendered and will be commensurate with amounts paid to third parties bargaining at arm's length for similar services. McCausland, Keen & Buckman March , 1997 Page 4 18. Parent and Sub are authorized to make all of the representations set forth herein. B. Reliance by You in Rendering Opinion; Limitations on Your Opinion. ----------------------------------------------------------------- 1. Parent and Sub recognize that (i) your opinion will be based on the representations set forth herein and on the statements contained in the Agreement and documents related thereto, and (ii) your opinion will be subject to certain limitations and qualifications including that they may not be relied upon if any such representations are not accurate in all material respects. 2. Parent and Sub recognize that your opinion will not address any tax consequences of the Merger or any action taken in connection therewith except as expressly set forth in such opinion. Very truly yours, Airgas, Inc. By: ----------------------------------------- Authorized Officer Airgas Carbonic Industries, Inc. By: ---------------------------------------- Authorized Officer EXHIBIT B TO McCAUSLAND, KEEN & BUCKMAN TAX OPINION [Carbonic Industries Corporation Letterhead] ____________, 1997 McCausland, Keen & Buckman Radnor Court 259 Radnor-Chester Road, Suite 160 Radnor, Pennsylvania 19087-5240 RE: Merger pursuant to Agreement and Plan of Merger (the "Agreement") dated March 12, 1997, by and among Airgas, Inc., a Delaware corporation ("Parent"), Airgas Carbonic Industries, Inc., a Delaware corporation ("Sub") and Carbonic Industries Corporation, a Florida corporation ("CIC") ---------------------------------------- Ladies and Gentlemen: This letter is supplied to you in connection with your rendering of an opinion regarding certain federal income tax consequences of the Merger (as defined in Section 9.3 (g)of the Agreement). Unless otherwise defined herein, capitalized terms not defined herein shall have the meanings set forth in the Agreement. A. Representations. After consulting with its counsel and auditors --------------- regarding the meaning of and factual support for the following representations, the undersigned hereby certifies and represents that the following facts are true as of the Merger Effective Time. 1. Except as described in the attached schedule, the Merger will be consummated in compliance with the material terms of the Agreement and none of the material terms and conditions therein have been waived or modified and CIC has no plan or intention to waive or modify further any such material term or condition. 2. The ratio for exchange of shares of capital stock of CIC for common stock of Parent in the Merger was negotiated through arm's length bargaining. Accordingly, the undersigned believes that the fair market value of the Parent common stock and cash consideration to be received by CIC stockholders in the Merger will be approximately equal to the fair market value of the CIC capital stock surrendered by CIC stockholders in exchange therefor. 3. Consistent with Paragraph 1 above, the total fair market value of all consideration other than Parent's common stock received by CIC's stockholders in the Merger (including, without limitation, cash paid to CIC's stockholders perfecting dissenters' rights) will be less than fifty percent (50%) of the aggregate fair market value of CIC's capital stock outstanding immediately prior to the Merger. McCausland, Keen & Buckman ___________________, 1997 Page 2 4. Other than shares of CIC capital stock or options to acquire CIC capital stock issued to present or former service providers (including, without limitation, employees and directors) of CIC in the ordinary course of business, no issuance of CIC's capital stock has occurred or will occur during the period beginning on the date of commencement of negotiations between Parent and CIC regarding the Merger and ending at the Merger Effective Time (the "Pre-Merger Period"), other than pursuant to options, warrants or agreements outstanding prior to the Pre-Merger Period or issued in the ordinary course of business during the Pre-Merger Period. 5. Based on inquiry of those persons listed in Section 11.6 of the Agreement (the "Management of CIC"), CIC has no knowledge of, and believes that there does not exist any plan or intention by the CIC stockholders to sell, exchange, or otherwise dispose of a number of shares of Parent common stock received in the Merger that would reduce the CIC stockholders' ownership of Parent common stock to a number of shares having a value, as of the date of the Merger, of less than 50 percent of the value of all of the formerly outstanding capital stock of CIC immediately prior to the Merger. For purposes of this representation, shares of CIC capital stock exchanged for cash or other property (including without limitation, cash received pursuant to the perfection of dissenters' rights) will be treated as outstanding CIC capital stock immediately prior to the Merger. Moreover, shares of CIC capital stock and shares of Parent common stock held by CIC stockholders and otherwise sold, redeemed, or disposed of prior or subsequent to the transaction will be considered in making this representation. In addition, the Management of CIC is not aware of any transfers of CIC capital stock by any holders thereof prior to the Merger Effective Time which were or will be made in contemplation of the Merger. 6. As a result of the Merger, CIC will transfer to Sub at least ninety percent (90%) of the fair market value of the net assets and at least seventy percent (70%) of the fair market value of the gross assets of CIC held by it immediately prior to the Merger. For this purpose, amounts used to pay CIC stockholders perfecting dissenters' rights or to pay reorganization expenses, and all redemptions and distributions (except for regular, normal dividends) made by CIC during the "Pre-Merger Period" will be considered as assets held by CIC immediately prior to the Merger. CIC has not redeemed any of the CIC capital stock, made any distribution with respect to any of the CIC capital stock, or disposed of any of its assets in anticipation of or as a part of a plan for the acquisition of CIC by Sub pursuant to the Merger. 7. To CIC's knowledge, the assumption by Sub of the liabilities of CIC pursuant to the Merger is for a bona fide business purpose and the principal purpose of such assumption is not the avoidance of federal income tax on the transfer of assets of CIC to Sub pursuant to the Merger. 8. The liabilities of CIC assumed by Sub and the liabilities to which the transferred assets CIC are subject were incurred by CIC in the ordinary course of its business. No liabilities of any McCausland, Keen & Buckman ___________________, 1997 Page 3 person other than CIC will be assumed by Sub or Parent in the Merger. 9. Parent, Sub and CIC will pay their respective expenses, if any, incurred in connection with the Merger. None of Parent, Sub, and CIC will pay any of the expenses of the stockholders of CIC incurred in connection with the Merger. 10. There is no intercorporate indebtedness existing between Parent and CIC or between Sub and CIC that was issued, acquired, or will be settled at a discount. 11. CIC is not an investment company as defined in Section 368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code of 1986, as amended (the "Code"). 12. CIC is not under the jurisdiction of a court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code. 13. On the date of the Merger, the fair market value of the assets of CIC will exceed the sum of its liabilities (including any liabilities to which its assets are subject). 14. None of the compensation received by any stockholder-employee of CIC pursuant to any employment, consulting or similar arrangement (including Controlling Shareholder Employment Agreement) is or will be separate consideration for, or allocable to, any of his shares of CIC capital stock. None of the shares of common stock of Parent received by any stockholder- employee of CIC pursuant to the Merger are or will be separate consideration for, or allocable to, any such employment, consulting or similar arrangement. The compensation paid to any stockholder-employee of CIC pursuant to any such employment consulting or similar arrangement is or will be for services actually rendered and will be commensurate with amounts paid to third parties bargaining at arm's length for similar services. 15. CIC is authorized to make all of the representations set forth herein. B. Reliance by You in Rendering Opinion; Limitations on Your --------------------------------------------------------- Opinion. ------- 1. CIC recognizes that (i) your opinion will be based on the representations set forth herein and on the statements contained in the Agreement and documents related thereto, and (ii) your opinion will be subject to certain limitations and qualifications including that they may not be relied upon if any such representations are not accurate in all material respects. McCausland, Keen & Buckman ___________________, 1997 Page 4 2. CIC recognizes that your opinion will not address any tax consequences of the Merger or any action taken in connection therewith except as expressly set forth in such opinion. Very truly yours, Carbonic Industries Corporation By: ____________________________________ J. Vernon Hinely, as President EXHIBIT C TO McCAUSLAND, KEEN & BUCKMAN TAX OPINION CONTINUITY OF INTEREST CERTIFICATE ---------------------------------- The undersigned is completing and delivering this Continuity of Interest Certificate to Carbonic Industries Corporation ("CIC") in connection with the merger (the "Merger") of CIC into Airgas Carbonic Industries, Inc., a wholly- owned subsidiary ("Airgas Sub") of Airgas, Inc. ("Airgas"). 1. Ownership of Airgas Shares. -------------------------- (a) Do you own any shares of Airgas stock? _____ YES ______ NO. (If no, please proceed to question 2. If yes, please complete items 1(b), 1(c) and, if applicable, 1(d) below) (b) How many shares of Airgas stock do you own? _________ (c) Did you acquire any of these shares after April 22, 1996? ____YES _____NO (d) If the answer to 1(b) is "yes," did you acquire any of these shares in anticipation of the Merger? _____ YES _____ NO. 2. Ownership of CIC Shares. ----------------------- (a) How many shares of CIC Class A common stock do you own? ____________ (b) How many shares of CIC Class B common stock do you own? ____________ (c) Were any of these shares acquired after April 22, 1996? ______ YES ____ NO If YES, please briefly describe the circumstances under which you acquired the shares and list the approximate dates and the number of shares involved:______________________________________________ _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ (d) Were any of these CIC shares acquired in anticipation of the Merger? ____ YES ___ NO If YES, please briefly describe the circumstances under which you acquired the shares and list the approximate dates and the number of shares involved:______________________________________________ _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ Continuity of Interest Certificate - Page 2 of 3 - ------------------------- (e) Have you sold, exchanged or otherwise disposed of any CIC shares since April 22, 1996? ______ YES _______ NO. If YES, please briefly describe the circumstances and list the approximate dates and the number of shares involved:_____________ _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ (f) Have you sold, exchanged or disposed of any CIC shares in anticipation of the Merger? ______ YES ______ NO If YES, please briefly describe the circumstances and list the approximate dates and the number of shares involved:_____________ _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ 3. No Intention to Sell Lockup Shares. ---------------------------------- I do not have any present plan or intention to sell, exchange or otherwise dispose of any of my Lockup Shares and will not have any such plan or intention at the time the Merger becomes effective. My "Lockup Shares" means the shares of Airgas common stock that will represent a portion (between 55% and 57%) of my proceeds from the Merger and will be held for a period of time pursuant to the Lockup/Escrow Agreement (all as further described in the Proxy Statement and Prospectus relating to the Merger and dated __________ ___, 1997). 4. Intentions Regarding Other Airgas Shares ---------------------------------------- I do not have any present plan or intention to sell, exchange or otherwise dispose of (a) any other shares of Airgas common stock that I will receive in the Merger (i.e. non-Lockup Shares) or (b) any shares of Airgas stock that I own; and I will not have any such plan or intention at the time the Merger becomes effective. ______ TRUE ______ FALSE. If FALSE, please briefly explain___________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ Continuity of Interest Certificate - Page 3 of 3 - ------------------------- 5. Importance of Certificate ------------------------- I represent that the statements contained in this certificate are true and accurate. I understand that the truthfulness and accuracy of this certificate is important to achieving the tax treatment of the Merger described in the Proxy Statement and Prospectus. I also understand that the parties to the Merger and their respective counsel are in part relying on the truth an accuracy of this certificate as well as the certificates of the other CIC shareholders to conclude that the Merger is a reorganization within the meaning of the Internal Revenue code. Accordingly, I have obtained such legal and financial counsel as I have deemed appropriate to assist me in filling out this certificate (but I did not obtain any such counsel if I did not feel it was necessary). 6. Obligation to Notify CIC of Changes. ----------------------------------- I will notify CIC in writing prior to the time that the Merger becomes effective of any changes in my intentions or my ownership of CIC or Airgas shares that would make any information contained in this certificate untrue or inaccurate. I will send such notice to CIC at ________________________, ____________. Dated _____________ ____, 1997. -------------------------------------------- (Please print exact name of shareholder) By:_________________________________________ (Signature) Name:_______________________________________ (Please print) Title:______________________________________ (If applicable) EXHIBIT 11.4 TO CIC/AIRGAS MERGER AGREEMENT ========================== CIC SHAREHOLDERS' AGENT COMMITTEE --------------------------------- J. Vernon Hinely 1473 Montcalm Orlando, Florida 32806 John A. Toepke 1301 Pinehurst Road Grayson, Georgia 30221-1126 Jonathan I. Wax 2214 Bohler Road Atlanta, Georgia 30327-1104 APPENDIX B Florida Statutes Governing Dissenters' Rights 607.1301. Dissenters' rights; definitions The following definitions apply to (S)(S) 607.1302 and 607.1320: (1) "Corporation" means the issuer of the shares held by a dissenting shareholder before the corporate action or the surviving or acquiring corporation by merger or share exchange of that issuer. (2) "Fair value," with respect to a dissenter's shares, means the value of the shares as of the close of business on the day prior to the shareholders' authorization date, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable. (3) "Shareholders' authorization date" means the date on which the shareholders' vote authorizing the proposed action was taken, the date on which the corporation received written consents without a meeting from the requisite number of shareholders in order to authorize the action, or, in the case of a merger pursuant to (S) 607.1104, the date prior to the date on which a copy of the plan of merger was mailed to each shareholder of record of the subsidiary corporation. 607.1302. Right of shareholders to dissent (1) Any shareholder of a corporation has the right to dissent from, and obtain payment of the fair value of his shares in the event of, any of the following corporate actions: (a) Consummation of a plan of merger to which the corporation is a party: 1. If the shareholder is entitled to vote on the merger, or 2. If the corporation is a subsidiary that is merged with its parent under (S) 607.1104, and the shareholders would have been entitled to vote on action taken, except for the applicability of (S) 607.1104; (b) Consummation of a sale or exchange of all, or substantially all, of the property of the corporation, other than in the usual and regular course of business, if the shareholder is entitled to vote on the sale or exchange pursuant to (S) 607.1202, including a sale in dissolution but not including a sale pursuant to court order or a sale for cash pursuant to a plan by which all or substantially all of the net proceeds of the sale will be distributed to the shareholders within 1 year after the date of sale; (c) As provided in (S) 607.0902(11), the approval of a control- share acquisition; (d) Consummation of a plan of share exchange to which the corporation is a party as the corporation the shares of which will be acquired, if the shareholder is entitled to vote on the plan; (e) Any amendment of the articles of incorporation if the shareholder is entitled to vote on the amendment and if such amendment would adversely affect such shareholder by: 1. Altering or abolishing any preemptive rights attached to any of his shares; 2. Altering or abolishing the voting rights pertaining to any of his shares, except as such rights may be affected by the voting rights of new shares then being authorized of any existing or new class or series of shares; 3. Effecting an exchange, cancellation, or reclassification of any of his shares, when such exchange, cancellation, or reclassification would alter or abolish his voting rights or alter his percentage of equity in the corporation, or affecting a reduction or cancellation of accrued dividends or other arrearages in respect to such shares; 4. Reducing the stated redemption price of any of his redeemable shares, altering or abolishing any provision relating to any sinking fund for the redemption or purchase of any of his shares, or making any of his shares subject to redemption when they are not otherwise redeemable; 5. Making noncumulative, in whole or in part, dividends of any of his preferred shares which had theretofore been cumulative; 6. Reducing the stated dividend preference of any of his preferred shares; or 7. Reducing any stated preferential amount payable on any of his preferred shares upon voluntary or involuntary liquidation; or (f) Any corporate action taken, to the extent the articles of incorporation provide that a voting or nonvoting shareholder is entitled to dissent and obtain payment for his shares. (2) A shareholder dissenting from any amendment specified in paragraph (1)(e) has the right to dissent only as to those of his shares which are adversely affected by the amendment. (3) A shareholder may dissent as to less than all the shares registered in his name. In the event, his rights shall be determined as if the shares as to which he has dissented and his other shares were registered in the names of different shareholders. -2- (4) Unless the articles of incorporation otherwise provide, this section does not apply with respect to a plan of merger or share exchange or a proposed sale or exchange of property, to the holders of shares of any class or series which, on the record date fixed to determine the shareholders entitled to vote at the meeting of shareholders at which such action is to be acted upon or to consent to any such action without a meeting, were either registered on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc., or held of record by not fewer than 2,000 shareholders. (5) A shareholder entitled to dissent and obtain payment for his shares under this section may not challenge the corporate action creating his entitlement unless the action is unlawful or fraudulent with respect to the shareholder or the corporation. 607.1320. Procedure for exercise of dissenters' rights (1) (a) If a proposed corporate action creating dissenters' rights under (S) 607.1302 is submitted to a vote at a shareholders' meeting, the meeting notice shall state that shareholders are or may be entitled to assert dissenters' rights and be accompanied by a copy of (S)(S) 607.1301, 607.1302, and 607.1320. A shareholder who wishes to assert dissenters' rights shall: 1. Deliver to the corporation before the vote is taken written notice of his intent to demand payment for his shares if the proposed action is effectuated, and 2. Note vote his shares in favor of the proposed action. A proxy or vote against the proposed action does not constitute such a notice of intent to demand payment. (b) If proposed corporate action creating dissenters' rights under (S) 607.1302 is effectuated by written consent without a meeting, the corporation shall deliver a copy of (S)(S) 607.1301, 607.1302, and 607.1320 to each shareholder simultaneously with any request for his written consent or, if such a request is not made, within 10 days after the date the corporation received written consents without a meeting from the requisite number of shareholders necessary to authorize the action. (2) Within 10 days after the shareholders' authorization date, the corporation shall give written notice of such authorization or consent or adoption of the plan of merger, as the case may be, to each shareholder who filed a notice of intent to demand payment for his shares pursuant to paragraph (1)(a) or, in the case of action authorized by written consent, to each shareholder, excepting any who voted for, or consented in writing to, the proposed action. (3) Within 20 days after the giving of notice to him, any shareholder who elects to dissent shall file with the corporation a notice of such election, stating his name and address, the number, classes, and series of shares as to which he dissents, and a demand for payment of the fair value of his shares. Any shareholder failing to file such election to dissent within the period set forth shall be bound by the terms of the proposed corporate action. Any shareholder filing an election to dissent shall deposit his certificates for certificated shares with the corporation simultaneously with the filing -3- of the election to dissent. The corporation may restrict the transfer of uncertificated shares from the date the shareholder's election to dissent is filed within the corporation. (4) Upon filing a notice of election to dissent, the shareholder shall thereafter be entitled only to payment as provided in this section and shall not be entitled to vote or to exercise any other rights of a shareholder. A notice of election may be withdrawn in writing by the shareholder at any time before an offer is made by the corporation, as provided in subsection (5), to pay for his shares. After such offer, no such notice of election may be withdrawn unless the corporation consents thereto. However, the right of such shareholder to be paid the fair value of his shares shall cease, and he shall be reinstated to have all his rights as a shareholder as of the filing of his notice of election, including any intervening preemptive rights and the right to payment of any intervening dividend or other distribution or, if any such rights have expired or any such dividend or distribution other than in cash has been completed, in lieu thereof, at the election of the corporation, the fair value thereof in cash as determined by the board as of the time of such expiration or completion, but without prejudice otherwise to any corporate proceedings that may have been taken in the interim, if: (a) Such demand is withdrawn as provided in this section; (b) The proposed corporate action is abandoned or rescinded or the shareholders revoke the authority to effect such action; (c) No demand or petition for the determination of fair value by a court has been made or filed within the time provided in this section; or (d) A court of competent jurisdiction determines that such shareholder is not entitled to the relief provided by this section. (5) Within 10 days after the expiration of the period in which shareholders may file their notices of election to dissent, or within 10 days after such corporate action is effected, whichever is later (but in no case later than 90 days from the shareholders' authorization date), the corporation shall make a written offer to each dissenting shareholder who has made demand as provided in this section to pay an amount the corporation estimates to be the fair value for such shares. If the corporate action has not been consummated before the expiration of the 90-day period after the shareholders' authorization date, the offer may be made conditional upon the consummation of such action. Such notice and offer shall be accompanied by: (a) A balance sheet of the corporation, the shares of which the dissenting shareholder holds, as of the latest available date and not more than 12 months prior to the making of such offer; and (b) A profit and loss statement of such corporation for the 12- month period ended on the date of such balance sheet or, if the corporation was not in existence throughout such 12-month period, for the portion thereof during which it was in existence. -4- (6) If within 30 days after the making of such offer any shareholder accepts the same, payment for his shares shall be made within 90 days after the making of such offer or the consummation of the proposed action, whichever is later. Upon payment of the agreed value, the dissenting shareholder shall cease to have any interest in such shares. (7) If the corporation fails to make such offer within the period specified therefor in subsection (5) or if it makes the offer and any dissenting shareholder or shareholders fail to accept the same within 30 days after receipt of written demand from any dissenting shareholder given within 60 days after the date on which such corporate action was effected, shall, or at its election at any time within such period of 60 days may, file an action in any court of competent jurisdiction in the county in this state where the registered office of the corporation is located requesting that the fair value of such shares be determined. The court shall also determine whether each dissenting shareholder, as to whom the corporation requests the court to make such determination, is entitled to receive payment for his shares. If the corporation fails to institute the proceeding as herein provided, any dissenting shareholder may do so in the name of the corporation. All dissenting shareholders (whether or not residents of this state), other than shareholders who have agreed with the corporation as to the value of their shares, shall be made parties to the proceeding as an action against their shares. The corporation shall serve a copy of the initial pleading in such proceeding upon each dissenting shareholder who is a resident of this state in the manner provided by law for the service of a summons and complaint and upon each nonresident dissenting shareholder either by registered or certified mail and publication or in such other manner as is permitted by law. The jurisdiction of the court is plenary and exclusive. All shareholders who are proper parties to the proceeding are entitled to judgment against the corporation for the amount of the fair value of their shares. The court may, if it so elects, appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers shall have such power and authority as is specified in the order of their appointment or an amendment thereof. The corporation shall pay each dissenting shareholder the amount found to be due him within 10 days after final determination of the proceedings. Upon payment of the judgment, the dissenting shareholder shall cease to have any interest in such shares. (8) The judgment may, at the discretion of the court, include a fair rate of interest, to be determined by the court. (9) The costs and expenses of any such proceeding shall be determine by the court and shall be assessed against the corporation, but all or any part of such costs and expenses may be apportioned and assessed as the court deems equitable against any or all of the dissenting shareholders who are parties to the proceeding, to whom the corporation has made an offer to pay for the shares, if the court finds that the action of such shareholders in failing to accept such offer was arbitrary, vexatious, or not in good faith. Such expenses shall include reasonable compensation for, and reasonable expenses of, the appraisers, but shall exclude the fees and expenses of counsel for, and experts employed by, any party. If the fair value of the shares, as determined, materially exceeds the amount which the corporation offered to pay therefor or if no offer was made, the court in its discretion may award to any shareholder who is a party to the proceeding such sum as the court determines to be reasonable compensation to any attorney or expert employed by the shareholder in the proceeding. -5- (10) Shares acquired by a corporation pursuant to payment of the agreed value thereof or pursuant to payment of the judgment entered therefore, as provided in this section, may be held and disposed of by such corporation as authorized but unissued shares of the corporation, except that, in the case of a merger, they may be held and disposed of as the plan of merger otherwise provides. The shares of the surviving corporation into which the shares of such dissenting shareholders would have been converted had they assented to the merger shall have the status of authorized but unissued shares of the surviving corporation. -6- PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 20. Indemnification of Directors and Officers. The Registrant's Amended and Restated Certificate of Incorporation includes a provision limiting the liability of its directors and officers and its stockholders, to the maximum extent permitted by law, for money damages except for liability (i) for any breach of the director's duty of loyalty to the Company 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 DGCL, or (iv) for any transaction from which the director derived an improper personal benefit. Section 145 of the Delaware General Corporation Law, as amended (the "DGCL"), provides that under certain circumstances a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director, officer, employee or agent of the corporation or is or was serving at its request in such capacity in another corporation or business association, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interest of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful. The directors and officers of the Registrant are insured under policies of insurance maintained by the Registrant, subject to the limits of the policies, against certain losses arising from any claim made against them by reason of being or having been such directors or officers. In addition, the Registrant has entered into contracts with all of its directors providing for indemnification of such persons by the Registrant to the full extent authorized or permitted by law, subject to certain limited exceptions. Item 21. Exhibits and Financial Statement Schedules (a) Exhibits. *2.1 Agreement and Plan of Merger by and among Airgas, Inc., Airgas Carbonic Industries, Inc. and Carbonic Industries Corporation (the "Merger Agreement") is Appendix A to the Proxy Statement/Prospectus included in Part I and is incorporated herein by reference.. 3.1 Amended and Restated Certificate of Incorporation of Airgas, Inc. dated as of August 7, 1995 (Incorporated by reference to Exhibit 3.1 to the Company's September 30, 1995 Quarterly Report on Form 10-Q). 3.2 Airgas, Inc. By-Laws Amended and Restated November 29, 1994 (Incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended March 31, 1996. ["1996 Form 10-K"]). - ---------------------------------- * Filed herewith. ** To be filed by amendment. II-1 4.1 Seventh Amended and Restated Loan Agreement dated August 10, 1995 between Airgas, Inc. and certain banks and NationsBank of North Carolina, N.A. ($375,000,000 credit facility). (Incorporated by reference to Exhibit 4.1 to the Company's September 30, 1995 Quarterly Report on Form 10-Q). 4.3 Loan Agreement dated February 5, 1996 between Airgas, Inc. and certain banks and NationsBank of North Carolina, N.A. ($100,000,000 credit facility). (Incorporated by reference to Exhibit 4.3 of the Company's 1996 Form 10-K). 4.4 Loan Agreement dated June 28, 1996 between Airgas, Inc. and NationsBank, N.A. ($100,000 credit facility). (Incorporated by reference to Exhibit 4 of the Company's June 28, 1996 Report on Form 8-K/A). *4.5 Indenture dated as of August 1, 1996 of Airgas, Inc. to Bank of New York, Trustee. *4.6 Form of Airgas, Inc. Medium-Term Note (Fixed Rate) *4.7 Form of Airgas, Inc. Medium-Term Note (Floating Rate) There are no other instruments with respect to long-term debt of the Company that involve indebtedness or securities authorized thereunder exceeding 10% of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to file a copy of any instrument or agreement defining the rights of holders of long-term debt of the Company upon request of the Securities and Exchange Commission. **5 Opinion of McCausland, Keen & Buckman regarding legality of the shares of the Company's Common Stock being registered. *8 Form of Opinion of McCausland, Keen & Buckman regarding tax matters is Exhibit 9.3(g) to the Merger Agreement included in Part I and incorporated herein by reference. 10.1 Agreement between the Company and Peter McCausland, dated January 8, 1991, and form of Common Stock Purchase Warrant. (Incorporated by reference to Exhibit 10.16 to the Company's March 31, 1992 report on Form 10-K). 10.2 Common Stock Purchase Warrant held by Britton H. Murdoch and certain other employees and other persons (Pursuant to Instruction 2 to Item 601 of Regulation S-K, the Common Stock Purchase Warrants, which are substantially identical in all material respects except as to the parties thereto, held by certain employees, including the following Executive Officers and a Director, and other persons are not being filed: Hermann Knieling, Kenneth A. Keeley, Alfred B. Crichton, Gordon L. Keen, Jr., William Sanford, Scott Melman and Ronald Beebe and Director, Merril Stott). (Incorporated by reference to Exhibit 10.17 to the Company's March 31, 1993 report on Form 10-K). - --------------------------------- * Filed herewith. ** To be filed by amendment. II-2 10.3 Amended and Restated 1984 Stock Option Plan for Directors (Non- Employees), as amended. (Incorporated by reference to Exhibit 10.1 to the Company's September 30, 1995 report on Form 10-Q). 10.4 1989 Non-Qualified Stock Option Plan for Directors (Non-Employees), as amended. (Incorporated by reference to Exhibit 10.7 to the Company's March 31, 1992 report on Form 10-K). 10.5 Amendment to the 1989 Non-Qualified Stock Option Plan for Directors (Non-Employees) as amended through August 7, 1995 (Incorporated by reference to Exhibit 10.2 to the Company's September 30, 1995 Quarterly Report on Form 10-Q). 10.6 1994 Employee Stock Purchase Plan. (Incorporated by reference to Exhibit 10.19 to the Company's March 31, 1993 report on Form 10-K). 10.7 Amended and Restated Joint Venture Agreement dated March 31, 1992 between American Carbide and Carbon Corporation and Elkem Metals Company. (Incorporated by reference to Exhibit 10.5 to the Company's March 31, 1992 report on Form 10-K). 10.8 Airgas, Inc. Management Incentive Plan (Incorporated by reference to Exhibit 10.3 to the Company's September 30, 1995 Quarterly Report on Form 10-Q). 10.9 Joint Venture Agreement dated June 28, 1996 between Airgas, Inc. and National Welders Supply Company, Inc. and J.A. Turner, Jr., Judith Carpenter, J.A. Turner, III, and Linerieux B. Turner and Molo Limited Partnership, Turner (1996) Limited Partnership, Charitable Remainder Unitrust for James A. Turner, Jr. and Foundation for the Carolinas (Incorporated by reference to Exhibit 2.1 to the Company's June 28, 1996 Report on Form 8-K). 11 Statement re: Computation of earnings per share (Incorporated by reference to Exhibit 11 to the 1996 Form 10-K). *21 Subsidiaries of the Company. *23.1 Consent of KPMG Peat Marwick LLP. *23.2 Consent of Osburn, Henning and Company. **23.3 Consent of McCausland, Keen, & Buckman (included in Exhibit 5) *24 Powers of Attorney (included in signature page). *99.1 Form of proxy to be used by Carbonic Industries Corporation. *99.2 Form of Cash Election/Transmittal Letter for Carbonic Industries Corporation Class A Common Stock. *99.3 Form of Transmittal Letter for Carbonic Industries Corporation Class B Common Stock. 99.4 Form of Transmittal Letter for Continuity of Interest Certificate. - --------------------------------- * Filed herewith. ** To be filed by amendment. II-3 (b) Financial Statement Schedules Schedule II - Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulations promulgated by the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. Item 22. Undertakings (1) The undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (2) The registrant undertakes that every prospectus (a) that is filed pursuant to paragraph (1) immediately preceding, or (b) that purports to meet the requirements of section 10(a)(3) of the Securities Act of 1933 and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (4) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-4 SCHEDULE II CONSOLIDATED AIRGAS, INC. AND SUBSIDIARIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS For the Years Ended March 31, 1996, 1995 and 1994 (In thousands of dollars)
Column A Column B Column C - -------- -------- -------- Additions --------- Charged Balance at Charged to (Credited) Beginning Cost and to Other Description of Period Expense Accounts - ------------ --------- ---------- ------------ 1996 Accounts Receivable -- Allowance for doubtful accounts . . $ 4,161 $ 2,719 $ 1,313(1) LIFO cost reserve . . . . . . . . . 1,061 282 -- Insurance reserves. . . . . . . . . 6,304 19,510 262 1995 Accounts Receivable -- Allowance for doubtful accounts . . $ 4,207 $ 3,102 $ 1,033(1) LIFO cost reserve . . . . . . . . . 659 402 -- Insurance reserves. . . . . . . . . 5,341 17,038 132 1994 Accounts Receivable -- Allowance for doubtful accounts . . $ 3,392 $ 2,884 $ 1,155(1) LIFO cost reserve . . . . . . . . . 465 194 -- Insurance reserves. . . . . . . . . 7,046 13,031 165
(COLUMNS CONTINUED) II-5 SCHEDULE II CONSOLIDATED AIRGAS, INC. AND SUBSIDIARIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS For the Years Ended March 31, 1996, 1995 and 1994 (In thousands of dollars) (Columns Continued)
Column A Column D Column E - -------- -------- -------- Balance at End of Description Deductions Period - ------------ -------------- -------- 1996 Accounts Receivable -- Allowance for doubtful accounts . . . $ (4,797)(2) $ 3,396 LIFO cost reserve . . . . . . . . . . -- 1,343 Insurance reserves. . . . . . . . . . (20,779) 5,297 1995 Accounts Receivable -- Allowance for doubtful accounts . . . $ (4,181)(2) $ 4,161 LIFO cost reserve . . . . . . . . . . -- 1,061 Insurance reserves. . . . . . . . . . (16,207) 6,304 1994 Accounts Receivable -- Allowance for doubtful accounts . . . $ (3,224)(2) $ 4,207 LIFO cost reserve . . . . . . . . . . -- 659 Insurance reserves. . . . . . . . . . (14,901) 5,341
- ---------- (1) Includes collections on accounts previously written-off and allowances for doubtful accounts of businesses acquired less the allowance for doubtful accounts of businesses sold. (2) Write-off of uncollectible accounts. II-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, hereunto duly authorized, in the Town of Radnor, State of Pennsylvania on this 20th day of March, 1997. AIRGAS, INC. By: /s/PETER McCAUSLAND ------------------------------------- Peter McCausland Chairman of the Board and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Peter McCausland and Todd R. Craun. and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated:
Signature Title Date --------- ----- ---- /s/Peter McCausland Director, Chairman of the Board and March 20, 1997 - -------------------------------- Peter McCausland Chief Executive Officer /s/Hermann Knieling President and Chief Operating Officer March 20, 1997 - -------------------------------- Hermann Knieling /s/Thomas C. Deas, Jr. Vice President & Chief Financial Officer March 20, 1997 - ------------------------------ (Principal Financial Officer) Thomas C. Deas, Jr. /s/ Jeffrey P. Cornwell Assistant Vice President and Corporate March 20, 1997 - ------------------------------ Controller (Principal Accounting Officer) Jeffrey P. Cornwell /s/ W. Thacher Brown Director March 20, 1997 - ------------------------------ W. Thacher Brown
Director - -------------------------------- Frank B. Foster, III /s/ Dr. Robert E. Naylor Director March 20, 1997 - -------------------------------- Dr. Robert E. Naylor Director - ----------------------------------- Robert L. Yohe /s/John A.H. Shober Director March 20, 1997 - --------------------------------- John A. H. Shober /s/Merril L. Stott Director March 20, 1997 - --------------------------------- Merril L. Stott /s/Erroll C. Sult Director March 20, 1997 - --------------------------------- Erroll C. Sult /s/Argeris N. Karabelas Director March 20, 1997 - --------------------------------- Argeris N. Karabelas
EX-4.5 2 INDENTURE DATED AS OF AUGUST 1, 1996 EXHIBIT 4.5 - -------------------------------------------------------------------------------- AIRGAS, INC. TO THE BANK OF NEW YORK Trustee ------------------------- Indenture Dated as of August 1, 1996 ------------------------- Debt Securities - --------------------------------------------------------------------------------
TABLE OF CONTENTS Page PARTIES.................................................................... 1 RECITALS................................................................... 1 ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions.............................................. 1 Act............................................................... 2 Additional Amounts................................................ 2 Affiliate......................................................... 2 Attributable Debt................................................. 2 Authenticating Agent.............................................. 3 Authorized Newspaper.............................................. 3 Bankruptcy Law.................................................... 3 Bearer Security................................................... 3 Board of Directors................................................ 3 Board Resolution.................................................. 3 Business Day...................................................... 3 CEDEL............................................................. 3 Commission........................................................ 3 Common Stock...................................................... 4 Company........................................................... 4 Company Request and Company Order................................. 4 Consolidated Net Tangible Assets.................................. 4 Conversion Event.................................................. 4 Corporate Trust Office............................................ 4 corporation....................................................... 4 coupon............................................................ 4 Custodian......................................................... 4 Debt.............................................................. 5 Defaulted Interest................................................ 5 Dollar or $....................................................... 5 ECU............................................................... 5 Euroclear......................................................... 5 European Communities.............................................. 5 European Monetary System.......................................... 5 Event of Default.................................................. 5 Foreign Currency.................................................. 5 Funded Debt....................................................... 5 Government Obligations............................................ 5 Holder............................................................ 6 Indenture......................................................... 6 Indexed Security.................................................. 6 interest.......................................................... 7 Interest Payment Date............................................. 7 Maturity.......................................................... 7
i Mortgage.......................................................... 7 Officers' Certificate............................................. 7 Opinion of Counsel................................................ 7 Original Issue Discount Security.................................. 7 Outstanding....................................................... 7 Paying Agent...................................................... 9 Person............................................................ 9 Place of Payment.................................................. 9 Predecessor Security.............................................. 9 Preferred Stock................................................... 9 Principal Property................................................ 9 Redemption Date................................................... 10 Redemption Price.................................................. 10 Registered Security............................................... 10 Regular Record Date............................................... 10 Repayment Date.................................................... 10 Repayment Price................................................... 10 Responsible Officer............................................... 10 Restricted Subsidiary............................................. 10 sale and leaseback transaction.................................... 10 Security.......................................................... 11 Security Register and Security Registrar.......................... 11 Significant Subsidiary............................................ 11 Special Record Date............................................... 11 Stated Maturity................................................... 11 Subsidiary........................................................ 11 Trust Indenture Act or TIA........................................ 11 Trustee........................................................... 11 United States..................................................... 12 United States person.............................................. 12 Yield to Maturity................................................. 12 SECTION 102. Compliance Certificates and Opinions..................... 12 SECTION 103. Form of Documents Delivered to Trustee................... 13 SECTION 104. Acts of Holders.......................................... 13 SECTION 105. Notices, etc., to Trustee and Company.................... 15 SECTION 106. Notice to Holders; Waiver................................ 16 SECTION 107. Effect of Headings and Table of Contents................. 17 SECTION 108. Successors and Assigns................................... 17 SECTION 109. Separability Clause...................................... 17 SECTION 110. Benefits of Indenture.................................... 17 SECTION 111. Governing Law............................................ 17 SECTION 112. Legal Holidays........................................... 17 ARTICLE TWO SECURITIES FORMS SECTION 201. Forms of Securities...................................... 18 SECTION 202. Form of Trustee's Certificate of Authentication........................................... 18 SECTION 203. Securities Issuable in Global Form....................... 19
ii SECTION 204. Forms of Legends for Global Securities and Securities Initially Sold Under Rule 144A..................................... 20 ARTICLE THREE THE SECURITIES SECTION 301. Amount Unlimited; Issuable in Series..................... 21 SECTION 302. Denominations............................................ 25 SECTION 303. Execution, Authentication, Delivery and Dating............................................... 25 SECTION 304. Temporary Securities..................................... 28 SECTION 305. Registration, Registration of Transfer and Exchange.................................... 31 SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities........................................ 35 SECTION 307. Payment of Interest; Interest Rights Preserved......................................... 37 SECTION 308. Persons Deemed Owners.................................... 39 SECTION 309. Cancellation............................................. 40 SECTION 310. Computation of Interest.................................. 40 SECTION 311. Transfers................................................ 41 SECTION 312. CUSIP Numbers............................................ 41 ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture.................. 41 SECTION 402. Application of Trust Funds............................... 43 ARTICLE FIVE REMEDIES SECTION 501. Events of Default........................................ 43 SECTION 502. Acceleration of Maturity; Rescission and Annulment................................. 45 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee......................... 46 SECTION 504. Trustee May File Proofs of Claim......................... 47 SECTION 505. Trustee May Enforce Claims Without Possession of Securities or Coupons...................... 48 SECTION 506. Application of Money Collected........................... 48 SECTION 507. Limitation on Suits...................................... 49 SECTION 508. Unconditional Right of Holders to Receive Principal, Premium, if any, Interest and Additional Amounts.......................... 49 SECTION 509. Restoration of Rights and Remedies....................... 50 SECTION 510. Rights and Remedies Cumulative........................... 50 SECTION 511. Delay or Omission Not Waiver............................. 50
iii SECTION 512. Control by Holders of Securities......................... 50 SECTION 513. Waiver of Past Defaults.................................. 51 SECTION 514. Waiver of Usury, Stay or Extension Laws.................. 51 SECTION 515. Undertaking for Costs.................................... 51 ARTICLE SIX THE TRUSTEE SECTION 601. Notice of Defaults....................................... 52 SECTION 602. Certain Rights of Trustee................................ 52 SECTION 603. Not Responsible for Recitals or Issuance of Securities................................... 54 SECTION 604. May Hold Securities...................................... 55 SECTION 605. Money Held in Trust...................................... 55 SECTION 606. Compensation and Reimbursement........................... 55 SECTION 607. Corporate Trustee Required; Eligibility; Conflicting Interests....................... 56 SECTION 608. Resignation and Removal; Appointment of Successor................................................ 56 SECTION 609. Acceptance of Appointment by Successor................... 58 SECTION 610. Merger, Conversion, Consolidation or Succession to Business................................... 59 SECTION 611. Preferential Collection of Claims........................ 60 SECTION 612. Appointment of Authenticating Agent...................... 60 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. Disclosure of Names and Addresses of Holders............................................... 62 SECTION 702. Reports by Trustee....................................... 62 SECTION 703. Reports by Company....................................... 62 SECTION 704. Company to Furnish Trustee Names and Addresses of Holders..................................... 63 SECTION 705. Calculation of Original Issue Discount................... 64 SECTION 706. Delivery of Certain Information.......................... 64 ARTICLE EIGHT CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE SECTION 801. Consolidations and Mergers of Company and Sales, Leases and Conveyances Permitted Subject to Certain Conditions............................ 64 SECTION 802. Rights and Duties of Successor Corporation.............................................. 65 SECTION 803. Officers' Certificate and Opinion of Counsel.................................................. 65
iv ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders.............................................. 66 SECTION 902. Supplemental Indentures with Consent of Holders................................................. 67 SECTION 903. Execution of Supplemental Indentures.................... 69 SECTION 904. Effect of Supplemental Indentures....................... 69 SECTION 905. Conformity with Trust Indenture Act..................... 69 SECTION 906. Reference in Securities to Supplemental Indentures.............................................. 69 ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium, if any, Interest and Additional Amounts......................... 70 SECTION 1002. Maintenance of Office or Agency......................... 70 SECTION 1003. Money for Securities Payments to Be Held in Trust........................................... 72 SECTION 1004. Limitation on Liens..................................... 74 SECTION 1005. Sale and Leaseback Transactions......................... 76 SECTION 1006. Existence............................................... 77 SECTION 1007. Insurance............................................... 77 SECTION 1008. Payment of Taxes and Other Claims....................... 77 SECTION 1009. Provision of Financial Information...................... 77 SECTION 1010. Statement as to Compliance.............................. 78 SECTION 1011. Notice of Default....................................... 78 SECTION 1012. Additional Amounts...................................... 78 SECTION 1013. Waiver of Certain Covenants............................. 80 ARTICLE ELEVEN REDEMPTION OF SECURITIES SECTION 1101. Applicability of Article................................ 80 SECTION 1102. Election to Redeem; Notice to Trustee................... 80 SECTION 1103. Selection by Trustee of Securities to Be Redeemed.......................................... 80 SECTION 1104. Notice of Redemption.................................... 81 SECTION 1105. Deposit of Redemption Price............................. 82 SECTION 1106. Securities Payable on Redemption Date................... 83 SECTION 1107. Securities Redeemed in Part............................. 84
v ARTICLE TWELVE SINKING FUNDS
SECTION 1201. Applicability of Article................................ 84 SECTION 1202. Satisfaction of Sinking Fund Payments with Securities......................................... 84 SECTION 1203. Redemption of Securities for Sinking Fund.................................................... 85 ARTICLE THIRTEEN REPAYMENT AT THE OPTION OF HOLDERS SECTION 1301. Applicability of Article................................ 86 SECTION 1302. Repayment of Securities................................. 86 SECTION 1303. Exercise of Option...................................... 86 SECTION 1304. When Securities Presented for Repayment Become Due and Payable........................ 87 SECTION 1305. Securities Repaid in Part............................... 88 ARTICLE FOURTEEN DEFEASANCE AND COVENANT DEFEASANCE SECTION 1401. Applicability of Article; Company's Option to Effect Defeasance or Covenant Defeasance..................................... 89 SECTION 1402. Defeasance and Discharge................................ 89 SECTION 1403. Covenant Defeasance..................................... 90 SECTION 1404. Conditions to Defeasance or Covenant Defeasance.............................................. 90 SECTION 1405. Deposited Money and Government Obligations to Be Held in Trust; Other Miscellaneous Provisions.......................... 92 ARTICLE FIFTEEN MEETINGS OF HOLDERS OF SECURITIES SECTION 1501. Purposes for Which Meetings May Be Called.................................................. 94 SECTION 1502. Call, Notice and Place of Meetings...................... 94 SECTION 1503. Persons Entitled to Vote at Meetings.................... 94 SECTION 1504. Quorum; Action.......................................... 95 SECTION 1505. Determination of Voting Rights; Conduct and Adjournment of Meetings..................... 96 SECTION 1506. Counting Votes and Recording Action of Meetings............................................. 97
vi TESTIMONIUM SIGNATURES AND SEALS ACKNOWLEDGMENTS EXHIBIT A - FORMS OF CERTIFICATION vii AIRGAS, INC. Reconciliation and tie between Trust Indenture Act of 1939 (the "1939 Act") and Indenture, dated as of August 1, 1996 Trust Indenture Act Section Indenture Section (S) 310(a)(1) ....................................... 607 (a)(2) ....................................... 607 (b) .......................................... 607, 608 (S) 312(c) .......................................... 701 (S) 313(a) .......................................... 702 (c) .......................................... 702 (S) 314(a) .......................................... 703 (a)(4) ....................................... 1010 (c)(1) ....................................... 102 (c)(2) ....................................... 102 (e) .......................................... 102 (S) 315(b) .......................................... 601 (S) 316(a) (last sentence) .......................... 101 ("Outstanding") (a)(1)(A) .................................... 502, 512 (a)(1)(B) .................................... 513 (b) .......................................... 508 (S) 317(a)(1) ....................................... 503 (a)(2) ....................................... 504 (S) 318(a) .......................................... 111 (c) .......................................... 111
- ---------------------- NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. Attention should also be directed to Section 318(c) of the 1939 Act, which provides that the provisions of Sections 310 to and including 317 of the 1939 Act are a part of and govern every qualified indenture, whether or not physically contained therein. viii INDENTURE, dated as of August 1, 1996, between AIRGAS, INC., a Delaware corporation (hereinafter called the "Company"), having its principal office at 100 Matsonford Road, Radnor, Pennsylvania 19087 and THE BANK OF NEW YORK, a corporation organized under the laws of New York, as Trustee hereunder (hereinafter called the "Trustee"), having its Corporate Trust Office at 101 Barclay Street, New York, New York 10286. RECITALS OF THE COMPANY The Company deems it necessary to issue from time to time for its lawful purposes senior debt securities (hereinafter called the "Securities") evidencing its unsecured and unsubordinated indebtedness, and has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of the Securities, unlimited as to principal amount, to bear interest at the rates or formulas, to mature at such times and to have such other provisions as shall be fixed as hereinafter provided. This Indenture is subject to the provisions of the Trust Indenture Act of 1939, as amended, that are deemed to be incorporated into this Indenture and shall, to the extent applicable, be governed by such provisions. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (2) all other terms used herein which are defined in the TIA, either directly or by reference therein, have the meanings 1 assigned to them therein, and the terms "cash transaction" and "self-liquidating paper", as used in TIA Section 311, shall have the meanings assigned to them in the rules of the Commission adopted under the TIA; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; and (4) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Act", when used with respect to any Holder, has the meaning specified --- in Section 104. "Additional Amounts" means any additional amounts which are required ------------------ by a Security or by or pursuant to a Board Resolution, under circumstances specified therein, to be paid by the Company in respect of certain taxes imposed on certain Holders and which are owing to such Holders. "Affiliate" of any specified Person means any other Person directly or --------- indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Attributable Debt" shall mean, as to any particular lease under which ----------------- the Company is at the time liable, at any date as of which the amount thereof is to be determined, the lesser of (i) the fair value of the property subject to such lease (as determined by the chairman of the Board of Directors of the Company) or (ii) the total net amount of rent required to be paid by the Company under such lease during the remaining term thereof, discounted from the respective due dates thereof to such date at the rate of interest per annum implicit in the terms of such lease, as determined by the chairman of the Board of Directors of the Company, compounded semiannually. The net amount of rent required to be paid under any such lease for any such period shall be the amount of the rent payable by the lessee with the respect to such period, after excluding amounts required to be paid on account of maintenance and repairs, insurance, taxes, assessment, water rates and similar charges. In the case of any lease which is terminable by the lessee upon the payment of a penalty, such net amount shall also include the amount of such penalty, but no rent shall be considered as 2 required to be paid under such lease subsequent to the first date upon which it may be so terminated. "Authenticating Agent" means any authenticating agent appointed by the -------------------- Trustee pursuant to Section 612. "Authorized Newspaper" means a newspaper, printed in the English -------------------- language or in an official language of the country of publication, customarily published on each Business Day, whether or not published on Saturdays, Sundays or holidays, and of general circulation in each place in connection with which the term is used or in the financial community of each such place. Whenever successive publications are required to be made in Authorized Newspapers, the successive publications may be made in the same or in different Authorized Newspapers in the same city meeting the foregoing requirements and in each case on any Business Day. "Bankruptcy Law" has the meaning specified in Section 501. -------------- "Bearer Security" means any Security established pursuant to Section --------------- 201 which is payable to bearer. "Board of Directors" means the board of directors of the Company, the ------------------ executive committee or any committee of that board duly authorized to act hereunder. "Board Resolution" means a copy of a resolution certified by the ---------------- Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day", when used with respect to any Place of Payment or any ------------ other particular location referred to in this Indenture or in the Securities, means, unless otherwise specified with respect to any Securities pursuant to Section 301, any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in that Place of Payment or particular location are authorized or required by law, regulation or executive order to close. "CEDEL" means Centrale de Livraison de Valeurs Mobilieres, S.A., or ----- its successor. "Commission" means the Securities and Exchange Commission, as from ---------- time to time constituted, created under the Securities Exchange Act of 1934, or, if at any time after execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date. 3 "Common Stock" means, with respect to any Person, capital stock issued ------------ by such Person other than Preferred Stock. "Company" means the Person named as the "Company" in the first ------- paragraph of this Indenture until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor corporation. "Company Request" and "Company Order" mean, respectively, a written --------------- ------------- request or order signed in the name of the Company by its Chairman of the Board, the President or a Vice President, and by its Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company, and delivered to the Trustee. "Consolidated Net Tangible Assets" shall mean, at any date of -------------------------------- determination, the aggregate amount of assets of each entity or entities so specified (less applicable reserves and other properly deductible items) after deducting therefrom (i) all current liabilities (excluding any thereof which are by their terms extendible or renewable at the option of the obligor thereon to a time more than 12 months after the time as of which the amount thereof is being computed and excluding current maturities of long-term indebtedness and capital lease obligations) and (ii) all goodwill, all as shown in the audited consolidated balance sheet of such entity or entities contained in the Company's then most recent annual report to stockholders. "Conversion Event" means the cessation of use of (i) a Foreign Currency ---------------- both by the government of the country which issued such currency and for the settlement of transactions by a central bank or other public institutions of or within the international banking community, (ii) the ECU both within the European Monetary System and for the settlement of transactions by public institutions of or within the European Communities or (iii) any currency unit (or composite currency) other than the ECU for the purposes for which it was established. "Corporate Trust Office" means the office of the Trustee at which, at ---------------------- any particular time, its corporate trust business shall be principally administered, which office at the date hereof is located at 101 Barclay Street, New York, New York 10286. "corporation" includes corporations, associations, companies and ----------- business trusts. "coupon" means any interest coupon appertaining to a Bearer Security. ------ "Custodian" has the meaning specified in Section 501. --------- 4 "Debt" has the meaning specified in Section 1004. ---- "Defaulted Interest" has the meaning specified in Section 307. ------------------ "Dollar" or "$" means a dollar or other equivalent unit in such coin ------ - or currency of the United States of America as at the time shall be legal tender for the payment of public and private debts. "ECU" means the European Currency Unit as defined and revised from --- time to time by the Council of the European Communities. "Euroclear" means Morgan Guaranty Trust Company of New York, Brussels --------- Office, or its successor as operator of the Euroclear System. "European Communities" means the European Economic Community, the -------------------- European Coal and Steel Community and the European Atomic Energy Community. "European Monetary System" means the European Monetary System ------------------------ established by the Resolution of December 5, 1978 of the Council of the European Communities. "Event of Default" has the meaning specified in Article Five. ---------------- "Foreign Currency" means any currency, currency unit or composite ---------------- currency, including, without limitation, the ECU issued by the government of one or more countries other than the United States of America or by any recognized confederation or association of such governments. "Funded Debt" shall mean all indebtedness for money borrowed having a ----------- maturity of more than 12 months from the date as of which the amount thereof is to be determined or having a maturity of less than 12 months but by its terms being renewable or extendible beyond 12 months from such date at the option of the borrower. "GAAP" means generally accepted accounting principles, as in effect ---- from time to time, as used in the United States applied on a consistent basis. "Government Obligations" means securities which are (i) direct ---------------------- obligations of the United States of America or the government which issued the Foreign Currency in which the Securities of a particular series are payable, for the payment of which its full faith 5 and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America or such government which issued the foreign currency in which the Securities of such series are payable, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America or such other government, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a deposi tory receipt issued by a bank or trust company as custodian with respect to any such Government Obligation or a specific payment of interest on or principal of any such Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is -------- not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of interest on or principal of the Government Obligation evidenced by such depository receipt. "Holder" means, in the case of a Registered Security, the Person in ------ whose name a Security is registered in the Security Register and, in the case of a Bearer Security, the bearer thereof and, when used with respect to any coupon, shall mean the bearer thereof. "Indenture" means this instrument as originally executed or as it may --------- from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, and shall include the terms of particular series of Securities established as contemplated by Section 301; provided, however, that, if at any time more than -------- ------- one Person is acting as Trustee under this instrument, "Indenture" shall mean, --------- with respect to any one or more series of Securities for which such Person is Trustee, this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of the or those particular series of Securities for which such Person is Trustee established as contemplated by Section 301, exclusive, however, of any provisions or terms which relate solely to other series of Securities for which such Person is Trustee, regardless of when such terms or provisions were adopted, and exclusive of any provisions or terms adopted by means of one or more indentures supplemental hereto executed and delivered after such Person had become such Trustee but to which such Person, as such Trustee, was not a party. "Indexed Security" means a Security the terms of which provide that ---------------- the principal amount thereof payable at Stated Maturity may be more or less than the principal face amount thereof at original issuance. 6 "interest", when used with respect to an Original Issue Discount -------- Security which by its terms bears interest only after Maturity, shall mean interest payable after Maturity, and, when used with respect to a Security which provides for the payment of Additional Amounts pursuant to Section 1012, includes such Additional Amounts. "Interest Payment Date", when used with respect to any Security, means --------------------- the Stated Maturity of an installment of interest on such Security. "Maturity", when used with respect to any Security, means the date on -------- which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, notice of redemption, notice of option to elect repayment or otherwise. "Mortgage" has the meaning specified in Section 1004. -------- "Officers' Certificate" means a certificate signed by the Chairman of --------------------- the Board of Directors, the President or a Vice President and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company, and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel, who may be ------------------ counsel for the Company or who may be an employee of or other counsel for the Company and who shall be satisfactory to the Trustee. "Original Issue Discount Security" means any Security which provides -------------------------------- for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502. "Outstanding", when used with respect to Securities, means, as of the ----------- date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: ------ (i) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities, or portions thereof, for whose payment or redemption or repayment at the option of the Holder money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities and any coupons appertaining thereto, provided that, -------- 7 if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; (iii) Securities, except to the extent provided in Sections 1402 and 1403, with respect to which the Company has effected defeasance and/or covenant defeasance as provided in Article Fourteen; (iv) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; and (v) Securities converted into Common Stock or Preferred Stock pursuant to or in accordance with this Indenture if the terms of such Securities provide for convertibility pursuant to Section 301; provided, however, that in determining whether the Holders of the requisite - -------- ------- principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder or are present at a meeting of Holders for quorum purposes, and for the purpose of making the calculations required by TIA Section 313, (i) the principal amount of an Original Issue Discount Security that may be counted in making such determination or calculation and that shall be deemed to be Outstanding for such purpose shall be equal to the amount of principal thereof that would be (or shall have been declared to be) due and payable, at the time of such determination, upon a declaration of acceleration of the maturity thereof pursuant to Section 502, (ii) the principal amount of any Security denominated in a Foreign Currency that may be counted in making such determination or calculation and that shall be deemed Outstanding for such purpose shall be equal to the Dollar equivalent, determined pursuant to Section 301 as of the date such Security is originally issued by the Company, of the principal amount (or, in the case of an Original Issue Discount Security, the Dollar equivalent as of such date of original issuance of the amount determined as provided in clause (i) above) of such Security, (iii) the principal amount of any Indexed Security that may be counted in making such determination or calculation and that shall be deemed outstanding for such purpose shall be equal to the principal face amount of such Indexed Security at original issuance, unless otherwise provided with respect to such Security pursuant to Section 301, and (iv) Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, 8 except that, in determining whether the Trustee shall be protected in making such calculation or in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. "Paying Agent" means any Person authorized by the Company to pay the ------------ principal of (and premium, if any) or interest on any Securities or coupons on behalf of the Company. "Person" means any individual, corporation, partnership, ------ joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment", when used with respect to the Securities of or ---------------- within any series, means the place or places where the principal of (and premium, if any) and interest on such Securities are payable as specified as contemplated by Sections 301 and 1002. "Predecessor Security" of any particular Security means every previous -------------------- Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security or a Security to which a mutilated, destroyed, lost or stolen coupon appertains shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security or the Security to which the mutilated, destroyed, lost or stolen coupon appertains. "Preferred Stock" means, with respect to any Person, capital stock --------------- issued by such Person that is entitled to a preference or priority over any other capital stock issued by such Person upon any distribution of such Person's assets, whether by dividend or upon liquidation. "Principal Property" shall mean any building, structure or other ------------------ facility, together with the land upon which it is erected and fixtures comprising a part thereof, used primarily for conducting the operations of the Company or a Subsidiary and located in the United States of America. 9 "Redemption Date", when used with respect to any Security to be --------------- redeemed, in whole or in part, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be ---------------- redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Registered Security" shall mean any Security which is registered in ------------------- the Security Register. "Regular Record Date" for the interest payable on any Interest Payment ------------------- Date on the Registered Securities of or within any series means the date specified for that purpose as contemplated by Section 301, whether or not a Business Day. "Repayment Date" means, when used with respect to any Security to be -------------- repaid at the option of the Holder, the date fixed for such repayment by or pursuant to this Indenture. "Repayment Price" means, when used with respect to any Security to be --------------- repaid at the option of the Holder, the price at which it is to be repaid by or pursuant to this Indenture. "Responsible Officer", when used with respect to the Trustee, means ------------------- the chairman or vice-chairman of the board of directors, the chairman or vice- chairman of the executive committee of the board of directors, the president, any vice president (whether or not designated by a number or a word or words added before or after the title "vice president"), the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of such officer's knowledge and familiarity with the particular subject. "Restricted Subsidiary" shall mean (i) each Subsidiary of the Company --------------------- as of the date of this Indenture and (ii) each Subsidiary that became such after the date of this Indenture; provided, however, that at any time the Company shall have the right, by notice to the Trustee, to exclude from this definition one or more Subsidiaries if (x) after giving effect to such exclusion, the Company would be permitted to issue at least one dollar of secured Debt without providing that the Securities of all Series be secured equally and ratably with (or prior to) such Debt and (y) the aggregate Consolidated Net Tangible Assets represented by such excluded Subsidiaries (and all such Subsidiaries previously so 10 excluded) at the time of exclusion does not exceed ten percent of the current Consolidated Net Tangible Assets of the Company and its Restricted Subsidiaries. "sale and leaseback transaction" has the meaning specified in Section ------------------------------ 1005. "Security" has the meaning stated in the first recital of this -------- Indenture and, more particularly, means any Security or Securities authenticated and delivered under this Indenture; provided, however, that, if at any time -------- ------- there is more than one Person acting as Trustee under this Indenture, "Securities" with respect to the Indenture as to which such Person is Trustee shall have the meaning stated in the first recital of this Indenture and shall more particularly mean Securities authenticated and delivered under this Indenture, exclusive, however, of Securities of any series as to which such Person is not Trustee. "Security Register" and "Security Registrar" have the respective ----------------- ------------------ meanings specified in Section 305. "Significant Subsidiary" means any Subsidiary which is a "significant ---------------------- subsidiary" (as defined in Article I, Rule 1-02 of Regulation S-X, promulgated under the Securities Act of 1933) of the Company. "Special Record Date" for the payment of any Defaulted Interest on the ------------------- Registered Securities of or within any series means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity", when used with respect to any Security or any --------------- installment of principal thereof or interest thereon, means the date specified in such Security or a coupon representing such installment of interest as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable. "Subsidiary" means a corporation a majority of the outstanding voting ---------- stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries of the Company. For the purposes of this definition, "voting stock" means stock having voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, ------------------- --- as amended and as in force at the date as of which this Indenture was executed, except as provided in Section 905. 11 "Trustee" means the Person named as the "Trustee" in the first ------- paragraph of this Indenture until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder; provided, however, that if at any time there is more than one such Person, - -------- ------- "Trustee" as used with respect to the Securities of any series shall mean only the Trustee with respect to Securities of that series. "United States" means, unless otherwise specified with respect to any ------------- Securities pursuant to Section 301, the United States of America (including the states and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction. "United States person" means, unless otherwise specified with respect -------------------- to any Securities pursuant to Section 301, an individual who is a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or an estate or trust the income of which is subject to United States federal income taxation regardless of its source. "Yield to Maturity" means the yield to maturity, computed at the time ----------------- of issuance of a Security (or, if applicable, at the most recent redetermination of interest on such Security) and as set forth in such Security in accordance with generally accepted United States bond yield computation principles. SECTION 102. Compliance Certificates and Opinions. Upon any ------------------------------------ application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (including certificates delivered pursuant to Section 1010) shall include: (1) a statement that each individual signing such certificate or opinion has read such condition or covenant and the definitions herein relating thereto; 12 (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such condition or covenant has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 103. Form of Documents Delivered to Trustee. In any case -------------------------------------- where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion as to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon an Opinion of Counsel, or a certificate or representations by counsel, unless such officer knows, or in the exercise of reasonable care should know, that the opinion, certificate or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such Opinion of Counsel or certificate or representations may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information as to such factual matters is in the possession of the Company, unless such counsel knows that the certificate or opinion or representations as to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 104. Acts of Holders. (a) Any request, demand, --------------- authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders of the Outstanding Securities of all series or one or more series, as the case may be, may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing. If Securities of a series are issuable as Bearer Securities, any request, demand, authorization, direction, notice, consent, waiver or other action 13 provided by this Indenture to be given or taken by Holders of Securities of such series may, alternatively, be embodied in and evidenced by the record of Holders of Securities of such series voting in favor thereof, either in person or by proxies duly appointed in writing, at any meeting of Holders of Securities of such series duly called and held in accordance with the provisions of Article Fifteen, or a combination of such instruments and any such record. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or record or both are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments and any such record (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments or so voting at any such meeting. Proof of execution of any such instrument or of a writing appointing any such agent, or of the holding by any Person of a Security, shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company and any agent of the Trustee or the Company, if made in the manner provided in this Section. The record of any meeting of Holders of Securities shall be proved in the manner provided in Section 1506. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other reasonable manner which the Trustee deems sufficient. (c) The ownership of Registered Securities shall be proved by the Security Register. (d) The ownership of Bearer Securities may be proved by the production of such Bearer Securities or by a certificate executed, as depositary, by any trust company, bank, banker or other depositary, wherever situated, if such certificate shall be deemed by the Trustee to be satisfactory, showing that at the date therein mentioned such Person had on deposit with such depositary, or exhibited to it, the Bearer Securities therein described; or such facts may be proved by the certificate or affidavit of the Person holding such Bearer Securities, if such certificate or affidavit is deemed by the Trustee to be satisfactory. The Trustee and the Company may assume that such ownership of any Bearer Security continues until (1) another certificate or affidavit bearing a later date issued in 14 respect of the same Bearer Security is produced, or (2) such Bearer Security is produced to the Trustee by some other Person, or (3) such Bearer Security is surrendered in exchange for a Registered Security, or (4) such Bearer Security is no longer Outstanding. The ownership of Bearer Securities may also be proved in any other manner which the Trustee deems sufficient. (e) If the Company shall solicit from the Holders of Registered Securities any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, in or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. Notwithstanding TIA Section 316(c), such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not earlier than the date 30 days prior to the first solicitation of Holders generally in connection therewith and not later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Securities shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such - -------- record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than eleven months after the record date. (f) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee, any Security Registrar, any Paying Agent, any Authenticating Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Security. SECTION 105. Notices, etc., to Trustee and Company. Any request, ------------------------------------- demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished 15 or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration, or (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this Indenture or at any other address previously furnished in writing to the Trustee by the Company. SECTION 106. Notice to Holders; Waiver. Where this Indenture ------------------------- provides for notice of any event to Holders of Registered Securities by the Company or the Trustee, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each such Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders of Registered Securities is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders of Registered Securities or the sufficiency of any notice to Holders of Bearer Securities given as provided herein. Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice. If by reason of the suspension of or irregularities in regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification to Holders of Registered Securities as shall be made with the approval of the Trustee shall constitute a sufficient notification to such Holders for every purpose hereunder. Except as otherwise expressly provided herein or otherwise specified with respect to any Securities pursuant to Section 301, where this Indenture provides for notice to Holders of Bearer Securities of any event, such notice shall be sufficiently given if published in an Authorized Newspaper in The City of New York and in such other city or cities as may be specified in such Securities on a Business Day, such publication to be not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once, on the date of the first such publication. If by reason of the suspension of publication of any Authorized Newspaper or Authorized Newspapers or by reason of any 16 other cause it shall be impracticable to publish any notice to Holders of Bearer Securities as provided above, then such notification to Holders of Bearer Securities as shall be given with the approval of the Trustee shall constitute sufficient notice to such Holders for every purpose hereunder. Neither the failure to give notice by publication to any particular Holder of Bearer Securities as provided above, nor any defect in any notice so published, shall affect the sufficiency of such notice with respect to other Holders of Bearer Securities or the sufficiency of any notice to Holders of Registered Securities given as provided herein. Any request, demand, authorization, direction, notice, consent or waiver required or permitted under this Indenture shall be in the English language, except that any published notice may be in an official language of the country of publication. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. SECTION 107. Effect of Headings and Table of Contents. The Article ---------------------------------------- and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 108. Successors and Assigns. All covenants and agreements in ---------------------- this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. SECTION 109. Separability Clause. In case any provision in this ------------------- Indenture or in any Security or coupon shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 110. Benefits of Indenture. Nothing in this Indenture or in --------------------- the Securities or coupons, express or implied, shall give to any Person, other than the parties hereto, any Security Registrar, any Paying Agent, any Authenticating Agent and their successors hereunder and the Holders any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 111. Governing Law. This Indenture and the Securities and ------------- coupons shall be governed by and construed in accordance with the law of the State of New York, without regard to principles of conflicts of laws. This Indenture is subject to the 17 provisions of the TIA that are required to be part of this Indenture and shall, to the extent applicable, be governed by such provisions. SECTION 112. Legal Holidays. In any case where any Interest Payment -------------- Date, Redemption Date, Repayment Date, sinking fund payment date, Stated Maturity or Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or any Security or coupon other than a provision in the Securities of any series which specifically states that such provision shall apply in lieu hereof), payment of interest or any Additional Amounts or principal (and premium, if any) need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date, Redemption Date, Repayment Date or sinking fund payment date, or at the Stated Maturity or Maturity, provided that -------- no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date, Redemption Date, Repayment Date, sinking fund payment date, Stated Maturity or Maturity, as the case may be. ARTICLE TWO SECURITIES FORMS SECTION 201. Forms of Securities. The Registered Securities, if any, ------------------- of each series and the Bearer Securities, if any, of each series and related coupons shall be in substantially the forms as shall be established in one or more indentures supplemental hereto or approved from time to time by or pursuant to a Board Resolution in accordance with Section 301, shall have such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture or any indenture supplemental hereto, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements placed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Securities may be listed, or to conform to usage. Unless otherwise specified as contemplated by Section 301, Bearer Securities shall have interest coupons attached. The definitive Securities and coupons shall be printed, lithographed or engraved or produced by any combination of these methods on a steel engraved border or steel engraved borders or may be produced in any other manner, all as determined by the officers 18 executing such Securities or coupons, as evidenced by their execution of such Securities or coupons. SECTION 202. Form of Trustee's Certificate of Authentication. ----------------------------------------------- Subject to Section 612, the Trustee's certificate of authentication shall be in substantially the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. THE BANK OF NEW YORK, as Trustee By ------------------------------------------ Authorized Signatory SECTION 203. Securities Issuable in Global Form. If Securities of or ---------------------------------- within a series are issuable in global form, as specified as contemplated by Section 301, then, notwithstanding clause (8) of Section 301 and the provisions of Section 302, any such Security shall represent such of the Outstanding Securities of such series as shall be specified therein and may provide that it shall represent the aggregate amount of Outstanding Securities of such series from time to time endorsed thereon and that the aggregate amount of Outstanding Securities of such series represented thereby may from time to time be increased or decreased to reflect exchanges. Any endorsement of a Security in global form to reflect the amount, or any increase or decrease in the amount, of Outstanding Securities represented thereby shall be made by the Trustee in such manner and upon instructions given by such Person or Persons as shall be specified therein or in the Company Order to be delivered to the Trustee pursuant to Section 303 or 304. Subject to the provisions of Section 303 and, if applicable, Section 304, the Trustee shall deliver and redeliver any Security in permanent global form in the manner and upon instructions given by the Person or Persons specified therein or in the applicable Company Order. If a Company Order pursuant to Section 303 or 304 has been, or simultaneously is, delivered, any instructions by the Company with respect to endorsement or delivery or redelivery of a Security in global form shall be in writing but need not comply with Section 102 and need not be accompanied by an Opinion of Counsel. The provisions of the last sentence of Section 303 shall apply to any Security represented by a Security in global form if such Security was never issued and sold by the Company and the Company delivers to the Trustee the Security in global form together with written instructions (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) with regard to 19 the reduction in the principal amount of Securities represented thereby, together with the written statement contemplated by the last sentence of Section 303. Notwithstanding the provisions of Section 307, unless otherwise specified as contemplated by Section 301, payment of principal of and any premium and interest on any Security in permanent global form shall be made to the Person or Persons specified therein. Notwithstanding the provisions of Section 308 and except as provided in the preceding paragraph, the Company, the Trustee and any agent of the Company and the Trustee shall treat as the Holder of such principal amount of Outstanding Securities represented by a permanent global Security (i) in the case of a permanent global Security in registered form, the Holder of such permanent global Security in registered form, or (ii) in the case of a permanent global Security in bearer form, Euroclear or CEDEL. SECTION 204. Forms of Legends for Global Securities and Securities ----------------------------------------------------- Initially Sold Under Rule 144A. (a) Unless otherwise specified as contemplated - ------------------------------ by Section 301 for the Securities evidenced thereby, every global Security authenticated and delivered hereunder shall bear a legend in substantially the following form: UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR DEBT SECURITIES IN CERTIFICATED FORM, THIS DEBT SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. (b) If specified as contemplated by Section 301 that the Securities of a particular series are initially to be sold in reliance on Rule 144A under the Securities Act, the Securities of such series authenticated and delivered hereunder shall bear a legend in substantially the following form: THIS DEBT SECURITY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS DEBT SECURITY MAY NOT BE REOFFERED, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS DEBT SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS DEBT SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS DEBT SECURITY AGREES FOR THE BENEFIT OF THE ISSUER OF THIS DEBT SECURITY THAT (A) THIS DEBT SECURITY MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) TO A 20 PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144, (3) IN AN OFFSHORE TRANSACTION COMPLYING WITH REGULATION S UNDER THE SECURITIES ACT OR (4) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, AND IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATES OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS DEBT SECURITY FROM IT OF THE RESTRICTIONS REFERRED TO IN (A) ABOVE. ARTICLE THREE THE SECURITIES SECTION 301. Amount Unlimited; Issuable in Series. The aggregate ------------------------------------ principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series. There shall be established in one or more Board Resolutions or pursuant to authority granted by one or more Board Resolutions and, subject to Section 303, set forth, or determined in the manner provided, in an Officers' Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series, any or all of the following, as applicable (each of which (except for the matters set forth in clauses (1), (2) and (15) below), if so provided, may be determined from time to time by the Company with respect to unissued Securities of the series when issued from time to time): (1) the title of the Securities of the series (which shall distinguish the Securities of such series from all other series of Securities); (2) any limit upon the aggregate principal amount of the Securities of the series that may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 304, 305, 306, 906, 1107 or 1305); (3) the date or dates, or the method by which such date or dates will be determined, on which the principal of the Securities of the series shall be payable; 21 (4) the rate or rates at which the Securities of the series shall bear interest, if any, or the method by which such rate or rates shall be determined, the date or dates from which such interest shall accrue or the method by which such date or dates shall be determined, the Interest Payment Dates on which such interest will be payable and the Regular Record Date, if any, for the interest payable on any Registered Security on any Interest Payment Date, or the method by which such date shall be determined, and the basis upon which interest shall be calculated if other than that of a 360-day year of twelve 30-day months; (5) the place or places, if any, other than or in addition to the Borough of Manhattan, The City of New York, where the principal of (and premium, if any), interest, if any, on, and Additional Amounts, if any, payable in respect of, Securities of the series shall be payable, any Registered Securities of the series may be surrendered for registration of transfer, exchange or conversion and notices or demands to or upon the Company in respect of the Securities of the series and this Indenture may be served; (6) the period or periods within which, the price or prices at which, the currency or currencies, currency unit or units or composite currency or currencies in which, and other terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company, if the Company is to have the option; (7) the obligation, if any, of the Company to redeem, repay or purchase Securities of the series pursuant to any sinking fund or analogous provision or at the option of a Holder thereof, and the period or periods within which or the date or dates on which, the price or prices at which, the currency or currencies, currency unit or units or composite currency or currencies in which, and other terms and conditions upon which Securities of the series shall be redeemed, repaid or purchased, in whole or in part, pursuant to such obligation; (8) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which any Registered Securities of the series shall be issuable and, if other than the denomination of $5,000, the denomination or denominations in which any Bearer Securities of the series shall be issuable; (9) if other than the Trustee, the identity of each Security Registrar and/or Paying Agent; (10) if other than the principal amount thereof, the portion of the principal amount of Securities of the series that 22 shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 502 or, if applicable, the portion of the principal amount of Securities of the series that is convertible in accordance with the provisions of this Indenture, or the method by which such portion shall be determined; (11) if other than Dollars, the Foreign Currency or Currencies in which payment of the principal of (and premium, if any) or interest or Additional Amounts, if any, on the Securities of the series shall be payable or in which the Securities of the series shall be denominated; (12) whether the amount of payments of principal of (and premium, if any) or interest, if any, on the Securities of the series may be determined with reference to an index, formula or other method (which index, formula or method may be based, without limitation, on one or more currencies, currency units, composite currencies, commodities, equity indices or other indices), and the manner in which such amounts shall be determined; (13) whether the principal of (and premium, if any) or interest or Additional Amounts, if any, on the Securities of the series are to be payable, at the election of the Company or a Holder thereof, in a currency or currencies, currency unit or units or composite currency or currencies other than that in which such Securities are denominated or stated to be payable, the period or periods within which, and the terms and conditions upon which, such election may be made, and the time and manner of, and identity of the exchange rate agent with responsibility for, determining the exchange rate between the currency or currencies, currency unit or units or composite currency or currencies in which such Securities are denominated or stated to be payable and the currency or currencies, currency unit or units or composite currency or currencies in which such Securities are to be so payable; (14) provisions, if any, granting special rights to the Holders of Securities of the series upon the occurrence of such events as may be specified; (15) any deletions from, modifications of or additions to the Events of Default or covenants of the Company with respect to Securities of the series, whether or not such Events of Default or covenants are consistent with the Events of Default or covenants set forth herein; (16) whether Securities of the series are to be issuable as Registered Securities, Bearer Securities (with or without coupons) or both, any restrictions applicable to the offer, sale or 23 delivery of Bearer Securities and the terms upon which Bearer Securities of the series may be exchanged for Registered Securities of the series and vice versa (if permitted by applicable laws and regulations), whether any Securities of the series are to be issuable initially in temporary global form and whether any Securities of the series are to be issuable in permanent global form with or without coupons and, if so, whether beneficial owners of interests in any such permanent global Security may exchange such interests for Securities of such series and of like tenor of any authorized form and denomination and the circumstances under which any such exchanges may occur, if other than in the manner provided in Section 305, and, if Registered Securities of the series are to be issuable as a global Security, the identity of the depositary for such series; (17) the date as of which any Bearer Securities of the series and any temporary global Security representing Outstanding Securities of the series shall be dated if other than the date of original issuance of the first Security of the series to be issued; (18) the Person to whom any interest on any Registered Security of the series shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, the manner in which, or the Person to whom, any interest on any Bearer Security of the series shall be payable, if otherwise than upon presentation and surrender of the coupons appertaining thereto as they severally mature, and the extent to which, or the manner in which, any interest payable on a temporary global Security on an Interest Payment Date will be paid if other than in the manner provided in Section 304; (19) the applicability, if any, of Sections 1402 and/or 1403 to the Securities of the series and any provisions in modification of, in addition to or in lieu of any of the provisions of Article Fourteen; (20) if the Securities of such series are to be issuable in definitive form (whether upon original issue or upon exchange of a temporary Security of such series) only upon receipt of certain certificates or other documents or satisfaction of other conditions, then the form and/or terms of such certificates, documents or conditions; (21) if the Securities of the series are to be issued upon the exercise of warrants, the time, manner and place for such Securities to be authenticated and delivered; 24 (22) whether and under what circumstances the Company will pay Additional Amounts as contemplated by Section 1012 on the Securities of the series to any Holder who is not a United States person (including any modification to the definition of such term) in respect of any tax, assessment or governmental charge and, if so, whether the Company will have the option to redeem such Securities rather than pay such Additional Amounts (and the terms of any such option); (23) the obligation, if any, of the Company to permit the conversion of the Securities of such series into the Company's Common Stock or Preferred Stock, as the case may be, and the terms and conditions upon which such conversion shall be effected (including, without limitation, the initial conversion price or rate, the conversion period, any adjustment of the applicable conversion price and any requirements relative to the reservation of such shares for purposes of conversion; and (24) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture). All Securities of any one series and the coupons appertaining to any Bearer Securities of such series shall be substantially identical except, in the case of Registered Securities, as to denomination and except as may otherwise be provided in or pursuant to such Board Resolution (subject to Section 303) and set forth in such Officers' Certificate or in any such indenture supplemental hereto. All Securities of any one series need not be issued at the same time and, unless otherwise provided, a series may be reopened, without the consent of the Holders, for issuances of additional Securities of such series. If any of the terms of the Securities of any series are established by action taken pursuant to one or more Board Resolutions, a copy of an appropriate record of such action(s) shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers' Certificate setting forth the terms of the Securities of such series. SECTION 302. Denominations. The Securities of each series shall be ------------- issuable in such denominations as shall be specified as contemplated by Section 301. With respect to Securities of any series denominated in Dollars, in the absence of any such provisions with respect to the Securities of any series, the Registered Securities of such series, other than Registered Securities issued in global form (which may be of any denomination), shall be issuable in denominations of $1,000 and any integral multiple thereof and the Bearer Securities of such series, other than Bearer Securities 25 issued in global form (which may be of any denomination), shall be issuable in a denomination of $5,000. SECTION 303. Execution, Authentication, Delivery and Dating. The ---------------------------------------------- Securities and any coupons appertaining thereto shall be executed on behalf of the Company by its Chairman of the Board, its President or one of its Vice Presidents, under its corporate seal reproduced thereon, and attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities and coupons may be manual or facsimile signatures of the present or any future such authorized officer and may be imprinted or otherwise reproduced on the Securities. Securities or coupons bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities or coupons. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series, together with any coupon appertaining thereto, executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and make available for delivery such Securities; provided, however, that, in connection with its original issuance, no Bearer - -------- ------- Security shall be mailed or otherwise delivered to any location in the United States; and provided further that, unless otherwise specified with respect to -------- ------- any series of Securities pursuant to Section 301, a Bearer Security may be delivered in connection with its original issuance only if the Person entitled to receive such Bearer Security shall have furnished a certificate to Euroclear or Cedel, as the case may be, in the form set forth in Exhibit A-1 to this Indenture or such other certificate as may be specified with respect to any series of Securities pursuant to Section 301, dated no earlier than 15 days prior to the earlier of the date on which such Bearer Security is delivered and the date on which any temporary Security first becomes exchangeable for such Bearer Security in accordance with the terms of such temporary Security and this Indenture. If any Security shall be represented by a permanent global Bearer Security, then, for purposes of this Section and Section 304, the notation of a beneficial owner's interest therein upon original issuance of such Security or upon exchange of a portion of a temporary global Security shall be deemed to be delivery in connection with its original issuance of such beneficial owner's interest in such permanent global Security. Except as permitted by Section 306, the Trustee shall not authenticate and make available for delivery any Bearer Security 26 unless all appurtenant coupons for interest then matured have been detached and cancelled. If all the Securities of any series are not to be issued at one time and if the Board Resolution or supplemental indenture establishing such series shall so permit, such Company Order may set forth procedures acceptable to the Trustee for the issuance of such Securities and determining the terms of particular Securities of such series, such as interest rate or formula, maturity date, date of issuance and date from which interest shall accrue. In authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to TIA Section 315(a) through 315(d)) shall be fully protected in relying upon, (i) a supplemental Indenture, if any; (ii) an Opinion of Counsel stating that (a) the form or forms of such Securities and any coupons have been established in conformity with the provisions of this Indenture; (b) the terms of such Securities and any coupons have been established in conformity with the provisions of this Indenture; and (c) such Securities, together with any coupons appertaining thereto, when completed by appropriate insertions and executed and delivered by the Company to the Trustee for authentication in accordance with this Indenture, authenticated and made available for delivery by the Trustee in accordance with this Indenture and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute legal, valid and binding obligations of the Company, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization and other similar laws of general applicability relating to or affecting the enforcement of creditors' rights generally and to general equitable principles; and (ii) an Officers' Certificate stating that all conditions precedent provided for in this Indenture relating to the issuance of the Securities have been complied with and that, to the best of the knowledge of the signers of such certificate, that no Event of Default with respect to any of the Securities shall have occurred and be continuing. 27 If such form or terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own rights, duties, obligations or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. Notwithstanding the provisions of Section 301 and of the preceding paragraph, if all the Securities of any series are not to be issued at one time, it shall not be necessary to deliver an Officers' Certificate otherwise required pursuant to Section 301 or a Company Order, or an Opinion of Counsel or an Officers' Certificate otherwise required pursuant to the preceding paragraph at the time of issuance of each Security of such series, but such order, opinion and certificates, with appropriate modifications to cover such future issuances, shall be delivered at or before the time of issuance of the first Security of such series. Each Registered Security shall be dated the date of its authentication and each Bearer Security shall be dated as of the date specified as contemplated by Section 301. No Security or coupon shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security or Security to which such coupon appertains a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of an authorized signatory, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and made available for delivery hereunder and is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 309 together with a written statement (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and made available for delivery hereunder and shall never be entitled to the benefits of this Indenture. SECTION 304. Temporary Securities. (a) Pending the preparation of -------------------- definitive Securities of any series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued, in registered form, or, if authorized, in bearer form with one or more coupons or without 28 coupons, and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. In the case of Securities of any series, such temporary Securities may be in global form. Except in the case of temporary Securities in global form (which shall be exchanged in accordance with Section 304(b) or as otherwise provided in or pursuant to a Board Resolution), if temporary Securities of any series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series (accompanied by any non-matured coupons appertaining thereto), the Company shall execute and the Trustee shall authenticate and make available for delivery in exchange therefor a like principal amount of definitive Securities of the same series of authorized denominations; provided, however, that no definitive Bearer -------- ------- Security shall be delivered in exchange for a temporary Registered Security; and provided further that a definitive Bearer Security shall be delivered in - -------- ------- exchange for a temporary Bearer Security only in compliance with the conditions set forth in Section 303. Until so exchanged, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series. (b) Unless otherwise provided in or pursuant to a Board Resolution, this Section 304(b) shall govern the exchange of temporary Securities issued in global form other than through the facilities of The Depository Trust Company. If any such temporary Security is issued in global form, then such temporary global Security shall, unless otherwise provided therein, be delivered to the London office of a depositary or common depositary (the "Common Depositary"), for the benefit of Euroclear and CEDEL, for credit to the respective accounts of the beneficial owners of such Securities (or to such other accounts as they may direct). Without unnecessary delay but in any event not later than the date specified in, or determined pursuant to the terms of, any such temporary global Security (the "Exchange Date"), the Company shall deliver to the Trustee definitive Securities, in aggregate principal amount equal to the principal amount of such temporary global Security, executed by the Company. On or after the Exchange Date, such temporary global Security shall be surrendered by the Common Depositary to the Trustee, as the Company's agent for such purpose, to be exchanged, in whole or from time to time in part, for 29 definitive Securities without charge, and the Trustee shall authenticate and deliver, in exchange for each portion of such temporary global Security, an equal aggregate principal amount of definitive Securities of the same series of authorized denominations and of like tenor as the portion of such temporary global Security to be exchanged. The definitive Securities to be delivered in exchange for any such temporary global Security shall be in bearer form, registered form, permanent global bearer form or permanent global registered form, or any combination thereof, as specified as contemplated by Section 301, and, if any combination thereof is so specified, as requested by the beneficial owner thereof; provided, however, that, unless otherwise specified in such -------- ------- temporary global Security, upon such presentation by the Common Depositary, such temporary global Security is accompanied by a certificate dated the Exchange Date or a subsequent date and signed by Euroclear as to the portion of such temporary global Security held for its account then to be exchanged and a certificate dated the Exchange Date or a subsequent date and signed by CEDEL as to the portion of such temporary global Security held for its account then to be exchanged, each in the form set forth in Exhibit A-2 to this Indenture or in such other form as may be established pursuant to Section 301; and provided -------- further that definitive Bearer Securities shall be delivered in exchange for a - ------- portion of a temporary global Security only in compliance with the requirements of Section 303. Unless otherwise specified in such temporary global Security, the interest of a beneficial owner of Securities of a series in a temporary global Security shall be exchanged for definitive Securities of the same series and of like tenor following the Exchange Date when the account holder instructs Euroclear or CEDEL, as the case may be, to request such exchange on his behalf and delivers to Euroclear or CEDEL, as the case may be, a certificate in the form set forth in Exhibit A-1 to this Indenture (or in such other form as may be established pursuant to Section 301), dated no earlier than 15 days prior to the Exchange Date, copies of which certificate shall be available from the offices of Euroclear and CEDEL, the Trustee, any Authenticating Agent appointed for such series of Securities and each Paying Agent. Unless otherwise specified in such temporary global Security, any such exchange shall be made free of charge to the beneficial owners of such temporary global Security, except that a Person receiving definitive Securities must bear the cost of insurance, postage, transportation and the like unless such Person takes delivery of such definitive Securities in person at the offices of Euroclear or CEDEL. Definitive Securities in bearer form to be delivered in exchange for any portion of a temporary global Security shall be delivered only outside the United States. Until exchanged in full as hereinabove provided, the temporary Securities of any series shall in all respects be entitled to 30 the same benefits under this Indenture as definitive Securities of the same series and of like tenor authenticated and delivered hereunder, except that, unless otherwise specified as contemplated by Section 301, interest payable on a temporary global Security on an Interest Payment Date for Securities of such series occurring prior to the applicable Exchange Date shall be payable to Euroclear and CEDEL on such Interest Payment Date upon delivery by Euroclear and CEDEL to the Trustee of a certificate or certificates in the form set forth in Exhibit A-2 to this Indenture (or in such other forms as may be established pursuant to Section 301), for credit without further interest on or after such Interest Payment Date to the respective accounts of Persons who are the beneficial owners of such temporary global Security on such Interest Payment Date and who have each delivered to Euroclear or CEDEL, as the case may be, a certificate dated no earlier than 15 days prior to the Interest Payment Date occurring prior to such Exchange Date in the form set forth as Exhibit A-1 to this Indenture (or in such other forms as may be established pursuant to Section 301). Notwithstanding anything to the contrary herein contained, the certifications made pursuant to this paragraph shall satisfy the certification requirements of the preceding two paragraphs of this Section 304(b) and of the third paragraph of Section 303 of this Indenture and the interests of the Persons who are the beneficial owners of the temporary global Security with respect to which such certification was made will be exchanged for definitive Securities of the same series and of like tenor on the Exchange Date or the date of certification if such date occurs after the Exchange Date, without further act or deed by such beneficial owners. Except as otherwise provided in this paragraph, no payments of principal or interest owing with respect to a beneficial interest in a temporary global Security will be made unless and until such interest in such temporary global Security shall have been exchanged for an interest in a definitive Security. Any interest so received by Euroclear and CEDEL and not paid as herein provided shall be returned to the Trustee prior to the expiration of two years after such Interest Payment Date in order to be repaid to the Company. SECTION 305. Registration, Registration of Transfer and Exchange. --------------------------------------------------- The Company shall cause to be kept at the Corporate Trust Office of the Trustee or in any office or agency of the Company in a Place of Payment a register for each series of Securities (the registers maintained in such office or in any such office or agency of the Company in a Place of Payment being herein sometimes referred to collectively as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Registered Securities and of transfers of Registered Securities. The Security Register shall be in written form or any other form capable of being converted into written form within a reasonable time. The Trustee, at its Corporate Trust Office, is hereby initially appointed "Security Registrar" for 31 the purpose of registering Registered Securities and transfers of Registered Securities on such Security Register as herein provided. In the event that the Trustee shall cease to be Security Registrar, it shall have the right to examine the Security Register during regular business hours or at other reasonable times. Subject to the provisions of this Section 305, upon surrender for registration of transfer of any Registered Security of any series at any office or agency of the Company in a Place of Payment for that series, the Company shall execute, and the Trustee shall authenticate and make available for delivery, in the name of the designated transferee or transferees, one or more new Registered Securities of the same series, of any authorized denominations and of a like aggregate principal amount, bearing a number not contemporaneously outstanding, and containing identical terms and provisions. Subject to the provisions of this Section 305, at the option of the Holder, Registered Securities of any series may be exchanged for other Registered Securities of the same series, of any authorized denomination or denominations and of a like aggregate principal amount, containing identical terms and provisions, upon surrender of the Registered Securities to be exchanged at any such office or agency. Whenever any such Registered Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and make available for delivery, the Registered Securities which the Holder making the exchange is entitled to receive. Unless otherwise specified with respect to any series of Securities as contemplated by Section 301, Bearer Securities may not be issued in exchange for Registered Securities. If (but only if) permitted by the applicable Board Resolution and (subject to Section 303) set forth in the applicable Officers' Certificate, or in any indenture supplemental hereto, delivered as contemplated by Section 301, at the option of the Holder, Bearer Securities of any series may be exchanged for Registered Securities of the same series of any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Bearer Securities to be exchanged at any such office or agency, with all unmatured coupons and all matured coupons in default thereto appertaining. If the Holder of a Bearer Security is unable to produce any such unmatured coupon or coupons or matured coupon or coupons in default, any such permitted exchange may be effected if the Bearer Securities are accompanied by payment in funds acceptable to the Company in an amount equal to the face amount of such missing coupon or coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Trustee if there is furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless. If thereafter the Holder of such Security shall surrender to any 32 Paying Agent any such missing coupon in respect of which such a payment shall have been made, such Holder shall be entitled to receive the amount of such payment; provided, however, that, except as otherwise provided in Section 1002, -------- ------- interest represented by coupons shall be payable only upon presentation and surrender of those coupons at an office or agency located outside the United States. Notwithstanding the foregoing, in case a Bearer Security of any series is surrendered at any such office or agency in a permitted exchange for a Registered Security of the same series and like tenor after the close of business at such office or agency on (i) any Regular Record Date and before the opening of business at such office or agency on the relevant Interest Payment Date, or (ii) any Special Record Date and before the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest, such Bearer Security shall be surrendered without the coupon relating to such Interest Payment Date or proposed date for payment, as the case may be, and interest or Defaulted Interest, as the case may be, will not be payable on such Interest Payment Date or proposed date for payment, as the case may be, in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such coupon when due in accordance with the provisions of this Indenture. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. Notwithstanding the foregoing, except as otherwise specified as contemplated by Section 301, any permanent global Security shall be exchangeable only as provided in this paragraph. If the depositary for any permanent global Security is The Depository Trust Company ("DTC"), then, unless the terms of such global Security expressly permit such global Security to be exchanged in whole or in part for definitive Securities, a global Security may be transferred, in whole but not in part, only to a nominee of DTC, or by a nominee of DTC to DTC, or to a successor to DTC for such global Security selected or approved by the Company or to a nominee of such successor to DTC. If at any time DTC notifies the Company that it is unwilling or unable to continue as depositary for the applicable global Security or Securities or if at any time DTC ceases to be a clearing agency registered under the Securities Exchange Act of 1934 if so required by applicable law or regulation, the Company shall appoint a successor depositary with respect to such global Security or Securities. If (x) a successor depositary for such global Security or Securities is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such unwillingness, inability or ineligibility, (y) an Event of Default has occurred and is continuing and the beneficial owners representing a majority in principal amount of the applicable series of Securities represented by such global Security or Securities advise 33 DTC to cease acting as depositary for such global Security or Securities or (z) the Company, in its sole discretion, determines at any time that all Outstanding Securities (but not less than all) of any series issued or issuable in the form of one or more global Securities shall no longer be represented by such global Security or Securities, then the Company shall execute, and the Trustee shall authenticate and deliver definitive Securities of like series, rank, tenor and terms in definitive form in an aggregate principal amount equal to the principal amount of such global Security or Securities. If any beneficial owner of an interest in a permanent global Security is otherwise entitled to exchange such interest for Securities of such series and of like tenor and principal amount of another authorized form and denomination, as specified as contemplated by Section 301 and provided that any applicable notice provided in the permanent global Security shall have been given, then without unnecessary delay but in any event not later than the earliest date on which such interest may be so exchanged, the Company shall execute, and the Trustee shall authenticate and deliver definitive Securities in aggregate principal amount equal to the principal amount of such beneficial owner's interest in such permanent global Security. On or after the earliest date on which such interests may be so exchanged, such permanent global Security shall be surrendered for exchange by DTC or such other depositary as shall be specified in the Company Order with respect thereto to the Trustee, as the Company's agent for such purpose; provided, however, that no such exchanges may occur during a period beginning at - -------- ------- the opening of business 15 days before any mailing of a Notice of Redemption and ending on such relevant mailing date if the Security for which exchange is requested may be among those selected for redemption; and provided further that -------- ------- no Bearer Security delivered in exchange for a portion of a permanent global Security shall be mailed or otherwise delivered to any location in the United States. If a Registered Security is issued in exchange for any portion of a permanent global Security after the close of business at the office or agency where such exchange occurs on (i) any Regular Record Date and before the opening of business at such office or agency on the relevant Interest Payment Date, or (ii) any Special Record Date and the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest, interest or Defaulted Interest, as the case may be, will not be payable on such Interest Payment Date or proposed date for payment, as the case may be, in respect of such Registered Security, but will be payable on such Interest Payment Date or proposed date for payment, as the case may be, only to the Person to whom interest in respect of such portion of such permanent global Security is payable in accordance with the provisions of this Indenture. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits 34 under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Registered Security presented or surrendered for registration of transfer or for exchange or redemption shall (if so required by the Company or the Security Registrar) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906, 1107 or 1305 not involving any transfer. The Company or the Trustee, as applicable, shall not be required (i) to issue, register the transfer of or exchange any Security if such Security may be among those selected for redemption during a period beginning at the opening of business 15 days before the mailing of a Notice of Redemption under Section 1103 and ending at the close of business on (A) if such Securities are issuable only as Registered Securities, the day of the mailing of the relevant notice of redemption and (B) if such Securities are issuable as Bearer Securities, the day of the first publication of the relevant notice of redemption or, if such Securities are also issuable as Registered Securities and there is no publication, the mailing of the relevant notice of redemption, or (ii) to register the transfer of or exchange any Registered Security so selected for redemption in whole or in part, except, in the case of any Registered Security to be redeemed in part, the portion thereof not to be redeemed, or (iii) to exchange any Bearer Security so selected for redemption except that such a Bearer Security may be exchanged for a Registered Security of that series and like tenor, provided that such Registered Security shall be simultaneously -------- surrendered for redemption, or (iv) to issue, register the transfer of or exchange any Security which has been surrendered for repayment at the option of the Holder, except the portion, if any, of such Security not to be so repaid. SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. If ------------------------------------------------ any mutilated Security or a Security with a mutilated coupon appertaining to it is surrendered to the Trustee or the Company, together with, in proper cases, such security or indemnity as may be required by the Company or the Trustee to save each of them or any agent of either of them harmless, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and principal amount, containing identical terms and provisions and bearing a number not 35 contemporaneously outstanding, with coupons corresponding to the coupons, if any, appertaining to the surrendered Security. If there shall be delivered to the Company and to the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security or coupon, and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security or coupon has been acquired by a bonafide purchaser, the Company shall execute and upon its request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security or in exchange for the Security to which a destroyed, lost or stolen coupon appertains (with all appurtenant coupons not destroyed, lost or stolen), a new Security of the same series and principal amount, containing identical terms and provisions and bearing a number not contemporaneously outstanding, with coupons corresponding to the coupons, if any, appertaining to such destroyed, lost or stolen Security or to the Security to which such destroyed, lost or stolen coupon appertains. Notwithstanding the provisions of the previous two paragraphs, in case any such mutilated, destroyed, lost or stolen Security or coupon has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, with coupons corresponding to the coupons, if any, appertaining to such destroyed, lost or stolen Security or to the Security to which such destroyed, lost or stolen coupon appertains, pay such Security or coupon; provided, however, that payment of principal of (and premium, if any), -------- ------- any interest on and any Additional Amounts with respect to, Bearer Securities shall, except as otherwise provided in Section 1002, be payable only at an office or agency located outside the United States and, unless otherwise specified as contemplated by Section 301, any interest on Bearer Securities shall be payable only upon presentation and surrender of the coupons appertaining thereto. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security of any series with its coupons, if any, issued pursuant to this Section in lieu of any destroyed, lost or stolen Security, or in exchange for a Security to which a destroyed, lost or stolen coupon appertains, shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security and its coupons, if any, or the destroyed, lost or stolen coupon shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture 36 equally and proportionately with any and all other Securities of that series and their coupons, if any, duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities or coupons. SECTION 307. Payment of Interest; Interest Rights Preserved. Except ---------------------------------------------- as otherwise specified with respect to a series of Securities in accordance with the provisions of Section 301, interest on any Registered Security that is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest at the office or agency of the Company maintained for such purpose pursuant to Section 1002; provided, however, that each -------- ------- installment of interest on any Registered Security may at the Company's option be paid by (i) mailing a check for such interest, payable to or upon the written order of the Person entitled thereto pursuant to Section 308, to the address of such Person as it appears on the Security Register or (ii) transfer to an account maintained by the payee located inside the United States. Unless otherwise provided as contemplated by Section 301 with respect to the Securities of any series, payment of interest may be made, in the case of a Bearer Security, by transfer to an account maintained by the payee with a bank located outside the United States. Unless otherwise provided as contemplated by Section 301, every permanent global Security will provide that interest, if any, payable on any Interest Payment Date will be paid to DTC, Euroclear and/or CEDEL, as the case may be, with respect to that portion of such permanent global Security held for its account by Cede & Co. or the Common Depositary, as the case may be, for the purpose of permitting such party to credit the interest received by it in respect of such permanent global Security to the accounts of the beneficial owners thereof. In case a Bearer Security of any series is surrendered in exchange for a Registered Security of such series after the close of business (at an office or agency in a Place of Payment for such series) on any Regular Record Date and before the opening of business (at such office or agency) on the next succeeding Interest Payment Date, such Bearer Security shall be surrendered without the coupon relating to such Interest Payment Date and interest will not be payable on such Interest Payment Date in respect of the Registered Security issued in exchange for such Bearer Security, but will 37 be payable only to the Holder of such coupon when due in accordance with the provisions of this Indenture. Except as otherwise specified with respect to a series of Securities in accordance with the provisions of Section 301, any interest on any Registered Security of any series that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the registered Holder thereof on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Registered Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Registered Security of such series and the date of the proposed payment (which shall not be less than 20 days after such notice is received by the Trustee), and at the same time the Company shall deposit with the Trustee an amount of money in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Registered Securities of such series at his address as it appears in the Security Register not less than 10 days prior to such Special Record Date. The Trustee may, in its discretion, in the name and at the expense of the Company, cause a similar notice to be published at least once in an Authorized Newspaper in each place of payment, but such publications shall not be a condition precedent to the establishment of such Special Record Date. Notice of the 38 proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names the Registered Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). In case a Bearer Security of any series is surrendered at the office or agency in a Place of Payment for such series in exchange for a Registered Security of such series after the close of business at such office or agency on any Special Record Date and before the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest, such Bearer Security shall be surrendered without the coupon relating to such proposed date of payment and Defaulted Interest will not be payable on such proposed date of payment in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such coupon when due in accordance with the provisions of this Indenture. (2) The Company may make payment of any Defaulted Interest on the Registered Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after written notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section and Section 305, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 308. Persons Deemed Owners. Prior to due presentment of a --------------------- Registered Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Registered Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any), and (subject to Sections 305 and 307) interest on, such Registered Security and for all other purposes whatsoever, whether or not such Registered Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. Title to any Bearer Security and any coupons appertaining thereto shall pass by delivery. The Company, the Trustee and any agent of the Company or the Trustee may treat the Holder of any 39 Bearer Security and the Holder of any coupon as the absolute owner of such Security or coupon for the purpose of receiving payment thereof or on account thereof and for all other purposes whatsoever, whether or not such Security or coupon be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. None of the Company, the Trustee, any Paying Agent or the Security Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Security in global form or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Notwithstanding the foregoing, with respect to any global Security, nothing herein shall prevent the Company, the Trustee, or any agent of the Company or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by any depositary, as a Holder, with respect to such global Security or impair, as between such depositary and owners of beneficial interests in such global Security, the operation of customary practices governing the exercise of the rights of such depositary (or its nominee) as Holder of such global Security. SECTION 309. Cancellation. All Securities and coupons surrendered ------------ for payment, redemption, repayment at the option of the Holder, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee, and any such Securities and coupons and Securities and coupons surrendered directly to the Trustee for any such purpose shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and made available for delivery hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly cancelled by the Trustee. If the Company shall so acquire any of the Securities, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Securities unless and until the same are surrendered to the Trustee for cancellation. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. Cancelled Securities and coupons held by the Trustee shall be returned to the Company upon its written instruction. SECTION 310. Computation of Interest. Except as otherwise specified ----------------------- as contemplated by Section 301 with respect to Securities 40 of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year consisting of twelve 30-day months. SECTION 311. Transfers. Each Holder of a Security agrees to --------- indemnify the Company and the Trustee against any liability that may result from the transfer, exchange or assignment of such Holder's Security in violation of any provision of this Indenture and/or applicable United States federal or state securities law. SECTION 312. CUSIP Numbers. The Company in issuing the Securities ------------- may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the - -------- correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the CUSIP numbers. ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture. This Indenture --------------------------------------- shall upon Company Request cease to be of further effect with respect to any series of Securities specified in such Company Request (except as to any surviving rights of registration of transfer or exchange of Securities of such series herein expressly provided for and any right to receive Additional Amounts, as provided in Section 1012), and the Trustee, upon receipt of a Company Order, and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture as to such series when (1) either (A) all Securities of such series theretofore authenticated and delivered and all coupons, if any, appertaining thereto (other than (i) coupons appertaining to Bearer Securities surrendered for exchange for Registered Securities and maturing after such exchange, whose surrender is not required or has been waived as provided in Section 305, (ii) Securities and coupons of such series which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306, (iii) coupons appertaining to Securities called for redemption and maturing after the 41 relevant Redemption Date, whose surrender has been waived as provided in Section 1106, and (iv) Securities and coupons of such series for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all Securities of such series and, in the case of (i) or (ii) below, any coupons appertaining thereto not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) if redeemable at the option of the Company, are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (i), (ii) or (iii) above, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable, sufficient to pay and discharge the entire indebtedness on such Securities and such coupons not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest, and any Additional Amounts with respect thereto, to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture as to such series have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee and any predecessor Trustee under Section 606, the obligations of the Company to any Authenticating Agent under Section 612 and, if money shall have been 42 deposited with and held by the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive. SECTION 402. Application of Trust Funds. Subject to the provisions -------------------------- of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities, the coupons and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any), and any interest and Additional Amounts for whose payment such money has been deposited with or received by the Trustee, but such money need not be segregated from other funds except to the extent required by law. ARTICLE FIVE REMEDIES SECTION 501. Events of Default. "Event of Default", wherever used ----------------- herein with respect to any particular series of Securities, means any one of the following events (whatever the reason for such Event of Default and whether or not it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest upon or any Additional Amounts payable in respect of any Security of that series or of any coupon appertaining thereto, when such interest, Additional Amounts or coupon becomes due and payable, and continuance of such default for a period of 10 days; or (2) default in the payment of the principal of (or premium, if any, on) any Security of that series when it becomes due and payable at its Maturity; or (3) default in the deposit of any sinking fund payment, when and as due by the terms of any Security of that series; or (4) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture with respect to any Security of that series (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the Company by the 43 Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities of that series a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (5) a default under any bond, debenture, note or other evidence of indebtedness of the Company, or under any mortgage, indenture or other instrument of the Company (including a default with respect to Securities of any series other than that series) under which there may be issued or by which there may be secured any indebtedness of the Company (or by any Subsidiary, the repayment of which the Company has guaranteed or for which the Company is directly responsible or liable as obligor or guarantor), whether such indebtedness now exists or shall hereafter be created, which default shall constitute a failure to pay an aggregate principal amount exceeding $25,000,000 of such indebtedness when due and payable after the expiration of any applicable grace period with respect thereto and shall have resulted in such indebtedness in an aggregate principal amount exceeding $25,000,000 becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such indebtedness having been discharged, or such acceleration having been rescinded or annulled, within a period of 30 days after there shall have been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 10% in principal amount of the Outstanding Securities of that series a written notice specifying such default and requiring the Company to cause such indebtedness to be discharged or cause such acceleration to be rescinded or annulled and stating that such notice is a "Notice of Default" hereunder; or (6) the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a Custodian of it or for all or substantially all of its property, or (D) makes a general assignment for the benefit of its creditors; or (7) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: 44 (A) is for relief against the Company or any Significant Subsidiary in an involuntary case, (B) appoints a Custodian of the Company or any Significant Subsidiary or for all or substantially all of either of its property, or (C) orders the liquidation of the Company or any Significant Subsidiary, and the order or decree remains unstayed and in effect for 90 days; or (8) any other Event of Default provided with respect to Securities of that series. As used in this Section 501, the term "Bankruptcy Law" means title 11, U.S. Code or any similar Federal or State law for the relief of debtors and the term "Custodian" means any receiver, trustee, assignee, liquidator or other similar official under any Bankruptcy Law. SECTION 502. Acceleration of Maturity; Rescission and Annulment. If -------------------------------------------------- an Event of Default with respect to Securities of any series at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of that series may declare the principal (or, if any Securities are Original Issue Discount Securities or Indexed Securities, such portion of the principal as may be specified in the terms thereof) of all the Securities of that series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by the Holders), and upon any such declaration such principal or specified portion thereof shall become immediately due and payable. At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities of that series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if: (1) the Company has paid or deposited with the Trustee a sum sufficient to pay in the currency, currency unit or composite currency in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series): 45 (A) all overdue installments of interest on and any Additional Amounts payable in respect of all Outstanding Securities of that series and any related coupons, (B) the principal of (and premium, if any, on) any Outstanding Securities of that series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates borne by or provided for in such Securities, (C) to the extent that payment of such interest is lawful, interest upon overdue installments of interest and any Additional Amounts at the rate or rates borne by or provided for in such Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default with respect to Securities of that series, other than the nonpayment of the principal of (or premium, if any) or interest on Securities of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 503. Collection of Indebtedness and Suits for Enforcement by ------------------------------------------------------- Trustee. The Company covenants that if: - ------- (1) default is made in the payment of any installment of interest or Additional Amounts, if any, on any Security of any series and any related coupon when such interest or Additional Amount becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Security of any series at its Maturity, then the Company will, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Securities of such series and coupons, the whole amount then due and payable on such Securities and coupons for principal (and premium, if any) and interest and Additional Amount, with interest upon any overdue principal (and premium, if any) and, to the extent that payment of such interest shall be legally enforceable, upon any overdue installments of interest or Additional Amounts, if any, at the rate or rates borne by or provided for in such Securities, and, in addition there- 46 to, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor upon such Securities of such series and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Securities of such series, wherever situated. If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series and any related coupons by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 504. Trustee May File Proofs of Claim. In case of the -------------------------------- pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities of any series shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal, premium, if any, or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise: (i) to file and prove a claim for the whole amount, or such lesser amount as may be provided for in the Securities of such series, of principal (and premium, if any) and interest and Additional Amounts, if any, owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and 47 (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator (or other similar official) in any such judicial proceeding is hereby authorized by each Holder of Securities of such series and coupons to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee and any predecessor Trustee, their agents and counsel, and any other amounts due the Trustee or any predecessor Trustee under Section 606. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder of a Security or coupon any plan of reorganization, arrangement, adjustment or composition affecting the Securities or coupons or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder of a Security or coupon in any such proceeding. SECTION 505. Trustee May Enforce Claims Without Possession of ------------------------------------------------ Securities or Coupons. All rights of action and claims under this Indenture or - --------------------- any of the Securities or coupons may be prosecuted and enforced by the Trustee without the possession of any of the Securities or coupons or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities and coupons in respect of which such judgment has been recovered. SECTION 506. Application of Money Collected. Any money collected by ------------------------------ the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest and any Additional Amounts, upon presentation of the Securities or coupons, or both, as the case may be, and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee and any predecessor Trustee under Section 606; SECOND: To the payment of the amounts then due and unpaid upon the Securities and coupons for principal (and premium, if 48 any) and interest and any Additional Amounts payable, in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the aggregate amounts due and payable on such Securities and coupons for principal (and premium, if any), interest and Additional Amounts, respectively; and THIRD: To the payment of the remainder, if any, to the Company. SECTION 507. Limitation on Suits. No Holder of any Security of any ------------------- series or any related coupon shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of that series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders. 49 SECTION 508. Unconditional Right of Holders to Receive Principal, ---------------------------------------------------- Premium, if any, Interest and Additional Amounts. Notwithstanding any other - ------------------------------------------------ provision in this Indenture, the Holder of any Security or coupon shall have the right which is absolute and unconditional to receive payment of the principal of (and premium, if any) and (subject to Sections 305 and 307) interest on, and any Additional Amounts in respect of, such Security or payment of such coupon on the respective due dates expressed in such Security or coupon (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. SECTION 509. Restoration of Rights and Remedies. If the Trustee or ---------------------------------- any Holder of a Security or coupon has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, the Company, the Trustee and the Holders of Securities and coupons shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 510. Rights and Remedies Cumulative. Except as otherwise ------------------------------ provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities or coupons in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders of Securities or coupons is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 511. Delay or Omission Not Waiver. No delay or omission of ---------------------------- the Trustee or of any Holder of any Security or coupon to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders of Securities or coupons, as the case may be. SECTION 512. Control by Holders of Securities. The Holders of not -------------------------------- less than a majority in principal amount of the Outstanding Securities of any series shall have the right to direct the 50 time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to the Securities of such series, provided that -------- (1) such direction shall not be in conflict with any rule of law or with this Indenture, (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and (3) the Trustee need not take any action which might involve it in personal liability or be unduly prejudicial to the Holders of Securities of such series not joining therein. SECTION 513. Waiver of Past Defaults. The Holders of not less than a ----------------------- majority in principal amount of the Outstanding Securities of any series may on behalf of the Holders of all the Securities of such series and any related coupons waive any past default hereunder with respect to such series and its consequences, except a default (1) in the payment of the principal of (or premium, if any) or interest on or Additional Amounts payable in respect of any Security of such series or any related coupons, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. SECTION 514. Waiver of Usury, Stay or Extension Laws. The Company --------------------------------------- covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. 51 SECTION 515. Undertaking for Costs. All parties to this Indenture --------------------- agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of any undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security on or after the respective Stated Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date). ARTICLE SIX THE TRUSTEE SECTION 601. Notice of Defaults. Within 90 days after the occurrence ------------------ of any default hereunder with respect to the Securities of any series, the Trustee shall transmit in the manner and to the extent provided in TIA Section 313(c), notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the -------- ------- case of a default in the payment of the principal of (or premium, if any) or interest on or any Additional Amounts with respect to any Security of such series, or in the payment of any sinking fund installment with respect to the Securities of such series, the Trustee shall be protected in withholding such notice if and so long as Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interests of the Holders of the Securities and coupons of such series; and provided further that in the -------- ------- case of any default or breach of the character specified in Section 501(4) with respect to the Securities and coupons of such series, no such notice to Holders shall be given until at least 60 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to the Securities of such series. SECTION 602. Certain Rights of Trustee. Subject to the provisions of ------------------------- TIA Section 315(a) through 315(d): 52 (1) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (2) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order (other than delivery of any Security, together with any coupons appertaining thereto, to the Trustee for authentication and delivery pursuant to Section 303 which shall be sufficiently evidenced as provided therein) and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (3) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (4) the Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (5) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders of Securities of any series or any related coupons pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction ; (6) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon or other paper or document, but the Trustee, in its discretion, may make such further reasonable inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further reasonable inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole expense of the Company and shall incur no 53 liability or additional liability of any kind by reason of such inquiry or investigation; (7) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and (8) the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; and (9) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Securities of any series, determined as provided in Sections 101, 104 and 512, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Securities of such series. The Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Except during the continuance of an Event of Default, the Trustee undertakes to perform only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee. In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. SECTION 603. Not Responsible for Recitals or Issuance of Securities. ------------------------------------------------------ The recitals contained herein and in the Securities, except the Trustee's certificate of authentication, and in any cou- 54 pons shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities or coupons, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Securities and perform its obligations hereunder. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of Securities or the proceeds thereof. SECTION 604. May Hold Securities. The Trustee, any Paying Agent, ------------------- Security Registrar, Authenticating Agent or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and coupons and, subject to TIA Sections 310(b) and 311, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar, Authenticating Agent or such other agent. SECTION 605. Money Held in Trust. Money held by the Trustee in trust ------------------- hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. SECTION 606. Compensation and Reimbursement. The Company agrees: ------------------------------ (1) to pay to the Trustee from time to time such compensation as the Company and the Trustee shall from time to time agree in writing for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse each of the Trustee and any predecessor Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify each of the Trustee and any predecessor Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its own part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and reasonable expenses of defending itself against any claim or liability in connection with the exercise or 55 performance of any of its powers or duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent that such loss, damage, claim, liability or expense is due to its own negligence or bad faith. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 501(5) or Section 501(6), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable Federal or state bankruptcy, insolvency or other similar law. As security for the performance of the obligations of the Company under this Section, the Trustee shall have a lien prior to the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of (or premium, if any) or interest on particular Securities or any coupons. The provisions of this Section shall survive the termination of this Indenture. SECTION 607. Corporate Trustee Required; Eligibility; Conflicting ---------------------------------------------------- Interests. There shall at all times be a Trustee hereunder which shall be - --------- eligible to act as Trustee under TIA Section 310(a)(1) and shall have a combined capital and surplus of at least $50,000,000. If such corporation publishes reports of condition at least annually, pursuant to law or the requirements of Federal, State, Territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 608. Resignation and Removal; Appointment of Successor. (a) ------------------------------------------------- No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 609. (b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after 56 the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Trustee and to the Company. (d) If at any time: (1) the Trustee shall fail to comply with the provisions of TIA Section 310(b) after written request therefor by the Company or by any Holder of a Security who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 607 and shall fail to resign after written request therefor by the Company or by any Holder of a Security who has been a bona fide Holder of a Security for at least six months, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by or pursuant to a Board Resolution may remove the Trustee and appoint a successor Trustee with respect to all Securities, or (ii) subject to TIA Section 315(e), any Holder of a Security who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of removal, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause with respect to the Securities of one or more series, the Company, by or pursuant to a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any par- 57 ticular series). If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the suc cessor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders of Securities and accepted appointment in the manner hereinafter provided, any Holder of a Security who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to Securities of such series. (f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series in the manner provided for notices to the Holders of Securities in Section 106. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. SECTION 609. Acceptance of Appointment by Successor. (a) In case of -------------------------------------- the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder, subject nevertheless to its claim, if any, provided for in Section 606. (b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto, pursuant to Article Nine hereof, wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be 58 necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. (c) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) or (b) of this Section, as the case may be. (d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 610. Merger, Conversion, Consolidation or Succession to ------------------------------------ ------------- Business. Any corporation into which the Trustee may be merged or converted or - -------- with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this - -------- Article, without the execution or filing of any paper or any 59 further act on the part of any of the parties hereto. In case any Securities or coupons shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities or coupons so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities or coupons. In case any Securities or coupons shall not have been authenticated by such predecessor Trustee, any such successor Trustee may authenticate and deliver such Securities or coupons, in either its own name or that of its predecessor Trustee, with the full force and effect which this Indenture provides for the certificate of authentication of the Trustee. SECTION 611. Preferential Collection of Claims. If and when the --------------------------------- Trustee shall be or become a creditor of the Company (or any other obligor upon the Debt Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). SECTION 612. Appointment of Authenticating Agent. At any time when ----------------------------------- any of the Securities remain Outstanding, the Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon exchange, registration of transfer or partial redemption or repayment thereof, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Any such appointment shall be evidenced by an instrument in writing signed by a Responsible Officer of the Trustee, a copy of which instrument shall be promptly furnished to the Company. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a bank or trust company or corporation organized and doing business and in good standing under the laws of the United States of America or of any State or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authorities. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and 60 surplus as set forth in its most recent report of condition so published. In case at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent for any series of Securities may at any time resign by giving written notice of resignation to the Trustee for such series and to the Company. The Trustee for any series of Securities may at any time terminate the agency of an Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee for such series may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall give notice of such appointment to all Holders of Securities of the series with respect to which such Authenticating Agent will serve in the manner set forth in Section 106. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent herein. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation including reimbursement of its reasonable expenses for its services under this Section. If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to or in lieu of the Trustee's certificate of authentication, an alternate certificate of authentication substantially in the following form: 61 This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. THE BANK OF NEW YORK as Trustee By: , -------------------------- as Authenticating Agent By: -------------------------- Authorized Signatory ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. Disclosure of Names and Addresses of Holders. Every -------------------------------------------- Holder of Securities or coupons, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any Authenticating Agent nor any Paying Agent nor any Security Registrar shall be held accountable by reason of the disclosure of any information as to the names and addresses of the Holders of Securities in accordance with TIA Section 312, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under TIA Section 312(b). SECTION 702. Reports by Trustee. Within 60 days after May 15 of each ------------------ year commencing with the first May 15 after the first issuance of Securities pursuant to this Indenture, the Trustee shall transmit by mail to all Holders of Securities as provided in TIA Section 313(c) a brief report dated as of such May 15 if required by TIA Section 313(a). SECTION 703. Reports by Company. The Company will: ------------------ (1) file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934; or, if the Company is not required to file information, documents or re- 62 ports pursuant to either of such Sections, then it will file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and (3) transmit by mail to the Holders of Securities, within 30 days after the filing thereof with the Trustee, in the manner and to the extent provided in TIA Section 313(c), such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs (1) and (2) of this Section as may be required by rules and regulations prescribed from time to time by the Commission. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 704. Company to Furnish Trustee Names and Addresses of ------------------------------------------------- Holders. The Company will furnish or cause to be furnished to the Trustee: - ------- (a) semi-annually, not later than 15 days after the Regular Record Date for interest for each series of Securities, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Registered Securities of such series as of such Regular Record Date, or if there is no Regular Record Date for interest for such series of Securities, semi- annually, upon such dates as are set forth in the Board Resolution or indenture supplemental hereto authorizing such series, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished, 63 provided, however, that, so long as the Trustee is the Security Registrar, no - -------- ------- such list shall be required to be furnished. SECTION 705. Calculation of Original Issue Discount. The Company -------------------------------------- shall file with the Trustee promptly at the end of each calendar year a written notice specifying the amount of original issue discount (including daily rates and accrual periods) accrued on Outstanding Securities as of the end of such year. SECTION 706. Delivery of Certain Information. If specified as ------------------------------- contemplated by Section 301 with respect to a series of Securities, at any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the request of a holder of a Security, the Company will promptly furnish or cause to be furnished Rule 144A Information (as defined below) to such Holder, to a prospective purchaser who is a "qualified institutional buyer", within the meaning of Rule 144A under the Securities Act, of such Security designated by such Holder in order to permit compliance by such Holder with Rule 144A in connection with the resale of such Security by such Holder; provided, however, that unless otherwise specified as contemplated by Section 301, the Company shall not be required to furnish such information in connection with any request made on or after the date which is three years from the later of (i) the date such Security (or any predecessor Security) was acquired from the Company or (ii) the date such Security (or any predecessor Security) was last acquired from an "affiliate" of the Company within the meaning of Rule 144 under the Securities Act. "Rule 144A Information" shall be such information as is specified pursuant to Rule 144A(d)(4) under the Securities Act as in effect on the date hereof. ARTICLE EIGHT CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE SECTION 801. Consolidations and Mergers of Company and Sales, Leases ------------------------------------------------------- and Conveyances Permitted Subject to Certain Conditions. The Company may - ------------------------------------------------------- consolidate with, or sell, lease or convey all or substantially all of its assets to, or merge with or into any other corporation, provided that in any such case, (1) either the Company shall be the continuing corporation, or the successor corporation shall expressly assume the due and punctual payment of the principal of (and premium, if any) and any interest (including all Additional Amounts, if any, payable pursuant to Section 1012) on all of the Securities, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed by the Company by supplemental indenture, complying with Article Nine hereof, satisfactory to the Trustee, executed and delivered to the Trustee by such corporation and (ii) immediately after giving effect 64 to such transaction and treating any indebtedness which becomes an obligation of the Company or any Subsidiary as a result thereof as having been incurred by the Company or such Subsidiary at the time of such transaction, no Event of Default, and no event which, after notice or the lapse of time, or both, would become an Event of Default, shall have occurred and be continuing. SECTION 802. Rights and Duties of Successor Corporation. In case of ------------------------------------------ any such consolidation, merger, sale, lease or conveyance and upon any such assumption by the successor corporation, such successor corporation shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the party of the first part, and the predecessor corporation, except in the event of a lease, shall be relieved of any further obligation under this Indenture and the Securities. Such successor corporation thereupon may cause to be signed, and may issue either in its own name or in the name of the Company, any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such successor corporation, instead of the Company, and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities which previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Securities which such successor corporation thereafter shall cause to be signed and delivered to the Trustee for that purpose. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale, lease or conveyance, such changes in phraseology and form (but not in substance) may be made in the Securities thereafter to be issued as may be appropriate. SECTION 803. Officers' Certificate and Opinion of Counsel. Any -------------------------------------------- consolidation, merger, sale, lease or conveyance permitted under Section 801 is also subject to the condition that the Trustee receive an Officers' Certificate and an Opinion of Counsel to the effect that any such consolidation, merger, sale, lease or conveyance, and the assumption by any successor corporation, complies with the provisions of this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. 65 ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders. -------------------------------------------------- Without the consent of any Holders of Securities or coupons, the Company, when authorized by or pursuant to a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities contained; or (2) to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company; or (3) to add any additional Events of Default for the benefit of the Holders of all or any series of Securities (and if such Events of Default are to be for the benefit of less than all series of Securities, stating that such Events of Default are expressly being included solely for the benefit of such series); provided, however, that in respect of any such -------- ------- additional Events of Default such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default or may limit the right of the Holders of a majority in aggregate principal amount of that or those series of Securities to which such additional Events of Default apply to waive such default; or (4) to add to or change any of the provisions of this Indenture to provide that Bearer Securities may be registrable as to principal, to change or eliminate any restrictions on the payment of principal of or any premium or interest on Bearer Securities, to permit Bearer Securities to be issued in exchange for Registered Securities, to permit Bearer Securities to be issued in exchange for Bearer Securities of other authorized denominations or to permit or facilitate the issuance of Securities in uncertificated form, provided that any such action shall not adversely -------- affect the interests of the Holders of 66 Securities of any series or any related coupons in any material respect; or (5) to change or eliminate any of the provisions of this Indenture, provided that any such change or elimination shall become effective only -------- when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision; or (6) to secure the Securities; or (7) to establish the form or terms of Securities of any series and any related coupons as permitted by Sections 201 and 301, including the provisions and procedures relating to Securities convertible into Common Stock or Preferred Stock, as the case may be; or (8) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee; or (9) to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided such provisions shall not -------- adversely affect the interests of the Holders of Securities of any series or any related coupons in any material respect; or (10) to supplement any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the defeasance and discharge of any series of Securities pursuant to Sections 401, 1402 and 1403; provided that any such action shall not adversely affect the -------- interests of the Holders of Securities of such series and any related coupons or any other series of Securities in any material respect. SECTION 902. Supplemental Indentures with Consent of Holders. With ----------------------------------------------- the consent of the Holders of not less than a majority in principal amount of all Outstanding Securities affected by such supplemental indenture, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by or pursuant to a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the 67 provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities and any related coupons under this Indenture; provided, -------- however, that no such supplemental indenture shall, without the consent of the - ------- Holder of each Outstanding Security affected thereby: (1) change the Stated Maturity of the principal of (or premium, if any, on) or any installment of principal of or interest on, any Security; or reduce the principal amount thereof or the rate or amount of interest thereon or any Additional Amounts payable in respect thereof, or any premium payable upon the redemption thereof, or change any obligation of the Company to pay Additional Amounts pursuant to Section 1011 (except as contemplated by Section 801(1) and permitted by Section 901(1)), or reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502 or the amount thereof provable in bankruptcy pursuant to Section 504, or adversely affect any right of repayment at the option of the Holder of any Security, or change any Place of Payment where, or the currency or currencies, currency unit or units or composite currency or currencies in which, any Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption or repayment at the option of the Holder, on or after the Redemption Date or the Repayment Date, as the case may be), or (2) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver with respect to such series (or compliance with certain provisions of this Indenture or certain defaults hereunder and their conse quences) provided for in this Indenture, or reduce the requirements of Section 1504 for quorum or voting, or (3) modify any of the provisions of this Section, Section 513 or Section 1012, except to increase the required percentage to effect such action or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to consent to any indenture supplemental hereto. If a record date is fixed, the Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to consent to such 68 supplemental indenture, whether or not such Holders remain Holders after such record date; provided, that unless such consent shall have become effective by virtue of the requisite percentage having been obtained prior to the date which is 90 days after such record date, any such consent previously given shall automatically and without further action by any Holder be cancelled and of no further effect. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. SECTION 903. Execution of Supplemental Indentures. In executing, or ------------------------------------ accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modification thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 904. Effect of Supplemental Indentures. Upon the execution --------------------------------- of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder and of any coupon appertaining thereto shall be bound thereby. SECTION 905. Conformity with Trust Indenture Act. Every supplemental ----------------------------------- indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 906. Reference in Securities to Supplemental Indentures. -------------------------------------------------- Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall, if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in 69 such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium, if any, Interest and --------------------------------------------------- Additional Amounts. The Company covenants and agrees for the benefit of the - ------------------ Holders of each series of Securities that it will duly and punctually pay the principal of (and premium, if any) and interest on and any Additional Amounts payable in respect of the Securities of that series in accordance with the terms of such series of Securities, any coupons appertaining thereto and this Indenture. Unless otherwise specified as contemplated by Section 301 with respect to any series of Securities, any interest due on and any Additional Amounts payable in respect of Bearer Securities on or before Maturity, other than Additional Amounts, if any, payable as provided in Section 1011 in respect of principal of (or premium, if any, on) such a Security, shall be payable only upon presentation and surrender of the several coupons for such interest installments as are evidenced thereby as they severally mature. Unless otherwise specified with respect to Securities of any series pursuant to Section 301, at the option of the Company, all payments of principal may be paid by check to the registered Holder of the Registered Security or other person entitled thereto against surrender of such Security. SECTION 1002. Maintenance of Office or Agency. If Securities of a ------------------------------- series are issuable only as Registered Securities, the Company shall maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for payment or conversion, where Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. If Securities of a series are issuable as Bearer Securities, the Company will maintain: (A) in the Borough of Manhattan, The City of New York, an office or agency where any Registered Securities of that series may be presented or surrendered for payment or conversion, where any Registered Securities of that series may be surrendered for registration of transfer, where Securities of that series may be surrendered for exchange, where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served and where 70 Bearer Securities of that series and related coupons may be presented or surrendered for payment or conversion in the circumstances described in the following paragraph (and not otherwise); (B) subject to any laws or regulations applicable thereto, in a Place of Payment for that series which is located outside the United States, an office or agency where Securities of that series and related coupons may be presented and surrendered for payment (including payment of any Additional Amounts payable on Securities of that series pursuant to Section 1011) or conversion; provided, however, that if the Securities of -------- ------- that series are listed on the Luxembourg Stock Exchange or any other stock exchange located outside the United States and such stock exchange shall so require, the Company will maintain a Paying Agent for the Securities of that series in Luxembourg or any other required city located outside the United States, as the case may be, so long as the Securities of that series are listed on such exchange; and (C) subject to any laws or regulations applicable thereto, in a Place of Payment for that series located outside the United States an office or agency where any Registered Securities of that series may be surrendered for registration of transfer, where Securities of that series may be surrendered for exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of each such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, except that Bearer Securities of that series and the related coupons may be presented and surrendered for payment (including payment of any Additional Amounts payable on Bearer Securities of that series pursuant to Section 1011) or conversion at the offices specified in the Security, in London, England, and the Company hereby appoints the same as its agent to receive such respective presentations, surrenders, notices and demands, and the Company hereby appoints the Trustee its agent to receive all such presentations, surrenders, notices and demands. Unless otherwise specified with respect to any Securities pursuant to Section 301, no payment of principal, premium or interest on or Additional Amounts in respect of Bearer Securities shall be made at any office or agency of the Company in the United States or by check mailed to any address in the United States or by tranfer to an account maintained with a bank located in the United States; provided, however, that, if the Securities of a series are -------- ------- payable in Dollars, payment of principal of and any premium and interest on any Bearer Security (including any Additional Amounts payable on Securities of such series pursuant to Section 1011) shall be made at the office of the Company's Paying Agent in the Borough of Manhattan, The City of New York, if (but only if) payment in 71 Dollars of the full amount of such principal, premium, interest or Additional Amounts, as the case may be, at all offices or agencies outside the United States maintained for the purpose by the Company in accordance with this Indenture, is illegal or effectively precluded by exchange controls or other similar restrictions. The Company may from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all of such purposes, and may from time to time rescind such designations; provided, however, that no such designation or rescission -------- ------- shall in any manner relieve the Company of its obligation to maintain an office or agency in accordance with the requirements set forth above for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Unless otherwise specified with respect to any Securities pursuant to Section 301 with respect to a series of Securities, the Company hereby designates as a Place of Payment for each series of Securities the office or agency of the Company in the Borough of Manhattan, The City of New York, and initially appoints the Trustee at its Corporate Trust Office as Paying Agent in such city and as its agent to receive all such presentations, surrenders, notices and demands. Unless otherwise specified with respect to any Securities pursuant to Section 301, if and so long as the Securities of any series (i) are denominated in a Foreign Currency or (ii) may be payable in a Foreign Currency, or so long as it is required under any other provision of the Indenture, then the Company will maintain with respect to each such series of Securities, or as so required, at least one exchange rate agent. SECTION 1003. Money for Securities Payments to Be Held in Trust. If ------------------------------------------------- the Company shall at any time act as its own Paying Agent with respect to any series of any Securities and any related coupons, it will, on or before each due date of the principal of (and premium, if any), or interest on or Additional Amounts in respect of, any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) sufficient to pay the principal (and premium, if any) or interest or Additional Amounts so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its action or failure so to act. 72 Whenever the Company shall have one or more Paying Agents for any series of Securities and any related coupons, it will, on or before each due date of the principal of (and premium, if any), or interest on or Additional Amounts in respect of, any Securities of that series, deposit with a Paying Agent a sum (in the currency or currencies, currency unit or units or composite currency or currencies described in the preceding paragraph) sufficient to pay the principal (and premium, if any) or interest or Additional Amounts, so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest or Additional Amounts and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will (1) hold all sums held by it for the payment of principal of (and premium, if any) or interest on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Company (or any other obligor upon the Securities) in the making of any such payment of principal (and premium, if any) or interest; and (3) at any time during the continuance of any such default upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such sums. Except as otherwise provided in the Securities of any series, any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any) or interest on, or any Additional Amounts in respect of, any Security of any series and remaining unclaimed for two years after such principal (and premium, if any), interest 73 or Additional Amounts has become due and payable shall be paid to the Company upon Company Request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment of such principal of (and premium, if any) or interest on, or any Additional Amounts in respect of, any Security, without interest thereon, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee -------- ------- or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in an Authorized Newspaper, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 1004. Limitation on Liens. The Company will not, nor will it ------------------- permit any Restricted Subsidiary to, incur, issue, assume or guarantee any indebtedness for money borrowed or any other indebtedness evidenced by notes, bonds, debentures or other similar evidences of indebtedness for money borrowed (hereinafter called "Debt") other than guarantees arising in connection with the sale, discount, guarantee or pledge of notes, chattel mortgages, leases, accounts receivable, trade acceptances and other paper arising, in the ordinary course of business, out of installment or conditional sales to or by, or transactions involving title retention with, distributors, dealers or other customers, of merchandise, equipment or services, secured by a pledge of, or mortgage, deed of trust or other lien on, any Principal Property owned by the Company or any Restricted Subsidiary, or any shares of stock or Debt of any Restricted Subsidiary (such pledges, mortgages, deeds of trust and other liens being hereinafter called "Mortgage" or "Mortgages"), except with respect to each series of Securities any Debt so secured on the date of issuance of such series, without effectively providing that the Securities of all series (together with, if the Company shall so determine, any other Debt of the Company or such Restricted Subsidiary then existing or thereafter created which is not subordinate to the Securities) shall be secured equally and ratably with (or prior to) such secured Debt, so long as such secured Debt shall be so secured, unless, after giving effect thereto, the aggregate principal amount of all such secured Debt which would otherwise be prohibited, plus all Attributable Debt of the Company and its Restricted Subsidiaries in respect of sale and leaseback transactions described in Section 1005 which would otherwise be prohibited by the covenant limiting sale and leaseback transactions provided by such Section 1005 would not exceed the sum of 10% of the Consolidated Net Tangible Assets of the Company and each then Restricted Subsidiary; provided, however, that these restrictions shall not apply to, and there shall be excluded from 74 secured Debt in any computation under these restrictions, Debt secured by: (i) Mortgages to secure indebtedness of any Restricted Subsidiary to the Company or to another Restricted Subsidiary; (ii) Mortgages for taxes, assessments or governmental charges or levies in each case (a) not then due and delinquent or (b) the validity of which is being contested in good faith by appropriate proceedings, and materialmen's, mechanics', carriers', workmen's, repairmen's, landlord's or other like Mortgages, or deposits to obtain the release of such Mortgages; (iii) Mortgages arising under an order of attachment or distraint or similar legal process so long as the execution or enforcement thereof is effectively stayed and the claims secured thereby are being contested in good faith; (iv) Mortgages to secure public or statutory obligations or to secure payment of workmen's compensation or to secure performance in connection with tenders, leases of real property, bids or contracts or to secure (or in lieu of) surety or appeal bonds and Mortgages made in the ordinary course of business for similar purposes; (v) Mortgages in favor of the United States of America or any State thereof, or any department, agency or instrumentality or political subdivision of the United States of America or any State thereof, or in favor of any other country, or any political subdivision thereof, to secure partial, progress, advance or other payments pursuant to any contract or statute (including Debt of the Pollution Control or Industrial Revenue Bond type) or to secure any indebtedness incurred for the purpose of financing all or any part of the purchase price or the cost of construction of the property subject to such Mortgages; (vi) Mortgages on property (including any lease which should be capitalized on the lessee's balance sheet in accordance with generally accepted accounting principles), shares of stock or Debt existing at the time of acquisition thereof (including acquisition through merger or consolidation or through purchase or transfer of the properties of a corporation as an entirety or substantially as an entirety) or to secure the payment of all or any part of the purchase price or construction cost or improvement cost thereof or to secure any Debt incurred prior to, at the time of, or within one year after, the acquisition of such property or shares or Debt or the completion of any such construction (including any improvements on an existing property) or the commencement of 75 commercial operation of such property, whichever is later, for the purpose of financing all or any part of the purchase price or construction cost thereof; (vii) Mortgages existing at the date of the Indenture; and (viii) any extension, renewal or replacement (or successive extensions, renewals or replacements), as a whole or in part, of any Mortgage referred to in the foregoing clauses (i) to (vii), inclusive; provided, however, that (a) such extension, renewal or replacement Mortgage shall be limited to all or a part of the same property, shares of stock or Debt that secured the Mortgage extended, renewed or replaced (plus improvements on such property) and (b) the Debt secured by such Mortgage at such time is not increased. SECTION 1005. Sale and Leaseback Transactions. The Company will not, ------------------------------- nor will it permit any Restricted Subsidiary to, enter into any arrangement with any bank, insurance company or other lender or investor (not including the Company or any Restricted Subsidiary) or to which any such lender or investor is a party, providing for the leasing by the Company or any such Restricted Subsidiary for a period, including renewals in excess of three years, of any Principal Property owned by the Company or such Restricted Subsidiary which has been or is to be sold or transferred more than one year after the acquisition thereof or after the completion of construction and commencement of full operation thereof, by the Company or any such Restricted Subsidiary to such lender or investor or to any person to whom funds have been or are to be advanced by such lender or investor on the security of such Principal Property (herein referred to as a "sale and leaseback transaction") unless either: (i) the Company or such Restricted Subsidiary could create Debt secured by a Mortgage on the Principal Property to be leased back in an amount equal to the Attributable Debt with respect to such sale and leaseback transaction without equally and ratably securing the Securities of all series pursuant to the provisions of the covenant provided by Section 1004 (which provisions include the exceptions set forth in clauses (i) through (viii) of such covenant) or (ii) the Company within 270 days after the sale or transfer shall have been made by the Company or by any such Restricted Subsidiary, applies an amount equal to the greater of (a) the net proceeds of the sale of the Principal Property sold and leased back pursuant to such arrangement or (b) the fair market value of the Principal Property so sold and leased back at the time of entering into such arrangement (as determined by any two of the following: the chairman of the Board of Directors of the Company, its president, any vice president, its treasurer and its controller) to (x) the purchase of property, facilities or equipment (other than the property, facilities or equipment involved in such sale) having 76 a value at least equal to the net proceeds of such sale or (y) the retirement of Funded Debt of the Company; provided, however, that the amount to be applied to the retirement of Funded Debt of the Company shall be reduced by (a) the principal amount of any Securities of any series (or, if the Securities of any series are original issue discount Debt Securities, such portion of the principal amount as may be due and payable with respect to such series pursuant to a declaration in accordance with their terms) delivered within 270 days after such sale to the Trustee for retirement and cancellation and (b) the principal amount of Funded Debt, other than the Securities of any series, voluntarily retired by the Company within 270 days after such date. Notwithstanding the foregoing, no retirement referred to in clause (ii) of the preceding sentence may be effected by payment at maturity or pursuant to any mandatory sinking fund payment or any mandatory prepayment provision. SECTION 1006. Existence. Subject to Article Eight, the Company will --------- do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to -------- ------- preserve any right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 1007. Insurance. The Company will, and will cause each of --------- its Subsidiaries to, keep all of its insurable properties insured against loss or damage at such level as is customary for companies of comparable size in the same or similar businesses. SECTION 1008. Payment of Taxes and Other Claims. The Company will --------------------------------- pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon it or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary; provided, however, that the Company shall not be -------- ------- required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim (a) if the failure to so pay or discharge would not have a material adverse effect on the Company and its Subsidiaries taken as a whole or (b) whose amount, applicability or validity is being contested in good faith by appropriate proceedings. SECTION 1009. Provision of Financial Information. Whether or not the ---------------------------------- Company is subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company will, to the extent 77 permitted under the Securities Exchange Act of 1934, file with the Commission the annual reports, quarterly reports and other documents which the Company would have been required to file with the Commission pursuant to such Section 13 or 15(d) (the "Financial Statements") if the Company were so subject, such documents to be filed with the Commission on or prior to the respective dates (the "Required Filing Dates") by which the Company would have been required so to file such documents if the Company were so subject. The Company will also in any event (x) within 15 days of each Required Filing Date (i) transmit by mail to all Holders, as their names and addresses appear in the Security Register, without cost to such Holders copies of the annual reports and quarterly reports which the Company would have been required to file with the Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 if the Company were subject to such Sections, and (ii) file with the Trustee copies of the annual reports, quarterly reports and other documents which the Company would have been required to file with the Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 if the Company were subject to such Sections and (y) if filing such documents by the Company with the Commission is not permitted under the Securities Exchange Act of 1934, promptly upon written request and payment of the reasonable cost of duplication and delivery, supply copies of such documents to any prospective Holder. SECTION 1010. Statement as to Compliance. The Company will deliver -------------------------- to the Trustee, commencing July 29, 1997, within 120 days after the end of each fiscal year, a brief certificate from the principal executive officer, principal financial officer or principal accounting officer as to his or her knowledge of the Company's compliance with all conditions and covenants under this Indenture and, in the event of any noncompliance, specifying such noncompliance and the nature and status thereof. For purposes of this Section 1010, such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture. SECTION 1011. Notice of Default. The Company shall file with the ----------------- Trustee written notice of the occurrence of any Default or Event of Default within five Business Days of its becoming aware of any such Default or Event of Default. SECTION 1012. Additional Amounts. If any Securities of a series ------------------ provide for the payment of Additional Amounts, the Company will pay to the Holder of any Security of such series or any coupon appertaining thereto Additional Amounts as may be specified as contemplated by Section 301. Whenever in this Indenture there is mentioned, in any context except in the case of Section 502(1), the payment of the principal of or any premium or interest on, or in 78 respect of, any Security of any series or payment of any related coupon or the net proceeds received on the sale or exchange of any Security of any series, such mention shall be deemed to include mention of the payment of Additional Amounts provided by the terms of such series established pursuant to Section 301 to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof pursuant to such terms and express mention of the payment of Additional Amounts (if applicable) in any provisions hereof shall not be construed as excluding Additional Amounts in those provisions hereof where such express mention is not made. Except as otherwise specified as contemplated by Section 301, if the Securities of a series provide for the payment of Additional Amounts, at least 10 days prior to the first Interest Payment Date with respect to that series of Securities (or if the Securities of that series will not bear interest prior to Maturity, the first day on which a payment of principal and any premium is made), and at least 10 days prior to each date of payment of principal and any premium or interest if there has been any change with respect to the matters set forth in the below-mentioned Officers' Certificate, the Company will furnish the Trustee and the Company's principal Paying Agent or Paying Agents, if other than the Trustee, with an Officers' Certificate instructing the Trustee and such Paying Agent or Paying Agents whether such payment of principal of and any premium or interest on the Securities of that series shall be made to Holders of Securities of that series or any related coupons who are not United States persons without withholding for or on account of any tax, assessment or other governmental charge described in the Securities of the series. If any such withholding shall be required, then such Officers' Certificate shall specify by country the amount, if any, required to be withheld on such payments to such Holders of Securities of that series or related coupons and the Company will pay to the Trustee or such Paying Agent the Additional Amounts required by the terms of such Securities. In the event that the Trustee or any Paying Agent, as the case may be, shall not so receive the above-mentioned certificate, then the Trustee or such Paying Agent shall be entitled (i) to assume that no such withholding or deduction is required with respect to any payment of principal or interest with respect to any Securities of a series or related coupons until it shall have received a certificate advising otherwise and (ii) to make all payments of principal and interest with respect to the Securities of a series or related coupons without withholding or deductions until otherwise advised. The Company covenants to indemnify the Trustee and any Paying Agent for, and to hold them harmless against, any loss, liability or expense reasonably incurred without negligence or bad faith on their part arising out of or in connection with actions taken or omitted by any of them or in reliance on any Officers' Certificate furnished pursu- 79 ant to this Section or in reliance on the Company's not furnishing such an Officers' Certificate. SECTION 1013. Waiver of Certain Covenants. The Company may omit in --------------------------- any particular instance to comply with any term, provision or condition set forth in Sections 1004 to 1009, inclusive, if before or after the time for such compliance the Holders of at least a majority in principal amount of all outstanding Securities of such series, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. ARTICLE ELEVEN REDEMPTION OF SECURITIES SECTION 1101. Applicability of Article. Securities of any series ------------------------ which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article. SECTION 1102. Election to Redeem; Notice to Trustee. The election of ------------------------------------- the Company to redeem any Securities shall be evidenced by or pursuant to a Board Resolution. In case of any redemption at the election of the Company of less than all of the Securities of any series, the Company shall, at least 45 days prior to the giving of the notice of redemption in Section 1104 (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities of such series to be redeemed. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction. SECTION 1103. Selection by Trustee of Securities to Be Redeemed. If ------------------------------------------------- less than all the Securities of any series issued on the same day with the same terms are to be redeemed, the particular Securities to be redeemed shall be selected not less than 30 and not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series issued on such date with the same terms not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum 80 authorized denomination for Securities of that series or any integral multiple thereof) of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of that series. The Trustee shall promptly notify the Company and the Security Registrar (if other than itself) in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. SECTION 1104. Notice of Redemption. Notice of redemption shall be -------------------- given in the manner provided in Section 106, not less than 30 days nor more than 60 days prior to the Redemption Date, unless a shorter period is specified by the terms of such series established pursuant to Section 301, to each Holder of Securities to be redeemed, but failure to give such notice in the manner herein provided to the Holder of any Security designated for redemption as a whole or in part, or any defect in the notice to any such Holder, shall not affect the validity of the proceedings for the redemption of any other such Security or portion thereof. Any notice that is mailed to the Holders of Registered Securities in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives the notice. All notices of redemption shall state: (1) the Redemption Date, (2) the Redemption Price, accrued interest to the Redemption Date payable as provided in Section 1106, if any, and Additional Amounts, if any, (3) if less than all Outstanding Securities of any series are to be redeemed, the identification (and, in the case of partial redemption, the principal amount) of the particular Security or Securities to be redeemed, (4) in case any Security is to be redeemed in part only, the notice which relates to such Security shall state that on and after the Redemption Date, upon surrender of such Security, the holder will receive, without a charge, a new Security or 81 Securities of authorized denominations for the principal amount thereof remaining unredeemed, (5) that on the Redemption Date the Redemption Price and accrued interest to the Redemption Date payable as provided in Section 1106, if any, will become due and payable upon each such Security, or the portion thereof, to be redeemed and, if applicable, that interest thereon shall cease to accrue on and after said date, (6) the Place or Places of Payment where such Securities, together in the case of Bearer Securities with all coupons appertaining thereto, if any, maturing after the Redemption Date, are to be surrendered for payment of the Redemption Price and accrued interest, if any, or for conversion, (7) that the redemption is for a sinking fund, if such is the case, (8) that, unless otherwise specified in such notice, Bearer Securities of any series, if any, surrendered for redemption must be accompanied by all coupons maturing subsequent to the date fixed for redemption or the amount of any such missing coupon or coupons will be deducted from the Redemption Price, unless security or indemnity satisfactory to the Company, the Trustee for such series and any Paying Agent is furnished, (9) if Bearer Securities of any series are to be redeemed and any Registered Securities of such series are not to be redeemed, and if such Bearer Securities may be exchanged for Registered Securities not subject to redemption on this Redemption Date pursuant to Section 305 or otherwise, the last date, as determined by the Company, on which such exchanges may be made, (10) the CUSIP number of such Security, if any, and (11) if applicable, that a Holder of Securities who desires to convert Securities for redemption must satisfy the requirements for conversion contained in such Securities, the then existing conversion price or rate, and the date and time when the option to convert shall expire. Notice of redemption of Securities to be redeemed shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. SECTION 1105. Deposit of Redemption Price. At least one Business Day --------------------------- prior to any Redemption Date, the Company shall deposit 82 with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, which it may not do in the case of a sinking fund payment under Article Twelve, segregate and hold in trust as provided in Section 1003) an amount of money in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) sufficient to pay on the Redemption Date the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities or portions thereof which are to be redeemed on that date. SECTION 1106. Securities Payable on Redemption Date. Notice of ------------------------------------- redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) (together with accrued interest, if any, to the Redemption Date), and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall, if the same were interest-bearing, cease to bear interest and the coupons for such interest appertaining to any Bearer Securities so to be redeemed, except to the extent provided below, shall be void. Upon surrender of any such Security for redemption in accordance with said notice, together with all coupons, if any, appertaining thereto maturing after the Redemption Date, such Security shall be paid by the Company at the Redemption Price, together with accrued interest, if any, to the Redemption Date; provided, however, that -------- ------- installments of interest on Bearer Securities whose Stated Maturity is on or prior to the Redemption Date shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified as contemplated by Section 301, only upon presentation and surrender of coupons for such interest; and provided further -------- ------- that, except as otherwise provided with respect to Securities convertible into Common Stock or Preferred Stock, installments of interest on Registered Securities whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If any Bearer Security surrendered for redemption shall not be accompanied by all appurtenant coupons maturing after the Redemption Date, such Security may be paid after deducting from the Redemption Price an amount equal to the face amount of all such missing coupons, or the surrender of such missing coupon or coupons 83 may be waived by the Company and the Trustee if there be furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless. If thereafter the Holder of such Security shall surrender to the Trustee or any Paying Agent any such missing coupon in respect of which a deduction shall have been made from the Redemption Price, such Holder shall be entitled to receive the amount so deducted; provided, however, that interest -------- ------- represented by coupons shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified as contemplated by Section 301, only upon presentation and surrender of those coupons. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate borne by the Security. SECTION 1107. Securities Redeemed in Part. Any Registered Security --------------------------- which is to be redeemed only in part (pursuant to the provisions of this Article or of Article Twelve) shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing) and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security without service charge a new Security or Securities of the same series, of any authorized denomination as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. ARTICLE TWELVE SINKING FUNDS SECTION 1201. Applicability of Article. The provisions of this ------------------------ Article shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 301 for Securities of such series. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of such Securities of any series is herein referred to as an "optional sinking fund payment". If provided for by the terms of any Securities of any series, the cash amount of any mandatory sinking fund payment may be subject to reduction as provided in Section 1202. Each sinking fund 84 payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series. SECTION 1202. Satisfaction of Sinking Fund Payments with Securities. ----------------------------------------------------- The Company may, in satisfaction of all or any part of any mandatory sinking fund payment with respect to the Securities of a series, (1) deliver Outstanding Securities of such series (other than any previously called for redemption) together in the case of any Bearer Securities of such series with all unmatured coupons appertaining thereto and (2) apply as a credit Securities of such series which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, as provided for by the terms of such Securities, or which have otherwise been acquired by the Company; provided that such Securities so delivered or applied as a credit have -------- not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the applicable Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such mandatory sinking fund payment shall be reduced accordingly. SECTION 1203. Redemption of Securities for Sinking Fund. Not less ----------------------------------------- than 60 days prior to each sinking fund payment date for Securities of any series, the Company will deliver to the Trustee an Officers' Certificate specifying the amount of the next ensuing mandatory sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, which is to be satisfied by payment of cash in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of that series pursuant to Section 1202, and the optional amount, if any, to be added in cash to the next ensuing mandatory sinking fund payment, and will also deliver to the Trustee any Securities to be so delivered and credited. If such Officers' Certificate shall specify an optional amount to be added in cash to the next ensuing mandatory sinking fund payment, the Company shall thereupon be obligated to pay the amount therein specified. Not less than 30 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1104. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 1106 and 1107. 85 ARTICLE THIRTEEN REPAYMENT AT THE OPTION OF HOLDERS SECTION 1301. Applicability of Article. Repayment of Securities of ------------------------ any series before their Stated Maturity at the option of Holders thereof shall be made in accordance with the terms of such Securities, if any, and (except as otherwise specified by the terms of such series established pursuant to Section 301) in accordance with this Article. SECTION 1302. Repayment of Securities. Securities of any series ----------------------- subject to repayment in whole or in part at the option of the Holders thereof will, unless otherwise provided in the terms of such Securities, be repaid at a price equal to the principal amount thereof, together with interest, if any, thereon accrued to the Repayment Date specified in or pursuant to the terms of such Securities. The Company covenants that at least one Business Day prior to the Repayment Date it will deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) sufficient to pay the principal (or, if so provided by the terms of the Securities of any series, a percentage of the principal) of, and (except if the Repayment Date shall be an Interest Payment Date) accrued interest on, all the Securities or portions thereof, as the case may be, to be repaid on such date. SECTION 1303. Exercise of Option. Securities of any series subject ------------------ to repayment at the option of the Holders thereof will contain an "Option to Elect Repayment" form on the reverse of such Securities. In order for any Security to be repaid at the option of the Holder, the Trustee must receive at the Place of Payment therefor specified in the terms of such Security (or at such other place or places of which the Company shall from time to time notify the Holders of such Securities) not earlier than 60 days nor later than 30 days prior to the Repayment Date (1) the Security so providing for such repayment together with the "Option to Elect Repayment" form on the reverse thereof duly completed by the Holder (or by the Holder's attorney duly authorized in writing) or (2) a facsimile transmission or a letter from a member of a national securities exchange, or the National Association of Securities Dealers, Inc. ("NASD"), or a commercial bank or trust company in the United States setting forth the name of the Holder of the Security, the principal amount of the Security, the principal amount of the Security to be repaid, the CUSIP number, if any, or a description of the tenor and terms of the Security, a statement that the option to 86 elect repayment is being exercised thereby and a guarantee that the Security to be repaid, together with the duly completed form entitled "Option to Elect Repayment" on the reverse of the Security, will be received by the Trustee not later than the fifth Business Day after the date of such facsimile transmission or letter; provided, however, that such facsimile transmission or letter shall -------- ------- only be effective if such Security and form duly completed are received by the Trustee by such fifth Business Day. If less than the entire principal amount of such Security is to be repaid in accordance with the terms of such Security, the principal amount of such Security to be repaid, in increments of the minimum denomination for Securities of such series, and the denomination or denominations of the Security or Securities to be issued to the Holder for the portion of the principal amount of such Security surrendered that is not to be repaid, must be specified. The principal amount of any Security providing for repayment at the option of the Holder thereof may not be repaid in part if, following such repayment, the unpaid principal amount of such Security would be less than the minimum authorized denomination of Securities of the series of which such Security to be repaid is a part. Except as otherwise may be provided by the terms of any Security providing for repayment at the option of the Holder thereof, exercise of the repayment option by the Holder shall be irrevocable unless waived by the Company. SECTION 1304. When Securities Presented for Repayment Become Due and ------------------------------------------------------ Payable. If Securities of any series providing for repayment at the option of - ------- the Holders thereof shall have been surrendered as provided in this Article and as provided by or pursuant to the terms of such Securities, such Securities or the portions thereof, as the case may be, to be repaid shall become due and payable and shall be paid by the Company on the Repayment Date therein specified, and on and after such Repayment Date (unless the Company shall default in the payment of such Securities on such Repayment Date) such Securities shall, if the same were interest-bearing, cease to bear interest and the coupons for such interest appertaining to any Bearer Securities so to be repaid, except to the extent provided below, shall be void. Upon surrender of any such Security for repayment in accordance with such provisions, together with all coupons, if any, appertaining thereto maturing after the Repayment Date, the principal amount of such Security so to be repaid shall be paid by the Company, together with accrued interest, if any, to the Repayment Date; provided, however, that coupons whose Stated Maturity is on or prior to the - -------- ------- Repayment Date shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified pursuant to Section 301, only upon presentation and surrender of such coupons; and provided further that, in the case of Registered -------- ------- Securities, installments of interest, if any, whose Stated Maturity is on or prior to the Repayment Date shall be payable (but without 87 interest thereon, unless the Company shall default in the payment thereof) to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If any Bearer Security surrendered for repayment shall not be accompanied by all appurtenant coupons maturing after the Repayment Date, such Security may be paid after deducting from the amount payable therefor as provided in Section 1302 an amount equal to the face amount of all such missing coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Trustee if there be furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless. If thereafter the Holder of such Security shall surrender to the Trustee or any Paying Agent any such missing coupon in respect of which a deduction shall have been made as provided in the preceding sentence, such Holder shall be entitled to receive the amount so deducted; provided, however, that interest represented -------- ------- by coupons shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified as contemplated by Section 301, only upon presentation and surrender of those coupons. If the principal amount of any Security surrendered for repayment shall not be so repaid upon surrender thereof, such principal amount (together with interest, if any, thereon accrued to such Repayment Date) shall, until paid, bear interest from the Repayment Date at the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) set forth in such Security. SECTION 1305. Securities Repaid in Part. Upon surrender of any ------------------------- Registered Security which is to be repaid in part only, the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge and at the expense of the Company, a new Registered Security or Securities of the same series, of any authorized denomination specified by the Holder, in an aggregate principal amount equal to and in exchange for the portion of the principal of such Security so surrendered which is not to be repaid. 88 ARTICLE FOURTEEN DEFEASANCE AND COVENANT DEFEASANCE SECTION 1401. Applicability of Article; Company's Option to Effect ---------------------------------------------------- Defeasance or Covenant Defeasance. If, pursuant to Section 301, provision is - --------------------------------- made for either or both of (a) defeasance of the Securities of or within a series under Section 1402 or (b) covenant defeasance of the Securities of or within a series under Section 1403, then the provisions of such Section or Sections, as the case may be, together with the other provisions of this Article (with such modifications thereto as may be specified pursuant to Section 301 with respect to any Securities), shall be applicable to such Securities and any coupons appertaining thereto, and the Company may at its option by Board Resolution, at any time, with respect to such Securities and any coupons appertaining thereto, elect to have Section 1402 (if applicable) or Section 1403 (if applicable) be applied to such Outstanding Securities and any coupons appertaining thereto upon compliance with the conditions set forth below in this Article. SECTION 1402. Defeasance and Discharge. Upon the Company's exercise ------------------------ of the above option applicable to this Section with respect to any Securities of or within a series, the Company shall be deemed to have been discharged from its obligations with respect to such Outstanding Securities and any coupons appertaining thereto on the date the conditions set forth in Section 1404 are satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by such Outstanding Securities and any coupons appertaining thereto, which shall thereafter be deemed to be "Outstanding" only for the purposes of Section 1405 and the other Sections of this Indenture referred to in clauses (A) and (B) below, and to have satisfied all of its other obligations under such Securities and any coupons appertaining thereto and this Indenture insofar as such Securities and any coupons appertaining thereto are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of such Outstanding Securities and any coupons appertaining thereto to receive, solely from the trust fund described in Section 1404 and as more fully set forth in such Section, payments in respect of the principal of (and premium, if any) and interest, if any, on such Securities and any coupons appertaining thereto when such payments are due, (B) the Company's obligations with respect to such Securities under Sections 305, 306, 1002 and 1003 and with respect to the payment of Additional Amounts, if any, on such Securities as contemplated by Section 1011, (C) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (D) this Article. Subject 89 to compliance with this Article Fourteen, the Company may exercise its option under this Section notwithstanding the prior exercise of its option under Section 1403 with respect to such Securities and any coupons appertaining thereto. SECTION 1403. Covenant Defeasance. Upon the Company's exercise of ------------------- the above option applicable to this Section with respect to any Securities of or within a series, the Company shall be released from its obligations under Sections 1004 to 1009, inclusive, and, if specified pursuant to Section 301, its obligations under any other covenant, with respect to such Outstanding Securities and any coupons appertaining thereto on and after the date the conditions set forth in Section 1404 are satisfied (hereinafter, "covenant defeasance"), and such Securities and any coupons appertaining thereto shall thereafter be deemed to be not "Outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with Sections 1004 to 1009, inclusive, or such other covenant, but shall continue to be deemed "Outstanding" for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to such Outstanding Securities and any coupons appertaining thereto, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section or such other covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such Section or such other covenant or by reason of reference in any such Section or such other covenant to any other provision herein or in any other document and such omission to comply shall not constitute a default or an Event of Default under Section 501(4) or 501(8) or otherwise, as the case may be, but, except as specified above, the remainder of this Indenture and such Securities and any coupons appertaining thereto shall be unaffected thereby. SECTION 1404. Conditions to Defeasance or Covenant Defeasance. The ----------------------------------------------- following shall be the conditions to application of Section 1402 or Section 1403 to any Outstanding Securities of or within a series and any coupons appertaining thereto: (a) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 607 who shall agree to comply with the provisions of this Article Fourteen applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities and any coupons appertaining thereto, (1) an amount in such currency, currencies or currency unit in which such Securities and any coupons appertaining thereto are then specified as payable at Stated Maturity, or (2) Government Obligations applicable to such Securities and coupons 90 appertaining thereto (determined on the basis of the currency, currencies or currency unit in which such Securities and coupons appertaining thereto are then specified as payable at Stated Maturity) which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment of principal of (and premium, if any) and interest, if any, on such Securities and any coupons appertaining thereto, money in an amount, or (3) a combination thereof, in any case, in an amount, sufficient, without consideration of any reinvestment of such principal and interest, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge, (i) the principal of (and premium, if any) and interest, if any, on such Outstanding Securities and any coupons appertaining thereto on the Stated Maturity of such principal or installment of principal or interest and (ii) any mandatory sinking fund payments or analogous payments applicable to such Outstanding Securities and any coupons appertaining thereto on the day on which such payments are due and payable in accordance with the terms of this Indenture and of such Securities and any coupons appertaining thereto. (b) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company is a party or by which it is bound. (c) No Event of Default or event which with notice or lapse of time or both would become an Event of Default with respect to such Securities and any coupons appertaining thereto shall have occurred and be continuing on the date of such deposit or, insofar as Sections 501(6) and 501(7) are concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period). (d) In the case of an election under Section 1402, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of execution of this Indenture, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of such Outstanding Securities and any coupons appertaining thereto will not recognize 91 income, gain or loss for Federal income tax purposes as a result of such defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred. (e) In the case of an election under Section 1403, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of such Outstanding Securities and any coupons appertaining thereto will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred. (f) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance under Section 1402 or the covenant defeasance under Section 1403 (as the case may be) have been complied with and an Opinion of Counsel to the effect that either (i) as a result of a deposit pursuant to subsection (a) above and the related exercise of the Company's option under Section 1402 or Section 1403 (as the case may be), registration is not required under the Investment Company Act of 1940, as amended, by the Company, with respect to the trust funds representing such deposit or by the Trustee for such trust funds or (ii) all necessary registrations under said Act have been effected. (g) Notwithstanding any other provisions of this Section, such defeasance or covenant defeasance shall be effected in compliance with any additional or substitute terms, conditions or limitations which may be imposed on the Company in connection therewith pursuant to Section 301. SECTION 1405. Deposited Money and Government Obligations to Be Held ------------------------------ ---------------------- in Trust; Other Miscellaneous Provisions. Subject to the provisions of the last - ---------------------------------------- paragraph of Section 1003, all money and Government Obligations (or other property as may be provided pursuant to Section 301) (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 1405, the "Trustee") pursuant to Section 1404 in respect of any Outstanding Securities of any series and any coupons appertaining thereto shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and any coupons appertaining thereto and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities and any coupons appertaining thereto of 92 all sums due and to become due thereon in respect of principal (and premium, if any) and interest and Additional Amounts, if any, but such money need not be segregated from other funds except to the extent required by law. Unless otherwise specified with respect to any Security pursuant to Section 301, if, after a deposit referred to in Section 1404(a) has been made, (a) the Holder of a Security in respect of which such deposit was made is entitled to, and does, elect pursuant to Section 301 or the terms of such Security to receive payment in a currency or currency unit other than that in which the deposit pursuant to Section 1404(a) has been made in respect of such Security, or (b) a Conversion Event occurs in respect of the currency or currency unit in which the deposit pursuant to Section 1404(a) has been made, the indebtedness represented by such Security and any coupons appertaining thereto shall be deemed to have been, and will be, fully discharged and satisfied through the payment of the principal of (and premium, if any), and interest, if any, on such Security as the same becomes due out of the proceeds yielded by converting (from time to time as specified below in the case of any such election) the amount or other property deposited in respect of such Security into the currency or currency unit in which such Security becomes payable as a result of such election or Conversion Event based on the applicable market exchange rate for such currency or currency unit in effect on the second Business Day prior to each payment date, except, with respect to a Conversion Event, for such currency or currency unit in effect (as nearly as feasible) at the time of the Conversion Event. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the Government Obligations deposited pursuant to Section 1404 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of such Outstanding Securities and any coupons appertaining thereto. Anything in this Article to the contrary notwithstanding, subject to Section 606, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or Government Obligations (or other property and any proceeds therefrom) held by it as provided in Section 1404 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect a defeasance or covenant defeasance, as applicable, in accordance with this Article. 93 ARTICLE FIFTEEN MEETINGS OF HOLDERS OF SECURITIES SECTION 1501. Purposes for Which Meetings May Be Called. A meeting of ----------------------------------------- Holders of Securities of any series may be called at any time and from time to time pursuant to this Article to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be made, given or taken by Holders of Securities of such series. SECTION 1502. Call, Notice and Place of Meetings. (a) The Trustee ---------------------------------- may, but shall not be obligated to call at any time a meeting of Holders of Securities of any series for any purpose specified in Section 1501, to be held at such time and at such place in the Borough of Manhattan, The City of New York, or in London as the Trustee shall determine. Notice of every meeting of Holders of Securities of any series, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given, in the manner provided in Section 106, not less than 21 nor more than 180 days prior to the date fixed for the meeting. (b) In case at any time the Company, pursuant to a Board Resolution, or the Holders of at least 10% in principal amount of the Outstanding Securities of any series shall have requested the Trustee to call a meeting of the Holders of Securities of such series for any purpose specified in Section 1501, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have made the first publication of the notice of such meeting within 21 days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Company or the Holders of Securities of such series in the amount above specified, as the case may be, may determine the time and the place in the Borough of Manhattan, The City of New York, or in London for such meeting and may call such meeting for such purposes by giving notice thereof as provided in subsection (a) of this Section. SECTION 1503. Persons Entitled to Vote at Meetings. To be entitled ------------------------------------ to vote at any meeting of Holders of Securities of any series, a Person shall be (1) a Holder of one or more Outstanding Securities of such series, or (2) a Person appointed by an instrument in writing as proxy for a Holder or Holders of one or more Outstanding Securities of such series by such Holder or Holders. The only Persons who shall be entitled to be present or to speak at any meeting of Holders of Securities of any series shall be the Persons entitled to vote at such meeting and their counsel, any representatives of the Trustee and its counsel and any representatives of the Company and its counsel. 94 SECTION 1504. Quorum; Action. The Persons entitled to vote a -------------- majority in principal amount of the Outstanding Securities of a series shall constitute a quorum for a meeting of Holders of Securities of such series; provided, however, that if any action is to be taken at such meeting with - -------- ------- respect to a consent or waiver which this Indenture expressly provides may be given by the Holders of not less than a specified percentage in principal amount of the Outstanding Securities of a series, the Persons entitled to vote such specified percentage in principal amount of the Outstanding Securities of such series shall constitute a quorum. In the absence of a quorum within 30 minutes after the time appointed for any such meeting, the meeting shall, if convened at the request of Holders of Securities of such series, be dissolved. In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 1502(a), except that such notice need be given only once not less than five days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of any adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the Outstanding Securities of such series which shall constitute a quorum. Except as limited by the proviso to Section 902, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the Holders of a majority in principal amount of the Outstanding Securities of that series; provided, however, that, except as limited by the proviso to Section 902, any - -------- ------- resolution with respect to any request, demand, authorization, direction, notice, consent, waiver or other action which this Indenture expressly provides may be made, given or taken by the Holders of a specified percentage, which is less than a majority, in principal amount of the Outstanding Securities of a series may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid by the affirmative vote of the Holders of such specified percentage in principal amount of the Outstanding Securities of that series. Any resolution passed or decision taken at any meeting of Holders of Securities of any series duly held in accordance with this Section shall be binding on all the Holders of Securities of such series and the related coupons, whether or not present or represented at the meeting. 95 Notwithstanding the foregoing provisions of this Section 1504, if any action is to be taken at a meeting of Holders of Securities of any series with respect to any request, demand, authorization, direction, notice, consent, waiver or other action that this Indenture expressly provides may be made, given or taken by the Holders of a specified percentage in principal amount of all Outstanding Securities affected thereby, or of the Holders of such series and one or more additional series: (i) there shall be no minimum quorum requirement for such meeting; and (ii) the principal amount of the Outstanding Securities of such series that vote in favor of such request, demand, authorization, direction, notice, consent, waiver or other action shall be taken into account in determining whether such request, demand, authorization, direction, notice, consent, waiver or other action has been made, given or taken under this Indenture. SECTION 1505. Determination of Voting Rights; Conduct and Adjournment ------------------------------------------------------- of Meetings. (a) Notwithstanding any provisions of this Indenture, the Trustee - ----------- may make such reasonable regulations as it may deem advisable for any meeting of Holders of Securities of a series in regard to proof of the holding of Securities of such series and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Except as otherwise permitted or required by any such regulations, the holding of Securities shall be proved in the manner specified in Section 104 and the appointment of any proxy shall be proved in the manner specified in Section 104 or by having the signature of the Person executing the proxy witnessed or guaranteed by any trust company, bank or banker authorized by Section 104 to certify to the holding of Bearer Securities. Such regulations may provide that written instruments appointing proxies, regular on their face, may be presumed valid and genuine without the proof specified in Section 104 or other proof. (b) The Trustee shall, by an instrument in writing appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Holders of Securities as provided in Section 1502(b), in which case the Company or the Holders of Securities of the series calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A perma- nent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote a majority in principal amount of the Outstanding Securities of such series represented at the meeting. 96 (c) At any meeting each Holder of a Security of such series or proxy shall be entitled to one vote for each $1,000 principal amount of the Outstanding Securities of such series held or represented by him; provided, -------- however, that no vote shall be cast or counted at any meeting in respect of any - ------- Security challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote, except as a Holder of a Security of such series or proxy. (d) Any meeting of Holders of Securities of any series duly called pursuant to Section 1502 at which a quorum is present may be adjourned from time to time by Persons entitled to vote a majority in principal amount of the Outstanding Securities of such series represented at the meeting, and the meeting may be held as so adjourned without further notice. SECTION 1506. Counting Votes and Recording Action of Meetings. The ----------------------------------------------- vote upon any resolution submitted to any meeting of Holders of Securities of any series shall be by written ballots on which shall be subscribed the signatures of the Holders of Securities of such series or of their representatives by proxy and the principal amounts and serial numbers of the Outstanding Securities of such series held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record, at least in duplicate, of the proceedings of each meeting of Holders of Securities of any Series shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the fact, setting forth a copy of the notice of the meeting and showing that said notice was given as provided in Section 1502 and, if applicable, Section 1504. Each copy shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one such copy shall be delivered to the Company and another to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. * * * * * 97 This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Indenture. 98 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. AIRGAS, INC. By: ------------------------- [SEAL] Title: Attest: - ---------------------------- Title: THE BANK OF NEW YORK, as Trustee By: ------------------------- Title: [SEAL] Attest: - ---------------------------- Title: STATE OF ) ) ss: COUNTY OF ) On the day of , 1996, before me personally came , to me known, who, being by me duly sworn, did depose and say that he/she resides at , , that he/she is of AIRGAS, INC., one of the corporations described in and which executed the foregoing instrument; that he/she knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he/she signed his/her name thereto by like authority. [Notarial Seal] ------------------------- Notary Public COMMISSION EXPIRES STATE OF NEW YORK ) ) ss: COUNTY OF NEW YORK ) On the _____ day of ____________, 1996, before me personally came ___________________, to me known, who, being by me duly sworn, did depose and say that he/she resides at __________________, that he/she is a ________________ of THE BANK OF NEW YORK, one of the corporations described in and which executed the foregoing instrument; that he/she knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he/she signed his/her name thereto by like authority. [Notarial Seal] ------------------------- Notary Public COMMISSION EXPIRES 101 EXHIBIT A FORMS OF CERTIFICATION EXHIBIT A-1 FORM OF CERTIFICATE TO BE GIVEN BY PERSON ENTITLED TO RECEIVE BEARER SECURITY OR TO OBTAIN INTEREST PAYABLE PRIOR TO THE EXCHANGE DATE CERTIFICATE [Insert title or sufficient description of Securities to be delivered] This is to certify that, as of the date hereof, and except as set forth below, the above-captioned Securities held by you for our account (i) are owned by person(s) that are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States federal income taxation regardless of its source ("United States person(s)"), (ii) are owned by United States person(s) that are (a) foreign branches of United States financial institutions (financial institutions, as defined in United States Treasury Regulations Section 2.165- 12(c)(1)(v) are herein referred to as "financial institutions") purchasing for their own account or for resale, or (b) United States person(s) who acquired the Securities through foreign branches of United States financial institutions and who hold the Securities through such United States financial institutions on the date hereof (and in either case (a) or (b), each such United States financial institution hereby agrees, on its own behalf or through its agent, that you may advise Airgas, Inc. or its agent that such financial institution will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the United States Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) are owned by United States or foreign financial institution(s) for purposes of resale during the restricted period (as defined in United States Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and, in addition, if the owner is a United States or foreign financial institution described in clause (iii) above (whether or not also described in clause (i) or (ii)), this is to further certify that such financial institution has not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions. A-1 As used herein, "United States" means the United States of America (including the States and the District of Columbia); and its "possessions" include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands. We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the above- captioned Securities held by you for our account in accordance with your Operating Procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date. This certificate excepts and does not relate to [U.S.$] ______________ of such interest in the above-captioned Securities in respect of which we are not able to certify and as to which we understand an exchange for an interest in a Permanent Global Security or an exchange for and delivery of definitive Securities (or, if relevant, collection of any interest) cannot be made until we do so certify. We understand that this certificate may be required in connection with certain tax legislation in the United States. If administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate or a copy thereof to any interested party in such proceedings. Dated: __________________, 19__ [To be dated no earlier than the 15th day prior to (i) the Exchange Date or (ii) the relevant Interest Payment Date occurring prior to the Exchange Date, as applicable] [Name of Person Making Certification] --------------------------- (Authorized Signatory) Name: Title: A-2 EXHIBIT A-2 FORM OF CERTIFICATE TO BE GIVEN BY EUROCLEAR AND CEDEL S.A. IN CONNECTION WITH THE EXCHANGE OF A PORTION OF A TEMPORARY GLOBAL SECURITY OR TO OBTAIN INTEREST PAYABLE PRIOR TO THE EXCHANGE DATE CERTIFICATE [Insert title or sufficient description of Securities to be delivered] This is to certify that, based solely on written certifications that we have received in writing, by tested telex or by electronic transmission from each of the persons appearing in our records as persons entitled to a portion of the principal amount set forth below (our "Member Organizations") substantially in the form attached hereto, as of the date hereof, [U.S.$] _______________ principal amount of the above-captioned Securities (i) is owned by person(s) that are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States Federal income taxation regardless of its source ("United States person(s)"), (ii) is owned by United States person(s) that are (a) foreign branches of United States financial institutions (financial institutions, as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(v) are herein referred to as "financial institutions") purchasing for their own account or for resale, or (b) United States person(s) who acquired the Securities through foreign branches of United States financial institutions and who hold the Securities through such United States financial institutions on the date hereof (and in either case (a) or (b), each such financial institution has agreed, on its own behalf or through its agent, that we may advise Airgas, Inc. or its agent that such financial institution will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) is owned by United States or foreign financial institution(s) for purposes of resale during the restricted period (as defined in United States Treasury Regulations Section 1.163- 5(c)(2)(i)(D)(7)), and, to the further effect, that financial institutions described in clause (iii) above (whether or not also described in clause (i) or (ii)) have certified that they have not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions. As used herein, "United States" means the United States of America (including the States and the District of Columbia); and its A-3 "possessions" include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands. We further certify that (i) we are not making available herewith for exchange (or, if relevant, collection of any interest) any portion of the temporary global Security representing the above-captioned Securities excepted in the above referenced certificates of Member Organizations and (ii) as of the date hereof we have not received any notification from any of our Member Organizations to the effect that the statements made by such Member Organizations with respect to any portion of the part submitted herewith for exchange (or, if relevant, collection of any interest) are no longer true and cannot be relied upon as of the date hereof. We understand that this certification is required in connection with certain tax legislation in the United States. If administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate or a copy thereof to any interested party in such proceedings. Dated: _____________ 19__ [To be dated no earlier than the Exchange Date or the relevant Interest Payment Date occurring prior to the Exchange Date, as applicable] [Morgan Guaranty Trust Company of New York, Brussels Office,] as Operator of the Euroclear System [Cedel S.A.] By: -------------------------- A-4 EX-4.6 3 FORM OF AIRGAS, INC. (FIXED RATE) Exhibit 4.6 UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") (55 WATER STREET, NEW YORK, NEW YORK) TO THE ISSUER HEREOF OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. REGISTERED CUSIP No.: PRINCIPAL AMOUNT: No. FXR- --- ----------------- ---------------- AIRGAS, INC. MEDIUM-TERM NOTE, SERIES A (Fixed Rate) ORIGINAL ISSUE DATE: INTEREST RATE: % STATED MATURITY DATE: INTEREST PAYMENT DATE(S) DEFAULT RATE: % [ ] and ------- ------- [ ] Other: INITIAL REDEMPTION INITIAL REDEMPTION ANNUAL REDEMPTION DATE: PERCENTAGE: % PERCENTAGE REDUCTION: % OPTIONAL REPAYMENT [ ] CHECK IF AN ORIGINAL DATE(S): ISSUE DISCOUNT NOTE Issue Price: % AUTHORIZED DENOMINATION: [ ] $1,000 and integral multiples thereof [ ] Other: ADDENDUM ATTACHED OTHER/ADDITIONAL PROVISIONS: [ ] Yes [ ] No F-1 AIRGAS, INC., Delaware Corporation (the "Company", which terms include any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to , or registered assigns, the principal sum of , on the Stated Maturity Date specified above (or any Redemption Date or Repayment Date, each as defined on the reverse hereof) (each such Stated Maturity Date, Redemption Date or Repayment Date being hereinafter referred to as the "Maturity Date" with respect to the principal repayable on such date) and to pay interest thereon, at the Interest Rate per annum specified above, until the principal hereof is paid or duly made available for payment, and (to the extent that the payment of such interest shall be legally enforceable) at the Default Rate per annum specified above on any overdue principal, premium and/or interest. The Company will pay interest in arrears on each Interest Payment Date, if any, specified above (each, an "Interest Payment Date"), commencing with the first Interest Payment Date next succeeding the Original Issue Date specified above, and on the Maturity Date; provided, however, that if the Original Issue Date occurs between -------- ------- a Record Date (as defined below) and the next succeeding Interest Payment Date, interest payments will commence on the second Interest Payment Date next succeeding the Original Issue Date to the holder of this Note on the Record Date with respect to such second Interest Payment Date. Interest on this Note will be computed on the basis of a 360-day year of twelve 30-day months. Interest on this Note will accrue from, and including, the immediately preceding Interest Payment Date to which interest has been paid or duly provided for (or from, and including, the Original Issue Date if no interest has been paid or duly provided for) to, but excluding, the applicable Interest Payment Date or the Maturity Date, as the case may be (each, an "Interest Period"). The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, subject to certain exceptions described herein, be paid to the person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on the fifteenth calendar day (whether or not a Business Day, as defined below) immediately preceding such Interest Payment Date (the "Record Date"); provided, however, that interest payable on -------- ------- the Maturity Date will be payable to the person to whom the principal hereof and premium, if any, hereon shall be payable. Any such interest not so punctually paid or duly provided for ("Defaulted Interest") will forthwith cease to be payable to the holder on any Record Date, and shall be paid to the person in whose name this Note is registered at the close of business on a special record date (the "Special Record Date") for the payment of such Defaulted Interest to be fixed by the Trustee hereinafter referred to, notice whereof shall be given to the holder of this Note by the Trustee not less than 10 calendar days prior to such Special Record Date or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which this Note may be listed, and upon such notice as may be required by such exchange, all as more fully provided for in the Indenture. F-2 Payment of principal, premium, if any, and interest in respect of this Note due on the Maturity Date will be made in immediately available funds upon presentation and surrender of this Note (and, with respect to any applicable repayment of this Note, a duly completed election form as contemplated on the reverse hereof) at the corporate trust office of the Trustee maintained for that purpose in the Borough of Manhattan, The City of New York, currently located at 101 Barclay Street, New York, New York 10286, or at such other paying agency in the Borough of Manhattan, The City of New York, as the Company may determine; provided, however, that a holder of $10,000,000 or more in aggregate principal - -------- ------- amount of Notes (whether having identical or different terms and provisions) will be entitled to receive interest payments on such Interest Payment Date by wire transfer of immediately available funds if appropriate wire transfer instructions have been received in writing by the Trustee not less than 15 calendar days prior to such Interest Payment Date. Any such wire transfer instructions received by the Trustee shall remain in effect until revoked by such holder. If any Interest Payment Date or the Maturity Date falls on a day that is not a Business Day, the required payment of principal, premium, if any, and/or interest shall be made on the next succeeding Business Day with the same force and effect as if made on the date such payment was due, and no interest shall accrue with respect to such payment for the period from and after such Interest Payment Date or the Maturity Date, as the case may be, to the date of such payment on the next succeeding Business Day. As used herein, "Business Day" means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law, regulation or executive order to close in The City of New York. The principal of, and interest on, this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof and, if so specified on the face hereof, in an Addendum hereto, which further provisions shall have the same force and effect as if set forth on the face hereof. Notwithstanding the foregoing, if an Addendum is attached hereto or "Other/Additional Provisions" apply to this Note as specified above, this Note shall be subject to the terms set forth in such Addendum or such "Other/Additional Provisions". Unless the Certificate of Authentication hereon has been executed by the Trustee by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. F-3 IN WITNESS WHEREOF, Airgas, Inc. has caused this Note to be duly executed by one of its duly authorized officers. AIRGAS, INC. By -------------------------------- Title: Dated: TRUSTEE'S CERTIFICATE OF AUTHENTICATION: This is one of the Debt Securities of the series designated therein referred to in the within-mentioned Indenture. THE BANK OF NEW YORK, as Trustee By ----------------------------- Authorized Signatory F-4 AIRGAS, INC. MEDIUM-TERM NOTE, SERIES A (Fixed Rate) This Note is one of a duly authorized series of Debt Securities (the "Debt Securities") of the Company issued and to be issued under an Indenture, dated as of August 1, 1996, as amended, modified or supplemented from time to time (the "Indenture"), between the Company and The Bank of New York, as Trustee (the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the holders of the Debt Securities, and of the terms upon which the Debt Securities are, and are to be, authenticated and delivered. This Note is one of the series of Debt Securities designated as "Medium-Term Notes, Series A, Due Nine Months or More From Date of Issue" (the "Notes"). All terms used but not defined in this Note or in an Addendum hereto shall have the meanings assigned to such terms in the Indenture or on the face hereof, as the case maybe. This Note is issuable only in registered form without coupons in minimum denominations of $1,000 and integral multiples thereof or the minimum Authorized Denomination specified on the face hereof. This Note will not be subject to any sinking fund and, unless otherwise specified on the face hereof in accordance with the provisions of the following two paragraphs, will not be redeemable or repayable prior to the Stated Maturity Date. This Note will be subject to redemption at the option of the Company on any date on or after the Initial Redemption Date, if any, specified on the face hereof, in whole or from time to time in part in increments of $1,000 or the minimum Authorized Denomination (provided that any remaining principal amount hereof shall be at least $1,000 or such minimum Authorized Denomination), at the Redemption Price (as defined below), together with unpaid interest accrued thereon to the date fixed for redemption (each, a "Redemption Date"), on notice given no more than 60 nor less than 30 calendar days prior to the Redemption Date and in accordance with the provisions of the Indenture. The "Redemption Price" shall initially be the Initial Redemption Percentage specified on the face hereof multiplied by the unpaid principal amount of this Note to be redeemed. The Initial Redemption Percentage shall decline at each anniversary of the Initial Redemption Date by the Annual Redemption Percentage Reduction, if any, specified on the face hereof until the Redemption Price is 100% of unpaid principal amount to be redeemed. In the event of redemption of this Note in part only, a new Note of like tenor for the unredeemed portion R-1 hereof and otherwise having the same terms as this Note shall be issued in the name of the holder hereof upon the presentation and surrender hereof. This Note will be subject to repayment by the Company at the option of the holder hereof on the Optional Repayment Date(s), if any, specified on the face hereof, in whole or in part in increments of $1,000 or the minimum Authorized Denomination (provided that any remaining principal amount hereof shall be at least $1,000 or such minimum Authorized Denomination), at a repayment price equal to 100% of the unpaid principal amount to be repaid, together with unpaid interest accrued thereon to the date fixed for repayment (each, a "Repayment Date"). For this Note to be repaid, this Note must be received, together with the form hereon entitled "Option to Elect Repayment" duly completed, by the Trustee at its corporate trust office not more than 60 nor less than 30 calendar days prior to the Repayment Date. Exercise of such repayment option by the holder hereof will be irrevocable. In the event of repayment of this Note in part only, a new Note of like tenor for the unrepaid portion hereof and otherwise having the same terms as this Note shall be issued in the name of the holder hereof upon the presentation and surrender hereof. If this Note is an Original Issue Discount Note as specified on the face hereof, the amount payable to the holder of this Note in the event of redemption, repayment or acceleration of maturity will be equal to the sum of (1) the Issue Price specified on the face hereof (increased by any accruals of the Discount, as defined below) and, in the event of any redemption of this Note (if applicable), multiplied by the Initial Redemption Percentage (as adjusted by the Annual Redemption Percentage Reduction, if applicable) and (2) any unpaid interest on this Note accrued from the Original Issue Date to the Redemption Date, Repayment Date or date of acceleration of maturity, as the case may be. The difference between the Issue Price and 100% of the principal amount of this Note is referred to herein as the "Discount". For purposes of determining the amount of Discount that has accrued as of any Redemption Date, Repayment Date or date of acceleration of maturity of this Note, such Discount will be accrued so as to cause the yield on the Note to be constant. The constant yield will be calculated using a 30-day month, 360-day year convention, a compounding period that, except for the Initial Period (as defined below), corresponds to the shortest period between Interest Payment Dates (with ratable accruals within a compounding period) and an assumption that the maturity of this Note will not be accelerated. If the period from the Original Issue Date to the initial Interest Payment Date (the "Initial Period") is shorter than the compounding period for this Note, a proportionate amount of the yield for an entire compounding period will be accrued. If the Initial Period is longer than the compounding period, then such period will be divided into a regular compounding period and a short period, with the short period being treated as provided in the preceding sentence. R-2 If an Event of Default, as defined in the Indenture, shall occur and be continuing, the principal of the Notes may be accelerated in the manner and with the effect provided in the Indenture. The Indenture contains provisions for defeasance of (i) the entire indebtedness of the Notes or (ii) certain covenants and Events of Default with respect to the Notes, in each case upon compliance with certain conditions set forth therein, which provisions apply to the Notes. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the holders of the Debt Securities at any time by the Company and the Trustee with the consent of the holders of not less than a majority of the aggregate principal amount of all Debt Securities at the time outstanding and affected thereby. The Indenture also contains provisions permitting the holders of not less than a majority of the aggregate principal amount of the outstanding Debt Securities of any series, on behalf of the holders of all such Debt Securities, to waive compliance by the Company with certain provisions of the Indenture. Furthermore, provisions in the Indenture permit the holders of not less than a majority of the aggregate principal amount of the outstanding Debt Securities of any series, in certain instances, to waive, on behalf of all of the holders of Debt Securities of such series, certain past defaults under the Indenture and their consequences. Any such consent or waiver by the holder of this Note shall be conclusive and binding upon such holder and upon all future holders of this Note and other Notes issued upon the registration of transfer hereof or in exchange heretofore or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay principal, premium, if any, and interest in respect of this Note at the times, places and rate or formula, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein and herein set forth, the transfer of this Note is registrable in the Security Register of the Company upon surrender of this Note for registration of transfer at the office or agency of the Company in any place where the principal hereof and any premium or interest hereon are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the holder hereof or by his attorney duly authorized in writing, and thereupon one or more new Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. R-3 As provided in the Indenture and subject to certain limitations therein and herein set forth, this Note is exchangeable for a like aggregate principal amount of Notes of different authorized denominations but otherwise having the same terms and conditions, as requested by the holder hereof surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the holder in whose name this Note is registered as the owner thereof for all purposes, whether or not this Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. The Indenture and this Note shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely in such State. R-4 ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this Note, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - ______ Custodian _____ TEN ENT - as tenants by the entireties (Cust) (Minor) JT TEN - as joint tenants with right of under Uniform Gifts to Minors survivorship and not as tenants Act_____________________ in common (State) Additional abbreviations may also be used though not in the above list. ---------------------------------- ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - -------------------------------- - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ (Please print or typewrite name and address including postal zip code of assignee) - ------------------------------------------------------------------------------ this Note and all rights thereunder hereby irrevocably constituting and appointing ____________________________________________________________________ Attorney to transfer this Note on the books of the Trustee, with full power of substitution in the premises. Dated: --------------------- ------------------------------------------- ------------------------------------------- Notice: The signature(s) on this Assignment must correspond with the name(s) as written upon the face of this Note in every particular, without alteration or enlargement or any change whatsoever. R-5 OPTION TO ELECT REPAYMENT The undersigned hereby irrevocably request(s) and instruct(s) the Company to repay this Note (or portion hereof specified below) pursuant to its terms at a price equal to 100% of the principal amount to be repaid, together with unpaid interest accrued hereon to the Repayment Date, to the undersigned, at___________ ________________________________________________________________________________ (Please print or typewrite name and address of the undersigned) For this Note to be repaid, the Trustee must receive at its corporate trust office in the Borough of Manhattan, The City of New York, currently located at 101 Barclay Street, not more than 60 nor less than 30 calendar days prior to the Repayment Date, this Note with this "Option to Elect Repayment" form duly completed. If less than the entire principal amount of this Note is to be repaid, specify the portion hereof (which shall be increments of $1,000 which the holder elects to have repaid) and specify the denomination or denominations (which shall be an Authorized Denomination) of the Notes to be issued to the holder for the portion of this Note not being repaid (in the absence of any such specification, one such Note will be issued for the portion not being repaid). Principal Amount to be Repaid: $ ------------- --------------------------------- Notice: The signature(s) on this Date: Option to Elect Repayment must ---------------------- correspond with the name(s) as written upon the face of this Note in every particular, without alteration or enlargement or any change whatsoever. R-6 EX-4.7 4 FORM OF AIRGAS, INC. (FLOATING RATE) Exhibit 4.7 UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") (55 WATER STREET, NEW YORK, NEW YORK) TO THE ISSUER HEREOF OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. REGISTERED CUSIP No.: PRINCIPAL AMOUNT: No. FLR-___ ______________ ________________ AIRGAS, INC. MEDIUM-TERM NOTE, SERIES A (Floating Rate) INTEREST RATE BASIS ORIGINAL ISSUE DATE: STATED MATURITY DATE: OR BASES: IF LIBOR: IF CMT RATE: [ ] LIBOR Reuters Designated CMT Telerate Page: Page: [ ] LIBOR Telerate IF Telerate Page 7052: Page: [ ] Weekly Average INDEX CURRENCY: [ ] Monthly Average Designated CMT Maturity Index: INDEX MATURITY: INITIAL INTEREST INTEREST PAYMENT DATE(S): RATE: % SPREAD (PLUS OR SPREAD MULTIPLIER: INITIAL INTEREST RESET MINUS): DATE: MINIMUM INTEREST MAXIMUM INTEREST INTEREST RESET DATE(S): RATE: % RATE: % INTEREST RESET PERIOD: F-1 INITIAL REDEMPTION INITIAL REDEMPTION ANNUAL REDEMPTION DATE: PERCENTAGE: % PERCENTAGE REDUCTION: % OPTIONAL REPAYMENT CALCULATION AGENT: THE BANK OF NEW YORK DATE(S): INTEREST CATEGORY: DAY COUNT CONVENTION: [ ] Regular Floating Rate Note [ ] 30/360 for the period [ ] Floating Rate/Fixed Rate Note from to . Fixed Rate Commencement Date: [ ] Actual/360 for the period Fixed Interest Rate: % from to . [ ] Inverse Floating Rate Note [ ] Actual/Actual for the period Fixed Interest Rate: % from to . [ ] Original Issue Discount Note Applicable Interest Rate Basis: Issue Price: % AUTHORIZED DENOMINATION: [ ] $1,000 and integral multiples thereof [ ] Other: DEFAULT RATE: % ADDENDUM ATTACHED [ ] Yes [ ] No OTHER/ADDITIONAL PROVISIONS: F-2 Airgas, Inc., a Delaware corporation (the "Company", which terms include any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to , or registered assigns, the principal sum of , on the Stated Maturity Date specified above (or any Redemption Date or Repayment Date, each as defined on the reverse hereof) (each such Stated Maturity Date, Redemption Date or Repayment Date being hereinafter referred to as the "Maturity Date" with respect to the principal repayable on such date) and to pay interest thereon, at a rate per annum equal to the Initial Interest Rate specified above until the Initial Interest Reset Date specified above and thereafter at a rate determined in accordance with the provisions specified above and on the reverse hereof or in an Addendum hereto with respect to one or more Interest Rate Bases specified above until the principal hereof is paid or duly made available for payment, and (to the extent that the payment of such interest shall be legally enforceable) at the Default Rate per annum specified above on any overdue principal, premium and/or interest. The Company will pay interest in arrears on each Interest Payment Date, if any, specified above (each, an "Interest Payment Date"), commencing with the first Interest Payment Date next succeeding the Original Issue Date specified above, and on the Maturity Date; provided, however, that if -------- ------- the Original Issue Date occurs between a Record Date (as defined below) and the next succeeding Interest Payment Date, interest payments will commence on the second Interest Payment Date next succeeding the Original Issue Date to the holder of this Note on the Record Date with respect to such second Interest Payment Date. Interest on this Note will accrue from, and including, the immediately preceding Interest Payment Date to which interest has been paid or duly provided for (or from, and including, the Original Issue Date if no interest has been paid or duly provided for) to, but excluding, the applicable Interest Payment Date or the Maturity Date, as the case may be (each, an "Interest Period"). The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, subject to certain exceptions described herein, be paid to the person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on the fifteenth calendar day (whether or not a Business Day, as defined on the reverse hereof) immediately preceding such Interest Payment Date (the "Record Date"); provided, however, that interest -------- ------- payable on the Maturity Date will be payable to the person to whom the principal hereof and premium, if any, hereon shall be payable. Any such interest not so punctually paid or duly provided for ("Defaulted Interest") will forthwith cease to be payable to the holder on any Record Date, and shall be paid to the person in whose name this Note is registered at the close of business on a special record date (the "Special Record Date") for the payment of such Defaulted Interest to be fixed by the Trustee hereinafter referred to, notice whereof shall be given to the holder of this Note by the Trustee not less than 10 calendar days prior to such Special Record Date or may be paid at any time in any other lawful manner not inconsistent with the requirements of any F-3 securities exchange on which this Note may be listed, and upon such notice as may be required by such exchange, all as more fully provided for in the Indenture. Payment of principal, premium, if any, and interest in respect of this Note due on the Maturity Date will be made in immediately available funds upon presentation and surrender of this Note (and, with respect to any applicable repayment of this Note, a duly completed election form as contemplated on the reverse hereof) at the corporate trust office of the Trustee maintained for that purpose in the Borough of Manhattan, The City of New York, currently located at 101 Barclay Street, New York, New York 10286, or at such other paying agency in the Borough of Manhattan, The City of New York, as the Company may determine. Payment of interest due on any Interest Payment Date other than the Maturity Date will be made by check mailed to the address of the person entitled thereto as such address shall appear in the Security Register maintained at the aforementioned office of the Trustee; provided, however, that a holder of -------- ------- $10,000,000 or more in aggregate principal amount of Notes (whether having identical or different terms and provisions) will be entitled to receive interest payments on such Interest Payment Date by wire transfer of immediately available funds if appropriate wire transfer instructions have been received in writing by the Trustee not less than 15 calendar days prior to such Interest Payment Date. Any such wire transfer instructions received by the Trustee shall remain in effect until revoked by such holder. If any Interest Payment Date other than the Maturity Date would otherwise be a day that is not a Business Day, such Interest Payment Date shall be postponed to the next succeeding Business Day, except that if LIBOR is an applicable Interest Rate Basis and such Business Day falls in the next succeeding calendar month, such Interest Payment Date shall be the immediately preceding Business Day. If the Maturity Date falls on a day that is not a Business Day, the required payment of principal, premium, if any, and interest shall be made on the next succeeding Business Day with the same force and effect as if made on the date such payment was due, and no interest shall accrue with respect to such payment for the period from and after the Maturity Date to the date of such payment on the next succeeding Business Day. The principal of, and interest on, this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof and, if so specified on the face hereof, in an Addendum hereto, which further provisions shall have the same force and effect as if set forth on the face hereof. F-4 Notwithstanding any provisions to the contrary contained herein, if the face of this Note specifies that an Addendum is attached hereto or that "Other/Additional Provisions" apply, this Note shall be subject to the terms set forth in such Addendum or such "Other/Additional Provisions". Unless the Certificate of Authentication hereon has been executed by the Trustee by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. F-5 IN WITNESS WHEREOF, Airgas, Inc. has caused this Note to be duly executed by one of its duly authorized officers. AIRGAS, INC. By --------------------------------- Title: Dated: TRUSTEE'S CERTIFICATE OF AUTHENTICATION: This is one of the Debt Securities of the series designated therein referred to in the within-mentioned Indenture. THE BANK OF NEW YORK, as Trustee By --------------------------------- Authorized Signatory F-6 AIRGAS, INC. MEDIUM-TERM NOTE, SERIES A (Floating Rate) This Note is one of a duly authorized series of Debt Securities (the "Debt Securities") of the Company issued and to be issued under an Indenture, dated as of August 1, 1996, as amended, modified or supplemented from time to time (the "Indenture"), between the Company and The Bank of New York, as Trustee (the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the holders of the Debt Securities, and of the terms upon which the Debt Securities are, and are to be, authenticated and delivered. This Note is one of the series of Debt Securities designated as "Medium-Term Notes, Series A, Due Nine Months or More From Date of Issue" (the "Notes"). All terms used but not defined in this Note or in an Addendum hereto shall have the meanings assigned to such terms in the Indenture or on the face hereof, as the case may be. This Note is issuable only in registered form without coupons in minimum denominations of $1,000 and integral multiples thereof or the minimum Authorized Denomination specified on the face hereof. This Note will not be subject to any sinking fund and, unless otherwise specified on the face hereof in accordance with the provisions of the following two paragraphs, will not be redeemable or repayable prior to the Stated Maturity Date. This Note will be subject to redemption at the option of the Company on any date on or after the Initial Redemption Date, if any, specified on the face hereof, in whole or from time to time in part in increments of $1,000 or the minimum Authorized Denomination (provided that any remaining principal amount hereof shall be at least $1,000 or such minimum Authorized Denomination), at the Redemption Price (as defined below), together with unpaid interest accrued thereon to the date fixed for redemption (each, a "Redemption Date"), on notice given no more than 60 nor less than 30 calendar days prior to the Redemption Date and in accordance with the provisions of the Indenture. The "Redemption Price" shall initially be the Initial Redemption Percentage specified on the face hereof multiplied by the unpaid principal amount of this Note to be redeemed. The Initial Redemption Percentage shall decline at each anniversary of the Initial Redemption Date by the Annual Redemption Percentage Reduction, if any, specified on the face hereof until the Redemption Price is 100% of unpaid principal amount to be redeemed. In the event of redemption of this Note in part only, a new Note of like tenor for the unredeemed portion hereof and otherwise having the same terms as this Note shall be issued in R-1 the name of the holder hereof upon the presentation and surrender hereof. This Note will be subject to repayment by the Company at the option of the holder hereof on the Optional Repayment Date(s), if any, specified on the face hereof, in whole or in part in increments of $1,000 or the minimum Authorized Denomination (provided that any remaining principal amount hereof shall be at least $1,000 or such minimum Authorized Denomination), at a repayment price equal to 100% of the unpaid principal amount to be repaid, together with unpaid interest accrued thereon to the date fixed for repayment (each, a "Repayment Date"). For this Note to be repaid, this Note must be received, together with the form hereon entitled "Option to Elect Repayment" duly completed, by the Trustee at its corporate trust office not more than 60 nor less than 30 calendar days prior to the Repayment Date. Exercise of such repayment option by the holder hereof will be irrevocable. In the event of repayment of this Note in part only, a new Note of like tenor for the unrepaid portion hereof and otherwise having the same terms as this Note shall be issued in the name of the holder hereof upon the presentation and surrender hereof. If the Interest Category of this Note is specified on the face hereof as an Original Issue Discount Note, the amount payable to the holder of this Note in the event of redemption, repayment or acceleration of maturity of this Note will be equal to the sum of (1) the Issue Price specified on the face hereof (increased by any accruals of the Discount, as defined below) and, in the event of any redemption of this Note (if applicable), multiplied by the Initial Redemption Percentage (as adjusted by the Annual Redemption Percentage Reduction, if applicable) and (2) any unpaid interest on this Note accrued from the Original Issue Date to the Redemption Date, Repayment Date or date of acceleration of maturity, as the case may be. The difference between the Issue Price and 100% of the principal amount of this Note is referred to herein as the "Discount." For purposes of determining the amount of Discount that has accrued as of any Redemption Date, Repayment Date or date of acceleration of maturity of this Note, such Discount will be accrued so as to cause an assumed yield on the Note to be constant. The assumed constant yield will be calculated using a 30-day month, 360-day year convention, a compounding period that, except for the Initial Period (as defined below), corresponds to the shortest period between Interest Payment Dates (with ratable accruals within a compounding period), a constant coupon rate equal to the initial interest rate applicable to this Note and an assumption that the maturity of this Note will not be accelerated. If the period from the Original Issue Date to the initial Interest Payment Date (the "Initial Period") is shorter than the compounding period for this Note, a proportionate amount of the yield for an entire compounding period will be accrued. If the Initial Period is longer than the compounding period, then such period will be divided into a regular compounding period and a short period, with the short period being treated as provided in the preceding sentence. R-2 The interest rate borne by this Note will be determined as follows: (i) Unless the Interest Category of this Note is specified on the face hereof as a "Floating Rate/Fixed Rate Note" or an "Inverse Floating Rate Note" or as otherwise specified as Other/Additional Provisions on the face hereof or in an Addendum hereto, this Note shall be designated as a "Regular Floating Rate Note" and, except as set forth below or specified on the face hereof or in an Addendum hereto, shall bear interest at the rate determined by reference to the applicable Interest Rate Basis or Bases (a) plus or minus the Spread, if any, and/or (b) multiplied by the Spread Multiplier, if any, in each case as specified on the face hereof. Commencing on the Initial Interest Reset Date, the rate at which interest on this Note shall be payable shall be reset as of each Interest Reset Date specified on the face hereof; provided, however, that the interest rate in -------- ------- effect for the period, if any, from the Original Issue Date to the Initial Interest Reset Date shall be the Initial Interest Rate. (ii) If the Interest Category of this Note is specified on the face hereof as a "Floating Rate/Fixed Rate Note", then, except as set forth below or specified on the face hereof or in an Addendum hereto, this Note shall bear interest at the rate determined by reference to the applicable Interest Rate Basis or Bases (a) plus or minus the Spread, if any, and/or (b) multiplied by the Spread Multiplier, if any. Commencing on the Initial Interest Reset Date, the rate at which interest on this Note shall be payable shall be reset as of each Interest Reset Date; provided, however, -------- ------- that (y) the interest rate in effect for the period, if any, from the Original Issue Date to the Initial Interest Reset Date shall be the Initial Interest Rate and (z) the interest rate in effect for the period commencing on the Fixed Rate Commencement Date specified on the face hereof to the Maturity Date shall be the Fixed Interest Rate specified on the face hereof or, if no such Fixed Interest Rate is specified, the interest rate in effect hereon on the day immediately preceding the Fixed Rate Commencement Date. (iii) If the Interest Category of this Note is specified on the face hereof as an "Inverse Floating Rate Note", then, except as set forth below or specified on the face hereof or in an Addendum hereto, this Note shall bear interest at the Fixed Interest Rate minus the rate determined by reference to the applicable Interest Rate Basis or Bases (a) plus or minus the Spread, if any, and/or (b) multiplied by the Spread Multiplier, if any; provided, however, that, unless otherwise specified on the face hereof or -------- ------- in an Addendum hereto, the interest rate hereon shall not be less than zero. Commencing on the Initial Interest Reset Date, the rate at which interest on this Note shall be payable shall be reset as of each Interest Reset Date; provided, however, that the interest rate in effect for the -------- ------- R-3 period, if any, from the Original Issue Date to the Initial Interest Reset Date shall be the Initial Interest Rate. Except as set forth above or specified on the face hereof or in an Addendum hereto, the interest rate in effect on each day shall be (i) if such day is an Interest Reset Date, the interest rate determined as of the Interest Determination Date (as defined below) immediately preceding such Interest Reset Date or (ii) if such day is not an Interest Reset Date, the interest rate determined as of the Interest Determination Date immediately preceding the most recent Interest Reset Date. If any Interest Reset Date would otherwise be a day that is not a Business Day, such Interest Reset Date shall be postponed to the next succeeding Business Day, except that if LIBOR is an applicable Interest Rate Basis and such Business Day falls in the next succeeding calendar month, such Interest Reset Date shall be the immediately preceding Business Day. In addition, if the Treasury Rate is an applicable Interest Rate Basis and the Interest Determination Date would otherwise fall on an Interest Reset Date, then such Interest Reset Date will be postponed to the next succeeding Business Day. As used herein, "Business Day" means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law, regulation or executive order to close in The City of New York; provided, however, that if LIBOR is an applicable Interest -------- ------- Rate Basis, such day is also a London Business Day (as defined below). "London Business Day" means (i) if the Index Currency (as defined below) is other than European Currency Units ("ECU"), any day on which dealings in such Index Currency are transacted in the London interbank market or (ii) if the Index Currency is ECU, any day that does not appear as an ECU non-settlement day on the display designated as "ISDE" on the Reuter Monitor Money Rates Service (or a day so designated by the ECU Banking Association) or, if ECU non-settlement days do not appear on that page (and are not so designated), is not a day on which payments in ECU cannot be settled in the international interbank market. The interest rate applicable to each Interest Reset Period commencing on the related Interest Reset Date will be determined by the Calculation Agent as of the applicable Interest Determination Date and will be calculated by the Calculation Agent on or prior to the Calculation Date (as defined below), except with respect to the LIBOR and the Eleventh District Cost of Funds Rate, which will be calculated as of such Interest Determination Date. The "Interest Determination Date" with respect to the CD Rate, the CMT Rate, the Commercial Paper Rate, the Federal Funds Rate and the Prime Rate will be the second Business Day immediately preceding the applicable Interest Reset Date; the "Interest Determination Date" with respect to the Eleventh District Cost of Funds Rate shall be the last working day of the month immediately preceding the applicable Interest Reset Date on which the Federal Home Loan Bank of San Francisco (the "FHLB of San Francisco") publishes the Index (as defined below); and the "Interest Determination Date" with respect to LIBOR shall be the second London Business Day immediately R-4 preceding the applicable Interest Reset Date, unless the Index Currency is British pounds sterling, in which case the "Interest Determination Date" will be the applicable Interest Reset Date. The "Interest Determination Date" with respect to the Treasury Rate shall be the day in the week in which the applicable Interest Reset Date falls on which day Treasury Bills (as defined below) are normally auctioned (Treasury Bills are normally sold at an auction held on Monday of each week, unless that day is a legal holiday, in which case the auction is normally held on the following Tuesday, except that such auction may be held on the preceding Friday); provided, however, that if an auction is -------- ------- held on the Friday of the week preceding the applicable Interest Reset Date, the "Interest Determination Date" shall be such preceding Friday. If the interest rate of this Note is determined with reference to two or more Interest Rate Bases specified on the face hereof, the "Interest Determination Date" pertaining to this Note shall be the most recent Business Day which is at least two Business Days prior to the applicable Interest Reset Date on which each Interest Rate Basis is determinable. Each Interest Rate Basis shall be determined as of such date, and the applicable interest rate shall take effect on the related Interest Reset Date. Unless otherwise specified on the face hereof or in an Addendum hereto, the rate with respect to each Interest Rate Basis will be determined in accordance with the applicable provisions below. CD Rate. If an Interest Rate Basis for this Note is specified on the face ------- hereof as the CD Rate, the CD Rate shall be determined as of the applicable Interest Determination Date (a "CD Rate Interest Determination Date") as the rate on such date for negotiable United States dollar certificates of deposit having the Index Maturity specified on the face hereof as published by the Board of Governors of the Federal Reserve System in "Statistical Release H.15(519), Selected Interest Rates" or any successor publication ("H.15(519)") under the heading "CDs (Secondary Market)", or, if not published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on such CD Rate Interest Determination Date for negotiable United States dollar certificates of deposit of the Index Maturity as published by the Federal Reserve Bank of New York in its daily statistical release "Composite 3:30 P.M. Quotations for United States Government Securities" or any successor publication ("Composite Quotations") under the heading "Certificates of Deposit". If such rate is not yet published in either H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on the related Calculation Date, then the CD Rate on such CD Rate Interest Determination Date will be calculated by the Calculation Agent specified on the face hereof and will be the arithmetic mean of the secondary market offered rates as of 10:00 A.M., New York City time, on such CD Rate Interest Determination Date, of three leading nonbank dealers in negotiable United States dollar certificates of deposit in The City of New York selected by the Calculation Agent for negotiable certificates of deposit of major United States money market banks for negotiable United States dollar certificates of deposit with a remaining maturity closest R-5 to the Index Maturity in an amount that is representative for a single transaction in that market at that time; provided, however, that if the dealers -------- ------- so selected by the Calculation Agent are not quoting as mentioned in this sentence, the CD Rate determined as of such CD Rate Interest Determination Date will be the CD Rate in effect on such CD Rate Interest Determination Date. CMT Rate. If an Interest Rate Basis for this Note is specified on the face -------- hereof as the CMT rate, the CMT Rate shall be determined as of the applicable Interest Determination Date (a "CMT Rate Interest Determination Date") as the rate displayed on the Designated CMT Telerate Page (as defined below) under the caption "...Treasury Constant Maturities...Federal Reserve Board Release H.15...Mondays Approximately 3:45 P.M.", under the column for the Designated CMT Maturity Index (as defined below) for (i) if the Designated CMT Telerate Page is 7055, the rate on such CMT Rate Interest Determination Date and (ii) if the Designated CMT Telerate Page is 7052, the weekly or monthly average, as specified on the face hereof, for the week or month, as applicable, ended immediately preceding the week or month, as applicable, in which the related CMT Rate Interest Determination Date occurs. If such rate is no longer displayed on the relevant page or is not displayed by 3:00 P.M., New York City time, on the related Calculation Date, then the CMT Rate for such CMT Rate Interest Determination Date will be such treasury constant maturity rate for the Designated CMT Maturity Index as published in H.15(519). If such rate is no longer published or is not published by 3:00 P.M., New York City time, on the related Calculation Date, then the CMT Rate on such CMT Rate Interest Determination Date will be such treasury constant maturity rate for the Designated CMT Maturity Index (or other United States Treasury rate for the Designated CMT Maturity Index) for the CMT Rate Interest Determination Date with respect to such Interest Reset Date as may then be published by either the Board of Governors of the Federal Reserve System or the United States Department of the Treasury that the Calculation Agent determines to be comparable to the rate formerly displayed on the Designated CMT Telerate Page and published in H.15(519). If such information is not provided by 3:00 P.M., New York City time, on the related Calculation Date, then the CMT Rate on the CMT Rate Interest Determination Date will be calculated by the Calculation Agent and will be a yield to maturity, based on the arithmetic mean of the secondary market closing offer side prices as of approximately 3:30 P.M., New York City time, on such CMT Rate Interest Determination Date reported, according to their written records, by three leading primary United States government securities dealers (each, a "Reference Dealer") in The City of New York selected by the Calculation Agent (from five such Reference Dealers selected by the Calculation Agent and eliminating the highest quotation (or, in the event of equality, one of the highest) and the lowest quotation (or, in the event of equality, one of the lowest)), for the most recently issued direct noncallable fixed rate obligations of the United States ("Treasury Notes") with an original maturity of approximately the Designated CMT Maturity Index and a remaining term to maturity of not less than such Designated CMT Maturity Index minus one year. R-6 If the Calculation Agent is unable to obtain three such Treasury Note quotations, the CMT Rate on such CMT Rate Interest Determination Date will be calculated by the Calculation Agent and will be a yield to maturity based on the arithmetic mean of the secondary market offer side prices as of approximately 3:30 P.M., New York City time, on such CMT Rate Interest Determination Date of three Reference Dealers in The City of New York (from five such Reference Dealers selected by the Calculation Agent and eliminating the highest quotation (or, in the event of equality, one of the highest) and the lowest quotation (or, in the event of equality, one of the lowest)), for Treasury Notes with an original maturity of the number of years that is the next highest to the Designated CMT Maturity Index and a remaining term to maturity closest to the Designated CMT Maturity Index and in an amount of at least $100 million. If three or four (and not five) of such Reference Dealers are quoting as described above, then the CMT Rate will be based on the arithmetic mean of the offer prices obtained and neither the highest nor the lowest of such quotes will be eliminated; provided, however, that if fewer than three Reference Dealers selected by the Calculation Agent are quoting as mentioned herein, the CMT Rate determined as of such CMT Rate Interest Determination Date will be the CMT Rate in effect on such CMT Rate Interest Determination Date. If two Treasury Notes with an original maturity as described in the second preceding sentence have remaining terms to maturity equally close to the Designated CMT Maturity Index, the Calculation Agent will obtain quotations for the Treasury Note with the shorter remaining term to maturity. "Designated CMT Telerate Page" means the display on the Dow Jones Telerate Service (or any successor service) on the page specified on the face hereof (or any other page as may replace such page on such service (or any successor service) for the purpose of displaying Treasury Constant Maturities as reported in H.15(519). If no such page is specified on the face hereof, the Designated CMT Telerate Page shall be 7052, for the most recent week. "Designated CMT Maturity Index" means the original period to maturity of the United States Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified on the face hereof with respect to which the CMT Rate will be calculated. If no such maturity is specified on the face hereof, the Designated CMT Maturity Index shall be 2 years. Commercial Paper Rate. If an Interest Rate Basis for this Note is --------------------- specified on the face hereof as the Commercial Paper Rate, the Commercial Paper Rate shall be determined as of the applicable Interest Determination Date (a "Commercial Paper Rate Interest Determination Date") as the Money Market Yield (as defined below) on such date of the rate for commercial paper having the Index Maturity as published in H.15(519) under the heading "Commercial Paper". In the event that such rate is not published by 3:00 P.M., New York City time, on such Calculation Date, then the Commercial Paper Rate on such Commercial Paper Rate Interest Determination Date will be the Money Market Yield of the rate for commercial paper having the Index Maturity as R-7 published in Composite Quotations under the heading "Commercial Paper" (with an Index Maturity of one month or three months being deemed to be equivalent to an Index Maturity of 30 days or 90 days, respectively). If such rate is not yet published in either H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on such Calculation Date, then the Commercial Paper Rate on such Commercial Paper Rate Interest Determination Date will be calculated by the Calculation Agent and shall be the Money Market Yield of the arithmetic mean of the offered rates at approximately 11:00 A.M., New York City time, on such Commercial Paper Rate Interest Determination Date of three leading dealers of commercial paper in The City of New York selected by the Calculation Agent for commercial paper having the Index Maturity placed for an industrial issuer whose bond rating is "AA", or the equivalent, from a nationally recognized statistical rating organization; provided, however, that if the dealers so selected by the -------- ------- Calculation Agent are not quoting as mentioned in this sentence, the Commercial Paper Rate determined as of such Commercial Paper Rate Interest Determination Date will be the Commercial Paper Rate in effect on such Commercial Paper Rate Interest Determination Date. "Money Market Yield" means a yield (expressed as a percentage) calculated in accordance with the following formula: Money Market Yield = D x 360 x 100 --------------------- 360 - (D x M) where "D" refers to the applicable per annum rate for commercial paper quoted on a bank discount basis and expressed as a decimal, and "M" refers to the actual number of days in the Interest Period for which interest is being calculated. Eleventh District Cost of Funds Rate. If an Interest Rate Basis for this ------------------------------------ Note is specified on the face hereof as the Eleventh District Cost of Funds Rate, the Eleventh District Cost of Funds Rate shall be determined as of the applicable Interest Determination Date (an "Eleventh District Cost of Funds Rate Interest Determination Date") as the rate equal to the monthly weighted average cost of funds for the calendar month immediately preceding the month in which such Eleventh District Cost of Funds Rate Interest Determination Date falls, as set forth under the caption "11th District" on Telerate Page 7058 as of 11:00 A.M., San Francisco time, on such Eleventh District Cost of Funds Rate Interest Determination Date. If such rate does not appear on Telerate Page 7058 on such Eleventh District Cost of Funds Rate Interest Determination Date, then the Eleventh District Cost of Funds Rate on such Eleventh District Cost of Funds Rate Interest Determination Date shall be the monthly weighted average cost of funds paid by member institutions of the Eleventh Federal Home Loan Bank District that was most recently announced (the "Index") by the FHLB of San Francisco as such cost of funds for the calendar month immediately preceding such Eleventh District Cost of Funds Rate Interest Determination Date. If the FHLB of San Francisco fails to announce the Index on or prior to such Eleventh District Cost of Funds Rate Interest Determination Date for the calendar month immediately preceding such Eleventh R-8 District Cost of Funds Rate Interest Determination Date, the Eleventh District Cost of Funds Rate determined as of such Eleventh District Cost of Funds Rate Interest Determination Date will be the Eleventh District Cost of Funds Rate in effect on such Eleventh District Cost of Funds Rate Interest Determination Date. Federal Funds Rate. If an Interest Rate Basis for this Note is specified ------------------ on the face hereof as the Federal Funds Rate, the Federal Funds Rate shall be determined as of the applicable Interest Determination Date (a "Federal Funds Rate Interest Determination Date") as the rate on such date for United States dollar federal funds as published in H.15(519) under the heading "Federal Funds (Effective)" or, if not published by 3:00 P.M., New York City time, on the Calculation Date, the rate on such Federal Funds Rate Interest Determination Date as published in Composite Quotations under the heading "Federal Funds/Effective Rate". If such rate is not published in either H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on the related Calculation Date, then the Federal Funds Rate on such Federal Funds Interest Determination Date shall be calculated by the Calculation Agent and will be the arithmetic mean of the rates for the last transaction in overnight United States dollar federal funds arranged by three leading brokers of federal funds transactions in The City of New York selected by the Calculation Agent, prior to 9:00 A.M., New York City time, on such Federal Funds Rate Interest Determination Date; provided, however, that if the brokers so selected by the Calculation -------- ------- Agent are not quoting as mentioned in this sentence, the Federal Funds Rate determined as of such Federal Funds Rate Interest Determination Date will be the Federal Funds Rate in effect on such Federal Funds Rate Interest Determination Date. LIBOR. If an Interest Rate Basis for this Note is specified on the face ----- hereof as LIBOR, LIBOR shall be determined by the Calculation Agent as of the applicable Interest Determination Date (a "LIBOR Interest Determination Date") in accordance with the following provisions: (i) if (a) "LIBOR Reuters" is specified on the face hereof, the arithmetic mean of the offered rates (unless the Designated LIBOR Page (as defined below) by its terms provides only for a single rate, in which case such single rate will be used) for deposits in the Index Currency having the Index Maturity, commencing on the applicable Interest Reset Date, that appear (or, if only a single rate is required as aforesaid, appears) on the Designated LIBOR Page (as defined below) as of 11:00 A.M., London time, on such LIBOR Interest Determination Date, or (b) "LIBOR Telerate" is specified on the face hereof, or if neither "LIBOR Reuters" nor "LIBOR Telerate" is specified on the face hereof as the method for calculating LIBOR, the rate for deposits in the Index Currency having the Index Maturity, commencing on such Interest Reset Date, that appears on the Designated LIBOR Page as of 11:00 A.M., London time, on such LIBOR Interest Determination Date. If fewer than two such offered rates appear, or if no such rate appears, as applicable, LIBOR on such LIBOR R-9 Interest Determination Date shall be determined in accordance with the provisions described in clause (ii) below. (ii) With respect to a LIBOR Interest Determination Date on which fewer than two offered rates appear, or no rate appears, as the case may be, on the Designated LIBOR Page as specified in clause (i) above, the Calculation Agent shall request the principal London offices of each of four major reference banks in the London interbank market, as selected by the Calculation Agent, to provide the Calculation Agent with its offered quotation for deposits in the Index Currency for the period of the Index Maturity, commencing on the applicable Interest Reset Date, to prime banks in the London interbank market at approximately 11:00 A.M., London time, on such LIBOR Interest Determination Date and in a principal amount that is representative for a single transaction in such Index Currency in such market at such time. If at least two such quotations are so provided, then LIBOR on such LIBOR Interest Determination Date will be the arithmetic mean of such quotations. If fewer than two such quotations are so provided, then LIBOR on such LIBOR Interest Determination Date will be the arithmetic mean of the rates quoted at approximately 11:00 A.M., in the applicable Principal Financial Center, on such LIBOR Interest Determination Date by three major banks in such Principal Financial Center selected by the Calculation Agent for loans in the Index Currency to leading European banks, having the Index Maturity and in a principal amount that is representative for a single transaction in such Index Currency in such market at such time; provided, -------- however, that if the banks so selected by the Calculation Agent are not quoting - ------- as mentioned in this sentence, LIBOR determined as of such LIBOR Interest Determination Date shall be LIBOR in effect on such LIBOR Interest Determination Date. "Index Currency" means the currency or composite currency specified on the face hereof as to which LIBOR shall be calculated. If no such currency or composite currency is specified on the face hereof, the Index Currency shall be United States dollars. "Principal Financial Center" means the capital city of the country issuing the Index Currency, except that with respect to United States dollars, Australian dollars, Deutsche marks, Dutch guilders, Italian lire, Swiss francs and ECU, the Principal Financial Center shall be The City of New York, Sydney, Frankfurt, Amsterdam, Milan, Zurich and Luxembourg, respectively. "Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified on the face hereof, the display on the Reuter Monitor Money Rates Service (or any successor service) on the page specified on the face hereof (or any other page as may replace such page on such service (or any successor service)), for the purpose of displaying the London interbank rates of major banks for the Index Currency, or (b) if "LIBOR Telerate" is specified on the face hereof or neither "LIBOR Reuters" nor "LIBOR Telerate" is specified on the face hereof as the method for calculating LIBOR, the display on the Dow Jones Telerate Service (or any successor service) on the page specified on the face hereof (or any other page as may replace such page on such R-10 service (or any successor service)) for the purpose of displaying the London interbank rates of major banks for the Index Currency. Prime Rate. If an Interest Rate Basis for this Note is specified on the ---------- face hereto as the Prime Rate, the Prime Rate shall be determined as of the applicable Interest Determination Date (a "Prime Rate Interest Determination Date") as the rate on such date as such rate is published in H.15(519) under the heading "Bank Prime Loan". If such rate is not published prior to 3:00 P.M., New York City time, on the related Calculation Date, then the Prime Rate shall be the arithmetic mean of the rates of interest publicly announced by each bank that appears on the Reuters Screen USPRIME1 Page (as defined below) as such bank's prime rate or base lending rate as in effect for such Prime Rate Interest Determination Date. If fewer than four such rates appear on the Reuters Screen USPRIME1 Page for such Prime Rate Interest Determination Date, the Prime Rate shall be the arithmetic mean of the prime rates quoted on the basis of the actual number of days in the year divided by a 360-day year as of the close of business on such Prime Rate Interest Determination Date by four major money center banks in The City of New York selected by the Calculation Agent. If fewer than four such quotations are so provided, the Prime Rate shall be the arithmetic mean of four prime rates quoted on the basis of the actual number of days in the year divided by a 360-day year as of the close of business on such Prime Rate Interest Determination Date as furnished in The City of New York by the major money center banks, if any, that have provided such quotations and by a reasonable number of substitute banks or trust companies to obtain four such prime rate quotations, provided such substitute banks or trust companies are organized and doing business under the laws of the United States, or any State thereof, each having total equity capital of at least $500 million and being subject to supervision or examination by Federal or State authority, selected by the Calculation Agent to provide such rate or rates; provided, however, that if -------- ------- the banks or trust companies so selected by the Calculation Agent are not quoting as mentioned in this sentence, the Prime Rate determined as of such Prime Rate Interest Determination Date will be the Prime Rate in effect on such Prime Rate Interest Determination Date. "Reuters Screen USPRIME1 Page" means the display designated as page "USPRIME1" on the Reuter Monitor Money Rates Service (or any successor service) (or such other page as may replace the USPRIME1 page on such service (or any successor service) for the purpose of displaying prime rates or base lending rates of major United States banks). Treasury Rate. If an Interest Rate Basis for this Note is specified on the ------------- face hereof as the Treasury Rate, the Treasury Rate shall be determined as of the applicable Interest Determination Date (a "Treasury Rate Interest Determination Date") as the rate from the auction held on such Treasury Rate Interest Determination Date (the "Auction") of direct obligations of the United States ("Treasury Bills") having the Index Maturity, as such rate is published in H.15(519) under the heading "Treasury bills-auction average (investment)" or, if not R-11 published by 3:00 P.M., New York City time, on the related Calculation Date, the auction average rate of such Treasury Bills (expressed as a bond equivalent on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) as otherwise announced by the United States Department of the Treasury. In the event that the results of the Auction of Treasury Bills having the Index Maturity are not reported as provided above by 3:00 P.M., New York City time, on such Calculation Date, or if no such Auction is held, then the Treasury Rate shall be calculated by the Calculation Agent and shall be a yield to maturity (expressed as a bond equivalent on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) of the arithmetic mean of the secondary market bid rates, as of approximately 3:30 P.M., New York City time, on such Treasury Rate Interest Determination Date, of three leading primary United States government securities dealers selected by the Calculation Agent, for the issue of Treasury Bills with a remaining maturity closest to the Index Maturity; provided, however, that if the dealers so selected by the Calculation -------- ------- Agent are not quoting as mentioned in this sentence, the Treasury Rate determined as of such Treasury Rate Interest Determination Date will be the Treasury Rate in effect on such Treasury Rate Interest Determination Date. Notwithstanding the foregoing, the interest rate hereon shall not be greater than the Maximum Interest Rate, if any, or less than the Minimum Interest Rate, if any, in each case as specified on the face hereof. The interest rate on this Note will in no event be higher than the maximum rate permitted by New York law, as the same may be modified by United States law of general application. The "Calculation Date", if applicable, pertaining to any Interest Determination Date shall be the earlier of (i) the tenth calendar day after such Interest Determination Date or, if such day is not a Business Day, the next succeeding Business Day or (ii) the Business Day immediately preceding the applicable Interest Payment Date or the Maturity Date, as the case may be. At the request of the Holder hereof, the Calculation Agent will provide to the Holder hereof the interest rate hereon then in effect and, if determined, the interest rate that will become effective as a result of a determination made for the next succeeding Interest Reset Date. Accrued interest hereon shall be an amount calculated by multiplying the principal amount hereof by an accrued interest factor. Such accrued interest factor shall be computed by adding the interest factor calculated for each day in the applicable Interest Period. Unless otherwise specified as the Day Count Convention on the face hereof, the interest factor for each such date shall be computed by dividing the interest rate applicable to such day by 360 if the CD Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate, the Federal Funds Rate, LIBOR or the Prime Rate is an applicable Interest Rate Basis or by the actual number of days in the year if the CMT Rate or the Treasury Rate is an applicable Interest Rate Basis. Unless otherwise specified as the Day Count Convention on the face R-12 hereof, the interest factor for this Note, if the interest rate is calculated with reference to two or more Interest Rate Bases, shall be calculated in each period in the same manner as if only the Applicable Interest Rate Basis specified on the face hereof applied. All percentages resulting from any calculation on this Note shall be rounded to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upwards, and all amounts used in or resulting from such calculation on this Note shall be rounded to the nearest cent. If an Event of Default, as defined in the Indenture, shall occur and be continuing, the principal of the Notes may be accelerated in the manner and with the effect provided in the Indenture. The Indenture contains provisions for defeasance of (i) the entire indebtedness of the Notes or (ii) certain covenants and Events of Default with respect to the Notes, in each case upon compliance with certain conditions set forth therein, which provisions apply to the Notes. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the holders of the Debt Securities at any time by the Company and the Trustee with the consent of the holders of not less than a majority of the aggregate principal amount of all Debt Securities at the time outstanding and affected thereby. The Indenture also contains provisions permitting the holders of not less than a majority of the aggregate principal amount of the outstanding Debt Securities of any series, on behalf of the holders of all such Debt Securities, to waive compliance by the Company with certain provisions of the Indenture. Furthermore, provisions in the Indenture permit the holders of not less than a majority of the aggregate principal amount of the outstanding Debt Securities of any series, in certain instances, to waive, on behalf of all of the holders of Debt Securities of such series, certain past defaults under the Indenture and their consequences. Any such consent or waiver by the holder of this Note shall be conclusive and binding upon such holder and upon all future holders of this Note and other Notes issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay principal, premium, if any, and interest in respect of this Note at the times, places and rate or formula, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein and herein set forth, the transfer of this Note is registrable in the Security Register of the Company upon surrender of this Note for registration of transfer at the office R-13 or agency of the Company in any place where the principal hereof and any premium or interest hereon are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the holder hereof or by his attorney duly authorized in writing, and thereupon one or more new Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. As provided in the Indenture and subject to certain limitations therein and herein set forth, this Note is exchangeable for a like aggregate principal amount of Notes of different authorized denominations but otherwise having the same terms and conditions, as requested by the holder hereof surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the holder in whose name this Note is registered as the owner thereof for all purposes, whether or not this Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. The Indenture and this Note shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely in such State. R-14 ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this Note, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - ______ Custodian _____ TEN ENT - as tenants by the entireties (Cust) (Minor) JT TEN - as joint tenants with right of under Uniform Gifts to Minors survivorship and not as tenants Act_____________________ in common (State) Additional abbreviations may also be used though not in the above list. __________________________________ ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - -------------------------------- ______________________________________________________________________________ ______________________________________________________________________________ (Please print or typewrite name and address including postal zip code of assignee) ______________________________________________________________________________ this Note and all rights thereunder hereby irrevocably constituting and appointing ____________________________________________________________________ Attorney to transfer this Note on the books of the Trustee, with full power of substitution in the premises. Dated:_____________________ _______________________________________ _______________________________________ Notice: The signature(s) on this Assignment must correspond with the name(s) as written upon the face of this Note in every particular, without alteration or enlargement or any change whatsoever. R-15 OPTION TO ELECT REPAYMENT The undersigned hereby irrevocably request(s) and instruct(s) the Company to repay this Note (or portion hereof specified below) pursuant to its terms at a price equal to 100% of the principal amount to be repaid, together with unpaid interest accrued hereon to the Repayment Date, to the undersigned, at _____________________________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name and address of the undersigned) For this Note to be repaid, the Trustee must receive at its corporate trust office in the Borough of Manhattan, The City of New York, currently located at 101 Barclay Street, not more than 60 nor less than 30 calendar days prior to the Repayment Date, this Note with this "Option to Elect Repayment" form duly completed. If less than the entire principal amount of this Note is to be repaid, specify the portion hereof (which shall be increments of $1,000 which the holder elects to have repaid) and specify the denomination or denominations (which shall be an Authorized Denomination) of the Notes to be issued to the holder for the portion of this Note not being repaid (in the absence of any such specification, one such Note will be issued for the portion not being repaid). Principal Amount to be Repaid: $_____________ ______________________________________ Notice: The signature(s) on this Option to Elect Repayment must correspond with the name(s) as Date: ______________________ written upon the face of this Note in every particular, without alteration or enlargement or any change whatsoever. R-16 EX-21 5 SUBSIDIARIES OF THE COMPANY EXHIBIT 21 AIRGAS, INC. AND SUBSIDIARIES
Corporation Name Domicile AIRGAS BEVERAGE SERVICE, INC. DE AIRGAS BEVERAGE SYSTEMS INC. DE AIRGAS BREATHING AIR SYSTEMS, INC. DE AIRGAS CANADA, INC. CAN AIRGAS CARBONIC ENTERPRISES, INC. DE AIRGAS CARBONIC INDUSTRIES, INC. DE AIRGAS CARBONIC WEST, INC. DE AIRGAS DIRECT INDUSTRIAL, INC. DE AIRGAS HOUSTON, INC. DE AIRGAS INTERNATIONAL, INC. VI AIRGAS MANAGEMENT, INC. DE AIRGAS MANAGEMENT (INDIA) PVT. LTD. INDIA AIRGAS NEW ENGLAND REAL ESTATE, DE INC. AIRGAS NORTHEAST, INC DE AIRGAS ONTARIO, INC. CAN AIRGAS REALTY, INC. DE AIRGAS SAFETY, INC. DE AIRGAS (SINGAPORE) PTE LTD. SINGAPORE AIRGAS SPECIALTY GASES, INC. TX AIRGAS TEXAS, INC. DE AMERICAN CARBIDE AND CARBON DE CORPORATION ATNL, INC. DE BAY AIRGAS, INC. DE
BHORUKA GASES LTD INDIA CASCADE AIRGAS, INC. DE CENTRAL STATES AIRGAS, INC. DE CYLINDER LEASING CORP. DE DELTA AIRGAS, INC. DE ELKEM AMERICA JOINT VENTURE PA EMPIRE AIRGAS, INC. DE FORAIR, INC. DE GATEWAY AIRGAS, INC. DE G.S. PARSONS, CO. CA GREAT LAKES AIRGAS, INC. DE GREAT WESTERN AIRGAS, INC. DE GULF STATES AIRGAS, INC. DE INDUSTRIAL GASES OF WICHITA, INC. KS KAAMOOL AIRGAS, LTD THAILAND KEYSTONE AIRGAS, INC. PA MAURITIUS INDUSTRIAL GASES, INC. MAURITIUS MICHIGAN AIRGAS, INC. DE MID AMERICA AIRGAS, INC. DE MOUNTAIN AIRGAS, INC. DE MOUNTAIN STATES AIRGAS, INC. DE NATIONAL WELDERS SUPPLY CO., INC. (JV) NC NEJD PIPELINE CO., INC. DE NITROUS OXIDE CORP. DE NORTHERN GASES, INC. DE PACIFIC AIRGAS, INC. DE POLASKA AIRGAS SP. Z o.o.. POLAND POLIGAZ, S.A. POLAND POST AIRGAS, INC. DE POTOMAC AIRGAS, INC. VA
RED-D-ARC, INC. NV RED-D-ARC LIMITED CAN RUTLAND TOOL & SUPPLY CO, INC. CA SIERRA AIRGAS, INC. DE SODA LEASING, INC. DE SOONER AIRGAS, INC. DE SOUTHEAST AIRGAS, INC. DE SOUTHERN CALIFORNIA AIRGAS, INC. DE SOUTHWEST AIRGAS, INC. DE TRINITY AIRGAS, INC. DE TRISTATE AIRGAS, INC. DE US AIRGAS, INC. DE WESTWIND COMPANY PA
02/03/97 EX-23.1 6 CONSENT OF KPMG PEAT MARWICK LLP. EXHIBIT 23.1 Consent of Independent Auditors The Board of Directors Airgas, Inc. We consent to the use of our report included herein and to the reference to our firm under the heading "Experts" in the Proxy. /s/ KPMG Peat Marwick LLP Philadelphia, Pennsylvania March 18, 1997 EX-23.2 7 CONSENT OF OSBURN, HENNING AND COMPANY EXHIBIT 23.2 Consent of Independent Auditors The Board of Directors Airgas, Inc.: We consent to the inclusion of our report in the registration statement on Form S-4 of Airgas, Inc. of our report dated February 16, 1996, with respect to the consolidated balance sheets of Carbonic Industries Corporation, Inc. as of December 31, 1995 and 1994, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1995, and to the reference to our firm under the heading "Experts" in the proxy. /s/ Osburn, Henning and Company OSBURN, HENNING AND COMPANY EX-99.1 8 FORM OF PROXY EXHIBIT 99.1 CARBONIC INDUSTRIES CORPORATION 3700 Crestwood Parkway, Suite 200 Duluth, Georgia 30136-5240 PROXY SOLICITED BY THE BOARD OF CARBONIC INDUSTRIES CORPORATION FOR A SPECIAL MEETING OF SHAREHOLDERS ______________, 1997 The undersigned shareholder of Carbonic Industries Corporation hereby appoints J. Vernon Hinely and Julian K. Dominick, or either of them, with full power of substitution, acting jointly or by either one of them if only one be present and acting, attorney and proxies to vote in the manner specified below the shares of stock which the undersigned could vote if personally present at the Special Meeting of Shareholders to be held on May __, 1997, or at any adjournment thereof. Proposal to Approve the Agreement and Plan of Merger by and among Airgas, Inc., Airgas Carbonic Industries, Inc. and Carbonic Industries Corporation. FOR ______ AGAINST ______ ABSTAIN ______ If no direction to the contrary is indicated, this proxy will be voted FOR the proposal to approve the Agreement and Plan of Merger. Dated: _______________________, 1997 ___________________________________ Signature(s) of Shareholder ___________________________________ Signature if signing jointly Please sign exactly as name appears hereon. If shares are held jointly, each shareholder should sign. When signing for a corporation or partnership or as attorney, executor, administrator, trustee, guardian or custodian, please indicate the capacity in which you are signing. PLEASE FILL IN, DATE AND SIGN THE PROXY AND RETURN IT IN THE ENCLOSED POSTPAID ENVELOPE. EX-99.2 9 FORM OF CASH ELECTION / TRANSMITTAL LETTER EXHIBIT 99.2 CARBONIC INDUSTRIES CORPORATION Class A Common Stock INSTRUCTIONS FOR CASH ELECTION AND TRANSMITTAL LETTER Accompanying this Form is a Prospectus/Proxy Statement that describes a proposed acquisition of Carbonic Industries Corporation ("CIC") by Airgas, Inc. ("Airgas"). In connection with the proposed Merger of CIC with Airgas' subsidiary, each shareholder has the right to choose, subject to proration and certain limitations, whether to receive cash or shares of Airgas Common Stock in exchange for shares of CIC Class A Common Stock. Please refer to the Prospectus/Proxy Statement for information about the Merger and the choice between cash and Airgas' Common Stock. Except as described below, with respect to the total consideration each CIC shareholder is to receive for his shares, (i) 55% will be in the form of Airgas Common Stock and will be placed in an lockup/escrow account where it will be held for two years, subject to earlier release if certain specified events occur, and (ii) 0.25% will be placed in a special fees and expenses fund and used to satisfy costs relating to the Merger that arise after the Merger is effective. To the extent the monies in the special fees and expenses fund are not completely used, they will be distributed to each CIC shareholder on a pro rata basis. Neither of these provisions apply to CIC shareholders who own 500 or fewer shares of CIC Class A Common Stock (unless such shareholder acquired his shares after March 12, 1997 from a holder of more than 500 shares). If the total cash consideration to be received by CIC shareholders (including cash paid to dissenters, if any) exceeds 50% of the total consideration, the percentage of cash each shareholder will receive will be reduced (but not more than two percentage points) in order to reduce the cash consideration to less than 50% of the total consideration. Matters related to the lockup/escrow arrangement and special fees and expenses fund will be handled by a Shareholders' Agent Committee after the Merger. Please refer to the Prospectus/Proxy Statement that accompanies this Form of Cash Election/Transmittal Letter for a complete discussion of the purposes of the lockup/escrow arrangement, the special fees and expenses fund and the Shareholders' Agent Committee. You may receive cash for up to 45% (44.75% after the 0.25% deduction for fees and expenses) of your CIC Class A Common Stock, unless you own 500 or fewer shares, (and you did not acquire your shares after March 12, 1997 from a holder of more than 500 shares), in which case you may receive cash for up to all your shares of CIC Class A Common Stock. If you want to be sure to receive cash for some of your shares of CIC Class A Common Stock, you must complete this form carefully and send it, with the stock certificates for your shares of CIC Class A Common Stock covered by your "Cash Election," to The Bank of New York (the "Exchange Agent") in time to be received by 5:00 pm. on ____________, ________, 1997. Please do not send this to CIC; it must be sent to the Exchange Agent. --- If you do not want to make a Cash Election, you must still complete this Form, but leave the cash election portion (Box B) blank, and send it to the Exchange Agent (with your CIC stock certificates) to receive Airgas Common Stock for your shares of CIC Class A Common Stock. If you send in your stock certificates now, it will not limit your right to --- vote your shares of CIC Common Stock. If the Merger is not approved by the shareholders or is not completed for any other reason, your CIC stock certificates will be returned to you. Please read the following Instructions carefully before completing this Form of Cash Election/Transmittal Letter ("Transmittal Letter"). CASH ELECTION AND NON-CASH ELECTION SHARES A. SPECIAL CONDITIONS FOR CASH ELECTIONS 1. Deadline for Cash Election To be effective, a Cash Election on this Transmittal Letter and your stock certificate(s) representing shares of CIC Class A Common Stock covered by the Cash Election must be received by the Exchange Agent no later than 5:00 p.m. -------- Eastern Time on _____________, ____________, 1997 (the "Cash Election Deadline"). Persons whose certificates and Letters of Transmittal are not so received will not be entitled to make a Cash Election and will receive all of their Merger Consideration in shares of Airgas Common Stock. Any cash election for more than 45% of your shares (unless you own 500 or fewer shares and did not acquire such shares from a holder of more than 500 shares after March 12, 1997) will be deemed to be an election for only 45% of your shares (rounded down to the nearest whole share). 2. Revocation Your Cash Election will be irrevocable once it has been received by the Exchange Agent, unless the Exchange Agent, in its discretion, permits you to amend or withdraw it. Record holders of shares of CIC Class A Common Stock on deposit with the Exchange Agent will remain shareholders of record of CIC with respect to such shares until the effective time of the Merger. 3. Termination All Cash Elections and other instructions in the Transmittal Letter will be void and of no effect if the Merger is not consummated. If the Merger Agreement is terminated, the CIC stock certificates you submitted to the Exchange Agent will be promptly returned. B. SHARES AS TO WHICH CASH ELECTION IS MADE You may elect to receive cash with respect to your CIC Class A Common Stock by filling in the appropriate box on the Transmittal Letter under "Number of Shares as to which Cash is Elected." If you own 500 or fewer shares of CIC Class A Common Stock (and did not acquire your shares after March 12, 1997 from a shareholder who did own more than 500 shares), you may elect to receive cash for up to 100% of your shares; otherwise you may only elect to receive cash for up to 45% (rounded down to the nearest whole share). No Cash Election will be deemed to have been made for the shares of CIC Class A Common Stock you submit with the Transmittal Letter unless you clearly indicate the number of shares covered by the Cash Election. The CIC shares represented by certificates you submit to the Exchange Agent for which a Cash Election is not made will be --- treated as provided below in Instruction D. If you do not make a Cash Election, you will receive Airgas Common Stock for all your shares of CIC Class A Common --- Stock. C. PRORATION If the Cash Elections submitted by all holders of CIC Class A Common Stock, together with cash to be received by holders of CIC Class B Common Stock (and cash paid to dissenting shareholders, if any), exceed 50% of the value of the total consideration Airgas is paying to acquire CIC, the Exchange Agent will eliminate from the number of shares subject to Cash Elections (pro-rata as nearly as practicable) the number of shares necessary to reduce the cash portion of the Merger consideration to less than 50% of the overall Merger consideration. No shareholder's original Cash Election will be reduced more than two percentage points (e.g., from 45% to 43%). The shares for which Cash ---- Elections are accepted will be treated as "Cash Election Shares," and all other shares of CIC Class A Common Stock (including those for which Cash Elections are rejected or are not properly submitted) will be treated as "Non-Cash Election Shares." D. EXCHANGE OF CERTIFICATES FOR NON-CASH ELECTION SHARES Each Non-Cash Election Share will be converted into shares of Airgas Common Stock. Certificates representing Non-Cash Election Shares must also be submitted to the Exchange Agent with the attached Transmittal Letter. As noted (ii) above, certain of the Airgas shares to be received by each CIC shareholder (except those who hold 500 or fewer shares and did not acquire their shares after March 12, 1997 from a shareholder who did own more than 500 shares) will be placed into an escrow account where they will be held for a period of two years, subject to earlier release if certain specified events occur. E. NO FRACTIONAL SHARES OF AIRGAS COMMON STOCK No fractional shares of Airgas Common Stock will be issued. The total number of shares of Airgas Common Stock to be issued to each holder of shares of CIC Class A Common Stock who would otherwise be entitled to receive a fractional share of such Common Stock will be rounded up to the nearest whole share. GENERAL INSTRUCTIONS 1. General The Transmittal Letter should be properly filled in, dated and signed, and should be delivered (together with your stock certificates representing shares of CIC Class A Common Stock) to the Exchange Agent at the address set forth in the Transmittal Letter. THE METHOD OF DELIVERY OF ALL DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR OPTION AND RISK, BUT IF SENT BY MAIL, CERTIFIED OR REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. AN ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. THESE DOCUMENTS MUST BE SENT DIRECTLY TO THE EXCHANGE AGENT AND NOT TO CIC. --- 2. Signatures The signature (or signatures, in the case of certificates owned by two or more joint holders) on the Transmittal Letter must correspond exactly to the name as written on the face of the stock certificate(s) sent to the Exchange Agent (for example, if you are a custodian for an account set up under a Uniform Gift to Minors Act, you must sign the Transmittal Letter exactly as the name appears on the certificate). If there is insufficient space to list all of your share certificates being submitted to the Exchange Agent or to respond to any other information, please use Attachment A or attach a separate sheet. Unless you are making a correction to the name on a certificate (see Instruction 3), do not endorse your certificates. If shares of CIC Class A Common Stock are registered in different names on several certificates, it will be necessary to complete, sign and submit a separate Transmittal Letter for each different registration of certificates. For example, if some certificates are registered solely in your name, some are registered solely in your spouse's name and some are registered jointly in the name of you and your spouse, three separate Letters of Transmittal should be submitted. Additional copies of the Transmittal Letter may be obtained from the Exchange Agent. 3. Correction of or Change in Name. For a correction in name, the surrendered certificate(s) should be appropriately endorsed, for example, "James E. Brown, incorrectly inscribed as James S. Brown," with the signature guaranteed by a financial institution (bank) or brokerage firm having membership in good - --------- ----------- --------- --------- ---- standing in a recognized guarantee program (Securities Transfer Agent Medallion Program, New York Stock Exchange Medallion Signature Program or Stock Exchange Medallion Program (a "Qualified Guarantor")).For a change in name by marriage, etc., the surrendered certificate(s) should be appropriately endorsed, for example, "Mary Doe, now by marriage Mrs. Mary Jones," with the signature guaranteed by a Qualified Guarantor. Notaries Public cannot execute acceptable signature guarantees. (iii) 4. Supporting Evidence If the Transmittal Letter, certificate or endorsement is executed by an agent, trustee, executor, administrator, guardian, attorney, or any other person acting in a representative or fiduciary capacity, or by an officer of a corporation on behalf of the corporation, such person should so indicate when signing and must submit with the Transmittal Letter and surrendered certificate(s) documentary evidence of appointment and authority to act in such capacity (including court orders and corporate resolutions when necessary) as well as evidence of the authority of the person making such execution to assign, sell or transfer the shares. Such documentary evidence of authority must be in a form satisfactory to the Exchange Agent. If you have any questions as to what constitutes appropriate documentary evidence of authority, please contact the Exchange Agent at (800) ____________. 5. Validity of Surrender A surrender of certificate(s) will not be deemed to have been made and the Transmittal Letter will not be deemed to be complete until all irregularities (including attempts to change the text of the Transmittal Letter) and defects have been cured or waived. All questions as to validity, form and eligibility of any surrender of the certificate(s) or the Transmittal Letter will be determined by Airgas (which may delegate power in whole or in part to the Exchange Agent), and such determination will be final and binding. 6. Federal Tax Withholding Under federal income tax law, the Exchange Agent is required to file a report with the Internal Revenue Service ("IRS") disclosing the payments being made to you as an exchanging shareholder. Federal law also requires each shareholder to provide the Exchange Agent with a correct Taxpayer Identification Number ("TIN") on a Substitute Form W-9 set forth in the Transmittal Letter. If the Exchange Agent is not provided with the correct TIN, you may be subject to a $50 penalty by the IRS and payments that are made to you with respect to surrendered shares may be subject to backup withholding. If you are an individual, your TIN is your social security number. Your TIN number should be included in Part I of the substitute W-9 form provided in the Transmittal Letter. If you are exempt from backup withholding, you should complete the substitute W-9 to avoid possible erroneous backup withholding. Enter your correct TIN in Part I, write "EXEMPT" in the block in Part II, and sign and date the form. If backup withholding applies, the Exchange Agent is required to withhold 31% of any payments to be made to you. Backup withholding is not an additional tax. Rather, the amount of tax withheld will be applied as a credit against the tax liability of persons subject to backup withholding. If withholding results in an overpayment of taxes, a refund may be obtained by filing a tax return with the IRS. The Exchange Agent cannot refund amounts withheld by reason of backup withholding. Certain shareholders, such as corporations, are exempt from backup withholding and should so indicate by writing "exempt" on the substitute W-9 in the Transmittal Letter. To complete the form if you do not have a TIN, write "Applied for" in the space for the TIN in Part I and sign and date the form. Generally, you will then have 60 days to obtain a TIN and furnish it to the Exchange Agent. If the Exchange Agent does not receive your TIN within 60 days, backup withholding, if applicable, will begin and continue until you furnish your TIN to the Exchange Agent. (iv) 7. Lost Stock Certificates If you are unable to locate your certificates representing shares of CIC Class A Common Stock, you should follow the "Instructions for Completing Notice of Lost Stock Certificate(s)" on Attachment B to the Transmittal Letter. 8. Special Delivery Instructions Indicate the name and address to which the check for your cash payment and your shares of Airgas Common Stock (other than the shares to be held in the lockup/escrow fund) should be sent in Box C if different from the address set forth in Box A. You may elect to receive your cash payment by wire transfer of same day funds by completing the Special Delivery Instructions relating to wire transfers in Box C. 9. Miscellaneous As soon as practicable after the Merger occurs, the Exchange Agent will begin mailing and delivering cash payments and stock certificates for Airgas Common Stock in exchange for stock certificates representing shares of CIC Class A Common Stock that have been received by the Exchange Agent. There will be a delay, however, if you are unable to locate your shares or if you do not deliver them to the Exchange Agent with the Transmittal Letter. No holder of any surrendered certificate for shares of CIC Class A Common Stock will be entitled under any circumstances to receive any interest on cash to be received in the Merger. For further information or assistance concerning the Transmittal Letter, contact The Bank of New York at (800) ___________. (v) FORM OF CASH ELECTION/TRANSMITTAL LETTER To accompany certificates representing common stock of Carbonic Industries Corporation when submitted in connection with the merger of Carbonic Industries Corporation with and into Airgas Carbonic Industries, Inc., a wholly-owned subsidiary of Airgas, Inc. This Form of Cash Election/Transmittal Letter ("Transmittal Letter"), properly completed and signed in accordance with the instructions provided with this Transmittal Letter, together with the certificates for the shares of the Class A Common Stock of Carbonic Industries Corporation ("CIC") covered by this Transmittal Letter, must be received by The Bank of New York (the "Exchange Agent") at the address set forth below no later than 5:00 p.m., Eastern Time on _____________, _________, 1997. The Bank of New York 101 Barclay Street New York, New York 10286 Ladies and Gentlemen: Enclosed are the following certificates representing the Class A Common Stock, no par value, of CIC ("CIC Class A Common Stock"), which are surrendered for payment pursuant to the Agreement and Plan of Merger ("Merger Agreement") by and among Airgas, Inc., a Delaware corporation ("Airgas"), Airgas Carbonic Industries, Inc., a wholly-owned subsidiary of Airgas ("SubCorp"), and CIC, a Florida corporation, dated as of March 12, 1997, pursuant to which CIC will become a wholly owned subsidiary of Airgas through a merger of CIC with and into SubCorp. BOX A: CERTIFICATES SURRENDERED (Please list in Box A all the certificates --- representing CIC Class A Common Stock you are submitting at this time, regardless of how many (if any) are covered by a Cash Election. (If there is not enough space below to list all of your certificates, see Attachment A.) Use Box B to specify how many are covered by a Cash Election. A separate Transmittal Letter should be submitted for shares registered in different names.
============================================================================================= Name(s) and Address of Registered Holder(s) Certificates Enclosed (Please fill in or make corrections needed if label is affixed) - --------------------------------------------------------------------------------------------- Certificate No. No. of Shares ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- Total Shares =============================================================================================
1 BOX B: NUMBER OF SHARES AS TO WHICH CASH IS ELECTED ================================================================================ Check only one of the boxes below and, if the first box is checked, fill --- in the numbers as indicated: Please read carefully the Instructions for Cash Election [_] The Cash Election is made only as to ___________ (number) or _______ (%) (not greater than 45%) of the shares of CIC Class A Common Stock represented by the certificate(s) submitted with this Transmittal Letter. I am not making a Cash Election as to the other shares of CIC Class A Common Stock being submitted. [_] No Cash Election is made with respect to any of the shares of CIC Class A Common Stock represented by the certificate(s) submitted with this Transmittal Letter. [_] The Cash Election is made as to all shares of CIC Class A Common Stock represented by the certificate(s) submitted with this Transmittal Letter (only available to holders of 500 or fewer shares of CIC Class A Common Stock who did not acquire their shares from a shareholder who held more than 500 shares on March 12, 1997 . ================================================================================ Subject to the terms, conditions and limitations set forth in the Merger Agreement and the terms, conditions and limitations specified in the Instructions for this Transmittal Letter, the undersigned elects to receive in exchange for the number of shares of CIC Class A Common Stock submitted with this Transmittal Letter as to which the Cash Election is made above, and authorizes and instructs you, as Exchange Agent, to deliver in exchange for such shares, cash in an amount equal to $43.00 multiplied by the number of shares of CIC Class A Common Stock covered by such Cash Election (minus amounts applied to the special fees and expenses fund), or, in the event of proration, in the amount, if any, computed in accordance with Instruction C of the Instructions for Cash Election. For all other shares submitted herewith, the undersigned authorizes and instructs you, as Exchange Agent, to deliver in exchange for such shares the Airgas Common Stock payable for "Non-Cash Election Shares." Except as otherwise requested in the "Special Delivery Instructions" below, the undersigned requests that the check for any cash payment and the stock certificate for any shares of Airgas Common Stock to which the undersigned is entitled (other than the shares of Airgas Common Stock which will be delivered to the Lockup/Escrow Agent pursuant to the Merger Agreement and the Lockup/Escrow Agreement) be delivered to the registered holder(s) set forth in Box A above at the address set forth in Box A above. 2 BOX C--SPECIAL DELIVERY INSTRUCTIONS ============================================ Fill in ONLY if (i) delivery of the check or certificates is to be sent to an address OTHER than the address appearing in Box A above or (ii) the undersigned elects to receive a wire transfer. -------------------------------------------- Mail or deliver to: Name_____________________________________ (Please Print) Address __________________________________ _________________________________________ (Zip Code) Wire Instructions: Name of Account:__________________________ Account No. ______________________________ Name of Bank: ____________________________ ABA Routing No. _________________________ Name and telephone number of contact person at Receiving Bank _________________________ ============================================= The undersigned represents and warrants (and if more than one, each undersigned represents and warrants jointly and severally) that the undersigned has full power and authority to surrender the certificates listed in Box A and (if applicable) Attachment A and has good title to such certificates, free and clear of all liens, restrictions, charges, encumbrances, pledges, security interests, or other obligations affecting the assignment or transfer of the certificates and such assignment and transfer will not be subject to any adverse claim. By completing and returning this Transmittal Letter, the undersigned acknowledges and agrees (i) to the creation pursuant to the Merger Agreement of (a) the lockup/escrow arrangement and (b) the special fees and expenses fund and (ii) to the designation of the Shareholders' Agent Committee and its authority to act on the undersigned's behalf in accordance with the Merger Agreement. All authority conferred or agreed to be conferred in this Transmittal Letter shall not be affected by, and shall survive the death or incapacity of the undersigned and any obligation of the undersigned under this Transmittal Letter shall be binding upon successors, assigns, heirs, executors, administrators, and legal representatives of the undersigned. Upon request, the undersigned agrees to execute and deliver any additional documents deemed necessary or desirable by the Exchange Agent to complete the exchange of the certificates. The undersigned agrees that all questions as to validity, form and eligibility of any surrender of the certificates or the Transmittal Letter will be determined by Airgas (which may delegate power in whole or in part to the Exchange Agent) and such determination shall be final and binding. THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS RECEIVED AND READ THE PROSPECTUS/PROXY STATEMENT DATED _________ __, 1997 OF AIRGAS AND CIC 3 RELATING TO THE MERGER. Additional copies of the Prospectus/Proxy Statement may be obtained from Airgas at 259 Radnor-Chester Road, Suite 100, Radner, Pennsylvania 19087-5240 Attention: _________________ or from CIC at 3700 Crestwood Parkway, Suite 200, Duluth, Georgia 30136-5583 Attention: Sandra Fowler Hurt, Assistant Secretary. =============================================================================== SIGN HERE (Please complete Substitute Form W-9) - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Signature(s) of Owner(s) Dated: ------------------------------------------------------------------------ Must be signed by registered holder(s) exactly as names(s) appear(s) on certificate(s). If signature is by an agent, trustee, executor, administrator, guardian, attorney, or others acting in a fiduciary or representative capacity, or by an officer of a corporation on behalf of the corporation, please set forth full title and furnish appropriate supporting evidence. (See General Instructions 2 and 4). Name(s)----------------------------------------------------------------------- ----------------------------------------------------------------------- (Please Print) Capacity (Full Title)--------------------------------------------------------- Address----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- (Including Zip Code) (Area Code and Daytime Telephone Number ( ) --------------------------------------- (Tax Identification or Social Security Number)------------------------------------------------------ (See Substitute Form W-9) MEDALLION SIGNATURE GUARANTEE SIGNATURE(S) GUARANTEED BY: NOTE: Signature Guarantee is required only when Instruction 3 applies. --------------------------------------- --------------------------------------- =============================================================================== 4 ================================================================================ SUBSTITUTE ---------------------------------------------------- FORM W-9 Name Department of the Treasury Internal Revenue Service ---------------------------------------------------- Address (number and street) Request for Taxpayer Identification Number (TIN) and Certification ---------------------------------------------------- City, State and ZIP Code ---------------------------------------------------- Part I - ENTER YOUR Social Security Number or TIN IN THE BOX AT Employer Identification RIGHT Number ==================================================== Part II - FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING (See Instruction 7) ==================================================== CERTIFICATION - Under Penalties of Perjury, I certify that: 1. The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me), and 2. I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service that I am subject to backup withholding as a result of a failure to report all interest and dividends, or (c) the Internal Revenue Service has notified me that I am no longer subject to backup withholding. CERTIFICATION INSTRUCTIONS - You must cross out item 2 if you have been notified by the Internal Revenue Service that you are currently subject to backup withholding because of under-reporting interest or dividends on your tax return. ____________________________ __________________ SIGNATURE DATE ================================================================================ ================================================================================ NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU. 5 ATTACHMENT A This is a continuation of Box A. You do not need to complete this --- unless there was not enough room on Box A to list all of your stock certificates. CONTINUATION OF BOX A: CERTIFICATES SURRENDERED
============================================================================= Name(s) and Address of Registered Holder(s) Certificates Enclosed (Please fill in) - ----------------------------------------------------------------------------- Certificate No. No. of Shares ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ Total Shares ==============================================================================
ATTACHMENT B INSTRUCTIONS FOR COMPLETING --------------------------- NOTICE OF LOST STOCK CERTIFICATE(S) ----------------------------------- IMPORTANT: THE NOTICE ON THE FOLLOWING PAGE SHOULD BE COMPLETED ONLY BY ---- SHAREHOLDERS WITH LOST, STOLEN OR DESTROYED CERTIFICATE(S). IF YOUR CERTIFICATE(S) ARE NOT LOST, STOLEN OR DESTROYED, STOP HERE AND DO NOT -------------------- COMPLETE THIS ATTACHMENT B. -------------------------- If any certificates representing shares of CIC Class A Common Stock that you are submitting with this Transmittal Letter have been lost, stolen or destroyed, you will need to complete the Notice of Lost Stock Certificate(s) ("Notice") on the following page and will need to return the Notice, along with your properly completed Transmittal Letter and any certificate(s) representing shares of CIC Class A Common Stock you are submitting at this time that have not --- been lost, stolen or destroyed, to the Exchange Agent at the address shown on page 1 of the Transmittal Letter. Once the Notice is received by the Exchange Agent, the Exchange Agent will send you an affidavit of loss and indemnity agreement, along with instructions for replacing the lost certificate(s). In order to replace the lost certificate(s) and receive the Merger Consideration, you will be required to pay for an indemnity bond covering the lost certificate(s). The cost of this bond will be based on the value of the shares of CIC Class A Common Stock represented by the lost certificates. THE EXCHANGE AGENT IS NOT AUTHORIZED TO PAY YOU ANY MERGER CONSIDERATION UNTIL YOU HAVE COMPLETED THE PROCEDURE FOR REPLACING LOST CERTIFICATE(S) AND HAVE PAID FOR THE INDEMNITY BOND. If you are able to locate your certificates and send them to the Exchange Agent prior to paying for the indemnity bond, you will not be required to pay for the indemnity bond. If you have any questions, contact the Exchange Agent at (800) ___________. NOTICE OF LOST STOCK CERTIFICATE(S) ----------------------------------- ________________________, 1997 Date TO: The Bank of New York ATTN: _________________________ Dear ___________________: Upon receipt of this Notice of Lost Stock Certificate(s) ("Notice"), please have a stop transfer order placed on my certificate(s) specified below and assist me in obtaining the payment of the Merger Consideration described in the Prospectus/Proxy Statement in exchange for these certificate(s). (PLEASE PRINT OR TYPE ALL INFORMATION.) _________________________ _________________________________________ Shareholder name Social Security or TIN Number _______________________________________________________________________________ Street City State Zip Code Description of lost certificates (attach additional sheets if necessary): Certificate Number of Date Issued Nature of Loss (lost, - ----------- --------- ----------- --------------------- Number Shares stolen, destroyed, etc.) - ------ ------ ------------------------ ______ ______ _________ ________________________ ______ ______ _________ ________________________ ______ ______ _________ ________________________ I understand that upon receipt of this Notice, The Bank of New York as the Exchange Agent, will place (or if prior to the Merger will ask CIC to place) a stop transfer order on the above described certificate(s) and forward the appropriate paperwork to me for obtaining the Merger Consideration described in the Prospectus/Proxy Statement in exchange for these certificate(s). If I should locate the above described certificate(s), I will immediately notify The Bank of New York in writing to release the stop transfer order. If I should locate the certificates after I have returned my affidavit of loss to The Bank of New York, I will send the stock certificate(s) to The Bank of New York for cancellation. ________________________________ Shareholder Signature EX-99.3 10 FORM OF TRANSMITTAL LETTER EXHIBIT 99.3 CARBONIC INDUSTRIES CORPORATION Class B Common Stock INSTRUCTIONS FOR TRANSMITTAL LETTER Accompanying this Form is a Prospectus/Proxy Statement that describes a proposed acquisition of Carbonic Industries Corporation ("CIC") by Airgas, Inc. ("Airgas"). In connection with the proposed Merger of CIC with Airgas' subsidiary, each CIC shareholder will receive cash and shares of Airgas Common Stock in exchange for shares of CIC Class B Common Stock. Please refer to the Prospectus/Proxy Statement for information about the Merger. Each holder of CIC Class B Common Stock will receive cash for 45% of his CIC Class B Common Stock (based on a value of $205.00 per share) and shares of Airgas Common Stock equal in value to the remaining 55% of his CIC Class B Common Stock. Airgas Common Stock received by each holder of CIC Class B Common Stock will be placed in an lockup/escrow account where it will be held for two years, subject to earlier release if certain specified events occur. In addition, 0.25% of the total consideration each CIC shareholder will receive will be placed in a special fees and expenses fund and used to satisfy costs relating to the Merger that arise after the Merger is effective. To the extent the monies in the special fees and expenses fund are not completely used, they will be refunded to each CIC shareholder on a pro rata basis. If the total cash consideration to be received by CIC shareholders (including cash paid to dissenters, if any) exceeds 50% of the total consideration, the percentage of cash each shareholder will receive will be reduced (but not more than two percentage points) in order to reduce the cash consideration to less than 50% of the total consideration. Matters related to the lockup/escrow arrangement and special fees and expenses fund will be handled on behalf of the former CIC shareholders by a Shareholders' Agent Committee after the Merger. Please refer to the Prospectus/Proxy Statement that accompanies this Transmittal Letter for a complete discussion of the purposes of the lockup/escrow arrangement, the special fees and expenses fund and the Shareholders' Agent Committee. To exchange your certificates of CIC Class B Common Stock for cash and Airgas Common Stock, you must complete this form carefully and send it, with the stock certificates for your shares of CIC Class B Common Stock to The Bank of New York (the "Exchange Agent"). Please do not send this to CIC; it must be --- sent to the Exchange Agent. If you send in your stock certificates now, it will not limit your right to --- vote your shares of CIC Common Stock. If the Merger is not approved by the shareholders or is not completed for any other reason, your CIC stock certificates will be returned to you. Please read the following Instructions carefully before completing this Transmittal Letter. CASH AND NON-CASH SHARES A. EXCHANGE OF CERTIFICATES FOR CASH AND AIRGAS COMMON STOCK Certificates for shares of CIC Class B Common Stock must be submitted to the Exchange Agent with the attached Transmittal Letter in order to be converted into cash or shares of Airgas Common Stock. As noted above, the Airgas shares to be received by each CIC shareholder will be placed into an escrow account where they will be held for a period of two years, subject to earlier release if certain specified events occur. B. PRORATION If the cash to be received by holders of CIC Class B Common Stock, together with the cash elections submitted by all holders of CIC Class A Common Stock (and cash paid to dissenting shareholders, if any), exceeds 50% of the value of the total consideration Airgas is paying to acquire CIC, the Exchange Agent will eliminate from the number of shares of CIC Class B Common Stock as to which cash is to be received and the number of shares of CIC Class A Common Stock subject to cash elections (pro-rata as nearly as practicable) the number of shares necessary to reduce the cash portion of the Merger consideration to less than 50% of the overall Merger consideration. No shareholder's cash portion will be reduced more than two percentage points (i.e., from 45% to 43%). ---- C. TERMINATION All instructions in the Transmittal Letter will be void and of no effect if the Merger is not consummated. If the Merger Agreement is terminated, the CIC stock certificates you submitted to the Exchange Agent will be promptly returned. Record holders of shares of CIC Class B Common Stock on deposit with the Exchange Agent will remain shareholders of record of CIC with respect to such shares until the effective time of the Merger. D. NO FRACTIONAL SHARES OF AIRGAS COMMON STOCK No fractional shares of Airgas Common Stock will be issued. The total number of shares of Airgas Common Stock to be issued to each holder of shares of CIC Class B Common Stock who would otherwise be entitled to receive a fractional share of such Common Stock will be rounded up to the nearest whole share. GENERAL INSTRUCTIONS 1. General The Transmittal Letter should be properly filled in, dated and signed, and should be delivered (together with your stock certificates representing shares of CIC Class B Common Stock) to the Exchange Agent at the address set forth in the Transmittal Letter. THE METHOD OF DELIVERY OF ALL DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR OPTION AND RISK, BUT IF SENT BY MAIL, CERTIFIED OR REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. AN ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. THESE DOCUMENTS MUST BE SENT DIRECTLY TO THE EXCHANGE AGENT AND NOT TO CIC. --- (ii) 2. Signatures The signature (or signatures, in the case of certificates owned by two or more joint holders) on the Transmittal Letter must correspond exactly to the name as written on the face of the stock certificate(s) sent to the Exchange Agent. If there is insufficient space to list all of your stock certificates being submitted to the Exchange Agent or to respond to any other information, please use Attachment A or attach a separate sheet. Unless you are making a correction to the name on a certificate (see Instruction 3), do not endorse your certificates. If shares of CIC Class B Common Stock are registered in different names on several certificates, it will be necessary to complete, sign and submit a separate Transmittal Letter for each different registration of certificates. For example, if some certificates are registered solely in your name, some are registered solely in your spouse's name and some are registered jointly in the name of you and your spouse, three separate Transmittal Letters should be submitted. Additional copies of the Transmittal Letter may be obtained from the Exchange Agent. 3. Correction of or Change in Name. For a correction in name, the surrendered certificate(s) should be appropriately endorsed, for example, "James E. Brown, incorrectly inscribed as James S. Brown," with the signature guaranteed by a financial institution, (bank) or brokerage firm having membership in good - --------- ----------- ------ -- ---------- ---- standing in a recognized guarantee program (Securities Transfer Agent Medallion Program, New York Stock Exchange Medallion Signature Program or Stock Exchange Medallion Program (a "Qualified Guarantor")). For a change in name by marriage, etc., the surrendered certificate(s) should be appropriately endorsed, for example, "Mary Doe, now by marriage Mrs. Mary Jones," with the signature guaranteed by a Qualified Guarantor. Notaries Public cannot execute acceptable signature guaranties. 4. Supporting Evidence If the Transmittal Letter, certificate or endorsement is executed by an agent, trustee, executor, administrator, guardian, attorney, or any other person acting in a representative or fiduciary capacity, or by an officer of a corporation on behalf of the corporation, such person should so indicate when signing and must submit with the Transmittal Letter or surrendered certificate(s) documentary evidence of appointment and authority to act in such capacity (including court orders and corporate resolutions when necessary) as well as evidence of the authority of the person making such execution to assign, sell or transfer the shares. Such documentary evidence of authority must be in a form satisfactory to the Exchange Agent. If you have any questions as to what constitutes appropriate documentary evidence of authority, please contact the Exchange Agent at (800) ______________. 5. Validity of Surrender of Certificates and Transmittal Letters A surrender of certificate(s) will not be deemed to have been made and the Transmittal Letter will not be deemed to be complete until all irregularities (including attempts to change the text of the Transmittal Letter) and defects have been cured or waived. All questions as to validity, form and eligibility of any surrender of the certificate(s) or the Transmittal Letter will be determined by Airgas (which may delegate power in whole or in part to the Exchange Agent), and such determination will be final and binding. 6. Federal Tax Withholding Under federal income tax law, the Exchange Agent is required to file a report with the Internal Revenue Service ("IRS") disclosing the payments being made to you as an exchanging shareholder. Federal law also requires each shareholder to provide the Exchange Agent with a correct Taxpayer Identification Number ("TIN") on a Substitute Form W-9 set forth in the Transmittal Letter. If the Exchange Agent is not provided with the correct TIN, you may be subject to a $50 penalty by the IRS and payments that are made to you with respect to surrendered shares may be subject to backup withholding. If you are an individual, your TIN is your social security number. Your TIN number should be included in Part I of the substitute W-9 form provided in the Transmittal Letter. If you are exempt from backup withholding, you should complete the substitute W-9 to avoid possible erroneous backup withholding. Enter your correct TIN in Part I, write "EXEMPT" in the block in Part II, and sign and date the form. (iii) If backup withholding applies, the Exchange Agent is required to withhold 31% of any payments to be made to you. Backup withholding is not an additional tax. Rather, the amount of tax withheld will be applied as a credit against the tax liability of persons subject to backup withholding. If withholding results in an overpayment of taxes, a refund may be obtained by filing a tax return with the IRS. The Exchange Agent cannot refund amounts withheld by reason of backup withholding. Certain shareholders, such as corporations, are exempt from backup withholding and should so indicate by writing "exempt" on the substitute W-9 in the Transmittal Letter. To complete the form if you do not have a TIN, write "Applied for" in the space for the TIN in Part I and sign and date the form. Generally, you will then have 60 days to obtain a TIN and furnish it to the Exchange Agent. If the Exchange Agent does not receive your TIN within 60 days, backup withholding, if applicable, will begin and continue until you furnish your TIN to the Exchange Agent. 7. Lost Stock Certificates If you are unable to locate your certificates representing shares of CIC Class B Common Stock, you should follow the "Instructions for Completing Notice of Lost Stock Certificate(s)" on Attachment B to the Transmittal Letter. 8. Special Delivery Instructions Indicate the name and address to which the check for your cash payment should be sent in Box C if different from the address set forth in Box A. You may elect to receive your cash payment by wire transfer of same day funds by completing the Special Delivery Instructions relating to wire transfers in Box C. 9. Miscellaneous As soon as practicable after the Effective Time, the Exchange Agent will begin mailing and delivering checks and stock certificates for Airgas Common Stock in exchange for stock certificates representing shares of CIC Class B Common Stock that have been received by the Exchange Agent. There will be a delay, however, if you are unable to locate your shares or if you do not deliver them to the Exchange Agent with the Transmittal Letter. No holder of any surrendered certificate for shares of CIC Class B Common Stock will be entitled under any circumstances to receive any interest on consideration to be received in the Merger. For further information or assistance concerning the Transmittal Letter, contact The Bank of New York at (800) ___________. (iv) Class B Transmittal Letter To accompany certificates representing common stock of Carbonic Industries Corporation when submitted in connection with the merger of Carbonic Industries Corporation with and into Airgas Carbonic Industries, Inc., a wholly-owned subsidiary of Airgas, Inc. This Transmittal Letter properly completed and signed in accordance with the instructions provided with this Transmittal Letter, together with the certificates for the shares of the Class B Common Stock of Carbonic Industries Corporation ("CIC") covered by this Transmittal Letter, must be received by The Bank of New York (the "Exchange Agent") at the address set forth below: The Bank of New York 101 Barclay Street New York, New York 10286 Ladies and Gentlemen: Enclosed are the following certificates representing the Class B Common Stock, no par value, of CIC ("CIC Class B Common Stock"), which are surrendered for payment pursuant to the Agreement and Plan of Merger ("Merger Agreement") by and among Airgas, Inc., a Delaware corporation ("Airgas"), Airgas Carbonic Industries, Inc., a wholly-owned subsidiary of Airgas ("SubCorp"), and CIC, a Florida corporation, dated as of March 12, 1997, pursuant to which CIC will become a wholly-owned subsidiary of Airgas through a merger of CIC with and into SubCorp. BOX A: CERTIFICATES SURRENDERED (Please list in Box A all the certificates --- representing CIC Class B Common Stock you are submitting. (If there is not enough space below to list all of your certificates, see Attachment A.) A separate Transmittal Letter should be submitted for shares registered in different names.
============================================================================= Name(s) and Address of Registered Holder(s) Certificates Enclosed (Please fill in or make corrections needed if label is affixed) - ----------------------------------------------------------------------------- Certificate No. No. of Shares ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ Total Shares ==============================
Except as otherwise requested in the "Special Delivery Instructions" below, the undersigned requests that the check for the cash payment to which the undersigned is entitled be delivered to the registered holder(s) set forth in Box A above at the address set forth in Box A above. The certificates for the shares of Airgas Common Stock to which the undersigned is entitled will be delivered to the Lockup/Escrow Agent pursuant to the Merger Agreement and the Lockup/Escrow Agreement. 1 BOX B--SPECIAL DELIVERY INSTRUCTIONS =========================================================== Fill in ONLY if (i) delivery of the check is to be sent to an address OTHER than the address appearing in Box A above or (ii) the undersigned elects to receive a wire transfer. ___________________________________________ Mail or deliver to: Name_____________________________________ (Please Print) Address __________________________________ _________________________________________ (Zip Code) Wire Instructions: Name of Account:__________________________ Account No. ______________________________ Name of Bank: ____________________________ ABA Routing No. _________________________ Name and telephone number of contact person at Receiving Bank ___________________________ =========================================================== The undersigned represents and warrants (and if more than one, each undersigned represents and warrants jointly and severally) that the undersigned has full power and authority to surrender the certificates listed in Box A and (if applicable) Attachment A and has good title to such certificates, free and clear of all liens, restrictions, charges, encumbrances, pledges, security interests, or other obligations affecting the assignment or transfer of the certificates and such assignment and transfer will not be subject to any adverse claim. By completing and returning this Transmittal Letter, the undersigned acknowledges and agrees (i) to the creation pursuant to the Merger Agreement of (a) the lockup/escrow arrangement and (b) the special fees and expenses fund and (ii) to the designation of the Shareholders' Agent Committee and its authority to act on the undersigned's behalf in accordance with the Merger Agreement. All authority conferred or agreed to be conferred in this Transmittal Letter shall not be affected by, and shall survive the death or incapacity of the undersigned and any obligation of the undersigned under this Transmittal Letter shall be binding upon successors, assigns, heirs, executors, administrators, and legal representatives of the undersigned. Upon request, the undersigned agrees to execute and deliver any additional documents deemed necessary or desirable by the Exchange Agent to complete the exchange of the certificates. The undersigned agrees that all questions as to validity, form and eligibility of any surrender of the certificates or the Transmittal Letter will be determined by Airgas (which may delegate power in whole or in part to the Exchange Agent) and such determination shall be final and binding. THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS RECEIVED AND READ THE PROSPECTUS/PROXY STATEMENT DATED ___________ __, 1997 OF AIRGAS AND CIC RELATING TO THE MERGER. Additional copies of the Prospectus/Proxy Statement may 2 be obtained from Airgas at 259 Radnor-Chester Road, Suite 100, Radner, Pennsylvania 19087-5240 Attention: __________ or from CIC at 3700 Crestwood Parkway, Suite 200, Duluth, Georgia 30136-5583 Attention: Sandra Fowler Hurt, Assistant Secretary. ================================================================================ SIGN HERE (Please complete Substitute Form W-9) _______________________________________________________________________________ _______________________________________________________________________________ Signature(s) of Owner(s) Dated:_________________________________________________________________________ Must be signed by registered holder(s) exactly as names(s) appear(s) on certificate(s). If signature is by an agent, trustee, executor, administrator, guardian, attorney, or others acting in a fiduciary or representative capacity, or by an officer of a corporation on behalf of the corporation, please set forth full title and furnish appropriate supporting evidence. (See General Instructions 2 and 4). Name(s)________________________________________________________________________ ________________________________________________________________________ (Please Print) Capacity (Full Title) __________________________________________________________ Address________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ (Including Zip Code) (Area Code and Daytime Telephone Number (___)__________________________________ (Tax Identification or Social Security Number)________________________________________________________ (See Substitute Form W-9) MEDALLION SIGNATURE GUARANTEE SIGNATURE(S) GUARANTEED BY: NOTE: Signature Guarantee is required only when Instruction 3 applies. ---------------------------------------------------- ---------------------------------------------------- ================================================================================ 3 ================================================================================ SUBSTITUTE -------------------------------------------------- FORM W-9 Name Department of the Treasury Internal Revenue Service -------------------------------------------------- Address (number and street) Request for Taxpayer Identification Number (TIN) and Certification -------------------------------------------------- City, State and ZIP Code -------------------------------------------------- Part I - ENTER YOUR Social Security Number or TIN IN THE BOX AT Employer Identification RIGHT Number -------------------------------------------------- Part II - FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING (See Instruction 7) -------------------------------------------------- CERTIFICATION - Under Penalties of Perjury, I certify that: 1. The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me), and 2. I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service that I am subject to backup withholding as a result of a failure to report all interest and dividends, or (c) the Internal Revenue Service has notified me that I am no longer subject to backup withholding. CERTIFICATION INSTRUCTIONS - You must cross out item 2 if you have been notified by the Internal Revenue Service that you are currently subject to backup withholding because of under-reporting interest or dividends on your tax return. _________________________ __________________ SIGNATURE DATE ================================================================================ ================================================================================ NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU. 4 ATTACHMENT A This is a continuation of Box A. You do not need to complete this --- unless there was not enough room on Box A to list all of your stock certificates.
CONTINUATION OF BOX A: CERTIFICATES SURRENDERED ================================================================================ Name(s) and Address of Registered Holder(s) Certificates Enclosed (Please fill in) - -------------------------------------------------------------------------------- Certificate No. No. of Shares -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- -------------------------------- Total Shares -------------------------------- ================================================================================
ATTACHMENT B INSTRUCTIONS FOR COMPLETING --------------------------- NOTICE OF LOST STOCK CERTIFICATE(S) ----------------------------------- IMPORTANT: THE NOTICE ON THE FOLLOWING PAGE SHOULD BE COMPLETED ONLY ---- BY SHAREHOLDERS WITH LOST, STOLEN OR DESTROYED CERTIFICATE(S). IF YOUR CERTIFICATE(S) ARE NOT LOST, STOLEN OR DESTROYED, STOP HERE AND ------------- DO NOT COMPLETE THIS ATTACHMENT B. --------------------------------- If any certificates representing shares of CIC Class B Common Stock that you are submitting with this Transmittal Letter have been lost, stolen or destroyed, you will need to complete the Notice of Lost Stock Certificate(s) ("Notice") on the following page and will need to return the Notice, along with your properly completed Transmittal Letter and any certificate(s) representing shares of CIC Class B Common Stock you are submitting at this time that have not --- been lost, stolen or destroyed, to the Exchange Agent at the address shown on page 1 of the Transmittal Letter. Once the Notice is received by the Exchange Agent, the Exchange Agent will send you an affidavit of loss and indemnity agreement, along with instructions for replacing the lost certificate(s). In order to replace the lost certificate(s) and receive the Merger Consideration, you will be required to pay for an indemnity bond covering the lost certificate(s). The cost of this bond will be based on the value of the shares of CIC Class B Common Stock represented by the lost certificates. THE EXCHANGE AGENT IS NOT AUTHORIZED TO PAY YOU ANY MERGER CONSIDERATION UNTIL YOU HAVE COMPLETED THE PROCEDURE FOR REPLACING LOST CERTIFICATE(S) AND HAVE PAID FOR THE INDEMNITY BOND. If you are able to locate your certificates and send them to the Exchange Agent prior to paying for the indemnity bond, you will not be required to pay for the indemnity bond. If you have any questions, contact the Exchange Agent at (800) ___________. NOTICE OF LOST STOCK CERTIFICATE(S) ----------------------------------- , 1997 ------------------------ Date TO: The Bank of New York ATTN: ________________________ Dear _____________: Upon receipt of this Notice of Lost Stock Certificate(s) ("Notice"), please have a stop transfer order placed on my certificate(s) specified below and assist me in obtaining the payment of the Merger Consideration described in the Prospectus/Proxy Statement in exchange for these certificate(s). (PLEASE PRINT OR TYPE ALL INFORMATION.) - ----------------------------- --------------------------------------- Shareholder name Social Security or TIN Number - ------------------------------------------------------------------------------ Street City State Zip Code Description of lost certificates (attach additional sheets if necessary):
Certificate Number of Date Issued Nature of Loss (lost, stolen, destroyed, etc.) - ------------ --------- ----------- --------------------------------------------- Number Shares - ------ ------ - ------- ------- ------- --------------------------------------------- - ------- ------- ------- --------------------------------------------- - ------- ------- ------- ---------------------------------------------
I understand that upon receipt of this Notice, The Bank of New York as the Exchange Agent, will place (or if prior to the Merger will ask CIC to place) a stop transfer order on the above described certificate(s) and forward the appropriate paperwork to me for obtaining the Merger Consideration described in the Prospectus/Proxy Statement in exchange for these certificate(s). If I should locate the above described certificate(s), I will immediately notify The Bank of New York in writing to release the stop transfer order. If I should locate the certificates after I have returned my affidavit of loss to The Bank of New York, I will send the stock certificate(s) to The Bank of New York for cancellation. - --------------------------------------------- Shareholder Signature EX-99.4 11 TRANSMITTAL LETTER EXHIBIT 99.4 [FORM OF TRANSMITTAL LETTER FOR CONTINUITY OF INTEREST CERTIFICATE] [CIC LETTERHEAD] [DATE] Dear Shareholders of Carbonic Industries Corporation: Among the materials accompanying this letter is a "Continuity of Interest Certificate" relating to the proposed acquisition of Carbonic Industries Corporation ("CIC") by Airgas, Inc. ("Airgas") (the "Merger"). To the extent your CIC shares are exchanged for Airgas shares in the Merger, the transaction is intended to be "tax-free" for federal income tax purposes. To qualify for this tax-free treatment, however, it is important for us to know that you do not currently intend to sell your Lockup Shares (as --------- defined below) and that you will not have changed your mind before the Merger takes place. "Lockup Shares" are the shares of Airgas common stock that will be held in the lockup/escrow fund as described in the Prospectus and Proxy Statement that accompanies this letter. It is also helpful to know your intentions with respect to other shares of Airgas common stock you may own. To record your intentions, you should complete the Continuity of Interest Certificate, sign and date it, and return it in the envelope provided. For your intentions to be properly understood, it is necessary that you complete the certificate in its entirety. If we do not receive these fully completed ------------------------------------------ certificates from substantially all of the CIC shareholders, the Merger may not - ------------------------------------------------------------------------------- go forward. - ---------- The Merger, the anticipated tax treatment of the Merger and the Continuity of Interest Certificate are discussed in greater detail in the Prospectus and Proxy Statement that accompany this letter and its attachment. We strongly urge you to read the Prospectus and Proxy Statement carefully before making any decisions regarding the Merger and to consult with your legal and financial counsel to the extent you deem appropriate. If you have any questions regarding the Continuity of Interest Certificate, please contact ____________ at ______________. Sincerely, J. Vernon Hinely Chairman of the Board and President -----END PRIVACY-ENHANCED MESSAGE-----