<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1999
Commission file number: 1-9344
AIRGAS, INC.
(Exact name of registrant as specified in its charter)
Delaware 56-0732648
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
259 North Radnor-Chester Road, Suite 100
Radnor, PA 19087-5283
(Address of principal executive offices) (ZIP code)
(610) 687-5253
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Common Stock outstanding at November 5, 1999: 70,209,648 shares
<PAGE> 2
AIRGAS, INC.
FORM 10-Q
September 30, 1999
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Earnings
for the Three and Six Months Ended September 30, 1999 and 1998 (Unaudited)...3
Consolidated Balance Sheets
as of September 30, 1999 (Unaudited) and March 31, 1999......................4
Consolidated Statements of Cash Flows
for the Six Months Ended September 30, 1999 and 1998 (Unaudited).............5
Notes to Consolidated Financial Statements (Unaudited).......................6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...............................................13
Item 3. Quantitative and Qualitative Disclosures About Market Risk..........26
PART II - OTHER INFORMATION
Item 1. Legal Proceedings...................................................29
Item 4. Submission of Matters to a Vote of Security Holders.................29
Item 5. Other Information...................................................30
Item 6. Exhibits and Reports on Form 8-K....................................31
SIGNATURES...................................................................32
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales
Distribution $ 346,973 $ 354,208 $ 692,940 $ 714,761
Gas Operations 40,316 42,384 73,842 82,604
Total net sales 387,289 396,592 766,782 797,365
Costs and expenses
Cost of products sold (excluding
depreciation and amortization)
Distribution 186,647 192,789 375,079 390,140
Gas Operations 16,200 17,755 29,035 37,507
Selling, distribution and
administrative expenses 129,185 132,509 256,146 262,153
Depreciation and amortization 22,953 21,748 45,119 43,345
Special charge - - - (1,000)
Total costs and expenses 354,985 364,801 705,379 732,145
Operating income
Distribution 26,408 26,072 52,668 54,612
Gas Operations 5,896 5,719 8,735 9,608
Special charge - - - 1,000
Total operating income 32,304 31,791 61,403 65,220
Interest expense, net (14,435) (15,720) (28,218) (30,526)
Other income, net 15,183 709 15,405 831
Equity in earnings of unconsolidated affiliates 725 1,222 1,725 1,976
Earnings before income taxes and the
cumulative effect of an accounting change 33,777 18,002 50,315 37,501
Income tax expense 14,865 7,522 21,728 15,746
Earnings before the cumulative effect of
an accounting change 18,912 10,480 28,587 21,755
Cumulative effect of an accounting change,
net of taxes -- -- (590) --
Net earnings $ 18,912 $ 10,480 $ 27,997 $ 21,755
Basic earnings per share:
Earnings per share before the cumulative
effect of an accounting change $ .27 $ .15 $ .41 $ .31
Cumulative effect per share of an
accounting change -- -- (.01) --
Net earnings per share $ .27 $ .15 $ .40 $ .31
Diluted earnings per share:
Earnings per share before the cumulative
effect of an accounting change $ .27 $ .15 $ .40 $ .30
Cumulative effect per share of an
accounting change -- -- (.01) --
Net earnings per share $ .27 $ .15 $ .39 $ .30
Weighted average shares outstanding:
Basic 69,700 70,000 69,800 70,100
Diluted 71,200 71,700 71,200 71,800
Comprehensive income $ 18,965 $ 10,329 $ 28,199 $ 21,619
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 4
<TABLE>
AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
<CAPTION>
(Unaudited)
September 30, March 31,
1999 1999
<S> <C> <C>
ASSETS
Current Assets
Trade receivables, less allowances for
doubtful accounts of $6,483 at September 30,
1999 and $6,092 at March 31, 1999 $ 199,796 $ 195,708
Inventories, net 157,418 154,424
Deferred income tax asset, net 7,783 7,549
Prepaid expenses and other current assets 21,326 21,161
Total current assets 386,323 378,842
Plant and equipment, at cost 1,034,201 993,496
Less accumulated depreciation (304,390) (275,637)
Plant and equipment, net 729,811 717,859
Goodwill, net of accumulated amortization of
$61,659 at September 30, 1999 and $54,986 at
March 31, 1999 427,846 428,349
Other non-current assets 136,309 173,422
Total assets $1,680,289 $1,698,472
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable, trade $ 71,698 $ 85,486
Accrued expenses and other current liabilities 106,454 108,295
Current portion of long-term debt 8,875 19,645
Total current liabilities 187,027 213,426
Long-term debt 835,015 847,841
Deferred income taxes 148,586 142,675
Other non-current liabilities 20,366 23,585
Commitments and contingencies -- --
Stockholders' Equity
Preferred stock, no par, 20,000 shares
authorized, no shares issued or outstanding at
September 30, 1999 and March 31, 1999 -- --
Common stock, par value $.01 per share,
200,000 shares authorized, 72,615 and
72,024 shares issued at September 30, 1999
and March 31, 1999, respectively 726 720
Capital in excess of par value 194,892 190,175
Retained earnings 317,087 289,090
Accumulated other comprehensive loss (708) (910)
Treasury stock, 671 and 130 common shares at
cost at September 30, 1999 and March 31, 1999,
respectively (8,368) (1,129)
Employee benefits trust, 1,451 and 826 common
shares at cost at September 30, 1999 and March 31,
1999, respectively (14,334) (7,001)
Total stockholders' equity 489,295 470,945
Total liabilities and stockholders' equity $1,680,289 $1,698,472
See accompanying notes to consolidated financial statements.
<PAGE> 5
</TABLE>
<TABLE>
AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<CAPTION>
Six Months Ended Six Months Ended
September 30, 1999 September 30, 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 27,997 $ 21,755
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 45,119 43,345
Deferred income taxes 6,750 5,511
Equity in earnings of unconsolidated affiliates (1,725) (2,563)
Gain on divestiture (14,369) --
(Gain) loss on sales of plant and equipment 7 (292)
Minority interest in earnings (51) 39
Stock issued for employee benefit plans 2,707 3,109
Other non-cash charges 1,027 (1,000)
Changes in assets and liabilities, excluding
effects of business acquisitions and divestitures:
Trade receivables, net (1,618) (16,308)
Inventories, net (697) (10,758)
Prepaid expenses and other current assets (139) 756
Accounts payable, net (14,274) (1,865)
Accrued expenses and other current liabilities 3,792 (986)
Other assets and liabilities, net (3,302) (8,526)
Net cash provided by operating activities 51,224 32,217
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (30,841) (56,528)
Proceeds from sale of plant and equipment 955 1,152
Proceeds from divestitures 46,596 10,463
Business acquisitions, net of cash acquired (23,377) (42,307)
Business acquisitions, holdback settlements (830) (1,564)
Investment in unconsolidated affiliates (30) (139)
Dividends from unconsolidated affiliates 1,897 1,697
Other, net (358) 4,831
Net cash used by investing activities (5,988) (82,395)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 77,985 258,505
Repayment of debt (102,461) (182,733)
Purchase of treasury stock (15,345) (13,982)
Exercise of stock options 904 356
Cash overdraft (6,319) (11,968)
Net cash provided (used) by fiancing activities (45,236) 50,178
Cash Increase (Decrease) $ -- $ --
Cash - beginning of period -- --
Cash - end of period $ -- $ --
Cash paid during the period for:
Interest $ 29,067 $ 31,292
Income taxes (net of refunds) $ 5,427 $ 3,000
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 6
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Airgas, Inc.
and its subsidiaries (the "Company"). Unconsolidated affiliates are
accounted for on the equity method and generally consist of 20 - 50% owned
operations where control does not exist or is considered temporary. The
excess of the cost of these affiliates over the Company's share of their
net assets at the acquisition date is being amortized over 20 to 40 years.
Intercompany accounts and transactions are eliminated in consolidation.
The accompanying consolidated financial statements have been prepared
in accordance with generally accepted accounting principles. These
statements do not include all disclosures required for annual financial
statements. These financial statements should be read in conjunction with
the more complete disclosures contained in the Company's audited
consolidated financial statements for the fiscal year ended March 31, 1999.
The financial statements reflect, in the opinion of management, all
adjustments necessary to present fairly the Company's financial position,
results of operations and cash flows for the periods presented. Such
adjustments are of a normal, recurring nature except for the impact of
acquisitions, divestitures and the accounting change which are discussed in
the notes to the accompanying financial statements. The interim operating
results are not necessarily indicative of the results to be expected for an
entire year.
Certain reclassifications have been made to previously issued financial
statements to conform to the current presentation.
(2) ACCOUNTING CHANGE
The Company adopted Statement of Position 98-5 "Reporting on the Costs of
Start-up Activities" ("SOP 98-5"), as required, in the first quarter of
fiscal year 2000 resulting in a charge to net earnings of $590 thousand, or
$.01 per diluted share. In accordance with SOP 98-5, the charge has been
reflected on a separate line entitled "Cumulative effect of an accounting
change, net of taxes", on the consolidated statement of earnings. The
charge primarily resulted from the write-off of start-up costs capitalized
in connection with the Company's two air separation units constructed
during fiscal 1998 and 1999.
(3) ACQUISITIONS AND DIVESTITURES
During the quarter ended September 30, 1999, the Company acquired three
distributors of industrial gas and related equipment with aggregate sales
of approximately $24 million.
On August 4, 1999, the Company completed its previously announced
divestiture of its operations in Poland and Thailand to Linde AG. The
divestiture resulted in a non-recurring gain of $14.4 million ($7.6 million
after-tax, or $.11 per diluted share) which was recognized in "other
income, net." Cash proceeds from the sale were $46.2 million ($38.4
million after taxes and closing costs). The operations in Poland and
Thailand had combined sales and operating losses in fiscal 2000 as follows:
Three Months Ended Six Months Ended
(In thousands) September 30, 1999 September 30, 1999
Sales $7,141 $12,724
Operating loss $ (29) $ (550)
<PAGE> 7
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The Company divested two non-core businesses during the quarter ended June
30, 1998. Consideration for the divestitures included the assumption of
certain liabilities and cash proceeds of approximately $10.5 million.
Divestiture reserves, established during the fourth quarter of fiscal 1998,
were adjusted by $1 million ($575 thousand after-tax) to reflect
differences between the original loss estimates and the actual loss on the
divestitures. The divested non-core businesses had combined sales and
operating income for the three months ended June 1998 of $4.6 million and
$121 thousand, respectively.
(4) EARNINGS PER SHARE
Basic earnings per share is calculated by dividing net earnings by the
weighted average number of shares of the Company's Common Stock outstanding
during the period. Diluted earnings per share is calculated by adjusting
the weighted average common shares outstanding for the dilutive effect of
common stock equivalents related to stock options and contingently issuable
shares.
The table below reconciles basic weighted average common shares
outstanding to diluted weighted average common shares outstanding for the
three and six months ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
(In thousands) 1999 1998 1999 1998
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding:
Basic 69,700 70,000 69,800 70,100
Stock options 1,300 1,600 1,200 1,600
Contingently issuable shares 200 100 200 100
Diluted 71,200 71,700 71,200 71,800
</TABLE>
(5) INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
(Unaudited)
September 30, March 31,
(In thousands) 1999 1999
<S> <C> <C>
Finished goods FIFO $ 132,039 $ 129,501
Finished goods LIFO 25,999 25,652
Raw materials 935 853
LIFO reserve (1,555) (1,582)
$ 157,418 $ 154,424
</TABLE>
<PAGE> 8
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(6) OTHER NON-CURRENT ASSETS
Other non-current assets include:
<TABLE>
<CAPTION>
(Unaudited)
September 30, March 31,
(In thousands) 1999 1999
<S> <C> <C>
Investments in unconsolidated
affiliates $ 73,848 $ 100,834
Non-compete agreements and other
intangible assets, at cost, net
of accumulated amortization of
$91.6 million at September 30,
1999 and $85.5 million at
March 31, 1999 51,922 55,894
Other assets 10,539 16,694
$ 136,309 $ 173,422
</TABLE>
The decrease in investments in unconsolidated affiliates is primarily due
to the divestiture of operations in Poland and Thailand.
(7) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities include:
<TABLE>
<CAPTION>
(Unaudited)
September 30, March 31,
(In thousands) 1999 1999
<S> <C> <C>
Cash overdraft $ 10,640 $ 16,959
Restructuring reserves 4,723 5,087
Insurance payable and
related reserves 10,474 9,584
Customer cylinder deposits 8,117 8,233
Accrued interest 12,208 12,331
Other accrued expenses and
current liabilities 60,292 56,101
$ 106,454 $ 108,295
</TABLE>
The cash overdraft is attributable to the float of the Company's
outstanding checks.
Restructuring reserves primarily relate to pending divestitures.
(8) LEASE TRANSACTION
In October 1999, the Company renewed a lease of real estate with a trust
established by a commercial bank. The original operating lease was amended
to include the sale leaseback of certain equipment. The appraised value of
the real estate and equipment under the lease totaled approximately $46
million. The lease has a five-year term and has been accounted for as an
operating lease. The Company has guaranteed a residual value of the real
estate and the equipment at the end of the lease term of approximately $31
million. A gain of approximately $12 million on the equipment portion of
the transaction has been deferred until the expiration of the Company's
guarantee of the residual value. Cash proceeds received from the
transaction were used to repay debt outstanding under the Company's
revolving credit facility.
<PAGE> 9
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(9) STOCKHOLDERS' EQUITY
Changes in stockholders' equity were as follows:
<TABLE>
<CAPTION>
Employee
Shares of Common Treasury Benefits
(In thousands of shares) Stock $.01 Par Value Stock Trust
<S> <C> <C> <C>
Balance-April 1, 1999 72,024 130 826
Common Stock issuance (a) 591 -- --
Purchase of treasury stock -- 1,214 --
Reissuance of treasury stock (b) -- (48) --
Sale of treasury stock to Trust (c) -- (625) 625
Balance-September 30, 1999 72,615 671 1,451
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Capital in Other Employee Compre-
Common Excess of Retained Comprehensive Treasury Benefits hensive
(In thousands of dollars) Stock Par Value Earnings Loss Stock Trust Income
<S> <C> <C> <C> <C> <C> <C> <C>
Balance-April 1, 1999 $720 $190,175 $289,090 $ (910) $ (1,129) $(7,001) $ --
Net earnings -- -- 27,997 -- -- -- 27,997
Common Stock issuance (a) 6 3,473 -- -- -- -- --
Foreign currency
translation adjustments -- -- -- 202 -- -- 202
Purchase of treasury stock -- -- -- -- (14,317) -- --
Reissuance of
treasury stock (b) -- (247) -- -- 424 -- --
Sale of treasury
stock to Trust (c) -- 679 -- -- 6,654 (7,333) --
Tax benefit from stock
options exercises -- 812 -- -- -- -- --
Balance-September 30, 1999 $726 $194,892 $317,087 $ (708) $ (8,368) $(14,334) $28,199
(a) Issuance of Common Stock for stock option exercises and for the Company's Employee Stock Purchase Plan.
(b) Reissuance of Common Stock in connection with stock option exercises.
(c) Sale of Common Stock from treasury to the Employee Benefits Trust.
</TABLE>
On October 12, 1999, the Employee Benefits Trust purchased 671 thousand
shares of Common Stock from the Company at fair market value.
<PAGE> 10
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(10) COMMITMENTS AND CONTINGENCIES
(a) Litigation
In July 1996, Praxair, Inc. ("Praxair") filed suit against the Company in
the Circuit Court of Mobile County, Alabama. The complaint alleged tortious
interference with business or contractual relations with respect to
Praxair's Right of First Refusal contract with the majority shareholders of
National Welders Supply Company, Inc. ("National Welders") by the Company
in connection with the Company's formation of a joint venture with National
Welders. In June 1998, Praxair filed a motion to dismiss its own action in
Alabama and commenced another action in the Superior Court of Mecklenburg
County, North Carolina, alleging substantially the same tortious
interference by the Company. The North Carolina action also alleges breach
of contract against National Welders and certain shareholders of National
Welders and unfair trade practices and conspiracy against all the
defendants. In the North Carolina action Praxair seeks compensatory
damages in excess of $10 thousand, punitive damages and other unspecified
relief. The Company believes that Praxair's North Carolina claims are
without merit and intends to defend vigorously against such claims.
The Company is involved in various legal and regulatory proceedings
that have arisen in the ordinary course of its business and have not been
finally adjudicated. These actions, when ultimately concluded and
determined, will not, in the opinion of management, have a material adverse
effect upon the Company's consolidated financial condition, results of
operations or liquidity.
(b) Insurance Coverage
The Company has established insurance programs to cover workers'
compensation, business automobile, general and product liability. These
programs have self-insured retentions of $500,000 per occurrence. Losses
are accrued based upon the Company's estimates, developed with third party
insurance adjusters, of the aggregate liability for claims incurred, claims
incurred but not reported and on Company experience. The Company has
established insurance reserves that management believes are adequate.
The nature of the Company's business may subject it to product and
general liability lawsuits. To the extent that the Company is subject to
claims that exceed its liability insurance coverage of $100 million, such
suits could have a material adverse effect on the Company's financial
position, results of operations or liquidity.
<PAGE> 11
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(11) SUMMARY BY BUSINESS SEGMENT
Information related to the Company's operations by business segment for
the three months ended September 30, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1999 September 30, 1998
(In thousands) Gas Gas
Distribution Operations Combined Distribution Operations Combined
<S> <C> <C> <C> <C> <C> <C>
Gas and rent $ 145,314 $ 39,369 $ 184,683 $ 143,223 $ 34,759 $ 177,982
Hardgoods 201,659 947 202,606 210,985 484 211,469
Other (1) -- -- -- -- 7,141 7,141
Total net sales 346,973 40,316 387,289 354,208 42,384 396,592
Intersegment sales -- 7,726 7,726 -- 7,594 7,594
Gross profit 160,326 24,116 184,442 161,419 24,629 186,048
Gross profit margin 46.2% 59.8% 47.6% 45.6% 58.1% 46.9%
Operating income 26,408 5,896 32,304 26,072 5,719 31,791
Earnings before
income taxes 15,267 18,510 33,777 14,110 3,892 18,002
EBITDA (2) 45,814 9,443 55,257 44,501 9,038 53,539
EBITDA margin 13.2% 23.4% 14.3% 12.6% 21.3% 13.5%
Assets 1,458,402 221,887 1,680,289 1,450,791 269,240 1,720,031
</TABLE>
<PAGE> 12
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(11) SUMMARY BY BUSINESS SEGMENT - (Continued)
Information related to the Company's operations by business segment for
the six months ended September 30, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
September 30, 1999 September 30, 1998
(In thousands) Gas Gas
Distribution Operations Combined Distribution Operations Combined
<S> <C> <C> <C> <C> <C> <C>
Gas and rent $ 288,095 $ 71,895 $ 359,990 $ 285,715 $ 67,561 $ 353,276
Hardgoods 404,845 1,947 406,792 429,046 790 429,836
Other (1) -- -- -- -- 14,253 14,253
Total net sales 692,940 73,842 766,782 714,761 82,604 797,365
Intersegment sales -- 16,385 16,385 -- 13,523 13,523
Gross profit 317,861 44,807 362,668 324,621 45,097 369,718
Gross profit margin 45.9% 60.6% 47.3% 45.4% 54.6% 46.4%
Operating income,
excluding special
charge in 1998 52,668 8,735 61,403 54,612 9,608 64,220
Earnings before
income taxes,
excluding special
charge in 1998 and
cumulative effect of
an accounting change
in 1999 30,931 19,384 50,315 30,765 5,736 36,501
EBITDA (2) 90,910 15,612 106,522 91,588 15,977 107,565
EBITDA margin 13.1% 21.1% 13.9% 12.8% 19.3% 13.5%
Assets 1,458,402 221,887 1,680,289 1,450,791 269,240 1,720,031
</TABLE>
A reconciliation of the combined operating segments to the applicable
line items on the consolidated financial statements for the six months
ended September 30, 1998 is as follows:
Six Months Ended
(In thousands) September 30, 1998
Segment operating income $ 64,220
Special charge 1,000
Operating income $ 65,220
Segment earnings before income taxes $ 36,501
Special charge 1,000
Earnings before income taxes $ 37,501
(1) Represents sales of calcium carbide and carbon products.
(2) EBITDA - Operating income, excluding special charges, plus depreciation
and amortization, is a measure of the Company's ability to generate cash
flow and should be considered in addition to, but not as a substitute
for, other measures of financial performance reported in accordance with
generally accepted accounting principles.
<PAGE> 13
AIRGAS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS: THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO
THE THREE MONTHS ENDED SEPTEMBER 30, 1998
INCOME STATEMENT COMMENTARY
Net Sales
Net sales decreased 2.3% in the quarter ended September 30, 1999 ("current
quarter") compared to the quarter ended September 30, 1998 ("prior year
quarter").
<TABLE>
<CAPTION>
Three Months Ended
(In thousands) September 30,
Net Sales 1999 1998 Decrease
<S> <C> <C> <C> <C>
Distribution $346,973 $354,208 $(7,235) (2.0%)
Gas Operations 40,316 42,384 (2,068) (4.9%)
$387,289 $396,592 $(9,303) (2.3%)
</TABLE>
The Distribution segment's principal products and services include
hardgoods; industrial medical and specialty gases; and equipment rental.
Hardgoods consist of welding supplies and equipment, safety products, and
industrial tools and supplies. Industrial gases consist of packaged and
small bulk gases. Equipment rental fees are generally charged on cylinders,
cryogenic liquid containers, bulk tanks and welding equipment.
Distribution sales decreased $7.2 million primarily as a result of a
decline in same-store hardgoods sales, partially offset by acquisitions.
Distribution same-store sales decreased $11.5 million (-3.2%) as a result
of lower sales of hardgoods of $12.1 million (-5.7%), offset by gas and
rent sales growth of $600 thousand (.4%). Hardgoods sales were negatively
impacted in the current quarter by the continued slowness in certain
manufacturing and industrial markets including: metal fabrication, petro-
chemical, agriculture, mining and shipbuilding. Gas and rent sales growth
was partially attributable to the expansion of its rental welder fleet and
strategic product sales, particularly sales related to refrigerants and
medical gases. Acquisition and divestiture activity accounted for a net
increase of $4.3 million in sales as the acquisition of eight distributors
since July 1, 1998 were partially offset by a divestiture during fiscal
1999.
Gas Operations' sales primarily include dry ice and carbon dioxide
that are used for cooling and beverage applications. In addition, the
segment includes the Company's foreign operations and businesses that
produce and distribute specialty gases and nitrous oxide. Prior to the
divestiture in December 1998, the segment also included sales of calcium
carbide and carbon products ("calcium carbide and carbon operations").
Although the Company's operations in Poland and Thailand were divested in
August 1999, the current period includes a full quarter of operating
results due to delayed financial reporting. Sales decreased $2.1 million
compared to the prior year quarter as a result of the calcium carbide and
carbon operations divestiture, partially offset by same-store sales growth
and acquisitions. Sales decreased $8.4 million primarily due to the
divestiture of the calcium carbide and carbon operations. Gas Operations'
same-store sales increased $1.7 million (4.5%) from higher liquid carbon
dioxide and nitrous oxide volumes. Seasonality and a stable supply of
product helped liquid carbon dioxide volumes. Sales of specialty gases
also increased primarily due to higher refrigerant sales during the summer
months. Three dry ice acquisitions completed since July 1, 1998
contributed sales of $4.6 million over the prior year quarter.
<PAGE> 14
AIRGAS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The Company estimates same-store sales based on a comparison of
current period sales to the prior period sales, adjusted for acquisitions
and divestitures. Future same-store sales growth is dependent on the
economy, competition and the Company's ability to implement price
increases and sell additional products and services to existing and new
customers.
Gross Profits
Gross profits decreased .9% during the current quarter compared to the
prior year quarter.
<TABLE>
<CAPTION>
Three Months Ended
(In thousands) September 30,
Gross Profits 1999 1998 Decrease
<S> <C> <C> <C> <C>
Distribution $160,326 $161,419 $(1,093) (.7%)
Gas Operations 24,116 24,629 (513) (2.1%)
$184,442 $186,048 $(1,606) (.9%)
</TABLE>
The decrease in Distribution gross profits of $1.1 million resulted
from a same-store gross profits decline of $3.3 million (-2%), offset by
net acquisition and divestiture activity of $2.2 million. Declines in
same-store gross profits consisted of decreases in hardgoods of $3.9
million (-6.7%), partially offset by gas and rent gross profits growth of
$600 thousand (.6%). The decrease in hardgoods same-store gross profits
resulted primarily from reduced sales to certain manufacturing and
industrial markets. Additionally, competitive pricing pressures have
impacted hardgoods gross margins. However, centralized purchasing and
distribution and private label products have helped support hardgoods
margins. The increase in gas and rental same-store gross profits resulted
primarily from increased rental revenue from an expanded rental welder
fleet and from increases in gas storage containers. Acquisition and
divestiture activity resulted in a net increase in gross profits of $2.2
million from eight distribution acquisitions since July 1, 1998, offset by
a divestiture in fiscal 1999. The Distribution gross profit margin of
46.2% in the current quarter increased 60 basis points from 45.6% in the
prior year quarter as a result of a shift in sales mix more heavily
weighted towards higher margin gas and rental revenues.
The decrease in Gas Operations' gross profits of $513 thousand
resulted from the divestiture of calcium carbide and carbon operations on
December 31, 1998, which had gross profits of $2.5 million in the prior
year quarter, offset by gross profits of $2 million from three dry ice
acquisitions completed since July 1, 1998. Gas Operations' gross profit
margin, excluding the divestiture which had lower margins, decreased from
65% in the prior year quarter to 60% in the current quarter primarily due
to lower dry ice margins. Increased production costs, from higher
electricity rates and lower operating efficiencies at peak production
levels during the summer months, impacted margins. Margins on foreign
operations were also down.
<PAGE> 15
AIRGAS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Operating Expenses
Selling, distribution and administrative expenses ("operating
expenses") consist of personnel and related costs, distribution and
warehouse costs, occupancy expenses and other selling, general and
administrative expenses. Operating expenses decreased $3.3 million (-2.5%)
compared to the prior year quarter primarily resulting from the Company's
cost reduction program initiated during the third and fourth quarters of
fiscal 1999 and from the elimination of certain repositioning expenses
recognized in the prior year. The Company believes its cost reduction
program combined with the elimination of certain repositioning expenses
will lower operating expenses by approximately $12 - $15 million on an
annual basis. The cost reductions have impacted many areas of the
Company's expense structure, including headcount reductions and
administrative cost reductions from the consolidation of back office
functions. As a percentage of net sales, operating expenses remained
unchanged at 33.4% compared to the prior year quarter.
Depreciation and amortization totaled $23 million in the current
quarter, an increase of $1.2 million (5.5%) compared to the prior year
quarter. Depreciation and amortization expense relative to sales was 5.9%
in the current quarter compared to 5.5% in the prior year quarter.
Depreciation and amortization expense increased primarily as a result of
acquisitions and capital expenditures since July 1, 1998.
Operating Income
Operating income increased 1.6% compared to the prior year quarter
primarily due to lower operating expenses resulting from cost reductions
and acquisitions, partially offset by lower gross profits from a decline in
hardgoods sales.
<TABLE>
<CAPTION>
Three Months Ended
(In thousands) September 30,
Operating Income 1999 1998 Increase
<S> <C> <C> <C> <C>
Distribution $ 26,408 $ 26,072 $ 336 1.3%
Gas Operations 5,896 5,719 177 3.1%
$ 32,304 $ 31,791 $ 513 1.6%
</TABLE>
The Distribution segment's operating income margin increased 20 basis
points to 7.6% in the current quarter compared to 7.4% in the prior year
quarter. Gas Operations' operating income margin, excluding the divested
calcium carbide and carbon operations, increased 200 basis points to 14.6%
in the current quarter from 12.6% in the prior year as a result of
operating cost reductions and acquisitions.
Interest Expense
Interest expense, net, totaled $14.4 million and reflects a decrease
of $1.3 million (8.2%) compared to the prior year quarter. The decrease in
interest expense resulted from lower interest rates and lower average
outstanding debt levels. The decrease in debt is primarily due to the
after-tax proceeds from the divestitures of the calcium carbide and carbon
operations and operations in Poland and Thailand. As discussed in
"Liquidity and Capital Resources" and in Item 3 "Quantitative and
Qualitative Disclosures About Market Risk", the Company manages interest
rate exposure of certain borrowing instruments through participation in
interest rate swap agreements.
<PAGE> 16
AIRGAS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Other Income, net
Other income, net, totaled $15.2 million in the current quarter and
included a $14.4 million gain from the divestiture of operations in Poland
and Thailand. Other income, net, totaled $709 thousand in the prior year
quarter.
Equity in Earnings of Unconsolidated Affiliates
Equity in earnings of unconsolidated affiliates of $725 thousand
decreased $497 thousand compared to the prior year quarter primarily as a
result of lower earnings from the Company's liquid carbon dioxide joint
venture and from joint venture earnings from National Welders Supply
("National Welders"). The liquid carbon dioxide joint venture incurred
higher electric costs related to peak production during the summer months.
National Welders' earnings were impacted by a slowdown in certain
industrial markets that it serves and from the impact of hurricane Floyd.
Income Tax Expense
Income tax expense, excluding the taxes on the gain from the
divestiture of operations in Poland and Thailand, represented 41.5% of pre-
tax earnings for the current quarter compared to 41.8% in the prior year
quarter. Including the gain on the divestiture, income tax expense
represented 44% of pre-tax earnings in the current quarter.
Net Earnings
Net earnings for the quarter ended September 30, 1999 were $18.9
million, or $.27 per diluted share, compared to $10.5 million, or $.15 per
diluted share, in the prior year quarter. Net earnings in the current
quarter, excluding the gain on the divestiture of operations in Poland and
Thailand, were $11.4 million, or $.16 per diluted share.
EBITDA
Operating income, plus depreciation and amortization ("EBITDA"), was
$55.3 million in the current quarter compared to $53.5 million in the prior
year quarter. EBITDA as a percentage of sales of 14.3% in the current
quarter increased from 13.5% in the prior year quarter primarily due to
cost reductions and acquisitions.
<PAGE> 17
AIRGAS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS: SIX MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE
SIX MONTHS ENDED SEPTEMBER 30, 1998
INCOME STATEMENT COMMENTARY
Net Sales
Net sales decreased 3.8% for the six months ended September 30, 1999
("current period") compared to the six months ended September 30, 1998
("prior year period").
<TABLE>
<CAPTION>
Six Months Ended
(In thousands) September 30,
Net Sales 1999 1998 Decrease
<S> <C> <C> <C> <C>
Distribution $692,940 $714,761 $(21,821) (3.1%)
Gas Operations 73,842 82,604 (8,762) (10.6%)
$766,782 $797,365 $(30,583) (3.8%)
</TABLE>
Distribution sales decreased $21.8 million as a result of a same-store
sales decline of $25.5 million (-3.6%), offset by a net sales increase of
$3.7 million, representing the net effect of acquisition and divestiture
activity. The decrease in same-store sales resulted from a $28.4 million
(-6.6%) decline in hardgoods sales, partially offset by gas and rent
same-store sales growth of $2.9 million (1%). The lower hardgoods sales
resulted from the continued slowness in certain manufacturing and industrial
markets. Gas and rent same-store sales growth was partially attributable to
the Company's expansion of its rental welder fleet and strategic product
sales, particularly sales related to refrigerants and medical gases. Sales
of $12.6 million from fourteen distributor acquisitions since April 1, 1998
were offset by the divestiture of three businesses during fiscal 1999 which
had sales of $8.9 million in the prior year period.
Gas Operations' sales decreased $8.8 million in the current period as
a result of divestitures which had sales of approximately $16.3 million in
the prior year period, partially offset by sales of $7.5 million from four
dry ice acquisitions completed since April 1, 1998. The divestitures
primarily consisted of the fiscal 1999 divestiture of the Company's calcium
carbide and carbon operations.
<PAGE> 18
AIRGAS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Gross Profits
Gross profits decreased 1.9% in the current period compared to the prior
year period.
<TABLE>
<CAPTION>
Six Months Ended
(In thousands) September 30,
Gross Profits 1999 1998 Decrease
<S> <C> <C> <C> <C>
Distribution $317,861 $324,621 $(6,760) (2.1%)
Gas Operations 44,807 45,097 (290) (.6%)
$362,668 $369,718 $(7,050) (1.9%)
</TABLE>
The decrease in Distribution gross profits of $6.8 million resulted
from a same-store gross profit decline of $8.2 million (-2.5%), partially
offset by acquisition and divestiture activity. The decline in same-store
gross profits consisted of a decrease in hardgoods of $10 million (-8.5%),
partially offset by gas and rent gross profit growth of $1.8 million (.9%).
The decrease in hardgoods same-store gross profits resulted primarily from
the continued slowness in certain manufacturing and industrial markets and
from price concessions in certain regions to retain customers in response
to competition. The increase in gas and rental same-store gross profits
resulted primarily from increased rental revenue from an expanded rental
welder fleet and from increases in gas storage containers. Gross profits
of $5.9 million from fourteen distributor acquisitions since April 1, 1998
were partially offset by the divestiture of three businesses during fiscal
1999 which had gross profits of $4.5 million in the prior year period. The
overall Distribution gross profit margin of 45.9% in the current period
increased 50 basis points from 45.4% in the prior year period as a result
of a shift in sales mix more heavily weighted towards higher margin gas and
rental revenues.
The decrease in Gas Operations gross profits of $290 thousand resulted
from the divestiture of the Company's calcium carbide and carbon operations
during fiscal 1999 offset by four dry ice acquisitions completed since
April 1, 1998. Excluding the impact of the divestiture of calcium carbide
and carbon operations, the current period gross profit margin of 61% was
flat compared to the prior year period.
Operating Expenses
Selling, distribution and administrative expenses ("operating
expenses") decreased $6 million (-2.3%) compared to the prior year period
primarily resulting from the Company's cost reduction program initiated
during the third and fourth quarters of fiscal 1999 and from the elimination
of certain repositioning expenses recognized in the prior year. The Company
believes its cost reduction program combined with the elimination of certain
repositionng expenses will lower operating expenses by approximately
$12 - $15 million on an annual basis. The cost reductions have impacted many
areas of the Company's expense structure, including headcount reductions and
administrative cost reductions from the consolidation of back office
functions. As a percentage of net sales, operating expenses increased 50
basis points to 33.4% compared to the prior year period. The increase in
the ratio of operating expenses relative to sales resulted from the decrease
in sales, which was larger than the Company's reduction of operating expenses.
Depreciation and amortization totaled $45.1 million in the current period
representing an increase of $1.8 million (4.1%) compared to the prior year
period. Depreciation and amortization expense increased primarily as a
result of acquisitions and capital expenditures since April 1, 1998.
Depreciation and amortization expense relative to sales was 5.9% for the
current period compared to 5.4% in the prior year period.
<PAGE> 19
AIRGAS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Operating Income
Excluding special charges, operating income decreased 4.4% compared to
the prior year period. The decrease in operating income was primarily due
to lower gross profits from the decline in hardgoods sales, partially
offset by a reduction in operating expenses.
<TABLE>
<CAPTION>
Six Months Ended
(In thousands) September 30,
Operating Income 1999 1998 Decrease
<S> <C> <C> <C> <C>
Distribution $ 52,668 $ 54,612 $(1,944) (3.6%)
Gas Operations 8,735 9,608 (873) (9.1%)
Special Charges -- 1,000 (1,000) --
$ 61,403 $ 65,220 $(3,817) (5.9%)
</TABLE>
The Distribution segment's operating income margin of 7.6% was flat
compared to the prior year period. Gas Operations' operating income margin
of 11.8% increased 30 basis points compared to the prior year period,
excluding the calcium carbide and carbon operations. The increase in Gas
Operations' operating income margin was primarily due to operating cost
reductions and dry ice acquisitions.
Interest Expense
Interest expense, net, totaled $28.2 million representing a decrease
of $2.3 million (-7.6%) compared to the prior year period. The decrease in
interest expense was primarily attributable to lower interest rates and
lower average outstanding debt levels. As discussed in "Liquidity and
Capital Resources" and in Item 3 "Quantitative and Qualitative Disclosures
About Market Risk", the Company manages interest rate exposure of certain
borrowing instruments through participation in interest rate swap
agreements.
Other Income, net
Other income, net, totaled $15.4 million in the current period and
included a $14.4 million gain from the divestiture of operations in Poland
and Thailand. Other income, net, totaled $831 thousand in the prior year
period.
Equity in Earnings of Unconsolidated Affiliates
Equity in earnings of unconsolidated affiliates of $1.7 million
decreased $251 thousand (-12.7%) compared to the prior year period
primarily from lower liquid carbon dioxide joint venture earnings. Higher
electric costs associated with peak production during the summer months
adversely impacted earnings.
<PAGE> 20
AIRGAS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Income Tax Expense
Income tax expense, excluding the taxes on the gain from the
divestiture of operations in Poland and Thailand, represented 41.5% of pre-
tax earnings for the current period compared to 42% in the prior year
period. Including the gain on the divestiture, income tax expense
represented 43.2% of pre-tax earnings in the current period.
Net Earnings
Net earnings in the current period were $28 million, or $.39 per
diluted share, compared to $21.8 million, or $.30 per diluted share, in the
prior year period. Net earnings, excluding special items (the current
period cumulative effect of an accounting change and a gain on the
divestiture of the Company's Poland and Thailand operations and the special
charge in the prior period), were $21 million, or $.30 per diluted share,
compared to $21.2 million, or $.29 per diluted share, in the prior year
period.
EBITDA
Operating income, excluding special charges, plus depreciation and
amortization ("EBITDA"), was $106.5 million in the current period compared
to $107.6 million in the prior year period. EBITDA as a percentage of
sales increased to 13.9% compared to 13.5% in the prior year period.
<PAGE> 21
AIRGAS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Cash flows from operating activities totaled $51.2 million for the six
months ended September 30, 1999. Adjustments to reconcile net income to
net cash provided by operating activities included depreciation and
amortization of $45.1 million and deferred income taxes of $6.8 million
from temporary differences, offset by a $14.4 million gain on the
divestiture of operations in Poland and Thailand. Additionally, cash flows
from working capital components decreased $12.9 million largely as a result
of a decrease in accounts payable of $14.3 million related to the timing of
payments to vendors. Accounts receivable increased $1.6 million with days'
sales outstanding increasing to 49 days from 47 days at March 31, 1999. The
increase in accounts receivable has resulted from the effects of computer
conversions, changes in administrative personnel and from a slowing in
certain manufacturing and industrial markets. Inventories increased $697
thousand with hardgoods days' supply of inventory increasing to 86 days
from 77 days at March 31, 1999. The increase in hardgoods days' supply of
inventory is primarily due to an increase in safety and welding product
inventories in connection with centralized purchasing and distribution.
After-tax cash flow (net earnings, excluding the cumulative effect of
an accounting change, a gain from a divestiture and a special charge, plus
depreciation, amortization and deferred income taxes) increased 4.3% to
$72.9 million compared to $69.9 million in the prior year period.
Cash used by investing activities totaled $6 million during the six
months ended September 30, 1999. Activities that used cash during the
period primarily included capital expenditures of $30.8 million and three
distributor acquisitions totaling $23.4 million. The divestiture of
operations in Poland and Thailand provided cash of $46.2 million ($38.4
million after taxes and closing costs).
Capital expenditures during the current period were 45% lower compared
to the prior year period. Capital expenditures associated with the
purchase of cylinders, bulk tanks, rental welders and machinery and
equipment totaled approximately $23 million or 75% of the total capital
expenditures during the current period. Management continues to focus on
improving asset utilization and believes that fiscal 2000 capital spending
will total less than $75 million.
Financing activities used cash of $45.2 million primarily for the
repayment of debt and the repurchase of the Company's Common Stock.
Additionally, cash overdraft, the float of the Company's outstanding
checks, decreased by $6.3 million since March 31, 1999.
The Company will continue to look for appropriate acquisitions of
distributors. Future acquisitions and capital expenditures are expected to
be funded through cash flows from operations, debt, Common Stock for
certain acquisitions, funds from the divestiture of certain businesses and
other available sources. The Company believes that its sources of
financing are adequate for its anticipated needs and that it could arrange
additional sources of financing for unanticipated requirements. The cost
and terms of any future financing arrangement will depend on the market
conditions and the Company's financial position at that time.
The Company does not currently pay dividends.
<PAGE> 22
AIRGAS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Financial Instruments
The Company has unsecured revolving credit facilities totaling $725
million and $100 million Canadian (US$68 million) under a credit agreement
with a final maturity date of December 5, 2002. The credit agreement
contains covenants that include the maintenance of certain financial
ratios, restrictions on additional borrowings and limitations on dividends.
At September 30, 1999, the Company had borrowings under the credit
agreement of approximately $515 million and $42 million Canadian (US$29
million). The Company also had commitments under letters of credit
supported by the credit agreement of approximately $57 million.
Availability under the credit facilities was approximately $192 million at
September 30, 1999. At September 30, 1999, the effective interest rate on
borrowings under the credit facilities averaged 5.79% (5.84% on U.S.
borrowings and 4.86% on Canadian borrowings).
At September 30, 1999, the Company had the following long-term debt
outstanding under medium-term notes: $50 million of unsecured notes due
September 2001 bearing interest at a fixed rate of 7.15%; $75 million of
unsecured notes due March 2004 bearing interest at a fixed rate of 7.14%;
and $100 million of unsecured notes due September 2006 bearing interest at
a fixed rate of 7.75%. Additionally, at September 30, 1999, long-term debt
of the Company included acquisition notes and other long-term debt
instruments of approximately $75 million with interest rates ranging from
6% to 9%. The Company also has a shelf registration statement which is
currently effective under applicable federal securities laws and may be
used to issue debt and other types of securities up to an aggregate of
approximately $175 million.
In managing interest rate exposure, principally under the Company's
floating rate revolving credit facilities, the Company participates in 25
interest rate swap agreements. The swap agreements are with major
financial institutions and aggregate $568 million in notional principal
amount at September 30, 1999. Eighteen swap agreements with approximately
$331 million in notional principal amount require fixed interest payments
based on an average effective rate of 6.35% for remaining periods ranging
between one and five years. Seven swap agreements with approximately $237
million in notional principal amount require variable interest payments
based on an average rate of 5.57% at September 30, 1999. Under the terms
of five swap agreements, the Company has elected to receive the discounted
value of the counterparties' interest payments up-front. At September 30,
1999, approximately $6.6 million of such payments were included in other
non-current liabilities. The Company monitors its positions and the credit
ratings of its counterparties, and does not anticipate non-performance by
the counterparties.
Share Repurchase Program
In March 1999, the Company's Board of Directors authorized the
repurchase of up to seven million shares of the Company's outstanding
Common Stock. The shares may be repurchased in the open market or in
privately negotiated transactions depending on market conditions and other
factors. The Company has financed its repurchase programs with borrowings
and funds provided by operating activities. During the six months ended
September 30, 1999, the Company repurchased 1.2 million shares at an
average cost of $11.78 per share, including 175 thousand shares to complete
a previous repurchase program. The effect of the share repurchases on
earnings per share for the current quarter was not material. Subsequent to
September 30, 1999, the Company repurchased approximately 300 thousand
shares at an average cost of $9.82 per share. As of November 5, 1999, the
remaining shares authorized for repurchase under the repurchase program
totaled approximately 5.7 million shares.
<PAGE 23>
AIRGAS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Employee Benefits Trust
On October 12, 1999, the Employee Benefits Trust purchased 671 thousand
shares of Common Stock from the Company at fair market value.
<PAGE 24>
AIRGAS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
YEAR 2000 READINESS DISCLOSURE
Year 2000 Issues
The Company is aware of the issues associated with the Year 2000
matter. The "Year 2000" matter relates to whether computer hardware and
software and equipment will properly recognize date sensitive information
referring to the Year 2000. Potential computer system and equipment
failures arising from years beginning with "20" rather than "19" are a
known risk. The Company's exposure to Year 2000 issues rests primarily in
three main areas: information systems hardware and application software,
embedded chip technology which may be found in a wide variety of operating
equipment and third party Year 2000 readiness.
Information Systems Hardware and Application Software
With respect to information systems hardware and application software,
the Company's businesses generally do not utilize "home grown" programs or
systems that require programming to become Year 2000 compliant. The
Company typically uses "out of the box" or "shrink wrap" software for its
business needs. Implementation of standardized software and computer
systems has been substantially completed across the Company in connection
with the Company's Repositioning Plan. Although vendors for such software
have advised the Company that their software is Year 2000 compliant, the
Company has reviewed time dimensional testing performed by a third party on
one critical system with no significant compliance exceptions identified.
The Company intends to complete internal time dimensional testing for the
other critical system by the end of November 1999. Although execution of
the Repositioning Plan addresses certain significant Year 2000 issues, it
was not undertaken primarily as a remediation initiative. The Company
believes that standardized operating platforms will help provide for an
effective multi-channel distribution network. Expenditures related to the
system conversion and standardization project have totaled approximately
$18 million over the duration of the project, of which approximately $12
million represented new capital equipment and software. While the
Company's standardization project will continue into the Year 2000,
management believes that the critical operating systems utilized by the
Company are Year 2000 compliant. Although it is considered unlikely by
management that the Company's information systems hardware and application
software will result in a Year 2000 problem, the Year 2000 matter could
have a material impact on the business, results of operations and financial
condition of the Company as well as on customers of the Company. The
Company has not determined the extent to which its business and customers
might be affected in that event.
In conjunction with the Repositioning Plan, the Company has established
a national data center equipped with systems hardware and application
software that its vendors have indicated are Year 2000 compliant. Time
dimensional testing of data center hardware has been completed with no
significant compliance exceptions identified. In addition, the Company has
substantially completed testing of its desktop personal computers with very
few failures noted.
Embedded Chips
The Company's Year 2000 project team includes designated operating
company managers responsible for directing Year 2000 remediation efforts.
These managers, in cooperation with the Company's national information
services personnel, have completed inventories, risk assessments and
testing of critical manufacturing processes and related equipment
containing embedded chips. No significant instances of non-compliance were
identified. The Year 2000 project team has also completed the process of
contacting certain suppliers to obtain Year 2000 readiness product
information for less significant equipment containing embedded chips.
Through this inquiry, the Company identified certain non-compliant phone
systems for repair or replacement. The Company anticipates completing the
necessary repairs and replacements by December 1999. Management has
developed contingency plans for the affected phone systems and believes the
contingency plans are sufficient such that operations will not be
materially impacted if the phone system repairs and replacements are not
completed by December 1999. The Company estimates expenditures for Year
2000 remediation, including the replacement of non-compliant embedded chip
equipment, will total approximately $1 million. Of this total, the Company
expects approximately $800 thousand will be for capital upgrades and
replacements. The Company believes it will complete the remediation of
embedded chip equipment and processes prior
<PAGE> 25
AIRGAS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
to the year 2000. However, if repair, replacement or contingency plans are
not completed before the Year 2000 or if contingency plans are inadequate,
then the Year 2000 matter could have a material impact on the business,
results of operations and financial condition of the Company.
Third Parties
The Company's Year 2000 issues relate not only to its own business
systems and equipment but also to those of its customers, vendors and
suppliers. To mitigate the risk to the Company arising from third parties,
the Company has contacted significant suppliers, customers and other
critical business partners to determine if they have effective Year 2000
plans in place. The Company anticipates that this evaluation will be
ongoing through the remainder of calendar year 1999. Most of the Company's
key suppliers have indicated that they have active Year 2000 compliance
programs. As a contingency plan, alternative suppliers have been
identified as deemed necessary. In addition, audits of certain key
suppliers to confirm Year 2000 readiness have been completed with no
significant issues identified. However, there can be no assurance that the
Company's customers, vendors, suppliers and other third parties will
successfully resolve their own Year 2000 issues in a timely manner
sufficient to prevent impact to the Company.
Contingency Plans
The Company believes that its most reasonably likely worst case
scenario changes over time. The Company has developed certain contingency
plans to address currently identified Year 2000 issues. These plans
address potential disruptions of the Company's business including
administrative and supply chain functions. Administrative contingency
plans provide for back-up data processing facilities, which have been
tested and found to be Year 2000 compliant, and encompass the national data
center, critical business software and communications networks. Supply
chain contingency plans include identifying alternative suppliers and
arranging for back-up or alternative transportation for shipping the
Company's products. Contingency plans will continue to be developed and
refined through the remainder of calendar year 1999, as deemed necessary.
Additionally, as of January 1, 2000, the Company intends to begin providing
24-hour information services support through the use of manned call centers
to assist the Company's various locations with any internal Year 2000
related problems. The Company anticipates that information services
support will continue until all critical systems have been determined to be
fully operational.
Resources
The Company is funding the computer conversion and standardization
project as well as non-compliant equipment repairs and replacements from
cash flow generated by operations and other available financing sources.
Substantially all of the effort to accomplish the remediation objectives
with regard to the computer conversion and standardization project,
embedded chip equipment, and evaluation of third party readiness has been
performed by internal Company personnel.
<PAGE> 26
AIRGAS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Forward-looking Statements
This report contains statements that are forward-looking, as that term
is defined by the Private Securities Litigation Reform Act of 1995 or by the
Securities and Exchange Commission in rules, regulations and releases. The
Company intends that such forward-looking statements be subject to the safe
harbors created thereby. All forward-looking statements are based on
current expectations regarding important risk factors, and the making of
such statements should not be regarded as a representation by the Company
or any other person that the results expressed therein will be achieved.
Important factors that could cause actual results to differ materially from
those contained in any forward-looking statement include, but are not
limited to, underlying market conditions, growth in same-store sales, the
Company's ability to reduce costs and capital spending, the Company's
efforts to improve asset utilization, implementation and standardization of
information systems projects, any potential problems relating to Year 2000
matters (including without limitation, those relating to the Company's
ability to identify and timely remediate Year 2000 problems, unanticipated
remediation costs, timely resolution of Year 2000 problems by significant
vendors, suppliers, customers and other similar third parties, and the
Company's ability to develop and implement contingency plans, if
necessary), the success and timing of acquisitions and divestitures, the
effects of competition from independent distributors and vertically
integrated gas producers on products and pricing, growth and acceptance of
new product lines through the Company's sales and marketing programs,
changes in product prices from gas producers and name-brand manufacturers
and suppliers of hardgoods, uncertainties regarding accidents or litigation
which arise in the ordinary course of business and the effects of, and
changes in the economy, monetary and fiscal policies, laws and regulations,
inflation and monetary fluctuations and fluctuations in interest rates,
both on a national and international basis. The Company does not undertake
to update any forward-looking statement made herein or that may be made
from time to time by or on behalf of the Company.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
The Company's primary market risk exposure is from changes in interest
rates. The Company's policy is to manage interest rate risk exposure
through the use of a combination of fixed and floating rate debt and
interest rate swap agreements. The Company maintains the ratio of fixed to
variable rate debt within parameters established by management under
policies approved by the Board of Directors. At September 30, 1999, the
ratio of fixed versus floating debt was 44% - 56%. In addition, the Company
monitors its positions and the credit ratings of its counterparties,
thereby minimizing the risk of non-performance by the counterparties. The
Company does not enter into derivative financial instruments for trading
purposes.
The table below summarizes the Company's market risks associated with
long-term debt obligations and interest rate swaps as of September 30,
1999. For long-term debt obligations, the table presents cash flows
related to payments of principal and interest by expected fiscal year of
maturity. For interest rate swaps, the table presents the notional amounts
underlying the interest rate swaps by year of maturity. The notional
amounts are used to calculate contractual payments to be exchanged and are
not actually paid or received. Fair values were computed using market
quotes, if available, or based on discounted cash flows using market
interest rates as of the end of the period.
PAGE <27>
<TABLE>
<CAPTION>
Expected Fiscal Year of Maturity
____________________________________________________
(In millions)
Fair
Fixed Rate Debt: 2000 2001 2002 2003 2004 2005 Thereafter Total Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Medium-term notes $ -- $ -- $ 50 $ -- $ 75 $ -- $100 $225 $208
Interest expense $ 17 $ 17 $ 15 $ 13 $ 10 $ 8 $ 7 $ 87
Average interest rate 7.41% 7.41% 7.45% 7.49% 7.49% 7.75% 7.75%
Acquisition notes $ 5 $ 13 $ 21 $ 1 $ 20 $ -- $ 2 $ 62 $ 59
Interest expense $ 5 $ 4 $ 3 $ 2 $ 1 $ -- $ -- $ 15
Average interest rate 7.47% 7.47% 7.47% 7.47% 7.47% 7.47% 7.47%
Other notes $ 2 $ 1 $ 1 $ 1 $ -- $ -- $ -- $ 5 $ 5
Average interest rate 6.90% 6.90% 6.90% 6.90%
Variable Rate Debt:
Revolving credit
facilities $ -- $ -- $ -- $544 $ -- $ -- $ -- $544 $544
Interest expense $ 31 $ 31 $ 31 $ 31 $ -- $ -- $ -- $124
Interest rate (a) 5.79% 5.79% 5.79% 5.79%
Other notes $ -- $ 1 $ 7 $ -- $ -- $ -- $ -- $ 8 $ 8
Average interest rate 8.75% 8.75%
US $ denominated Swaps:
15 Swaps Receive
Variable/Pay Fixed $ 15 $ 55 $120 $ 93 $ -- $ 40 $ -- $323 $ (7)
Variable Receive rate
(3 month LIBOR) = 5.36%
Weighted average
pay rate = 6.35%
7 Swaps Receive
Fixed/Pay Variable $ 57 $ 50 $ 50 $ -- $ 30 $ -- $ 50 $237 $ 2
Weighted average
receive rate = 6.60 %
Variable pay rate
(6 month LIBOR) = 5.57%
Canadian $ denominated Swaps:
3 Swaps Receive
Variable/Pay Fixed $ 3 $ 3 $ 2 $ -- $ -- $ -- $ -- $ 8 $ --
Variable Receive rate
(3 month CAD BA) = 4.88% (b)
Weighted average
pay rate = 6.66%
Other LIBOR based agreements:
Operating leases
with trust $ 13 $ -- $ -- $ -- $ -- $ -- $ -- $ 13 $ 13
Variable rate
(3 month LIBOR plus 110
basis points = 6.46%)
<PAGE> 28
(a) The variable rate of long-term debt obligations is based on the London
Interbank Offered Rate ("LIBOR") as of September 30, 1999. For future
periods, the variable interest rate is assumed to remain at 5.79% with the
principal balance of long-term debt obligations held constant at $544
million. However, the variable rate and borrowing levels of long-term debt
may fluctuate materially from those presented above.
(b) The variable receive rate for Canadian dollar denominated interest
rate swaps is the rate on Canadian Bankers' acceptances ("CAD BA").
</TABLE>
Limitations of the tabular presentation
As the table incorporates only those interest rate risk exposures that
exist as of September 30, 1999, it does not consider those exposures or
positions that could arise after that date. In addition, actual cash flows
of financial instruments in future periods may differ materially from
prospective cash flows presented in the table due to future fluctuations in
variable interest rates and Company debt levels.
Foreign Currency Rate Risk
Certain subsidiaries of the Company are located in foreign countries.
The Company does not hedge its exposure to translation gains and losses
relating to foreign currency net asset exposures. The Company considers
its exposure to foreign currency exchange fluctuations to be immaterial to
its consolidated results of operations.
<PAGE> 29
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
For information regarding certain litigation, reference is made to the
Company's Form 10-Q for the quarter ended June 30, 1999, which is
incorporated herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of the stockholders of the Company was held on August 2,
1999, where the following actions were taken:
(a) The stockholders voted to elect John A.H. Shober, Lee M. Thomas, and
Robert L. Yohe to the Board of Directors. The votes cast for each
Director were as follows:
No. of Shares
For Withheld/Against
John A.H. Shober 65,359,222 1,098,178
Lee M. Thomas 65,363,551 1,093,849
Robert L. Yohe 65,442,801 1,014,599
In addition to the Board members elected at the Annual Meeting,
the following are directors whose terms in office as directors
continued after the meeting: W. Thacher Brown, Frank B. Foster,
III, Rajiv L. Gupta, Peter McCausland, and Robert E. Naylor, Jr.
Subsequently, Mr. Gupta and Dr. Naylor both retired from the
Board.
(b) The stockholders voted to ratify the selection of KPMG LLP as the
Company's independent auditors. The votes cast in regard to the action
were as follows:
No. of Shares
For Withheld/Against Abstain
65,699,974 665,048 92,378
<PAGE> 30
Item 5. Other Information
Board of Directors Appointments
On September 7, 1999, the Company announced the appointment of Paula A.
Sneed and David M. Stout to the Company's board of directors to fill the
seats vacated by Mr. Gupta and Mr. Stott who retired from the board during
fiscal 2000 and fiscal 1999, respectively. On October 20, 1999, the
Company announced the appointment of James W. Hovey to the board to suceed
Dr. Naylor who retired.
Ms. Sneed, age 51, is executive vice president, Kraft Foods and president
of Kraft's e-commerce division. Ms. Sneed earned a Masters of Business
Administration from Harvard University and an undergraduate degree from
Simmons College. She was also the recipient of an Honorary Doctorate of
Business Administration degree from Johnson and Whales University in 1991.
Ms. Sneed is also a director of Hercules, Inc. and Westchester/Fairfield
Inroads, Inc.
Mr. Stout, age 45, is president, SmithKline Beecham Pharmaceuticals-North
America. Prior to joining Smith-Kline, Mr. Stout was president of Schering
Laboratories, the U.S. pharmaceutical operation of Schering-Plough
Corporation. Mr. Stout received a Bachelor or Arts degree in biology from
Western Maryland College in 1976. He also serves on the Board of Trustees
for both Western Maryland College and Magee Rehabilitation Hospital.
Mr. Hovey, age 54, is president of The Fox Companies, a diversified real
estate development firm. Mr. Hovey earned a Masters degree in City
Planning from the University of Pennsylvania and a Bachelor of Science
degree in economics from the Wharton School at the University of
Pennsylvania. Mr. Hovey currently serves as an overseer of the Graduate
School of Fine Arts at the University of Pennsylvania, a director of the
National Association of Industrial and Office Properties, a member of the
Advisory Board of the Wharton School Real Estate Center, a trustee of
Eisenhower Exchange Fellowships, Inc., and a trustee of the World Affairs
Council in Philadelphia, Pennsylvania.
Chief Financial Officer Appointment
On November 1, 1999, the Company announced the appointment of Roger F.
Millay as senior vice president and chief financial officer, effective
November 29, 1999. Mr. Millay succeeds Scott Melman who will be assuming a
new role at the Company.
Prior to joining the Company, Mr. Millay, age 42, was senior vice
president and chief financial officer at Transport International Pool, a
$2 billion division of General Electric Capital Corporation ("GE Capital").
Other positions during his twelve-year career at General Electric included
chief financial officer roles at GE Capital Mexico and Colony Advisors,
Inc., a GE Capital joint venture. Mr. Millay earned a graduate degree from
Georgetown University's school of business and an undergraduate degree from
the University of Virginia.
<PAGE> 31
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
The following exhibits are being filed as part of this Quarterly
Report on Form 10-Q:
Exhibit No. Description
3 By-Laws (Amended and Restated August 2, 1999)
10 Airgas, Inc. 401(k) Plan (Amended and Restated)
11 Calculation of earnings per share
27 Financial Data Schedules as of September 30, 1999 and
1998
b. Reports on Form 8-K
On July 30, 1999, the Company filed a Form 8-K pursuant to Item 5,
reporting its earnings for the first quarter ended June 30, 1999.
<PAGE> 32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Airgas, Inc.
(Registrant)
Date: November 11, 1999 /s/ Scott M. Melman
Scott M. Melman
Senior Vice President and
Chief Financial Officer
AIRGAS, INC.
BY-LAWS
(AMENDED AUGUST 2, 1999)
______________________________
ARTICLE I
OFFICES
Section 1.
The registered office of the Corporation in the State of Delaware
shall be in the City of Wilmington, County of New Castle, State of
Delaware.
The Corporation shall have offices at such other places as the Board
of Directors may from time to time determine.
ARTICLE II
STOCKHOLDERS
Section 1: Annual Meeting
The annual meeting of the stockholders for the election of Directors
and for the transaction of such other business as may properly come before
the meeting shall be held on such date within five (5) months after the end
of the fiscal year of the Corporation as the Board of Directors shall each
year fix. Each such annual meeting shall be held at such place, within or
without the State of Delaware, and hour as shall be determined by the Board
of Directors. The day, place and hour of each annual meeting shall be
specified in the notice of annual meeting.
The meeting may be adjourned from time to time and place to place
until its business is completed.
At the annual meeting of the stockholders, only such business shall be
conducted as shall have been specified in the notice of meeting. To be
properly brought before an annual meeting, business must (a) be specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the Board of Directors, (b) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (c)
otherwise properly brought before the meeting by a stockholder. For
business to be properly brought before an annual meeting by a stockholder,
the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of
the Corporation not earlier than the close of business on the 120th day
prior to the first anniversary of the preceding year's annual meeting and
not later than the close of business on the 90th day prior to the first
anniversary of the preceding year's annual meeting; provided, however, that
in the event that the date of the annual meeting is more than 30 days
before or more than 60 days after suchanniversary date, notice by the
<PAGE>
stockholder to be timely must be so delivered not earlier than the close of
business on the 120th day prior to such annual meeting and not later than
the close of business on the later of the 90th day prior to such annual
meeting or the 10th day following the day on which public announcement of
the date of such meeting is first made. In no event shall the public
announcement of an adjournment of an annual meeting commence a new time
period for the giving of a stockholder's notice as described above. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual
meeting, (b) the name and address, as they appear on the Corporation's
books, of the stockholder proposing such business, (c) the class and number
of shares of the Corporation which are beneficially owned by the
stockholder, and (d) any material interest of the stockholder in such
business. Notwithstanding anything in the By-Laws to the contrary, no
business shall be conducted at an annual meeting except in accordance with
the procedures set forth in this Section I. The presiding officer of an
annual meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting and in
accordance with the provisions of this Section 1, and if he should so
determine, he shall so declare to the meeting that any such business not
properly brought before the meeting shall not be transacted.
Section 2. Special Meetings.
Except as otherwise required by law and subject to the rights of
holders of any class or series of stock having a preference over the Common
Stock as to dividends or on liquidation, a special meeting of the
stockholders may be called only by (i) the Chairman of the Board, (ii) the
President, (iii) the Board of Directors pursuant to a resolution approved
by a majority of the entire Board of Directors, or (iv) subject to the
procedures set forth in this Section 2, pursuant to a request of holders of
33% of the combined voting power of the then outstanding shares of stock
entitled to vote generally in the election of Directors, voting together as
a single class. Upon request in writing sent by registered mail to the
Chairman of the Board or the President by any stockholder or stockholders
entitled to call a special meeting of the stockholders pursuant to this
Section 2, the Board of Directors shall determine a place and time for such
meeting, which time shall not be less than ninety (90) nor more than one
hundred and twenty (120) days after the receipt and determination of the
validity of such request, and a record date for the determination of
stockholders entitled to vote at such meeting in the manner set forth in
Section 6 hereof. Following such receipt and determination, it shall be
the duty of the Secretary to cause notice to be given to the stockholders
entitled to vote at such meeting, in the manner set forth in Section 4
hereof, that a meeting will be held at the time and place so determined.
Section 3. Stockholder Action.
Any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting
of such holders and may not be effected by any consent in writing by such
holders.
Section 4. Notice of Meeting.
Except as otherwise provided by statute, written or printed notice
stating the place, day and hour of the meeting and, in case of a special
meeting, stating the purpose or purposes for which the meeting is called,
shall be delivered not less than 10 nor more than 60 days before the date
of the meeting, either personally or by mail, by or at the direction of the
Secretary, to each stockholder of record entitled to vote at such meeting.
If mailed, such notice shall be deemed to be delivered when deposited in
the United States mail in a sealed envelope addressed to the stockholder at
his last known post office address as it appears on the stock record books
of the corporation, with postage thereon prepaid.
<PAGE>
Attendance of a person at a meeting of stockholders, in person or by
proxy, constitutes a waiver of notice of the meeting, except when the
stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
Section 5. Quorum.
Except as otherwise required by law, the Certificate of Incorporation
or these By-Laws, the holders of a majority of the shares entitled to vote
at any meeting of the stockholders, present, in person or by proxy, shall
constitute a quorum and the act of the majority of such quorum shall be
deemed the act of the stockholders.
If a quorum shall fail to attend any meeting, the chairman of the
meeting may adjourn the meeting to another place, date or time.
If a notice of any adjourned special meeting of stockholders is sent
to all stockholders entitled to vote thereat, stating that it will be held
with those present constituting a quorum, then, except as otherwise
required by law, those present at such adjourned meeting shall constitute a
quorum and all matters shall be determined by a majority of votes cast at
such meeting.
Section 6. Qualification of Voters.
The Board of Directors (hereinafter sometimes referred to as the
"Board") may fix a day and hour not more than sixty nor less then ten days
prior to the day of holding any meeting of the stockholders at the time of
which the stockholders entitled to notice of and to vote at such meeting
shall be determined. Only those persons who were holders of record of
voting stock at such time shall be entitled to notice of and to vote at
such meeting.
Section 7. Procedure.
The order of business and all other matters of procedure at every
meeting of the stockholders may be determined by the presiding officer.
Section 8. Voting Lists.
The officer or agent having charge of the transfer book for shares of
the Corporation shall prepare and make, at least 10 days before every
meeting of stockholders, a complete list of the stockholders entitled to
vote at such meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of the meeting during the whole
time thereof and may be inspected by any stockholder present. The original
share or stock ledger or transfer book or a duplicate thereof, shall be the
only evidence as to who are the stockholders entitled to examine such list
or share ledger or transfer book or to vote at any meeting of stockholders.
Section 9. Voting and Proxies.
Each holder of Common Stock shall be entitled to one vote per share
held of record upon each matter on which stockholders generally are
entitled to vote.
<PAGE>
At all meetings of stockholders, a stockholder entitled to vote may
vote in person or by proxy executed in writing by the stockholder or by his
duly authorized attorney-in-fact. Such proxy shall be filed with the
Secretary of the Corporation before or at the time of the meeting. Unless
otherwise provided by law, all questions touching the validity or
sufficiency of the proxies shall be decided by the Secretary.
Directors shall be elected by a plurality of the votes cast at an
election.
All other action (unless a greater plurality is required by law or by
the Certificates of Incorporation or by these By-Laws) shall be authorized
by a majority of the votes cast by the holders of shares entitled to vote
thereon, present in person or represented by proxy, and where a separate
vote by class is required, by a majority of the votes cast by the
stockholders of such class, present in person or presented by proxy.
Section 10. Notification of Nomination of Directors.
Nominations for election to the Board of Directors of the Corporation
at a meeting of stockholders may be made by the Board of Directors or by
any stockholder of the Corporation entitled to vote for the election of
directors at such meeting who complies with the notice procedures set forth
in this Section 10. Such nominations, other than those made by or on
behalf of the Board of Directors, may be made only if notice in writing is
personally delivered to, or mailed by first class United States mail,
postage prepaid, and received by, the Secretary of the Corporation (a) in
the case of an annual meeting of the stockholders, in accordance with the
fourth sentence of the third paragraph of Section 1 of these By-Laws and
(b) in the case of a special meeting of the stockholders, not earlier than
the close of business on the 120th day prior to such special meeting and
not later than the close of business on the later of the 90th day prior to
such special meeting or the 10th day following the day on which public
announcement is first made of the date of the special meeting. In no event
shall the public announcement of an adjournment of a special meeting
commence a new time period for the giving of a stockholder's notice as
described above. Such notice shall set forth (a) as to each proposed
nominee (i) the name, age, business address and, if known, residence
address of each such nominee, (ii) the principal occupation or employment
of each such nominee, (iii) the number of shares, if any, of stock of the
Corporation that are beneficially owned by each such nominee and (iv) any
other information concerning the nominee that must be disclosed in proxy
solicitations pursuant to the proxy rules of the Securities and Exchange
Commission if such person had been nominated, or intended to be nominated,
by the Board of Directors (including such person's written consent to be
named as a nominee and to serve as a director if elected); and (b) as to
the stockholder giving the notice (i) the name and address, as they appear
on the Corporation's books, of such stockholder (ii) a representation that
such stockholder is a holder of record of shares of stock of the
Corporation entitled to vote at the meeting and the class and number of
shares of the Corporation which are beneficially owned by such stockholder,
(iii) a representation that such stockholder intends to appear in person
or by proxy at the meeting to nominate the person or persons specified in
the notice and (iv) a description of all arrangements or understandings
between such stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or
nominations are to be made by such stockholder. The Corporation also may
require any proposed nominee to furnish such other information as may
reasonably be required by the Corporation to determine the eligibility of
such proposed nominee to serve as a director of the Corporation. The
presiding officer of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
<PAGE>
ARTICLE III
DIRECTORS
Section 1. Number, Election and Terms.
Except as otherwise fixed pursuant to the provisions of Article 4 of
the Certificate of Incorporation relating to the rights of the holders of
any class or series of stock having a preference over the Common Stock as
to dividends or upon liquidation to elect additional directors under
specified circumstances, the number of Directors shall consist of no less
than seven and no more than thirteen members, as shall be specifically
determined from time to time by resolution of the Board of Directors. The
Directors, other than those who may be elected by the holders of any class
or series of stock having a preference over the Common Stock as to
dividends or upon liquidation, shall be classified, with respect to the
time for which they severally hold office, into three classes, as nearly
equal in number as possible, one class to hold office initially for a term
expiring at the annual meeting of stockholders to be held in 1987, another
class to hold office initially for a term expiring at the annual meeting of
stockholders to be held in 1988, and a third class to hold office initially
for a term expiring at the annual meeting of stockholders to be held in
1989, with the members of each class to hold office until their successors
are elected and qualified. At each annual meeting of stockholders, the
successors or the class of Directors whose term expires at the meeting
shall be elected to hold office for a term expiring at the annual meeting
of stockholders held in third year following the year of their election.
The term "entire Board" as used in these By-Laws means the total
number of
Directors which the Corporation would have if there were no vacancies.
Subject to the rights of holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon
liquidation, nominations for the election of Directors may be made by the
Board of Directors or a committee appointed by the Board of Directors or by
any stockholder entitled to vote in the election of Directors generally.
Section 2. Powers.
The business, property and affairs of the Corporation shall be managed
by or under the direction on its Board of Directors, which shall have and
may exercise all the powers of the Corporation of Incorporation, or by
these By-Laws, directed or required to be exercised or done by the
stockholders.
Section 3. Vacancies.
Except as otherwise fixed pursuant to the provisions of Article 4 of
the Certificate of Incorporation relating to the rights of the holders of
any class or series of stock having a preference over the Common Stock as
to dividends or upon liquidation to elect Directors under specified
circumstances, any vacancies on the Board of Directors resulting from
death, resignation, disqualification, removal or other cause shall be
filled solely by the affirmative vote of a majority of the remaining
Directors then in office, even though less than a quorum of the Board of
Directors. Any director elected in accordance with the preceding sentence
shall hold office until the next annual meeting of stockholders. No
decrease in the number of Directors constituting the Board of Directors
shall shorten the term of any incumbent Director.
Section 4. Removal.
<PAGE>
Subject to the rights of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation to
elect Directors under specified circumstances, any Director may be removed
from office, without cause only by the affirmative vote of the holders of
67% of the combined voting power of the then outstanding shares of stock
entitled to vote generally in the election of Directors, voting together as
a single class.
Section 5. Regular Meetings.
Regular meetings of the Board shall be held at such times and places
as the Board may from time to time determine.
Section 6. Special Meetings.
Special meetings of the Board may be called at any time, at any place
and for any purpose by the Chairman of the Executive Committee, the
Chairman of the Board, or the President, or by any officer of the
Corporation upon the request of a majority of the entire Board.
Section 7. Notice of Meeting.
Notice of regular meetings of the Board need not be given.
Notice of every special meeting of the Board shall be given to each
Director at his usual place of business, or at such other address as shall
have been furnished by him for the purpose. Such notice shall be given at
least twenty-four hours before the meeting by telephone or by being
personally delivered, mailed, or telegraphed. Such notice need not include
a statement of the business to be transacted at, or the purpose of, any
such meeting.
Section 8. Quorum.
Except as may be otherwise provided by law or in these By-Laws, the
presence of a majority of the entire Board shall be necessary and
sufficient to constitute a quorum for the transaction of business at any
meeting of the Board, and the act of a majority of such quorum shall be
deemed the act of the Board.
Section 9. Powers.
Members of the Board, or of any committee thereof, may participate in
a meeting of such Board or committee by means of conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation
shall constitute presence in person at such meeting.
Section 10. Action Without a Meeting.
Action required or permitted to be taken pursuant to authorization
voted at a meeting of the Board, or a committee thereof, may be taken
without a meeting if, before or after the action, all members of the Board
or of the Committee consent thereto in writing. The written consents shall
be filed with the minutes of the proceedings of the Board or Committee.
The consent shall have the same effect as a vote of the Board or Committee
thereof for all purposes.
Section 11. Compensation of Directors.
<PAGE>
Directors shall receive such compensation for their services as shall
be determined by a majority of the entire Board provided that Directors who
are serving the Corporation as officers or employees and who receive
compensation for their services as such officers or employers shall not
receive any salary or other compensation for their services as Directors.
ARTICLE IV
OFFICERS
Section 1. Number.
The officers of the Corporation shall be a Chairman of the Board, a
President, such number of vice presidents as the Board may from time to
time determine, a Secretary and a Treasurer. The Chairman of the Board
shall be the chief executive officer unless the Board shall otherwise
determine. The Chairman of the Board or, in his absence, or if such office
be vacant the President, shall preside at all meetings of the stockholders
and of the Board. Any person may hold two or more offices at the same
time. The Chairman of the Board shall be a member of the Board of
Directors, but the other officers need not be members of the Board.
Section 2. Election and Term of Office.
The officers of the Corporation shall be elected annually by the Board
at the first meeting of the Board held after the annual meeting of
stockholders. If the election of officers shall not be held at such
meeting, such election shall be held as soon thereafter as the same can
conveniently be held. Each officer, except such officers may be elected or
appointed in accordance with the provisions of Section 3 of Article IV,
shall hold his office until his successor shall have been duly elected and
shall have qualified or until his death, resignation or removal.
All officers, agents and employees of the Corporation shall hold their
respective offices or positions at the pleasure of the Board of Directors
and may be removed at any time by the Board of Directors with or without
cause.
Section 3. Duties.
The officers, agents and employees shall perform the duties and
exercise the powers actually incident to the offices or positions held by
them respectively, and/or such other duties and powers as may be assigned
to them from time to time by the Board of Directors.
ARTICLE V
EXECUTIVE COMMITTEE
Section 1. Election.
At any meeting of the Board, an Executive Committee, composed of the
Chairman of the Board, the President, and not less than two other members,
may be elected by a majority vote of the entire Board to serve until the
Board shall otherwise determine. Either the Chairman of the Board or the
President, whichever is the chief executive officer, shall be the Chairman
of the Executive Committee, and the other shall be the Vice Chairman
thereof, unless the Board shall otherwise determine. Members of the
Executive Committee shall be members of the Board.
<PAGE>
Section 2. Powers.
The Executive Committee shall have and may exercise all of the powers
of the Board of Directors when the board is not in session, except that it
shall have no power to (a) elect directors or officers; (b) alter, amend
or repeal these By-Laws or any resolution or resolutions of the Board of
Directors relating to the Executive Committee; (c) declare any dividend or
make any other distribution to the stockholders of the Corporation; (d)
appoint any member of the Executive Committee; (e) take any other action
which legally may be taken only by the Board; or (f) approve the
acquisition of substantially all the assets or capital stock of a
corporation or business entity which has annual sales in excess of twenty
percent (20%) of the annual sales of the Corporation as of the date of such
approval.
Section 3. Vacancies.
Vacancies in the Executive Committee may be filled at any time by a
majority vote of the entire Board.
Section 4. Other Committees.
The Board may designate one or more other committees, each consisting
of one or more directors of the Corporation as members and one or more
directors as alternate members, with such power and authority as prescribed
in the By-Laws or as provided in a resolution adopted by a majority of the
entire Board. Each Committee, and each member thereof, shall serve at the
pleasure of the Board.
ARTICLE VI
LIABILITY OF DIRECTORS
A Director of the Corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except for liability (i) for any breach of
the Director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which
the Director derived any improper personal benefit. If the Delaware
General Corporation Law is hereafter amended to authorize the further
elimination or limitation of the liability of a Director, then the
liability of a Director of the Corporation shall be eliminated or limited
to the fullest extent permitted by the amended Delaware General Corporation
Law.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a Director of the Corporation existing at the time of such
repeal or modification.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
Section 1.
The Corporation shall indemnify to the full extent permitted by, and
in the manner permissible under, the laws of the State of Delaware any
person made, or threatened to be made, a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the
fact that he, his testator or intestate is or was a director or officer of
the Corporation or any predecessor of the Corporation, or served any other
enterprise as a director or officer at the request of the Corporation or
any predecessor of the Corporation.
<PAGE>
Section 2. General.
The foregoing provisions of this Article VII shall be deemed to be a
contract between the Corporation and each director and officer who serves
in such capacity at any time while this By-Law is in effect, and any repeal
or modification thereof shall not affect any rights or obligations then
existing with respect to any state of facts then or theretofore existing or
any action, suit or proceeding theretofore or thereafter brought based in
whole or in part upon any such state of facts.
The foregoing rights of indemnification shall not be deemed exclusive
of any other rights to which any director or officer may be entitled apart
from the provisions of this Article.
The Board of Directors in its discretion shall have the power on
behalf of the Corporation to indemnify any person, other than a director or
officer, made a party to any action, suit or proceeding by reason of the
fact that he, his testator or intestate, is or was an employee of the
Corporation.
ARTICLE VIII
CAPITAL STOCK
Section 1. Certificates of Stock.
The certificates for shares of the capital stock of the Corporation
shall be in such form as shall be approved by the Board. The certificates
shall be signed by the Chairman of the Board, the President, and also the
Treasurer or the Secretary, and may be sealed with the seal of the
Corporation, or a facsimile thereof.
The signatures of the aforesaid officers may be facsimiles if the
certificate is countersigned by a transfer agent or registered by a
registrar other than the Corporation or its employee. The validity of any
stock certificate of the Corporation signed and executed by or in the name
of duly qualified officers of the Corporation shall not be affected by the
subsequent death, resignation, or the ceasing for any other reason of any
such officer to hold such office, whether before or after the date borne by
or the actual delivery of such certificate.
The name of the person owning the shares represented thereby, with the
number of such shares and the date of issue, shall be entered on the
Corporation's capital stock records.
All certificates surrendered to the Corporation shall be canceled, and
no new certificates shall be issued until the former certificate for the
same number of shares shall have been surrendered and canceled except in
case of a lost or destroyed certificate.
The Corporation may treat the holder of record or any share or shares
of stock as the holder in fact thereof, and shall not be bound to recognize
any equitable or other claim to interest in any such share or shares on the
part of any other person, whether or not it shall express or other notice
thereof, save as expressly provided by law.
Section 2. Lost, Stolen or Destroyed Certificates.
The Corporation may issue a new certificate for shares in place of a
certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the Board may require the owner of the lost or destroyed
certificate, or his legal representative, to give the Corporation a bond in
form satisfactory to the Corporation sufficient to indemnify the
Corporation, its transfer agents and registrars against any claim that may
be made against them on account of the alleged lost or destroyed
certificate or the issuance of such a new certificate.
<PAGE>
Section 3. Transfer of Shares.
Shares of the capital stock of the Corporation shall be transferable
by the owner thereof in person or by duly authorized attorney, upon
surrender of the certificates therefore properly endorsed. The Board, at
its option, may appoint a transfer agent and registrar, or one or more
transfer agents and one or more registrars, or either, for the stock of the
Corporation.
Section 4. Regulations.
The Board shall have power and authority to make all such rules and
regulations as they may deem expedient concerning the issue, transfer and
registration of certificates for shares of the capital stock of the
Corporation.
ARTICLE IX
AMENDMENTS
Section 1. Amendments of By-Laws.
Subject to the provisions of the Certificate of Incorporation, these
By-Laws may be altered, amended or repealed at any regular meeting of the
stockholders (or at any special meeting thereof duly called for that
purpose) by a majority vote of the shares represented and entitled to vote
at such meeting; provided that in the notice of such special meeting notice
of such purpose shall be given. Subject to the laws of the State of
Delaware, the Certificate of Incorporation and these By-Laws, the Board of
Directors may by majority vote of those present at any meeting at which a
quorum is present amend these By-Laws, or enact such other By-Laws as in
their judgment may be advisable for the regulation of the conduct of the
affairs of the Corporation.
ARTICLE X
CORPORATE SEAL
The corporate seal of the Corporation shall have inscribed thereon the
name of the Corporation and the words "Corporate Seal 1986-Delaware." Said
seal may be used by causing it or a facsimile or equivalent thereof to be
impressed or affixed or reproduced, and shall be in the custody of the
Secretary. If and when so directed by the Board, a duplicate of the seal
may be kept and used by the Treasurer, or by any Assistant Treasurer or
Assistant Secretary.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 1. Dividends.
Dividends upon the outstanding shares of the Corporation may be paid
from any source permitted by law. Dividends may be declared at any regular
or special meeting of the Board and may be paid in cash or other property
or in the form of a stock dividend.
<PAGE>
Section 2. Fiscal Year.
The fiscal year of the Corporation shall end on the 31st day of March
of each year, unless otherwise provided by resolution of the Board.
Section 3. Stock in Other Corporations.
Any shares of stock in any other corporation which may from time to
time be held by the Corporation may be represented and voted at any meeting
of stockholders of such corporation by the Chairman or the President of the
Corporation or by any other person or persons thereunto authorized by the
Board, or by any proxy designated by written instrument of appointment
executed in the name of the Corporation either by the Chairman, the
President, or a Vice President, and attested by the Secretary or an
Assistant Secretary.
Shares of stock in any other corporation which shares are owned by the
Corporation need not stand in its name, but may be held for its benefit in
the individual name of the Chairman or of any other nominee designated for
the purpose by the Board. Certificates for shares so held for the benefit
of the Corporation shall be endorsed in blank, or have proper stock powers
attached so that said certificates are at all times in due form for
transfer, and shall be held for safekeeping in such manner as shall be
determined from time to time by the Board.
Section 4. Election of Auditors.
The directors shall select independent auditors to audit the books and
records of the Corporation for the current fiscal year, subject to the
approval of the stockholders at the annual meeting. Should the auditors so
elected resign, be removed for good cause shown, or otherwise fail to serve
during or with respect to said year, a majority of the directors shall
select a substitute firm of auditors to serve with respect to said year.
<PAGE> i
AIRGAS, INC. 401(k) PLAN
(Amended and Restated Effective January 1, 1997)
(Revised)
Airgas, Inc. (the "Company") adopted the Airgas, Inc. 401(k) Plan
(the "Plan") for the benefit of certain Employees (as defined in the Plan)
of the Company and its affiliates effective January 1, 1988. The Company
amended the Plan from time to time.
The Company's subsidiary, Midwest Carbide Corporation, adopted the
Keokuk Bargaining Unit 401(k) Plan (the "Keokuk Plan") effective January 1,
1988, for the benefit of certain of its Employees (as provided therein).
The Company provided for the merger of the Keokuk Plan with and into this
Plan effective as of January 1, 1997.
The Company hereby amends and completely restates the Plan
effective January 1, 1997, except as expressly stated to the contrary
herein, subject to the subsequent condition that the Internal Revenue
Service issues a determination that the Plan meets all applicable
requirements of section 401(a) of the Code (as defined in subsection 1(f)),
that employer contributions thereto remain deductible under section 404 of
the Code and that the trust fund maintained with respect thereto remains
tax exempt under section 501(a) of the Code. The Plan, as herein amended
and restated, shall apply only to an Employee who is credited with an Hour
of Service (as defined in subsection 1(o)) on or after January 1, 1997, and
to the Accrued Benefit of a former employee held in the Plan on January 1,
1997.
The Company executed the Plan as initially amended and restated
effective January 1, 1997 on January 27, 1997. The Company revised the
Plan as set forth herein to include subsequent amendments to the Plan and
reflect governmental interpretations of law applicable to the Plan.
<PAGE> ii
AIRGAS, INC. 401(k) PLAN
(Amended and Restated Effective January 1, 1997)
(Revised)
TABLE OF CONTENTS
Section Page
1 DEFINITIONS 1
(a) Accrued Benefit 1
(b) Administrator or Plan Administrator 1
(c) Annual Additions 1
(d) Board of Directors 1
(e) Break in Service 1
(f) Code 1
(g) Committee 2
(h) Company 2
(i) Compensation 2
(j) Employee 3
(k) Entry Date. 3
(l) ERISA 3
(m) Fiduciary 3
(n) Fund 3
(o) Hour of Service 3
(p) Investment Category 5
(q) Investment Manager 5
(r) Limitation Year 6
(s) Matching Account 6
(t) Member 6
(u) Normal Retirement Date 6
(v) Parent Company Stock. 6
(w) Participating Company 6
(x) Payroll Period 6
(y) Period of Service 6
(z) Period of Severance 7
(aa) Plan 7
(ab) Plan Year 7
(ac) Profit Sharing Account 7
(ad) Related Entity 7
(ae) Restatement Effective Date 8
(af) Rollover Account 8
(ag) Salary Reduction Account 8
(ah) Service 8
(ai) Severance Date 8
(aj) Supplemental Participating Company
Contribution 9
(ak) Trust Agreement 9
(al) Trustee 9
(am) Valuation Date 9
(an) Year of Service for Eligibility 9
<PAGE> iii
AIRGAS, INC. 401(k) PLAN
(Amended and Restated Effective January 1, 1997)
(Revised)
TABLE OF CONTENTS
Section Page
2 ADMINISTRATION OF THE PLAN 10
(a) ERISA Reporting and Disclosure
by Administrator 10
(b) Committee 10
(c) Multiple Capacities 10
(d) Committee Powers 10
(e) Allocation of Fiduciary Responsibility 11
(f) Claims 13
(g) Fiduciary Compensation 14
(h) Plan Expenses 14
(i) Fiduciary Insurance 14
(j) Indemnification 14
3 PARTICIPATION IN THE PLAN 15
(a) Initial Eligibility 15
(b) Measuring Service 16
(c) Termination and Requalification 17
(d) Special Rule for Rollovers 17
(e) Termination of Membership 17
4 MEMBER AND PARTICIPATING COMPANY CONTRIBUTIONS 18
(a) Salary Reduction Contributions 18
(b) Salary Reduction Contribution Limitations 18
(c) Salary Reduction Account 20
(d) Compliance with Salary Reduction
Contributions Discrimination Tests 20
(e) Participating Company Matching
Contributions 24
(f) Matching Account 24
(g) Compliance with Participating Company
Matching Contributions Discrimination
Tests 25
(h) Profit Sharing Contributions 28
(i) Profit Sharing Account 30
(j) Rollovers 30
(k) Voluntary Contributions 31
(l) Payroll Taxes 31
(m) Deductibility 31
(n) Supplemental Participating Company
Contributions 32
<PAGE> iv
AIRGAS, INC. 401(k) PLAN
(Amended and Restated Effective January 1, 1997)
(Revised)
TABLE OF CONTENTS
Section Page
5 MAXIMUM CONTRIBUTIONS AND BENEFITS 35
(a) Defined Contribution Limitation 35
(b) Combined Limitation 36
(c) Combined Limitation Computation 36
(d) Definition of "Compensation" for Code
Limitations 37
(e) Transition Provision 39
6 ADMINISTRATION OF FUNDS 40
(a) Investment Control 40
(b) Parent Company Stock 40
(c) Member Elections 40
(d) No Member Election 41
(e) Facilitation 41
(f) Valuations 41
(g) Allocation of Gain or Loss 41
(h) Bookkeeping 42
7 BENEFICIARIES AND DEATH BENEFITS 43
(a) Designation of Beneficiary 43
(b) Beneficiary Priority List 43
(c) Proof of Death 44
(d) Divorce 44
8 BENEFITS FOR MEMBERS 45
(a) Retirement Benefit 45
(b) Death Benefit 45
(c) Termination of Employment Benefit 45
(d) Vesting 45
9 DISTRIBUTION OF BENEFITS 46
(a) Commencement 46
(b) Benefit Forms 47
(c) Deferred Payments 48
(d) Withholding 48
(e) Compliance with Code Requirements 48
(f) Distribution Limitations 48
(g) Rollover Election 49
<PAGE> v
AIRGAS, INC. 401(k) PLAN
(Amended and Restated Effective January 1, 1997)
(Revised)
TABLE OF CONTENTS
Section Page
10 HARDSHIP AND IN-SERVICE DISTRIBUTIONS 51
(a) General Rule 51
(b) Need 51
(c) Satisfaction of Need 52
(d) Limitations 53
(e) Accounting 53
11 LOANS 54
(a) Availability 54
(b) Minimum Requirements 54
(c) Accounting 56
12 TITLE TO ASSETS 57
13 AMENDMENT AND TERMINATION 58
(a) Amendment 58
(b) Termination 58
(c) Conduct on Termination 58
14 LIMITATION OF RIGHTS 60
(a) Alienation 60
(b) Qualified Domestic Relations Order
Exception 60
(c) Employment 60
15 MERGERS, CONSOLIDATIONS OR TRANSFERS OF PLAN ASSETS 62
(a) General Rule 62
(b) Protected Benefits 62
(c) Vesting 62
(d) Special In-Service Hardship Distribution
Provisions 62
(e) Special In-Service Age 59-1/2
Distribution Provisions 63
(f) Special In-Service Age 55 Distribution
Provision 63
(g) Installment Settlement 63
(h) Limitations on In-Service Distributions 64
(i) Annuity Settlements 64
<PAGE> vi
AIRGAS, INC. 401(k) PLAN
(Amended and Restated Effective January 1, 1997)
(Revised)
TABLE OF CONTENTS
Section Page
16 PARTICIPATION BY RELATED ENTITIES 69
(a) Commencement 69
(b) Termination 69
(c) Single Plan 69
(d) Delegation of Authority 69
17 TOP-HEAVY REQUIREMENTS 70
(a) General Rule 70
(b) Calculation of Top-Heavy Status 70
(c) Definitions 70
(d) Combined Benefit Limitation 73
(e) Vesting 73
(f) Minimum Contribution 73
18 MISCELLANEOUS 75
(a) Incapacity 75
(b) Reversions 75
(c) Employee Data 76
(d) In Writing Requirement 76
(e) Doubt as to Right to Payment 76
(f) Inability to Locate Distributee 76
(g) Estoppel of Members and Their
Beneficiaries 77
(h) Law Governing 77
(i) Pronouns 77
(j) Interpretation 77
<PAGE> 1
1. DEFINITIONS
(a) "Accrued Benefit" shall mean on any date
of determination the value of a Member's share of the Fund.
(b) "Administrator" or "Plan Administrator" shall mean the
entity, individual or group of individuals
designated pursuant to subsection 2(a) to discharge the statutory
responsibilities of a plan administrator under ERISA. As of the
Restatement Effective Date, the Company is the Plan Administrator acting
directly or through its subsidiary, Airgas Management, Inc.
(c) "Annual Additions" shall mean the sum for
any Limitation Year of (i) employer contributions, (ii) employee
contributions, (iii) forfeitures and (iv) amounts described in sections
415(l) and 419A(d) of the Code, which are (A) allocated to an account which
provides medical benefits under section 401(h) or 419(e) of the Code and
(B) treated as "Annual Additions" to the account of a Member under such
provisions of the Code. "Annual Additions" shall include excess
contributions as defined in section 401(k)(8)(B) of the Code, excess
aggregate contributions as defined in section 401(m)(6)(B) of the Code and
excess deferrals as described in section 402(g) of the Code, regardless of
whether such amounts are distributed or forfeited. "Annual Additions"
shall not include (i) rollover contributions (as defined in sections
402(c), 403(a)(4), 403(b)(8) and 408(d)(3) of the Code) or (ii) employee
contributions to a simplified employee pension plan which are excludable
from gross income under section 408(k)(6) of the Code.
(d) "Board of Directors" shall mean the
Board of Directors of the Company or any committee or delegee thereof
designated in accordance with subsection 2(e)(ii).
(e) "Break in Service" shall mean for any
Employee any Plan Year in which he is not credited with more than 500 Hours
of Service.
(f) "Code" shall mean the Internal Revenue Code of 1986,
as amended, and the same as may be further amended from time to time.
<PAGE> 2
(g) "Committee" shall mean the individual or group
of individuals designated pursuant to subsection 2(b) to control and manage
the operation and administration of the Plan to the extent set forth
herein.
(h) "Company" shall mean Airgas, Inc.
(i) "Compensation" shall mean the total taxable
income, other than items excluded in he next sentence, paid to an Employee
for services by a Participating Company during a Plan Year, plus
amounts which an Employee elects to have withheld from his remuneration for
services under this Plan or a plan which meets the requirements of section
125 of the Code. "Compensation" shall not include (i) bonuses, (ii) income
from exercise of stock options, receipt or vesting of restricted stock
grants, exercise of stock appreciation rights or similar equity-based
compensation arrangements, (iii) deferred compensation, (iv) severance pay,
(v) accrued vacation pay paid in one lump sum after termination of
employment, (vi) tuition reimbursements, (vii) car allowances, (viii)
moving expenses, (ix) expense reimbursements, (x) employer contributions to
the Plan, (xi) the value of welfare benefits or perquisites, or (xii)
similar items (whether or not includible in gross income). Notwithstanding
the foregoing, "Compensation" for an Employee covered by the collective
bargaining agreement between Midwest Carbide Corporation and the Oil,
Chemical and Atomic Workers International Union, Keokuk Local No. 6-249,
shall mean the Employee's basic hourly rate of pay for a Pay Period
multiplied by the Hours of Service for which he was paid for such Pay
Period. "Compensation" with respect to any Member for any Plan Year shall
be limited to $150,000 (or an increased amount permitted in accordance with
a cost of living adjustment under section 415(d) of the Code).
<PAGE> 3
(j) "Employee" shall mean each and every person
employed by a Participating Company or a Related Entity. The term
"Employee" shall also include a person who is a "leased employee" (within
the meaning of section 414(n)(2) of the Code) with respect to a
Participating Company or a Related Entity except that no person who is a
"leased employee" shall be eligible to participate in this Plan or be
deemed an "Employee" for purposes of eligibility to participate.
(k) "Entry Date" shall mean the first day of each
calendar month of each Plan Year.
(l) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and the same as may be further amended
from time to time.
(m) "Fiduciary" shall mean a person who, with
respect to the Plan, (i) exercises any discretionary authority or
discretionary control respecting management of the Plan or exercises any
authority or control with respect to management or disposition of the
Plan's assets, (ii) renders investment advice for a fee or other
compensation, direct or indirect, with respect to any monies or other
property of the Plan, or has any authority or responsibility to do so, or
(iii) has any discretionary authority or discretionary responsibility in
the administration of the Plan.
(n) "Fund" shall mean the assets of the Plan. All
Investment Categories shall be part of the Fund.
(o) "Hour of Service"
(i) General Rule. "Hour of Service" shall mean each
hour (A) for which an Employee is directly or indirectly paid, or entitled
to payment, by a Participating Company or a Related Entity for the
performance of duties or (B) for which back pay, irrespective of mitigation
of damages, has been either awarded or agreed to by a Participating Company
or a Related Entity. These hours shall be credited to the Employee for the
period or
<PAGE> 4
periods in which the duties were performed or to which the award
or agreement pertains irrespective of when payment is made. The same hours
shall not be credited under both (A) and (B) above.
(ii) Paid Absences. An Employee shall also be credited
with one "Hour of Service" for each hour for which the Employee is directly
or indirectly paid, or entitled to payment, by a Participating Company or a
Related Entity for reasons other than the performance of duties or absence
due to vacation, holiday, illness, incapacity, disability, layoff, jury
duty or authorized leave of absence for a period not exceeding one year for
any reason in accordance with a uniform policy established by the
Committee; provided, however, not more than 501 "Hours of Service" shall be
credited to an Employee under this subsection 1(o)(ii) on account of any
single, continuous period during which the Employee performs no duties and
provided, further, that no credit shall be given if payment (A) is made or
due under a plan maintained solely for the purpose of complying with
applicable worker's compensation, unemployment compensation or disability
insurance laws or (B) is made solely to reimburse an Employee for medical
or medically related expenses incurred by the Employee.
(iii)Military. An Employee shall also be credited with
one "Hour of Service" for each hour during which the Employee is absent on
active duty in the military service of the United States under leave of
absence granted by a Participating Company or a Related Entity or when
required with respect to qualified military service by the Uniform Services
Employment and Reemployment Rights Act of 1994 and section 414(u) of the
Code, provided he returns to employment with a Participating Company or a
Related Entity within 90 days after his release from active duty or within
such longer period during which his right to reemployment is protected by
law.
(iv)Equivalencies. If, for Plan purposes, an
Employee's records are kept on other than an hourly basis as described
above, the Committee, according to uniform
<PAGE> 5
rules applicable to a class of Employees or Members, may apply the following
equivalencies for purposes of crediting "Hours of Service":
Basis Upon Which Records Credit Granted to Individual if Individual Earns
are Maintained One or More Hours of Service During Period
Shift Actual hours for full shift
Day 10 Hours of Service
Week 45 Hours of Service
Semi-Monthly Payroll Period 95 Hours of Service
Months of Employment 190 Hours of Service
(v) Miscellaneous. For purposes of this subsection
1(o), the regulations issued by the Secretary of Labor at 29 CFR 2530.200b-
2(b) and (c) are incorporated by reference. Nothing herein shall be
construed as denying an Employee credit for an "Hour of Service" if credit
is required by separate federal law.
(p) "Investment Category" shall mean any
separate investment fund which is made available under the terms of the
Plan.
(q) "Investment Manager" shall mean any
Fiduciary (other than a Trustee) who:
(i) has the power to manage, acquire, or dispose of any
asset of the Plan;
(ii) is:
(A)registered as an investment advisor under the
Investment Advisers Act of 1940;
(B)a bank, as defined in that Act; or
(C)an insurance company qualified to perform
services described in subsection 1(q)(i) above under the laws of more than one
state; and
(iii)has acknowledged in writing that he is a Fiduciary with
<PAGE> 6
respect to the Plan.
(r) "Limitation Year" shall mean the
consecutive twelve-month period commencing on January 1st and ending on
December 31st.
(s) "Matching Account" shall mean the portion
of the Member's Accrued Benefit derived from Participating Company
contributions under subsection 4(e) hereof and the corresponding provisions
of the Plan as heretofore effective, adjusted as provided in subsection
4(f).
(t) "Member" shall mean each and every Employee of a
Participating Company who satisfies the requirements for participation
under Section 3 hereof and each other person who has an Accrued Benefit
held under the Plan.
(u) "Normal Retirement Date" shall mean
the date on which a Member attains age 65.
(v) "Parent Company Stock" shall mean
Airgas, Inc. common stock.
(w) "Participating Company" shall mean
each Related Entity with respect to the Company which adopts this Plan
pursuant to Section 16. The term shall also include the Company, unless
the context otherwise requires.
(x) "Payroll Period" shall mean a weekly, bi-weekly, semi-
monthly or monthly pay period or such other standard pay period of a
Participating Company applicable to the class of Employees of which an
individual is a part.
(y) "Period of Service" shall mean the
period of time commencing on the date on which an Employee first is
credited with an Hour of Service or, if applicable, on the date following a
Period of Severance of one year or more on which an Employee first is
credited with an Hour of Service provided he requalifies for participation
under subsection 3(c), and ending on the next following Severance Date.
A Period of Severance of less than one year shall be included in a Period of
Service for all purposes.
<PAGE> 7
(z) "Period of Severance" shall mean the
period of time commencing on an Employee's Severance Date and ending on the
date on which the Employee first again is credited with an Hour of Service,
exclusive of periods during which an Employee is on an unpaid leave
pursuant to the Family and Medical Leave Act of 1993.
(aa) "Plan" shall mean the Airgas, Inc. 401(k) Plan as
amended and restated as set forth herein effective January 1, 1997, and the
same as may be amended from time to time.
(ab) "Plan Year" shall mean the consecutive twelve-
month period commencing on January 1st and ending on December 31st.
(ac) "Profit Sharing Account" shall mean the portion of the
Member's Accrued Benefit derived from contributions made under subsection
4(h) hereof and the corresponding provisions of the Plan as heretofore
effective, adjusted as provided in subsection 4(i).
(ad) "Related Entity" shall mean (i) all
corporations which are members with a Participating Company in a controlled
group of corporations within the meaning of section 1563(a) of the Code,
determined without regard to sections 1563(a)(4) and (e)(3)(C) of the Code,
(ii) all trades or businesses (whether or not incorporated) which are under
common control with a Participating Company as determined by
regulations promulgated under section 414(c) of the Code, (iii) all trades
or businesses which are members of an affiliated service group with a
Participating Company within the meaning of section 414(m) of the Code and
(iv) any entity required to be aggregated with a Participating Company
under regulations prescribed under section 414(o) of the Code (to the
extent provided in such regulations); provided, however, for purposes of
Section 5, the definition shall be modified to substitute the phrase "more
than 50%" for the phrase "at least 80%" each place it appears in section
1563(a)(1) of the Code. Furthermore, for purposes of crediting Hours of
Service for eligibility to participate, employment
<PAGE> 8
as a "leased employee," within the meaning of section 414(n) of the Code,
of a Participating Company or a Related Entity shall be treated as employment
for a Participating Company or a Related Entity. For purposes of subsections
3(a) and 3(b) governing Hours of Service for purposes of eligibility to
participate, an entity the stock or assets of which a Participating Company
acquires shall be deemed a "Related Entity" for periods prior to such
acquisition for persons who become Employees incident to such acquisition.
In any other case, an entity is a "Related Entity" only during those
periods in which it is included in a category described in this subsection.
(ae) "Restatement Effective Date"
shall mean January 1, 1997
(af) "Rollover Account" shall mean the portion
of the Member's Accrued Benefit derived from contributions made under
subsection 4(j)(i) hereof and the corresponding provisions of the Plan as
heretofore effective, adjusted as provided in subsection 4(j)(ii).
(ag) "Salary Reduction Account" shall
mean the portion of the Member's Accrued Benefit derived from contributions
made under subsection 4(a) hereof and the corresponding provisions of the
Plan as heretofore effective, adjusted as provided in subsection 4(c).
(ah) "Service" shall mean the sum of an Employee's
Periods of Service.
(ai) "Severance Date" shall mean the earliest of
the date an Employee quits, is discharged (or severed, if later), retires,
dies or otherwise has an absence which causes him to cease to be an
Employee. An Employee who terminates employment to enter the military
service of the United States shall not suffer a "Severance Date" as of such
date or any future date unless and until permitted by section 414(u) of the
Code and shall receive credit for Hours of
Service and Service for his entire period of absence. However, if the
Employee does not return to employment with a Participating Company or
Related Entity within the time prescribed by law, then the date he
terminated employment shall be his Severance Date.
<PAGE> 9
(aj) "Supplemental Participating Company Contribution" means an
amount contributed by the Participating Companies to the Fund pursuant to
Section 4 of the Plan.
(ak) "Trust Agreement" shall mean the agreement
or agreements between the Company and a Trustee under which all or a
portion of the Fund is held.
(al) "Trustee" shall mean such person, persons or corporate
fiduciary designated pursuant to subsection 6(a) to manage and control all
or a portion of the Fund pursuant to the terms of the Plan and a Trust
Agreement.
(am) "Valuation Date" shall mean any business
day the New York Stock Exchange is open for trading and such other dates as
the Committee may specify from time to time. With respect to a Member's
Accrued Benefit, the business day of initial investment of new
contributions or liquidation of a Member's investment credited to an
Investment Category for reinvestment or distribution shall be the
"Valuation Date" for purposes of determining the amount of investment,
reinvestment or distribution.
(an) "Year of Service for
Eligibility" shall mean a consecutive twelve-month measuring period
specified in the Plan in which an Employee is credited with 1,000 Hours of
Service or more.
<PAGE> 10
2. ADMINISTRATION OF THE PLAN
(a) ERISA Reporting and Disclosure by Administrator. The
Company, through its Board of Directors, may designate a Plan Administrator.
If no individual or group of individuals is designated or serving, the Company
shall be the Administrator. The Administrator shall file all reports and
distribute to Members and beneficiaries reports and other information required
under ERISA or the Code and perform such duties as are assigned to the
Administrator by the Plan or delegated to the Administrator by the
Committee.
(b) Committee. The Company, through its Board of
Directors, shall designate a Committee which shall have the authority to
control and manage the operation and administration of the Plan. If the
Committee consists of more than two members, it shall act by majority vote.
The Committee may (i) delegate all or a portion of the responsibilities of
controlling and managing the operation and administration of the Plan to
one or more persons, including the Administrator, and (ii) appoint agents,
investment advisers, counsel, physicians or other representatives to render
advice with regard to any of its responsibilities under the Plan. The
Board of Directors may remove, with or without cause, the Committee or any
Committee member. The Committee may remove, with or without cause, any
delegate or adviser designated by it.
(c) Multiple Capacities. Any person may
serve in more than one fiduciary capacity.
(d) Committee Powers. The responsibility to
control and manage the operation and administration of the Plan shall
include, but shall not be limited to, the performance of the following
acts:
(i) the filing of all reports required of the Plan,
other than those which are the responsibility of the Administrator;
(ii)the distribution to Members and beneficiaries of
all reports
<PAGE> 11
and other information required of the Plan, other than reports
and information required to be distributed by the Administrator;
(iii)the keeping of complete records of the
administration of the Plan;
(iv) the promulgation of rules and regulations for
administration of the Plan and establishment of a procedure to determine
the qualified status of a domestic relations order; and
(v) the interpretation of the Plan, including the
determination of any questions of fact arising under the Plan and the
making of all decisions required by the Plan.
The Committee's interpretation of the Plan and any actions and decisions
taken in good faith by the Committee based on its interpretation shall be
final and conclusive. The Committee may correct any defect, or supply any
omission, or reconcile any inconsistency in the Plan in such manner and to
such extent as shall be expedient to carry the Plan into effect and shall
be the sole judge of such expediency.
(e) Allocation of Fiduciary Responsibility. The Board of
Directors, the Administrator, the Committee, each Trustee and each Investment
Manager (if any) possess certain specified powers, duties, responsibilities
and obligations under the Plan's governing instruments. It is intended under
this Plan that each Fiduciary be responsible solely for the proper exercise of
its own functions and that each not be responsible for any act or failure to
act of another, unless otherwise responsible as a breach of its fiduciary duty
or for breach of duty by another Fiduciary under ERISA's rules of co-fiduciary
responsibility. In general:
<PAGE> 12
(i) the Board of Directors is responsible for
appointing and removing the Administrator, the Committee, each Trustee and
each Investment Manager (if any); for amending or terminating the Plan,
each Trust Agreement, and each asset management agreement (if any); and
transferring the responsibility for any function from or to a particular
Fiduciary;
(ii) the Board of Directors may delegate any power or
duty it has under the Plan or a Trust Agreement, including, but not limited
to, amending the Plan or a Trust Agreement, to a committee of the Board of
Directors, to any officer or Employee of the Company or a Related Entity or
to any other person or entity, in which case such delegee and not the Board
of Directors, shall be responsible for exercise of the delegated functions;
(iii)the Committee is the Named Fiduciary (within the
meaning of ERISA) for the Plan and is responsible for administering the
Plan, for exercising the powers granted to it under subsections 2(b) and
2(d) and for providing a procedure for carrying out a funding policy and
method consistent with the objectives of the Plan and the requirements of
Title I of ERISA including, but not limited to, selecting or establishing
Investment Categories for the Plan as provided for in Section 6, unless the
Board of Directors establishes a funding policy or delegates the
responsibility to establish a funding policy to another Fiduciary;
(iv) the Administrator is responsible for discharging
the statutory duties of a plan administrator under ERISA and the Code and
such duties that the Committee delegates to the Administrator or the Plan
specifically assigns to the Administrator; and
(v) each Trustee and each Investment Manager (if any)
is responsible for the management and control of the portion of the Fund
over which it has
<PAGE> 13
control to the extent provided in its Trust Agreement or asset management
agreement, respectively.
(f) Claims. If, pursuant to the rules, regulations or
other interpretations of the Plan, the Committee denies the claim of a
Member or beneficiary for benefits under the Plan, the Committee shall
provide written notice, within 90 days after receipt of the claim, setting
forth in a manner calculated to be understood by the claimant:
(i) the specific reasons for such denial;
(ii) the specific reference to the Plan provisions on
which the denial is based;
(iii)a description of any additional material or
information necessary to perfect the claim and an explanation of why such
material or information is needed; and
(iv) an explanation of the Plan's claim review procedure
and the time limitations of this subsection applicable thereto.
A Member or beneficiary whose claim for benefits has been denied may
request review by the Committee of the denied claim by notifying the
Committee in writing within 60 days after receipt of the notification of
claim denial. As part of said review procedure, the claimant or his
authorized representative may review pertinent documents and submit issues
and comments to the Committee in writing. The Committee shall render its
decision to the claimant in a manner calculated to be understood by the
claimant not later than 60 days after receipt of the request for review,
unless special circumstances require an extension of time, in which case
decision shall be rendered as soon after the sixty-day period as possible,
but not later than 120 days after receipt of the request for review. The
decision on review shall state the specific reasons therefor and the
specific Plan references on which it is based.
<PAGE> 14
(g) Fiduciary Compensation. The
Committee or a Committee member, delegate, or adviser who already receives
full-time pay from a Participating Company or a Related Entity shall serve
without compensation from the Plan for his services as such, but he shall
be reimbursed pursuant to subsection 2(h) for any reasonable expenses
incurred by him in the administration of the Plan. The Committee or a
Committee member, delegate, or adviser who is not already receiving full-
time pay from a Participating Company may be paid such reasonable
compensation as shall be agreed upon.
(h) Plan Expenses. All expenses of
administration of the Plan shall be paid out of the Fund unless paid by the
Company or a Member. According to uniform rules, the Committee may charge
expenses to a particular Investment Category, a particular Member's Accrued
Benefit or a particular Member if the Committee determines that such
allocation of expense or charge is desirable for the equitable
administration of the Plan.
(i) Fiduciary Insurance. If the Committee
so directs, the Plan shall purchase insurance to cover the Plan from
liability or loss occurring by reason of the act or omission of a Fiduciary
provided such insurance permits recourse by the insurer against the
Fiduciary in the case of a breach of a fiduciary obligation by such
Fiduciary.
(j) Indemnification. The Company shall
indemnify and hold harmless to the maximum extent permitted by its by-laws
each Fiduciary who is an Employee or who is an officer or director of a
Participating Company or any Related Entity from any claim, damage, loss or
expense, including litigation expenses and attorneys' fees, resulting from
such person's service as a Fiduciary of the Plan provided the claim,
damage, loss or expense does not result from the Fiduciary's gross
negligence or intentional misconduct.
<PAGE> 15
3. PARTICIPATION IN THE PLAN
(a) Initial Eligibility
(i) Salary Reduction Contributions. Each and every Employee
of a Participating Company who is not excluded under subsection 3(a)(iv) shall
be eligible to make contributions under subsection 4(a) as of the first
Entry Date after the date the Employee first is credited with an Hour of
Service.
(ii) Matching Contributions. Each and every Employee
of a Participating Company not excluded under subsection 3(a)(iv) shall be
eligible and shall qualify to be allocated matching contributions for
Payroll Periods commencing after the date such Employee is credited with
one Year of Service for Eligibility.
(iii) Profit Sharing Contributions. Each and every
Employee of a Participating Company not excluded under subsection 3(a)(iv)
shall be eligible to be allocated profit sharing contributions, if any,
made by the Participating Company which employs him for a Plan Year ending
after the date such Employee is credited with one Year of Service for
Eligibility.
(iv) Excluded Employees. Notwithstanding the foregoing
provisions of this subsection,
(A)no Employee whose terms and conditions of
employment are determined by a collective bargaining agreement between
employee representatives and a Participating Company shall be eligible to
participate unless such collective bargaining agreement provides to the
contrary, in which case such Employee shall be eligible to participate only
to the extent provided in such agreement upon compliance with such
provisions for eligibility and participation as such agreement shall
provide; except that no Employee who has selected, or in the future
selects, a union shall become ineligible
<PAGE> 16
during the period between his selection of the union and the execution of
the first collective bargaining agreement which covers him;
(B)no Employee who is a summer student, co-
operative student or student intern hired on an "as needed" or temporary
basis shall be eligible to participate;
(C)no Employee who is hired as a temporary or
occasional Employee or in a temporary position shall be eligible to
participate;
(D) no Employee who is a non-resident alien and who
receives no earned income (within the meaning of section 911(d)(2) of the
Code) from a Participating Company which constitutes income from sources
within the United States (within the meaning of section 861(a)(3) of the
Code) shall be eligible to participate;
(E)no person who is an Employee by reason of the
second sentence of subsection 1(j) shall be eligible to participate; and
(F)no person a Participating Company determines is
not its Employee for purposes of federal income tax withholding shall be
eligible to participate, regardless of whether an administrative agency or
court rules that such person is a Participating Company's employee for any
purpose.
(b) Measuring Service. For purposes of
measuring service to satisfy the eligibility provisions of subsections
3(a)(ii) and (iii), the Year of Service for Eligibility computation period
shall begin with the date on which the Employee first is credited with an
Hour of Service; provided, however, if an Employee is credited with less
than 1,000 Hours of Service in such measuring period, then subsequent
measuring periods shall begin with the January 1st next following the
Employee's date of hire and continue on a Plan Year basis thereafter.
<PAGE> 17
(c) Termination and Requalification. An Employee who has
satisfied an applicable service requirement of subsection 3(a) and who
subsequently becomes ineligible for any reason shall requalify for
participation on the date on which he is next credited with an Hour of
Service in an eligible job classification under subsection 3(a); provided,
however, if the Employee has a Break in Service with respect to a Plan
Year, he shall not be eligible under subsection 3(a)(ii) or (iii) for
matching contributions or profit sharing contributions until he again
satisfies the service requirement applicable thereto.
(d) Special Rule for Rollovers. An
Employee of a Participating Company who will be eligible to participate in
the Plan after satisfying the service requirement of subsection 3(a)(i) may
make a contribution to the Plan under subsection 4(i) on or after the date
he first is credited with an Hour of Service. An Employee who makes a
contribution under subsection 4(i) shall become a Member on the date of his
contribution; however, such individual shall not be considered to be a
Member for purposes of the remainder of Section 4 until he satisfies the
applicable service requirements of subsection 3(a).
(e) Termination of Membership. An
Employee who becomes a Member shall remain a Member as long as he has an
Accrued Benefit held under the Plan.
<PAGE> 18
4. MEMBER AND PARTICIPATING COMPANY CONTRIBUTIONS
(a) Salary Reduction Contributions. Each Employee who
becomes eligible to participate under subsection 3(a)(i) may contribute
any even multiple of 1.0% of his Compensation, but not more than 15% (or
such other percentage as may be applicable to a class of Members covered by
a specific collective bargaining agreement) of his Compensation, for a Payroll
Period, as he shall elect in a manner prescribed by the Committee. The
initial election to contribute may be effective as of the first day of any
calendar month. Such contribution shall be accomplished through direct
reduction of Compensation in each Payroll Period that the election is in
effect. For purposes of the Code, such contribution shall be deemed to be
made by the Member's employer. A Member may elect to increase, reduce or
terminate his contributions from time to time. All such elections shall be
made in a manner and shall become effective on the date prescribed therefor
by the Committee. Contributions made by Participating Companies under this
subsection shall be made at such times as the Company determines and shall
be allocated to the Salary Reduction Accounts of the Members from whose
Compensation the contributions were withheld in an amount equal to the
amount withheld.
(b) Salary Reduction Contribution Limitations. Contributions
under subsection 4(a) shall be limited as provided below:
(i) Exclusion Limit. The maximum amount of
contribution which any Member may make in any calendar year under
subsection 4(a) is $9,500 (or such increased annual amount resulting from a
cost of living adjustment pursuant to sections 402(g)(5) and 415(d)(1) of
the Code), reduced by the amount of elective deferrals by such Member under
all other plans, contracts or arrangements of any Participating Company or
Related Entity. If the contribution under subsection 4(a) for a Member for
any calendar year exceeds $9,500 (or such increased annual amount resulting
from an adjustment described above), the Committee shall direct the Trustee
to distribute the excess amount (plus any income
<PAGE> 19
and minus any loss allocable to such amount) to the
Member not later than the April 15th following the close of such calendar
year. If (A) a Member participates in another plan which includes a
qualified cash or deferred arrangement, (B) such Member contributes in the
aggregate more than the exclusion limit under this Plan and the
corresponding provisions of the other plan and (C) the Member notifies the
Committee not later than the March 1st following the close of such calendar
year of the portion of the excess the Member has allocated to this Plan,
then the Committee may direct the Trustee to distribute to the Member not
later than April 15th following the close of such calendar year the excess
amount (plus any income and minus any loss allocable to such amount) which
the Member allocated to this Plan. A Member shall be deemed to have given
the notification described in (C) above if the excess results from
contributions solely to this Plan or plans sponsored by Related Entities.
(ii) Discrimination Test Limits. The Committee may
limit the maximum amount of contribution for Members who are "highly
compensated employees" (as defined below) to the extent it determines that
such limitation is necessary to keep the Plan in compliance with section
401(a)(4) or section 401(k)(3) of the Code. Any limitation shall be
effective for all Payroll Periods following the announcement of the
limitation. For purposes of Section 4 of the Plan, the term "highly
compensated employee" for a Plan Year shall mean an Employee who is
described in either or both of the following groups:
(A)an Employee who was a 5% owner, as defined in
section 416(i)(1) of the Code, at any time during the current Plan Year or
last preceding Plan Year; or
(B)an Employee who receives "compensation" (as
defined below) in excess of $80,000 (or an increased amount resulting from
a cost of living
<PAGE> 20
adjustment) during the preceding Plan Year and was in the "top-paid group"
(as defined below) for the preceding Plan Year.
For purposes hereof, the following rules and definitions
shall apply:
(C)The "top-paid" group consists of the top 20% of
Employees ranked on the basis of "compensation" received during the year.
For purposes of determining the number of Employees in the "top-paid"
group, Employees described in section 414(q)(5) of the Code and Q & A 9(b)
of section 1.414(q)-1T of the regulations thereunder are excluded.
(D)"Compensation" is compensation within the
meaning of section 415(c)(3) of the Code and for the 1997 Plan Year also
includes elective or salary reduction contributions to a cafeteria plan,
cash or deferred arrangement or tax-sheltered annuity under sections 125,
402(e)(3), 402(h)(3) and 403(b) of the Code.
(E)Employers aggregated under section 414(b), (c),
(m), or (o) of the Code are treated as a single employer.
(c) Salary Reduction Account. Each
Member's salary reduction contributions, as adjusted for investment gain or
loss and income or expense, constitute such Member's Salary Reduction
Account. A Member shall at all times have a nonforfeitable interest in the
portion of his Accrued Benefit derived from his Salary Reduction Account.
(d) Compliance with Salary Reduction Contributions
Discrimination Tests
(i) Rule. In no event shall the "average deferral
percentage" (as defined below) for Members who are "highly compensated
employees" in a testing group for any Plan Year bear a relationship to the
"average deferral percentage" for Members who are not "highly compensated
employees" in such testing group which does not satisfy either subsection
4(d)(i)(A) or (B) below. The test shall be separately performed for each
testing group. Each
<PAGE> 21
group of Members who participate in the Plan pursuant
to a collective bargaining agreement shall be a separate testing group and
all other Members shall be a separate testing group.
(A)The requirement shall be satisfied for a Plan
Year if the "average deferral percentage" for the Plan Year for the group
of Members who are "highly compensated employees" for the Plan Year is not
more than the "average deferral percentage" for the preceding Plan Year of
all Members who are not "highly compensated employees" for the preceding
Plan Year multiplied by 1.25.
(B)The requirement shall be satisfied for a Plan
Year if (1) the excess of the "average deferral percentage" for the Plan
Year for the Members who are "highly compensated employees" for the Plan
Year over the "average deferral percentage" for the preceding Plan Year of
all Members who are not "highly compensated employees" for the preceding
Plan Year is not more than two percentage points (or such lower amount as
may be required by applicable regulations under the Code) and (2) the
"average deferral percentage" for the Plan Year for Members who are "highly
compensated employees" for the Plan Year is not more than the "average
deferral percentage" for the preceding Plan Year of all Members who are not
"highly compensated employees" for the preceding Plan Year multiplied by
two (or such lower multiple as may be required by applicable regulations
under the Code).
(C) The Plan may test using the "average deferral
percentage" for non-highly compensated employees for the current Plan Year
rather than the preceding Plan Year if the Administrator so elects. The
Administrator may only revoke such an election in accordance with rules
promulgated by the Secretary of the Treasury. For the 1997 Plan Year, the
Administrator elected to use the percentage for the current (1997) Plan
Year rather than the percentage for the preceding Plan Year. For the 1998
Plan Year, the Administrator elected to use the percentage for the
preceding Plan Year.
(ii)Qualified Nonelective Contributions or Refunds.
<PAGE> 22
If the relationship of the "average deferral percentages" does not satisfy
subsection 4(d)(i) for any Plan Year, the Participating Companies may make
"qualified nonelective contributions" (within the meaning of the
regulations promulgated under section 401(k) of the Code) in an equal
dollar amount for all or a class of eligible "nonhighly compensated
employees". Such contributions shall be treated for all purposes of the
Plan as contributions made by a Member under subsection 4(a) for the Plan
Year for which they are made and shall be a part of the Member's Salary
Reduction Account, except that such contributions may not be distributed
under subsection 10(d)(ii). If the Participating Companies do not make
such contributions or such contributions do not result in satisfaction of
subsection 4(d)(i), then the Committee shall direct the Trustee to
distribute the "excess contribution" (as defined below) for such Plan Year
(plus any income and minus any loss allocable thereto for the Plan Year in
which the contributions were made as determined under the Plan's method for
allocating income and loss) within twelve months after the close of the
Plan Year to the "highly compensated employees" on the basis of the amount
of contributions attributable to each until the "excess contribution" is
eliminated. The portion of the "excess contribution" attributable to a
"highly compensated employee" is determined by reducing the dollar amount
of contributions paid over to the Fund on behalf of "highly compensated
employees", starting with the highest dollar amount of such contributions,
until the "excess contribution" is eliminated. The amount of "excess
contributions" to be distributed shall be reduced by excess deferrals
previously distributed for the taxable year ending in the same Plan Year
and excess deferrals to be distributed for a taxable year shall be reduced
by excess contributions previously distributed for the Plan Year beginning
in such taxable year. Any refund made to a Member in accordance with this
subsection shall be withdrawn from his Salary Reduction Account.
(iii)Additional Definitions. For purposes of this
subsection 4(d), the term "Member" shall mean each Employee eligible to
make contributions under subsection
<PAGE> 23
4(a) at any time during a Plan Year.
The "average deferral percentage" for a specific group of Members for a
Plan Year shall be the average of the "actual deferral percentage" for each
Member in the group for such Plan Year. The "actual deferral percentage"
for a particular Member for a Plan Year shall be the ratio of the amount of
contributions made under subsection 4(a) no later than twelve months after
the close of the relevant Plan Year for such Member out of amounts that
would have been received by him in the Plan Year but for his election under
subsection 4(a) and which are allocated to the Member on or before the last
day of the Plan Year without regard to participation or performance of
services thereafter to the Member's "compensation" for such Plan Year. For
this purpose, "compensation" means compensation for service performed for a
Participating Company which is currently includable in gross income or
which is excludable from gross income pursuant to an election under a
qualified cash or deferred arrangement under section 401(k) of the Code or
a cafeteria plan under section 125 of the Code; provided, however, the
Company may elect to limit compensation for all Members to amounts paid
during the portion of the Plan Year during which the Member was eligible to
participate in the Plan or use any definition of compensation permissible
under section 414(s) of the Code and the regulations thereunder. The
"excess contribution" for any Plan Year is the excess of the aggregate
amount of contributions paid over to the Fund pursuant to subsection 4(a)
on behalf of "highly compensated employees" for such Plan Year over the
maximum amount of such contributions permitted for "highly compensated
employees" under subsection 4(d)(i).
(iv) Aggregation of Contributions. The "actual deferral
percentage" for any Member who is a "highly compensated employee" for the
Plan Year and who is eligible to make elective contributions excludable
from income under sections 401(k) and 402(a)(8) of the Code to any plan
maintained by a Participating Company or a Related Entity shall be
determined as if all such contributions were made under this Plan.
(v) Aggregation of Plans. In the event that this Plan
satisfies the
<PAGE> 24
requirements of section 401(a)(4) or 410(b) of the Code only
if aggregated with one or more other plans, or if one or more other plans
satisfy the requirements of section 401(a)(4) or 410(b) of the Code only if
aggregated with this Plan, then subsection 4(d)(i) shall be applied by
determining the "actual deferral percentages" of Members as if all such
plans were a single plan.
(vi) Testing Alternatives. To the extent permitted by the
Code, the Plan may treat contributions made under subsection 4(a) as
contributions made under subsection 4(e), and vice versa, to facilitate
satisfaction of any applicable nondiscrimination requirement.
(e) Participating Company Matching Contributions
(i) Amount. Each Participating Company shall contribute
with respect to each Member employed by it who is eligible under subsection
3(a)(ii) with respect to a Plan Year an amount set by the Board of Directors and
communicated to Members prior to the first day of such Plan Year. Pending such
action, the amount shall be equal to the lesser of (A) 50% of the Member's
salary reduction contribution for each Payroll Period commencing after he has
completed a Year of Service for Eligibility or (B) 2% of the Member's
Compensation for such Payroll Period. No Member covered by a collective
bargaining agreement shall be eligible for a contribution under this subsection
unless the collective bargaining agreement covering him so provides, in which
case the rate and amount of matching contributions shall be as provided in the
collective bargaining agreement.
(ii) Payment Date. The Participating Companies shall
pay over to the Fund all contributions required under this subsection no
later than the due date, including extensions, for filing the Participating
Companies' federal income tax returns for the taxable year ended coincident
with or immediately following the end of the Plan Year with respect to
which such contributions are to be made.
(f) Matching Account. The Participating
Company contributions allocated to a Member under subsection 4(e) and the
corresponding provisions of the Plan as heretofore effective, all as
adjusted for the investment gain or loss and income or expense, constitute
<PAGE> 25
the Member's Matching Account. A Member shall at all times have a
nonforfeitable interest in the portion of his Accrued Benefit derived from
his Matching Account.
(g) Compliance with Participating Company
Matching Contributions Discrimination Tests
(i) Rule. In no event shall the "average contribution
percentage" (as defined below) for Members who are "highly compensated
employees" for any Plan Year bear a relationship to the "average
contribution percentage" for Members who are not "highly compensated
employees" which does not satisfy either subsection 4(g)(i)(A) or (B)
below. The requirement of this subsection shall not apply to Members who
participate in this Plan pursuant to a collective bargaining agreement, and
any such Members shall be excluded from the testing group.
(A)The requirement shall be satisfied for a Plan
Year if the "average contribution percentage" for the Plan Year for the
group of Members who are "highly compensated employees" for the Plan Year
is not more than the "average actual contribution percentage" for the
preceding Plan Year of all Members who are not "highly compensated
employees" for the preceding Plan Year multiplied by 1.25.
(B)The requirement shall be satisfied for a Plan
Year if (1) the excess of the "average contribution percentage" for the
Plan Year for the Members who are "highly compensated employees" for the
Plan Year over the "average contribution percentage" of all Members who are
not "highly compensated employees" for the preceding Plan Year is not more
than two percentage points (or such lower amount as may be required by
applicable regulations under the Code) and (2) the "average contribution
percentage" for the Plan Year for Members who are "highly compensated
employees" for the Plan Year is not more than the "average contribution
percentage" for the preceding Plan Year of all Members who are not
<PAGE> 26
"highly compensated employees" for the preceding Plan Year multiplied by
two (or such lower multiple as may be required by applicable regulations
under the Code).
(C)The Plan may test using the average
contribution percentage for nonhighly compensated employees for the current
Plan Year rather than the preceding Plan Year if the Administrator so
elects. The Administrator may only revoke such an election in accordance
with rules promulgated by the Secretary of the Treasury. For the 1997 Plan
Year, the Administrator elected to use the percentage for the current
(1997) Plan Year rather than the percentage for the preceding Plan Year.
For the 1998 Plan Year, the Administrator elected to use the percentage for
the preceding Plan Year.
(ii) Refund. If the relationship of the "average
contribution percentages" does not satisfy subsection 4(g)(i) for any Plan
Year, then the Committee shall direct the Trustee to distribute the "excess
aggregate contribution" (as defined below) for such Plan Year (plus any
income and minus any loss allocable thereto for the Plan Year in which the
contributions were made as determined under the Plan's method for
allocating income and loss) within twelve months after the close of the
Plan Year to the "highly compensated employees" on the basis of the amount
of contributions attributable to each until the "excess aggregate
contribution" is eliminated. The portion of the "excess aggregate
contribution" attributable to a "highly compensated employee" is determined
by reducing the dollar amount of contributions paid over to the Fund on
behalf of the "highly compensated employees", starting with the highest
dollar amount of such contributions, until the "excess aggregate
contribution" is eliminated. Any refund made to a Member in accordance
with this subsection shall be drawn from his Matching Account.
(iii)Additional Definitions. For purposes of this
subsection 4(g), the term "Member" shall mean each Employee not covered by
a collective bargaining agreement eligible to receive a matching
contribution under subsection 4(e) at any time during a Plan Year.
<PAGE> 27
The "average contribution percentage" for a specific group of Members for a
Plan Year shall be the average of the "actual contribution percentage" for
each Member in the group for such Plan Year. The "actual contribution
percentage" for a particular Member for a Plan Year shall be the ratio of
the sum of (A) the amount of contributions made under subsection 4(e) no
later than twelve months after the close of the Plan Year for such Member
which are allocated to the Member on or before the last day of the Plan
Year without regard to participation or performance of services thereafter,
(B) elective contributions of a nonhighly compensated employee which are
permitted to be treated as matching contributions under regulations
promulgated under section 401(m) of the Code and (C) after-tax employee
contributions which are Annual Additions to the Member's "compensation" for
such Plan Year. For this purpose, "compensation" means compensation for
service performed for a Participating Company which is currently includable
in gross income or which is excludable from gross income pursuant to an
election under a qualified cash or deferred arrangement under section
401(k) of the Code or a cafeteria plan under section 125 of the Code;
provided, however, the Company may elect to limit compensation for all
Members to amounts paid during the portion of the Plan Year during which
the Member was eligible to participate in the Plan or use any definition of
compensation permissible under section 414(s) of the Code and the
regulations thereunder. The "excess aggregate contribution" for any Plan
Year is the excess of the aggregate amount of matching contributions paid
over to the Fund pursuant to subsection 4(e) on behalf of "highly
compensated employees" for such Plan Year over the maximum amount of such
matching contributions permitted for "highly compensated employees" under
subsection 4(g)(i).
(iv) Aggregation of Contributions. The "actual
contribution percentage" for any Member who is a "highly compensated
employee" for the Plan Year and who is eligible to make after-tax
contributions to any plan subject to section 415 of the Code maintained by
a Participating Company or a Related Entity or to have employer matching
<PAGE> 28
contributions within the meaning of section 401(m)(4)(A) of the Code
allocated to his account under two or more plans described in section
401(a) of the Code that are maintained by a Participating Company or a
Related Entity shall be determined as if all such contributions were made
under this Plan and each other plan.
(v) Aggregation of Plans. In the event that this Plan
satisfies the requirements of section 401(a)(4) or 410(b) of the Code only
if aggregated with one or more other plans, or if one or more other plans
satisfy the requirements of section 401(a)(4) or 410(b) of the Code only if
aggregated with this Plan, then subsection 4(g)(i) shall be applied by
determining the "actual contribution percentages" of Members as if all such
plans were a single plan.
(vi) Aggregate Limit -- Multiple Use of Alternative
Limitation. The provisions of section 1.401(m)-2(b) of the regulations
under section 401(m) of the Code are hereby incorporated by reference. If
the limitation thereof is exceeded, it shall be corrected through reduction
of the "actual contribution percentage" in the manner specified in
subsection 4(g)(iii) with respect to "highly compensated employees"
eligible under both subsection 4(a) and subsection 4(e) of the Plan.
(vii)Testing Alternatives. To the extent permitted by
the Code, the Plan may treat contributions made under subsection 4(e) as
contributions made under subsection 4(a), and vice versa, to facilitate
satisfaction of any applicable nondiscrimination requirement.
(h) Profit Sharing Contributions
(i) Amount. For each Plan Year each Participating
Company may make contributions to the Fund in such amounts as the Company,
in its absolute discretion, shall determine; provided, however, the
aggregate contribution for a Plan Year shall not exceed any applicable
limitation of Section 4 or 5. The Company shall either (A) designate the
<PAGE> 29
payment in writing to the Trustee as a payment on account of its taxable
year which ends coincident with or next following such Plan Year or (B)
claim such payment as a deduction on its federal income tax return for such
taxable year. The Participating Companies shall pay the contribution, if
any, for a Plan Year on or before the date (including any extensions
thereof) on which they are required to file their federal income tax
returns for the taxable year which ends coincident with or next following
such Plan Year.
(ii) Allocation of Contributions. As of the last day of
each Plan Year, the Committee shall allocate to the Profit Sharing Account
of each eligible Member a portion of the amount, if any, contributed to the
Fund in respect of such Plan Year by the Participating Company employing
him on the last day of such Plan Year. Eligible Members shall be limited
to Employees who (A) have satisfied the eligibility requirements of
subsection 3(a)(iii), (B) are employed by a Participating Company on the
last day of the Plan Year and (C) are not excluded under subsection
3(a)(iv). The Committee shall allocate the amount among eligible Members
employed by a contributing Participating Company on the last day of the
Plan Year in the ratio that each such Member's Compensation for the Plan
Year bears to the Compensation of all eligible Members for such Plan Year.
Notwithstanding the foregoing, for the 1997 Plan Year the contribution of
Sierra Airgas shall be allocated to Members who were employed by it on both
the first and last day of the Plan Year and who were credited with 1,000
Hours of Service in such Plan Year and for the 1998 Plan Year and
subsequent Plan Years, the contribution of Airgas Northern California and
Nevada shall be allocated to Members who were (A) employed on the first day
of the Plan Year either by it or an entity merged or consolidated with it
during the Plan Year, (B) employed on the last day of the Plan Year by it
and (C) credited with 1,000 Hours of Service during the Plan Year. Sixty
percent of the contribution made by Sierra Airgas for 1997 and by Airgas
Northern California and Nevada thereafter, shall be allocated in proportion
to Compensation, as described above, and 40% shall be allocated in
<PAGE> 30
proportion to years of service where a Member is credited with one year for
each calendar year, including years prior to the date the Plan became
effective, in which he is credited with 1,000 Hours of Service.
(iii)Collective Bargaining Units. Notwithstanding
subsections 4(h)(i) and (ii) above, each Participating Company shall make
any formula profit sharing contribution required by a collective bargaining
agreement in accordance with the terms thereof. Such contribution shall be
allocated among Members eligible under the terms of the applicable
collective bargaining agreement as provided therein.
(i) Profit Sharing Account. The Participating Company
contributions allocated to a Member under subsection 4(h) and the
corresponding provisions of the Plan as heretofore effective, all as
adjusted for investment gain or loss and income or expense, constitute the
Member's Profit Sharing Account. A Member shall at all times have a
nonforfeitable interest in the portion of his Accrued Benefit derived from
his Profit Sharing Account.
(j) Rollovers
<PAGE> 31
(i) Contributions. Each Employee eligible under
subsection 3(e) and each Member actively employed by a Participating
Company may contribute to the Fund an amount constituting an "eligible
rollover distribution" from a "qualified trust," both within the meaning of
section 402(c)(4) of the Code, from a previous employer's retirement plan
(or an individual retirement account consisting solely of an "eligible
rollover distribution" from a "qualified trust").
(ii) Rollover Account. Each Member's contributions
under subsection 4(j)(i) and the corresponding provisions of the Plan as
heretofore effective, all as adjusted for investment gain or loss and
income or expense, constitute such Member's Rollover Account. A Member
shall at all times have a nonforfeitable interest in the portion of his
Accrued Benefit derived from his Rollover Account.
(iii)Refunds. If an Employee makes a contribution under
this subsection 4(j) which the Committee subsequently determines is not
eligible for contribution under section 402 of the Code, then the Committee
shall take such corrective action as the Committee determines is necessary
or appropriate under applicable law.
(k) Voluntary Contributions. A Member
shall not be permitted to make contributions to the Plan other than as
permitted under subsection 4(a) or 4(j).
(l) Payroll Taxes. The Participating Companies
shall withhold from the Compensation of the Members and remit to the
appropriate government agencies such payroll taxes and income withholding
as the Company determines is or may be necessary under applicable statutes
or ordinances and the regulations and rulings thereunder.
(m) Deductibility. All Participating Company
contributions are expressly conditioned upon their deductibility for
federal income tax purposes. Nondeductible contributions shall be abated
and to the extent permitted by applicable law, refunded, starting with
contributions made under subsection 4(h), then 4(e) and finally 4(a).
<PAGE> 32
(n) Supplemental Participating Company Contributions.
Notwithstanding any provision of the Plan to the contrary, the following
provisions shall govern the treatment of Supplemental Participating Company
Contributions.
(i) Frequency and Amount. For each Plan Year, the
Participating Companies shall make a Supplemental Participating Company
Contribution in an amount fixed by resolution of the Board of Directors
adopted on or before the last day of the Company's taxable year that ends
within such Plan Year, to be allocated as provided in subsection 4(n)(ii).
(ii) Allocation Method. The Supplemental Participating
Company Contribution shall be allocated among each individual who is both
an Employee and a Member on the first day of the Plan Year as follows:
(A) The Supplemental Participating Company
Contribution shall be allocated during the Plan Year as contributions under
subsections 4(a) and 4(e) to the Salary Reduction Account and Matching
Account of each eligible Member pursuant to the allocation provisions of
subsections 4(a) and 4(e) of the Plan.
(B) Second, the balance of the Supplemental
Participating Company Contribution remaining after the allocation in
subsection 4(n)(ii)(A), if any, shall be allocated as an additional
matching contribution under subsection 4(e) on the last day of the Plan
Year to the Matching Account of each eligible Member in the employ of a
Participating Company on the last day of the Plan Year in the ratio that
such Member's contributions under subsection 4(a) during the Plan Year
bears to the contributions under subsection 4(a) of all such eligible
Members during the Plan Year.
(C) The Committee shall reduce the proportionate
allocation under subsection 4(n)(ii)(B) to highly compensated employees (as
defined in section 414(q) of the Code) to the extent necessary to comply
with the provisions of section 401(a)(4) or 401(m) of the Code and the
regulations thereunder.
<PAGE> 33
(D) The Supplemental Participating Company
Contribution allocated as matching contributions to the Member's Matching
Account pursuant to subsection 4(n)(ii)(B) shall be treated in the same
manner as matching contributions for all purposes of the Plan.
Notwithstanding any other provision of the Plan to the contrary, any
allocation to a Member's Salary Reduction Account shall be made under
subsection 4(a) or this subsection, as appropriate, but not both
subsections. Similarly, any allocation to a Member's Matching Account
shall be made under subsection 4(e) or this subsection, as appropriate, but
not both subsections. Notwithstanding any other provision of the Plan to
the contrary, the amount allocated to a Member under (A) through (D) above
may be subject to an adjustment as may be determined necessary to prevent
contributions made by or on behalf of a Member for a Plan Year to exceed
the maximum allowable under section 415 of the Code.
(iii) Timing, Medium and Posting. The Participating
Companies shall make the Supplemental Participating Company Contribution in
cash, in one or more installments without interest, at any time during the
Plan Year, and for purposes of deducting such Contribution, not later than
the Company's federal tax return due date, including extensions, for its
taxable year that ends within such Plan Year. The Supplemental
Participating Company Contribution shall be held in a suspense account
until allocated. Such suspense account shall not participate in the
allocation of investment gains, losses, income and deductions of the Fund
as a whole, but shall be invested separately at the direction of the
Committee and all gains, losses, income and deductions attributable to such
investment shall be applied to pay Plan fees and expenses and, thereafter,
to reduce matching contributions.
(iv) Deduction Limitation. In no event shall the
Supplemental Participating Company Contribution, when aggregated with other
contributions
<PAGE> 34
for the Company's taxable year that ends within such Plan Year, exceed the
amount deductible by the Participating Companies for federal income tax
purposes for such taxable year.
<PAGE> 35
5. MAXIMUM CONTRIBUTIONS AND BENEFITS
(a) Defined Contribution Limitation. In the event that the
amount allocable to a Member from contributions to the Fund with respect to
any Plan Year would cause the Annual Additions allocated to any Member under
this Plan plus the Annual Additions allocated to such Member under any other
plan maintained by a Participating Company or a Related Entity to exceed for
any Limitation Year the lesser of (i) $30,000 (or, if greater, one-fourth of
the dollar limitation in effect under subsection 415(b)(1)(A) of the Code for
such Limitation Year) or (ii) 25% of such Member's compensation (as defined in
subsection 5(d)) for such Limitation Year, then such amount allocable to
such Member shall be reduced by the amount of such excess to determine the
actual amount of the contribution allocable to such Member with respect to
such Plan Year. If the excess amount results from a reasonable error in
determining the amount of contribution that may be made under subsection
4(a) without violating the limitation of this subsection, then the excess
amount with earnings attributable thereto shall be refunded to the Member.
If the excess amount results (i) from the allocation of forfeitures, (ii) a
reasonable error in estimating a Member's annual compensation (as defined
in subsection 5(d)) or (iii) under other limited facts and circumstances
that the Commissioner of Internal Revenue finds justify the availability of
the remedy next following, the excess amount with earnings attributable
thereto allocable to a Member's Accrued Benefit shall be held in a suspense
account and shall be used to reduce contributions allocable to the Member
for the next Limitation Year (and succeeding Limitation Years as necessary)
provided the Member is covered by the Plan as of the end of the Limitation
Year. However, if the Member is not covered by the Plan as of the end of
the Limitation Year, then the excess amount shall be held unallocated in a
suspense account and shall be allocated, after adjustment for investment
gains or losses, among all Employees eligible to make contributions under
subsection 4(a) for such Limitation Year as an equal percentage of their
Compensation for such Limitation Year. No excess amount may be distributed
<PAGE> 36
to a Member or former Member.
(b) Combined Limitation. In addition to
the limitation of subsection 5(a), if a Participating Company or a Related
Entity maintains or maintained a defined benefit plan and the amount
required to be contributed to the Fund with respect to any Plan Year would
cause the aggregate amount allocated to any Member under all defined
contribution plans maintained by any Participating Company or Related
Entity to exceed the maximum allocation as determined in subsection 5(c),
then such amount required to be contributed with respect to such Member
shall be reduced by the amount of such excess to determine the actual
amount of the contribution with respect to such Member for such Plan Year.
Notwithstanding the foregoing, if an excess amount is contributed with
respect to any Member, then the excess allocation shall be reallocated or
held in a suspense account in accordance with subsection 5(a). The
limitation of this subsection shall be applied to the Member's benefit from
the defined benefit plan prior to reduction of the Member's Annual
Additions under this Plan.
(c) Combined Limitation Computation.
The maximum allocation is the amount of Annual Additions
which may be allocated to a Member's benefit without permitting the sum of
the defined benefit plan fraction (as hereinafter defined) and the defined
contribution plan fraction (as hereinafter defined) from exceeding 1.0 for
any Limitation Year. The defined benefit plan fraction applicable to a
Member for any Limitation Year is a fraction, the numerator of which is the
projected annual benefit of the Member under the plan determined as of the
close of the Limitation Year and the denominator of which is the lesser of
(i) the product of 1.25 multiplied by the maximum then permitted dollar
amount of straight life annuity payable under the defined benefit plan
maximum benefit provisions of the Code and (ii) the product of 1.4
multiplied by the maximum permitted amount of straight life annuity, based
on the Member's
<PAGE> 37
compensation, payable under the defined benefit plan
maximum benefit provisions of the Code. For purposes of this subsection
5(c), a Member's projected annual benefit is equal to the annual benefit,
expressed in the form of a straight life annuity, to which the Member would
be entitled under the terms of the defined benefit plan based on the
assumptions that (i) the Member will continue employment until reaching his
normal retirement age under the plan (or current age, if later) at a rate
of compensation equal to that for the Limitation Year under consideration
and (ii) all other relevant factors used to determine benefits under the
plan for the Limitation Year under consideration will remain constant for
future Limitation Years. The defined contribution plan fraction applicable
to a Member for any Limitation Year is a fraction, the numerator of which
is the sum of the Annual Additions for all Limitation Years allocated to
the Member as of the close of the Limitation Year and the denominator of
which is the sum of the lesser, separately determined for each Limitation
Year of the Member's employment with a Participating Company or Related
Entity, of (i) the product of 1.25 multiplied by the maximum dollar amount
of Annual Additions which could have been allocated to the Member under the
Code for such Limitation Year and (ii) the product of 1.4 multiplied by the
maximum amount, based on the Member's compensation, of Annual Additions
which could have been allocated to the Member for such Limitation Year.
(d) Definition of "Compensation" for Code Limitations. For
purposes of the limitations on the allocation of Annual Additions to a Member
and maximum benefits under a defined benefit plan as provided for in this
Section 5, "compensation" for a Limitation Year shall mean the sum of
amounts paid by a Participating Company or a Related Entity to the Member
with respect to personal services rendered by the Member during the
Limitation Year plus (i) amounts received by the Member (A) through
accident or health insurance or under an accident or health plan maintained
or contributed to by a Participating Company or a Related Entity and which
are includable in the gross income of the Member, (B) through a plan
<PAGE> 38
contributed to by a Participating Company or a Related Entity providing
payments in lieu of wages on account of a Member's permanent and total
disability, or (C) as a moving expense allowance paid by a Participating
Company or a Related Entity and which are not deductible by the Member for
federal income tax purposes; (ii) the value of a non-statutory stock option
granted by a Participating Company or a Related Entity to the Member to the
extent included in the Member's gross income for the taxable year in which
it was granted; and (iii) the value of property transferred by a
Participating Company or a Related Entity to the Member which is includable
in the Member's gross income due to an election by the Member under
section 83(b) of the Code. "Compensation" shall not include (i)
contributions made by a Participating Company or a Related Entity to a
deferred compensation plan to the extent that, before application of the
limitations of section 415 of the Code to the plan, such contributions are
not includable in the Member's gross income for the taxable year in which
contributed, (ii) Participating Company or Related Entity contributions
made on behalf of a Member to a simplified employee pension plan to the
extent they are deductible by the Member under section 219(b) of the Code,
(iii) distributions from a deferred compensation plan (except from an
unfunded nonqualified plan when includable in gross income), (iv) amounts
realized from the exercise of a nonqualified stock option, or when
restricted stock (or property) held by a Member either becomes freely
transferable or is no longer subject to a substantial risk of forfeiture,
(v) amounts realized from the sale, exchange or other disposition of stock
acquired under a qualified or incentive stock option, and (vi) other
amounts which receive special tax benefits, such as premiums for group term
life insurance (to the extent excludable from gross income) or
Participating Company or Related Entity contributions towards the purchase
of an annuity contract described in section 403(b) of the Code.
Notwithstanding the foregoing, for Plan Years beginning after December 31,
1997, elective deferrals as defined in section 402(g)(3) of the Code and
any amount which is contributed or deferred by a Participating Company at
the election
<PAGE> 39
of an Employee and which is not included in gross income of
the Employee by reason of section 125 or 457 of the Code shall be included
in "compensation".
(e) Transition ProvisionTransition Provision.
Notwithstanding the foregoing provisions of this Section 5, the benefit of
a Member on January 1, 1987 under a defined benefit pension plan shall not
be less than it was on December 31, 1986 by reason of the reduction in the
dollar limit of section 415(b) of the Code which then became effective.
However, amounts in excess of the limitation by reason of changes in the
terms and conditions of a defined benefit pension plan made after May 5,
1986 shall not be preserved.
<PAGE> 40
6. ADMINISTRATION OF FUNDS
(a) Investment Control. Pursuant to the
terms of the Trust Agreement, the management and control of the assets of
the Plan shall be vested in the Trustee designated from time to time by the
Company through its Board of Directors; provided, however, the Company
through its Board of Directors may appoint one or more Investment Managers
to manage, acquire or dispose of any assets of the Plan. The Committee
shall instruct the Trustee or an Investment Manager to establish Investment
Categories for selection by the Members and may at any time add to or
delete from the Investment Categories.
(b) Parent Company Stock. The Committee
shall establish an Investment Category consisting solely of Parent Company
Stock. All dividends or other distributions with respect thereto shall be
applied to purchase additional Parent Company Stock. The Trustee may
acquire Parent Company Stock from any source, including the public market,
in private transactions, from the Company's treasury shares or from
authorized but unissued shares. A Member may elect in accordance with
subsection 6(c) that all or a portion of his Accrued Benefit be applied to
purchase Parent Company Stock. A Member shall have the right to direct the
Trustee to vote Parent Company Stock allocated to him in accordance with
procedures established under the Trust Agreement.
(c) Member Elections. In accordance with
rules established by the Committee, each Member shall have the right to
designate the Investment Category or Categories in which new contributions
allocated to such Member and prior balances are invested. Any designation
or change in designation of Investment Category shall be made in such
manner and be subject to such frequency limitations as the Committee shall
from time to time specify. The designation or change shall become
effective as of the date specified by the Committee on or after which it is
received. Any election of Investment Category by any Member shall, on its
effective date, cancel any prior election. The right to elect Investment
<PAGE> 41
Categories as set forth herein shall be the sole and exclusive investment
power granted to Members. The Committee may limit the right of a Member
(i) to increase or decrease his contributions to a particular Investment
Category, (ii) to transfer amounts to or from a particular Investment
Category or (iii) to transfer amounts between particular Investment
Categories, if such limitation is required by the rules establishing an
Investment Category or necessary to facilitate administration of the Plan.
In accordance with subsection 2(d), the Committee may promulgate separate
accounting and administrative rules to facilitate the establishment or
maintenance of an Investment Category.
(d) No Member Election. If a Member does
not make a written election of Investment Category, the Committee shall
direct that all amounts allocated to such Member be invested in the
Investment Category which, in the opinion of the Committee, best protects
principal.
(e) Facilitation. Notwithstanding any
instruction from any Member for investment of funds in an Investment
Category as provided for herein, the Trustee shall have the right to hold
uninvested or invested in a short-term investment fund any amounts intended
for investment or reinvestment until such time as investment may be made in
accordance with the Plan and the Trust Agreement.
(f ) Valuations. The Fund and each Investment
Category shall be valued at fair market value as of each Valuation Date.
(g) Allocation of Gain or Loss.
The Trustee may maintain accounts for each Member's investment in each
Investment Category. If such separate accounts are not maintained, then
any increase or decrease in the market value of each Investment Category of
the Fund since the preceding Valuation Date, as computed pursuant to
subsection 6(f), and all accrued income or expense and realized profit or
loss shall be added to or deducted from the account of each Member in the
ratio that each Member's account in such Investment Category at the prior
<PAGE> 42
Valuation Date adjusted on a uniform basis to reflect contributions and
withdrawals during the valuation period bears to the total of all such
adjusted accounts in such Investment Category; provided, however, such
allocation for the first period following the establishment of an
Investment Category shall be made based on the ratio that the amount
allocated to each Member in such Investment Category in the period bears to
the total amount allocated to such Investment Category in the period.
(h) Bookkeeping. The Committee shall direct that
separate bookkeeping accounts be maintained to reflect each Member's Salary
Reduction Account, elective contributions under subsection 4(a), Matching
Account, Profit Sharing Account and Rollover Account.
<PAGE> 43
7. BENEFICIARIES AND DEATH BENEFITS
(a) Designation of Beneficiary.
Each Member shall have the right to designate one or more beneficiaries and
contingent beneficiaries to receive any benefit to which such Member may be
entitled hereunder in the event of the death of the Member prior to the
complete distribution of such benefit by filing a written designation with
the Committee on the form prescribed by the Committee. Such Member may
thereafter designate a different beneficiary at any time by filing a new
written designation with the Committee. Notwithstanding the foregoing, if
a married Member designates a beneficiary other than his spouse, such
designation shall not be valid unless the spouse consents thereto in
writing witnessed by a notary public or authorized representative of the
Plan. A spouse's consent given in accordance with the Committee's rules
shall be irrevocable by the spouse with respect to the beneficiary then
designated by the Member unless the Member makes a new beneficiary
designation. Any written designation shall become effective only upon its
receipt by the Committee or its designee. If the beneficiary designated
pursuant to this subsection dies on or before the commencement of
distribution of benefits and the Member fails to make a new designation,
then his beneficiary shall be determined pursuant to subsection 7(b).
Notwithstanding the above, to the extent provided in a qualified domestic
relations order (within the meaning of section 414(p) of the Code) the
former spouse of the Member may be treated as the spouse of the Member for
purposes of this subsection, and the current spouse will not be treated as
the Member's spouse for such purposes.
(b) Beneficiary Priority List. If
(i) a Member omits or fails to designate a beneficiary, (ii) no designated
beneficiary survives the Member or (iii) the Committee determines that the
Member's beneficiary designation is invalid for any reason, then the death
benefits shall be paid to the Member's surviving spouse, or if the Member
is not survived by his spouse, then to the Member's estate. If the
Member's designated
<PAGE> 44
beneficiary dies after the Member but before distribution of benefits, then
the death benefits shall be paid to the beneficiary's estate.
(c) Proof of Death. The Committee may, as a
condition precedent to making payment to any beneficiary, require that a
death certificate, burial certificate or other evidence of death acceptable
to it be furnished.
(d) Divorce. If a Member designates his spouse as
beneficiary and subsequent to making the designation a decree of divorce is
issued which terminates the Member's marriage to such spouse, then the
Member's prior beneficiary designation shall be invalid and, unless the
Member makes a new designation, the Member shall be treated as having died
without designating a beneficiary.
<PAGE> 45
8. BENEFITS FOR MEMBERS
The following are the only post-employment benefits provided by the
Plan:
(a) Retirement Benefit
(i) Valuation. Each Member who retires on or after his
Normal Retirement Date shall be entitled to a retirement benefit equal to
100% of the Member's Accrued Benefit on the Valuation Date as of which his
Accrued Benefit is liquidated for distribution. Distribution will be made
at the time and the manner provided by Section 9.
(ii) Late Retirement. A Member who continues employment
beyond his Normal Retirement Date shall continue to participate in the
Plan.
(b) Death Benefit. In the event of the death of
a Member, 100% of the Member's Accrued Benefit on the Valuation Date after
his death as of which his Accrued Benefit is liquidated for distribution
shall constitute his death benefit and shall be distributed pursuant to
Sections 7 and 9 (i) to his designated beneficiary or (ii) if no
designation of beneficiary is then in effect, to the beneficiary determined
pursuant to subsection 7(b).
(c) Termination of Employment Benefit.
In the event a Member terminates employment with all
Participating Companies and all Related Entities for reasons other than
those covered by subsections 8(a) and 8(b) above, the Member shall be
entitled to receive a benefit equal to 100% of his Accrued Benefit on the
Valuation Date on which his Accrued Benefit is liquidated for distribution.
Distributions shall be made at the time and in the manner provided by
Section 9.
(d) Vesting. A Member shall have a nonforfeitable
right to his Accrued Benefit at all times.
<PAGE> 46
9. DISTRIBUTION OF BENEFITS
(a) Commencement
(i) Vested and Retirement Benefits. Generally, vested
and retirement benefits shall be paid as soon after the Member's
termination of employment as is administratively feasible, but not sooner
than 30 days after the Member receives the notice required by section
1.411(a)-11(c) of the regulations under section 411(a)(11) of the Code
unless the Member receives written notice that he has a right to a period
of at least 30 days after receipt of the notice to consider whether or not
to elect a distribution and affirmatively elects after receipt of the
notice to accept a distribution rather than elect the rollover provided for
under subsection 9(g). In addition, if the Member's nonforfeitable Accrued
Benefit exceeds $3,500, distribution of benefits shall not begin unless the
Member consents to such distribution in writing within the 90-day period
ending on the date on which the notice required under section 411(a)(11) of
the Code is given. If the Member does not consent to the distribution, his
Accrued Benefit shall be retained in the Fund. Distribution shall commence
as soon as administratively feasible after the Member's request for
distribution or, if earlier, the date on which the Member is required to
receive distribution under subsection 9(a)(ii). For purposes of the $3,500
threshold with respect to distributions made on or after March 22, 1999, if
the present value of the Accrued Benefit at the time of any distribution
exceeds $3,500, the present value of the Accrued Benefit at any subsequent
time will be deemed to exceed $3,500. For Plan Years beginning on or after
January 1, 1998, "$5,000" is substituted for "$3,500", each place "$3,500"
appears in this subsection.
(ii) Limitation and Required Commencement Date. In no
event other than with the written consent of the Member shall the payment
of benefits commence later than the 60th day after the close of the Plan
Year in which the latest of the following occurs:
(A)The Member's Normal Retirement Date;
<PAGE> 47
(B)The Member's termination of employment; or
(C)The tenth anniversary of the year in which the
Member first commenced participation in the Plan.
Furthermore, distribution of benefits must commence on or before the April
1st of the calendar year following the calendar year in which the Member
attains age 70-1/2 or terminates employment, whichever is later; provided,
however, if a Member is a 5% owner (as defined in section 416 of the Code)
with respect to the Plan at any time during the Plan Year ending in the
calendar year in which he attained age 70-1/2, then distribution of
benefits must commence no later than the April 1st of the calendar year
following the calendar year in which the Member attains age 70-1/2.
Distribution required under the preceding sentence shall be made in one
lump sum if the Member's Severance Date has occurred.
(iii) Death Benefits. The Plan shall pay a Member's
death benefit as soon after such time as the Member's beneficiary requests,
but not later than the December 31st of the calendar year in which occurs
the fifth anniversary of the Member's death or, if the Member's beneficiary
is the Member's spouse, the date on which the Member would have attained
age 70-1/2, if later.
(b) Benefit Forms. All benefits distributed
under Section 8 shall be paid in one lump sum. If a portion of a Member's
Accrued Benefit is invested in an Investment Category holding Parent
Company Stock, the Member may direct that the portion of his Accrued
Benefit so held be distributed to him in kind, except that the value of a
fractional share shall be distributed in cash.
<PAGE> 48
(c) Deferred Payments. If the payment of benefits is to be
deferred, the undistributed value of the benefit shall be retained in the
Fund subject to the administrative provisions of the Plan and the Trust
Agreement.
(d) Withholding. All distributions under the Plan
are subject to federal, state and local tax withholding as required by
applicable law as in effect from time to time.
(e) Compliance with Code Requirements.
All forms of benefit distributions and required benefit
commencement dates shall be subject to and in compliance with section
401(a)(9) of the Code and the regulations thereunder, including the minimum
distribution incidental benefit requirement. Unless the Member irrevocably
elects to the contrary at the time required distributions under section
401(a)(9) of the Code begin, required minimum distributions made before the
Member's Severance Date shall be based on the life expectancy of the
Member, as determined under the Code, without recalculation. The
provisions of section 401(a)(9) of the Code and the regulations thereunder,
including proposed regulation sections 1.401(a)(9)-1 and 2, shall override
any provision of the Plan inconsistent therewith.
(f) Distribution Limitations. Amounts contributed pursuant
to subsection 4(a) of the Plan shall not be distributed earlier than upon
occurrence of one of the following events:
(i) The Member's retirement, death, disability or
separation from service (within the meaning of sections 401(a) and (k) of
the Code);
(ii) The termination of the Plan without establishment
or maintenance of another defined contribution plan (other than an ESOP or
SEP);
(iii)The Member's attainment of age 59-1/2 or suffering
hardship;
(iv) The sale or other disposition by a Participating
Company to an unrelated corporation of substantially all of the assets used
in a trade or business, but only
<PAGE> 49
with respect to employees who continue
employment with the acquiring corporation and provided the acquiring
corporation does not maintain the Plan after the disposition; and
(v) The sale or other disposition by a Participating
Company of its interest in a subsidiary to an unrelated entity but only
with respect to employees who continue employment with the subsidiary and
provided the acquiring entity does not maintain the Plan after the
disposition.
Subsections 9(f)(ii), (iv) and (v), above, apply only if the distribution
is in the form of a lump sum. Subsections 9(f)(iv) and (v), above, apply
if the transferor corporation continues to maintain the Plan. This
subsection 9(f) shall not be construed as giving a Member a right to a
distribution not otherwise expressly provided for by another subsection of
the Plan.
(g) Rollover Election. Notwithstanding any provision of the
Plan to the contrary that would otherwise limit a "distributee's" election
under this subsection, a "distributee" may elect, at the time and in the
manner prescribed by the Committee, to have any portion of an "eligible
rollover distribution" paid directly to an "eligible retirement plan"
specified by the "distributee" in a "direct rollover". For purposes of
this subsection, the definitions specified below shall apply:
(i) Eligible Rollover Distribution. An eligible
rollover distribution is any distribution of all or any portion of the
balance to the credit of the distributee, except that an eligible rollover
distribution does not include: any distribution that is one of a series of
substantially equal periodic payments (not less frequently than annually)
made for the life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten years or more; any
distribution to the extent such distribution is required under section
401(a)(9) of the Code; any hardship distribution described in section
401(k)(2)(B)(i)(IV) of the Code made after December 31, 1999; and the
portion of any distribution that is not includible in gross income
<PAGE> 50
(determined without regard to the exclusion for net unrealized appreciation
with respect to employer securities).
(ii) Eligible Retirement Plan. An eligible retirement
plan is an individual retirement account described in section 408(a) of the
Code, an individual retirement annuity described in section 408(b) of the
Code, an annuity plan described in section 403(a) of the Code, or a
qualified trust described in section 401(a) of the Code, that accepts the
distributee's eligible rollover distribution. However, in the case of an
eligible rollover distribution to the surviving spouse, an eligible
retirement plan is an individual retirement account or an individual
retirement annuity.
(iii)Distributee. A distributee includes an Employee or
former Employee. In addition, the Employee's or former Employee's
surviving spouse and the Employee's or former Employee's spouse who is the
alternate payee under a qualified domestic relations order, as defined in
section 414(p) of the Code, are distributees with regard to the interest of
the spouse or former spouse.
(iv) Direct Rollover. A direct rollover is a payment by
the Plan to the eligible retirement plan specified by the distributee.
<PAGE> 51
10. HARDSHIP AND IN-SERVICE DISTRIBUTIONS
(a) General Rule
(i) Rollover. A Member may receive an in-service
distribution of all or a portion of his Rollover Account.
(ii) Hardship. A Member shall have the right to receive
an in-service distribution from his Rollover Account and Salary Reduction
Account on account of hardship. A distribution is on account of hardship
only if the distribution both (A) is made on account of an immediate and
heavy financial need of the Member and (B) is necessary to satisfy such
financial need.
(iii) Age 59-1/2. A Member who has attained age 59-
1/2 may receive an in-service distribution from his Rollover Account and
Salary Reduction Account without regard to hardship.
(iv) Age 70-1/2. A Member who has attained age 70-1/2
may receive an in-service distribution of all or any portion of his Accrued
Benefit.
(b) Need. A distribution shall be deemed to be made on
account of an immediate and heavy financial need of the Member if the
distribution is on account of (i) medical expenses described in section
213(d) of the Code incurred or to be incurred by the Member, the Member's
spouse or any dependent of the Member (as defined in section 152 of the
Code); (ii) purchase (excluding mortgage payments) of a principal residence
for the Member; (iii) payment of tuition and related educational fees,
including room and board expenses, for the next twelve months of post-
secondary education for the Member, the Member's spouse, child or any
dependent of the Member (as defined in section 152 of the Code); (iv) the
need to prevent the eviction of the Member from his principal residence or
foreclosure on the mortgage of the Member's principal residence; or (v)
such other reason as the Commissioner of Internal Revenue specifies as a
deemed immediate and heavy financial need through the publication of
regulations,
<PAGE> 52
revenue rulings, notices or other documents of general applicability.
(c) Satisfaction of Need. A distribution
shall be deemed to be necessary to satisfy an immediate and heavy financial
need of a Member only if all of the requirements or conditions set forth
below are satisfied or agreed to by the Member, as appropriate.
(i) Amount. The distribution is not in excess of the
amount of the immediate and heavy financial need of the Member, which
amount shall be deemed to include anticipated federal, state and local
income taxes and penalties.
(ii) Other Sources. The Member has obtained all
distributions, other than hardship distributions, and all nontaxable loans
currently available under all plans subject to section 415 of the Code
maintained by any Participating Company or Related Entity.
(iii) Suspension. The Member's elective
contributions under this Plan and each other deferred compensation plan
(within the meaning of regulations under section 401(k) of the Code)
maintained by a Participating Company or a Related Entity in which the
Member participates shall be suspended for twelve full calendar months
after receipt of the distribution.
(iv) Contribution Limitation. The Member does not (and
is not permitted to) make elective contributions under this Plan or any
other plan maintained by a Participating Company or a Related Entity for
the year immediately following the taxable year of the hardship
distribution in excess of the applicable limit under section 402(g) of the
Code for such next taxable year reduced by the amount of the Member's
elective contributions for the taxable year of the hardship distribution.
<PAGE> 53
(d) Limitations.
(i) Hardship. Distributions on account of hardship
shall be limited to the sum of (A) the Member's Rollover Account, (B) the
Member's elective contributions under subsection 4(a) and (C) income
credited to the Member's Salary Reduction Account as of December 31, 1988.
(ii) Other Distributions. A Member shall be permitted
only one in-service distribution per Plan Year under subsection 10(a).
(e) Accounting. A distribution under subsection
10(a)(ii) or (iii) shall be charged first against the Member's Rollover
Account and then against the Member's Salary Reduction Account. The
Committee may prescribe rules with respect to the order of Investment
Category from which the distribution shall be paid.
<PAGE> 54
11. LOANS
(a) Availability. The Committee shall direct
that a bona fide loan be made from the Fund to any Member who requests the
same, provided the Member (i) pays any application or processing fee which
the Committee uniformly charges with respect to loan requests and (ii) on
the date the loan would be disbursed is employed by a Participating Company
or Related Entity or is a party in interest (as defined in ERISA) with
respect to the Plan. All such loans shall be subject to the requirements
of this Section which shall be deemed to include written rules prescribed
by the Committee from time to time with respect to loans. Eligibility for
and the rules with respect to loans shall be uniformly applied.
(b) Minimum Requirements. Loans shall be
subject to the following rules:
(i) Principal Amount. The principal amount of the loan
to a Member may not be less than $1,000 and may not exceed, when added to
the outstanding balance of all other loans to the Member from the Plan, the
lesser of (A) $50,000, reduced by the excess of the highest outstanding
balance of loans to the Member from the Plan during the one-year period
ending on the day before the date on which such loan was made over the
outstanding balance of loans to the Member from the Plan on the date on
which such loan is made or (B) 50% of the Member's nonforfeitable Accrued
Benefit on the date on which the loan is made.
(ii) Maximum Term. The term of the loan may not exceed
five years; however, if the Member uses the loan proceeds to acquire his
principal residence, the term may be thirty years. If a Member's
employment with all Participating Companies and Related Entities terminates
for any reason, the loan shall be due and payable on the last day of the
calendar quarter following the calendar quarter in which employment
terminated; provided, however, in the case of a disposition of a
Participating Company or substantially all the assets of a trade or
business, the Committee, according to a uniform rule applicable to all
Members
<PAGE> 55
affected by the transaction, may permit Members to continue to
amortize the loan.
(iii) Interest Rate. The interest rate shall be a
rate charged by commercial lenders for comparable loans on the date the
loan request is approved, as determined by the Committee.
(iv) Repayment. The loan shall be repaid over its term
in level installment payments corresponding to the Member's payroll period.
As a condition precedent to approval of the loan, the Member shall be
required to authorize payroll withholding in the amount of each installment
for all periods he is employed by a Participating Company. Notwithstanding
the foregoing, the loan repayment of a Member who is in qualified military
service within the meaning of section 414(u) of the Code shall be suspended
to the extent permitted by section 414(u) of the Code.
(v) Collateral. The loan shall be secured by 50% of
the Member's nonforfeitable Accrued Benefit.
(vi) Distribution of Accrued Benefit. If the
nonforfeitable portion of a Member's Accrued Benefit is to be distributed
prior to the Member's payment of all principal and accrued interest due on
any loan to such Member, the distribution shall include as an offset the
amount of unpaid principal and interest due on the loan and the note shall
be distributed.
(vii) Notes. All loans shall be evidenced by a note
containing such terms and conditions as the Committee shall require.
(viii) Multiple Loans. A Member shall be permitted
only one outstanding loan at any time.
(ix) Fees. The Committee may adopt a rule pursuant to
subsections 2(h) and 11(a) of the Plan imposing a reasonable fee on a
Member who borrows under this Section 11 for processing his loan
application, preparing his loan documentation or administering his loan.
<PAGE> 56
(c) Accounting. The principal amount of any loan
shall be drawn first from the Member's Rollover Account, then from the
Member's Profit Sharing Account, then from the Member's Matching Account
and finally from the Member's Salary Reduction Account. The Committee may
prescribe rules with respect to the order of Investment Categories from
which the distribution shall be paid. The loan shall be treated as a
separate Investment Category of the borrowing Member. All payments of
principal and interest with respect to such loan shall be credited to the
borrowing Member, with repayment of principal credited to the Member's
Accounts in reverse order from the Accounts withdrawn. The repayment shall
be invested in accordance with the Member's current election for new
contributions.
<PAGE> 57
12. TITLE TO ASSETS
No person or entity shall have any legal or equitable right or
interest in the contributions made by any Participating Company, or
otherwise received into the Fund, or in any assets of the Fund, except as
expressly provided in the Plan.
<PAGE> 58
13. AMENDMENT AND TERMINATION
(a) Amendment. The provisions of this Plan may be
amended by the Board of Directors (or its delegee as authorized by
subsection 2(e)) from time to time and at any time in whole or in part,
provided that no amendment shall be effective unless the Plan as so amended
shall be for the exclusive benefit of the Members and their beneficiaries,
and that no amendment shall operate to deprive any Member of any rights or
benefits accrued to him under the Plan prior to such amendment.
(b) Termination. While it is the Company's
intention to continue the Plan in operation indefinitely, the Company
nevertheless expressly reserves the right by action of the Board of
Directors to terminate the Plan in whole or in part or discontinue
contributions. Any such termination, partial termination or discontinuance
of contributions shall be effected only upon condition that such action is
taken as shall render it impossible for any part of the corpus of the Fund
or the income therefrom to be used for, or diverted to, purposes other than
the exclusive benefit of the Members and their beneficiaries.
(c) Conduct on Termination. If the
Plan is to be terminated at any time, the Company shall give written notice
to the Trustee which shall thereupon revalue the assets of the Fund and the
accounts of the Members as of the date of termination, partial termination
or discontinuance of contributions and, after discharging and satisfying
any obligations of the Plan, shall allocate all unallocated assets to the
Accrued Benefits of the Members at the date of termination, partial
termination or discontinuance of contributions in accordance with
subsection 6(g). Upon termination, partial termination or discontinuance
of contributions, the Accrued Benefits of Members affected thereby shall
remain fully vested and shall not thereafter be subject to forfeiture in
whole or in part. The Committee shall instruct the Trustee to continue to
control and manage the Fund for the benefit of Members to whom
distributions will be made at the time and in the manner provided in
Section 9. Notwithstanding the foregoing, incident to a termination or a
<PAGE> 59
discontinuance of contributions, the Company may amend the Plan and the
Trust Agreement to provide for distribution of Accrued Benefits to each
affected Member provided such distribution does not violate any applicable
provision of subsection 9(f) of the Plan or section 401(a) or 401(k) of the
Code.
<PAGE> 60
14. LIMITATION OF RIGHTS
(a) Alienation. None of the payments, benefits or
rights of any Member shall be subject to any claim of any creditor of such
Member and, in particular, to the fullest extent permitted by law, shall be
free from attachment, garnishment, trustee's process, or any other legal or
equitable process available to any creditor of such Member. No Member
shall have the right to alienate, anticipate, commute, pledge, encumber or
assign any of the benefits or payments which he may expect to receive,
contingently or otherwise, under this Plan, except the right to designate a
beneficiary or beneficiaries in accordance with the Plan. This subsection
shall not apply to (i) voluntary and revocable assignments within the
meaning of the regulations under section 401(a)(13) of the Code, (ii)
offsets permitted by section 401(a)(13)(C) of the Code for amounts a Member
is required to pay by order, judgment, settlement or the like, (iii) the
pledging of a Member's Accrued Benefit as security for a loan made to such
Member under Section 11, (iv) the enforcement of a federal tax levy made
pursuant to section 6331 of the Code or (v) the collection by the United
States on a judgment resulting from an unpaid tax assessment.
(b) Qualified Domestic Relations Order Exception.
Subsection 14(a) shall not apply to
the creation, assignment or recognition of a right to any benefit payable
with respect to a Member under a qualified domestic relations order within
the meaning of section 414(p) of the Code. Notwithstanding Sections 8-10,
distribution to an alternate payee pursuant to a qualified domestic
relations order shall be made (i) at the time specified in such order or
(ii), if the order permits, as soon after the Committee approves the order
as is administratively feasible provided such distribution is permitted
under applicable provisions of the Code.
(c) Employment. Neither the establishment of the
Plan, nor any modification thereof, nor the creation of any fund, trust or
account, nor the payment of any benefit shall be construed as giving any
Member or Employee, or any person whomsoever, any legal or equitable right
against any Participating Company, the Trustee or the Committee unless
<PAGE> 61
such right shall be specifically provided for in the Trust Agreement or the
Plan or conferred by affirmative action of the Company or the Committee in
accordance with the terms and provisions of the Plan or as giving any
Member or Employee the right to be retained in the employ of any
Participating Company. All Members and other Employees shall remain
subject to discharge to the same extent as if the Plan had never been
adopted.
<PAGE> 62
15. MERGERS, CONSOLIDATIONS OR TRANSFERS OF PLAN ASSETS
(a) General Rule. In the case of any Plan merger
or Plan consolidation with, or transfer of assets or liabilities of the
Plan to, any other plan, each Member in the Plan must be entitled to
receive a benefit immediately after the merger, consolidation, or transfer
(if the Plan were then to terminate) which is equal to or greater than the
benefit he would have been entitled to receive immediately before the
merger, consolidation, or transfer (if the Plan had been terminated).
(b) Protected Benefits. Each Member who
had an account (the "Transferred Account") (i) in a plan which merges with
and into this Plan or (ii) a plan which transfers an account into this Plan
without providing the Member the option to receive a distribution, shall
have all of the benefits, rights or features provided by the transferor
plan which are protected under section 411(d)(6) of the Code with respect
to the Transferred Account. The Committee shall provide for separate
recordkeeping for a Member's Transferred Account and such additional
subaccounts as may be necessary to comply with the requirements of this
subsection. Except to the extent necessary to comply with the requirements
of this subsection, all Transferred Accounts shall be subject to the
general provisions of the Plan applicable to the type of account to which
they would have been credited had the amounts initially been contributed to
this Plan.
(c) Vesting. All Transferred Accounts shall be 100%
nonforfeitable, subject to valuation adjustment.
(d) Special In-Service Hardship Distribution Provisions. All
Transferred Accounts from the plans listed below shall be available for in-
service distribution for hardship in accordance with the Plan's general
rules applicable to distributions under subsection 10(a)(ii) but subject to
spousal consent requirements, if applicable, under
<PAGE> 63
subsection 15(i)(vi):
Acetylene Gas Company Retirement Plan.
Carbonic Industries Corporation 401(k) Plan.
Ia-Tech Sales Co. 401(k) Profit Sharing Plan.
National Welding Supply Co. 401(k) Salary Reduction Plan.
Industrial Gas Products & Supply, Inc. Profit Sharing
Plan.
(e) Special In-Service Age 59-1/2 Distribution Provisions. All
Transferred Accounts from the plans listed below shall be eligible for in-
service distributions in accordance with the Plan's rules applicable to
distributions under subsection 10(a)(iii) but subject to spousal consent
requirements, if applicable, under subsection 15(i)(vi):
Acetylene Gas Company Retirement Plan.
Carbonic Industries Corporation 401(k) Plan.
National Welding Supply Co. 401(k) Salary Reduction Plan.
Rutland Tool & Supply Co., Inc. Profit Sharing/401(k)
Plan.
(f) Special In-Service Age 55 Distribution Provision.
A Member with a Transferred Account consisting of employer contributions and
earnings thereon from the Industrial Gas Products & Supply, Inc. Profit
Sharing Plan shall be eligible for an in-service distribution from such
Transferred Account in accordance with the Plan's rules applicable to
distributions under subsection 10(a)(iii).
(g) Installment Settlement. All
Transferred Accounts from the plans listed below may, at the election of
the Member, but subject to spousal consent requirements, if applicable,
under section 15(i)(vi) be distributed by payment in monthly, quarterly or
annual installments over a fixed reasonable period of time, not exceeding
the life expectancy of the Member, or the joint life and last survivor
expectancy of the Member and his beneficiary. Distributions under this
subsection shall be subject to the minimum distribution requirements of
<PAGE> 64
section 401(a)(9) of the Code and the regulations thereunder, including the
minimum distribution incidental death benefit requirement:
Acetylene Gas Company Retirement Plan.
Carbonic Industries Corporation 401(k) Plan.
Ia-Tech Sales Co. 401(k) Profit Sharing Plan.
Rutland Tool & Supply Co., Inc. Profit Sharing/401(k)
Plan.
Kendeco Supply Co., Inc. Profit Sharing & 401(k)
Plan.
Industrial Gas Products & Supply, Inc. Profit Sharing
Plan.
(h) Limitations on In-Service Distributions.
The portion of each Member's Transferred Account
attributable to "qualified nonelective contributions" and "qualified
matching contributions" (within the meaning of the regulations under the
Code), if any, shall not be available for any in-service distribution
otherwise permitted under the Plan.
(i) Annuity Settlements. A Member's
Transferred Account from the plans listed below may be distributed in a
form of annuity settlement permitted under subsection 15(i)(vi) and shall
be subject to the distribution limitations and special rules set forth
below:
Acetylene Gas Company Retirement Plan.
Carbonic Industries Corporation 401(k) Plan.
Ia-Tech Sales Co. 401(k) Profit Sharing Plan.
National Welding Supply Co. 401(k) Salary Reduction Plan.
Rutland Tool & Supply Co., Inc. Profit Sharing/401(k)
Plan.
Langdon Oxygen Company, Inc. Employees 401(k) Profit
Sharing Plan.
Kendeco Supply Co., Inc. Profit Sharing & 401(k) Plan.
A Member's Transferred Account from the Carbonic Industries Corporation
401(k) Plan shall be subject to the spousal consent requirements of this
subsection 15(i) only if the Member is
<PAGE> 65
married as described in subsection
15(i)(i) and elects an annuity form of settlement other than a joint and
survivor annuity with his spouse as at least a 50% contingent annuitant, in
which case this subsection 15(i) shall only apply to such election.
(i) Married Member. If (A) a Member is
married to his then spouse for at least one year on the date on which
benefit payments are to commence and (B) his nonforfeitable Accrued Benefit
exceeds $5,000, his Transferred Account will be distributed in the form of
a joint and survivor annuity with his spouse as survivor annuitant, with
the survivor annuity in an amount not less than 50% or more than 100% of
the amount payable to the Member, unless the Member, with the written
consent of his spouse witnessed by a notary public or an authorized Plan
representative in a manner prescribed by the Committee, elects a straight
life annuity for his life or an alternate form of settlement permitted by
the Plan. Further, no total or partial distribution of a Member's
Transferred Account may be made after the annuity starting date where the
present value of the Member's Accrued Benefit immediately before the
annuity starting date exceeds $5,000 unless the Member and his spouse (or
where the Member has died, the surviving spouse) consent in writing
witnessed by a notary public or a representative of the Plan in a manner
prescribed by the Committee prior to such distribution. The Committee
shall furnish to such Member a written notification of the availability of
the election hereunder at least 90 days before the Member's anticipated
benefit commencement date or, if a Member notifies the Committee of his
intent to terminate employment less than 90 days before the proposed
benefit commencement date, as soon after the Member notifies the Committee
as is administratively feasible. The notification shall explain the terms
and conditions of the joint and survivor annuity described above and the
effect of electing not to take such annuity. The Member may, within a
period of 90 days after receipt of the written notification or such longer
period as the Committee may uniformly make available, complete the
election. The Member may revoke an election not to
<PAGE> 66
take the joint and survivor annuity described above or choose again to take
such annuity at any time and any number of times within the applicable
election period. If a Member requests additional information within 60 days
after receipt of the notification of election, the minimum election period
shall be extended an additional 60 days following his receipt of such
additional information.
(ii) Single Member. If (A) a Member is
single or has not been married to his then spouse for at least one year on
the date on which benefit payments are to commence and (B) his
nonforfeitable Accrued Benefit exceeds $5,000, benefits will be distributed
in the form of a straight life annuity for the Member's life unless the
Member elects an alternate form of settlement permitted by the Plan in
accordance with the election procedures described in subsection (i) above.
(iii) Annuity Purchases. If
benefits are to be paid in a form of an annuity, the Committee shall direct
the Trustee to apply the Member's Transferred Account to purchase an
appropriate nontransferable annuity contract and to deliver it to the
Member.
(iv) Spousal Death Benefit. If the
Member's beneficiary is the Member's surviving spouse, the Member's
Transferred Account shall be used to purchase a straight life annuity for
the spouse's life commencing as soon after the Member's date of death as is
administratively feasible unless the spouse elects a lump sum settlement or
approximately equal installment payments over the spouse's life expectancy
(or a specified shorter period) commencing not later than the date on which
the Member would have attained age 70-1/2 or, if later, as soon after the
Member's date of death as is administratively feasible.
(v) Special Beneficiary Designation Provisions.
Notwithstanding subsection 7(a), if a married Member designates a beneficiary
other than his
<PAGE> 67
spouse for his Transferred Accounts, such designation shall not be valid
(i) unless the spouse consents thereto in writing witnessed by a notary public
or authorized representative of the Plan and (ii) the Member attained age 35
on or before the first day of the Plan Year in which the spouse waived the
benefit. Further, the Committee shall provide to the Member within the
"applicable period" a written explanation of the terms and conditions of
the death benefit described above and the rights of the Member's spouse
with respect to the designation of an alternate beneficiary. For purposes
of this subsection "applicable period" shall mean whichever of the
following periods ends last:
(A)the period beginning with the first day of the
Plan Year in which the Member attains age 32 and ending with the close of
the Plan Year preceding the Plan Year in which the Member attains age 35;
(B)a reasonable period after the Member commences
participation in the Plan; or
(C)in the case of a Member who separates from
service before attaining age 35, the period beginning one year before and
ending one year after such separation from service.
(vi) Alternate Forms of Settlement.
Subject to the spousal consent requirements described above, a
Member may elect that his Transferred Account be distributed in the form of
a lump sum settlement as provided under the Plan, in installments if
available under subsection 15(h) or in the form of a joint and survivor
annuity or period certain and life annuity with a contingent annuitant
other than his spouse. Distributions under this subsection shall be
subject to the minimum distribution requirements of section 401(a)(9) of
the Code and the regulations thereunder, including the minimum distribution
incidental death benefit requirement.
(vii) Loans and In-Service Distributions.
<PAGE> 68
A married Member may not either pledge his
Transferred Account as security for a loan from the Plan or receive an in-
service distribution from his Transferred Account, in accordance with the
generally applicable rules of the Plan and the special provisions of this
Section 15, without the prior written consent of his spouse witnessed by a
notary public or authorized Plan representative in a manner prescribed by
the Committee.
<PAGE> 69
16. PARTICIPATION BY RELATED ENTITIES
(a) Commencement. Any entity which is a Related
Entity with respect to the Company shall be deemed to adopt this Plan and
the accompanying Trust Agreement effective as of the date the Committee
permits its Employees to make contributions under subsection 4(a).
(b) Termination. The Company may, by action of
the Board of Directors, determine at any time that any such Participating
Company shall cease participation in the Plan or withdraw and establish a
separate plan and fund. And such withdrawal shall be effected by a duly
executed instrument delivered to the Trustee instructing the Trustee to
segregate the assets of the Fund allocable to the Employees of such
Participating Company and pay them over to the separate fund. The
participation of any Participating Company and its Employees shall
automatically cease when such Participating Company ceases to be a Related
Entity unless the Committee expressly provides to the contrary. If a
Participating Company's participation in this Plan terminates for any
reason, the Accrued Benefits of Members employed by it shall be retained in
the Plan unless the Committee otherwise directs, subject to the Plan's
generally applicable benefit distribution provisions.
(c) Single Plan. The Plan shall at all times be
administered and interpreted as a single plan for the benefit of the
Employees of all Participating Companies.
(d) Delegation of Authority. Each
Participating Company hereby acknowledges that the Company has all the
rights and duties thereof under the Plan and the Trust Agreement, including
the right to amend the same.
<PAGE> 70
17. TOP-HEAVY REQUIREMENTS
(a) General Rule. For any Plan Year in which the
Plan is a top-heavy plan or included in a top-heavy group, as determined
under subsection 17(b), the special requirements of this Section shall
apply to Members not covered by a collective bargaining agreement.
(b) Calculation of Top-Heavy Status.
The Plan shall be a top-heavy plan (if it is not included in an
"aggregation group") or a plan included in a top-heavy group (if it is
included in an "aggregation group") with respect to any Plan Year if the
sum as of the "determination date" of the "cumulative accounts" of "key
employees" for the Plan Year exceeds 60% of a similar sum determined for
all "employees," excluding "employees" who were "key employees" in prior
Plan Years only.
(c) Definitions. For purposes of this Section 17,
the following definitions shall apply to be interpreted in accordance with
the provisions of section 416 of the Code and the regulations thereunder.
(i) "Aggregation Group" shall mean the plans of a
Participating Company or a Related Entity included below within the
following categories:
(A)each such plan in which a "key employee" is a
participant including a terminated plan in which a "key employee" was a
participant within the five-years ending on the "determination date";
(B)each other such plan which enables any plan in
subsection (A) above to meet the requirements of section 401(a)(4) or 410
of the Code; and
(C)each other plan not required to be included in
the "aggregation group" which the Company elects to include in the
"aggregation group" in accordance with the "permissive aggregation group"
rules of the Code if such group would
<PAGE> 71
continue to meet the requirements of sections 401(a) and 410 of the Code
with such plan being taken into account.
(ii) "Cumulative Account" for any "employee" shall mean
the sum of the amount of his accounts under this Plan plus all defined
contribution plans included in the "aggregation group" (if any) as of the
most recent valuation date for each such plan within a twelve-month period
ending on the "determination date," increased by any contributions due
after such valuation date and before the "determination date" plus the
present value of his accrued benefit under all defined benefit pension
plans included in the "aggregation group" (if any) as of the "determination
date." For a defined benefit plan, the present value of the accrued
benefit as of any particular "determination date" shall be the amount
determined under (A) the method, if any, that uniformly applies for accrual
purposes under all plans maintained by the Participating Companies and all
Related Entities, or (B) if there is no such method, as if such benefit
accrued not more rapidly than under the slowest accrual rate permitted
under the fractional accrual rule of section 411(b)(1)(C) of the Code, as
of the most recent valuation date for the defined benefit plan, under
actuarial equivalent factors specified therein, which is within a twelve-
month period ending on the "determination date." For this purpose, the
valuation date shall be the date for computing plan costs for purposes of
determining the minimum funding requirement under section 412 of the Code.
"Cumulative accounts" of "employees" who have not performed services for
any Participating Company or a Related Entity for the five-year period
ending on the "determination date" shall be disregarded. An "employee's"
"cumulative account" shall be increased by the aggregate distributions
during the five-year period ending on the "determination date" made with
respect to him under any plan in the aggregation group. Rollovers and
direct plan-to-plan transfers to this Plan or to a plan in the "aggregation
group" shall be included in an "employee's" "cumulative account" unless the
transfer is initiated by the "employee" and made from a plan maintained by
an employer which is not a Participating
<PAGE> 72
Company or a Related Entity.
(iii)"Determination Date" shall mean with respect to any
Plan Year the last day of the preceding Plan Year.
(iv) "Employee" shall mean any person (including a
beneficiary thereof) who has or had an accrued benefit held under this Plan
or a plan in the "aggregation group" including this Plan at any time during
the current or any one of the four preceding Plan Years. Any "employee"
other than a "key employee" described in subsection 17(c)(v) shall be
considered a "non-key employee" for purposes of this Section 17.
(v) "Key Employee" shall mean any "employee" or former
"employee" (including a beneficiary thereof) who is, at any time during the
Plan Year, or was, during any one of the four preceding Plan Years any one
or more of the following:
(A)an officer of a Participating Company or a
Related Entity whose compensation (as defined in subsection 5(d)) exceeds
50% of the dollar limitation in effect under section 415(b)(1)(A) of the
Code, unless 50 other such officers (or, if lesser, a number of such
officers equal to the greater of three or 10% of the "employees") have
higher annual compensation;
(B)one of the ten persons employed by a
Participating Company or a Related Entity both having annual compensation
(as defined in subsection 5(d)) greater than the limitation in effect under
section 415(c)(1)(A) of the Code, and owning (or considered as owning
within the meaning of section 318 of the Code) the largest interests (but
at least more than a 0.5% interest) in the Participating Companies and all
Related Entities. For purposes of this subsection (B), if two "employees"
have the same interest, the one with the greater compensation shall be
treated as owning the larger interest;
<PAGE> 73
(C)any person owning (or considered as owning
within the meaning of section 318 of the Code) more than 5% of the
outstanding stock of all Participating Companies or Related Entities or
stock possessing more than 5% of the total combined voting power of such
stock;
(D)a person who would be described in subsection
(C) above if 1% were substituted for 5% each place the same appears in
subsection (C) above, and who has annual compensation of more than
$150,000.
For purposes of determining ownership under this subsection, section
318(a)(2)(C) of the Code shall be applied by substituting 5% for 50%.
(d) Combined Benefit Limitation.
For purposes of the calculation of the combined limitation of subsection
5(c), "1.0" shall be substituted for "1.25" each place the same appears in
that subsection.
(e) Vesting. The Member's Accrued Benefit shall be
nonforfeitable.
(f) Minimum Contribution. Minimum
Participating Company contributions for a Member who is not a "key
employee" shall be required in an amount equal to the lesser of 3% of
compensation (as defined in subsection 5(d)) or the highest percentage of
such compensation limited to $150,000 (or an increased amount resulting
from a cost of living adjustment under section 415(d) of the Code)
contributed for any "key employee" under subsections 4(a) and 4(d). For
purposes of meeting the minimum contribution requirement, employer social
security contributions and elective contributions on behalf of "employees"
other than "key employees" shall be disregarded. Each "non-key employee"
of a Participating Company who has not separated from service at the end of
the Plan Year and who has satisfied the eligibility requirements of
subsection 3(a) shall receive any minimum contribution provided under this
Section 17 without regard to (i) whether he is credited with 1,000 Hours of
Service in the Plan Year, (ii) earnings level for the Plan Year or (iii)
<PAGE> 74
whether he elects to make contributions under subsection 4(a). If an
"employee" participates in both this Plan and another defined contribution
plan maintained by a Participating Company or a Related Entity, the minimum
benefit shall be provided under the other plan. Furthermore, if an
"employee" participates in both this Plan and a defined benefit plan
maintained by a Participating Company or a Related Entity, the minimum
benefit shall be provided under the defined benefit plan.
<PAGE> 75
18. MISCELLANEOUS
(a) Incapacity. If the Committee receives a copy
of a certified court order, or other binding legal certification, that a
person entitled to receive any benefit payment is under a legal disability
or is incapacitated in any way so as to be unable to manage his financial
affairs, the Committee shall direct that payments be made to such person's
legally appointed guardian or other representative. Any payment of a
benefit in accordance with the provisions of this subsection shall be a
complete discharge of any liability to make such payment.
(b) Reversions. In no event, except as provided
herein, shall the Trustee return to a Participating Company any amount
contributed by it to the Plan.
(i) Mistake of Fact. In the case of a contribution
made by a good faith mistake of fact, the Trustee shall return the
erroneous portion of the contribution, without increase for investment
earnings, but with decrease for investment losses, if any, within one year
after payment of the contribution to the Fund.
(ii) Deductibility. To the extent deduction of any
contribution determined by the Company to be deductible is disallowed, the
Trustee shall return that portion of the contribution, without increase for
investment earnings but with decrease for investment losses, if any, for
which deduction has been disallowed within one year after the disallowance
of the deduction.
(iii)Limitation. No return of contribution shall be
made under this subsection which adversely affects the Plan's qualified
status under regulations, rulings
or other published positions of the Internal Revenue Service or reduces a
Member's Accrued
Benefit below the amount it would have been had such contributions not been
made.
(iv) Compliance Refunds. This subsection shall not
preclude refunds made in accordance with subsection 4(b)(i), 4(d)(ii),
4(g)(ii), 4(j)(iii) or 5(a).
(c) Employee Data. The Committee, the Trustee
<PAGE> 76
or the Administrator may require that each Employee provide such data as it
deems necessary upon his becoming a Member in the Plan. Each Employee,
upon becoming a Member, shall be deemed to have approved of and to have
acquiesced in each and every provision of the Plan for himself, his
personal representatives, distributees, legatees, assigns, and
beneficiaries.
(d) In Writing Requirement. Unless
otherwise required by law, a requirement that a transaction or consent
under the Plan be "in writing" may, at the discretion of the Plan
Administrator, be effected through an interactive telephone system or by
other types of electronic communication.
(e) Doubt as to Right to Payment.
In the event that at any time any doubt exists as to the right of any
person to any payment hereunder or the amount or time of such payment
(including, without limitation, any case of doubt as to identity, or any
case in which any notice has been received from any other person claiming
any interest in amounts payable hereunder, or any case in which a claim
from other persons may exist by reason of community property or similar
laws), the Committee shall be entitled, in its discretion, to direct the
Trustee to hold such sum as a segregated amount in trust until such right
or amount or time is determined or until order of a court of competent
jurisdiction, or to pay such sum into court in accordance with appropriate
rules of law in such case then provided, or to make payment only upon
receipt of a bond or similar indemnification (in such amount and in such
form as is satisfactory to the Committee).
(f) Inability to Locate Distributee.
Notwithstanding any other provision of the Plan, in the event
that the Committee cannot locate any person to whom a payment is due under
this Plan, the benefit in respect of which such payment is to be made shall
be forfeited at such time as the Committee shall determine in its sole
discretion (but in all events prior to the time such benefit would
otherwise escheat under any applicable state law); provided, that such
benefit shall be reinstated if such person subsequently makes a valid claim
for such benefit.
<PAGE> 77
(g) Estoppel of Members and Their Beneficiaries.
The Participating Companies, Committee
and Trustee may rely upon any certificate, statement or other
representation made to them by any Employee, Member or beneficiary with
respect to age, length of service, leave of absence, date of cessation of
employment, marital status, or other fact required to be determined under
any other provisions of this Plan, and shall not be liable on account of
the payment of any moneys or the doing of any act in reliance upon any such
certificate, statement or other representation. Any such certificate,
statement or other representation made by an Employee or Member shall be
conclusively binding upon such Employee or Member and his beneficiary, and
such Employee, Member or beneficiary shall thereafter and forever be
estopped from disputing the truth and correctness of such certificate,
statement or other representation. Any such certificate, statement or
other representation made by a Member's beneficiary shall be conclusively
binding upon such beneficiary and such beneficiary shall thereafter and
forever be estopped from disputing the truth and correctness of such
certificate, statement or other representation.
(h) Law Governing. This Plan shall be
construed, administered and applied in a manner consistent with the laws of
the Commonwealth of Pennsylvania where those laws are not superseded by
federal law.
(i) Pronouns. The use of the masculine pronoun shall
be extended to include the feminine gender wherever appropriate.
(j) Interpretation. The Plan is a profit
sharing plan including a qualified, tax exempt trust under sections 401(a)
and 501(a) of the Code and a qualified cash
or deferred arrangement under section 401(k)(2) of the Code. The Plan
shall be interpreted
<PAGE> 78
in a manner consistent with its satisfaction of all requirements of the
Code applicable to such a plan.
IN WITNESS WHEREOF, and as evidence of the adoption of this Plan by
the Company, it has caused the same to be signed by its officers thereunto
duly authorized, and its corporate seal to be affixed hereto, this 20th
day of August, 1999.
AIRGAS, INC.
Attest:
/S/ Todd R. Craun By: /S/ Scott M. Melman
Todd R. Craun Scott M. Melman
General Counsel and Secretary Vice President,
Chief Financial Officer
(Corporate Seal)
<TABLE>
EXHIBIT 11
AIRGAS, INC.
EARNINGS PER SHARE CALCULATIONS
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
(In thousands, except per share amounts) 1999 1998 1999 1998
<S> <C> <C> <C> <C>
Weighted Average Shares Outstanding:
Basic shares outstanding 69,700 70,000 69,800 70,100
Stock options - incremental shares 1,300 1,600 1,200 1,600
Contingently issuable shares 200 100 200 100
Diluted shares outstanding 71,200 71,700 71,200 71,800
Net earnings $18,912 $10,480 $27,997 $21,755
Basic earnings per share $ .27 $ .15 $ .40 $ .31
Diluted earnings per share $ .27 $ .15 $ .39 $ .30
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> SEP-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 206,279
<ALLOWANCES> 6,483
<INVENTORY> 157,418
<CURRENT-ASSETS> 386,323
<PP&E> 1,034,201
<DEPRECIATION> 304,390
<TOTAL-ASSETS> 1,680,289
<CURRENT-LIABILITIES> 187,027
<BONDS> 835,015
<COMMON> 726
0
0
<OTHER-SE> 488,569
<TOTAL-LIABILITY-AND-EQUITY> 1,680,289
<SALES> 766,782
<TOTAL-REVENUES> 766,782
<CGS> 404,114
<TOTAL-COSTS> 705,379
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,218
<INCOME-PRETAX> 50,315
<INCOME-TAX> 21,728
<INCOME-CONTINUING> 28,587
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (590)
<NET-INCOME> 27,997
<EPS-BASIC> .40
<EPS-DILUTED> .39
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 201,719
<ALLOWANCES> 5,886
<INVENTORY> 165,863
<CURRENT-ASSETS> 395,738
<PP&E> 977,317
<DEPRECIATION> 262,175
<TOTAL-ASSETS> 1,720,031
<CURRENT-LIABILITIES> 211,089
<BONDS> 906,356
<COMMON> 717
0
0
<OTHER-SE> 437,464
<TOTAL-LIABILITY-AND-EQUITY> 1,720,031
<SALES> 797,365
<TOTAL-REVENUES> 797,365
<CGS> 427,647
<TOTAL-COSTS> 732,145
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,526
<INCOME-PRETAX> 37,501
<INCOME-TAX> 15,746
<INCOME-CONTINUING> 21,755
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,755
<EPS-BASIC> .30
<EPS-DILUTED> .29
</TABLE>
