PROSPECTUS
Pursuant to Rule 424B3
Registration No: 333-68722
333-68722-24
333-68722-23
333-68722-22
333-68722-21
333-68722-20
333-68722-14
333-68722-13
333-68722-11
333-68722-10
333-68722-09
333-68722-08
333-68722-07
333-68722-06
333-68722-05
333-68722-04
333-68722-03
333-68722-02
333-68722-01
333-68722-19
333-68722-18
333-68722-17
333-68722-16
333-68722-15
333-68722-12
[LOGO OF AIRGAS]
Airgas, Inc.
OFFER TO EXCHANGE
Up to $225,000,000 Principal Amount Outstanding of
9.125% Senior Subordinated Notes due 2011
for
a Like Principal Amount of
9.125% Senior Subordinated Notes due 2011
The new 9.125% Senior Subordinated Notes due 2011 will be free of the
transfer restrictions that apply to our outstanding unregistered 9.125% Senior
Subordinated Notes due 2011 that you currently hold, but will otherwise have
substantially the same terms of these outstanding old notes. This offer will
expire at 12:00 (midnight), New York City time, on October 16, 2001, unless we
extend it. The new notes will not trade on any established exchange.
----------------
Please see "Risk Factors" beginning on page 11 for a discussion of certain
factors you should consider in connection with the exchange offer.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the new notes or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
----------------
The date of this prospectus is September 17, 2001.
TABLE OF CONTENTS
Page
----
Disclosure Regarding Forward-Looking Statements............................ ii
Industry and Market Data................................................... iii
Where You Can Find More Information........................................ iii
Incorporation of Documents by Reference.................................... iii
Prospectus Summary......................................................... 1
Risk Factors............................................................... 11
Use of Proceeds............................................................ 17
The Exchange Offer......................................................... 18
Ratio of Earnings to Fixed Charges......................................... 25
Description of Notes....................................................... 26
Certain United States Federal Income Tax Considerations.................... 72
Plan of Distribution....................................................... 73
Legal Matters.............................................................. 73
Experts.................................................................... 73
i
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This offering circular contains statements that are forward looking within
the meaning of the Private Securities Litigation Reform Act of 1995. These
statements include, but are not limited to, statements regarding: our strategy
of leveraging our distribution network to sign new strategic accounts, pursue
cross-selling opportunities and promote strategic products; the success of
sales initiatives, including strategic products and accounts, in continuing
sales growth; the effect of price increases on sales growth; our expectation
that continued sales growth and the impact of price increases will help to
offset increases in product costs and operating expenses; the ability of our
cost reduction plan to offset higher operating expenses; our expectation that
we will realize cost savings in fiscal 2002 as a result of our cost reduction
plan; the ability of lower costs from centralized purchasing initiatives and
growth of higher margin private label products to offset lower gross profits
from sales of hardgoods; the estimate of future legal expenses related to the
Praxair, Inc. ("Praxair") lawsuit; the ultimate outcome of the Praxair lawsuit;
the timing, scope, success and effect on diluted earnings per share of the
project designed to improve certain operational and administrative processes;
the funding of future acquisitions, capital expenditures and current debt
maturities through the use of cash flow from operations, revolving credit
facilities, potential sales of assets and other financing alternatives; the
identification of acquisition candidates; future sources of financing and the
refinancing of our credit facilities and other debt instruments over the next
twelve months; the effect on us of higher interest rates; and performance of
counterparties under interest rate swap agreements. These forward-looking
statements involve risks and uncertainties.
Factors that could cause actual results to differ materially from those
predicted in any forward-looking statement include, but are not limited to:
underlying market conditions; growth and continued improvement in same-store
sales; the success of marketing initiatives on sales of strategic products and
accounts; our inability to control operating expenses and the potential impact
of higher operating expenses in future periods; the market acceptance and
success of private label products; our inability to improve margins through
sales of strategic and private label products; the inability of cost reduction
plans to improve operating margins and mitigate rising product costs and
operating expenses; adverse changes in customer buying patterns; market
acceptance of price increases; the inability of price increases and sales
growth to offset any increases in operating expenses; the impact of higher than
anticipated consulting expenses on future results; an economic downturn
(including adverse changes in the specific markets for our products); the
inability of centralized purchasing and distribution initiatives in lowering
product costs; the inability to generate sufficient cash flow from operations
or other sources to fund future acquisitions, capital expenditures and current
debt maturities; the inability to identify and successfully integrate
acquisition candidates; the inability to obtain financing at favorable rates;
the ability to manage interest rate exposure; the effects of competition from
independent distributors and vertically integrated gas producers on products,
pricing and sales growth; changes in product prices from gas producers and
name-brand manufacturers and suppliers of hardgoods; higher than estimated
legal fees related to the Praxair lawsuit; an unfavorable outcome of the
Praxair lawsuit; uncertainties regarding accidents or litigation which may
arise in the ordinary course of business; and the effects of, and changes in,
the economy, monetary and fiscal policies, laws and regulations, inflation and
monetary fluctuations and fluctuations in interest rates, both on a national
and international basis. We do not undertake to update any forward-looking
statement made herein or that may be made from time to time by or on our
behalf.
ii
INDUSTRY AND MARKET DATA
This offering circular includes market share and industry data and
forecasts that Airgas, Inc. obtained from internal company surveys, market
research, consultant surveys, publicly available information and industry
publications and surveys. Reports prepared or published by Merrill Lynch & Co.,
Cryogas International and Modern Distribution Management were the primary
sources for third party industry data and forecasts. Industry surveys,
publications, consultant surveys and forecasts generally state that the
information contained therein has been obtained from sources believed to be
reliable, but there can be no assurance as to the accuracy and completeness of
such information. Airgas, Inc. has not independently verified any of the data
from third-party sources nor has Airgas, Inc. ascertained the underlying
economic assumptions relied upon therein. Similarly, internal company surveys,
industry forecasts and market research, which Airgas, Inc. believes to be
reliable, based upon management's knowledge of the industry, have not been
verified by any independent sources.
---------------
WHERE YOU CAN FIND MORE INFORMATION
Airgas, Inc. is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In accordance with the
Exchange Act, Airgas, Inc. files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). The
reports, proxy statements and other information can be inspected and copied at
the public reference facilities that the Commission maintains at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
office located at Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Chicago, Illinois 60661. Copies of these materials can be obtained at
prescribed rates from the Public Reference Section of the Commission at the
principal offices of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission also maintains a web site at http://www.sec.gov, which
contains reports, proxy statements and other information regarding registrants
that file electronically with the Commission.
---------------
INCORPORATION OF DOCUMENTS BY REFERENCE
The Commission allows us to "incorporate by reference" the information we
file with them into this prospectus, which means that:
. incorporated documents are considered part of this prospectus;
. we can disclose important business and financial information about us,
that is not included in or delivered with this prospectus, to you by
referring you to those other documents; and
. information contained in later-dated documents will supplement, modify
or supersede, as applicable, the information contained in earlier-dated
documents, and information that we subsequently file with the Commission
will automatically update and supersede this incorporated information.
We incorporate by reference into this prospectus the documents listed
below, as amended and supplemented, and all documents filed by us with the
Commission under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this prospectus and prior to the time that the exchange offer made
hereby is completed:
. Annual Report on Form 10-K for the fiscal year ended March 31, 2001;
. Definitive Proxy Statement dated July 2, 2001;
iii
. Current Report on Form 8-K dated July 11, 2001;
. Current Report on Form 8-K dated July 16, 2001;
. Current Report on Form 8-K dated July 24, 2001; and
. Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2001.
You can obtain any of the filings incorporated by reference into this
document through us or from the Commission through the Commission's web site or
at the addresses listed above. Documents incorporated by reference into this
prospectus, except for any exhibits to those documents that are not expressly
incorporated by reference into those documents, are available from us without
charge by requesting them in writing or by telephone at the following address
and telephone number:
Airgas, Inc.
259 North Radnor-Chester Road
Suite 100
Radnor, PA 19087-5283
Attention: General Counsel
Telephone: (610) 687-5253
If you request any incorporated documents from us, we will mail them to you
by first-class mail, or by another equally prompt means, within one business
day after we receive your request. However, in order to obtain timely delivery
of these documents, you must make your request no later than five business days
before the expiration date of the exchange offer.
Unless the context requires otherwise, all references in this document to
"this prospectus" include all documents incorporated by reference into this
prospectus.
iv
PROSPECTUS SUMMARY
This summary does not contain all the information that may be important to
you. You should carefully read this prospectus in its entirety to understand,
our business, the risks associated with investing in the notes, the terms of
the notes and other considerations that may be important to you. As used in
this prospectus, unless otherwise indicated or the context otherwise requires,
the terms "Airgas," "we," "the company," "us" or "our" refer to Airgas, Inc.
and its subsidiaries. Our fiscal years end on March 31 and wherever we refer to
any of our fiscal years, we refer to the twelve-month period ending March 31st
of such year. As used in this prospectus, the term "Refinancing Transactions"
refers to (1) the completion of our accounts receivable facility and the
repayment of loans under our old bank credit facilities with the net proceeds,
(2) the initial borrowings under the new bank credit facility and the repayment
of loans under our old bank credit facilities with the net proceeds and (3) the
offering of the old notes and the application of the net proceeds therefrom to
repay loans under our old bank credit facilities.
Our Business
Overview
We are the largest distributor of industrial, medical and specialty gases
(delivered in cylinder or "packaged" form) and related welding supplies and
equipment, and the third largest distributor of safety products in the U.S. We
are also a leading producer and distributor of dry ice, liquid carbon dioxide
and nitrous oxide in the U.S. Our products are used in many industries,
including fabricated metal products, agriculture and mining, construction,
medical and health services and food and beverage.
Our revenue derives principally from the sale of packaged gases, such as
nitrogen, oxygen, argon, helium, acetylene, carbon dioxide, nitrous oxide,
hydrogen and specialty gases; the rental of our gas cylinders, bulk storage
tanks and welding equipment; and the sale of hardgoods, such as welding
supplies and equipment, safety products and maintenance, repair and operations
products. Our total net sales and Adjusted EBITDA for the fiscal year ended
March 31, 2001 were approximately $1.6 billion and $208 million, respectively.
We estimate the domestic market for packaged gas and welding equipment
sales in 2000 to have been approximately $8 billion. As of the fiscal year
ended March 31, 2001, we believe we had a market share of approximately 15%. We
also have a diversified base of over 700,000 customers, with our largest
customer representing approximately 1% of total net sales.
We operate the largest packaged gas distribution network in the U.S., with
approximately 700 locations in 44 states, consisting of five regional
distribution centers, 130 gas fill plants and testing facilities, approximately
600 branch stores and four customer call centers. We also operate two air
separation plants, 15 acetylene, 17 dry ice and eight liquid carbon dioxide
production facilities and six specialty gas laboratories.
Our Key Strengths
We believe that our key strengths are:
. Leading market positions in all our business segments. We are the
largest distributor of packaged industrial, medical and specialty gases
and related welding supplies and equipment in the U.S., with an
estimated market share of approximately 15%. We are also
1
the third largest distributor of safety products in the U.S., and a
leading producer and distributor of dry ice, liquid carbon dioxide and
nitrous oxide in the U.S.
. National distribution footprint. We believe we are better positioned
than our competitors to serve our customers with superior local service
and a national scope, with approximately 700 locations in 44 states. We
believe that our customers find it convenient to do business with us
through our multiple distribution channels, including our national
footprint of retail locations, catalogs, telemarketing and eBusiness. It
would be difficult and expensive for a competitor to replicate the
national footprint we have assembled through more than 300 acquisitions
over the last 18 years.
. Broad product and service offerings. We offer our customers a broad line
of products and services, from gases to hardgoods and safety products.
We have increasingly become a one-stop shopping source for our local and
national customers, with our broad selection and complementary sets of
products and services, including the Radnor(TM) private-label products.
One-stop shopping has also contributed to the success of our national
strategic accounts program through which we sign multi-year contracts to
distribute our products to customers with multiple locations across
broad geographic regions.
. Diverse customer base. We believe that our diverse customer base
minimizes the impact of economic cyclicality. We have over 700,000
customers representing more than 33 industries, including noncyclical
businesses such as medical services and food and beverage. In addition,
we do not rely on any single industry or customer for our sales. Our
largest industry served and largest individual customer accounted for
approximately 15% and 1% of our fiscal 2001 total net sales,
respectively.
. Stable cash flows. As a result of our diverse customer base and business
mix, we have enjoyed stable operating cash flows. In addition, our
business requires relatively low levels of maintenance capital
expenditures, and we have already completed most of the capital
investments required in developing our five regional distribution
centers. Our available cash flows have enabled us to reduce our
indebtedness from time to time.
. Strong management team with extensive industry experience. Our Chief
Executive Officer and Chief Operating Officer have an average of 22
years of experience in the industrial gas and chemicals industries. Our
senior management team combines professionals with long-term experience
within our company and recent key hires who bring broad talents and
expertise from the industrial gas and other industries. Moreover, our
senior management team is supported by numerous senior managers who have
extensive experience in our industry and in their respective regions.
Our Strategy
The key elements of our strategy are:
. Focus on internal growth supplemented by acquisitions in our core
businesses. One of our key objectives is to be the market leader with
respect to profitable sales growth. We believe that we can achieve this
goal by leveraging our leading market position, our national
distribution infrastructure, our multi-channel distribution network and
our broad product and service offerings. By implementing this strategy,
we increased same-store sales growth in fiscal 2001 by 3.1% during a
period of declining non-technology industrial production in the U.S. For
an explanation of same-store sales, see "Same-store Sales Growth"
included in our Current Report on Form 8-K dated July 11, 2001.
2
In addition, to supplement internal growth, we will continue to pursue
strategic acquisitions of complementary businesses. We are continuously
evaluating acquisition opportunities and consolidation possibilities,
and we are currently in various stages of due diligence or preliminary
discussions with respect to a number of potential transactions, one of
which would be significant. None of these potential transactions is
subject to a letter of intent (except for one immaterial acquisition
that is currently being evaluated) or otherwise so far advanced as to
make the transaction reasonably certain.
. Improve operating efficiencies to become the lowest-cost supplier in the
industry. We are highly focused on continuously improving our operating
efficiencies. Our efforts include improving internal logistics and
supply chain management, standardizing and centralizing administrative
and financial processes, consolidating our purchasing activities,
improving utilization of our gas cylinders and implementing
organization-wide best practices. In the fourth quarter of fiscal 2001,
we launched a program, which we refer to as Project One, that we believe
will assist us in achieving these objectives. Project One is expected to
realize short-term improvements from value-enhancing programs and build
our long-term scalable infrastructure that will sustain short-term
improvements and support future growth.
. Balance growth with continued discipline in paying down debt and
improving our credit profile. In fiscal 2001, we reduced our total debt
by $113 million, in addition to $73.2 million of debt repaid from the
proceeds of our accounts receivable securitization facility. We expect
to continue reducing debt and improving our credit ratios by improving
free cash flow through sales growth, implementing initiatives that we
expect will result in cost savings and working capital improvements and
divesting non-core businesses.
Recent Developments
In April 2001, we closed the second and final tranche of our $150 million
accounts receivable securitization facility, which resulted in net proceeds of
$64.3 million, which was subsequently reduced to $64.1 million to reflect
certain changes in our accounts receivable. These net proceeds were applied to
repay outstanding loans under our existing bank credit facilities.
On July 30, 2001, we obtained a new bank credit facility from a group of
financial institutions for which Bank of America, N.A. is the U.S. agent. The
new bank credit facility consists of a revolving credit facility providing
$367.5 million of dollar-denominated loans and CDN$50 million of Canadian
dollar-denominated loans, including letters of credit. The new bank credit
facility is guaranteed by certain of our domestic subsidiaries and our
borrowings in Canadian dollars are also guaranteed by certain of our Canadian
subsidiaries. See "New Bank Credit Facility" included in our Current Report on
Form 8-K dated July 11, 2001.
For the quarter ended June 30, 2001, we had sales and net earnings of $416
million and $13.5 million, respectively. Total same-store sales for the quarter
increased 2% as compared to the corresponding quarter a year ago. Same-store
sales for the Distribution segment increased 1%, reflecting an increase of 9%
for gases and rent and a decrease of 5% in hardgoods, while same-store sales
for the Gas Operations segment increased 13%.
3
The Offering
Summary of Terms of the Exchange Offer
Background........................ On July 30, 2001, we completed a private
placement of the old notes. In connection
with that private placement, we entered
into a registration rights agreement in
which we agreed, among other things, to
complete an exchange offer.
The Exchange Offer................ We are offering to exchange our new notes
which have been registered under the
Securities Act of 1933, as amended (the
"Securities Act") for a like principal
amount of our outstanding, unregistered
old notes. Old notes may only be tendered
in integral multiples of $1,000 principal
amount.
As of the date of this prospectus,
$225,000,000 in aggregate principal amount
of our old notes is outstanding.
Resale of New Notes............... We believe that new notes issued pursuant
to the exchange offer in exchange for old
notes may be offered for resale, resold
and otherwise transferred by you without
compliance with the registration and
prospectus delivery provisions of the
Securities Act, provided that:
. you are acquiring the new notes in the
ordinary course of your business;
. you have not engaged in, do not intend
to engage in, and have no arrangement
or understanding with any person to
participate in the distribution of the
new notes; and
. you are not our affiliate as defined
under Rule 405 of the Securities Act.
Each participating broker-dealer that
receives new notes for its own account
pursuant to the exchange offer in exchange
for old notes that were acquired as a
result of market-making or other trading
activity must acknowledge that it will
deliver a prospectus in connection with
any resale of new notes. See "Plan of
Distribution."
Consequences If You Do Not
Exchange Your Old Notes.......... Old notes that are not tendered in the
exchange offer or are not accepted for
exchange will continue to bear legends
restricting their transfer. You will not
be able to offer or sell the old notes
unless:
. the sale is exempt from the
registration requirements of the
Securities Act; or
. the old notes are registered under the
Securities Act.
4
After the exchange offer is closed, we
will no longer have an obligation to
register the old notes, except for some
limited exceptions. See "Risk Factors--If
you fail to exchange your old notes, they
will continue to be restricted and may
become less liquid."
Expiration Date................... 12:00 (midnight), New York City time, on
October 16, 2001, unless we extend the
exchange offer.
Certain Conditions to the
Exchange Offer................... The exchange offer is subject to certain
customary conditions, which we may waive.
Special Procedures for
Beneficial Holders............... If you beneficially own old notes which
are registered in the name of a broker,
dealer, commercial bank, trust company or
other nominee and you wish to tender in
the exchange offer, you should contact
such registered holder promptly and
instruct such person to tender on your
behalf. If you wish to tender in the
exchange offer on your own behalf, you
must, prior to completing and executing
the letter of transmittal and delivering
your old notes, either arrange to have the
old notes registered in your name or
obtain a properly completed bond power
from the registered holder. The transfer
of registered ownership may take a
considerable time.
Withdrawal Rights................. You may withdraw your tender of old notes
at any time before the offer expires.
Accounting Treatment.............. We will not recognize any gain or loss for
accounting purposes upon the completion of
the exchange offer. The expenses of the
exchange offer that we pay will increase
our deferred financing costs in accordance
with generally accepted accounting
principles. See "The Exchange Offer--
Accounting Treatment."
Certain Tax Consequences.......... The exchange pursuant to the exchange
offer generally should not be a taxable
event for U.S. Federal income tax
purposes.
Use of Proceeds................... We will not receive any proceeds from the
exchange or the issuance of new notes in
connection with the exchange offer.
Exchange Agent.................... The Bank of New York is serving as
exchange agent in connection with the
exchange offer.
5
Summary Description of the Securities to be Registered
Issuer...................... Airgas, Inc., a Delaware corporation.
Notes Offered............... $225.0 million aggregate principal amount of
9.125% Senior Subordinated Notes due 2011.
Maturity Date............... October 1, 2011.
Interest Payment Dates...... April 1 and October 1 beginning April 1, 2002.
Guarantors.................. The notes will be guaranteed by each of our
current and future domestic restricted
subsidiaries that guarantee our obligations under
the new credit facility. If we cannot make
payments on the notes when they are due, the
guarantors must make them instead. Not all of our
subsidiaries will guarantee the notes.
Ranking..................... The notes and the subsidiary guarantees are
senior subordinated debt. They rank behind all of
our and our guarantors' current and future
indebtedness, other than trade payables, except
indebtedness that expressly provides that it is
not senior to the notes and the subsidiary
guarantees. The notes rank equally with all of
our and our guarantors' future senior
subordinated indebtedness. The notes will be
effectively subordinated to all debt of
subsidiaries that do not guarantee the notes.
Optional Redemption......... We may redeem the notes, in whole or in part, at
any time beginning on October 1, 2006 at the
redemption prices listed under "Description of
Notes--Optional Redemption."
Before October 1, 2006, we may redeem the notes,
in whole or in part, at a price equal to 100% of
their principal amount plus the make-whole
premium described under "Description of Notes--
Optional Redemption."
In addition, before October 1, 2004, we may
redeem up to 35% of the notes issued under the
indenture with the proceeds of one or more equity
offerings by us at the price listed under
"Description of Notes--Optional Redemption."
Offer to Repurchase ........ If we sell assets under some circumstances, or
experience specific kinds of changes of control,
we must offer to repurchase the notes at the
prices listed under "Description of Notes--
Repurchase at the Option of Holders."
Basic Covenants............. The indenture governing the notes contains
covenants that, among other things, limit our
ability and the ability of any of our restricted
subsidiaries to:
6
. pay dividends or make distributions in respect
of our capital stock or to make certain other
restricted payments;
. incur indebtedness or issue preferred shares;
. create liens;
. agree to payment restrictions affecting our
restricted subsidiaries;
. consolidate, merge, sell or lease all or
substantially all of our assets;
. enter into transactions with our affiliates;
and
. designate our subsidiaries as unrestricted
subsidiaries.
At such time as the ratings assigned to the notes
are investment grade ratings by both Moody's
Investors Services and Standard & Poor's Ratings
Group, the foregoing covenants will cease to be
in effect with the exception of the covenants
that contain limitations on, among other things,
the designation of restricted and unrestricted
subsidiaries, certain consolidations, mergers and
transfers of assets, certain types of change of
control and liens.
These covenants are subject to important
exceptions and qualifications, which are
described under "Description of Notes--Repurchase
at the Option of Holders" and "--Certain
Covenants."
No Public Market............ The notes are a new issue of securities and will
not be listed on any securities exchange or
included in any automated quotation system.
Risk Factors
You should consider carefully all the information set forth in this
prospectus and, in particular, should evaluate the specific factors under the
section "Risk Factors" beginning on page 11 for considerations relevant to
participation in the exchange offer or an investment in the notes.
Our Executive Offices
Our executive offices are located at 259 North Radnor-Chester Road, Suite
100, Radnor, Pennsylvania 19087-5283, and our telephone number is (610) 687-
5253.
7
Summary Consolidated Financial Information
The following tables present summary financial information for fiscal 1999,
2000 and 2001 and at March 31, 1999, 2000 and 2001. These tables should be read
in conjunction with the information set forth under "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and our
consolidated financial statements and accompanying notes included in our Annual
Report on Form 10-K for fiscal year ended March 31, 2001.
The information below designated "as adjusted" gives effect to (1) our
accounts receivable securitization facility, the final phase of which was
completed in April 2001, and the repayment of loans under our old bank credit
facilities with the net proceeds, (2) the initial borrowings under the new bank
credit facility and the repayment of loans under our old bank credit facilities
with the net proceeds and (3) the issuance and sale of the old notes and the
application of the net proceeds therefrom to repay loans under our old bank
credit facilities, which events we refer to herein collectively as the
"Refinancing Transactions." The "as adjusted" information is derived from data
contained in our historical financial statements which has been adjusted to
give pro forma effect to the Refinancing Transactions as if the Refinancing
Transactions had occurred as of April 1, 2000 in the case of the income
statement information or March 31, 2001 in the case of the balance sheet
information.
Fiscal
--------------------------------
1999(1) 2000(2) 2001(3)
---------- ---------- ----------
(in thousands)
Income Statement Data:
Distribution sales.......................... $1,406,184 $1,409,949 $1,487,422
Gas Operations sales........................ 155,034 132,385 141,479
---------- ---------- ----------
Total net sales......................... 1,561,218 1,542,334 1,628,901
Cost of products sold (excluding
depreciation and amortization):
Distribution.............................. 768,568 760,122 797,423
Gas Operations............................ 69,487 56,475 49,777
Selling, distribution and administrative
expenses................................... 523,241 532,527 583,355
Depreciation................................ 61,901 63,635 62,938
Amortization................................ 26,025 25,673 23,816
Special (charges) recoveries, net........... 1,000 2,829 (3,643)
Total operating income...................... 112,996 106,731 107,949
Interest expense, net....................... 60,298 57,560 60,207
Earnings before income taxes and the
cumulative effect of an accounting change.. 86,361 70,424 48,941
Net earnings................................ 51,924 38,283 28,223
Cash Flow Statement Data:
Capital expenditures........................ $ 101,638 $ 65,211 $ 65,910
Net cash provided by operating activities... 102,063 100,092 199,005
Net cash used in investing activities....... 96,876 65,461 10,852
Net cash used in financing activities....... 5,187 34,631 188,153
Other Financial Data:
Interest expense(9)......................... $ 62,588 $ 58,712 $ 62,737
EBITDA(4)................................... 205,455 200,012 198,371
Adjusted EBITDA(5).......................... 202,655 208,483 208,014
Adjusted debt(6)............................ 882,648 924,449 811,039
Ratio of earnings to fixed charges(7)....... 2.48x 2.49x 2.41x
Ratio of Adjusted EBITDA to interest
expense(5)................................. 3.24x 3.55x 3.32x
Ratio of Adjusted debt to Adjusted
EBITDA(5)(6)................................ 4.36x 4.43x 3.90x
8
At March 31,
--------------------------------------------
2001,
1999 2000 2001 As Adjusted
---------- ---------- ---------- -----------
(in thousands)
Balance Sheet Data:
Plant and equipment, net......... 717,859 753,768 704,646 704,646
Total assets(8).................. 1,698,472 1,739,331 1,582,725 1,518,625
Current portion of long-term
debt............................ 19,645 20,071 72,945 72,945
Long-term debt, excluding current
portion......................... 847,841 857,422 620,664 566,189
Total long-term debt(8)........ 867,486 877,493 693,609 639,134
Total stockholders' equity....... 470,945 472,507 496,849 496,849
Fiscal
2001,
As Adjusted
-----------
As Adjusted Data:
Ratio of Adjusted EBITDA to
interest expense (as
adjusted)(5)(9)................. 2.93x
Ratio of Adjusted debt to
Adjusted EBITDA(5)(6)........... 3.95x
--------
(1) The results for fiscal 1999 include:
(a) special charge recoveries of $1.0 million ($575,000 after-tax),
(b) divestiture gains of $25.5 million ($15 million after-tax), and
(c) a $1.8 million after-tax nonrecurring gain relating to insurance
proceeds recorded by an equity affiliate.
(2) The results for fiscal 2000 include:
(a) special charge recoveries of $2.8 million ($1.7 million after-tax),
(b) divestiture gains of $17.5 million ($8.6 million after-tax),
(c) a litigation charge of $7.5 million ($4.8 million after-tax),
(d) an inventory write-down of $3.8 million ($2.2 million after-tax), and
(e) an after-tax charge of $590,000 representing a change in accounting
principle.
(3) The results for fiscal 2001 include:
(a) net special charges of $3.6 million ($2.3 million after-tax),
(b) litigation charges, net of $5.3 million ($3.4 million after-tax), and
(c) asset impairments associated with two equity affiliates of $700,000
after-tax.
(4) EBITDA represents total operating income plus depreciation, amortization
and cash dividends and fees from unconsolidated affiliates.
EBITDA is not a measure of operating income, operating performance or
liquidity under generally accepted accounting principles ("GAAP"). We
include EBITDA data because we understand such data are used by certain
investors to determine our historical ability to service our debt.
Nevertheless, this measure should not be considered in isolation or as a
substitute for operating income, as determined in accordance with GAAP, or
as a measure of liquidity. Additionally, it should be noted that companies
calculate EBITDA differently and therefore EBITDA as presented for Airgas
may not be comparable to EBITDA reported by other companies. EBITDA may not
be indicative of historical operating results, and we do not mean it to be
indicative of future results of operations or cash flows. You should also
see the statements of cash flows contained within our consolidated
financial statements, which are included in our Annual Report on Form 10-K
for the fiscal year ended March 31, 2001.
9
(5) Adjusted EBITDA represents EBITDA plus one-time losses and special charges
minus one-time gains and special recoveries. Adjusted EBITDA was calculated
as follows:
Fiscal
----------------------------
1999 2000 2001
-------- -------- --------
(in thousands)
EBITDA......................................... $205,455 $200,012 $198,371
One-time losses................................ -- 11,300 6,000
Special charges (recoveries)................... (1,000) (2,829) 3,643
One-time gains................................. (1,800) -- --
-------- -------- --------
Adjusted EBITDA................................ $202,655 $208,483 $208,014
======== ======== ========
(6) Adjusted debt represents total long-term debt as presented on the balance
sheet plus synthetic lease obligations and amounts drawn under the accounts
receivable securitization facility. Adjusted debt was calculated as
follows:
At March 31,
-----------------------------------
2001, As
1999 2000 2001 Adjusted
-------- -------- -------- --------
(in thousands)
Long-term debt............................ $867,486 $877,493 $693,609 $639,134
Synthetic Lease obligations............... 15,162 46,956 44,230 44,230
Accounts receivable securitization
facility................................. -- -- 73,200 137,300
-------- -------- -------- --------
Adjusted debt............................. $882,648 $924,449 $811,039 $820,664
======== ======== ======== ========
(7) Earnings consist of pre-tax income from continuing operations before equity
method earnings or losses plus fixed charges minus minority interest in
pre-tax income of entities that have not incurred fixed charges. Fixed
charges consist of interest expense on debt and amortization of deferred
debt issuance costs, and the portion of rental expense that we believe is
representative of the interest component of rental expense of approximately
$11.8 million, $12.8 million and $14.6 million in 1999, 2000 and 2001,
respectively.
(8) In April 2001, we closed the final tranche of our $150 million accounts
receivable securitization facility and used the net proceeds of $64.3
million to repay borrowings under our existing bank credit facilities.
Currently, there is $137.3 million funded under the facility.
(9) The following table sets forth a reconciliation of interest expense, which
includes gross interest expense and the discount on the securitization of
trade receivables of $61.4 million and $1.3 million, respectively, to
interest expense (as adjusted):
Fiscal 2001
--------------
(in thousands)
Interest expense............................................ $ 62,737
Net effect of the Refinancing Transactions on interest
expense.................................................... 8,252
--------
Interest expense (as adjusted).............................. $ 70,989
========
10
RISK FACTORS
In addition to the other information in this document, you should consider
the following factors in evaluating Airgas before purchasing the notes.
Risks Relating to Investment in the Notes
If you fail to exchange your old notes, they will continue to be restricted and
may become less liquid.
Old notes which you do not tender or we do not accept will, following the
exchange offer, continue to be restricted securities, and you may not offer to
sell them except pursuant to an exemption from, or in a transaction not subject
to, the Securities Act and applicable state securities law. We will issue new
notes in exchange for the old notes pursuant to the exchange offer only
following the satisfaction of the procedures and conditions set forth in "The
Exchange Offer--Procedures for Tendering." Such procedures and conditions
include timely receipt by the exchange agent of such old notes and of a
properly completed and duly executed letter of transmittal.
Because we anticipate that most holders of old notes will elect to exchange
such old notes, we expect that the liquidity of the market for any old notes
remaining after the completion of the exchange offer may be substantially
limited. Any old notes tendered and exchanged in the exchange offer will reduce
the aggregate principal amount at maturity of the old notes outstanding.
Following the exchange offer, if you did not tender your old notes you
generally will not have any further registration rights, and such old notes
will continue to be subject to certain transfer restrictions. Accordingly, the
liquidity of the market for such old notes could be adversely affected. The old
notes are currently eligible for sale pursuant to Rule 144A and Regulation S
under the Securities Act through the Private Offerings, Resale and Trading
through Automated Linkages market of the National Association of Securities
Dealers, Inc.
The notes will be contractually junior in right of payment to all of our senior
indebtedness and the subsidiary guarantees will be contractually junior in
right of payment to all senior indebtedness of the subsidiary guarantors.
As of March 31, 2001, after giving pro forma effect to the Refinancing
Transactions, we would have had approximately $414.1 million of senior
indebtedness, including letters of credit issued under the new credit facility
aggregating approximately $51.7 million, and our guarantors would have had
approximately $389.2 million of senior indebtedness, including guarantees of
senior debt of Airgas aggregating approximately $360.6 million. Although the
indenture with respect to the notes will contain limitations on our ability to
incur additional indebtedness, those limitations are subject to a number of
qualifications and exceptions that, depending on the circumstances at the time,
would allow us to incur a substantial amount of additional indebtedness, all of
which could be senior indebtedness.
We generally may not pay our obligations on the notes, or repurchase,
redeem or otherwise retire the notes if any senior indebtedness is not paid
when due or any default on senior indebtedness occurs and the maturity of the
senior indebtedness is accelerated in accordance with its terms, unless, in
either case, the default has been cured or waived, any acceleration has been
rescinded or the senior indebtedness has been repaid in full. In addition, if
certain other defaults regarding our senior indebtedness occur, we may not be
permitted to pay any obligations under the notes or any subsidiary guarantees
for a designated period of time. If we or any subsidiary guarantors are
declared bankrupt or insolvent, or if there is a payment default under, or an
acceleration of, any senior indebtedness, we are required to pay the lenders
under the new bank credit facility and any other creditors who are holders of
senior indebtedness in full before we apply
11
any of our assets to pay you. Accordingly, we may not have enough assets
remaining after payments to holders of the senior indebtedness to pay you.
Also, if our credit ratings are reduced, loans under the new bank credit
facility will become secured by liens on substantially all of our tangible and
intangible assets. The notes are unsecured and therefore do not have the
benefit of any collateral. If any event of default occurs under the new bank
credit facility when the lenders thereunder are secured by those assets, the
lenders may foreclose upon their collateral. In that case, those assets would
first be used to repay in full all amounts outstanding under the new bank
credit facility and may not be available to repay our obligations on the notes.
See "New Bank Credit Facility" included in our Current Report on Form 8-K dated
July 11, 2001 and "Description of the Notes--Events of Default and Remedies"
included in this prospectus.
We may not have sufficient funds to purchase notes upon a change of control.
If there is a change of control under the terms of the indenture governing
the notes, each holder of notes may require us to purchase all or a portion of
its notes at a purchase price equal to 101% of the principal amount thereof,
plus accrued interest to the date of purchase. Our ability to purchase the
notes upon a change of control may be limited by the terms of our other debt
agreements at that time. In order to purchase any outstanding notes, we might
have to refinance our outstanding indebtedness, which we might not be able to
do. Even if we were able to refinance our other indebtedness, any financing
might be on terms unfavorable to us. In addition, the new bank credit facility
will prohibit us from purchasing any notes, including as a result of any offer
in connection with a change of control, and also provides that the occurrence
of certain kinds of change of control events will constitute a default under
the new bank credit facility. In the event of a certain kind of change of
control, we must offer to repay all borrowings under the new bank credit
facility and obtain the consent of our lenders under the new bank credit
facility to purchase the notes. If we do not obtain such a consent or repay
such borrowings, we will remain prohibited from purchasing notes. In such a
case, our failure to purchase tendered notes would constitute a default under
the indenture governing the notes, which would constitute a default under the
new bank credit facility. We cannot assure you that we will have the financial
ability to purchase outstanding notes upon the occurrence of a change of
control. See "Description of Notes--Change of Control."
Not all of our subsidiaries guarantee our obligations under the notes, and the
assets of the non-guarantor subsidiaries may not be available to make payments
on the notes.
Our present and future foreign subsidiaries and domestic unrestricted
subsidiaries will not be guarantors of the notes. Payments on the notes are
only required to be made by the subsidiary guarantors and us. As a result, no
payments are required to be made from the assets of subsidiaries that do not
guarantee the notes, unless those assets are transferred by dividend or
otherwise to us or a subsidiary guarantor. See "Description of Notes--
Subordination--Liabilities of Subsidiaries versus Notes." Our non-guarantor
subsidiaries generated 1.3% of our total net sales and 4.6% of our EBITDA in
fiscal 2001.
In the event of a bankruptcy, liquidation or reorganization of any of the
non-guarantor subsidiaries, holders of their indebtedness, including their
trade creditors and other obligations, including any preferred stock, will be
entitled to payment of their claims from the assets of those subsidiaries
before any assets are made available for distribution to us. As a result, the
notes are effectively subordinated to all the liabilities of the non-guarantor
subsidiaries.
U.S. bankruptcy or fraudulent conveyance law may interfere with the payment of
the subsidiary guarantees.
Our subsidiaries will not receive any of the proceeds from the notes. Under
U.S. federal bankruptcy law and comparable provisions of state fraudulent
transfer laws, a guarantee could be
12
subordinated to all other indebtedness of that subsidiary guarantor if, among
other things, the subsidiary guarantor, at the time it incurred the
indebtedness evidenced by its guarantee:
. incurred the guarantee with the intent of hindering, delaying or
defrauding current or future creditors; or
. received less than reasonably equivalent value or fair consideration
for incurring the guarantee; and
. were insolvent or were rendered insolvent by reason of the
incurrence;
. were engaged, or about to engage, in a business or transaction for
which the assets remaining with it constituted unreasonably small
capital to carry on our business;
. intended to incur, or believed that it would incur, debts beyond
its ability to pay as these debts matured; or
. were a defendant in an action for money damages, or had a judgment
for money damages entered against us if, in either case, after
final judgment the judgment was unsatisfied.
The measure of insolvency for these purposes will vary depending upon the
law of the jurisdiction that is being applied in any proceeding. Generally,
however, a debtor would be considered insolvent if, at the time the debtor
incurred the indebtedness, either:
. the sum of the debtor's debts and liabilities, including contingent
liabilities, is greater than the debtor's assets at fair valuation; or
. the present fair saleable value of the debtor's assets is less than the
amount required to pay the probable liability on the debtor's total
existing debts and liabilities, including contingent liabilities, as
they become absolute and matured.
If the subsidiary guarantees are not enforceable, the notes would be
effectively junior in ranking to all liabilities of the subsidiary guarantors,
including trade payables of the subsidiary guarantors, and to any other prior
claims, including claims by holders of any preferred stock. In addition, any
payment by such subsidiary guarantor pursuant to its guarantee could be voided
and required to be returned to such guarantor, or to a fund for the benefit of
the creditors of the subsidiary guarantor. As of March 31, 2001, on a pro forma
basis, after giving effect to the Refinancing Transactions our subsidiary
guarantors had total liabilities, excluding liabilities owed to us and
guarantees of our indebtedness, of approximately $373.4 million.
Investors may find it difficult to trade the new notes.
The new notes are a new issue of securities, and there is currently no
public market for the new notes. We do not intend to apply for listing of the
new notes on any securities exchange. We also cannot assure you that you will
be able to sell your new notes at a particular time or that the prices that you
receive when you sell will be favorable. We also cannot assure you as to the
level of liquidity of the trading market for the new notes. Future trading
prices of the new notes will depend on many factors, including:
. our operating performance, prospects and financial condition or the
operating performance, prospects and financial condition of companies
in our industry generally;
. the interest of securities dealers in making a market for the new
notes; and
. the market for similar securities.
Historically, the market for non-investment-grade debt has been subject to
disruptions that have caused volatility in prices. It is possible that the
market for the new notes will be subject to
13
disruptions. Any disruptions may have a negative effect on the holders of the
new notes, regardless of our prospects and financial performance.
Risks Relating to Our Business
We have significant debt and our debt service obligations are substantial.
We have substantial amounts of outstanding indebtedness. As of March 31,
2001, after giving pro forma effect to the Refinancing Transactions, we would
have had total consolidated Adjusted debt of approximately $821 million, which
includes $639.1 million of long-term debt, $44.2 million of synthetic lease
obligations and $137.3 million of our accounts receivable securitization
facility. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in our Annual Report on Form 10-K for fiscal
year ended March 31, 2001.
Our substantial indebtedness could have significant negative consequences,
including:
. increasing our vulnerability to general adverse economic and industry
conditions;
. limiting our ability to obtain additional financing for working
capital, capital expenditures, acquisitions and other purposes;
. requiring the dedication of a significant portion of our expected cash
flow from operations to service our indebtedness, thereby reducing the
amount of our expected cash flow available for working capital, capital
expenditures, acquisitions and other purposes;
. making it more difficult to satisfy our obligations with respect to the
notes;
. limiting our flexibility in planning for, or reacting to, changes in
our business and industry;
. placing us at a possible competitive disadvantage relative to less
leveraged competitors;
. increasing the amount of our interest expense, because some of our
borrowings are at variable rates of interest, which, if interest rates
increase, could result in higher interest expense; and
. limiting, through the financial and other restrictive covenants in our
indebtedness, among other things, our ability to borrow additional
funds, dispose of assets or make investments.
After giving pro forma effect to the Refinancing Transactions, our pro
forma interest expense for fiscal 2001 would have been $71.0 million. This pro
forma interest expense does not take into account the costs of our synthetic
leases. Our ability to meet our expenses and debt obligations will depend on
our future performance, which will be affected by financial, business, economic
and other factors. We will not be able to control many of these factors, such
as economic conditions, governmental regulation and the availability of fuel
supplies. We cannot be certain that our earnings will be sufficient to allow us
to pay the principal and interest on our debt, including the notes, and meet
our other obligations. If we do not have enough money, we may be required to
refinance all or part of our existing debt, including the notes, sell assets,
borrow more money or sell equity. We cannot assure you that we will be able to
accomplish any of these alternatives on terms acceptable to us, if at all.
Despite currently expected levels of indebtedness, our subsidiaries and we will
be able to incur substantially more debt.
Our subsidiaries and we will be able to incur substantial additional
indebtedness in the future. Although the new bank credit facility and the
indenture governing the notes contain limitations on the incurrence of
additional indebtedness, those limitations are subject to a number of
qualifications and exceptions that, depending on the circumstances at the time,
would allow us to incur a substantial
14
amount of additional indebtedness. As of March 31, 2001, after giving pro forma
effect to the Refinancing Transactions, we would have had availability under
our new bank credit facility of approximately $105 million as a result of
limitations imposed by its financial covenants. In addition, the indenture with
respect to the notes does not restrict us from incurring obligations that do
not constitute indebtedness or preferred stock (as those terms are used in the
indenture). To the extent new debt and other obligations are added to our and
our subsidiaries' currently anticipated debt levels, the substantial risks
described above would increase.
Many of our customers are in cyclical industries some of which are currently
experiencing downturns.
Demand for our products is affected by general economic conditions. A
decline in general economic or business conditions in the industries served by
our customers can have a material adverse effect on our business. In addition,
many of our customers are in businesses that are cyclical in nature, such as
the automotive and oil and gas industries. Downturns in these industries, even
during periods of strong general economic conditions, can adversely affect our
sales and our financial results.
We may not be successful in generating internal sales growth and in controlling
expenses.
Although one of our principal business strategies is to improve our
internal sales growth, the achievement of this objective may be adversely
affected by:
. competition from independent distributors and vertically integrated gas
producers on products and pricing;
. changes in supply prices from gas producers and manufacturers of
hardgoods; and
. general economic conditions in the industrial markets which we serve,
including metal fabrication, agriculture, mining, construction and
other markets.
In addition, we may not be able to adequately control expenses due to inflation
and potentially higher costs of our distribution infrastructure, including the
cost of developing new sales channels, such as eBusiness.
Increases in energy costs could reduce our profitability.
The cost of industrial gases represented a significant percentage of our
operating costs in fiscal 2001. Because the production of industrial gases
requires significant amounts of electric energy, industrial gas prices have
historically increased as the cost of electric energy increases. Recent
shortages of energy in various states may cause energy prices to continue to
rise and, as a result, increase the cost of industrial gases. In addition, a
significant portion of our distribution costs is comprised of diesel fuel
costs, which have been rising recently. While we have historically been able to
pass increases in the cost of our supplies on to our customers, we cannot
assure you that we will be able to continue to do so in the future. Increases
in energy and other costs that we are unable to pass on to our customers could
significantly reduce our profitability.
We may not be successful in making acquisitions.
We have historically expanded our business primarily through acquisitions.
A part of our business strategy is to continue to grow through the acquisition
of producers and distributors of industrial gases and related equipment. We are
continuously evaluating acquisition opportunities and consolidation
possibilities, and we are currently in various stages of due diligence or
preliminary discussions with respect to a number of potential transactions, one
of which would be significant.
15
None of these potential transactions is subject to a letter of intent (except
for one immaterial acquisition that is currently being evaluated) or otherwise
so far advanced as to make the transaction reasonably certain. We cannot assure
you that we will continue to be able to identify acquisition candidates, or
that we will be able to make acquisitions on terms acceptable to us. In
addition, there is no assurance that we will be able to obtain financing on
terms acceptable to us for future acquisitions and, in any event, such
financing may be restricted by the terms of our new bank credit facility or the
indenture relating to the notes.
We may not be successful in integrating our past and future acquisitions and
achieving intended benefits and synergies.
The process of integrating acquired operations into our operations and
achieving targeted synergies may result in unexpected operating difficulties
and may require significant financial and other resources that would otherwise
be available for the ongoing development or expansion of the existing
operations. Acquisitions involve numerous risks, including:
. difficulty with the assimilation of acquired operations and products;
. failure to achieve targeted synergies;
. inability to retain key employees and business relationships of acquired
companies; and
. diversion of the attention and resources of our management team.
Acquisitions may have a material adverse effect on our business.
We may be required to incur additional debt in order to consummate
acquisitions in the future, which debt may be substantial. In addition,
acquisitions may result in the assumption of the outstanding indebtedness of
the acquired company, as well as the incurrence of contingent liabilities and
other expenses. All of the foregoing could materially adversely affect our
financial condition and operating results.
We cannot assure you that we will be able to successfully implement Project
One, our strategic initiative, or that this initiative will produce its
anticipated positive effects.
In the fourth quarter of fiscal 2001, we launched a program, which we refer
to as Project One, that we believe will assist us in achieving our strategic
objectives. Project One is expected to realize short-term improvements from
value-enhancing programs and build our long-term scalable infrastructure, which
will sustain our profitable growth, both organic growth and growth through
future acquisitions. During the implementation phase of Project One, we expect
our implementation costs to exceed realized savings. Moreover, we cannot assure
you that we will be able to successfully implement Project One as currently
contemplated, or at all, or that the anticipated cost savings will be realized
as a result of the implementation.
We depend on our key personnel to manage our business effectively and they may
be difficult to replace.
Our performance substantially depends on the efforts and abilities of our
senior management team, including our Chairman and Chief Executive Officer, and
other executive officers and key employees. Furthermore, much of our
competitive advantage is based on the expertise, experience and know-how of our
key personnel regarding our distribution infrastructure, systems and products.
The loss of key employees could have a negative effect on our business,
revenues, results of operations and financial condition.
16
Litigation may have a material adverse effect on our business.
From time to time, we are involved in lawsuits that arise from our business
transactions, including the Praxair litigation described under "Business--Legal
Proceedings" included in our Annual Report on Form 10-K for fiscal year ended
March 31, 2001. The defense and ultimate outcome of lawsuits against us may
result in higher operating expenses. Those higher operating expenses could have
a material adverse effect on our business, results of operations or financial
condition.
We will have ongoing environmental costs.
We are subject to laws and regulations relating to the protection of the
environment and natural resources. These include, among other things, the
management of hazardous substances and wastes, air emissions and water
discharges. Violations of some of these laws can result in substantial
penalties, temporary or permanent plant closures and criminal convictions.
Moreover, the nature of our existing and historical operations exposes us to
the risk of liabilities to third parties. These potential claims include
property damage, personal injuries and cleanup obligations. See "Business--
Regulatory and Environmental Matters" included in our Annual Report on Form 10-
K for fiscal year ended March 31, 2001.
We operate in a highly competitive environment.
The U.S. industrial gas industry is comprised of a small number of major
producers. Additionally, there are hundreds of smaller, local distributors,
some of whom operate on a low-cost basis, primarily in the cylinder segment.
Some of our competitors may have greater financial resources than we do. If we
are unable to compete effectively with our competitors, we will suffer lower
revenue and a loss of market share.
Although the current trend is for increasing prices, the industrial gas
industry has experienced periods of falling prices, and if such a trend were to
return, we could experience reduced revenues and/or cash flows.
Previously, our major competitors and we have had to reduce prices in order
to maintain our market share. Although prices are now increasing, in part due
to increased energy and raw materials prices, we cannot assure you that the
prices of our products will not fall in the future, which could adversely
affect our revenues and cash flows, or that we will be able to maintain current
levels of profitability.
USE OF PROCEEDS
We will not receive any proceeds from the exchange offer.
17
THE EXCHANGE OFFER
Purpose of the Exchange Offer
In connection with the sale of the old notes, we entered into a
registration rights agreement with the initial purchasers, under which we
agreed to use our best efforts to file and have declared effective an exchange
offer registration statement under the Securities Act.
We are making the exchange offer in reliance on the position of the
Commission as set forth in certain no-action letters. However, we have not
sought our own no-action letter. Based upon these interpretations by the
Commission, we believe that a holder of new notes, but not a holder who is our
"affiliate" within the meaning of Rule 405 of the Securities Act, who exchanges
old notes for new notes in the exchange offer, generally may offer the new
notes for resale, sell the new notes and otherwise transfer the new notes
without further registration under the Securities Act and without delivery of a
prospectus that satisfies the requirements of Section 10 of the Securities Act.
This does not apply, however, to a holder who is our "affiliate" within the
meaning of Rule 405 of the Securities Act. We also believe that a holder may
offer, sell or transfer the new notes only if the holder acquires the new notes
in the ordinary course of its business and is not participating, does not
intend to participate and has no arrangement or understanding with any person
to participate in a distribution of the new notes.
Any holder of the old notes using the exchange offer to participate in a
distribution of new notes cannot rely on the no-action letters referred to
above. This includes a broker-dealer that acquired old notes directly from us,
but not as a result of market-making activities or other trading activities.
Consequently, the holder must comply with the registration and prospectus
delivery requirements of the Securities Act in the absence of an exemption from
such requirements.
Each broker-dealer that receives new notes for its own account in exchange
for old notes, as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such new notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of new notes received in exchange for old notes where such old
notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The letter of transmittal states that
by acknowledging and delivering a prospectus, a broker-dealer will not be
considered to admit that it is an "underwriter" within the meaning of the
Securities Act. We have agreed that for a period of 120 days after the
expiration date, we will make this prospectus available to broker-dealers for
use in connection with any such resale. See "Plan of Distribution."
Except as described above, this prospectus may not be used for an offer to
resell, resale or other transfer of new notes.
The exchange offer is not being made to, nor will we accept tenders for
exchange from, holders of old notes in any jurisdiction in which the exchange
offer or the acceptance of it would not be in compliance with the securities or
blue sky laws of such jurisdiction.
Terms of the Exchange
Upon the terms and subject to the conditions of the exchange offer, we will
accept any and all old notes validly tendered prior to 12:00 (midnight), New
York time, on the expiration date. The date of acceptance for exchange of the
old notes, and completion of the exchange offer, is the exchange date, which
will be the first business day following the expiration date (unless extended
as described in this document). We will issue, on or promptly after the
exchange date, an aggregate principal amount of up to $225,000,000 of new notes
for a like principal amount of outstanding old notes
18
tendered and accepted in connection with the exchange offer. The new notes
issued in connection with the exchange offer will be delivered on the earliest
practicable date following the exchange date. Holders may tender some or all of
their old notes in connection with the exchange offer, but only in $1,000
increments of principal amount at maturity.
The terms of the new notes are identical in all material respects to the
terms of the old notes, except that the new notes have been registered under
the Securities Act and are issued free from any covenant regarding
registration, including the payment of liquidated damages upon a failure to
file or have declared effective an exchange offer registration statement or to
complete the exchange offer by certain dates. The new notes will evidence the
same debt as the old notes and will be issued under the same indenture and
entitled to the same benefits under that indenture as the old notes being
exchanged. As of the date of this prospectus, $225,000,000 in aggregate
principal amount of the old notes is outstanding.
In connection with the issuance of the old notes, we arranged for the old
notes originally purchased by qualified institutional buyers and those sold in
reliance on Regulation S under the Securities Act to be issued and transferable
in book-entry form through the facilities of The Depository Trust Company
("DTC"), acting as depositary. Except as described under "Description of
Notes--Book-Entry, Delivery and Form," the new notes will be issued in the form
of a global note registered in the name of DTC or its nominee and each
beneficial owner's interest in it will be transferable in book-entry form
through DTC. See "Description of Notes--Book-Entry, Delivery and Form."
Holders of old notes do not have any appraisal or dissenters' rights in
connection with the exchange offer. Old notes which are not tendered for
exchange or are tendered but not accepted in connection with the exchange offer
will remain outstanding and be entitled to the benefits of the indenture under
which they were issued, but will not be entitled to any registration rights
under the registration rights agreement.
We shall be considered to have accepted validly tendered old notes if and
when we have given oral or written notice to the exchange agent. The exchange
agent will act as agent for the tendering holders for the purposes of receiving
the new notes from us.
If any tendered old notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events described in this
prospectus or otherwise, we will return the old notes, without expense, to the
tendering holder as quickly as possible after the expiration date.
Holders who tender old notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the letter of
transmittal, transfer taxes on exchange of old notes in connection with the
exchange offer. We will pay all charges and expenses, other than certain
applicable taxes described below, in connection with the exchange offer. See
"--Fees and Expenses."
Expiration Date; Extensions; Amendments
The expiration date for the exchange offer is 12:00 (midnight), New York
City time, on October 16, 2001, unless extended by us in our sole discretion
(but in no event to a date later than October 30, 2001), in which case the term
"expiration date" shall mean the latest date and time to which the exchange
offer is extended.
We reserve the right, in our sole discretion:
. to delay accepting any old notes, to extend the offer or to terminate
the exchange offer if, in our reasonable judgment, any of the
conditions described below shall not have been
19
satisfied, by giving oral or written notice of the delay, extension or
termination to the exchange agent, or
. to amend the terms of the exchange offer in any manner.
If we amend the exchange offer in a manner that we consider material, we
will disclose such amendment by means of a prospectus supplement, and we will
extend the exchange offer for a period of five to ten business days.
If we determine to make a public announcement of any delay, extension,
amendment or termination of the exchange offer, we will do so by making a
timely release through an appropriate news agency.
Interest on the New Notes
Interest on the new notes will accrue at the rate of 9.125% per annum from
the most recent date to which interest on the new notes has been paid or, if no
interest has been paid, from the date of the indenture governing the notes.
Interest will be payable semiannually in arrears on April 1 and October 1,
commencing on April 1, 2002.
Conditions to the Exchange Offer
Despite any other term of the exchange offer, we will not be required to
accept for exchange, or exchange new notes for, any old notes and may terminate
the exchange offer as provided in this prospectus before the acceptance of the
old notes, if:
. any action or proceeding is instituted or threatened in any court or by
or before any governmental agency relating to the exchange offer which,
in our reasonable judgment, might materially impair our ability to
proceed with the exchange offer or materially impair the contemplated
benefits of the exchange offer to us, or any material adverse
development has occurred in any existing action or proceeding relating
to us or any of our subsidiaries;
. any change, or any development involving a prospectus change, in our
business or financial affairs or any of our subsidiaries has occurred
which, in our reasonable judgment, might materially impair our ability
to proceed with the exchange offer or materially impair the
contemplated benefits of the exchange offer to us;
. any law, statue, rule or regulation is proposed, adopted or enacted,
which in our reasonable judgment, might materially impair our ability
to proceed with the exchange offer or materially impair the
contemplated benefits of the exchange offer to us; or
. any governmental approval has not been obtained, which approval we, in
our reasonable discretion, consider necessary for the completion of the
exchange offer as contemplated by this prospectus.
The conditions listed above are for our sole benefit and may be asserted by
us regardless of the circumstances giving rise to any of these conditions. We
may waive these conditions in our reasonable discretion in whole or in part at
any time and from time to time. The failure by us at any
time to exercise any of the above rights shall not be considered a waiver of
such right, and such right shall be considered an ongoing right which may be
asserted at any time and from time to time.
20
If we determine in our reasonable discretion that any of the conditions are
not satisfied, we may:
. refuse to accept any old notes and return all tendered old notes to the
tendering holders;
. extend the exchange offer and retain all old notes tendered before the
expiration of the exchange offer, subject, however, to the rights of
holders to withdraw these old notes (See "--Withdrawal of Tenders"
below); or
. waive unsatisfied conditions relating to the exchange offer and accept
all properly tendered old notes which have not been withdrawn.
Procedures for Tendering
Unless the tender is being make in book-entry form, to tender in the
exchange offer, a holder must:
. complete, sign and date the letter of transmittal, or a facsimile of
it,
. have the signatures guaranteed if required by the letter of
transmittal, and
. mail or otherwise deliver the letter of transmittal or the facsimile,
the old notes and any other required documents to the exchange agent
prior to 12:00 (midnight), New York City time, on the expiration date.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the old notes by
causing DTC to transfer the old notes into the exchange agent's account.
Although delivery of old notes may be effected through book-entry transfer into
the exchange agent's account at DTC, the letter of transmittal (or facsimile),
with any required signature guarantees and any other required documents, must,
in any case, be transmitted to and received or confirmed by the exchange agent
at its addresses set forth under the caption "exchange agent" below, prior to
12:00 (midnight), New York City time, on the expiration date. Delivery of
documents to DTC in accordance with its procedures does not constitute delivery
to the exchange agent.
The tender by a holder of old notes will constitute an agreement between us
and the holder in accordance with the terms and subject to the conditions set
forth in this prospectus and in the letter of transmittal.
The method of delivery of old notes and the letter of transmittal and all
other required documents to the exchange agent is at the election and risk of
the holders. Instead of delivery by mail, we recommend that holders use an
overnight or hand delivery service. In all cases, holders should allow
sufficient time to assure delivery to the exchange agent before the expiration
date. No letter of transmittal of old notes should be sent to us. Holders may
request their respective brokers, dealers, commercial banks, trust companies or
nominees to effect the tenders for such holders.
Any beneficial owner whose old notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on behalf of the beneficial owner. If the
beneficial owner wishes to tender on that owner's own behalf, the owner must,
prior to completing and executing the letter of transmittal and delivery of
such owner's old notes, either make appropriate arrangements to register
ownership of the old notes in the owner's name or obtain a
properly completed bond power from the registered holder. The transfer of
registered ownership may take considerable time.
21
Signature on a letter of transmittal or a notice of withdrawal must be
guaranteed by an eligible guarantor institution within the meaning of Rule
17Ad-15 under the Exchange Act, unless the old notes tendered pursuant thereto
are tendered:
. by a registered holder who has not completed the box entitled "Special
Payment Instructions" or "Special Delivery Instructions" on the letter
of transmittal, or
. for the account of an eligible guarantor institution.
In the event that signatures on a letter or transmittal or a notice of
withdrawal are required to be guaranteed, such guarantee must be by:
. a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc.,
. a commercial bank or trust company having an office or correspondent in
the United States, or
. an "eligible guarantor institution."
If the letter of transmittal is signed by a person other than the
registered holder of any old notes, the old notes must be endorsed by the
registered holder or accompanied by a properly completed bond power, in each
case signed or endorsed in blank by the registered holder.
If the letter of transmittal or any old notes or bond powers are signed or
endorsed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by
us, submit evidence satisfactory to us of their authority to act in that
capacity with the letter of transmittal.
We will determine all questions as to the validity, form, eligibility
(including time of receipt) and acceptance and withdrawal of tendered old notes
in our sole discretion. We reserve the absolute right to reject any and all old
notes not properly tendered or any old notes whose acceptance by us would, in
the opinion of our U.S. counsel, be unlawful. We also reserve the right to
waive any defects, irregularities or conditions of tender as to any particular
old notes either before or after the expiration date. Our interpretation of the
terms and conditions of the exchange offer (including the instructions in the
letter of transmittal) will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of old notes must be
cured within a time period we will determine. Although we intend to request the
exchange agent to notify holders of defects or irregularities relating to
tenders of old notes, neither we, the exchange agent nor any other person will
have any duty or incur any liability for failure to give such notification.
Tenders of old notes will not be considered to have been made until such
defects or irregularities have been cured or waived. Any old notes received by
the exchange agent that are not properly tendered and as to which the defects
or irregularities have not been cured or waived will be returned by the
exchange agent to the tendering holders, unless otherwise provided in the
letter of transmittal, as soon as practicable following the expiration date.
In addition, we reserve the right, as set forth above under the caption "--
Conditions to the Exchange Offer," to terminate the exchange offer.
By tendering, each holder represents to us, among other things, that:
. the new notes acquired in connection with the exchange offer are being
obtained in the ordinary course of business of the person receiving the
new notes, whether or not such person is the holder;
22
. neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of
such new notes; and
. neither the holder nor any such other person is our "affiliate" (as
defined in Rule 405 under the Securities Act).
. if the holder is a broker-dealer which will receive new notes for its
own account in exchange for old notes, it will acknowledge that it
acquired such old notes as the result of market-making activities or
other trading activities and it will deliver a prospectus in connection
with any resale of such new notes. See "Plan of Distribution."
Guaranteed Delivery Procedures
A holder who wishes to tender its old notes and:
. whose old notes are not immediately available;
. who cannot deliver the holder's old notes, the letter of transmittal or
any other required documents to the exchange agent prior to the
expiration date; or
. who cannot complete the procedures for book-entry transfer before the
expiration date may effect a tender if:
. the tender is made through an eligible guarantor institution;
. before the expiration date, the exchange agent receives from the
eligible guarantor institution:
. a properly completed and duly executed notice of guaranteed
delivery by facsimile transmission, mail or hand delivery,
. the name and address of the holder,
. the certificate number(s) of the old notes and the principal
amount at maturity of old notes tendered, stating that the
tender is being made and guaranteeing that, within three New
York Stock Exchange trading days after the expiration date, the
letter of transmittal and the certificate(s) representing the
old notes (or a confirmation of book-entry transfer), and any
other documents required by the letter of transmittal will be
deposited by the eligible guarantor institution with the
exchange agent; and
. the exchange agent receives, within three New York Stock
Exchange trading days after the expiration date, a properly
completed and executed letter of transmittal or facsimile, as
well as the certificate(s) representing all tendered old notes
in proper form for transfer or a confirmation of book-entry
transfer, and all other documents required by the letter of
transmittal.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of old notes may be withdrawn
at any time prior to 12:00 (midnight), New York City time, on the expiration
date.
To withdraw a tender of old notes in connection with the exchange offer, a
written facsimile transmission notice of withdrawal must be received by the
exchange agent at its address set forth herein prior to 12:00 (midnight), New
York City time, on the expiration date. Any such notice of withdrawal must:
. specify the name of the person who deposited the old notes to be
withdrawn,
. identify the old notes to be withdrawn (including the certificate
number or numbers and principal amount at maturity of such old notes),
23
. be signed by the depositor in the same manner as the original signature
on the letter of transmittal by which such old notes were tendered
(including any required signature guarantees) or be accompanied by
documents or transfer sufficient to have the trustee register the
transfer of such old notes into the name of the person withdrawing the
tender, and
. specify the name in which any such old notes are to be registered, if
different from that of the depositor.
We will determine all questions as to the validity, form and eligibility
(including time of receipt) of such withdrawal notices. Any old notes so
withdrawn will be considered not to have been validly tendered for purposes of
the exchange offer, and no new notes will be issued unless the old notes
withdrawn are validly re-tendered. Any old notes which have been tendered but
which are not accepted for exchange or which are withdrawn will be returned to
the holder without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the exchange offer. Properly withdrawn
old notes may be re-tendered by following one of the procedures described above
under the caption "--Procedures for Tendering" at any time prior to the
expiration date.
Exchange Agent
The Bank of New York has been appointed as exchange agent in connection
with the exchange offer. Questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal should be
directed to the exchange agent, at its offices at Corporate Trust Department,
3rd floor, 385 Rifle Camp Road, West Paterson, NJ 07424, Attention: Terence
Rawlins. The exchange agent's telephone number is (973) 357-7055 and facsimile
number is (973) 357-7840.
Fees and Expenses
We will not make any payment to brokers, dealers or others soliciting
acceptances of the exchange offer. We will pay certain other expenses to be
incurred in connection with the exchange offer, including the fees and expenses
of the exchange agent, accounting and certain legal fees.
Holders who tender their old notes for exchange will not be obligated to
pay transfer taxes. If, however:
. new notes are to be delivered to, or issued in the name of, any person
other than the registered holder of the old notes tendered, or
. if tendered old notes are registered in the name of any person other
than the person signing the letter of transmittal, or
. if a transfer tax is imposed for any reason other than the exchange of
old notes in connection with the exchange offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption from them is not
submitted with the letter of transmittal, the amount of such transfer taxes
will be billed directly to the tendering holder.
Accounting Treatment
The new notes will be recorded at the same carrying value as the old notes
as reflected in our accounting records on the date of the exchange.
Accordingly, we will not recognize any gain or loss for accounting purposes
upon the completion of the exchange offer. The expenses of the exchange
24
offer that we pay will increase our deferred financing costs in accordance
with generally accepted accounting principles.
Consequences of Failures to Properly Tender Old Notes in the Exchange
Issuance of the new notes in exchange for the old notes under the exchange
offer will be made only after timely receipt by the exchange agent of such old
notes, a properly completed and duly executed letter of transmittal and all
other required documents. Therefore, holders of the old notes desiring to
tender such old notes in exchange for new notes should allow sufficient time
to ensure timely delivery. We are under no duty to give notification of
defects or irregularities of tenders of old notes for exchange. Old notes that
are not tendered or that are tendered but not accepted by us will, following
completion of the exchange offer, continue to be subject to the existing
restrictions upon transfer thereof under the Securities Act, and, upon
completion of the exchange offer, certain registered rights under the
registration rights agreement will terminate.
In the event the exchange offer is completed, we will not be required to
register the remaining old notes. Remaining old notes will continue to be
subject to the following restrictions on transfer:
. the remaining old notes may be resold only if registered pursuant to
the Securities Act, if any exemption from registration is available, or
if neither such registration nor such exemption is required by law, and
. the remaining old notes will bear a legend restricting transfer in the
absence of registration or an exemption.
We do not currently anticipate that we will register the remaining old
notes under the Securities Act. To the extent that old notes are tendered and
accepted in connection with the exchange offer, any trading market for
remaining old notes could be adversely affected.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges for
the periods indicated:
Three Months
Ended
Year Ended March 31, June 30,
----------------------------- ------------
1997 1998 1999 2000 2001 2001
----- ----- ----- ----- ----- ------------
Ratio of Earnings to
Fixed Charges.......... 2.66x 2.83x 2.48x 2.49x 2.41x 3.00x
For purposes of computing the above ratios: (1) earnings consist of pre-
tax income from continuing operations before equity method earnings or losses
plus fixed charges minus minority interest in pre-tax income of entities that
have not incurred fixed charges; and (2) fixed charges consist of interest
expense on debt and amortization of deferred debt issuance costs, and the
portion of rental expense that we believe is representative of the interest
component of rental expense of approximately $8.0 million, $10.1 million,
$11.8 million, $12.8 million, $14.6 million and $3.6 million in 1997, 1998,
1999, 2000, 2001 and the three months ended June 30, 2001, respectively.
25
DESCRIPTION OF NOTES
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." In this description, "Airgas"
refers only to Airgas, Inc. and not to any of its subsidiaries.
Airgas issued the old notes under an indenture dated July 30, 2001 among
itself, the Guarantors and The Bank of New York, as trustee. The new notes
(which are sometimes referred to in this description as "exchange notes") will
be issued under the same indenture and will be identical in all material
respects to the old notes, except that the new notes have been registered under
the Securities Act and are free of any obligation regarding registration,
including the payment of liquidated damages upon failure to file or have
declared effective an exchange offer registration statement or to consummate an
exchange offer by certain dates. Unless specifically stated to the contrary,
the following description applies equally to the new notes and the old notes.
The terms of the notes include those stated in the indenture and those made
part of the indenture by reference to the Trust Indenture Act of 1939.
The following description is a summary of the material provisions of the
indenture and the registration rights agreement. It does not restate those
agreements in their entirety. We urge you to read the indenture and the
registration rights agreement because they, and not this description, define
your rights as holders of the notes. Copies of the indenture and the
registration rights agreement are available as set forth below under "--
Additional Information." Certain defined terms used in this description but not
defined below under "--Certain Definitions" have the meanings assigned to them
in the indenture.
The registered Holder of a note will be treated as the owner of it for all
purposes. Only registered Holders will have rights under the indenture.
Brief Description of the Notes and the Guarantees
The Notes
The notes:
. are general unsecured senior subordinated obligations of Airgas;
. are subordinated in right of payment to all existing and future Senior
Debt of Airgas, including borrowings under the New Credit Facility;
. rank pari passu in right of payment with any future unsecured Senior
Subordinated Indebtedness of Airgas;
. are effectively junior to all existing and future liabilities,
including trade payables, of Airgas' non-guarantor Subsidiaries;
. are guaranteed by the Guarantors; and
. are subject to registration with the Commission pursuant to the
registration rights agreement.
The Guarantees
The notes are guaranteed on a senior subordinated basis by all of Airgas'
Domestic Restricted Subsidiaries that guarantee our obligations under the New
Credit Facility.
Each guarantee of the notes:
. is a general unsecured senior subordinated obligation of the Guarantor;
26
. is subordinated in right of payment to all existing and future Senior
Debt of that Guarantor; and
. ranks pari passu in right of payment with any future unsecured Senior
Subordinated Indebtedness of that Guarantor.
After giving pro forma effect to the Refinancing Transactions, as of March
31, 2001, Airgas would have had total Senior Debt of approximately $414.1
million, including letters of credit aggregating approximately $51.7 million
that secure Senior Debt of certain of the Guarantors, and the Guarantors would
have had total Senior Debt of approximately $389.2 million, including
approximately $360.6 million representing guarantees of Senior Debt of Airgas.
As indicated above and as discussed in detail below under the caption "--
Subordination," payments on the notes and under the guarantees of the notes
will be subordinated to the payment in cash of Senior Debt. The indenture will
permit the Guarantors and us to incur additional debt, including Senior Debt,
in the future.
Not all of our Subsidiaries will guarantee the notes. In the event of a
bankruptcy, liquidation or reorganization of any of these non-guarantor
Subsidiaries, the non-guarantor Subsidiaries will pay the holders of their debt
and their trade creditors before they will be able to distribute any of their
assets to us. The guarantor Subsidiaries generated 98.7% of our total net sales
in fiscal 2001. The non-guarantor Subsidiaries generated approximately 4% of
our EBITDA in fiscal 2001.
As of the date of the indenture, all of our Domestic Subsidiaries will be
"Restricted Subsidiaries." However, under the circumstances described below
under the subheading "Certain Covenants--Designation of Restricted and
Unrestricted Subsidiaries," we will be permitted to designate certain of our
Subsidiaries as "Unrestricted Subsidiaries." Our Unrestricted Subsidiaries will
not be subject to most of the restrictive covenants in the indenture. Our
Unrestricted Subsidiaries will not guarantee the notes. See "Risk Factors--
Risks Relating to Investment in the Notes."
Principal, Maturity and Interest
Airgas issued $225.0 million of old notes on July 30, 2001. Airgas may
issue additional notes ("Additional Notes") under the indenture from time to
time after this offering with the same CUSIP numbers as the old notes and new
notes. Any offering of Additional Notes is subject to the covenant described
below under the caption "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock." The old notes, the new notes and any Additional
Notes subsequently issued under the indenture will be treated as a single class
for all purposes under the indenture, including, without limitation, waivers,
amendments, redemptions and offers to purchase. Airgas will issue notes in
denominations of $1,000 and integral multiples of $1,000. The notes will mature
on October 1, 2011.
Interest on the notes will accrue at the rate of 9.125% per annum and will
be payable semiannually in arrears on April 1 and October 1, commencing on
April 1, 2002. Airgas will make each interest payment to the Holders of record
on the immediately preceding March 15 and September 15.
Interest on the notes will accrue from the date of original issuance or, if
interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
Methods of Receiving Payments on the Notes
If a Holder has given wire transfer instructions to Airgas, Airgas will pay
all principal, interest and premium and Special Interest, if any, on that
Holder's notes in accordance with those
27
instructions. All other payments on notes will be made at the office or agency
of the paying agent and registrar within the City and State of New York unless
Airgas elects to make interest payments by check mailed to the Holders at their
address set forth in the register of Holders.
Paying Agent and Registrar for the Notes
The trustee under the indenture will initially act as paying agent and
registrar. Airgas may change the paying agent or registrar without prior notice
to the Holders of the notes, and Airgas or any of its Subsidiaries may act as
paying agent or registrar.
Transfer and Exchange
A Holder may transfer or exchange notes in accordance with the indenture.
The registrar and the trustee may require a Holder to furnish appropriate
endorsements and transfer documents in connection with a transfer of notes.
Holders will be required to pay all taxes due on transfer. Airgas is not
required to transfer or exchange any note selected for redemption. Also, Airgas
is not required to transfer or exchange any note for a period of 15 days before
a selection of notes to be redeemed.
Subordination
Senior Debt versus Notes
The payment of principal, interest and premium and Special Interest, if
any, on the notes will be subordinated to the prior payment in full in cash of
all Senior Debt of Airgas, including Senior Debt incurred after the date of the
indenture.
The holders of Senior Debt will be entitled to receive payment in full in
cash of all Obligations due in respect of Senior Debt (including interest after
the commencement of any bankruptcy proceeding at the rate specified in the
applicable Senior Debt) before the Holders of notes will be entitled to receive
any payment with respect to the notes (except that Holders of notes may receive
and retain Permitted Junior Securities and payments made from the trust
described under "--Legal Defeasance and Covenant Defeasance" to the extent
permitted thereby), in the event of any distribution to creditors of Airgas:
(1) in a liquidation or dissolution of Airgas;
(2) in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to Airgas or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshaling of Airgas' assets and liabilities.
Liabilities of Subsidiaries versus Notes
None of our Foreign Subsidiaries are guaranteeing the notes. Claims of
creditors of such non-guarantor Subsidiaries, including trade creditors holding
indebtedness or guarantees issued by such non-guarantor Subsidiaries, generally
will effectively have priority with respect to the assets and earnings of such
non-guarantor Subsidiaries over the claims of our creditors, including holders
of the notes, even if such claims do not constitute Senior Debt. Accordingly,
the notes will be effectively subordinated to creditors (including trade
creditors) and preferred stockholders, if any, of such non-guarantor
Subsidiaries.
At March 31, 2001, after giving pro forma effect to the Refinancing
Transactions, the total liabilities of Airgas' Subsidiaries (other than the
Guarantors) would have been approximately $63 million, including trade
payables. Although the indenture limits the incurrence of Indebtedness
28
and preferred stock of certain of our Subsidiaries, each such limitation is
subject to a number of significant qualifications. Moreover, the indenture does
not impose any limitation on the incurrence by such Subsidiaries of liabilities
that are not considered Indebtedness or preferred stock under the indenture.
See "--Certain Covenants--Certain Covenants Incurrence of Indebtedness and
Issuance of Preferred Stock."
Other Senior Subordinated Indebtedness versus Notes
Only Indebtedness of Airgas or any of its Subsidiaries that is Senior Debt
of such Person ranks senior to the notes or the relevant Subsidiary Guarantee,
as the case may be, in accordance with the provisions of the indenture. The
notes and each Subsidiary Guarantee rank pari passu with all other Senior
Subordinated Indebtedness of Airgas and the relevant Subsidiary, respectively.
Airgas and the Guarantors have agreed in the indenture that Airgas and such
Guarantors will not incur, directly or indirectly, any Indebtedness that is
contractually subordinate or junior in right of payment to Airgas' Senior Debt,
or the Senior Debt of such Guarantors, unless such Indebtedness is Senior
Subordinated Indebtedness of such Person or is expressly subordinated in right
of payment to Senior Subordinated Indebtedness of such Person. The indenture
does not treat unsecured Indebtedness as subordinated or junior to Secured
Indebtedness merely because it is unsecured.
Payment of Notes
Airgas also may not make any payment in respect of the notes (except in
Permitted Junior Securities or from the trust described under "--Legal
Defeasance and Covenant Defeasance" when permitted thereby) if:
(1) a default in the payment of the principal (including reimbursement
obligations in respect of letters of credit) of or interest on or
commitment, letter of credit or administrative fees relating to Senior
Debt occurs and is continuing beyond any applicable grace period; or
(2) any other default occurs and is continuing on any series of
Designated Senior Debt that permits holders of that series of Designated
Senior Debt to accelerate its maturity and the trustee receives a notice
of such default (a "Payment Blockage Notice") from the holders of any such
Designated Senior Debt (or their representative).
Payments on the notes will be resumed:
(1) in the case of a payment default, upon the date on which such
default is cured or waived; and
(2) in the case of a nonpayment default, upon the earlier of the date
on which such nonpayment default is cured or waived or 179 days after the
date on which the applicable Payment Blockage Notice is received, unless
the maturity of any Designated Senior Debt has been accelerated.
No new Payment Blockage Notice may be delivered unless and until:
(1) 360 days have elapsed since the delivery of the immediately prior
Payment Blockage Notice; and
(2) all scheduled payments of principal, interest and premium and
Special Interest, if any, on the notes that have come due have been paid
in full in cash.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the trustee will be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default has been
cured or waived for a period of not less than 180 days.
29
If the trustee or any Holder of the notes receives a payment in respect of
the notes (except in Permitted Junior Securities or from the trust described
under "--Legal Defeasance and Covenant Defeasance") when:
(1) the payment is prohibited by these subordination provisions; and
(2) the trustee or the Holder has actual knowledge that the payment is
prohibited;
the trustee or the Holder, as the case may be, will hold the payment in trust
for the benefit of the holders of Senior Debt. Upon the proper written request
of the holders of Senior Debt, the trustee or the Holder, as the case may be,
will deliver the amounts in trust to the holders of Senior Debt or their proper
representative.
Airgas must promptly notify holders of Senior Debt if payment of the notes
is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a bankruptcy, liquidation or reorganization of Airgas, Holders of notes may
recover less ratably than creditors of Airgas who are holders of Senior Debt.
See "Risk Factors--The notes will be contractually junior in right of payment
to all of our senior indebtedness and the subsidiary guarantees will be
contractually junior in right of payment to all senior indebtedness of the
subsidiary guarantors."
Subsidiary Guarantees
The notes are and will be guaranteed on an unsecured senior subordinated
basis by each of Airgas' current and future Domestic Restricted Subsidiaries
that guarantee the obligations under the New Credit Facility. These Subsidiary
Guarantees are joint and several obligations of the Guarantors. Each Subsidiary
Guarantee is subordinated to the prior payment in full of all Senior Debt of
that Guarantor, including Senior Debt incurred after the date of the indenture,
on the same basis as provided above with respect to the subordination of
payments on the notes by Airgas to the prior payment in full of Senior Debt.
The obligations of each Guarantor under its Subsidiary Guarantee is limited as
necessary to prevent that Subsidiary Guarantee from constituting a fraudulent
conveyance under applicable law. See "Risk Factors--Risks Relating to the
Notes--U.S. bankruptcy or fraudulent conveyance law may interfere with the
payment of the subsidiary guarantees." Except as described below under "--
Repurchase at the Option of Holders--Asset Sales" and "--Certain Covenants,"
Airgas is not restricted from selling or otherwise disposing of any of its
direct or indirect Equity Interests in the Guarantors.
A Guarantor may not sell or otherwise dispose of all or substantially all
of its assets to, or consolidate with or merge with or into (whether or not
such Guarantor is the surviving Person), another Person, other than Airgas or
another Guarantor, unless:
(1) immediately after giving effect to that transaction, no Default
exists; and
(2) either:
(a) the Person acquiring the property in any such sale or
disposition or the Person formed by or surviving any such
consolidation or merger assumes all the obligations of that Guarantor
under the indenture, its Subsidiary Guarantee and the registration
rights agreement pursuant to a supplemental indenture reasonably
satisfactory to the trustee; or
(b) the Net Proceeds of such sale or other disposition are applied
in accordance with the applicable provisions of the indenture.
30
The Subsidiary Guarantee of a Guarantor will be released and the Guarantor
relieved of any Obligations under its Guarantee:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that Guarantor (including by way of
merger or consolidation) to a Person that is not (either before or after
giving effect to such transaction) a Restricted Subsidiary of Airgas, if
the sale or other disposition complies with the "Asset Sale" provisions of
the indenture;
(2) in connection with any sale of all of the Capital Stock of a
Guarantor to a Person that is not (either before or after giving effect to
such transaction) a Restricted Subsidiary of Airgas, if the sale complies
with the "Asset Sale" provisions of the indenture;
(3) the Legal Defeasance or Covenant Defeasance of the notes in
accordance with the terms of the indenture; or
(4) if Airgas designates such Guarantor as an Unrestricted Subsidiary
in accordance with the applicable provisions of the indenture.
See "--Repurchase at the Option of Holders--Asset Sales."
Optional Redemption
At any time on or prior to October 1, 2004, Airgas may at its option on any
one or more occasions redeem notes (which includes Additional Notes, if any) in
an aggregate principal amount not to exceed 35% of the aggregate principal
amount of notes (which includes Additional Notes, if any) issued under the
indenture at a redemption price of 109.125% of the principal amount, plus
accrued and unpaid interest and Special Interest, if any, to the redemption
date, with the net cash proceeds of one or more Public Equity Offerings;
provided that:
(1) at least 65% of the aggregate principal amount of notes (which
includes Additional Notes, if any) issued under the indenture remains
outstanding immediately after the occurrence of such redemption (excluding
notes held by Airgas and its Subsidiaries); and
(2) the redemption occurs within 90 days of the date of the closing of
such Public Equity Offering.
At any time prior to October 1, 2006, Airgas may also redeem all or a part
of the notes, upon not less than 30 nor more than 60 days prior notice, at a
redemption price equal to 100% of the principal amount of notes redeemed plus
the Applicable Premium as of, and accrued and unpaid interest and Special
Interest, if any, to, the date of redemption (the "Redemption Date").
On and after October 1, 2006, Airgas may at its option redeem all or a part
of the notes upon not less than 30 nor more than 60 days' prior notice, at the
redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest and Special Interest, if any, on the
notes redeemed, to the applicable redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the twelve-month period
beginning on October 1 of the years indicated below:
Year Percentage
---- ----------
2006.......................................................... 104.563%
2007.......................................................... 103.042%
2008.......................................................... 101.521%
2009 and thereafter........................................... 100.000%
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Selection and Notice
If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption as follows:
(1) if the notes are listed on any national securities exchange, in
compliance with the requirements of the principal national securities
exchange on which the notes are listed; or
(2) if the notes are not listed on any national securities exchange,
on a pro rata basis, by lot or by such method as the trustee deems fair
and appropriate.
No notes of $1,000 or less can be redeemed in part. Notices of redemption
will be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of notes to be redeemed at its registered
address, except that redemption notices may be mailed more than 60 days prior
to a redemption date if the notice is issued in connection with a defeasance of
the notes or a satisfaction and discharge of the indenture. Notices of
redemption may not be conditional.
If any note is to be redeemed in part only, the notice of redemption that
relates to that note will state the portion of the principal amount of that
note that is to be redeemed. A new note in principal amount equal to the
unredeemed portion of the original note will be issued in the name of the
Holder of notes upon cancellation of the original note. Notes called for
redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on notes or portions of them called
for redemption.
Mandatory Redemption; Offers to Purchase; Open Market Purchases
We are not required to make any mandatory redemption or sinking fund
payments with respect to the notes. However, under certain circumstances, we
may be required to offer to purchase notes as described under the captions "--
Repurchase of Notes at the Option of Holders--Asset Sales" and "--Change of
Control." We may at any time and from time to time purchase notes in the open
market or otherwise.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each Holder of notes will have the right to
require Airgas to repurchase all or any part (equal to $1,000 or an integral
multiple of $1,000) of that Holder's notes validly tendered pursuant to the
offer described below (the "Change of Control Offer"). The offer price in any
Change of Control Offer will be payable in cash and will be equal to 101% of
the aggregate principal amount of notes repurchased plus accrued and unpaid
interest and Special Interest, if any, on the notes repurchased, to the date of
purchase (the "Change of Control Payment"). Within 30 days following any Change
of Control, Airgas will mail a notice to each Holder describing the transaction
or transactions that constitute the Change of Control and offering to
repurchase notes on the Change of Control Payment Date specified in the notice
(the "Change of Control Payment Date"), which date will be no earlier than 30
days and no later than 60 days from the date such notice is mailed, pursuant to
the procedures required by the indenture and described in such notice. Airgas
will comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent those laws and
regulations are applicable in connection with the repurchase of the notes as a
result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of the indenture
relating to a Change of Control Offer, Airgas will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under the indenture by virtue of such conflict.
32
On the Change of Control Payment Date, Airgas will, to the extent lawful:
(1) accept for payment all notes or portions of notes properly
tendered pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the Change of
Control Payment in respect of all notes or portions of notes properly
tendered; and
(3) deliver or cause to be delivered to the trustee the notes properly
accepted together with an officers' certificate stating the aggregate
principal amount of notes or portions of notes being purchased by Airgas.
The paying agent will promptly mail to each Holder of notes properly
tendered the Change of Control Payment for such notes, and the trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new note equal in principal amount to any unpurchased portion of
the notes surrendered, if any; provided that each new note will be in a
principal amount of $1,000 or an integral multiple of $1,000.
Prior to complying with any of the provisions of this "Change of Control"
covenant, but in any event within 90 days following a Change of Control, Airgas
will either repay all outstanding Senior Debt or obtain the requisite consents,
if any, under all agreements governing outstanding Senior Debt to permit the
repurchase of notes required by this covenant. Airgas will publicly announce
the results of the Change of Control Offer on or as soon as practicable after
the Change of Control Payment Date.
The provisions described above that require Airgas to make a Change of
Control Offer following a Change of Control will be applicable whether or not
any other provisions of the indenture are applicable. Except as described above
with respect to a Change of Control, the indenture does not contain provisions
that permit the Holders of the notes to require that Airgas repurchase or
redeem the notes in the event of a takeover, recapitalization or other similar
transaction.
Airgas will not be required to make a Change of Control Offer upon a Change
of Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in the
indenture applicable to a Change of Control Offer made by Airgas and purchases
all notes properly tendered and not withdrawn under the Change of Control
Offer.
The Change of Control purchase feature of the notes may in certain
circumstances make more difficult or discourage a sale or takeover of Airgas
and, thus, the removal of incumbent management. The Change of Control purchase
feature is a result of negotiations between Airgas and the initial purchasers.
We have no present intention to engage in a transaction involving a Change of
Control, although it is possible that we could decide to do so in the future.
Subject to the limitations discussed below, we could, in the future, enter into
certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
indenture, but that could increase the amount of Indebtedness outstanding at
such time or otherwise affect our capital structure or credit ratings.
Restrictions on Airgas' ability to incur additional Indebtedness are contained
in the covenants described under "Certain Covenants Incurrence of Indebtedness
and Issuance of Preferred Stock." Such restrictions can only be waived with the
consent of the Holders of a majority in principal amount of the notes then
outstanding. Except for the limitations contained in such covenants, however,
the indenture will not contain any covenants or provisions that may afford
Holders of the notes protection in the event of a highly leveraged transaction.
The definition of Change of Control includes a phrase relating to the
direct or indirect sale, lease, transfer, conveyance or other disposition of
"all or substantially all" of the properties or assets
33
of Airgas and its Restricted Subsidiaries taken as a whole. Although there is a
limited body of case law interpreting the phrase "substantially all," there is
no precise established definition of the phrase under applicable law.
Accordingly, the ability of a Holder of notes to require Airgas to repurchase
its notes as a result of a sale, lease, transfer, conveyance or other
disposition of less than all of the assets of Airgas and its Restricted
Subsidiaries taken as a whole to another Person or group may be uncertain.
The provisions under the indenture relating to Airgas' obligation to make
an offer to repurchase the notes as a result of a Change of Control may be
waived or modified with the written consent of the Holders of a majority in
principal amount of the notes then outstanding.
Asset Sales
Airgas will not, and will not permit any of its Restricted Subsidiaries to,
consummate an Asset Sale unless:
(1) Airgas (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of the Asset Sale at least equal to the fair
market value of the assets or Equity Interests issued or sold or otherwise
disposed of; and
(2) at least 75% of the consideration received in the Asset Sale by
Airgas or such Restricted Subsidiary is in the form of cash or Cash
Equivalents.
For purposes of this provision, each of the following will be deemed to be
cash or Cash Equivalents:
(a) any liabilities, as shown on Airgas' or such Restricted
Subsidiary's most recent balance sheet, of Airgas or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by
their terms subordinated to the notes or any Subsidiary Guarantee) that
are assumed by the transferee of any such assets and the lender releases
Airgas or such Restricted Subsidiary from further liability; and
(b) any securities, notes or other obligations received by Airgas or
any such Restricted Subsidiary from such transferee that are promptly
converted by Airgas or such Restricted Subsidiary into cash or Cash
Equivalents, to the extent of the cash or Cash Equivalents received in
that conversion.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
Airgas, or the Restricted Subsidiaries, as the case may be, may apply an amount
equal to such Net Proceeds at its option:
(1) to repay any Senior Debt of Airgas or any of its Restricted
Subsidiaries;
(2) to acquire (or enter into a binding agreement to acquire, provided
that such commitment shall be subject only to customary conditions (other
than financing) and such acquisition shall be consummated within 180 days
after the end of such 365 day period) the assets of, or a majority of the
Voting Stock of, a Permitted Business or the minority interest in any
Restricted Subsidiary;
(3) to make a capital expenditure; or
(4) to acquire (or enter into a binding agreement to acquire, provided
that such commitment shall be subject only to customary conditions (other
than financing) and such acquisition shall be consummated within 180 days
after the end of such 365 day period) other long-term assets that are used
or useful in a Permitted Business.
34
If an amount equal to the Net Proceeds from Asset Sales is not applied or
invested as provided in the preceding paragraph such amount will constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $25.0
million, Airgas will make an offer to holders of the notes (and to holders of
other Senior Subordinated Indebtedness of Airgas designated by Airgas) to
purchase notes (and such other Senior Subordinated Indebtedness of Airgas)
pursuant to and subject to the conditions contained in the indenture (the
"Asset Sale Offer"). Airgas will purchase notes tendered pursuant to the Asset
Sale Offer at a purchase price of 100% of their principal amount (or, in the
event such other Senior Subordinated Indebtedness of Airgas was issued with
significant original issue discount, 100% of the accreted value thereof)
without premium, plus accrued but unpaid interest (or, in respect of such
other Senior Subordinated Indebtedness of Airgas, such lesser price, if any,
as may be provided for by the terms of such Senior Subordinated Indebtedness)
in accordance with the procedures (including prorating in the event of
oversubscription) set forth in the indenture (the "Asset Sale Offer Price").
If the aggregate purchase price of the securities tendered exceeds the Net
Proceeds allotted to their purchase, Airgas will select the securities to be
purchased on a pro rata basis but in round denominations, which in the case of
the notes will be denominations of $1,000 principal amount or multiples
thereof. If any Excess Proceeds remain after consummation of an Asset Sale
Offer, Airgas may use those Excess Proceeds for any purpose not otherwise
prohibited by the indenture. Upon completion of each Asset Sale Offer, the
amount of Excess Proceeds will be reset at zero.
Airgas will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent
those laws and regulations are applicable in connection with each repurchase
of notes pursuant to an Asset Sale Offer. To the extent that the provisions of
any securities laws or regulations conflict with the Asset Sale provisions of
the indenture, Airgas will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations under the
Asset Sale provisions of the indenture by virtue of such conflict.
The agreements governing Airgas' outstanding Senior Debt currently
prohibit Airgas from purchasing any notes, and also provides that certain
change of control events with respect to Airgas would constitute a default
under these agreements. Any future credit agreements or other agreements
relating to indebtedness to which Airgas becomes a party may contain similar
restrictions and provisions. In the event a Change of Control Offer or Asset
Sale Offer would require Airgas to purchase notes when it is prohibited from
doing so, Airgas could seek the consent of its senior lenders to the purchase
of notes or could attempt to refinance the borrowings that contain such
prohibition. If Airgas does not obtain such a consent or repay such
borrowings, Airgas will remain prohibited from purchasing notes. In such case,
Airgas' failure to purchase tendered notes would constitute an Event of
Default under the indenture, which would, in turn, constitute a default under
its other indebtedness. In such circumstances, the subordination provisions in
the indenture would likely restrict payments to the Holders of notes. See
"Risk Factors--We may not have sufficient funds to purchase notes upon a
change of control."
Certain Covenants
Set forth below are summaries of certain covenants contained in the
indenture. Following the first day that:
(a) the notes have an Investment Grade Rating from both of the Rating
Agencies, and
(b) no Default has occurred and is continuing under the indenture.
Airgas and its Restricted Subsidiaries will not be subject to the
provisions of the indenture summarized under the subcaptions:
. ""--Repurchase at the Option of the Holders--Asset Sales"
35
. ""--Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock"
. ""--Certain Covenants--Restricted Payments"
. ""--Certain Covenants--Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries"
. ""--Certain Covenants--Merger, Consolidation or Sale of Assets" (but
only clause (4) of such covenant)
. ""--Certain Covenants--Transactions with Affiliates"
(collectively, the "Suspended Covenants"). In the event that Airgas and its
Restricted Subsidiaries are not subject to the Suspended Covenants for any
period of time as a result of the preceding sentence, and subsequently one or
both of the Rating Agencies downgrades the rating assigned to the notes below
an Investment Grade Rating, then Airgas and the Restricted Subsidiaries will
thereafter again be subject to the Suspended Covenants, and compliance with
the Suspended Covenants with respect to Restricted Payments made after the
time of such downgrade will be calculated in accordance with the terms of the
covenant described below under "Restricted Payments" as though such covenant
had been in effect since the date the notes were originally issued.
Restricted Payments
Airgas will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of Airgas' or any of its Restricted Subsidiaries'
Equity Interests (including, without limitation, any payment in connection
with any merger or consolidation involving Airgas or any of its Restricted
Subsidiaries) or to the direct or indirect holders of Airgas' or any of
its Restricted Subsidiaries' Equity Interests in their capacity as such
(other than dividends or distributions payable (i) in Equity Interests
(other than Disqualified Stock) of Airgas or (ii) to Airgas or a
Restricted Subsidiary of Airgas);
(2) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or
consolidation involving Airgas) any Equity Interests of Airgas (other than
any such Equity Interests owned by Airgas or any of its Restricted
Subsidiaries);
(3) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the notes or the Subsidiary Guarantees, except a payment
of interest or principal at the Stated Maturity thereof; or
(4) make any Restricted Investment (all such payments and other
actions set forth in these clauses (1) through (4) above being
collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(a) no Default has occurred and is continuing or would occur as a
consequence of such Restricted Payment;
(b) Airgas would, after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the applicable four-
quarter period, have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in
the first paragraph of the covenant described below under the caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by Airgas and its Restricted Subsidiaries
after the date of the indenture (excluding Restricted Payments permitted
by clauses (2) through (8) of the next succeeding paragraph), is less than
the sum, without duplication, of:
36
(i) 50% of the Consolidated Net Income of Airgas for the period
(taken as one accounting period) from the beginning of the fiscal
quarter immediately preceding the fiscal quarter in which the date of
the indenture occurs to the end of Airgas' most recently ended fiscal
quarter for which internal financial statements are available at the
time of such Restricted Payment (or, if such Consolidated Net Income
for such period is a deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds received by Airgas
since the date of the indenture as a contribution to its common equity
capital or from the issue or sale of Equity Interests of Airgas (other
than Disqualified Stock) or from the issue or sale of convertible or
exchangeable Disqualified Stock or convertible or exchangeable debt
securities of Airgas that have been converted into or exchanged for
such Equity Interests (other than Equity Interests, Disqualified Stock
or debt securities sold to a Subsidiary of Airgas), plus
(iii) to the extent that any Restricted Investment that was made
after the date of the indenture is sold for cash or otherwise
liquidated or repaid, purchased or redeemed for cash, the lesser of
(i) such cash (less the cost of disposition, if any) and (ii) the
amount of such Restricted Investment, plus
(iv)to the extent that any Unrestricted Subsidiary of Airgas is
redesignated as a Restricted Subsidiary after the date of the
indenture, the lesser of (i) the fair market value of Airgas'
Investment in such Subsidiary as of the date of such redesignation and
(ii) such fair market value as of the date on which such Subsidiary
was originally designated as an Unrestricted Subsidiary.
The preceding provisions will not prohibit:
(1) the payment of any dividend or distribution on, or redemption of,
Equity Interests, within 60 days after the date of declaration or notice
thereof, if at the date of declaration or the giving of such notice, the
payment would have complied with the provisions of the indenture;
(2) any Restricted Payment made in exchange for, or made out of the
net cash proceeds of, the substantially concurrent sale (other than to a
Restricted Subsidiary of Airgas) of, Equity Interests of Airgas (other
than Disqualified Stock), provided that the amount of any such net cash
proceeds that are utilized for any such Restricted Payment will be
excluded from clause (c)(ii) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of Airgas or any Guarantor with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness;
(4) the payment of any dividend or other payment or distribution by a
Restricted Subsidiary of Airgas to the holders of its Equity Interests on
a pro rata basis;
(5) repurchases of Equity Interests deemed to occur upon exercise of
stock options if those Equity Interests represent all or a portion of the
exercise price of those options;
(6) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of Airgas or any Restricted Subsidiary of
Airgas (in the event such Equity Interests are not owned by Airgas or any
of its Restricted Subsidiaries) in an amount not to exceed $5.0 million in
any fiscal year, so long as no Default has occurred and is continuing or
would be caused thereby;
(7) the purchase by Airgas of fractional shares arising out of stock
dividends, splits or combinations or business combinations;
(8) distributions or payments of Receivables Fees; or
37
(9) Restricted Payments not to exceed $25.0 million under this clause
(9) in the aggregate, plus, to the extent Restricted Payments made
pursuant to this clause (9) are Investments made by Airgas or any of its
Restricted Subsidiaries in any Person and such Investment is sold for cash
or otherwise liquidated or repaid, purchased or redeemed for cash, an
amount equal to the lesser of (i) such cash (less the cost of disposition,
if any) and (ii) the amount of such Restricted Payment, provided, that (i)
at the time of such Restricted Payment, no Default shall have occurred and
be continuing (or result therefrom) and (ii) the amount of such cash will
be excluded from clause (c)(iv) of the preceding paragraph.
The amount of all Restricted Payments (other than cash) will be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by Airgas or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any assets or securities that are required to be valued by this
covenant will be determined by the Board of Directors of Airgas, whose
determination will be conclusive.
Incurrence of Indebtedness and Issuance of Preferred Stock
Airgas will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect
to (collectively, "incur") any Indebtedness (including Acquired Debt), and
Airgas will not, and will not permit any Guarantor to, issue any Disqualified
Stock and will not permit any of its Restricted Subsidiaries to issue any
shares of preferred stock, provided, that Airgas may incur Indebtedness
(including Acquired Debt) or issue Disqualified Stock, and Airgas' Restricted
Subsidiaries may incur Indebtedness (including Acquired Debt) or issue
preferred stock, in each case, if the Fixed Charge Coverage Ratio for Airgas'
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock or preferred
stock is issued would have been at least 2.0 to 1, determined on a pro forma
basis (including a pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred or the Disqualified Stock or
preferred stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The first paragraph of this covenant will not prohibit the incurrence of
any of the following items of Indebtedness (collectively, "Permitted Debt"):
(1) the incurrence by Airgas and any of its Restricted Subsidiaries of
Indebtedness and letters of credit under Credit Facilities in an aggregate
principal amount at any one time outstanding under this clause (1) (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of Airgas and its Restricted Subsidiaries
thereunder) not to exceed the greater of (x) $550.0 million or (y) the
amount of the Borrowing Base as of the date of such incurrence;
(2) the incurrence by Airgas and its Restricted Subsidiaries of the
Existing Indebtedness;
(3) the incurrence by Airgas and the Guarantors of Indebtedness
represented by the old notes and the related Subsidiary Guarantees to be
issued, in the case of the old notes, on the date of the indenture and the
new notes and the related Subsidiary Guarantees to be issued pursuant to
the registration rights agreement;
(4) the incurrence by Airgas or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case, incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of Airgas
or such Restricted Subsidiary, in an aggregate principal amount, including
all Permitted
38
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (4), not to exceed $25.0
million at any time outstanding;
(5) the incurrence by Airgas or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the indenture to be
incurred under the first paragraph of this covenant or clauses (2), (3),
(4), (5) or (11) of this paragraph;
(6) the incurrence by Airgas or any of its Restricted Subsidiaries of
Indebtedness owing to Airgas, any of its Restricted Subsidiaries or any
Accounts Receivable Subsidiary, provided that:
(a) if Airgas or any Guarantor is the obligor on any such
Indebtedness owing to any Restricted Subsidiary, such Indebtedness
must be expressly subordinated to the prior payment in full in cash of
all Obligations with respect to the notes, in the case of Airgas, or
the Subsidiary Guarantee, in the case of a Guarantor; and
(b) (i) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person other
than Airgas, a Restricted Subsidiary of Airgas or an Accounts
Receivable Entity and (ii) any sale or other transfer of any such
Indebtedness to a Person that is not Airgas, a Restricted Subsidiary
of Airgas or an Accounts Receivable Entity will be deemed, in each
case, to constitute an incurrence of such Indebtedness by Airgas or
such Restricted Subsidiary, as the case may be, that was not permitted
by this clause (6);
(7) the incurrence by Airgas or any of its Restricted Subsidiaries of
Hedging Obligations;
(8) the guarantee by Airgas or any of the Restricted Subsidiaries of
Indebtedness of Airgas or a Restricted Subsidiary of Airgas that was
permitted to be incurred by another provision of this covenant;
(9) Obligations in respect of performance, bid and surety bonds and
completion guarantees provided by Airgas or any Restricted Subsidiary in
the ordinary course of business;
(10) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument drawn
against insufficient funds in the ordinary course of business, provided,
that such Indebtedness is extinguished within five Business Days of its
incurrence; and
(11) the incurrence by Airgas or any of its Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) which, when taken together with all other
Indebtedness of Airgas and its Restricted Subsidiaries outstanding on the
date of such incurrence and incurred pursuant to this clause (11), does
not exceed $25.0 million.
For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that an
item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (11) above, or
is entitled to be incurred pursuant to the first paragraph of this covenant,
Airgas will be permitted to divide and classify such item of Indebtedness on
the date of its incurrence, or later reclassify all or a portion of such item
of Indebtedness, in any manner that complies with this covenant. Indebtedness
under Credit Facilities outstanding on the date on which notes are first
issued and authenticated under the indenture will be deemed to have been
incurred on such date in reliance on the exception provided by clause (1) of
the definition of Permitted Debt.
Accrual of interest and dividends, accretion or amortization of original
issue discount and changes to amounts outstanding in respect of Hedging
Obligations solely as a result of fluctuations in
39
foreign currency exchange rates or interest rates or by reason of fees,
indemnities and compensation payable thereunder, will not be deemed to be an
incurrence of Indebtedness or an issuance of preferred stock for purpose of
this covenant.
For purposes of determining compliance with any U.S. dollar denominated
restriction on the incurrence of Indebtedness where the Indebtedness incurred
is denominated in a currency other than U.S. dollars, the amount of such
Indebtedness will be the U.S. Dollar Equivalent of such Indebtedness determined
on the date of incurrence, provided, that if any such Indebtedness denominated
in a currency other than U.S. dollars is subject to a Currency Agreement with
respect to U.S. dollars covering all principal, premium, if any, and interest
payable on such Indebtedness, the amount of such Indebtedness expressed in U.S.
dollars will be as provided in such Currency Agreement. The principal amount of
any Permitted Refinancing Indebtedness incurred in the same currency as the
Indebtedness being refinanced will be the U.S. Dollar Equivalent of the
Indebtedness being refinanced, except to the extent that (i) such U.S. Dollar
Equivalent was determined based on a Currency Agreement, in which case the
Permitted Refinancing Indebtedness will be determined in accordance with the
preceding sentence, and (ii) the principal amount of the Permitted Refinancing
Indebtedness exceeds the principal amount of the Indebtedness being refinanced,
in which case the U.S. Dollar Equivalent of such excess will be determined on
the date such Permitted Refinancing Indebtedness is incurred.
Anti-Layering
Airgas will not incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is subordinate or junior in right of payment
to any Senior Debt of Airgas and senior in any respect in right of payment to
the notes. No Guarantor will incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to the Senior Debt of such Guarantor and senior in any respect
in right of payment to such Guarantor's Subsidiary Guarantee.
Limitation on Liens
Airgas will not, and will not permit any of its Restricted Subsidiaries to,
create, incur or otherwise cause or suffer to exist or become effective any
Liens of any kind upon any property or assets of Airgas or any Restricted
Subsidiary of Airgas, now owned or hereafter acquired, which secures
Indebtedness that ranks pari passu with or subordinate to the notes unless:
(1) if such Lien secures Indebtedness which is pari passu with the
notes, then the notes are secured on an equal and ratable basis with the
Indebtedness so secured until such time as such Indebtedness is no longer
secured by a Lien, or
(2) if such Lien secures Indebtedness, which is subordinated to the
notes, any such Lien shall be subordinated to a Lien granted to the
holders of the notes in the same collateral as that securing such Lien to
the same extent as such subordinated Indebtedness is subordinated to the
notes.
Dividend and Other Payment Restrictions Affecting Subsidiaries
Airgas will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any of its Restricted
Subsidiaries to:
(1) pay dividends or make any other distributions on its Capital Stock
to Airgas or any of its Restricted Subsidiaries, or with respect to any
other interest or participation in, or measured
40
by, its profits and payable to Airgas and any of its Restricted
Subsidiaries, or pay any indebtedness owed to Airgas or any of its
Restricted Subsidiaries;
(2) make loans or advances to Airgas or any of its Restricted
Subsidiaries; or
(3) transfer any of its properties or assets to Airgas or any of its
Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) any agreement in effect or entered into on the date of the
indenture, including agreements governing Existing Indebtedness and the
New Credit Facility as in effect on the date of the indenture and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings of those agreements, provided
that the amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacement or refinancings are not materially
less favorable, taken as a whole, with respect to such dividend and other
payment restrictions than those contained in those agreements on the date
of the indenture;
(2) the indenture, the notes and the Subsidiary Guarantees;
(3) applicable law and any applicable rule, regulation or order;
(4) any instrument governing Indebtedness or Capital Stock of a Person
acquired by Airgas or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness or
Capital Stock was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person,
or the property or assets of the Person, so acquired, provided that, in
the case of Indebtedness, such Indebtedness was permitted by the terms of
the indenture to be incurred;
(5) customary non-assignment provisions in leases, licenses or
contracts entered into in the ordinary course of business;
(6) purchase money obligations that impose restrictions on that
property of the nature described in clause (3) of the preceding paragraph;
(7) any agreement for the sale or other disposition of assets,
including, without limitation, customary restrictions with respect to a
Subsidiary pursuant to an agreement that has been entered into for the
sale or disposition of Capital Stock or assets of that Subsidiary;
(8) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are not materially less favorable, taken as a whole, than
those contained in the agreements governing the Indebtedness being
refinanced;
(9) Liens that limit the right of the debtor to dispose of the assets
subject to such Liens;
(10) customary provisions in joint venture agreements, asset sale
agreements, stock sale agreements and other similar agreements entered
into in the ordinary course of business;
(11) any such encumbrance or restriction with respect to a Foreign
Subsidiary pursuant to an agreement governing Indebtedness incurred by
such Foreign Subsidiary;
(12) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
(13) any agreement governing the terms of any Indebtedness incurred
pursuant to clause (1) of the covenant described under "--Incurrence of
Indebtedness and Issuance of Preferred Stock", provided, that (i) either
(x) the encumbrance or restriction applies only in the event of
41
and during the continuance of a payment default or a default with respect
to a financial covenant contained in such Indebtedness or agreement or (y)
Airgas determines that, at the time any such Indebtedness is incurred (and
at the time of any modification of the terms of any such encumbrance or
restriction), any such encumbrance or restriction will not materially
affect Airgas' ability to make principal or interest payments on the notes
and (ii) the encumbrance or restriction is not materially more
disadvantageous to the Holders of the notes than is customary in
comparable financings or agreements (as determined by Airgas in good
faith); and
(14) restrictions created in connection with any Receivables Facility
that, in the good faith determination of the Board of Directors of Airgas,
are necessary or advisable to effect that Receivables Facility.
Merger, Consolidation or Sale of Assets
Airgas may not, directly or indirectly: (1) consolidate or merge with or
into another Person (whether or not Airgas is the surviving corporation); or
(2) sell, assign, transfer, convey or otherwise dispose of all or substantially
all of the properties or assets of Airgas and its Restricted Subsidiaries taken
as a whole, in one or more related transactions, to another Person; unless:
(1) either: (a) Airgas is the surviving corporation; or (b) the Person
formed by or surviving any such consolidation or merger (if other than
Airgas) or to which such sale, assignment, transfer, conveyance or other
disposition has been made is a corporation organized or existing under the
laws of the United States, any state of the United States or the District
of Columbia (any such Person, the "Successor Company");
(2) the Successor Company assumes all the obligations of Airgas under
the notes, the indenture and the registration rights agreement pursuant to
agreements reasonably satisfactory to the trustee;
(3) immediately after such transaction no Default exists; and
(4) Airgas or the Successor Company will, on the date of such
transaction after giving pro forma effect thereto and any related
financing transactions as if the same had occurred at the beginning of the
applicable four quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test
set forth in the first paragraph of the covenant described above under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock."
The foregoing clause (4) will not prohibit (a) a merger between Airgas and
any of its Restricted Subsidiaries or (b) a merger between Airgas and an
Affiliate incorporated solely for the purpose of reincorporating Airgas in
another state of the United States, so long as the amount of Indebtedness of
Airgas and its Restricted Subsidiaries is not increased thereby.
In addition, Airgas may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. This "Merger, Consolidation or Sale of
Assets" covenant will not apply to a sale, assignment, transfer, conveyance or
other disposition of assets between or among Airgas and any of the Guarantors.
The Successor Company will be the successor to Airgas and shall succeed to,
and be substituted for, and may exercise every right and power of, Airgas under
the indenture, and the predecessor company shall be released from its
obligations with respect to the notes, including with respect to its obligation
to pay the principal of and interest and Special Interest, if any, on the
notes.
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Transactions with Affiliates
Airgas will not, and will not permit any of its Restricted Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any of
its properties or assets to, or purchase any property or assets from, or enter
into or make or amend any transaction, contract, agreement, understanding,
loan, advance or guarantee with, or for the benefit of, any Affiliate (each, an
"Affiliate Transaction"), unless:
(1) the Affiliate Transaction is on terms that are not materially less
favorable to Airgas or the relevant Restricted Subsidiary than those that
would have been obtained in a comparable transaction by Airgas or such
Restricted Subsidiary with an unrelated Person; and
(2) Airgas delivers to the trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, a resolution of the Board of Directors of Airgas set
forth in an officers' certificate certifying that such Affiliate
Transaction complies with this covenant and that such Affiliate
Transaction has been approved by a majority of the disinterested
members of the Board of Directors of Airgas; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$15.0 million, the Board of Directors of Airgas shall also have
received a written opinion from an Independent Qualified Party to the
effect that such Affiliate Transaction is fair, from a financial
standpoint, to Airgas and its Restricted Subsidiaries or not
materially less favorable to Airgas and its Restricted Subsidiaries
than could reasonably be expected to be obtained at the time in an
arm's-length transaction with a Person who was not an Affiliate.
Notwithstanding the foregoing, the following items will not be deemed to be
Affiliate Transactions and, therefore, will not be subject to the provisions of
the prior paragraph:
(1) any employment agreement entered into by Airgas or any of its
Restricted Subsidiaries in the ordinary course of business of Airgas or
such Restricted Subsidiary;
(2) transactions between or among Airgas and/or its Restricted
Subsidiaries;
(3) transactions with a Person that is an Affiliate of Airgas solely
because Airgas owns an Equity Interest in, or controls, such Person;
(4) payment of reasonable directors fees;
(5) the issuance or sale of Equity Interests (other than Disqualified
Stock) of Airgas;
(6) the pledge of Equity Interests of Unrestricted Subsidiaries to
support the Indebtedness thereof;
(7) Restricted Payments that are permitted by the provisions of the
indenture described above under the caption "--Restricted Payments;" and
(8) transfers of accounts receivable, or participations therein, in
connection with any Receivables Facility.
Additional Subsidiary Guarantees
Airgas will not permit any of its Restricted Subsidiaries that are Domestic
Subsidiaries, directly or indirectly, to guarantee or pledge any assets to
secure the payment of any other Indebtedness of Airgas unless such Restricted
Subsidiary simultaneously executes and delivers to the trustee a supplemental
indenture, in form and substance reasonably satisfactory to the trustee
pursuant to
43
which such Restricted Subsidiary shall guarantee all of Airgas' obligations
under the notes, which Guarantee will be senior to or pari passu with such
Subsidiary's Guarantee of or pledge to secure such other Indebtedness unless
such other Indebtedness is Senior Debt, in which case the Guarantee of the
notes may be subordinated to the Guarantee of such Senior Debt to the same
extent as the notes are subordinated to such Senior Debt.
Designation of Restricted and Unrestricted Subsidiaries
The Board of Directors of Airgas may designate any Restricted Subsidiary of
Airgas to be an Unrestricted Subsidiary if that designation would not cause a
Default. If a Restricted Subsidiary is designated as an Unrestricted
Subsidiary, the aggregate fair market value of all outstanding Investments
owned by Airgas and its Restricted Subsidiaries in the Subsidiary properly
designated will be deemed to be an Investment made as of the time of the
designation. That designation will only be permitted if the Investment would be
permitted at that time and if the Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary. The Board of Directors of Airgas may
redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the
redesignation would not cause a Default.
Payments for Consent
Airgas will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any Holder of notes for or as an inducement to any consent, waiver
or amendment of any of the terms or provisions of the indenture or the notes
unless such consideration is offered to be paid and is paid to all Holders of
the notes that consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.
Reports
Whether or not required by the Commission, so long as any notes are
outstanding, Airgas will furnish to the Holders of notes, within the time
periods specified in the Commission's rules and regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if Airgas were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and, with respect to the annual information only, a report on the annual
financial statements by Airgas' certified independent accountants; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if Airgas were required to file such reports.
In addition, whether or not required by the Commission, Airgas will file a
copy of all of the information and reports referred to in clauses (1) and (2)
above with the Commission for public availability within the time periods
specified in the Commission's rules and regulations (unless the Commission will
not accept such a filing) and make such information available to securities
analysts and prospective investors upon request.
In addition, Airgas and the Guarantors have agreed that, for so long as any
notes remain outstanding, they will furnish to the Holders and to securities
analysts and prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
If Airgas has designated any of its Subsidiaries as Unrestricted
Subsidiaries, then the quarterly and annual financial information required by
the preceding paragraph will include a reasonably
44
detailed presentation, either on the face of the financial statements or in the
footnotes thereto, and in Management's Discussion and Analysis of Financial
Condition and Results of Operations, of the financial condition and results of
operations of Airgas and its Restricted Subsidiaries separate from the
financial condition and results of operations of the Unrestricted Subsidiaries
of Airgas.
Events of Default and Remedies
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on, or
Special Interest with respect to, the notes whether or not prohibited by
the subordination provisions of the indenture;
(2) default in payment when due of the principal of, or premium, if
any, on the notes, whether or not prohibited by the subordination
provisions of the indenture;
(3) failure by Airgas to comply with the provisions described under
the caption "--Certain Covenants--Merger, Consolidation or Sale of
Assets;"
(4) failure by Airgas or any of its Restricted Subsidiaries to comply
for 30 days after receipt of notice with the provisions described under
the captions "--Repurchase at the Option of Holders--Change of Control,"
"--Repurchase at the Option of Holders--Asset Sales," "--Certain
Covenants--Restricted Payments" or "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock;"
(5) failure by Airgas or any of its Restricted Subsidiaries for 60
days after notice to comply with any of the other agreements in the
indenture;
(6) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by Airgas or any of its Restricted
Subsidiaries that are Significant Subsidiaries (or the payment of which is
guaranteed by Airgas or any of its Restricted Subsidiaries that are
Significant Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date of the indenture, if that default:
(a) is caused by a failure to pay principal at its stated maturity
after giving effect to any applicable grace period provided in such
Indebtedness (a "Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to its
express maturity,
and, in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which there
has been a Payment Default or the maturity of which has been so
accelerated, aggregates $25.0 million or more;
(7) failure by Airgas or any of its Restricted Subsidiaries to pay
final judgments aggregating in excess of $25.0 million, which judgments
are not paid, discharged or stayed for a period of 60 days;
(8) certain events of bankruptcy, insolvency or reorganization of
Airgas or a Restricted Subsidiary of Airgas that is a Significant
Subsidiary; and
(9) except as permitted by the indenture, any Subsidiary Guarantee
shall be held in any judicial proceeding to be unenforceable or invalid or
shall cease for any reason to be in full force and effect or any
Guarantor, or any Person acting on behalf of any Guarantor, shall deny or
disaffirm its obligations under its Subsidiary Guarantee.
However, a default under clauses (4) or (5) will not constitute an Event of
Default until the trustee or the holders of 25% in principal amount of the
outstanding notes notify Airgas of the default and Airgas does not cure such
default within the time specified after receipt of such notice. In the case of
45
an Event of Default arising from certain events of bankruptcy or insolvency
with respect to Airgas, all outstanding notes will become due and payable
immediately without further action or notice. If any other Event of Default
occurs and is continuing, the trustee or the Holders of at least 25% in
principal amount of the then outstanding notes may declare all the notes to be
due and payable immediately.
Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding notes may direct the
trustee in its exercise of any trust or power. The trustee may withhold from
Holders of the notes notice of any continuing Default if it determines that
withholding notes is in their interest, except a Default relating to the
payment of principal or interest or Special Interest.
The Holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the trustee may on behalf of the Holders of all of the
notes waive any existing Default and its consequences under the indenture
except a continuing Default in the payment of interest or Special Interest on,
or the principal of, the notes (other than the non-payment of principal of or
interest or Special Interest, if any, on the notes that became due solely
because of the acceleration of the notes).
Airgas is required to deliver to the trustee within 90 days after the end
of each fiscal year a statement regarding compliance with the indenture during
such fiscal year. Upon becoming aware of any Default, Airgas is required to
deliver to the trustee a statement specifying such Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of Airgas or
any Guarantor, as such, will have any liability for any obligations of Airgas
or the Guarantors under the notes, the indenture, the Subsidiary Guarantees, or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of notes by accepting a note waives and releases
all such liability. The waiver and release are part of the consideration for
issuance of the notes. The waiver may not be effective to waive liabilities
under the federal securities laws, and it is the view of the Commission that
such a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
Airgas may, at its option and at any time, elect to terminate all of the
obligations of itself and the Guarantors with respect to the notes and the
indenture ("Legal Defeasance") except for:
(1) the rights of Holders to receive payments in respect of the
principal of, or interest or premium or Special Interest, if any, on such
notes when such payments are due from the Defeasance Trust (as defined
below);
(2) Airgas' obligations to issue temporary notes, register the
transfer or exchange of notes, to replace mutilated, destroyed, lost or
stolen notes and to maintain a registrar and paying agent in respect of
the notes;
(3) the rights, powers, trusts, duties and immunities of the trustee,
and Airgas' and the Guarantors' obligations in connection therewith; and
(4) the Legal Defeasance provisions of the indenture.
In addition, Airgas may, at its option and at any time, elect to have the
obligations of Airgas and the Guarantors released with respect to certain
covenants that are described in the indenture ("Covenant Defeasance") and
thereafter any omission to comply with those covenants will not constitute a
Default with respect to the notes. In the event Covenant Defeasance occurs,
certain
46
events (not including non-payment or bankruptcy, receivership, rehabilitation
and insolvency events with respect to Airgas) described under "Events of
Default and Remedies" will no longer constitute an Event of Default with
respect to the notes.
If Airgas exercises its Legal Defeasance option or its Covenant Defeasance
option, each Guarantor will be released from all of its obligations with
respect to its Guarantee.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) Airgas must irrevocably deposit with the trustee, in trust (the
"Defeasance Trust"), for the benefit of the Holders of the notes, cash in
U.S. dollars, non-callable Government Securities, or a combination of cash
in U.S. dollars and non-callable Government Securities, in amounts as will
be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, or interest and
premium and Special Interest, if any, on the outstanding notes on the
stated maturity or on the applicable redemption date, as the case may be,
and Airgas must specify whether the notes are being defeased to maturity
or to a particular redemption date;
(2) in the case of Legal Defeasance, Airgas has delivered to the
trustee an opinion of counsel reasonably acceptable to the trustee
confirming that (a) Airgas has received from, or there has been published
by, the Internal Revenue Service a ruling or (b) since the date of the
indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such opinion of
counsel will confirm that, the Holders of the outstanding notes will not
recognize income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, Airgas has delivered to the
trustee an opinion of counsel reasonably acceptable to the trustee
confirming that the Holders of the outstanding notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(4) no Default has occurred and is continuing on the date of such
deposit (other than a Default resulting from the borrowing of funds to be
applied to such deposit);
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the indenture) to which Airgas or any
of its Restricted Subsidiaries is a party or by which Airgas or any of its
Restricted Subsidiaries is bound, including the New Credit Facility;
(6) Airgas must deliver to the trustee an officers' certificate
stating that the deposit was not made by Airgas with the intent of
preferring the Holders of notes over the other creditors of Airgas with
the intent of defeating, hindering, delaying or defrauding other creditors
of Airgas; and
(7) Airgas must deliver to the trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent relating to
the Legal Defeasance or the Covenant Defeasance have been complied with.
Amendment, Supplement and Waiver
Except as provided in the next three succeeding paragraphs, the indenture
or the notes may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount
47
of the notes then outstanding (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, notes), and any existing default or compliance with any provision of the
indenture or the notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding notes (including, without
limitation, consents obtained in connection with a purchase of, or tender
offer or exchange offer for, notes).
Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any notes held by a non-consenting Holder):
(1) reduce the principal amount of notes whose Holders must consent to
an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note
or alter the provisions with respect to the redemption of the notes;
(3) reduce the rate of or change the time for payment of interest on
any note;
(4) waive a Default in the payment of principal of, or interest or
premium or Special Interest, if any, on the notes (except a rescission of
acceleration of the notes by the Holders of at least a majority in
aggregate principal amount of the notes and a waiver of the payment
default that resulted from such acceleration);
(5) make any note payable in money other than that stated in the
notes;
(6) make any change in the provisions of the indenture relating to
waivers of past Defaults or the rights of Holders of notes to receive
payments of principal of, or interest or premium or Special Interest, if
any, on the notes;
(7) waive a redemption payment with respect to any note;
(8) release any Guarantor from any of its obligations under its
Subsidiary Guarantee or the indenture, except in accordance with the terms
of the indenture; or
(9) make any change in the preceding amendment and waiver provisions.
In addition, any amendment to, or waiver of, the provisions of the
indenture relating to subordination that adversely affects the rights of the
Holders of the notes will require the consent of the Holders of at least 75%
in aggregate principal amount of notes then outstanding.
Notwithstanding the foregoing, without the consent of any Holder of notes,
Airgas, the Guarantors and the trustee may amend or supplement the indenture
or the notes:
(1) to cure any ambiguity, defect or inconsistency or to make a
modification of a formal, minor or technical nature or to correct a
manifest error;
(2) to provide for uncertificated notes in addition to or in place of
certificated notes;
(3) to comply with the covenant relating to mergers, consolidations
and sales of assets;
(4) to provide for the assumption of Airgas' or any Guarantor's
obligations to Holders of notes in the case of a merger or consolidation
or sale of all or substantially all of Airgas' assets;
(5) to add Guarantees with respect to the notes or to secure the
notes;
(6) to add to the covenants of Airgas or any Guarantor for the benefit
of the Holders of the notes or surrender any right or power conferred upon
Airgas or any Guarantor;
(7) to make any change that would provide any additional rights or
benefits to the Holders of notes or that does not adversely affect the
legal rights under the indenture of any such Holder;
48
(8) to comply with any requirement of the Commission in connection
with the qualification of the indenture under the Trust indenture Act;
(9) to evidence and provide for the acceptance and appointment under
the indenture of a successor trustee pursuant to the requirements thereof;
or
(10) to provide for the issuance of exchange or private exchange
notes.
However, no amendment may be made to (A) the subordination provisions of
the indenture or (B) the conditions precedent to Legal Defeasance and Covenant
Defeasance described in clause (5) under the caption "--Legal Defeasance and
Covenant Defeasance," in each case, that adversely affects the rights of any
holder of Senior Debt of Airgas or a Guarantor then outstanding unless the
holders of such Senior Debt (or their representative) consents to such change.
The consent of the Holders is not necessary under the indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
The provisions under the indenture relating to Airgas' obligation to make
an offer to repurchase the notes as described above under the caption "--
Repurchase at the Option of Holders" may be waived or modified with the written
consent of the Holders of a majority in principal amount of the notes then
outstanding.
After an amendment under the indenture becomes effective, we are required
to mail to holders of the notes a notice briefly describing such amendment.
However, the failure to give such notice to all holders of the notes, or any
defect therein, will not impair or affect the validity of the amendment.
Satisfaction and Discharge
The indenture will be discharged and will cease to be of further effect as
to all notes issued thereunder, when:
(1) either:
(a) all notes that have been authenticated, except lost, stolen or
destroyed notes that have been replaced or paid and notes for whose
payment money has been deposited in trust and thereafter repaid to
Airgas, have been delivered to the trustee for cancellation; or
(b) all notes that have not been delivered to the trustee for
cancellation have become due and payable by reason of the mailing of a
notice of redemption or otherwise or will become due and payable
within one year and Airgas or any Guarantor has irrevocably deposited
or caused to be deposited with the trustee as trust funds in trust
solely for the benefit of the Holders, cash in U.S. dollars, non-
callable Government Securities, or a combination of cash in U.S.
dollars and non-callable Government Securities, in amounts as will be
sufficient without consideration of any reinvestment of interest, to
pay and discharge the entire indebtedness on the notes not delivered
to the trustee for cancellation for principal, premium or Special
Interest, if any, and accrued interest to the date of maturity or
redemption;
(2) no Default has occurred and is continuing on the date of the
deposit or will occur as a result of the deposit and the deposit will not
result in a breach or violation of, or constitute a default under, any
other instrument to which Airgas or any Guarantor is a party or by which
Airgas or any Guarantor is bound;
(3) Airgas or any Guarantor has paid or caused to be paid all sums
payable by it under the indenture; and
49
(4) Airgas has delivered irrevocable instructions to the trustee under
the indenture to apply the deposited money toward the payment of the notes
at maturity or the redemption date, as the case may be.
In addition, Airgas must deliver an officers' certificate and an opinion of
counsel to the trustee stating that all conditions precedent to satisfaction
and discharge have been satisfied.
Concerning the Trustee
If the trustee becomes a creditor of Airgas or any Guarantor, the indenture
limits its right to obtain payment of claims in certain cases, or to realize on
certain property received in respect of any such claim as security or
otherwise. The trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate such
conflict within 90 days, apply to the Commission for permission to continue or
resign.
The Holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
occurs and is continuing, the trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
Holder of notes, unless such Holder has offered to the trustee security and
indemnity satisfactory to it against any loss, liability or expense.
Additional Information
Anyone who receives this offering circular may obtain a copy of the
indenture and registration rights agreement without charge by writing to
Airgas, Inc., 259 N. Radnor-Chester Road, Radnor, PA 19087 Attention: Investor
Relations.
Book-Entry, Delivery and Form
The new notes will be represented by one or more notes in registered,
global form without interest coupons (collectively, the "Global Notes"). The
Global Notes will be deposited upon issuance with the trustee as custodian for
DTC, in New York, New York, and registered in the name of DTC or its nominee,
in each case for credit to an account of a direct or indirect participant in
DTC as described below.
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for
notes in certificated form except in the limited circumstances described below.
See "--Exchange of Book-Entry Notes for Certificated Notes." Except in the
limited circumstances described below, owners of beneficial interests in the
Global Notes will not be entitled to receive physical delivery of notes in
certificated form. Transfers of beneficial interests in the Global Notes will
be subject to the applicable rules and procedures of DTC and its direct or
indirect participants, which may change from time to time.
Depository Procedures
The following description of the operations and procedures of DTC is
provided solely as a matter of convenience. These operations and procedures are
solely within the control of DTC and are subject to changes by DTC. Airgas
takes no responsibility for these operations and procedures and urges investors
to contact DTC directly to discuss these matters.
50
DTC has advised Airgas that DTC is a limited-purpose trust company created
to hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of its Participants. The Participants include securities brokers
and dealers (including the initial purchasers), banks, trust companies,
clearing corporations and certain other organizations. Access to DTC's system
is also available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own
securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interests in, and transfers of ownership
interests in, each security held by or on behalf of DTC are recorded on the
records of the Participants and Indirect Participants.
DTC has also advised Airgas that, pursuant to procedures established by it:
(1) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the initial purchasers with portions of the
principal amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will be shown on,
and the transfer of ownership of these interests will be effected only
through, records maintained by DTC (with respect to the Participants) or
by the Participants and the Indirect Participants (with respect to other
owners of beneficial interest in the Global Notes).
The laws of some states require that certain Persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Note to such Persons will be limited
to that extent. Because DTC can act only on behalf of Participants, which in
turn act on behalf of Indirect Participants, the ability of a Person having
beneficial interests in a Global Note to pledge such interests to Persons that
do not participate in the DTC system, or otherwise take actions in respect of
such interests, may be affected by the lack of a physical certificate
evidencing such interests.
Except as described below, owners of interests in the Global Notes will not
have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or
"Holders" thereof under the indenture for any purpose.
Payments in respect of the principal of, and interest and premium and
Special Interest, if any, on a Global Note registered in the name of DTC or its
nominee will be payable to DTC in its capacity as the registered Holder under
the indenture. Under the terms of the indenture, Airgas and the trustee will
treat the Persons in whose names the notes, including the Global Notes, are
registered as the owners of the notes for the purpose of receiving payments and
for all other purposes. Consequently, neither Airgas, the trustee nor any agent
of Airgas or the trustee has or will have any responsibility or liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of
beneficial ownership interest in the Global Notes or for maintaining,
supervising or reviewing any of DTC's records or any Participant's or
Indirect Participant's records relating to the beneficial ownership
interests in the Global Notes; or
(2) any other matter relating to the actions and practices of DTC or
any of its Participants or Indirect Participants.
DTC has advised Airgas that its current practice, upon receipt of any
payment in respect of securities such as the notes (including principal and
interest), is to credit the accounts of the relevant
51
Participants with the payment on the payment date unless DTC has reason to
believe it will not receive payment on such payment date. Each relevant
Participant is credited with an amount proportionate to its beneficial
ownership of an interest in the principal amount of the relevant security as
shown on the records of DTC. Payments by the Participants and the Indirect
Participants to the beneficial owners of notes will be governed by standing
instructions and customary practices and will be the responsibility of the
Participants or the Indirect Participants and will not be the responsibility of
DTC, the trustee or Airgas. Neither Airgas nor the trustee will be liable for
any delay by DTC or any of its Participants in identifying the beneficial
owners of the notes, and Airgas and the trustee may conclusively rely on and
will be protected in relying on instructions from DTC or its nominee for all
purposes.
DTC has advised Airgas that it will take any action permitted to be taken
by a Holder of notes only at the direction of one or more Participants to whose
account DTC has credited the interests in the Global Notes and only in respect
of such portion of the aggregate principal amount of the notes as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the notes, DTC reserves the right to exchange the
Global Notes for legended notes in certificated form, and to distribute such
notes to its Participants.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Notes among participants in DTC, they are under no
obligation to perform or to continue to perform such procedures, and may
discontinue such procedures at any time. Neither Airgas nor the trustee nor any
of their respective agents will have any responsibility for the performance by
DTC or its participants or indirect participants of its obligations under the
rules and procedures governing its operations.
Exchange of Global Notes for Certificated Notes
A Global Note is exchangeable for definitive notes in registered
certificated form ("Certificated Notes") if:
(1) DTC (a) notifies Airgas that it is unwilling or unable to continue
as depositary for the Global Notes and Airgas fails to appoint a successor
depositary or (b) has ceased to be a clearing agency registered under the
Exchange Act and Airgas fails to appoint a successor depositary;
(2) Airgas, at its option, notifies the trustee in writing that it
elects to cause the issuance of the Certificated Notes; or
(3) there has occurred and is continuing a Default with respect to the
notes.
In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon prior written notice given to the trustee by or on
behalf of DTC in accordance with the indenture. In all cases, Certificated
Notes delivered in exchange for any Global Note or beneficial interests in
Global Notes will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with
its customary procedures).
Exchange of Certificated Notes for Global Notes
Certificated Notes may not be exchanged for beneficial interests in any
Global Note unless the transferor first delivers to the trustee a written
certificate (in the form provided in the indenture) to the effect that such
transfer will comply with the appropriate transfer restrictions applicable to
such notes.
52
Same Day Settlement and Payment
Airgas will make payments in respect of the notes represented by the Global
Notes (including principal, premium, if any, interest and Special Interest, if
any) by wire transfer of immediately available funds to the accounts specified
by the Global Note Holder. Airgas will make all payments of principal, interest
and premium and Special Interest, if any, with respect to Certificated Notes by
wire transfer of immediately available funds to the accounts specified by the
Holders of the Certificated Notes or, if no such account is specified, by
mailing a check to each such Holder's registered address. The notes represented
by the Global Notes are expected to be eligible to trade in the PORTAL market
and to trade in DTC's Same-Day Funds Settlement System, and any permitted
secondary market trading activity in such notes will, therefore, be required by
DTC to be settled in immediately available funds. Airgas expects that secondary
trading in any Certificated Notes will also be settled in immediately available
funds.
Registration Rights; Special Interest
Holders of the new notes are not entitled to any registration rights with
respect to the new notes.
The following description is a summary of the material provisions of the
registration rights agreement. It does not restate that agreement in its
entirety. We urge you to read the proposed form of registration rights
agreement in its entirety because it, and not this description, defines the
registration rights of Holders of old notes. See "--Additional Information."
Airgas, the Guarantors and the initial purchasers entered into the
registration rights agreement on the closing of the offering of old notes.
Pursuant to the registration rights agreement, Airgas and the Guarantors agreed
to file with the Commission the exchange offer registration statement on the
appropriate form under the Securities Act with respect to the notes. Upon the
effectiveness of the exchange offer registration statement, Airgas and the
Guarantors will offer to the Holders of Transfer Restricted Securities pursuant
to the exchange offer who are able to make certain representations the
opportunity to exchange their Transfer Restricted Securities for new notes.
If:
(1) Airgas and the Guarantors are not
(a) required to file the exchange offer registration statement; or
(b) permitted to consummate the exchange offer because the
exchange offer is not permitted by applicable law or Commission
policy; or
(2) any Holder of Transfer Restricted Securities notifies Airgas prior
to the 20th day following consummation of the exchange offer that:
(a) it is prohibited by law or Commission policy from
participating in the exchange offer; or
(b) that it may not resell the new notes acquired by it in the
exchange offer to the public without delivering a prospectus and the
prospectus contained in the exchange offer registration statement is
not appropriate or available for such resales; or
(c) that it is a broker-dealer and owns old notes acquired
directly from Airgas or an affiliate of Airgas,
53
Airgas and the Guarantors will file with the Commission a shelf registration
statement to cover resales of the old notes by the Holders of the old notes who
satisfy certain conditions relating to the provision of information in
connection with the shelf registration statement.
Airgas and the Guarantors will use their reasonable best efforts to cause
the applicable registration statement to be declared effective as promptly as
possible by the Commission.
For purposes of the preceding, "Transfer Restricted Securities" means each
old note until:
(1) the date on which such note has been exchanged by a Person other
than a broker-dealer for an Exchange Note in the Exchange Offer;
(2) following the exchange by a broker-dealer in the exchange offer of
an old note for a new note, the date on which such new note is sold to a
purchaser who receives from such broker-dealer on or prior to the date of
such sale a copy of the prospectus contained in the exchange offer
registration statement;
(3) the date on which such note has been effectively registered under
the Securities Act and disposed of in accordance with the shelf
registration statement; or
(4) the date on which such note is distributed to the public pursuant
to Rule 144 under the Securities Act.
The registration rights agreement provides that:
(1) Airgas and the Guarantors will file an exchange offer registration
statement with the Commission on or prior to 90 days after the closing of
the offering of old notes;
(2) Airgas and the Guarantors will use their reasonable best efforts
to have the exchange offer registration statement declared effective by
the Commission on or prior to 180 days after the closing of this offering
of old notes;
(3) unless the exchange offer would not be permitted by applicable law
or Commission policy, Airgas and the Guarantors will
(a) commence the exchange offer; and
(b) use their reasonable best efforts to issue on or prior to 30
business days, or longer, if required by the federal securities laws,
after the date on which the exchange offer registration statement was
declared effective by the Commission, new notes in exchange for all
old notes tendered prior thereto in the exchange offer; and
(4) if obligated to file the shelf registration statement, Airgas and
the Guarantors will use their reasonable best efforts to file the shelf
registration statement with the Commission on or prior to 60 days after
such filing obligation arises and to cause the shelf registration
statement to be declared effective by the Commission on or prior to 120
days after such obligation arises or such later dates on which the
exchange offer registration statement would have been required to be filed
or declared effective, as the case may be.
If:
(1) Airgas and the Guarantors fail to file any of the registration
statements required by the registration rights agreement on or before the
date specified for such filing; or
(2) any of such registration statements is not declared effective by
the Commission on or prior to the date specified for such effectiveness
(the "Effectiveness Target Date"); or
(3) Airgas and the Guarantors fail to consummate the exchange offer
within 30 business days of the Effectiveness Target Date with respect to
the exchange offer registration statement; or
54
(4) the shelf registration statement or the exchange offer
registration statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted
Securities during the periods specified in the registration rights
agreement (each such event referred to in clauses (1) through (4) above, a
"Registration Default"),
then Airgas and the Guarantors will pay Special Interest to each Holder of
notes, with respect to the first 90-day period immediately following the
occurrence of the first Registration Default in an amount equal to 0.25% per
annum of the principal amount of notes held by such Holder.
The amount of the Special Interest will increase by an additional 0.25% per
annum of the principal amount of notes with respect to each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum amount
of Special Interest for all Registration Defaults of 1.0% per annum of the
principal amount of notes.
All accrued Special Interest will be paid by Airgas and the Guarantors on
each Damages Payment Date to the Global Note Holder by wire transfer of
immediately available funds or by federal funds check and to Holders of
Certificated Notes by wire transfer to the accounts specified by them or by
mailing checks to their registered addresses if no such accounts have been
specified.
Following the cure of all Registration Defaults, the accrual of Special
Interest will cease.
Holders of old notes will be required to make certain representations to
Airgas (as described in the registration rights agreement) in order to
participate in the exchange offer and will be required to deliver certain
information to be used in connection with the shelf registration statement and
to provide comments on the shelf registration statement within the time periods
set forth in the registration rights agreement in order to have their notes
included in the shelf registration statement and benefit from the provisions
regarding Special Interest set forth above. By acquiring Transfer Restricted
Securities, a Holder will be deemed to have agreed to indemnify Airgas and the
Guarantors against certain losses arising out of information furnished by such
Holder in writing for inclusion in any shelf registration statement. Holders of
notes will also be required to suspend their use of the prospectus included in
any registration statement under certain circumstances upon receipt of written
notice to that effect from Airgas.
Certain Definitions
Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Accounts Receivable Entity" means any Person (other than a Restricted
Subsidiary) to which Airgas or any of its Restricted Subsidiaries sells any of
its accounts receivable pursuant to a Receivables Facility.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified
Person, whether or not such Indebtedness is incurred in connection with,
or in contemplation of, such other Person merging with or into, or
becoming a Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of
55
this definition, "control," as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person will be
deemed to be control. For purposes of this definition, the terms "controlling,"
"controlled by" and "under common control with" have correlative meanings.
"Applicable Premium" means, with respect to any note on any Redemption
Date, the greater of:
(1) 1.0% of the principal amount of the note; or
(2) the excess of:
(a) the present value at such Redemption Date of (i) the
redemption price of the note at October 1, 2006 (such redemption price
being set forth in the table appearing above under the caption "--
Optional Redemption") plus (ii) all required interest payments due on
the note through October 1, 2006 (excluding accrued but unpaid
interest), computed using a discount rate equal to the Treasury Rate
plus 50 basis points; over
(b) the principal amount of the note, if greater.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights; provided that the sale, conveyance or other disposition of all or
substantially all of the assets of Airgas and its Subsidiaries taken as a
whole will be governed by the provisions of the indenture described above
under the caption "--Repurchase at the Option of Holders--Change of
Control" and/or the provisions described above under the caption "--
Certain Covenants--Merger, Consolidation or Sale of Assets" and not by the
provisions of the Asset Sale covenant; and
(2) the issuance of Equity Interests by any of Airgas' Restricted
Subsidiaries or the sale of Equity Interests in any of its Restricted
Subsidiaries.
Notwithstanding the preceding, the following items will not be deemed to be
Asset Sales:
(1) for purposes of the covenant described above under the caption "--
Repurchase at the Option of the Holders--Asset Sales" only, any single
transaction or series of related transactions that involves assets having
a fair market value of less than $5.0 million or for net cash proceeds of
less than $5.0 million;
(2) a transfer of assets between or among Airgas and its Restricted
Subsidiaries;
(3) an issuance of Equity Interests by a Subsidiary to Airgas or to a
Restricted Subsidiary of Airgas;
(4) the sale or lease of equipment, inventory, accounts receivable or
other assets in the ordinary course of business;
(5) the sale or other disposition of cash or Cash Equivalents;
(6) for purposes of the covenant described above under the caption "--
Repurchase at the Option of the Holders--Asset Sales" only, the sale of
the capital stock of, or assets comprising, any of the Specified
Businesses, provided that the requirements under clause (1) of that
covenant shall have been satisfied;
(7) for purposes of the covenant described above under the caption "--
Repurchase at the Option of the Holders--Asset Sales" only, a Restricted
Payment or Permitted Investment that is permitted by the covenant
described above under the caption "--Certain Covenants--Restricted
Payments";
56
(8) any sale of Equity Interests in, or Indebtedness or other
securities of, an Unrestricted Subsidiary;
(9) sales of property or equipment that has become worn out, obsolete
or damaged or otherwise unsuitable for use in connection with the business
of Airgas or any of its Restricted Subsidiaries;
(10) a transfer of accounts receivable, or participations therein, and
related rights and assets in connection with any Receivables Facility;
(11) the license of patents, trademarks, copyrights and know-how to
third Persons in the ordinary course of business; and
(12) the creation of Liens.
"Asset Sale Offer" has the meaning set forth above under the caption
"Repurchase at the Option of Holders--Asset Sales."
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and leaseback transaction including any period for which such lease has
been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" will be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"Beneficially Owns" and "Beneficially Owned" have a corresponding meaning.
"Board of Directors" means:
(1) with respect to a corporation, the board of directors of the
corporation;
(2) with respect to a partnership, the Board of Directors of the
general partner of the partnership; and
(3) with respect to any other Person, the board or committee of such
Person serving a similar function.
"Borrowing Base" means, as of any date, an amount equal to:
(1) 85% of the book value of all accounts receivable and 85% of the
cost of cylinders owned by Airgas and its Restricted Subsidiaries as of
the most recent date for which Airgas has available a balance sheet,
provided that, in the case of such accounts receivable, such accounts
receivable are not more than 90 days past due; plus
(2) 50% of the book value of all inventory owned by Airgas and its
Restricted Subsidiaries as of the most recent date for which Airgas has
available a balance sheet.
"Capital Lease Obligation" means, at the time any determination is to be
made, the amount of the liability in respect of a capital lease that would at
that time be required to be capitalized on a balance sheet in accordance with
GAAP.
57
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means:
(1) United States dollars and any other currency that is convertible
into United States dollars without legal restrictions and which is
utilized by Airgas or any of its Restricted Subsidiaries in the ordinary
course of its business;
(2) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality of the
United States government (provided that the full faith and credit of the
United States is pledged in support of those securities) having maturities
of not more than six months from the date of acquisition;
(3) time deposit accounts, certificates of deposit and money market
deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States, any state thereof or any foreign country recognized by the
United States, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $100.0 million (or the foreign
currency equivalent thereof) and has outstanding debt which is rated "A"
(or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under
the Securities Act) or any money-market fund sponsored by a registered
broker dealer or mutual fund distributor;
(4) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;
(5) commercial paper maturing not more than 365 days after the date of
acquisition of an issuer with a rating, at the time of which any
investment therein is made, of "A-1" (or higher) according to S&P or "P-1"
(or higher) according to Moody's or carrying an equivalent rating by a
nationally recognized rating agency if both of the two named rating
agencies cease publishing ratings of investments;
(6) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1) through (5) of this
definition; and
(7) in the case of any Subsidiary organized or having is principal
place of business outside the United States, investments denominated in
the currency of the jurisdiction in which that Subsidiary is organized or
has its principal place of business which are similar to the items
specified in clauses (1) through (6) above, including, without limitation,
any deposit with a bank that is a lender to any Restricted Subsidiary of
Airgas.
"Change of Control" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all of the
properties or assets of Airgas and its Restricted Subsidiaries taken as a
whole to any "person" (as that term is used in Section 13(d)(3) of the
Exchange Act) other than a Principal or a Related Party of a Principal;
58
(2) the adoption of a plan relating to the liquidation or dissolution
of Airgas;
(3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above) other than the Principal and its Related
Parties, becomes the Beneficial Owner, directly or indirectly, of more
than 50% of the Voting Stock of Airgas, measured by voting power rather
than number of shares; or
(4) the first day on which a majority of the members of the Board of
Directors of Airgas are not Continuing Directors.
"Change of Control Offer" has the meaning set forth above under the caption
"Repurchase at the Option of Holders--Change of Control."
"Change of Control Payment" has the meaning set forth above under the
caption "Repurchase at the Option of Holders--Change of Control."
"Change of Control Payment Date" has the meaning set forth above under the
caption "Repurchase at the Option of Holders--Change of Control."
"Consolidated Cash Flow" means, with respect to any specified Person for
any period, the Consolidated Net Income of such Person for such period plus,
without duplication:
(1) an amount equal to any extraordinary loss plus any net loss
realized by such Person or any of its Restricted Subsidiaries in
connection with an Asset Sale, to the extent such losses were deducted in
computing such Consolidated Net Income; plus
(2) provision for taxes based on income or profits of such Person and
its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net
Income; plus
(3) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect
to Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings,
and net of the effect of all payments made or received pursuant to Hedging
Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income; plus
(4) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period) and other non-cash expenses (excluding any
such non-cash expense to the extent that it represents an accrual of or
reserve for cash expenses in any future period or amortization of a
prepaid cash expense that was paid in a prior period) of such Person and
its Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income; minus
(5) any extraordinary non-cash items increasing such Consolidated Net
Income for such period, other than the accrual of revenue in the ordinary
course of business;
in each case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other non-cash
expenses of, a Subsidiary of Airgas will be
59
added to Consolidated Net Income to compute Consolidated Cash Flow of Airgas
only to the extent that a corresponding amount would be permitted at the date
of determination to be dividended, distributed or otherwise transferred to
Airgas by such Subsidiary without prior governmental approval (that has not
been obtained), and without direct or indirect restriction pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to that
Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that:
(1) the Net Income (or loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting
will not be included except such Net Income will be included to the extent
of the amount of dividends or distributions paid in cash to the specified
Person or a Restricted Subsidiary of the Person;
(2) the Net Income of any Restricted Subsidiary will be excluded to
the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental
approval (that has not been obtained) or, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders;
(3) the Net Income (or loss) of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
will be excluded; and
(4) the cumulative effect of a change in accounting principles will be
excluded.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of Airgas who:
(1) was a member of such Board of Directors on the date of the
indenture; or
(2) was nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election; or
(3) is a designee of a Principal or was nominated by a Principal.
"Covenant Defeasance" has the meaning set forth above under the caption
"Legal Defeasance and Covenant Defeasance."
"Credit Facilities" means, one or more debt facilities (including, without
limitation, the New Credit Facility) or commercial paper facilities, in each
case with banks or other institutional lenders providing for revolving credit
loans, term loans, receivables financing (including through the sale of
receivables to such lenders or to special purpose entities formed to borrow
from such lenders against such receivables) or letters of credit, in each case,
as amended, extended, renewed, restated, supplemented or otherwise modified (in
whole or in part, and without limitation as to amount, terms, conditions,
covenants and other provisions) from time to time, and any agreement (and
related document) governing Indebtedness incurred to Refinance, in whole or in
part, the borrowings and commitments then outstanding or permitted to be
outstanding under such Credit Facility or a successor Credit Facility, whether
by the same or any other lender or group of lenders.
"Currency Agreement" means, with respect to any Person, any foreign
exchange contract, currency swap agreement or other similar agreement designed
to protect such Person against fluctuations in currency values.
60
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Defeasance Trust" has the meaning set forth above under the caption "Legal
Defeasance and Covenant Defeasance."
"Designated Senior Debt" means:
(1) any Indebtedness outstanding under the New Credit Facility; and
(2) after payment in full of all Obligations under the New Credit
Facility, any other Senior Debt permitted under the indenture the
principal amount of which is $25.0 million or more and that has been
designated by Airgas as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder of the Capital Stock),
or upon the happening of any event (other than any event solely within the
control of the issuer thereof), matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or redeemable at the option of the
holder of the Capital Stock, in whole or in part, on or prior to the date that
is 91 days after the date on which the notes mature. Notwithstanding the
preceding sentence, any Capital Stock that would constitute Disqualified Stock
solely because the holders of the Capital Stock have the right to require
Airgas to repurchase such Capital Stock upon the occurrence of a change of
control or an asset sale will not constitute Disqualified Stock if the terms of
such Capital Stock provide that Airgas may not repurchase or redeem any such
Capital Stock pursuant to such provisions unless such repurchase or redemption
complies with the covenant described above under the caption "--Certain
Covenants--Restricted Payments."
"Domestic Subsidiary" means any Restricted Subsidiary of Airgas that was
formed under the laws of the United States or any state of the United States or
the District of Columbia.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Excess Proceeds" has the meaning set forth above under the caption
"Repurchase at the Option of Holders--Assets Sales."
"Existing Indebtedness" means Indebtedness of Airgas and its Subsidiaries
(other than Indebtedness under the Credit Facilities) in existence on the date
of the indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any specified Person for any period,
the sum, without duplication, of:
(1) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable
Debt, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net of
the effect of all payments made or received pursuant to Hedging
Obligations; plus
(2) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period; plus
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(3) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured
by a Lien on assets of such Person or one of its Restricted Subsidiaries,
whether or not such Guarantee or Lien is called upon; plus
(4) the product of (a) all dividends, whether or not in cash, on any
series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividends on Equity Interests payable solely in
Equity Interests of Airgas (other than Disqualified Stock) or the
applicable Restricted Subsidiary or to Airgas or a Restricted Subsidiary
of Airgas, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the effective combined federal, state
and local tax rate of such Person for such period as estimated by the
chief financial officer in good faith, expressed as a decimal;
in each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any specified Person
for any period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the specified
Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees,
repays, repurchases or redeems any Indebtedness (other than ordinary working
capital borrowings) or issues, repurchases or redeems preferred stock
subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated and on or prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio will be calculated
giving pro forma effect to such incurrence, assumption, Guarantee, repayment,
repurchase or redemption of Indebtedness, or such issuance, repurchase or
redemption of preferred stock, and the use of the proceeds therefrom as if the
same had occurred at the beginning of the applicable four-quarter reference
period.
In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions that have been made by the specified Person or any of
its Restricted Subsidiaries, including through mergers or consolidations
and including any related financing transactions, during the four-quarter
reference period or subsequent to such reference period and on or prior to
the Calculation Date will be given pro forma effect as if they had
occurred on the first day of the four-quarter reference period and
Consolidated Cash Flow for such reference period will be calculated to
include the Consolidated Cash Flow of the acquired entities on a pro forma
basis after giving effect to cost savings resulting from employee
terminations, facilities consolidations and closings, standardization of
employee benefits and compensation practices, consolidation of property,
casualty and other insurance coverage and policies, standardization of
sales and distribution methods, reduction in taxes other than income taxes
and other cost savings reasonably expected to be realized from such
acquisition, as determined in good faith by the principal financial
officer of Airgas (regardless of whether such costs savings could then be
reflected in pro forma financial statements under GAAP, Regulation S-X
promulgated under the Securities Act or any other regulation or policy of
the Commission), but without giving effect to clause (3) of the proviso
set forth in the definition of Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or
businesses disposed of prior to the Calculation Date, will be excluded;
and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, will be excluded, but only to the extent
that the obligations giving rise to such Fixed Charges will not be
obligations of the specified Person or any of its Subsidiaries following
the Calculation Date.
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For purposes of this definition, whenever pro forma effect is to be given
to an acquisition of assets, the amount of income or earnings relating thereto
and the amount of Fixed Charges associated with any Indebtedness incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting officer of Airgas. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest on such Indebtedness shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period (taking into account any Interest Rate Agreement applicable to such
Indebtedness if such Interest Rate Agreement has a remaining term in excess of
12 months).
"Foreign Subsidiary" means any Restricted Subsidiary of Airgas that is not
a Domestic Subsidiary.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from on the date of the indenture, provided
that, upon adoption, the Proposed Accounting Changes will be treated as being
in effect as of the date of the indenture.
"Government Securities" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Guarantors" means any Subsidiary of Airgas that guarantees the notes in
accordance with the provisions of the indenture.
"Hedging Obligations" means, with respect to any specified Person, the
obligations of such Person under any Interest Rate or Currency Agreement.
"Holder" means the Person in whose name a note is registered on the
registrar's books.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) in respect of banker's acceptances;
(4) representing Capital Lease Obligations;
(5) representing the balance deferred and unpaid of the purchase price
of any property, except any such balance that constitutes an accrued
expense or trade payable; or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of
the specified Person prepared in accordance with
63
GAAP. In addition, the term "Indebtedness" includes all Indebtedness of others
secured by a Lien on any asset of the specified Person (whether or not such
Indebtedness is assumed by the specified Person) and, to the extent not
otherwise included, the Guarantee by the specified Person of any Indebtedness
of any other Person.
The amount of any Indebtedness outstanding as of any date will be:
(1) the accreted value of the Indebtedness, in the case of any
Indebtedness issued with original issue discount; or
(2) the principal amount of the Indebtedness.
In addition, for the purpose of avoiding duplication in calculating the
outstanding principal amount of Indebtedness for purposes of the covenant
described under the caption "--Certain Covenants--Incurrence of Indebtedness
and Issuance of Preferred Stock", Indebtedness arising solely by reason of the
existence of a Lien to secure other Indebtedness permitted to be incurred under
the covenant described under the caption "--Certain Covenants-- Incurrence of
Indebtedness and Issuance of Preferred Stock" will not be considered
incremental Indebtedness.
Indebtedness shall not include the obligations of any Person (A) resulting
from the endorsement of negotiable instruments for collection in the ordinary
course of business, (B) under stand-by letters of credit to the extent
collateralized by cash or Cash Equivalents and (C) resulting from
representations, warranties, covenants and indemnities given by such Person
that are reasonably customary for sellers or transferors in an accounts
receivable securitization transaction.
"Independent Qualified Party" means an investment banking firm, accounting
firm or appraisal firm of national standing; provided however, that such firm
is not an Affiliate of Airgas.
"Interest Rate Agreement" means in respect of a Person any interest rate
swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates.
"Investment Grade Rating" means a rating equal to or higher than Baa3 (or
the equivalent) by Moody's and BBB- (or the equivalent) by S&P, or an
equivalent rating by any other Rating Agency.
"Investments" means, with respect to any Person, all direct or indirect
investments by such Person in other Persons (including Affiliates) in the forms
of loans (including Guarantees or other obligations), advances or capital
contributions (excluding commission, travel and similar advances to officers
and employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If Airgas or
any Restricted Subsidiary of Airgas sells or otherwise disposes of any Equity
Interests of any direct or indirect Restricted Subsidiary of Airgas such that,
after giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of Airgas, Airgas will be deemed to have made an Investment on the
date of any such sale or disposition equal to the fair market value of the
Equity Interests of such Subsidiary not sold or disposed of in an amount
determined as provided in the final paragraph of the covenant described above
under the caption "--Certain Covenants--Restricted Payments." The acquisition
by Airgas or any Restricted Subsidiary of Airgas of a Person that holds an
Investment in a third Person will be deemed to be an Investment by Airgas or
such Restricted Subsidiary in such third Person in an amount equal to the fair
market value of the Investment held by the acquired Person in such third Person
in an amount determined as provided in the final paragraph of the covenant
described above under the caption "--Certain Covenants--Restricted Payments."
Except as otherwise provided for herein, the amount of an Investment shall
be its fair value at the time the Investment is made and without giving effect
to subsequent changes in value.
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"Legal Defeasance" has the meaning set forth above under the caption "Legal
Defeasance and Covenant Defeasance."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Income" means, with respect to any specified Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:
(1) any gain (or loss), together with any related provision for taxes
on such gain (or loss), realized in connection with: (a) any Asset Sale;
or (b) the disposition of any securities by such Person or any of its
Restricted Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Restricted Subsidiaries;
(2) any extraordinary gain (or loss), together with any related
provision for taxes on such extraordinary gain (or loss); and
(3) any non-cash charges taken in connection with any loss realized
upon the sale of capital stock of, or assets comprising, any of the
Specified Businesses or any write-down of assets constituting any of the
Specified Businesses.
"Net Proceeds" means the aggregate cash proceeds received by Airgas or any
of its Restricted Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-
cash consideration received in any Asset Sale, but only as and when received),
in each case net of
(1) the direct costs relating to such Asset Sale, including, without
limitation, legal, accounting and investment banking fees, and sales
commissions, recording fees, title transfer fees, appraiser fees, cost of
preparation of assets for sale, and any relocation expenses incurred as a
result of the Asset Sale;
(2) taxes paid or payable as a result of the Asset Sale, in each case,
after taking into account any available tax credits or deductions and any
tax sharing arrangements;
(3) amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such
Asset Sale;
(4) all distributions and other payments required to be made to
minority interest holders in Restricted Subsidiaries or joint ventures as
a result of such Asset Sale; and
(5) any reserve for adjustment in respect of the sale price of such
asset or assets established in accordance with GAAP.
"New Credit Facility" means that certain Tenth Amended and Restated Credit
Agreement, dated as of July 30, 2001, by and among Airgas, the Canadian
borrowing subsidiaries named therein, the guarantor subsidiaries named therein,
Bank of America, N.A., as U.S. Agent, the Canadian Agent and the other Lenders
named therein providing for $367.5 million of dollar-denominated loans and
CDN$50 million of Canadian dollar-denominated loans, including any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or Refinanced from time to time including
65
any agreement extending the maturity of, Refinancing from time to time
including any agreement extending the maturity of, Refinancing, replacing or
otherwise restructuring (including increasing the amount of available
borrowings thereunder or adding Restricted Subsidiaries of Airgas as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness
under such agreement or any successor or replacement agreement and whether by
the same or any other agent, lender or group of lenders.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither Airgas nor any of its Restricted Subsidiaries
(a) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness), (b) is
directly or indirectly liable as a guarantor or otherwise or (c)
constitutes the lender;
(2) no default with respect to which (including any rights that the
holders of the Indebtedness may have to take enforcement action against an
Unrestricted Subsidiary) would permit upon notice, lapse of time or both
any holder of any other Indebtedness (other than the notes) of Airgas or
any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment of the Indebtedness to be accelerated or
payable prior to its stated maturity; and
(3) as to which the lenders have been notified in writing (which may
be by the terms of the instrument evidencing such Indebtedness) that they
will not have any recourse to the stock (other than the stock of an
Unrestricted Subsidiary pledged by Airgas or any of its Restricted
Subsidiaries) or assets of Airgas or any of its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Payment Default" has the meaning set forth above under the caption "Events
of Default and Remedies."
"Permitted Business" means any business that derives a majority of its
revenues from the business engaged in by Airgas and its Restricted Subsidiaries
on the date of original issuance of the notes and/or activities that are
reasonably similar, ancillary, incidental, complementary or related to, or a
reasonable extension, development or expansion of, the businesses in which
Airgas and its Restricted Subsidiaries are engaged on the date of original
issuance of the notes.
"Permitted Investments" means:
(1) any Investment in Airgas or in a Restricted Subsidiary of Airgas;
(2) any Investment in cash or Cash Equivalents;
(3) any Investment by Airgas or any Restricted Subsidiary of Airgas in
a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of Airgas; or
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or
is liquidated into, Airgas or a Restricted Subsidiary of Airgas;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption "--
Repurchase at the Option of Holders--Asset Sales;"
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(5) any investment to the extent made in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of Airgas;
(6) Hedging Obligations;
(7) any Investment in Permitted Joint Ventures, provided, except with
respect to any Investment resulting from the sale of capital stock or
assets of any Specified Business, that at the time of and immediately
after giving pro forma effect to such Investment (and any related
transaction or series of transactions), Airgas would be permitted to incur
at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio Test set forth under the first paragraph of the covenant
described under "--Incurrence of Indebtedness and Issuance of Preferred
Stock;"
(8) Investments in prepaid expenses, negotiable instruments held for
collection and lease, utility and workers' compensation, performance and
other similar deposits;
(9) transactions with officers, directors and employees of Airgas or
any of its Restricted Subsidiaries entered into in the ordinary course of
business (including compensation, employee benefit or indemnity
arrangements with any such officer, director or employee) and consistent
with past business practices;
(10) any Investment consisting of a guarantee permitted under "Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock"
above;
(11) Investments consisting of non-cash consideration received in the
form of securities, notes or similar obligations in connection with
dispositions of obsolete or worn out assets permitted pursuant to the
indenture;
(12) advances, loans or extensions of credit to suppliers in the
ordinary course of business by Airgas or any of its Restricted
Subsidiaries;
(13) Investments (including debt obligations) received in connection
with the bankruptcy or reorganization of suppliers and customers and in
settlement of delinquent obligations of, and other disputes with,
customers and suppliers arising in the ordinary course of business;
(14) loans and advances to employees made in the ordinary course of
business;
(15) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of
business;
(16) Investments in any Person to the extent such Investment existed
on date of the indenture and any Investment that replaces, refinances or
refunds such an Investment, provided that the new Investment is in an
amount that does not exceed that amount replaced, refinanced or refunded
and is made in the same Person as the Investment replaced, refinanced or
refunded;
(17) Investments relating to any special purpose Affiliate of Airgas
organized in connection with a Receivables Facility that, in the good
faith determination of the Board of Directors of Airgas, are necessary or
advisable to effect that Receivables Facility; and
(18) other Investments in any Person having an aggregate fair market
value, when taken together with all other Investments made pursuant to
this clause (18) since the date of the indenture that are at the time
outstanding not to exceed $25.0 million.
"Permitted Joint Venture" means a corporation, partnership or other entity
(other than a Subsidiary of Airgas) engaged in one or more Permitted Businesses
in respect of which Airgas or a Restricted Subsidiary (a) beneficially owns at
least 25% of the Equity Interest of such entity and (b) either is a party to an
agreement empowering one or more parties to such agreement (which may or
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may not be Airgas or its Restricted Subsidiary), or is a member of a group that
pursuant to the constituent documents of the applicable corporation,
partnership or other entity, has the power, to direct the policies, management
and affairs of such entity.
"Permitted Junior Securities" means:
(1) Equity Interests in Airgas or any Guarantor; or
(2) debt securities that are subordinated to all Senior Debt and any
debt securities issued in exchange for Senior Debt to at least the same
extent as the notes and the Subsidiary Guarantees are subordinated to
Senior Debt under the indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of Airgas or
any of its Restricted Subsidiaries issued to Refinance other Indebtedness of
Airgas or any of its Restricted Subsidiaries (other than intercompany
Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount
(or accreted value, if applicable) of the Indebtedness being Refinanced
(plus all accrued interest on the Indebtedness and the amount of all
expenses and premiums incurred in connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being Refinanced;
(3) if the Indebtedness being Refinanced is subordinated in right of
payment to the notes, such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is subordinated
in right of payment to, the notes on terms at least as favorable to the
Holders of notes as those contained in the documentation governing the
Indebtedness being Refinanced; and
(4) such Indebtedness is incurred either by Airgas or by the
Restricted Subsidiary who is the obligor on the Indebtedness being
Refinanced.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company, government or any agency or political subdivision thereof or
any other entity.
"Principal" means Peter McCausland (and in the event of his incompetency or
death, his estate, heirs, executor, administrator, committee or other personal
representative (collectively, "heirs")) or any Person controlled, directly or
indirectly, by Peter McCausland or his heirs.
"Proposed Accounting Changes" means the currently proposed accounting
changes by the Financial Accounting Standards Board relating to business
combinations and amortization of goodwill, in the form such changes are finally
adopted by the Financial Accounting Standards Board.
"Public Equity Offering" means any underwritten public offering of common
stock of Airgas.
"Rating Agency" means S&P and Moody's or, if S&P or Moody's or both shall
not make a rating on the notes publicly available, a nationally recognized
statistical rating agency or agencies, as the case may be, selected by Airgas
(as certified by a resolution of the Board of Directors of Airgas) which shall
be substituted for S&P or Moody's or both, as the case may be.
"Receivable Facility" means one or more receivables financing facilities,
as amended from time to time, pursuant to which Airgas or any of its Restricted
Subsidiaries sells its accounts receivable to an Accounts Receivables Entity.
68
"Receivables Fees" means distributions or payments made directly or by
means of discounts with respect to any participation interests issued or sold
in connection with, and other fees paid to a Person that is not a Restricted
Subsidiary in connection with, any Receivables Facility.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced"
and "Refinancing" shall have correlative meanings.
"Related Party" means:
(1) any immediate family member (in the case of an individual) of the
Principal; or
(2) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially
holding an 80% or more controlling interest of which consist of the
Principal.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Rating Group, Inc. and its successors.
"Senior Debt" means:
(1) all Indebtedness of Airgas or any Guarantor outstanding under
Credit Facilities and all Hedging Obligations with respect thereto;
(2) any other Indebtedness of Airgas or any Guarantor permitted to be
incurred under the terms of the indenture; and
(3) all Obligations with respect to the items listed in the preceding
clauses (1) and (2).
unless in the case of clauses (1) and (2), the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the notes or any Subsidiary Guarantee, as
the case may be.
Notwithstanding anything to the contrary in the preceding paragraph,
Senior Debt will not include:
(1) any liability for federal, state, local or other taxes owed or
owing by Airgas or any Guarantor;
(2) any intercompany Indebtedness of Airgas or any of its Restricted
Subsidiaries owing to Airgas or any of its Affiliates;
(3) any trade payables; or
(4) the portion of any Indebtedness that is incurred in violation of
the indenture, provided that such Indebtedness shall be deemed not to have
been incurred in violation of the indenture for purposes of this clause
(4) if (x) the holders of such Indebtedness or their representative or
Airgas shall have furnished to the trustee an opinion of recognized
independent legal counsel addressed to the trustee (which legal counsel
may, as to matters of fact, rely upon an officers' certificate) to the
effect that the incurrence of such Indebtedness does not violate the
provisions of the indenture or (y) such Indebtedness consists of
Indebtedness under any Credit Facility and holders of such Indebtedness or
their agent or representative (I) had no actual knowledge at the time of
the incurrence that the incurrence of such Indebtedness violated the
indenture
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and (II) shall have received an officers' certificate to the effect that
the incurrence of such Indebtedness does not violate the provisions of the
indenture.
"Senior Subordinated Indebtedness" means, with respect to any Person, the
notes (in the case of Airgas), the Subsidiary Guarantees (in the case of a
Guarantor) and any other Indebtedness of such Person that specifically provides
that such Indebtedness is to rank pari passu with the notes or such Subsidiary
Guarantee, as the case may be, in right of payment and is not subordinated by
its terms in right of payment to any Indebtedness or other obligation of such
Person which is not Senior Debt of such Person.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Specified Businesses" means the Air Separation Units and related
facilities and contracts of Nitrous Oxide Corp., Airgas Canada, Inc. and
Rutland Tool & Supply Co., Inc.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which the payment of
interest or principal was scheduled to be paid, including any mandatory
redemption provision, but excluding any provision providing for any contingent
obligations to repay, redeem or repurchase any such interest or principal at
the option of the Holder thereof.
"Subsidiary" means, as to any Person, (a) any corporation more than 50% of
whose stock of any class or classes having by the terms thereof ordinary voting
power to elect a majority of the directors of such corporation (irrespective of
whether or not at the time, any class or classes of such corporation shall have
or might have voting power by reason of the happening of any contingency) is at
the time owned by such Person directly or indirectly through Subsidiaries, and
(b) any partnership, association, joint venture or other entity in which such
Person directly or indirectly through Subsidiaries has more than 50% equity
interest at any time. The term "Subsidiary" or "Subsidiaries" shall include
National Welders Supply Company, Inc. at such time, if ever, as National
Welders Supply Company, Inc. is required to be consolidated with Airgas in
accordance with GAAP.
"Subsidiary Guarantee" means a Guarantee by a Guarantor of Airgas'
obligations with respect to the notes.
"Treasury Rate" means, as of any Redemption Date, the yield to maturity as
of such Redemption Date of United States Treasury securities with a constant
maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to the Redemption Date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data))
most nearly equal to the period from the Redemption Date to October 1, 2006,
provided that if the period from the Redemption Date to October 1, 2006 is less
than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year will be used.
"Unrestricted Subsidiary" means any Subsidiary of Airgas that is designated
by the Board of Directors of Airgas as an Unrestricted Subsidiary pursuant to a
Board Resolution and any Subsidiary of an Unrestricted Subsidiary, but only to
the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is a Person with respect to which neither Airgas nor any of its
Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to
70
maintain or preserve such Person's financial condition or to cause such
Person to achieve any specified levels of operating results; and
(3) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of Airgas or any of its Restricted
Subsidiaries;
Any designation of a Subsidiary of Airgas as an Unrestricted Subsidiary
will be evidenced to the trustee by filing with the trustee a certified copy of
the Board Resolution giving effect to such designation and an officers'
certificate certifying that such designation complied with the preceding
conditions and was permitted by the covenant described above under the caption
"--Certain Covenants--Restricted Payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the preceding requirements as an Unrestricted
Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for
purposes of the indenture and any Indebtedness of such Subsidiary will be
deemed to be incurred by a Restricted Subsidiary of Airgas as of such date and,
if such Indebtedness is not permitted to be incurred as of such date under the
covenant described under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock," Airgas will be in default of
such covenant. The Board of Directors of Airgas may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation will be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of Airgas of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation will only be permitted if (1) such Indebtedness
is permitted under the covenant described under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock,"
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period; and (2) no Default would be in
existence following such designation.
"U.S. Dollar Equivalent" means, with respect to any monetary amount in a
currency other than U.S. Dollars, at any time for determination thereof, the
amount of U.S. dollars obtained by converting such foreign currency involved in
such computation into U.S. dollars at the spot rate for the purchase of U.S.
dollars with the applicable foreign currency as published in The Wall Street
Journal in the "Exchange Rates" column under the heading "Currency Trading" on
the date two Business Days prior to such determination.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect of the Indebtedness, by (b) the number of years (calculated to the
nearest one-twelfth) that will elapse between such date and the making of
such payment; by
(2) the then outstanding principal amount of such Indebtedness.
71
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a general summary of certain U.S. Federal
income tax consequences of the exchange offer to holders of old notes. The
summary below is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), regulations of the Treasury Department, administrative rulings and
pronouncements of the Internal Revenue Service and judicial decisions, all of
which are subject to change, possibly with retroactive effect. This summary
does not address all of the U.S. Federal income tax consequences that may be
applicable to particular holders, including dealers in securities, financial
institutions, insurance companies and tax-exempt organizations. In addition,
this summary does not consider the effect of any foreign, state, local, gift,
estate or other tax laws that may be applicable to a particular holder. This
summary applies only to a holder that acquired old notes at original issue for
cash and holds such old notes as a capital asset within the meaning of Section
1221 of the Code. Holders of old notes considering the exchange offer should
consult their own tax advisors concerning the U.S. Federal income tax
consequences in light of their particular situations as well as any
consequences arising under the laws of any other taxing jurisdiction.
An exchange of old notes for new notes pursuant to the exchange offer will
not be treated as a taxable exchange or other taxable event for U.S. Federal
income tax purposes. Accordingly, there will be no U.S. Federal income tax
consequences to holders who exchange their old notes for new notes in
connection with the exchange offer and any such holder will have the same
adjusted tax basis and holding period in the new notes as it had in the old
notes immediately before the exchange.
72
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account pursuant to
the exchange offer must acknowledge that it will deliver a prospectus in
connection with nay resale of such new notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of new notes received in exchange for old notes where
such old notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that, for a period of 120 days after
the expiration date, it will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until October 27, 2001, all dealers effecting transactions in the new
notes may be required to deliver a prospectus.
We will not receive any proceeds from any sale of new notes by broker-
dealers. New notes received by broker-dealers for their own account pursuant to
the exchange offer may be sold from time to time in one or more transactions in
the over-the-counter market, in negotiated transactions, through the writing of
options on the new notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such new notes. Any broker-dealer that resells new notes that
were received by it for its own account pursuant to the exchange offer and any
broker or dealer that participates in a distribution of such new notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of new notes and any commission or concessions
received by any such persons may be deemed to be underwriting compensation
under the Securities Act. The letter of transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 120 days after the expiration date we will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests such documents in the letter of
transmittal. We agreed to pay all expenses incident to the exchange offer other
than commissions or concessions of any brokers or dealers and will indemnify
the Holders of the old notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the new notes will be passed upon
for Airgas by Cravath, Swaine & Moore, New York, New York.
EXPERTS
The consolidated financial statements and schedules of Airgas, Inc. as of
March 31, 2001 and 2000, and for each of the years in the three-year period
ended March 31, 2001, have been incorporated by reference into this prospectus
and in the registration statement in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
73
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$225,000,000
9.125% Senior Subordinated Notes due 2011
[LOGO OF AIRGAS]
Airgas, Inc.
OFFER TO EXCHANGE
all Outstanding 9.125% Senior Subordinated Notes due 2011 for
9.125% Senior Subordinated Notes due 2011 which have been Registered
under the Securities Act of 1933
----------------
Prospectus
September 17, 2001
----------------
Until October 27, 2001, all dealers that effect transactions in these
securities, whether or not participating in this exchange offer, may be
required to deliver a prospectus. This is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
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