<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NO. 000-29226
VALLEY NATIONAL GASES INCORPORATED
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-2888240
(State or other jurisdiction of I.R.S. Employer Identification No.)
incorporation or organization)
67 43rd STREET
WHEELING, WEST VIRGINIA 26003
(Address of principal executive offices)
(304) 232-1541
(Registrant's telephone number, including area code)
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ___x____ No_________
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at February 10, 1997
------ --------------------------------
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Common stock, $0.001 par value 9,620,084
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VALLEY NATIONAL GASES INCORPORATED
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
ITEM 1 Condensed Consolidated Balance Sheets as of June 30, 1997
And December 31, 1997 3
Condensed Consolidated Statements of Operations for the
Three Months Ended December 31, 1996 and 1997 5
Condensed Consolidated Statements of Operations for the
Six Months Ended December 31, 1996 and 1997 6
Condensed Consolidated Statements of Changes in
Stockholders Equity for the Year Ended June 30, 1997 and
the Six Months Ended December 31, 1997 7
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended December 31, 1996 and 1997 8
Notes to Condensed Consolidated Financial Statements 9
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K 18
SIGNATURES 19
EXHIBIT INDEX 20
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
VALLEY NATIONAL GASES INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
A S S E T S
June 30, December 31,
1997 1997
-------------------- ----------------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,551,949 $ 594,101
Accounts receivable, net of allowance for doubtful accounts of
$200,750 10,299,100 12,119,102
Inventory 6,822,171 8,764,300
Prepaids and other 1,604,181 1,669,752
-------------------- ----------------------
Total current assets 20,277,401 23,147,255
-------------------- ----------------------
PROPERTY, PLANT AND EQUIPMENT:
Land 70,842 149,786
Buildings and improvements 3,578,332 4,147,980
Equipment 38,946,506 47,339,893
Transportation equipment 6,670,016 7,707,992
Furniture and fixtures 2,590,373 3,023,188
-------------------- ----------------------
Total property, plant and equipment 51,856,069 62,368,839
Accumulated depreciation (21,786,762) (24,870,397)
-------------------- ----------------------
Net property, plant and equipment 30,069,307 37,498,442
-------------------- ----------------------
OTHER ASSETS:
Intangibles, net of amortization of $3,666,793 and $4,942,353,
respectively 17,130,777 32,319,795
Deposits and other assets 328,610 749,011
-------------------- ----------------------
Total other assets 17,459,387 33,068,806
-------------------- ----------------------
TOTAL ASSETS $ 67,806,095 $ 93,714,503
==================== ======================
</TABLE>
The accompanying notes are an integral part of these financial statements.
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VALLEY NATIONAL GASES INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY June 30, December 31,
1997 1997
------------------- ---------------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 3,928,387 $ 7,834,675
Bank overdraft -- 1,010,424
Accounts payable, trade 2,984,658 3,672,407
Accrued compensation and employee benefits 2,965,676 2,584,123
Other current liabilities 713,684 1,455,305
------------------- ---------------------
Total current liabilities 10,592,405 16,556,934
LONG-TERM DEBT, less current maturities 28,787,064 47,107,596
DEFERRED TAXES AND OTHER LONG-TERM LIABILITIES 5,317,031 5,097,471
------------------- ---------------------
Total liabilities 44,696,500 68,762,001
------------------- ---------------------
REDEEMABLE COMMON STOCK, par value, $.001
per share, issued 235,000 shares 1,880,000 1,880,000
STOCKHOLDERS' EQUITY:
Common stock, par value, $.001 per share-
Authorized, 30,000,000 shares
Issued, 9,385,084 shares 9,385 9,385
Paid-in-capital 17,162,396 17,162,396
Retained earnings 4,057,814 5,900,721
------------------- ---------------------
Total stockholders' equity 21,229,595 23,072,502
------------------- ---------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 67,806,095 $ 93,714,503
=================== =====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
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VALLEY NATIONAL GASES INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-----------------------------------------
1996 1997
------------------ ------------------
<S> <C> <C>
NET SALES $19,263,633 $23,890,001
COST OF PRODUCTS SOLD, excluding depreciation and amortization
9,173,131 10,988,568
------------------ ------------------
Gross profit 10,090,502 12,901,433
EXPENSES:
Operating and administrative 6,826,536 8,381,385
Depreciation and amortization 1,560,782 2,145,691
------------------ ------------------
Total expenses 8,387,318 10,527,076
------------------ ------------------
Income from operations 1,703,184 2,374,357
INTEREST EXPENSE 578,037 684,045
OTHER INCOME (EXPENSE) NET 75,731 59,342
------------------ ------------------
EARNINGS BEFORE INCOME TAXES 1,200,878 1,749,654
==================
PROVISION FOR INCOME TAXES 731,098
------------------
NET EARNINGS $ 1,018,556
==================
BASIC EARNINGS PER SHARE $ 0.11
DILUTED EARNINGS PER SHARE $ 0.11
WEIGHTED AVERAGE SHARES 9,620,084
DILUTED AVERAGE SHARES 9,666,349
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
Information
(Unaudited)
-------------------
1996
-------------------
<S> <C>
EARNINGS BEFORE INCOME TAXES $ 1,200,878
PRO FORMA INCOME TAXES 480,351
-------------------
PRO FORMA NET EARNINGS $ 720,527
===================
PRO FORMA NET EARNINGS PER SHARE $ 0.10
PRO FORMA WEIGHTED AVERAGE SHARES 7,267,074
</TABLE>
The accompanying notes are an integral part of these financial statements.
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VALLEY NATIONAL GASES INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
-----------------------------------------
1996 1997
------------------ ------------------
<S> <C> <C>
NET SALES $33,777,288 $44,511,152
COST OF PRODUCTS SOLD, excluding depreciation and amortization
15,504,275 20,463,037
------------------ ------------------
Gross profit 18,273,013 24,048,115
EXPENSES:
Operating and administrative 12,567,193 15,745,455
Depreciation and amortization 2,934,240 4,044,592
------------------ ------------------
Total expenses 15,501,433 19,790,047
------------------ ------------------
Income from operations 2,771,580 4,258,068
INTEREST EXPENSE 992,851 1,255,212
OTHER INCOME (EXPENSE) NET 150,016 120,716
------------------ ------------------
EARNINGS BEFORE INCOME TAXES 1,928,745 3,123,572
==================
PROVISION FOR INCOME TAXES 1,280,665
------------------
NET EARNINGS $ 1,842,907
==================
BASIC EARNINGS PER SHARE $ 0.19
DILUTED EARNINGS PER SHARE $ 0.19
WEIGHTED AVERAGE SHARES 9,620,084
DILUTED AVERAGE SHARES 9,664,341
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
Information
(Unaudited)
-------------------
1996
-------------------
<S> <C>
EARNINGS BEFORE INCOME TAXES $ 1,928,745
PRO FORMA INCOME TAXES 771,498
-------------------
PRO FORMA NET EARNINGS $ 1,157,247
===================
PRO FORMA NET EARNINGS PER SHARE $ 0.16
PRO FORMA WEIGHTED AVERAGE SHARES 7,267,074
</TABLE>
The accompanying notes are an integral part of these financial statements.
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VALLEY NATIONAL GASES INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1997 AND
THE SIX MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Common Stock Treasury Stock
------------ --------------
Total
Paid-in- Retained Stockholders'
Shares Amount Shares Amount Capital Earnings Equity
------ ------ ------ ------ ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
June 30, 1996 18,300,653 $ 18,301 11,300,653 $ (3,705,000) $ 95,914 $19,961,877 $ 16,371,092
Net loss - - - - - (844,897) (844,897)
Issuance of
common stock 2,218,000 2,218 - - 15,730,059 - 15,732,277
Issuance of
stock
pursuant to
compensation
agreements 267,084 267 - - 2,136,323 - 2,136,590
Conversion of
debt to equity 135,000 135 - 1,079,865 - 1,080,000
Reclassification
of redeemable
common stock
outside of
shareholders'
equity (235,000) (235) - - (1,879,765) - (1,880,000)
Retirement of
treasury
stock (11,300,653) (11,301) (11,300,653) 3,705,000 - (3,693,699)
Dividends paid - - - - - (11,365,467) (11,365,467)
------------ ----------- ------------- ---------------- --------------- -------------- --------------
BALANCE,
June 30, 1997 9,385,084 9,385 - - 17,162,396 4,057,814 21,229,595
Net earnings - - - - - 1,842,907 1,842,907
--------------------------------------------------------------------------------------------------------------
BALANCE,
December 31, 1997 9,385,084 $9,385 - - $17,162,396 $5,900,721 $23,072,502
(Unaudited) ============ =========== ============= ================ =============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 8
VALLEY NATIONAL GASES INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
-------------------------------------------
1996 1997
------------------- -------------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,186,735 $ 5,314,163
------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of assets 24,353 395,884
Purchases of property and equipment (1,377,456) (2,714,678)
Business acquisitions, net of cash acquired (4,827,247) (22,038,500)
Change in restricted cash 400,000 -
------------------- -------------------
Net cash used by investing activities
(5,780,350) (24,357,294)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 5,511,102 21,516,037
Principal payments on loans (1,270,104) (3,430,754)
Dividends paid (389,043) -
------------------- -------------------
Net cash provided by
financing activities 3,851,955 18,085,283
------------------- -------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (741,660) (957,848)
CASH AND CASH EQUIVALENTS, beginning of period 4,148,546 1,551,949
------------------- -------------------
CASH AND CASH EQUIVALENTS, end of period $ 3,406,886 $ 594,101
=================== ===================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for interest $ 814,226 $ 1,371,350
=================== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 9
VALLEY NATIONAL GASES INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The financial statements of Valley National Gases Incorporated (the Company)
presented herein are unaudited. Certain information and footnote disclosures
normally prepared in accordance with generally accepted accounting principles
have been either condensed or omitted pursuant to the rules and regulations of
the Securities and Exchange Commission. Although the Company believes that all
adjustments, consisting of only normal recurring adjustments, necessary for a
fair presentation have been made, interim periods are not necessarily indicative
of the financial results of operations for a full year. As such, these financial
statements should be read in conjunction with the financial statements and notes
thereto included or incorporated by reference in the Company's audited financial
statements for the period ending June 30, 1997.
2. INVENTORY:
Inventory is carried at the lower of cost or market using the first-in,
first-out (FIFO) method.
The components of inventory are as follows:
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1997
----------------- ---------------------
(Unaudited)
<S> <C> <C>
Hardgoods $6,043,962 $7,804,657
Gases 778,209 959,643
----------------- ---------------------
$6,822,171 $8,764,300
================= =====================
</TABLE>
3. ACQUISITIONS:
The Company acquires businesses engaged in the distribution of industrial,
medical and specialty gases and related welding supplies and accessories.
Acquisitions have been recorded using the purchase method of accounting and,
accordingly, results of their operations have been included in the Company's
financial statements since the effective dates of the respective acquisitions.
During the six months ended December 31, 1997, the Company purchased three
businesses. The largest of these acquisitions and their effective dates included
Doansco, Inc. (July, 1997), Goss Brothers Welding Supply, Inc.
(September, 1997) and Buckeye Welder Services, Inc.(December, 1997).
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<PAGE> 10
In connection with these acquisitions, the total purchase price, fair value of
assets acquired, cash paid and liabilities assumed were as follows:
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1997
---------------------
(Unaudited)
<S> <C>
Cash paid $ 19,396,808
Notes issued to sellers 2,647,800
Notes payable and capital leases assumed 847,530
Other liabilities assumed and acquisition costs 4,897,136
---------------------
Total purchase price allocated to assets acquired
$ 27,789,274
=====================
</TABLE>
On October 10, 1996, the Company purchased substantially all of the assets of
Weldco Inc. (Weldco) pursuant to a Purchase and Sale Agreement (the Weldco
Purchase Agreement) for approximately $11.1 million. Approximately $7.9 million
of the purchase price was paid by promissory notes from the Company. In
conjunction with the Company's initial public offering, Weldco shareholders
converted a portion of the Company's promissory notes to shares of the Company's
common stock at the initial public offering price. The Company prepaid
$1,720,000 under the Company's promissory notes and issued 135,000 shares of
common stock to Weldco shareholders immediately prior to the closing of the
Offering in exchange for the cancellation of indebtedness in the amount of
$2,800,000. Additionally, certain Weldco shareholders purchased 100,000 shares
of common stock in the Offering. The Weldco Purchase Agreement further grants
Weldco shareholders the right to cause the Company to purchase the 235,000
shares of common stock issued to Weldco shareholders pursuant to the conversion
of indebtedness for a period of three years following the closing of the
Offering at the initial public offering price plus interest from the date of
issuance at the rate of 6.6% per annum. Accordingly, such shares will not be
classified as shareholders' equity. The Company's payment obligation is secured
by a letter of credit.
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<PAGE> 11
4. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1997
-------------------- ---------------------
(Unaudited)
<S> <C> <C>
Revolving note, interest at LIBOR plus 1.75% payable monthly through October
1999 and October 2000, respectively. Secured by the assets
of the Company. $ 9,075,154 $24,355,583
Term note, interest at LIBOR plus 1.75% payable monthly through October
2003. Secured by the assets of the Company.
11,607,143 14,710,418
Note payable, interest at 6.6% payable annually through October 2003. Secured by
certain assets of the Company.
4,781,521 4,098,447
Individuals and corporations, mortgages and notes, interest at 2.978% to 10.00%,
payable at various dates through 2010.
7,456,419 11,970,305
-------------------- -------------------
32,920,237 55,134,753
Original issue discount (204,786) (192,482)
Current maturities (3,928,387) (7,834,675)
-------------------- -------------------
Total long-term debt $28,787,064 $47,107,596
==================== ===================
</TABLE>
Prime rate was 8.5% and LIBOR was 5.75% at December 31, 1997.
On October 4, 1996, the Company executed a three year revolving credit agreement
with Bank One, Indiana, NA ("Bank One") for the purpose of refinancing the then
existing revolving credit agreement with NationsBank and to provide additional
acquisition capital. This agreement provided for a term note of $13,000,000 at a
variable interest rate based upon prime or LIBOR, depending on the Company's
funded debt to EBITDA ratio, payable monthly through September of 2003. The
agreement also provided for a revolving note with maximum borrowings (including
letters of credit) of $25,000,000 at a variable interest rate equal to that of
the term note payable monthly through September of 1999. A commitment fee of
$32,500 was paid upon acceptance of the agreement. These notes are secured by
the Company's accounts receivable, equipment, inventory, and general
intangibles, and the proceeds thereof. The loan agreement for the credit
facility contains various financial covenants applicable to the Company,
including covenants requiring minimum fixed charge coverage maximum funded debt
to EBITDA, and minimum net worth.
On September 29, 1997 the Company entered into an amended and restated revolving
credit agreement with Bank One which increased the term note to $15,350,000 and
the maximum revolving note borrowings to $34,250,000. The maturity of the
revolving note was also extended to October 2000. The Company is not required to
make principal payments on outstanding balances of the revolving loan as long as
certain covenants are satisfied. The Company pays a fee for the unused portion
of the revolving loan. The loan agreement for the
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<PAGE> 12
credit facility contains various financial covenants applicable to the Company,
including covenants requiring minimum fixed charge coverage maximum funded debt
to EBITDA, and minimum net worth.
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<PAGE> 13
On December 23, 1997, the Company entered into two interest rate swap agreements
with Bank One to reduce the impact of changes in interest rates. The first
agreement was for a period of seven years, cancelable by the bank at the end of
five years, whereby the Company agreed to pay the bank a fixed rate of 5.90% per
annum on the notional principal amount of $5.0 million and the bank agreed to
pay the Company the one month LIBOR rate on the same notional amount. The second
agreement was for a period of five years, cancelable by the bank at the end of
three years, whereby the Company agreed to pay the bank a fixed rate of 5.80%
per annum on the notional principal amount of $5.0 million and the bank agreed
to pay the Company the one month LIBOR rate on the same notional amount. The
Company is exposed to credit loss in the event of nonperformance by the bank.
However, the Company does not anticipate nonperformance by the bank.
5. SUBSEQUENT EVENTS:
On January 15, 1998, the Company entered into two interest rate swap agreements
with Bank One to reduce the impact of changes in interest rates. The first
agreement was for a period of seven years, cancelable by the bank at the end of
five years, whereby, the Company agreed to pay the bank a fixed rate of 5.43%
per annum on the notional principal amount of $10.0 million and the bank agreed
to pay the Company the one month LIBOR rate on the same notional amount. The
second agreement was for a period of five years, cancelable by the bank at the
end of three years, whereby, the Company agreed to pay the bank a fixed rate of
5.29% per annum on the notional principal amount of $10.0 million and the bank
agreed to pay the Company the one month LIBOR rate on the same notional amount.
The Company is exposed to credit loss in the event of nonperformance by the
bank. However, the Company does not anticipate nonperformance by the bank.
On January 30, 1998 the Company acquired the assets of Liberty Fire Protection
Company, Inc. a supplier of fire protection and safety equipment having
approximately $0.5 million in annualized sales. The Company financed this
transaction from operating funds and notes with the Seller.
On February 5, 1998 the Company entered into an amended and restated credit
facility with Bank One, as agent. The new credit facility increased the maximum
revolving note borrowings to $75.3 million and refinanced the term note at the
existing balance of $14.7 million. The new scheduled maturity date of the term
note is October 4, 2003. The new scheduled maturity date of the revolving note
is January 16, 2001. The Company paid the banks fees of approximately $210,000,
which will be amortized over the term of the notes. The Company pays a fee for
the unused portion of the revolving loan. The loan agreement for the credit
facility contains various financial covenants applicable to the Company,
including covenants requiring minimum fixed charge coverage maximum funded debt
to EBITDA, and minimum net worth.
6. PRO FORMA INFORMATION (UNAUDITED):
The pro forma adjustments for income taxes included in the accompanying
condensed consolidated statement of operations for the three months and six
months ended December 31, 1996 are based upon the statutory rates in effect for
C Corporations during the periods presented. Pro forma earnings per share were
calculated by dividing pro forma earnings by the weighted average shares
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<PAGE> 14
outstanding for the period. The weighted average number of shares outstanding
used to calculate the pro forma net income per share is based on the historical
weighted average number of shares outstanding using an offering price of $8 per
share.
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<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is qualified in
its entirety by, the Financial Statements and the Notes thereto.
OVERVIEW
The Company is a leading packager and distributor of industrial, medical and
specialty gases, welding equipment and supplies, and propane in ten states in
the mid-Atlantic and midwestern regions of the United States. The Company's net
sales have grown, primarily as a result of acquisitions, at a compound annual
rate of approximately 17% per year since the Company started business in 1958,
increasing from $190,000 in that year to $84.6 million for the last twelve
months. In fiscal 1997, gases accounted for approximately 42% of net sales,
welding equipment and supplies accounted for approximately 44% of net sales, and
cylinder and tank rental accounted for approximately 14% of net sales.
The Company believes it has been successful in executing its strategy of growth
through acquisitions, having completed 30 acquisitions since 1990. Some
acquisitions have had, and the Company expects some future acquisitions may
have, a dilutive effect upon the Company's income from operations and net income
before tax for a short period following consummation. This temporary dilution
occurs because some of the benefits of acquisitions, such as leveraging of
operating and administrative expenses, improved product gross margins and real
sales growth, occur over a period ranging from two to eight quarters, depending
upon the complexity of integrating each acquisition into the Company's existing
operations. The consideration for most acquisitions includes a combination of a
cash payment at closing, seller financing and payments under covenants not to
compete and consulting agreements. In most cases, operating cash flow of an
acquired business is positive in a relatively short period of time. For many
acquisitions, the Company believes that projections of future cash flows justify
payment of amounts in excess of the book or market value of the assets acquired,
resulting in goodwill being recorded.
The Company's results are subject to moderate seasonality, primarily due to
fluctuations in the demand for propane, which is highest during winter months
falling in the Company's second and third fiscal quarters.
Operating and administrative expenses are comprised primarily of salaries,
benefits, transportation equipment operating costs, facility lease expenses and
general office expenses. These expenses are generally fixed on a quarter-
to-quarter basis. The Company believes that changes in these expenses as a
percentage of sales should be evaluated over the long term rather than on a
quarter-to-quarter basis due to the moderate seasonality of sales mentioned
above and the generally fixed nature of these expenses.
Historically, the Company's gross profit margins as a percentage of sales have
been higher on the sale of gases than on the sale of welding equipment and
supplies ("hard goods"). As a result of recent acquisitions of some distributors
with a higher proportion of hard goods to gas sales, the Company's average gross
profit as a percentage of sales has decreased in
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<PAGE> 16
comparison to prior years. Future acquisitions may affect this pattern depending
upon the product mix of the acquired businesses. Until April 10, 1997, the
Company was treated as an S Corporation for federal and state income tax
purposes. As a result, the Company was not subject to federal and state income
taxes. The Company terminated its S Corporation election in connection with its
initial public offering of stock and become a C Corporation. As a result of
termination of the S Corporation election, the Company recognized $3.9 million
of deferred income taxes in the fourth quarter of fiscal year 1997.
RESULTS OF OPERATIONS
Comparison of Three Months Ended December 31, 1997 and 1996
Net sales increased 24.0%, or $4.6 million, to $23.9 million from $19.3 million
for the three months ended December 31, 1997, and 1996, respectively.
Acquisitions made during the proceeding twelve months contributed $4.0 million
of the increase in net sales, while same store growth contributed $0.6 million
of the increase. Same store sales increased 3.2% versus the same quarter last
year. Gases and cylinder revenue represented 54.6% of net sales for the three
months ended December 31, 1997, with hard goods representing 45.4%. In
comparison, net sales for the three months ended December 31, 1996 reflected
gases and cylinder revenue at 56.9% and hard goods as 43.1%. This change in
sales mix reflects the effect of acquisitions made during the preceding twelve
months.
Gross profit, which excludes depreciation and amortization, increased 27.9%, or
$2.8 million, to $12.9 million from $10.1 million for the three months ended
December 31, 1997 and 1996, respectively. Acquisitions made during the
proceeding twelve months contributed $2.2 million of the increase in gross
profit, while the base business contributed $0.6 million of the increase. Gross
profit as a percentage of net sales was 54.0% for the three months ended
December 31, 1997, compared to 52.4% for the three months ended December 31,
1996. This change reflected the improvement in product margins, partially offset
by the increase in the mix of hard goods to total sales.
Operating and administrative expenses increased 22.8%, or $1.6 million, to $8.4
million from $6.8 million for the three months ended December 31, 1997 and 1996,
respectively. Of this increase, $1.5 million was related to acquired businesses
and the remaining $0.1 million reflected increases on a same store basis.
Operating and administrative expenses as a percentage of sales decreased to
35.1% for the three months ended December 31, 1997, as compared to 35.4% for the
same quarter in 1996, reflecting the addition of operating expenses related to
acquired businesses as a percentage of sales at a rate lower than the Company
average before the acquisitions were made.
Depreciation and amortization expense increased $0.6 million for the three
months ended December 31, 1997 compared to the same period in 1996, primarily as
a result of acquisitions made during the last twelve months.
Interest expense increased $0.1 million for the quarter, reflecting the
financing of acquisitions made during the last twelve months, partially reduced
by lower interest rates and reductions in debt as a result of the Company's
initial public offering of stock in April 1997.
- 16 -
<PAGE> 17
Net earnings increased 41.4%, or $0.3 million, to $1.0 million from pro forma
net earnings of $0.7 million for the three months ended December 31, 1997 and
1996, respectively.
Comparison of Six Months Ended December 31, 1997 and 1996
Net sales increased 31.8%, or $10.7 million, to $44.5 million from $33.8 million
for the six months ended December 31, 1997, and 1996, respectively. Acquisitions
made during the proceeding twelve months contributed $9.1 million of the
increase in net sales, while same store growth contributed $1.6 million of the
increase. Same store sales increased 4.7% versus the same period last year.
Gases and cylinder revenue represented 53.7% of net sales for the six months
ended December 31, 1997, with hard goods representing 46.3%. In comparison, net
sales for the six months ended December 31, 1996 reflected gases and cylinder
revenue at 57.3% and hard goods as 42.7%. This change in sales mix primarily
reflects the effect of acquisitions made during the preceding twelve months.
Gross profit, which excludes depreciation and amortization, increased 31.6%, or
$5.8 million, to $24.1 million from $18.3 million for the six months ended
December 31, 1997 and 1996, respectively. Acquisitions made during the
proceeding twelve months contributed $4.8 million of the increase in gross
profit, while the base business contributed $1.0 million of the increase. Gross
profit as a percentage of net sales was 54.0% for the six months ended December
31, 1997, compared to 54.1% for the six months ended December 31, 1996. This
change reflected the increase in the mix of hard goods to total sales, partially
offset by improvement in product margins.
Operating and administrative expenses increased 25.3%, or $3.2 million, to $15.7
million from $12.5 million for the six months ended December 31, 1997 and 1996,
respectively. Of this increase, $2.9 million was related to acquired businesses
and the remaining $0.3 million reflected increases on a same store basis.
Operating and administrative expenses as a percentage of sales decreased to
35.4% for the six months ended December 31, 1997, as compared to 37.2% for the
same quarter in 1996, reflecting the addition of operating expenses related to
acquired businesses as a percentage of sales at a rate lower than the Company
average before the acquisitions were made.
Depreciation and amortization expense increased $1.1 million for the six months
ended December 31, 1997 compared to the same period in 1996, primarily as a
result of acquisitions made during the last twelve months.
Interest expense increased $0.3 million for the six months, reflecting the
financing of acquisitions made during the last twelve months, partially reduced
by lower interest rates and reductions in debt as a result of the Company's
initial public offering of stock in April 1997.
Net earnings increased 59.2%, or $0.7 million, to $1.8 million from pro forma
net earnings $1.1 million for the six months ended December 31, 1997 and 1996,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
- 17 -
<PAGE> 18
Historically, the Company has financed its operations, capital expenditures and
debt service with funds provided from operating activities. Acquisitions have
been financed by a combination of seller financing, bank borrowings and funds
generated from operations.
At December 31, 1997, the Company had working capital of approximately $6.6
million. Funds provided by operations for the six months ended December 31, 1997
were approximately $5.3 million. Funds used for investing activities were
approximately $24.4 million for the six months ended December 31, 1997,
consisting primarily of capital spending and financing for acquisitions. Sources
of funds from financing activities for six months ended December 31, 1997 were
approximately $18.1 million from net borrowings. The Company's cash balance
decreased $1.0 million during the quarter as $0.7 million in voluntary debt
reduction was made.
On September 29, 1997, the Company entered into an amended and restated
revolving credit agreement totaling $49.6 million, consisting of a $15.4 million
term loan, which matures in six years and is amortized in equal monthly
payments, and a $34.2 million revolving loan with a $15.0 million sublimit for
letters of credit, which matures in October 2000. The revolving loan is used
primarily to fund acquisitions. The Company is not required to make principal
payments on outstanding balances of the revolving loan as long as certain
covenants are satisfied. Interest is charged on both the term loan and the
revolving loan at either the lender's prime rate or various LIBOR rates, at the
Company's discretion, plus an applicable spread. The weighted average interest
rate for substantially all of the borrowings under the credit facility was 7.5%
as of December 31, 1997. The Company pays a fee for the unused portion of the
revolving loan. As of December 31, 1997, availability under the revolving loan
was approximately $2.3 million, with outstanding borrowings of approximately
$24.4 million and outstanding letters of credit of approximately $7.5 million.
The credit facility is secured by all of the Company's assets.
The loan agreement for the credit facility contains various financial covenants
applicable to the Company, including covenants requiring minimum fixed charge
coverage, maximum funded debt to EBITDA, and minimum net worth. The Company is
in compliance with these covenants and believes that it will continue to be in
compliance through at least the next twelve months.
The Company is obligated under various promissory notes related to the financing
of acquisitions that have various rates of interest, ranging from 3.0% to 10.0%
per annum, and maturities through 2010. The outstanding balance of these notes
as of December 31, 1997 was $15.9 million. Some of these notes are secured by
assets related to the applicable acquisition, some are unsecured, and some are
backed by bank letters of credit issued under the Company's credit facility.
On December 23, 1997, the Company entered into two interest rate swap agreements
with Bank One to reduce the impact of changes in interest rates. The first
agreement was for a period of seven years, cancelable by the bank at the end of
five years, whereby the Company agreed to pay the bank a fixed rate of 5.90% per
annum on the notional principal amount of $5.0 million and the bank agreed to
pay the Company the one month LIBOR rate on the same notional amount. The second
agreement was for a period of five years, cancelable by the
- 18 -
<PAGE> 19
bank at the end of three years, whereby the Company agreed to pay the bank a
fixed rate of 5.80% per annum on the notional principal amount of $5.0 million
and the bank agreed to pay the Company the one month LIBOR rate on the same
notional amount. The Company is exposed to credit loss in the event of
nonperformance by the bank. However, the Company does not anticipate
nonperformance by the bank.
FLUCTUATIONS IN QUARTERLY RESULTS
The Company generally has experienced higher sales activity during its second
and third quarters as a result of seasonal sales of propane, with corresponding
lower sales for the first and fourth quarters. As a result, income from
operations and net income typically is higher for the second and third quarters
than for the first and fourth quarters of the fiscal year.
- 19 -
<PAGE> 20
INFLATION
The impact of inflation on the Company's operating results has been moderate in
recent years, reflecting generally low rates of inflation in the economy and the
Company's historical ability to pass purchase price increases to its customers
in the form of sales price increases. While inflation has not had, and the
Company does not expect that it will have, a material impact upon operating
results, there is no assurance that the Company's business will not be affected
by inflation in the future.
SUBSEQUENT EVENTS
On January 15, 1998, the Company entered into two interest rate swap agreements
with Bank One to reduce the impact of changes in interest rates. The first
agreement was for a period of seven years, cancelable by the bank at the end of
five years, whereby, the Company agreed to pay the bank a fixed rate of 5.43%
per annum on the notional principal amount of $10.0 million and the bank agreed
to pay the Company the one month LIBOR rate on the same notional amount. The
second agreement was for a period of five years, cancelable by the bank at the
end of three years, whereby, the Company agreed to pay the bank a fixed rate of
5.29% per annum on the notional principal amount of $10.0 million and the bank
agreed to pay the Company the one month LIBOR rate on the same notional amount.
The Company is exposed to credit loss in the event of nonperformance by the
bank. However, the Company does not anticipate nonperformance by the bank.
On January 30, 1998 the Company acquired the assets of Liberty Fire Protection
Company, Inc. a supplier of fire protection and safety equipment having
approximately $0.5 million in annualized sales. The Company financed this
transaction from operating funds and notes with the Seller.
On February 5, 1998 the Company entered into an amended and restated credit
facility with Bank One, as agent. The new credit facility increased the maximum
revolving note borrowings to $75.3 million and refinanced the term note at the
existing balance of $14.7 million. The new scheduled maturity date of the term
note is October 4, 2003. The new scheduled maturity date of the revolving note
is January 16, 2001. The Company paid the banks fees of approximately $210,000,
which will be amortized over the term of the notes. The Company pays a fee for
the unused portion of the revolving loan. The loan agreement for the credit
facility contains various financial covenants applicable to the Company,
including covenants requiring minimum fixed charge coverage maximum funded debt
to EBITDA, and minimum net worth.
- 20 -
<PAGE> 21
RECENT ACCOUNTING PRONOUNCEMENTS
Financial Accounting Standard Board Statement No. 128, "Earnings Per Share"
(SFAS No. 128) was issued in February 1997 and is effective for periods ending
after December 15, 1997. This statement, upon adoption, will require all
prior-period earnings per share (EPS) data to be restated, to conform to the
provisions of the statement. This statement's objective is to simplify the
computation of EPS and to make the U.S. standard for EPS computations more
compatible with that of the International Accounting Standards Committee. The
Company has adopted SFAS No. 128 during the quarter ended December 31, 1997.
Financial Accounting Standard Board Statement No. 129, "Disclosure of
Information about Capital Structure" (SFAS No. 129) was issued in February 1997
and is effective for periods ending after December 15, 1997. This statement,
upon adoption, will require all companies to provide specific disclosure
regarding the entities capital structure. SFAS No. 129 will specify the
disclosures, for all companies, including descriptions of the securities
comprising the capital structure and the contractual rights of the holders of
such securities. The Company has adopted SFAS No. 129 during the quarter ended
December 31, 1997.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
See the Exhibit Index on page 20.
(b) Reports on Form 8-K:
Form 8-K dated October 14, 1997 reporting under Item 2 the
acquisition of Goss Brothers Welding Supply, Inc.
Form 8-K dated December 15, 1997 reporting under Item 5 the
execution of a letter of intent for the acquisition of Buckeye
Welder Services, Inc.
- 21 -
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VALLEY NATIONAL GASES INCORPORATED
February 13, 1998 /s/ Robert D. Scherich
----------------------
Robert D. Scherich
Chief Financial Officer
- 22 -
<PAGE> 23
EXHIBIT INDEX
Exhibit Number Description
- -------------- -------------------------------------------------------------
3.1 Articles of Amendment of the Company, incorporated by reference
to Exhibit 3.1 to the Company's Registration Statement on Form
S-1 under the Securities Act of 1933, as amended, (File No.
333-19973)
3.2 Bylaws of the Company, incorporated by reference to Exhibit 3.2
to the Company's Registration Statement on Form S-1 under the
Securities Act of 1933, as amended, (File No. 333-19973)
10.1 Amended and Restated Credit Agreement dated January 23, 1997
between the Company and BankOne, Indiana NA
11.1 Calculation of Earnings Per Share
27.1 Financial Data Schedule (provided for the information of the
U.S. Securities and Exchange Commission only)
- 23 -
<PAGE> 1
EXHIBIT 10.1
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT is executed as of
the 23rd day of January, 1998 ("Closing Date"), by VALLEY NATIONAL GASES, INC.,
a West Virginia corporation (the "Company"), VALLEY NATIONAL GASES INCORPORATED,
a Pennsylvania corporation ("VNGI"), VALLEY NATIONAL GASES DELAWARE, INC., a
Delaware corporation ("VNGDI"), and BANK ONE, INDIANA, NATIONAL ASSOCIATION, a
national banking association with its principal office in Indianapolis, Indiana
("Bank One"), LASALLE NATIONAL BANK, a national banking association with offices
in St. Louis, Missouri ("LaSalle"), STAR BANK, NATIONAL ASSOCIATION, a national
banking association with its principal office in Cincinnati, Ohio ("Star"), PNC
BANK, NATIONAL ASSOCIATION, a national banking association with its principal
office in Pittsburgh, Pennsylvania ("PNC"), NATIONSBANK, N.A., a national
banking association with its principal office in Charlotte, North Carolina
("NationsBank"), NATIONAL CITY BANK, a national banking association with its
principal office in Cleveland, Ohio ("National City"), THE HUNTINGTON NATIONAL
BANK, a national banking association with offices in Charleston, West Virginia
("Huntington") (collectively, the "Initial Banks") and Bank One, as agent for
the Banks (in such capacity, the "Agent").
RECITALS
1. The Company, VNGDI, VNGI and Bank One are parties to an
Amended and Restated Credit Agreement, dated September 29, 1997 (as the same has
been amended, modified and supplemented prior to the Closing Date and as in
effect immediately prior to the execution of this Agreement, the "Original
Agreement").
2. The Company is a wholly-owned Subsidiary of VNGDI, and
VNGDI is a wholly-owned Subsidiary of VNGI .
3. By Transfer Agreement, dated as of the Closing Date (the
"Transfer Agreement"), Bank One has sold, transferred and assigned to the
Initial Banks (including itself) and/or the Agent pro rata interests in the
Original Agreement and the documents executed in connection therewith and the
indebtedness, obligations and liabilities evidenced thereby, arising therefrom,
pursuant to or by virtue thereof.
4. The Company, VNGDI and VNGI (referred to herein
collectively, as the "Credit Parties", and individually as a "Credit Party")
have requested the Initial Banks and the Agent to amend, and as so amended,
restate the Original Agreement, subject to and in accordance with the terms of
this Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the premises, the mutual
covenants and agreements herein, and each act performed and to be performed
hereunder, the Initial Banks, the Agent and the Credit Parties agree to amend,
and as so amended, restate, the Original Agreement as follows:
<PAGE> 2
ARTICLE I
DEFINITION OF TERMS
Section 1.01. ACCOUNTING TERMS -- DEFINITIONS. All accounting and
financial terms used in this Agreement are used with the meanings such terms
would be given in accordance with GAAP except as may be otherwise specifically
provided in this Agreement. The following terms have the meanings indicated when
used in this Agreement with the initial letter capitalized:
"Acquisition Seller Debt" means, collectively (i) the Existing
Acquisition Seller Debt, and (ii) any deferred purchase price of a New
Acquisition payable by the Company to the Acquisition Sellers or any of
them with respect to that New Acquisition evidenced by or payable under
the terms of a promissory note or non-compete agreement or other Debt
instrument.
"Acquisition Sellers" means, collectively (i) the Existing Acquisition
Sellers, and (ii) any and all Persons from whom the Company acquires a
New Acquisition, and when used in the singular form, means any of the
Acquisition Sellers, as the context so requires.
"Additional EBITDA Amount" means such amount as may be approved by Bank
One in its sole discretion of EBITDA of a Related Business Entity
acquired in a New Acquisition for the twelve (12) calendar month period
immediately preceding the New Acquisition Closing Date for such New
Acquisition or for such other twelve (12) calendar month period
preceding such New Acquisition Closing Date as may be agreed and
approved by the Bank One, provided that, such amount is subject to
redetermination by Bank One at its sole discretion to reflect
elimination of expenses (including salaries, benefits and associated
payroll costs for employees who have been identified for termination as
a result of the New Acquisition and are to be terminated; rent expenses
for leases that are to be terminated within sixty (60) days of closing
of the New Acquisition; reduction of cost of goods sold due to lower
gas margins from increased volume discounts; and any other
identifiable, immediate net cost savings deemed applicable by Bank One)
of such Related Business Entity by virtue of the acquisition.
"Advance" means a disbursement of proceeds of the Revolving Loans.
"Affiliate" means, with respect to any Person, any officer, shareholder
or director of such Person and any Person or group acting in concert in
respect of the Person in question that, directly or indirectly,
controls or is controlled by or is under common control with such
Person.
"Agent" has the meaning ascribed to such term in the preamble of this
Agreement.
"Agent Fee Agreement" has the meaning ascribed to such term in Section
2.08 of this Agreement.
"Aggregate Commitment" means the aggregate of the Commitments of all of
the Banks, as reduced from time to time pursuant to the terms of this
Agreement.
"Agreement" means this Amended and Restated Credit Agreement, as
amended, modified, supplemented and/or restated from time to time and
at any time.
"Applicable LOC Fee Percentage" means the rate per annum at which the
commission due on each Letter of Credit will be calculated, which rate shall be
determined by reference to the Ratio of Total Funded Debt to EBITDA in
accordance with the following table:
<PAGE> 3
<TABLE>
<CAPTION>
Total Funded Debt to EBITDA Applicable LOC Fee Percentage
--------------------------- -----------------------------
<S> <C>
4.00 to 4.50 1.50%
3.50 to 3.99 1.25%
3.00 to 3.49 1.00%
2.50 to 2.99 0.75%
2.00 to 2.49 0.75%
Below 2.00 0.75%
</TABLE>
The Applicable LOC Fee Percentage shall be determined on the Closing Date on the
basis of the Ratio of Total Funded Debt to EBITDA for the Credit Parties and
their respective Subsidiaries in effect on the Closing Date (which the Company
and the Banks agree for purposes of the Applicable LOC Fee Percentage shall be
between 2.50 and 2.99 as of the Closing Date) and shall be redetermined and
adjusted as of the close of each fiscal quarter of the Company thereafter,
concurrently with any adjustment to the Ratio of Total Funded Debt to EBITDA (as
provided in the definition of Ratio of Total Funded Debt to EBITDA in this
Agreement), with such redetermined Applicable LOC Fee Percentage to be effective
for the entire fiscal quarter of the Company which immediately follows each such
fiscal quarter.
Notwithstanding the foregoing, the Applicable LOC Fee Percentage shall
be as follows if, and during any period, the reimbursement obligations of the
Company to Bank One under the applicable Reimbursement Agreement and this
Agreement for such Letter of Credit are fully secured by Cash Collateral:
<TABLE>
<CAPTION>
Total Funded Debt to EBITDA Applicable LOC Fee Percentage
--------------------------- -----------------------------
<S> <C>
4.00 to 4.50 0.75%
3.50 to 3.99 0.75%
3.00 to 3.49 0.75%
2.50 to 2.99 0.50%
2.00 to 2.49 0.50%
Below 2.00 0.50%
</TABLE>
"Applicable Spread" means the percentage per annum to be taken into
account in determining any LIBOR-based Rate and any Prime-based Rate as provided
in this Agreement, which number shall be determined by reference to the Ratio of
Total Funded Debt to EBITDA in accordance with the following table:
<TABLE>
<CAPTION>
Ratio of Total Funded If Determining a If Determining a
Debt to EBITDA Prime-based Rate LIBOR-based Rate
-------------- ---------------- ----------------
<S> <C> <C>
4.00 or above 0.50% 2.375%
3.50 to 3.99 0.25% 2.125%
3.00 to 3.49 0% 1.875%
2.50 to 2.99 0% 1.625%
2.00 to 2.49 0% 1.25%
less than 2.00 0% 1.00%
</TABLE>
The Applicable Spread shall be determined on the Closing Date
on the basis of the Ratio of Total Funded Debt to EBITDA for
the Credit Parties and their respective Subsidiaries in effect
on the Closing Date as provided in the definition of Ratio of
Total Funded Debt to EBITDA in this Agreement, and shall be
redetermined and adjusted
-3-
<PAGE> 4
concurrently with any adjustment to the Ratio of Total Funded
Debt to EBITDA as provided in the definition of Ratio of Total
Funded Debt to EBITDA in this Agreement, with prospective
effect until so redetermined and adjusted.
"Applicable Unused Commitment Fee Percentage" means the percentage per annum
determined by reference to the Ratio of Total Funded Debt to EBITDA in
accordance with the following table:
-4-
<PAGE> 5
<TABLE>
<CAPTION>
Ratio of Total Funded Applicable Unused Commitment
Debt to EBITDA Fee Percentage
-------------- --------------
<S> <C>
4.00 or above 0.50%
3.50 to 3.99 0.375%
3.00 to 3.49 0.25%
2.50 to 2.99 0.25%
2.00 to 2.49 0.125%
less than 2.00 0.125%
</TABLE>
The Applicable Unused Commitment Fee Percentage shall be
determined on the Closing Date on the basis of the Ratio of
Total Funded Debt to EBITDA in effect on the Closing Date as
provided in the definition of Ratio of Total Funded Debt to
EBITDA in this Agreement, and shall be redetermined and
adjusted concurrently with any adjustment to the Ratio of
Total Funded Debt to EBITDA as provided in the definition of
Ratio of Total Funded Debt to EBITDA in this Agreement, with
prospective effect until so redetermined and adjusted.
"Application for Revolving Loans Advance" means a written application
of the Company for an Advance substantially in the form of EXHIBIT A
attached hereto.
"Authorized Officer" means the President or the Chief Financial Officer
of the Company or such other officer whose authority to perform acts to
be performed only by an Authorized Officer under the terms of this
Agreement is evidenced to the Agent by a certified copy of an
appropriate resolution of the Board of Directors of the Company.
"Bank One" has the meaning ascribed to such term in the preamble to
this Agreement.
"Banking Day" means a day on which the principal office of Bank One in
the City of Indianapolis, Indiana, is open for the purpose of
conducting substantially all of the Bank's business activities.
"Banks" means, collectively, the Initial Banks and any Purchaser that
becomes a Bank party to this Agreement pursuant to the terms of Section
9.08 of this Agreement, together with their respective successors and
assigns, and "Bank" means any one of the Banks.
"Capital Expenditures" for any period shall mean the aggregate amount
of all expenditures (whether paid in cash or accrued as a liability) of
the Credit Parties and their respective Subsidiaries, computed on a
consolidated basis, during such period that to the extent required by
GAAP are required to be included in or reflected as property, plant or
equipment or similar fixed asset account in any Financial Statements,
including any acquisition, construction or installation of properties
or for any additions and improvements thereto or any replacement
thereof and the amount capitalized under any Capital Lease, less the
net cash proceeds from any dispositions to the extent specifically
permitted under this Agreement.
"Capital Lease" shall mean any lease of property (whether real,
personal or mixed) which, to the extent required by GAAP, is accounted
for as a capital lease or a Capital Expenditure on the consolidated
balance sheet of the Credit Parties and their respective Subsidiaries.
-5-
<PAGE> 6
"Cash Capital Expenditures" means those Capital Expenditures that are
not financed with new Debt (including Debt incurred under this
Agreement) or through Capital Leases.
"Cash Collateral" means any and all cash (or qualified investment
property as may be acceptable to the Required Banks in their sole
discretion) required or permitted to be pledged by any Person to the
Agent for the pro rata benefit of the Banks and the Agent under this
Agreement as security for all or any part of the Obligations, which
shall be held by the Agent for the benefit of the Banks and the Agent,
as secured parties, in a cash or securities collateral account
maintained with the Agent ("Collateral Account") under which the Agent
for the benefit of the Banks and the Agent are granted a pledge,
security interest and lien in and to the Collateral Account, the cash
and any and all other investment property or other property at any time
held in the Collateral Account, and all proceeds and substitutions of
any of the foregoing (collectively, the "Collateral Account Property"),
pursuant to a pledge agreement, account control agreement, and such
other security instruments as may be required by the Required Banks to
perfect and maintain perfection of such security interest in the
Collateral Account Property, all in form and substance satisfactory to
the Required Banks in all respects.
"Closing Date" has the meaning ascribed to such term in the preamble to
this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means all present and future assets of each of the Credit
Parties and their respective Subsidiaries upon which a lien is
purported to be created by this Credit Agreement, any security
agreement or any other Loan Document executed in connection with,
pursuant to or by virtue of this Credit Agreement, and all proceeds and
products of any of the foregoing.
"Commitment" means, with respect to each Bank, its commitment to make
Advances, to lend its portion of the Term Loan, and to issue or risk
participate as to Letters of Credit as set forth in Article II of this
Agreement. The amount of the initial Commitment of each Bank is set
forth on Exhibit B attached to this Agreement and made a part hereof
for all purposes, as amended from time to time and at any time in
accordance with the terms of this Agreement.
"Commitment Percentage" shall mean, when used with reference to any
Bank and any described aggregate or total amount, an amount equal to
the result obtained by multiplying such described aggregate or total
amount by the percentage set opposite its designation on Exhibit B, as
amended from time to time and at any time in accordance with the terms
of this Agreement, or as the context requires, shall mean, when used
with reference to any Bank, the percentage set opposite its designation
on Exhibit B, as amended from time to time and at any time in
accordance with the terms of this Agreement.
"Common Stock" means, with respect to any corporation, the common stock
of such corporation, and any class of capital stock of such corporation
now or hereafter authorized having the right to share in distributions
either of earnings or assets of such corporation without limit as to
amount or percentage.
"Company" has the meaning ascribed to such term in the preamble to this
Agreement.
-6-
<PAGE> 7
"Company's Auditors" means one of the six (6) largest independent
certified public accounting firms in the U.S.
"Company Pledge Agreement" has the meaning ascribed to such term in
Section 4.01(e)(2) of this Agreement.
"Company Security Agreement" means the Amended and Restated Security
Agreement, dated as of the Closing Date, executed by the Company in
favor of the Agent for the benefit of the Banks and the Agent, as the
same has been and hereafter may be amended, modified, supplemented
and/or restated from time to time and at any time.
"Consolidated Net Income" means, for any period, the net income of the
Credit Parties and their respective Subsidiaries, computed on a
consolidated basis and in accordance with GAAP for such period.
"Consolidated Net Worth" means, as of the date any determination
thereof is to be made, the net worth of the Credit Parties and their
respective Subsidiaries, computed on a consolidated basis in accordance
with GAAP as of such date.
"Convertible Securities" means evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable
for, with or without payment of additional consideration, shares of
Common Stock, either immediately or upon the arrival of a specified
date or the happening of a specified event.
"Credit Enhancement" means, in reference to the prohibited purposes of
Letters of Credit described in Section 2.03(a) of this Agreement, the
enhancement or support of or security for any credit extended or to be
extended by any Person to the Company or any Subsidiary or Affiliate of
the Company or any other Credit Party, including any Debt of the
Company for borrowed money, Capital Lease obligations, and any
guarantees, endorsements and other contingent obligations of the
Company or any other Credit Party with respect to indebtedness,
liabilities or obligations of any other Person; provided, that, the
term "Credit Enhancement" shall not include Acquisition Seller Debt.
"Credit Party" and "Credit Parties" have the respective meanings
ascribed to such terms in the Recitals to this Agreement.
"Debt" means, with reference to any Person, all indebtedness,
liabilities and obligations, contingent or otherwise, which in
accordance with GAAP should be classified upon such Person's balance
sheet as liabilities, but in any event including (without duplication)
liabilities secured by any lien on property owned or acquired by such
Person (whether or not the liability secured thereby shall have been
assumed and whether or not such Person is personally liable for the
payment thereof), obligations under leases which have been (or which in
accordance with GAAP should be) capitalized for financial reporting
purposes, and all guarantees, endorsements and other contingent
obligations of such Person with respect to indebtedness, liabilities or
obligations of others.
"Doansco" means Doansco, Inc., an Ohio corporation, being on the
Closing Date a Subsidiary of the Company.
"Draft" means a drawing or other demand for payment under a Letter of
Credit.
"EBITDA" means, with respect to the Credit Parties and their respective
Subsidiaries for any period, the amount of Consolidated Net Income,
plus, without duplication and to the extent deducted in determining the
amount of
-7-
<PAGE> 8
Consolidated Net Income, the sum of interest expense, income tax
expense, depreciation and amortization expense, determined in
accordance with GAAP.
For purposes of determining EBITDA for the Credit
Parties and their respective Subsidiaries on a pro forma basis to
determine the effect of a New Acquisition on compliance with the
covenants in subsections 5.01(g) of this Agreement (excluding the
covenant in subsection 5.01(g)(2) of this Agreement) and to determine
the Applicable Spread, the Applicable LOC Fee Percentage and the
Applicable Unused Commitment Fee Percentage for any period of twelve
(12) months or four fiscal quarters of the Company that ends ("Period
Ending Date"): (i) on any New Acquisition Closing Date, EBITDA for such
period will be deemed to include the Additional EBITDA Amount
calculated with respect to the Related Business Entity acquired on such
New Acquisition Closing Date; and (ii) within one year after any New
Acquisition Closing Date, EBITDA for such period will be deemed to
include an amount equal to (A) the Additional EBITDA Amount calculated
with respect to the Related Business Entity acquired on such New
Acquisition Closing Date, minus (B) 1/12 of such Additional EBITDA
Amount for each full calendar month that has elapsed between such New
Acquisition Closing Date and the Period Ending Date, minus (c) 1/30 of
such Additional EBITDA Amount for each day of any partial calendar
month that has elapsed between such New Acquisition Closing Date and
the Period Ending Date.
"Environmental Laws" means all federal, state and local laws and
implementing regulations, now or hereafter effective during the term of
this Agreement, relating to pollution or protection of the environment,
including laws or regulations relating to or permitting emissions,
discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances
or wastes into the environment (including without limitation ambient
air, surface water, ground water, or land), or to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
or handling of pollutants, contaminants, chemicals, industrial wastes,
or hazardous substances. Such laws shall include, but not be limited
to: (a) the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. Section 9601 et seq.; (b) the
Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section
6901 et seq., including the statutes regulating underground storage
tanks, 42 U.S.C. 6991-6991h; (c) the Clean Air Act, as amended, 42
U.S.C. 7401 et seq.; and (d) the Federal Water Pollution Control Act,
as amended, 33 U.S.C. Section 1251 et seq., including the statute
regulating the National Pollutant Discharge Elimination System, 33
U.S.C. Section 1342.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Existing Acquisition Sellers" means, collectively, the Persons
identified on EXHIBIT C attached hereto.
"Existing Acquisition Seller Debt" means, collectively, the Debt owed
by the Company to the Existing Acquisition Sellers, respectively,
identified on EXHIBIT C attached hereto.
"Event of Default" means any of the events described in Section 7.01 of
this Agreement.
"Financial Statements" includes, but is not limited to, balance sheets,
profit and loss statements, and cash flow statements, prepared in
accordance with GAAP.
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"Fixed Charge Coverage Ratio I" means, with respect to the Credit
Parties and their respective Subsidiaries for any period, a ratio of
EBITDA to the sum of the following for the Credit Parties and their
respective Subsidiaries, computed on a consolidated basis and
determined in accordance with GAAP: (i) the amount of interest which
was due and payable in cash or was paid in cash during such period,
plus (ii) the amount of Cash Capital Expenditures made during such
period, plus (iii) the amount of scheduled principal payments of Debt
which were due and payable in cash or were paid during such period,
plus (iv) the amount of income taxes which were due or paid during such
period, plus (v) the amount of dividends that were paid by VNGI in cash
during such period.
"Fixed Charge Coverage Ratio II" means, with respect to the Credit
Parties and their respective Subsidiaries for any period, a ratio of
EBITDA to the sum of the following for the Credit Parties and their
respective Subsidiaries, computed on a consolidated basis and
determined in accordance with GAAP: (i) the amount of interest which
was due and payable in cash or was paid in cash during such period,
plus (ii) the amount of scheduled principal payments of Debt which were
due and payable in cash or were paid during such period, plus (iii) the
amount of income taxes which were due or paid during such period, plus
(iv) the amount of dividends that were paid by VNGI in cash during such
period.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, which shall include
the official interpretations thereof by the Financial Accounting
Standards Board, consistently applied (from and after the date hereof)
and for the period as to which such accounting principles are to apply.
Except as otherwise provided in this Agreement, to the extent
applicable, all computations and determinations as to accounting or
financial matters and all Financial Statements to be delivered pursuant
to this Agreement shall be made and prepared in accordance with GAAP
(including principles of consolidation where appropriate), and, to the
extent applicable, all accounting or financial terms shall have the
meanings ascribed to such terms by GAAP.
"Government Acts" has the meaning ascribed to such term in subsection
2.03(e) of this Agreement.
"Guaranties" means, collectively, the Parent Guaranties and the
Subsidiary Guaranties, and the term "Guaranty" means any of the
Guaranties, individually.
"Guarantors" means, collectively, VNGDI, VNGI, Doansco, Toledo Oxygen
and any other Subsidiary of the Company which hereafter unconditionally
guaranties the Obligations pursuant to a Guaranty executed and
delivered by such Subsidiary in favor of the Banks, and "Guarantor"
means any of the Guarantors, individually.
"Hazardous Substance" means any hazardous or toxic substance regulated
by any Environmental Laws, including but not limited to the
Comprehensive Environmental Response, Compensation and Liability Act,
the Resource Conservation and Recovery Act and the Toxic Substance
Control Act, or by any federal, state or local governmental agencies
having jurisdiction over the control of any such substance including
but not limited to the United States Environmental Protection Agency.
"Initial Banks" has the meaning ascribed to such term in the preamble
of this Agreement.
"Initial Letters of Credit" means the letters of credit issued by Bank
One on behalf of the Company pursuant to the Original Agreement or any
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previous version thereof which remain outstanding on the Closing Date,
which letters of credit are identified on Schedule 1.01 attached
hereto.
"Intercreditor Agreements" means one or more intercreditor and
subordination agreements between the Agent, and/or the Banks, the
Company and the Existing Acquisition Sellers, in form and substance the
same as attached hereto as EXHIBIT D, as the same may be amended,
modified, extended, renewed, supplemented, replaced and/or restated
from time to time and at any time.
"Letters of Credit" means all standby letters of credit issued by Bank
One pursuant to Section 2.03 of this Agreement, but including the
Initial Letters of Credit.
"Letter of Credit Exposure" means, as of the date such amount is to be
determined, the sum of:
(a) the aggregate face amounts of all Letters of
Credit that have not expired by their terms or have
not been surrendered by the beneficiary prior to the
expiration thereof (including the face amounts of any
Letters of Credit that have expired by their terms
but have not been surrendered by the beneficiary and
as to which the beneficiary asserts a right to
present and/or have honored Drafts); less any portion
of such face amounts that has been exhausted by the
payment or acceptance of Drafts thereunder or
otherwise; plus
(b) the total dollar amount of (1) the amount of all
Drafts under Letters of Credit which have been
honored by Bank One or which Bank One has otherwise
been required to pay but with respect to which Bank
One has not yet received reimbursement from the
Company, including without limitation, the principal
amounts of all outstanding Letter of Credit Loans,
and (2) the amount of all Drafts under Letters of
Credit which have been presented to Bank One but not
honored by Bank One, which Bank One (in its sole
discretion) determines it may yet honor or be
required to honor or the amount of which it may
otherwise be required to pay.
"Letter of Credit Loan" has the meaning ascribed to such term in
subsection 2.03(d) of this Agreement.
"LIBOR-based Rate" means a variable rate at which interest may accrue
on all or a portion of either of the Loans under the terms of this
Agreement, which rate is determined by reference to the London
Interbank Offered Rate.
"Liens" or "lien" has the meaning ascribed to such term in Section
5.02(b) of this Agreement.
"Loans" means, collectively, the Revolving Loans and the Term Loan and,
when used in the singular form, means either of the Loans, as the
context requires.
"Loan Documents" means, collectively, this Agreement, the Revolving
Notes, the Term Notes, the Company Security Agreement, the Company
Pledge Agreement, the Parent Guaranties, the Parent Pledge Agreements,
the Parent Security Agreements, the Subsidiary Guaranties, the
Subsidiary Security Agreements, the Intercreditor Agreements, any and
all Reimbursement Agreements, the Agent Fee Agreement, and all other
instruments, agreements and documents executed and delivered or to be
delivered by any Person pursuant to or by virtue of this Agreement, as
each may be amended,
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modified, extended, renewed, supplemented and/or restated from time to
time and at any time, and when used in the singular form, means any of
the Loan Documents, as the context requires.
"London Interbank Offered Rate" means the per annum rate of interest,
as determined by the Agent, at which dollar deposits in immediately
available funds are offered to the principal banks in the London
interbank market by other principal banks in that market two Banking
Days prior to the commencement of a period of either one month, two
months, three months, or six months for which the Company shall have
requested a quotation of the rate in amounts equal to the amount for
which the Company shall have requested a quotation of the rate.
"Master Agreement" means that certain ISDA Master Agreement, dated as
of December 1, 1997, between Bank One and the Company, as the same may
be amended, supplemented and/or restated from time to time.
"Maximum Availability" means $75,289,585.00.
"Maximum Revolver Availability" means, as of any date such amount is to
be determined, the Maximum Availability minus the Letter of Credit
Exposure as of such date.
"New Acquisition" means the acquisition by the Company from any Person
of the assets and goodwill of such Person which comprise a Related
Business Entity, or of all or substantially all of the stock,
partnership interest, or other ownership interest of any type
whatsoever of such Person in a Related Business Entity if such Related
Business Entity is merged into the Company with the Company being the
surviving entity, in a transaction or series of transactions closed
after the Closing Date, provided that (i) the consummation of such
acquisition on a pro forma basis will not cause the occurrence of an
Event of Default or an Unmatured Event of Default; and (ii) Financial
Statements have been maintained for such Related Business Entity for
such periods preceding the acquisition as may be reasonably required by
the Required Banks.
"New Acquisition Closing Date" means the date on which a New
Acquisition is consummated.
"Notes" means, collectively, the Revolving Notes and the Term Notes,
and when used in the singular, means any of the Notes, as the context
requires.
"Obligations" means all present and future indebtedness, obligations
and liabilities, and all renewals and extensions thereof, now or
hereafter owed to the Banks or any of them or the Agent by the Company,
whether arising under, by virtue of or pursuant to this Agreement, any
of the Notes, any of the Reimbursement Agreements, any other Loan
Document, the Master Agreement or any of the agreements contemplated by
Section 9.15 of this Agreement, together with all costs, expenses and
reasonable attorneys' fees (including the reasonable allocated costs of
staff counsel) incurred by each of the Banks and by the Agent in the
enforcement or collection thereof, whether such indebtedness,
obligations and liabilities are direct, indirect, fixed, contingent,
liquidated, unliquidated, joint, several, joint and several, now exist
or hereafter arise, or were prior to acquisition thereof by any Bank
owed to some other Person.
"Officer's Certificate" means a certificate in the form included as a
part of EXHIBIT A attached hereto signed by the President or Chief
Financial Officer of the Company, confirming that all of the
representations and warranties contained in Section 3.01 of this
Agreement are true and
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correct as of the date of such certificate except as specified therein
and with the further exceptions that: (i) the representation contained
in subsection 3.01(d) of this Agreement shall be construed so as to
refer to the latest Financial Statements which have been furnished to
the Banks as of the date of any such certificate, (ii) the
representations contained in subsection 3.01(k) (with respect to
Hazardous Substances) will be construed so as to apply not only to the
Credit Parties, but also to their respective Subsidiaries, whether now
owned or hereafter acquired, (iii) the representation contained in
subsection 3.01(l) of this Agreement shall be deemed to be amended to
reflect the existence of any Subsidiary hereafter formed or acquired by
the Credit Parties with the consent of the Required Banks, and (iv) all
other representations will be construed to have been amended to conform
with any changes of which the Credit Parties shall have previously
given the Banks notice in writing. The Officer's Certificate shall
further confirm that no Event of Default or Unmatured Event of Default
shall have occurred and be continuing as of the date of the Officer's
Certificate or shall describe any such event which shall have occurred
and be then continuing and the steps being taken by the Credit Parties
to correct it.
"Parent Guaranties" and "Parent Guaranty" have the respective meanings
ascribed to such terms in Section 4.01(c)(1) of this Agreement.
"Parent Pledge Agreements" and "Parent Pledge Agreement" have the
respective meanings ascribed to such terms in Section 4.01(e)(1) of
this Agreement.
"Parent Security Agreements" and "Parent Security Agreement" have the
respective meanings ascribed to such terms in Section 4.01(d)(1) of
this Agreement.
"Period Ending Date" has the meaning ascribed to such term in the text
of the definition of EBITDA in this Section 1.01.
"Person" shall mean an individual, a corporation, a limited or general
partnership, a limited liability company, a joint venture, a trust or
unincorporated organization, a joint stock company or other similar
organization, a government or any political subdivision thereof, a
court, or any other legal entity, whether acting in an individual,
fiduciary or other capacity.
"Plan" means an employee pension benefit plan as defined in ERISA.
"Prepayment Premium" means the excess, if any, as determined by the
Required Banks to be prepaid of: (i) the present value at the time of
prepayment of the interest payments which would have been payable on
account of an amount prepaid from the date of prepayment until the end
of the period during which interest would have accrued at a LIBOR-based
Rate but for prepayment over (ii) the present value at the time of
prepayment of interest payments calculated at the rate (the
"Reinvestment Rate") which the Banks then estimate they would receive
upon reinvesting the principal amount of the prepayment in an
obligation which presents a credit risk substantially similar (as
determined in accordance with the commercial credit rating system then
used by the Agent) to that which is then presented by the Loan to be
prepaid for a period approximately equal to the balance of the period
during which interest would accrue on the portion of the Loan prepaid
at a LIBOR-based Rate, but for prepayment. The discount rate used by
the Banks in determining such present values shall be the Reinvestment
Rate.
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"Prime-based Rate" means any variable rate at which interest may accrue
on all or a portion of either of the Loans under the terms of this
Agreement, which rate is determined by reference to the Prime Rate.
"Prime Rate" means a variable per annum interest rate equal at all
times to the per annum rate of interest established and quoted by Bank
One as its prime rate, such rate to change contemporaneously with each
change in such established and quoted rate, provided that it is
understood that the Prime Rate shall not necessarily be representative
of the rate of interest actually charged by Bank One on any loan or
class of loans.
"Ratio of Total Funded Debt to EBITDA" shall mean, for any period, the
ratio of Total Funded Debt of the Credit Parties and their respective
Subsidiaries at the close of that period to EBITDA of the Credit
Parties and their respective Subsidiaries for that period, computed on
a consolidated basis and determined in accordance with GAAP. "Ratio of
Total Senior Funded Debt" shall mean, with respect to the Credit
Parties and their respective Subsidiaries for any period, the ratio of
Total Senior Funded Debt of the Credit Parties and their respective
Subsidiaries at the close of that period to EBITDA of the Credit
Parties and their respective Subsidiaries for that period, computed on
a consolidated basis and determined in accordance with GAAP. For
purposes of determining the Applicable Spread, the Applicable LOC Fee
Percentage and the Applicable Unused Commitment Fee and the ratios for
which compliance is required pursuant to Section 5.01(g) of this
Agreement, the Ratio of Total Funded Debt to EBITDA and the Ratio of
Senior Funded Debt to EBITDA shall be determined on the Closing Date on
the basis of the consolidated Financial Statements of the Credit
Parties and their respective Subsidiaries provided to the Banks prior
to the Closing Date for the preceding twelve (12) calendar month period
ending June 30, 1997, and thereafter shall be redetermined and adjusted
from and after the Closing Date as necessary as follows:
(i) Quarterly Adjustments. For purposes of
determining the Applicable Spread, the Applicable Unused
Commitment Fee, and the Applicable LOC Fee Percentage the
Ratio of Total Funded Debt to EBITDA shall be redetermined and
adjusted as necessary on the basis of the consolidated
Financial Statements of the Credit Parties and their
respective Subsidiaries for the most recent preceding four
fiscal quarters of the Company provided to the Bank pursuant
to the requirements of subsection 5.01(b) of this Agreement (a
"Quarterly Adjustment"), with prospective effect until the
next adjustment date. Quarterly Adjustments shall be made on
the first interest payment date which follows receipt by the
Banks of the consolidated Financial Statements for the last
month of the first fiscal quarter of the Company ending after
the Closing Date, and thereafter on the first interest payment
date which follows receipt by the Banks of the consolidated
Financial Statements upon which such adjustment is based (a
"Quarterly Adjustment Date"), but no Quarterly Adjustment
shall be effective as to any LIBOR-based Rate elected prior to
the Quarterly Adjustment Date until the expiration of the
period of time for which such LIBOR-based Rate shall have been
elected by the Company.
(ii) New Acquisition Adjustments. For purposes of
determining the Applicable Spread, the Applicable Unused
Commitment Fee, the Applicable LOC Fee Percentage, and the
ratios for which compliance is required pursuant to Section
5.01(g) of this Agreement, the Ratio of Total Funded Debt to
EBITDA and the Ratio of Total Senior Funded Debt to EBITDA
shall be redetermined and adjusted as necessary on each New
Acquisition Closing Date on the basis of the consolidated
Financial Statements of the Credit Parties
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and their respective Subsidiaries for the most recent twelve
(12) calendar month period that precedes the New Acquisition
Closing Date provided to the Banks pursuant to the
requirements of subsection 5.01(b) of this Agreement (a "New
Acquisition Adjustment"), with prospective effect until the
next adjustment date, but no New Acquisition Adjustment shall
be effective as to any LIBOR-based Rate elected prior to the
New Acquisition Date until the expiration of the period of
time for which such LIBOR-based Rate shall have been elected
by the Company.
Notwithstanding the foregoing, in the event the Credit Parties fail to
deliver when due the Financial Statements and compliance certificates
required under subsection 5.01(b) of this Agreement for any month which
ends a fiscal quarter of the Company and fail to cure such default
within ten (10) days after notice of such default by the Agent, then
the Applicable Unused Commitment Fee Percentage, Applicable LOC Fee
Percentage and the Applicable Spread shall be adjusted (without further
prior notice by the Agent or any of the Banks to the Company) to the
largest number shown in the table applicable to such definition from
such due date until the first interest payment date which follows
delivery to the Banks of such Financial Statements. It is noted that
the tables defining Applicable LOC Percentage, Applicable Unused
Commitment Fee Percentage and the Applicable Spread provide for a Ratio
of Total Funded Debt to EBITDA with respect to the Credit Parties and
their respective Subsidiaries greater than that which may be
permissible under the terms of subsection 5.01(g) of this Agreement.
For the avoidance of doubt, it is agreed that it is the intent of the
parties that the Banks shall be free to exercise all remedies otherwise
provided for in this Agreement in the event of the violation of the
covenant stated in subsection 5.01(g) of this Agreement,
notwithstanding the determination of the Applicable Unused Commitment
Fee Percentage, Applicable LOC Percentage and the Applicable Spread in
accordance with and by reference to this definition.
"Reimbursement Agreement" has the meaning ascribed to such term in
subsection 2.03(a) of this Agreement.
"Reinvestment Rate" has the meaning ascribed to such term in the text
of the definition of "Prepayment Premium" in this Section 1.01.
"Related Business Entity" means an operating business entity, division
or unit engaged in one or more lines of business in which the Company
is engaged as of the Closing Date, being the packaging and wholesale
distribution of industrial gas and welding, propane and fire
extinguishment equipment and supplies.
"Remaining Availability" means, at any time a determination thereof is
to be made, that amount which results by subtracting from the Maximum
Availability the sum of (i) the principal balance of the Revolving
Loans outstanding at such time, and (ii) the aggregate Letter of Credit
Exposure at such time.
"Required Banks" means Banks in the aggregate having at least 66.67% of
the Aggregate Commitment or, if the Aggregate Commitment has been
terminated, Banks in the aggregate holding at least 66.67% of the
aggregate unpaid principal of the Obligations.
"Revolving Loans" has the meaning ascribed to such term in subsection
2.02(a) of this Agreement.
"Revolving Loans Maturity Date" means the earlier of (i) the Scheduled
Revolving Loans Maturity Date, and (ii) that date upon which payment of
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any of the Revolving Loans is accelerated in accordance with Section
7.02 of this Agreement.
"Revolving Notes" has the meaning ascribed to such term in subsection
2.02(b) of this Agreement, and "Revolving Note" means any one of the
Revolving Notes.
"Securities Commission" means the Securities and Exchange Commission or
any other Federal agency from time to time administering the Securities
Act of 1933, as amended.
"Scheduled Revolving Loans Maturity Date" means January 16, 2001.
"Scheduled Term Loan Maturity Date" means October 4, 2003.
"Subordination Agreement" has the meaning ascribed to such term in
Section 5.02(d)(4) of this Agreement.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, joint venture or other business entity over which such
Person exercises control, provided that it shall be conclusively
presumed that such Person exercises control over any such entity 51% or
more of the equity interest in which is owned by such Person, directly
or indirectly.
"Subsidiary Guaranties" means, collectively, the amended and restated
guaranties executed and delivered to the Banks by each of Doansco and
Toledo Oxygen pursuant to the requirements of Section 4.01(c)(2) of
this Agreement and by any other Subsidiary of the Company pursuant to
the requirements of Section 4.01(f) of this Agreement, as the same may
be amended, modified, extended, renewed, supplemented, replaced and/or
restated from time to time and at any time, and the term "Subsidiary
Guaranty" means any of the Subsidiary Guaranties.
"Subsidiary Security Agreements" means, collectively the security
agreements executed and delivered to the Agent by each of Doansco and
Toledo Oxygen pursuant to the requirements of Section 4.01(d)(2) of
this Agreement and by any other Subsidiary of the Company pursuant to
the requirements of Section 4.01(f) of this Agreement, as the same may
be amended, modified, extended, renewed, supplemented, replaced and/or
restated from time to time and at any time, and the term "Subsidiary
Security Agreement" means any of the Subsidiary Security Agreements.
"Term Loan" has the meaning ascribed to such term in subsection 2.04 of
this Agreement.
"Term Loan Maturity Date" means the earlier of (i) the Scheduled Term
Loan Maturity Date, and (ii) that date upon which payment of the Term
Loan is accelerated in accordance with Section 7.02 of this Agreement.
"Term Notes" has the meaning ascribed to such term in subsection
2.04(b) of this Agreement, and "Term Note" means any one of the Term
Notes.
"Toledo Oxygen" means The Toledo Oxygen and Equipment Company, an Ohio
corporation, being on the Closing Date a Subsidiary of the Company.
"Total Funded Debt" means, with respect to the Credit Parties and their
respective Subsidiaries, as of the date any determination thereof is to
be made, all interest-bearing Debt of the Credit Parties and their
respective Subsidiaries (including all Acquisition Seller Debt or other
subordinated interest-bearing Debt), computed on a consolidated basis
and determined in accordance with GAAP.
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"Total Senior Funded Debt" means, as of the date any determination
thereof is to be made, all interest-bearing Debt of the Credit Parties
and their respective Subsidiaries, computed on a consolidated basis and
determined in accordance with GAAP, but excluding interest-bearing Debt
of the Credit Parties and their respective Subsidiaries the payment of
which is expressly subordinated to the Obligations pursuant to any
Subordination Agreement approved by the Required Banks.
"Transfer Agreement" has the meaning ascribed to such term in the
Recitals to this Agreement.
"Unmatured Event of Default" means any event specified in Section 7.01
of this Agreement, which is not initially an Event of Default, but
which would, if uncured, become an Event of Default with the giving of
notice or the passage of time or both.
"VNGI" has the meaning ascribed to such term in the Recitals to this
Agreement.
"VNGDI" has the meaning ascribed to such term in the Recitals to this
Agreement.
ARTICLE II
Borrowing Terms
Section 2.01. General Statement. Subject to and in accordance
with the terms of this Agreement, and in reliance upon the representations,
warranties, covenants and agreements of the Company and the other Credit Parties
made in this Agreement and the other Loan Documents, each Bank severally agrees
to make the Loans and issue or risk participate with respect to the Letters of
Credit as described in this Article II.
Section 2.02. The Revolving Loans.
(a) The Commitment -- Use of Proceeds. Each of the Banks
severally agrees, subject to the terms and conditions of this Agreement, to make
Advances to the Company on a revolving basis (collectively, the "Revolving
Loans") from time to time from and after the Closing Date until the Revolving
Loans Maturity Date, with the principal balance of all of the Revolving Loans
not to exceed in the aggregate at any time the Maximum Revolver Availability and
with the outstanding principal balance of all Advances made by each Bank not to
exceed at any time such Bank's Commitment Percentage of the Maximum Revolver
Availability. Advances may be used by the Company only to fund working capital
requirements, Capital Expenditures and New Acquisitions and to refinance
existing Debt of the Company.
The Revolving Loans under this Agreement are a continuation,
on amended terms, of the "Revolving Loan" extended to the Company by Bank One
under the Original Agreement (the "Prior Revolving Loan") and the Company
affirms, acknowledges and agrees that the outstanding principal balance of the
Prior Revolving Loan as of the Closing Date is $25,055,585.19, being the unpaid
principal amount of the Prior Revolving Loan immediately prior to the execution
of this Agreement.
(b) Method of Borrowing. The obligation of the Company to
repay the Revolving Loans shall be evidenced by promissory notes executed by the
Company to each of the Banks in the form of EXHIBIT E attached hereto (as the
same may be amended, modified, extended, renewed, supplemented, replaced and/or
restated from time to time and at any time, the "Revolving Notes"). So long as
no Event of Default or Unmatured Event of Default shall have occurred and be
continuing and until the Revolving Loans Maturity Date, the Company may borrow,
repay (subject to the requirements of Section 2.06 of this Agreement) and
reborrow under the Revolving Notes on any Banking Day, provided that Company
shall not be entitled to receive and the Banks shall not be obligated to make
any Advance: (i) at any time an Event of Default or an Unmatured Event of
Default has occurred or is continuing; (ii) if the amount of such Advance would
exceed the amount of the Remaining Availability as of the date of such Advance;
or (iii) if after making such Advance the aggregate principal balance of the
Revolving Loans would exceed the Maximum Revolver Availability. Each Advance
shall be conditioned upon receipt by the Agent from the Company of an
Application for Revolving Loans Advance and an Officer's Certificate, provided
that the Agent may, at its discretion, make a
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disbursement upon the oral request of the Company made by an Authorized Officer,
or upon a request transmitted to the Agent by telecopy or by any other form of
written electronic communication (all such requests for Advances being hereafter
referred to as "informal requests"). The Agent shall promptly give each Bank
telephonic notice (confirmed in writing, which may be by telecopy) of each
Advance request. In so doing, the Agent may rely on any informal request which
shall have been received by it in good faith from a Person reasonably believed
to be an Authorized Officer. Each informal request shall be promptly confirmed
by a duly executed Application for a Revolving Loans Advance and Officer's
Certificate if the Agent so requires and shall in and of itself constitute the
representation of the Company that no Event of Default or Unmatured Event of
Default has occurred and is continuing or would result from the making of the
requested Advance, that the requested Advance would not exceed the Remaining
Availability then outstanding, and that the making of the requested Advance
would not cause the aggregate principal balance of the Revolving Loans to exceed
the Maximum Revolver Availability. All borrowings and reborrowings and all
payments shall be in amounts of not less than Fifty Thousand Dollars ($50,000),
except for payment of the entire aggregate principal balance of the Revolving
Loans and except for special prepayments of principal required under the terms
of Section 2.06 of this Agreement. Upon receipt of an Application for a
Revolving Loans Advance, or at the Agent's discretion upon receipt of an
informal request for an Advance and upon compliance with any other conditions of
lending stated in Section 6.01 of this Agreement applicable to the Revolving
Loans, the Agent shall disburse the amount of the requested Advance to the
Company as provided in Section 2.02(c). Except as the Agent and the Banks may
otherwise determine in their absolute discretion, no Advance will be made on the
day the Agent receives the Application for a Revolving Loans Advance or informal
request for Advance is received by the Agent unless such Application or request
is received by the Agent prior to 12:00 noon, Indianapolis, Indiana time.
Advances by each Bank and payments by the Company shall be recorded by each Bank
on its books and records, and the principal amount outstanding from time to
time, plus interest payable thereon, shall be determined by reference to the
books and records of each Bank. The Banks' books and records shall be presumed
prima facie to be correct as to such matters.
(c) Disbursement of Funds. On the date each Advance is to be
made, each Bank will make available to the Agent its Commitment Percentage of
the Advance requested to be made on such date in U.S. Dollars and in immediately
available funds, not later than 1:00 p.m. (Indianapolis time) at the account
specified in Section 2.05(c), and the Agent will make available to the Company
the aggregate of the amounts so made available by the Banks, in immediately
available funds by disbursing such amounts to an account established by the
Company with the Agent for that purpose. Unless the Agent shall have been
notified by any Bank prior to the date of an Advance that such Bank does not
intend to make available to the Agent such Bank's Commitment Percentage of the
Advance to be made on such date, the Agent may assume that such Bank has made
such amount available to the Agent on the date of the Advance and the Agent may,
in reliance upon such assumption, make available to the Company such Bank's
Commitment Percentage thereof. If such Bank does not in fact make available to
the Agent such amount on the date of such Advance, the Agent shall be entitled
to recover such amount on demand from such Bank. If a Bank does not pay such
amount forthwith upon the Agent's demand therefor, the Agent shall promptly
notify the Company and the Company shall within one Banking Day repay a
corresponding amount to the Agent, together with interest on such corresponding
amount in respect of each day from and including the date such corresponding
amount was made available by the Agent to the Company to the date such
corresponding amount is recovered by the Agent, at the interest rate applicable
to the related Advance during the period in question (which amounts the Agent
shall be entitled to retain for its own account). Nothing herein shall be deemed
to relieve any Bank from its obligation to fund its Commitment Percentage of
each requested Advance, or to prejudice any rights which the Company may have
against a Bank as a result of any failure by such Bank to fund its Commitment
Percentage of any requested Advance.
The Company agrees that upon demand by any Bank (which demand
shall be accompanied by a statement setting forth the basis for the calculations
of the amount being claimed) the Company will indemnify such Bank against any
net loss or expense which such Bank sustains or incurs, as reasonably determined
by such Bank, as a result of any failure of the Company to borrow any Advance on
the date specified therefor in an Advance request.
(d) Interest on the Revolving Loans. The principal amount of
the Revolving Loans outstanding from time to time shall bear interest until the
Revolving Loans Maturity Date at a rate per annum equal to the Prime Rate plus
the Applicable Spread; provided that, at the option of the Company, exercised
from time to time as provided in subsection 2.05(a) of this Agreement, interest
may accrue prior to the Revolving Loans Maturity Date on any part or on the
entire outstanding principal balance of the Revolving Loans as to which no
LIBOR-based Rate previously elected
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<PAGE> 18
remains in effect, at a rate per annum equal to a LIBOR-based Rate for a period
of one month, two months, three months or six months, plus the Applicable
Spread. Notwithstanding the foregoing, the Company will not be permitted to
elect any LIBOR-based Rate for a period extending beyond the Scheduled Revolving
Loans Maturity Date. After the Revolving Loans Maturity Date, and until paid in
full, the principal amount of the Revolving Loans outstanding from time to time
shall bear interest at a per annum rate equal to the Prime Rate plus Two Percent
(2%) per annum. Accrued interest shall be due and payable quarterly on the last
Banking Day of March, 1998, and on the last Banking Day of each successive June,
September, December and March thereafter until the Revolving Loans Maturity
Date, at which time the entire unpaid principal balances of the Revolving Loans
and all unpaid, accrued interest thereon, shall be due and payable in full
without demand. After the Revolving Loans Maturity Date, interest shall be
payable as accrued and without demand.
(e) Facility Fee. In addition to interest accruing on the
Revolving Loans, the Company shall pay to the Agent, for the pro rata account of
the Banks, a facility fee for each partial or full calendar quarter from and
after the Closing Date until the Revolving Loans Maturity Date equal to the
Applicable Unused Commitment Fee Percentage per annum on the daily average
"Unused Revolving Loans Commitment" (as hereinafter defined) during each such
quarter. As used herein, the term "Unused Revolving Loans Commitment" means, for
each day a determination thereof is to be made, the positive excess, if any,
which results by subtracting from the Maximum Availability at the close of such
day the sum of the outstanding aggregate principal amount of the Revolving Loans
at the close of such day plus the Letter of Credit Exposure at the close of such
day. Facility fees for each calendar quarter shall be due and payable within ten
(10) days following the Agent's submission of a statement of the amount due.
Such fees may be debited by the Agent when due to any demand deposit account of
the Company carried with the Agent without further authority.
Section 2.03. Standby Letters of Credit.
(a) Standby Letters of Credit -- General. Bank One agrees,
subject to the terms and conditions of this Agreement, to issue upon the
application of the Company and for the account of the Company standby letters of
credit for the purpose of supporting payment of all or any part of the
Acquisition Seller Debt or for any other general business purpose of the Company
other than Credit Enhancement (each a "Letter of Credit"), provided that:
(1) The aggregate Letter of Credit Exposure shall not
at any time exceed the lesser of (A) Twenty-Five Million Dollars
($25,000,000) or (B) the Maximum Availability at such time minus the
aggregate outstanding principal balance of all Revolving Loans at such
time;
(2) The Company shall not request and Bank One shall
have no obligation to issue any Letter of Credit: (i) at any time any
Event of Default or Unmatured Event Default shall have occurred and be
continuing; (ii) at any time after the Revolving Loans Maturity Date;
(iii) if, after giving effect to such issuance, the aggregate Letter of
Credit Exposure would exceed the lesser of (A) Twenty-Five Million
Dollars ($25,000,000) or (B) the Maximum Availability then outstanding
minus the then aggregate outstanding principal balance of all Revolving
Loans; (iv) if the face amount of such Letter of Credit would exceed
the then outstanding Remaining Availability; or (v) for any purpose
other than those permitted hereunder;
(3) Bank One in no event shall be obligated to issue
any Letter of Credit: (i) having an expiration date later than seven
(7) years and thirty (30) days from the date of issuance; or (ii) if
the issuance of such Letter of Credit on the terms requested would be
contrary to, or in violation of the policies of Bank One or any
requirement of applicable law;
(4) The form of the requested Letter of Credit shall
be satisfactory to Bank One in the reasonable exercise of Bank One's
discretion; and
(5) Bank One shall have received from the Company an
application and reimbursement agreement for the Letter of Credit in
form and substance satisfactory to Bank One in all respects (as the
same may be amended, modified, extended, renewed, supplemented,
replaced and/or restated from time to time and at any time,
"Reimbursement Agreement"), duly executed by an Authorized Officer on
behalf of the Company.
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<PAGE> 19
(b) Risk Participation. Each Bank (other than Bank One) hereby
agrees that, immediately upon the issuance of each Letter of Credit and as of
the Closing Date as to the Initial Letters of Credit, such Bank shall purchase,
and shall be deemed to have irrevocably purchased from Bank One (without the
necessity of the execution or delivery by Bank One or such Bank of any further
or additional document evidencing such purchase) a risk participation in such
Letter of Credit and the obligations of Bank One with respect to Drafts
thereunder (including any Letter of Credit Loan), in an amount equal to such
Bank's Commitment Percentage.
(c) Letter of Credit Procedures. Whenever the Company desires
the issuance of a Letter of Credit, it shall deliver to Bank One not later than
11:30 a.m. (Dallas, Texas time) at least three Banking Days (or such shorter
period as may be agreed to by Bank One in any particular instance) in advance of
the proposed date of issuance a Reimbursement Agreement duly executed by an
Authorized Officer. Each Reimbursement Agreement shall include a precise
description of the documents and the verbatim text of any certificate to be
presented by the proposed beneficiary with, or as a part of any Draft; provided
that Bank One, in its sole judgment, may require changes in the description of
any such documents and the text of such certificates; and provided further that,
at the discretion of Bank One, each Letter of Credit shall provide that payment
against a conforming Draft is not required to be made thereunder prior to the
close of business on the third Banking Day following presentment of such Draft.
(d) Draws under Letters of Credit. Upon presentation of a
Draft under any Letter of Credit by the beneficiary thereof, Bank One shall
notify the Company and the Banks of the receipt thereof ("Draft Notice") not
later than one Banking Day prior to the date on which Bank One intends to honor
such Draft. The Draft Notice may be given by telephone or telecopy. Failure to
give the Draft Notice or to give the Draft Notice in a timely manner shall not
in any way affect or limit the payment obligation of the Company or the
obligations of the Banks hereunder. Upon receipt of the Draft Notice, the
Company shall make or cause to be made an irrevocable deposit with Bank One not
later than 1:00 p.m., Dallas, Texas time, one (1) Banking Day prior to the day
on which the Draft is to be honored, in an amount equal to the full amount which
is to be paid under such Draft, in good and collected funds (the "Reimbursement
Amount"), specifying that it is depositing such money for the sole purpose of
funding the payment of such Draft.
In determining whether to honor any Draft, Bank One shall be
responsible only to determine that the documents and certificates required to be
delivered with such Draft under the appropriate Letter of Credit have been
delivered and that on their faces they are in substantial compliance with the
requirements of that Letter of Credit. In the event of any conflict between the
terms of any Reimbursement Agreement and the terms of this Agreement, the terms
of this Agreement shall control; and the terms of a Reimbursement Agreement
shall not be deemed to be in conflict with the terms of this Agreement solely by
reason of the fact that it addresses one or more subject matters that are
addressed by this Agreement and contains provisions that are different from
those set forth in this Agreement.
(e) Reimbursement Obligations of the Company. The Company
hereby agrees to reimburse Bank One, on demand, the amount paid by Bank One to
settle its obligations in respect of each Draft under each Letter of Credit
(whether such amount is paid by virtue of Bank One's honor of any Draft or
otherwise) to the extent that a Reimbursement Amount is not available to Bank
One for that purpose, which reimbursement obligation shall be immediate and
automatic, without the necessity of any further act or the execution of any
additional document, instrument, or agreement. Any Reimbursement Amount that is
not paid in full when due shall be deemed to be and shall constitute a demand
loan made to the Company by Bank One on such due date in the principal amount of
the unpaid Reimbursement Amount (each such loan being referred to herein as a
"Letter of Credit Loan", and collectively as "Letter of Credit Loans"), which
Letter of Credit Loans shall bear interest, until paid in full, at a per annum
rate equal to the Prime Rate plus Three Percent (3%) per annum. A demand for
payment of each Reimbursement Amount and Letter of Credit Loan shall be deemed
to have been made by Bank One on the date of the corresponding payment by Bank
One to settle its obligations under a Draft. Nothing herein is intended to
preclude the Company from requesting an Advance to the extent available under
the Revolving Loans to pay any Reimbursement Amount or Letter of Credit Loan.
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<PAGE> 20
The obligation of the Company to reimburse Bank One in respect
of drawings made under the Letters of Credit shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement and the applicable Reimbursement Agreement (if and to extent the terms
of such Reimbursement Agreement do not conflict with this Agreement) under all
circumstances, and notwithstanding any of the following circumstances:
(1) any lack of validity or enforceability of any Letter of
Credit;
(2) the existence of any claim, set-off, defense or other right
which the Company may have at any time against a beneficiary
or any transferee of any Letter of Credit or (or any Persons
for whom any such transferee may be acting), or any other
Person, whether in connection with this Agreement, the
transactions contemplated herein or any unrelated transaction
(including any underlying transaction between the Company and
the beneficiary of any Letter of Credit);
(3) any draft, demand, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;
(4) payment by Bank One under any Letter of Credit against
presentation of a demand, draft or certificate or other
document which does not comply with the terms of such Letter
of Credit;
(5) any other circumstance or happening whatsoever which is
similar to any of the foregoing; or
(6) the fact that an Event of Default or Unmatured Event of
Default shall have occurred and be continuing;
provided however, that the Company shall not be obligated to reimburse Bank One
for any wrongful payment or disbursement made or to be made by Bank One under
any Letter of Credit as a result of acts or omissions constituting gross
negligence or willful misconduct on the part of Bank One. Payment of a Draft
that does not comply with the terms of the Letter of Credit against which it is
presented shall not in any event be deemed to be wrongful or an act or omission
constituting gross negligence or willful misconduct on the part of Bank One if
such payment is made at the specific written request of the Company in which the
Company waives the non-compliance of the Draft.
Upon a written request by the Company made in accordance with
the terms of Section 8.02 of this Agreement, Bank One will undertake to provide
to the Company copies of all instruments and documents constituting a Draft with
the Draft Notice, and in the event the Company has any knowledge (however
obtained) of any claim of non-compliance with the Company's instructions or with
the terms of the Letter of Credit, or of discrepancies or other irregularities
related solely to the Draft on the Letter of Credit, the Company shall
immediately notify Bank One thereof in writing, and the Company shall be deemed
to have waived any such claim or defense against Bank One related thereto or
arising therefrom unless such notice is given. The Company shall be deemed to
have knowledge of any such claim that is apparent on the face of copies of
instruments and documents constituting a Draft that are provided to the Company
pursuant to the preceding sentence.
Unless specified to the contrary in the Reimbursement
Agreement for a Letter of Credit, or any amendment to a Letter of Credit, the
Company agrees that Bank One and its correspondents may receive and accept any
Draft drawn or presented under such Letter of Credit or other document otherwise
in order, issued or purportedly issued by an agent, executor, trustee in
bankruptcy, receiver or other representative of the party who is authorized
under such Letter of Credit to issue such Draft or other document, as complying
with the terms of such Letter of Credit.
(f) Default by Company. In the event the Company fails to
deposit the Reimbursement Amount with Bank One, or if for any other reason the
Reimbursement Amount is not available to settle Bank One's obligations under a
Draft, the Agent shall make a demand on the Banks for funding pursuant to this
section. Each Bank (other than Bank One) shall forthwith (and in any event, not
later than 1:00 p.m., Indianapolis
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<PAGE> 21
time, on the day the Agent has indicated to the Banks as the day such Draft is
to be honored, or if such demand is made after 10:00 a.m., Indianapolis time on
the day indicated for honor of the Draft, then not later than 1:00 p.m.,
Indianapolis time, on the first Business Day immediately following the day such
demand is made), make available to the Agent at its principal banking offices
immediately available funds in an amount equal to its Commitment Percentage of
the amount of the Draft, which funds shall be immediately remitted by the Agent
to Bank One to be used by it to settle its obligations under such Draft. In
addition, if for any reason the Reimbursement Amount is recovered in whole or in
part from the Agent or Bank One or a recovery is obtained from the Agent or Bank
One based on such deposit, then the Agent shall make demand on each Bank for,
and each Bank shall pay to the Agent (for the account of Bank One if the
recovery is obtained from it) an amount equal to such Bank's Commitment
Percentage of the amount of the recovery (provided that Bank One shall not be
required to make any such payment in regard to an amount recovered from it).
Each payment by a Bank to the Agent pursuant to the preceding sentence of the
amount of any Reimbursement Amount recovered shall be deemed to be a Letter of
Credit Loan payable with interest as provided above. If for any reason the
foregoing payments to the Agent may not be deemed to be a Letter of Credit Loan,
each payment by a Bank to the Agent shall be considered to be the purchase of a
participation in Bank One's or the Agent's rights and claims arising as a result
of such recovery, if any, in an amount equal to such Bank's Commitment
Percentage thereof.
(g) Indemnity. The Company agrees to protect, indemnify and
save Bank One and the Banks harmless from and against any and all claims,
demands, liabilities, damages, losses, costs, charges and expenses (including
reasonable attorneys' fees and allocated costs of internal counsel) which Bank
One or any of the other Banks may incur or be subject to as a consequence,
direct or indirect, of (a) the issuance of the Letters of Credit, other than as
a result of the gross negligence or willful misconduct of Bank One, as
determined by a court of competent jurisdiction, or (b) the failure of Bank One
to honor a drawing under any Letter of Credit as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure or de
facto government or governmental authority (all such acts or omissions herein
called "Government Acts").
As between the Company, on the one hand, and Bank One, on the
other, the Company assumes all risks of the acts and omissions of, or misuse of
the Letters of Credit by the respective beneficiaries of such Letters of Credit.
In furtherance and not in limitation of the foregoing, Bank One shall not be
responsible and shall have no liability (a) for the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted by any party in
connection with the application for and issuance of such Letters of Credit, even
if it should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (b) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
such Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, which may prove to be invalid or ineffective for any
reason; (c) for failure of the beneficiary of any such Letter of Credit to
comply fully with the terms and conditions of the agreement pursuant to which
the Letter of Credit was procured and pursuant to which the beneficiary is
entitled to draw upon such Letter of Credit; (d) for errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex or otherwise, whether or not they be in cipher; (e) for
errors in interpretation of technical terms; (f) for any loss or delay in the
transmission or otherwise of any document required in order to make a Draft
under any such Letter of Credit or of the proceeds thereof; (g) for the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any Draft under such Letter of Credit; (h) for any consequences arising from
causes beyond the control of Bank One, including, without limitation, any
Government Acts; and (i) for any action taken or omitted by Bank One under or in
connection with the Letters of Credit, if taken or omitted in good faith. None
of the above shall affect, impair, or prevent the vesting of any of Bank Ones'
rights or powers hereunder.
Following the occurrence of an Event of Default or an
Unmatured Event of Default which is continuing, the Company agrees that any
action taken by Bank One, if taken in good faith, under or in connection with
any of the Letters of Credit, Reimbursement Agreements and Drafts, shall be
binding on the Company and shall not subject Bank One to any resulting liability
to the Company. In furtherance thereof, Bank One shall have the full right and
authority, following an Event of Default or Unmatured Event of Default which is
continuing, to (i) clear and resolve any questions of non-compliance of
documents, (ii) to give any instructions as to acceptance or rejection of any
documents or goods, and (iii) to grant any extensions of the maturity of, time
of payment for, or time of presentation of, any drafts, acceptances, or
documents.
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<PAGE> 22
(h) Letter of Credit Fees. The Company covenants and agrees to
pay to Bank One, on the date each Letter of Credit is issued, and on each
anniversary of the issue date for as long as the Letter of Credit is
outstanding, a commission (a "L/C Commission") equal to (i) the Applicable
Spread then in effect, if the amount of the total Letter of Credit Exposure
after issuance of such Letter of Credit exceeds twenty percent (20%) of the sum
of the principal balances of the Revolving Loans, the Term Loan and the total
Letter of Credit Exposure, all as of immediately after issuance of such Letter
of Credit, or (ii) otherwise, the Applicable LOC Fee Percentage then in effect.
Each L/C Commission shall be deemed fully earned and nonrefundable when due. The
Company shall pay Bank One's standard transaction fees with respect to any
transactions occurring on account of any Letter of Credit. Transaction fees
shall be payable upon completion of the transaction as to which they are
charged. All such L/C Commissions and fees may be debited by Bank One to any
deposit account of the Company carried with Bank One without further authority,
and in any event, shall be paid by the Company within ten (10) days following
billing. Upon receipt of each L/C Commission, Bank One shall retain 0.125% of
the amount of the Letter of Credit for which such commission is charged as its
independent fee for issuing such Letter of Credit and disburse the remainder of
the L/C Commission to each Bank, including Bank One, pro rata in accordance with
each Bank's Commitment Percentage. Promptly following the Closing Date, each
Bank (other than Bank One) shall receive payment from Bank One for each Initial
Letter of Credit in an amount equal to its Commitment Percentage of the L/C
Commission previously received by Bank One for such Initial Letter of Credit,
proportionately reduced to reflect the period of time such Letter of Credit was
outstanding prior to the Closing Date. All transaction fees shall be retained by
Bank One.
(i) Initial Letters of Credit. The Initial Letters of Credit
for all purposes shall be deemed to be Letters of Credit for all purposes
hereunder, except that no L/C Commission shall be due and payable by the Company
on the Initial Letters of Credit hereunder until renewal, extension or
replacement thereof.
Section 2.04 The Term Loan.
(a) The Term Loan -- General. Each Bank severally agrees,
subject to the terms and conditions of this Agreement, to loan to the Company
the principal amount equal to its Commitment Percentage of Fourteen Million
Seven Hundred Ten Thousand Four Hundred Fifteen Dollars ($14,710,415.00) for the
term period beginning on the Closing Date and ending on the Term Loan Maturity
Date (collectively, the "Term Loan").
The Term Loan under this Agreement is a continuation, on
amended terms, of the "Term Loan" extended to the Company by Bank One under the
Original Agreement (the "Prior Term Loan") and the Company affirms, acknowledges
and agrees that the outstanding aggregate principal balance of the Term Loan as
of the Closing Date is $14,710,415.00, being the unpaid principal amount of the
Prior Term Loan immediately prior to the execution of this Agreement.
(b) The Term Notes. The obligation of the Company to repay the
Term Loan shall be evidenced by promissory notes executed by the Company to each
of the Banks in the form of EXHIBIT F attached hereto (as the same may be
amended, modified, extended, renewed, supplemented, replaced and/or restated
from time to time and at any time, the "Term Notes"). The principal of the Term
Loan shall be repayable in equal quarterly installments of $639,585.00 each,
which quarterly installments shall be due and payable on the last Banking Day of
March, 1998, and on the last Banking Day of each successive calendar quarter
thereafter until the Term Loan Maturity Date, at which time the entire aggregate
principal balance of the Term Loan and all unpaid, accrued interest thereon,
shall be due and payable in full without demand. Subject to the contemporaneous
payment of any Prepayment Premium which would become due on account of any
proposed principal prepayment, the principal of the Term Loan may be prepaid at
any time in whole or in part, provided that any partial prepayment shall be in
an amount which is an integral multiple of Fifty Thousand Dollars ($50,000) and
provided further that all partial prepayments shall be applied to the latest
maturing installments of principal payable under the Term Loan in inverse order
of maturity.
(c) Interest on the Term Loan. The aggregate principal balance
of the Term Loan outstanding from time to time shall bear interest from the
Closing Date until the Term Loan Maturity Date at a rate per annum equal to the
Prime Rate plus the Applicable Spread, provided that, at the option of the
Company exercised from time to time as provided in subsection 2.05(a) of this
Agreement, interest may accrue prior to the Term Loan Maturity Date on the
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<PAGE> 23
entire outstanding balance of the Term Loan or on any portion thereof as to
which no LIBOR-based Rate previously selected remains in effect at a rate per
annum equal to a LIBOR-based Rate for a period of one month, two months, three
months or six months, plus the Applicable Spread. The Company will not be
permitted to elect any LIBOR-based Rate for a period extending beyond the
Scheduled Term Loan Maturity Date. After the Term Loan Maturity Date, interest
will accrue on the Term Loan at a rate per annum equal to the Prime Rate plus
Two Percent (2%) per annum. Prior to the Term Loan Maturity Date, interest shall
be due and payable on the last Banking Day of each calendar quarter beginning on
the last Banking Day of March, 1998 and on the last Banking Day of each
successive June, September, December and March. After the Term Loan Maturity
Date, interest shall be payable as accrued and without demand.
Section 2.05. Provisions Applicable to All the Loans. The
following provisions are applicable to all the Loans:
(a) Procedures for Electing LIBOR-based Rates -- Certain
Effects of Election. LIBOR-based Rates may be elected only in accordance with
the following procedures, shall be subject to the following conditions, and the
election of a LIBOR-based Rate shall have the following consequences in addition
to other consequences stated in this Agreement:
(1) The LIBOR-based Rate may be elected only for
Loans or portions of Loans in a minimum amount of $1,000,000.00. No
more than ten (10) LIBOR-based Rate elections may be in effect under
the Loans at any one time.
(2) No LIBOR-based Rate may be elected at any time
that an Event of Default or Unmatured Event of Default has occurred and
is continuing.
(3) Voluntary prepayment prior to scheduled maturity
of all or any portion of a Loan on which interest is accruing at a
LIBOR-based Rate shall be subject to contemporaneous payment of the
Prepayment Premium if, at the time of prepayment, the Reinvestment Rate
is less than the LIBOR-based Rate at which interest accrues on the
Loan. A Prepayment Premium shall also be due and payable on prepayment
of all or any portion of either Loan prior to scheduled maturity
because of acceleration of maturity on account of an Event of Default
if, at the time of acceleration of maturity, the Reinvestment Rate is
less than the LIBOR-based Rate at which interest is accruing on the
Loan. If any portion of the principal balances of the Revolving Loans
is required to be prepaid in order to reduce the balance of the
Revolving Loans on account of the requirement of Section 2.06 of this
Agreement, and while interest is accruing on such portion at a
LIBOR-based Rate, then a Prepayment Premium shall be due and payable in
addition to the principal amounts required to be prepaid, if, at the
time such principal payment is required, the Reinvestment Rate is less
than the LIBOR-based Rate at which interest is accruing on such portion
of the Loan. If at the time of any voluntary or mandatory prepayment of
any portion of the principal of any Loan, interest accrues at both a
LIBOR-based Rate or Rates and at a Prime-based Rate on portions of the
Loan, then any prepayment of principal will be applied first to the
portion of the Loan on which interest accrues at the Prime-based Rate
and next to the portion or portions at which interest accrues at a
LIBOR-based Rate or Rates, and if interest accrues on the Loan at more
than one LIBOR-based Rate, first to that portion or those portions on
which interest accrues at a Rate or Rates which results in no
Prepayment Premium or the lowest Prepayment Premium or Premiums.
(4) On any Banking Day, the Company may request a
quotation of the LIBOR-based Rates then in effect from the Agent. As
soon as possible, and in any event before the close of business on the
next following Banking Day, the Agent shall quote such LIBOR-based
Rates. The Company shall then have until the end of the Banking Day on
which such quotation is given or within such shorter time as the Agent
may specify, to exercise its option to elect any LIBOR-based Rate
quoted, subject to all other conditions and limitations stated in this
Agreement. The period for which any LIBOR-based Rate is effective shall
begin on the second Banking Day following the day on which the
quotation is given.
(5) An election of a LIBOR-based Rate may be
communicated to the Agent on behalf of the Company only by an
Authorized Officer. Such election may be communicated by telephone or
by
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<PAGE> 24
telecopy or any other form of written electronic communication, or
by a writing delivered to the Agent. At the request of the Agent, the
Company shall confirm any election in writing and such written
confirmation shall be signed by an Authorized Officer. The Agent shall
be entitled to rely on any oral or written electronic communication of
an election of a LIBOR-based Rate which is received by an appropriate
employee of the Agent from anyone reasonably believed in good faith by
such employee to be an Authorized Officer.
(6) The Agent may elect not to quote a LIBOR-based
Rate (the "Unavailable LIBOR-based Rate") to any of its customers
otherwise eligible for the Unavailable LIBOR-based Rate on any day (the
Unavailability Date") on which the Agent has determined that it is not
practical to quote the Unavailable LIBOR-based Rate because of the
unavailability of sufficient funds to the Banks for appropriate terms
at rates approximating the then relevant London Interbank Offered Rate,
or because of legal or regulatory changes which make it impractical or
burdensome for the Banks to lend money at the Unavailable LIBOR-based
Rate. In such event, and provided that no Event of Default or Unmatured
Event of Default has occurred and is continuing, the Company shall be
entitled by written notice given to the Agent within ten (10) days of
the Unavailability Date to continue the LIBOR-based Rate or Rates then
accruing on any portion or portions of the Loans (regardless of when
the such LIBOR-based Rate or Rates otherwise are scheduled to expire),
until the earlier of (i) that date which is ninety (90) days after the
Unavailability Date, (ii) that date upon which the Agent resumes
quoting the Unavailable LIBOR-based Rate; and (iii) the occurrence of
an Event of Default or Unmatured Event of Default.
(7) If, as a result of any regulatory change, the
basis of taxation of payments to any of the Banks of any of the
principal of or any interest on any Loan bearing interest at a
LIBOR-based Rate or any other amounts payable hereunder in respect
thereof, other than taxes imposed on the overall net income of any of
the Banks, is changed, or any reserve, special deposit, or similar
requirement relating to any extensions of credit or other assets of or
any deposits with or other liabilities of any of the Banks are imposed,
modified, or deemed applicable, and a Bank reasonably determines that,
by reason thereof, the cost to it of making, issuing, or maintaining
any Loan at a LIBOR-based Rate is increased by an amount deemed by it
to be material, then the Company shall pay promptly upon demand to the
Agent such additional amounts as such Bank reasonably determines will
compensate for such increased costs ("Increased Costs"); provided,
however, that (i) the Agent shall give the Company ninety (90) days'
prior written notice of such Bank's intention to collect Increased
Costs from the Company ("Increased Cost Notice"), and a Bank shall not
be entitled to pass-through to or collect from the Company Increased
Costs incurred by the Bank prior to that date which is the ninetieth
(90th) day after the delivery of the Increased Cost Notice to the
Company by the Bank, and (ii) the Company shall not be the only
borrower of the Bank that is singled out from a group of similarly
situated borrowers of the Bank subject to this type of provision that
is requested to remit Increased Costs. Any determination by a Bank of
Increased Costs made pursuant to the provisions of this section shall
be final, absent manifest error.
(b) Calculation of Interest. Interest on each of the Loans
shall be calculated on the basis that an entire year's interest is earned in 360
days.
(c) Manner of Payment - Application. All payments of principal
and interest on the Loans shall be payable at the principal office of the Agent
in Indianapolis, Indiana, in funds available for the Agent's immediate use in
that city at the Agent's account at:
Bank One, Indiana, National Association
ABA #074000010
Attn: Commercial Loan Note Servicing
Re: Valley National Gases, Inc.
Account No. 05315101000263
No payment will be considered to have been made until received in such funds.
Unless otherwise agreed to, in writing, or otherwise required by applicable law,
payments will be applied first to accrued, unpaid interest, then to principal,
and any remaining amount to any unpaid collection costs, late charges and other
charges, provided, however, upon
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delinquency or other default, the Banks reserve the right to apply payments
among principal, interest, late charges, collection costs and other charges at
their discretion, as determined by the Required Banks. All prepayments shall be
applied to the indebtedness owing hereunder in such order and manner as the
Required Banks may from time to time determine in their sole discretion.
(d) Automatic Debit. The Agent, on behalf of the Banks, may
debit when due all payments of principal and interest due under the terms of
this Agreement to any deposit account of the Company carried with the Agent
without further authority.
Section 2.06. Mandatory Prepayment/Reduction of Maximum
Availability. If at any time a determination thereof is to be made, the sum of
(a) the aggregate principal balance of the Revolving Loans outstanding at such
time, plus (b) the aggregate Letter of Credit Exposure existing at such time,
exceeds the Maximum Availability, the Company shall immediately repay the
Revolving Notes in an aggregate principal amount, together with such additional
amount as may be necessary, equal to such excess.
If an Event of Default or an Unmatured Event of Default has
occurred and is continuing and the Agent shall have notified the Company of the
Required Banks' election to take any action specified in Section 7.02 of this
Agreement, the Maximum Availability shall be automatically reduced to $0 without
any action on the part of or the giving of notice to the Company by the Agent or
the Banks.
Section 2.07. Pro Rata Treatment. All borrowings, conversions
and payments shall be effected so that after giving effect thereto the
Obligations of the Company to each Bank (which shall be deemed to include, with
respect to each Bank, its Commitment Percentage of the Letter of Credit
Exposure) shall be equal to such Bank's Commitment Percentage of the Obligations
of the Company to all Banks. The Agent shall distribute all payments to the
Banks on the same day of receipt if received prior to Noon, Indianapolis,
Indiana time, otherwise on the next Banking Day. References in any of the Loan
Documents to Indianapolis time shall mean time as kept in Indianapolis, Indiana.
If any Bank, whether by setoff or otherwise, has payment made to it upon its
Revolving Note or Term Note in a greater proportion than that received by any
other Bank, such Bank agrees, promptly upon demand, to purchase such
participation in the Revolving Notes and Term Notes held by the other Banks so
that after such purchase the purchasing Bank shall share such excess payment
ratably with each of them. If any Bank, whether in connection with setoff or
amounts which might be subject to setoff or otherwise, receives Collateral or
other protection for Borrower's Obligations to such Bank hereunder, such Bank
agrees, promptly upon demand, to take such action necessary such that all Banks
share in the benefits of such Collateral ratably in proportion to their
Commitment Percentages. In case any such payment is disturbed by legal process
or otherwise, appropriate further adjustments shall be made.
Section 2.08. Agent Fees. The Company shall pay to the Agent
fees for its services (the "Agent Fee Agreement"), the amounts and payment terms
of which are set forth in a separate agreement between the Agent and the
Company.
Section 2.09. Setoff. Upon the occurrence of any Event of
Default (including any applicable cure period) and during the continuance of any
Event of Default, each of the Banks is hereby authorized at any time and from
time to time, without notice to any Credit Party (any such notice being
expressly waived by the Credit Parties), to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by each of the Banks to or for the
credit or the account of the Credit Party against any and all of the Obligations
irrespective of whether or not any Bank shall have made any demand under this
Agreement, the Revolving Notes, the Term Notes or any other Loan Document and
although such Obligations may be unmatured. Each Bank exercising such right of
setoff and application agrees to promptly notify the Credit Party after any such
setoff and application; provided that, the failure to give such notice shall not
affect the validity of such setoff and application. The rights of each Banks
under this Section 2.09 are in addition to all other rights and remedies
(including, without limitation, other rights of setoff) which such Bank may
have.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. REPRESENTATIONS AND WARRANTIES. To induce the Banks to
make the Loans, each of the Credit Parties represents and warrants to each of
the Banks and the Agent that:
(a) Organization of the Company. The Company is a corporation
organized, existing and in good standing under the laws of the State of West
Virginia. VNGI is a corporation organized, existing and in good standing under
the laws of the State of Pennsylvania. VNGDI is a corporation organized,
existing and in good standing under the laws of the State of Delaware. Doansco
and Toledo Oxygen each is a corporation organized, existing and in good standing
under the laws of the State of Ohio. Each of the Credit Parties and their
respective Subsidiaries is qualified to do business in every jurisdiction in
which: (i) the nature of the business conducted or the character or location of
properties owned or leased, or the residences or activities of employees make
such qualification necessary; and (ii) failure so to qualify might impair its
title to material properties or its right to enforce material contracts or
result in its exposure to liability for material penalties in such jurisdiction.
No jurisdiction in which the Credit Parties or any of their respective
Subsidiaries is not qualified to do business has asserted that the Credit
Parties or any of their respective Subsidiaries is required to be qualified
therein. The principal office and chief executive office of the Company is
located at 67 43rd Street, Wheeling, West Virginia 26003-7601. The principal
office and chief executive office of VNGI is located at 1640 Jefferson Avenue,
Washington, Pennsylvania 15301. The principal office and chief executive office
of VNGDI is located at 2121 S. Dupont Highway, Dover, Delaware 19901. The
principal office and chief executive office of Doansco is located at 2881
Tylersville Road, Hamilton, Ohio 45015. The principal office and chief executive
office of Toledo Oxygen is located at 1310 Elm Street, Toledo, Ohio 43608.
Neither the Credit Parties nor any of their respective Subsidiaries nor any
Guarantor conducts any material operations or keeps any material amounts of
property at any location other than the locations specified in the Security
Agreement or Guarantor Security Agreement to which it is a party. Neither the
Credit Parties nor any of their respective Subsidiaries nor any Guarantor has
done business under any name other than its present corporate name at any time
during the six years preceding the date of this Agreement except as disclosed in
the Security Agreement or Guarantor Security Agreement to which it is a party.
(b) Authorization; No Conflict. The execution, delivery and
performance of this Agreement and all of the other Loan Documents to which it is
a party are within the corporate powers of each of the Credit Parties and each
Guarantor, have been duly authorized by all necessary corporate action, have
received any required governmental or regulatory agency approvals and do not and
will not contravene or conflict with any provision of law or of its articles of
incorporation or its by-laws or of any agreement binding upon it or its
properties.
(c) Validity and Binding Nature. This Agreement and all of the
other Loan Documents to which it is a party are the legal, valid and binding
obligations of each of the Credit Parties and each Guarantor, enforceable
against it in accordance with their respective terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium and other laws enacted for the relief of debtors generally and other
similar laws affecting the enforcement of creditors' rights generally or by
equitable principles which may affect the availability of specific performance
and other equitable remedies.
(d) Financial Statements (i) The Credit Parties have delivered
to the Agent and the Banks their audited, consolidated Financial Statements as
of June 30, 1997, and for the fiscal year of the Company then ended and their
unaudited consolidated interim Financial Statements as of November 30, 1997, and
for the month and partial fiscal year then ended, which Financial Statements
have been prepared in accordance with GAAP except, as to the interim statements,
for the absence of a statement of cash flows, footnotes and adjustments normally
made at year end which are not material in amount. Such Financial Statements
present fairly the financial position of the Credit Parties and their respective
Subsidiaries as of the dates thereof and the results of its and their operations
for the periods covered. (ii) Since the date of the most current Financial
Statement provided by the Credit Parties to the Bank there has been no material
adverse change in the financial position of the Credit Parties or their
respective Subsidiaries or in the results of its and their operations.
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<PAGE> 27
(e) Litigation and Contingent Liabilities. No litigation,
arbitration proceedings or governmental proceedings are pending or to the best
of the knowledge of the Credit Parties threatened against the Credit Parties or
their respective Subsidiaries or any Guarantor or any material assets owned
thereby which would, if adversely determined, materially and adversely affect
the financial position or continued operations of the Credit Parties or their
respective Subsidiaries or any Guarantor. None of the Credit Parties or their
respective Subsidiaries or any Guarantor has any material contingent liabilities
not provided for or disclosed in the Financial Statements referred to in
subsection 3.01(d) of this Agreement or on EXHIBIT G attached hereto.
(f) Liens. None of the assets of the Credit Parties or their
respective Subsidiaries or any Guarantor are subject to any mortgage, pledge,
title retention lien, judgment lien, execution lien, or other lien, encumbrance
or security interest except for liens and security interests described in
subsections 5.02(b)(1) through (7) of this Agreement.
(g) Employee Benefit Plans. Each Plan maintained by the Credit
Parties and their respective Subsidiaries and each Guarantor is in material
compliance with ERISA, the Code, and all applicable rules and regulations
adopted by regulatory authorities pursuant thereto, and the Credit Parties and
their respective Subsidiaries and each Guarantor each has filed all reports and
returns required to be filed by ERISA, the Code and such rules and regulations.
No Plan maintained by the Credit Parties or any of their respective Subsidiaries
and each Guarantor and no trust created under any such Plan has incurred any
"accumulated funding deficiency" within the meaning of Section 412(c)(1) of the
Code, and the present value of all benefits vested under each Plan did not
exceed, as of the last annual valuation date, the value of the assets of the
respective Plans allocable to such vested benefits. None of the Credit Parties
or any of their respective Subsidiaries or any Guarantor has any knowledge that
any "reportable event" as defined in ERISA has occurred with respect to any
Plan.
(h) Payment of Taxes. The Credit Parties and each of their
respective Subsidiaries and each Guarantor has filed all federal, state and
local tax returns and tax related reports which the Credit Parties and their
respective Subsidiaries and each Guarantor are required to file by any statute
or regulation and all taxes and any tax related interest payments and penalties
that are due and payable have been paid, except for such as are being contested
in good faith and by appropriate proceedings and as to which appropriate
reserves have been established. Adequate provision has been made for the payment
when due of all tax liabilities which have been incurred, but are not as yet due
and payable.
(i) Investment Company Act. None of the Credit Parties or
their respective Subsidiaries or any Guarantor is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(j) Regulation U. None of the Credit Parties or their
respective Subsidiaries or any Guarantor is engaged principally, or as one of
its important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System. Not more than twenty-five
percent (25%) of the assets of the Credit Parties or their respective
Subsidiaries or any Guarantor consists of margin stock, within the contemplation
of Regulation U, as amended.
(k) Hazardous Substances. Except as disclosed on EXHIBIT H
attached hereto, to the best knowledge of each of the Credit Parties (i) no
premises owned or occupied by or under lease to any of the Credit Parties or
their respective Subsidiaries or any Guarantor have ever been used, and as of
the date of this Agreement, no such premises are being used for any activities
involving the use, treatment, transportation, generation, storage or disposal of
any Hazardous Substances except in compliance with Environmental Laws, and (ii)
no Hazardous Substances have been released on any such premises in violation of
any Environmental Law, nor is there any threat of release of any Hazardous
Substances on any such premises.
(l) Subsidiaries. The Company has no Subsidiaries as of the
Closing Date, other than Doansco and Toledo Oxygen. VNGI has no Subsidiaries as
of the Closing Date, other than VNGDI. VNGDI has no Subsidiaries as of the
Closing Date, other than the Company.
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(m) Existing Seller Acquisition Debt. The nature and
outstanding balances of the Existing Seller Acquisition Debt identified on
EXHIBIT C attached hereto is true and accurate in all respects and the Company
is not in default with respect to any of the Existing Acquisition Seller Debt.
(n) Real Estate Leases. None of the Credit Parties or their
respective Subsidiaries or any Guarantor is in default under any of its leases
of real estate.
(o) Parent Assets. Neither of VNGI nor VNGDI own any assets
other than cash, intercompany receivables and Common Stock of their respective
Subsidiaries.
ARTICLE IV
Security for Obligations
Section 4.01. COLLATERAL FOR THE OBLIGATIONS. Until paid in
full, the Obligations will be secured by the following:
(a) Company Security Agreement. The Obligations are and shall
remain secured by a valid and enforceable first priority security interest and
lien in and to all personal property of the Company, tangible and intangible,
now owned and existing or hereafter acquired or arising, including, without
limitation, all equipment, inventory, accounts receivable, investment property,
and general intangibles and all proceeds and products thereof, which security
interest (excepting as respects Collateral covered by the Company Pledge
Agreement) has been and shall continue to be granted by the Company Security
Agreement, subject only to liens and security interests described in the
exceptions enumerated in subsections 5.02(b)(1) through (7) of this Agreement.
In the event the Company owns or acquires tangible or intangible personal
property that the Required Banks deem is or may not be covered as collateral by
the Company Security Agreement or the Company Pledge Agreement or in which the
Required Banks deem their security interest is or may not be perfected, the
Company covenants and agrees promptly upon the request of the Agent to execute
such other security instruments and documents and take such other actions as the
Agent may require to grant to the Agent, for the ratable benefit of the Banks
and the Agent, a perfected security interest therein, all of which security
instruments and documents shall be in form and substance satisfactory to the
Agent and the Required Banks in all respects.
(b) Real Estate. Upon request by the Required Banks or the
Agent, the Company covenants and agrees, within ten (10) days after receiving
such request, to grant to the Agent, for the ratable benefit of the Banks and
the Agent, as security for the Obligations, security interests and liens on all
real estate and improvements, including all fixtures, equipment, furnishings,
systems, and related property located thereon (collectively, the "Real Estate")
now owned or hereafter acquired and owned by the Company for a period of 90
consecutive days, including all proceeds thereof, pursuant to real estate
mortgages or deeds of trust in form and substance satisfactory to the Required
Banks in all respects duly executed, acknowledged and delivered to the Agent in
recordable form. Upon request by the Required Banks, the Company covenants and
agrees, within ten (10) days after receiving such request, to grant to the
Agent, for the ratable benefit of the Banks and the Agent, security interests
and liens in and to all of the Company's right, title and interest in any Real
Estate as a lessee thereof pursuant to leasehold mortgages or deeds of trust in
form and substance satisfactory to the Required Banks in all respects duly
executed, acknowledged and delivered to the Agent in recordable form. The
Company further covenants and agrees to provide to the Agent at or prior to the
execution and delivery of any real estate mortgages or deeds of trust or
leasehold mortgages or deeds of trust, at the Company's expense: (i) evidence
satisfactory to the Required Banks showing, in the case of owned Real Estate,
that such Real Estate is owned in fee simple by the Company free and clear of
all liens, encumbrances and exceptions which are not acceptable to the Agent or
the Required Banks, and in the case of leased Real Estate, showing the Company's
leasehold interest therein; and (ii) a Phase I environmental assessment (and
where reasonably deemed appropriate by the Required Banks based upon information
disclosed in such assessment, a Phase II environmental assessment) prepared by a
registered engineer or environmental consultant acceptable to the Agent and the
Required Banks confirming there are no material environmental problems
associated with such Real Estate.
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(c) Guaranties.
(1) Parent Guaranties. The Obligations will be further secured
by the valid and enforceable amended and restated unconditional guaranty of each
of VNGI and VNGDI pursuant to a written guaranty executed and delivered by each
Guarantor in favor of the Banks and the Agent, each in the form attached hereto
and made a part hereof for all purposes as EXHIBIT I-1 and I-2 (referred to
herein as the same may be amended, modified, extended, renewed, supplemented,
replaced and/or restated from time to time and at any time, collectively as the
"Parent Guaranties" and individually as a "Parent Guaranty"). Pursuant to its
Parent Guaranty, VNGI shall also unconditionally guaranty payment of all of the
obligations of VNGDI arising under, pursuant to or in connection with the Parent
Guaranty executed by VNGDI.
(2) Subsidiary Guaranties. The Obligations will be further
secured by the valid and enforceable amended and restated unconditional guaranty
of each of Doansco and Toledo Oxygen pursuant to a written guaranty executed and
delivered by each of them in favor of the Banks and the Agent, each in the form
attached hereto and made a part hereof for all purposes as EXHIBIT J or such
other form as hereafter is required by the Required Banks.
(d) Additional Security Agreements.
(1) Parent Security Agreements. The obligations of each of
VNGI and VNGDI arising under, pursuant to, or by virtue of its respective Parent
Guaranty shall be secured by a valid and enforceable first priority security
interest and lien in and to all of its personal property, tangible and
intangible, whether now owned and existing or hereafter acquired or arising,
including, without limitation, all equipment, inventory, accounts receivable,
investment property, and general intangibles and all proceeds thereof, which
security interest (except as respects Collateral covered by the Parent Pledge
Agreement) has been and shall continue to be granted by an amended and restated
security agreement executed and delivered by each of VNGI and VNGDI to the
Agent, for the benefit of the Banks and the Agent, each in the form attached
hereto and made a part hereof for all purposes as EXHIBIT K (referred to herein
as the same may be amended, modified, extended, renewed, supplemented, replaced
and/or restated from time to time and at any time, collectively as the "Parent
Security Agreements" and individually as a "Parent Security Agreement"), subject
only to liens and security interests described in the exceptions enumerated in
subsections 5.02(b)(1) through (7) of this Agreement.
(2) Subsidiary Security Agreements. The obligations of each of
Doansco and Toledo Oxygen arising under, pursuant to, or by virtue of its
respective Subsidiary Guaranty shall be secured by a valid and enforceable first
priority security interest and lien in and to all of its personal property,
tangible and intangible, whether now owned and existing or hereafter acquired or
arising, including, without limitation, all equipment, inventory, accounts
receivable, investment property and general intangibles and all proceeds
thereof, which security interest will be created by an amended and restated
security agreement executed and delivered by each of them to the Agent, for the
benefit of the Banks and the Agent, each in the form attached hereto and made a
part hereof for all purposes as EXHIBIT L or such other form as hereafter is
required by the Agent, subject only to liens and security interests described in
the exceptions enumerated in subsections 5.02(b)(1) through (7) of this
Agreement.
(e) Pledge Agreements.
(1) Parent Pledge Agreements. The obligations of each of VNGI
and VNGDI arising under, pursuant to, or by virtue of its respective Parent
Guaranty shall be further secured by a valid and enforceable first priority
pledge of and security interest and lien in and to all of the capital stock of
VNGDI owned by VNGI (which shall at all times be all of the issued and
outstanding capital stock of VNGDI) and all of the capital stock of the Company
owned by VNGDI (which shall be at all times all of the issued and outstanding
capital stock of the Company), whether now existing or hereafter arising or
acquired, and whether now or hereafter issued and outstanding, and all proceeds
thereof, which pledge, security interest and lien will be created by an amended
and restated pledge agreement executed by each of VNGI and VNGDI in form and
substance the same as attached hereto as EXHIBITS M-1 and M-2 (referred to
herein as the same may be amended, modified, extended, renewed, supplemented,
replaced and/or restated from time to time and at any time, collectively as the
"Parent Pledge Agreements" and individually as the "Parent Pledge Agreements"),
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subject only to liens and security interests described in the exceptions
enumerated in subsections 5.02(b)(1) through (7) of this Agreement.
(2) Company Pledge Agreement. The Obligations will be further
secured by a valid and enforceable first priority pledge of and security
interest and lien in and to all of the capital stock of each of Doansco and
Toledo Oxygen owned by the Company (which in each case shall be all of the
issued and outstanding capital stock of such Subsidiaries), whether now existing
or hereafter arising or acquired, and whether now or hereafter issued and
outstanding, and all proceeds thereof, which pledge, security interest and lien
will be created by an amended and restated pledge agreement in form and
substance the same as attached hereto as EXHIBIT N (as the same may be amended,
modified, extended, renewed, supplemented, replaced and/or restated from time to
time and at any time, the "Company Pledge Agreement"), subject only to liens and
security interests described in the exceptions enumerated in subsections
5.02(b)(1) through (7) of this Agreement.
(f) Additional Subsidiaries. As a condition to consenting to
the creation of any additional Subsidiaries of the Company in addition to
Doansco and Toledo Oxygen, the Agent and the Required Banks reserve the right to
require (i) the Company to amend the Pledge Agreement to include a pledge of and
security interest and lien in and to all of the capital stock of each such
Subsidiary on the same terms and conditions as provided in Section 4.01(e)(2)
with respect to the pledge of the capital stock of Doansco and Toledo Oxygen,
and (ii) any such Subsidiaries to become Guarantors and to execute and deliver
in favor of the Agent, for the benefit of the Banks and the Agent, Subsidiary
Guaranties and Subsidiary Security Agreements on the same terms and conditions
as provided in Section 4.01(c)(2) and (d)(2) with respect to Doansco and Toledo
Oxygen.
ARTICLE V
Affirmative and
Negative Covenants of the Credit Parties
Section 5.01. AFFIRMATIVE COVENANTS OF THE CREDIT PARTIES.
Until all Obligations terminate or are paid and satisfied in full, and for so
long as the Company is entitled to receive any Advance or the issuance of a
Letter of Credit or any Letter of Credit Exposure exists, each of the Credit
Parties shall strictly observe, and shall cause each of their respective
Subsidiaries and each Guarantor to observe, the following covenants:
(a) Corporate Existence. The Credit Parties and their
respective Subsidiaries and each Guarantor shall preserve its corporate
existence.
(b) Reports, Certificates and Other Information. The Credit
Parties shall furnish or cause to be furnished to the Agent copies of the
following Financial Statements, certificates and other information:
(1) Annual Statements. As soon as available and in
any event within one hundred and twenty (120) days after the close of
each fiscal year of the Company, annual audited consolidated Financial
Statements for the Credit Parties and their respective Subsidiaries,
audited by the Company's Auditors, showing the financial condition and
results of operations of the Credit Parties and their respective
Subsidiaries as at the close of such fiscal year and for such fiscal
year, all prepared in accordance with GAAP, accompanied by an opinion
of the Company's Auditors, which opinion shall be without qualification
and shall state that such audited Financial Statements present fairly
the financial position of the Credit Parties and their respective
Subsidiaries on a consolidated basis as of the date of such Financial
Statements and the results of its and their operations and changes in
its and their financial position for the period covered thereby, and
that their examination in connection with such Financial Statements has
been made in accordance with GAAP.
(2) Interim Monthly Statements. As soon as available
and in any event within thirty (30) days after the end of each calendar
month ending after the Closing Date (other than a calendar month which
ends a fiscal quarter of the Company), unaudited consolidated Financial
Statements for the Credit Parties and
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their respective Subsidiaries showing its and their financial condition
and results of operations as at, and for such calendar month and
year-to-date, all in reasonable detail, and certified to the Bank by
the respective President, Chief Financial Officer, or Treasurer of each
of the Credit Parties, together with comparable prior year-to-date
Financial Statements as at the end of same calendar month of the prior
year.
(3) Interim Quarterly Statements. As soon as
available and in any event within forty-five (45) days after the close
of each fiscal quarter of the Company ending after the Closing Date,
unaudited consolidated Financial Statements of the Credit Parties and
their respective Subsidiaries showing its and their financial condition
and results of operations as at, and for such fiscal quarter and
year-to-date, all in reasonable detail, prepared in accordance with
GAAP (except that footnote disclosures normally included in Financial
Statements prepared in accordance with GAAP may be condensed or omitted
if and to the extent such condensation or omission is consistent with
past practices of the Credit Parties, and if the information so omitted
is not necessary for a fair presentation of the results for such fiscal
quarter), and certified to the Bank by the respective President, Chief
Financial Officer, or Treasurer of each of the Credit Parties, together
with comparable prior year-to-date Financial Statements as at the end
of same fiscal quarter of the prior year.
(4) Certificates. Contemporaneously with the
furnishing of each set of Financial Statements provided for in
subsections 5.01(b)(1) and (2) of this Agreement, an Officer's
Certificate.
(5) Orders. Prompt notice of any orders in any
material proceedings to which the Company or any of its Subsidiaries is
a party, issued by any court or regulatory agency, federal or state,
and if the Agent or any Bank should so request, a copy of any such
order.
(6) Notice of Default or Litigation. Immediately upon
learning of the occurrence of an Event of Default or Unmatured Event of
Default, or the institution of or any adverse determination in any
litigation, arbitration proceeding or governmental proceeding which is
material to the Company or any of its Subsidiaries, or the occurrence
of any event which could have a material adverse effect upon the
Company or any of its Subsidiaries, written notice thereof describing
the same and the steps being taken with respect thereto.
(7) Compliance Certificates. Within forty-five (45)
days after the end of each calendar month ending after the Closing Date
that is also the end of a calendar quarter, a certificate of the Chief
Financial Officer or other appropriate officer of the Company
demonstrating compliance with the financial covenants stated in
subsection 5.01(g) of this Agreement. Such certificate shall relate the
covenants to the month-end figures and shall otherwise be in such form
and provide such detail as may be reasonably satisfactory to the Agent.
(8) Registration Statements and Reports. Promptly
upon filing with the Securities Commission or any state securities
regulatory authority, copies of all registration statements and all
periodic and special reports required or permitted to be filed under
federal or state securities laws and regulations.
(9) Consolidated Budget. Concurrently with delivery
of the annual financial statements pursuant to Section 5.06(b)(1), the
Credit Parties shall provide to the Agent and each of the Banks a
consolidated budget for the next fiscal year forecasting revenues and
expenses on a consolidated basis, for the Credit Parties. Such budget
shall be in such detail as the Agent and the Required Banks shall
reasonably require.
(10) Other Information. Within thirty (30) days after
the request, such other information concerning the Credit Parties and
their respective Subsidiaries as the Agent or the Banks may from time
to time request, including, without limitation, consolidating Financial
Statements of the Credit Parties and their respective Subsidiaries.
(c) Books, Records and Inspections. Each of the Credit Parties
and their Subsidiaries and each Guarantor shall maintain complete and accurate
books and records, and permit access thereto by the Agent and each of
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the Banks for purposes of inspection, copying and audit, and the Credit Parties
and each of their respective Subsidiaries and each Guarantor shall permit the
Bank to inspect its properties and operations at all reasonable times.
(d) Insurance. In addition to any insurance required by any
other Loan Documents to which it is a party, the Credit Parties and their
respective Subsidiaries and each Guarantor shall maintain such insurance as may
be required by law and such other insurance, to such extent and against such
hazards and liabilities, as is customarily maintained by companies similarly
situated. The Credit Parties and their respective Subsidiaries and each
Guarantor agree to name the Agent and each of the Banks, as additional insureds
and lender's loss payee on any such insurance policy under a standard lender's
loss payable clause and to provide a copy of any such policy to the Agent.
(e) Taxes and Liabilities. The Credit Parties and their
respective Subsidiaries and each Guarantor shall pay when due all taxes, license
fees, assessments and other liabilities except such as are being contested in
good faith and by appropriate proceedings and for which appropriate reserves
have been established.
(f) Compliance with Legal and Regulatory Requirements. The
Credit Parties and their respective Subsidiaries and each Guarantor shall
maintain material compliance with the applicable provisions of all federal,
state and local statutes, ordinances and regulations and any court orders or
orders of regulatory authorities issued thereunder.
(g) Financial Covenants. The Credit Parties shall observe each
of the following financial covenants:
(1) Consolidated Net Worth. The Credit Parties and
their respective Subsidiaries shall at all times from and after the
Closing Date maintain Consolidated Net Worth at a level not less than
(i) $20,766,365.00, plus (ii) Seventy-Five Percent (75%) of the
cumulative Consolidated Net Income for each fiscal quarter of the
Company ending after the date of the financial statement of the Credit
Parties delivered to Bank One prior to the date hereof, provided that
cumulative Consolidated Net Income shall not be reduced by the amount
of the net loss for any fiscal quarter in which the Credit Parties and
their respective subsidiaries on a consolidated basis suffers a net
loss, plus (iii) One Hundred Percent (100%) of the amount of any new
paid in capital or other new equity received by any Credit Party from
any Person who is not a Credit Party provided, that, such amount shall
in no event be less than zero.
(2) Fixed Charge Coverage Ratios.
(a) As of the close of each fiscal quarter of the
Company ending after the Closing Date, the Credit Parties and
their respective Subsidiaries, for the period of the four
consecutive fiscal quarters which end on such close, shall
have a Fixed Charge Coverage Ratio I of not less than 1.1:1.
(b) As of the close of each fiscal quarter of the
Company ending after the Closing Date, the Credit Parties and
their respective Subsidiaries, for the period of the four
consecutive fiscal quarters which end on such close, shall
have a Fixed Charge Coverage Ratio II of not less than 1.3:1.
(3) Ratio of Total Funded Debt to EBITDA. As of the
close of each fiscal quarter of the Company ending after the Closing
Date, the Credit Parties and their respective Subsidiaries, for the
period of the four consecutive fiscal quarters which end on such close,
shall have a Ratio of Total Funded Debt to EBITDA of not greater than
(i) 4.50:1 through December 30, 1999, (ii) 4.25:1 from December 31,
1999, through December 30, 2000, and (iii) 4.00:1 on December 31, 2000,
and thereafter.
(4) Ratio of Total Senior Funded Debt to EBITDA. As
of the close of each fiscal quarter of the Company ending after the
Closing Date, the Credit Parties and their respective Subsidiaries, for
the period of the four consecutive fiscal quarters which end on such
close, shall have a Ratio of Total Senior Funded Debt to EBITDA of not
greater than (i) 4.00:1 through December 30, 1999, (ii) 3.75:1 from
December 31, 1999, through December 30, 2000, and (iii) 3.50:1 on
December 31, 2000, and thereafter.
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(h) Primary Banking Relationship. The Company shall maintain
its primary concentration and deposit accounts with the Agent.
(i) Employee Benefit Plans. The Credit Parties and their
respective Subsidiaries and each Guarantor shall maintain any Plan in material
compliance with ERISA, the Code, and all rules and regulations of regulatory
authorities pursuant thereto and shall file all reports required to be filed
pursuant to ERISA, the Code, and such rules and regulations.
(j) Hazardous Substances. If any of the Credit Parties or any
of their respective Subsidiaries or any Guarantor should commence the use,
treatment, transportation, generation, storage or disposal of any Hazardous
Substance in reportable quantities in its operations in addition to those noted
in EXHIBIT H attached hereto, the Credit Parties shall immediately notify the
Agent and the Banks of the commencement of such activity with respect to each
such Hazardous Substance. The Credit Parties shall cause any Hazardous
Substances which are now or may hereafter be used or generated in the operations
of the Credit Parties or any of their respective Subsidiaries or any Guarantor
in reportable quantities to be accounted for and disposed of in compliance with
all Environmental Laws and other applicable federal, state and local laws and
regulations. The Credit Parties shall notify the Agent and the Banks immediately
upon obtaining knowledge that:
(1) any premises which have at any time been owned or
occupied by or have been under lease to any of the Credit Parties or
any of their respective Subsidiaries or any Guarantor are the subject
of an environmental investigation by any federal, state or local
governmental agency having jurisdiction over the regulation of any
Hazardous Substances, the purpose of which investigation is to quantify
the levels of Hazardous Substances located on such premises, or
(2) any of the Credit Parties or any of their
respective Subsidiaries or any Guarantor has been named or is
threatened to be named as a party responsible for the possible
contamination of any real property or ground water with Hazardous
Substances, including, but not limited to the contamination of past and
present waste disposal sites.
If any of the Credit Parties or any of their respective
Subsidiaries or any Guarantor is notified of any event described in subsections
5.01(j)(1) or (2) above, the Credit Parties shall immediately engage or cause
such Subsidiary or such Guarantor to engage a firm or firms of engineers or
environmental consultants appropriately qualified to determine as quickly as
practical the extent of contamination and the potential financial liability of
the Credit Parties or such Subsidiary or such Guaranty with respect thereto, and
the Agent and the Banks shall be provided with a copy of any report prepared by
such firm or by any governmental agency as to such matters as soon as any such
report becomes available to the Credit Parties, and the Credit Parties shall
immediately establish reserves in the amount of the potential financial
liability of the Credit Parties or such Subsidiary or such Guarantor identified
by such environmental consultants or engineers. The selection of any engineers
or environmental consultants engaged pursuant to the requirements of this
Section shall be subject to the approval of the Agent and the Banks, which
approval shall not be unreasonably withheld.
Section 5.02. NEGATIVE COVENANTS OF THE CREDIT PARTIES. Until
all Obligations terminate or are paid and satisfied in full, and so long as the
Company is entitled to receive any Advance or the issuance of a Letter of Credit
or any Letter of Credit Exposure exists, the Credit Parties shall strictly
observe, and shall cause each of their respective Subsidiaries and each
Guarantor to strictly observe, the following covenants:
(a) Restricted Payments. Except as provided in the next
sentence, none of the Credit Parties or any of their respective Subsidiaries
shall (i) purchase or redeem any shares of their respective capital stock or
declare or pay any dividends thereon except for dividends payable entirely in
capital stock, or (ii) make any other distributions to shareholders as
shareholders, or set aside any funds for any such purpose, or prepay, purchase
or redeem any subordinated Debt of the Company or any other Credit Party.
Notwithstanding the foregoing, if no Event of Default or Unmatured Event of
Default has occurred and is continuing at the time of such payment and if no
Event of Default or Unmatured Event of Default would result from such payment,
the Credit Parties and their respective Subsidiaries may pay cash dividends to
shareholders on their respective capital stock (i) in an unlimited amount with
respect to
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shareholders which are Credit Parties or their respective Subsidiaries, and (ii)
not to exceed an aggregate of $250,000 in any calendar year with respect to
shareholders which are not Credit Parties.
(b) Liens. Neither the Credit Parties nor any of their
respective Subsidiaries nor any Guarantor shall create or permit to exist any
mortgage, pledge, title retention lien or other lien, encumbrance or security
interest (all of which are hereafter referred to in this subsection and in this
Agreement as a "lien" or "liens") with respect to any property or assets now
owned or hereafter acquired, including, without limitation any of their
respective rights, title and interests in and to any Real Estate, whether leased
or owned, except:
(1) liens in favor of the Agent, for the benefit of
the Banks and the Agent, created pursuant to the requirements of this
Agreement or otherwise;
(2) any lien or deposit with any governmental agency
required or permitted to qualify it to conduct business or exercise any
privilege, franchise or license, or to maintain self-insurance or to
obtain the benefits of or secure obligations under any law pertaining
to worker's compensation, unemployment insurance, old age pensions,
social security or similar matters, or to obtain any stay or discharge
in any legal or administrative proceedings, or any similar lien or
deposit arising in the ordinary course of business;
(3) any mechanic's, worker's, repairmen's, carrier's,
warehousemen's or other like liens arising in the ordinary course of
business for amounts not yet due and for the payment of which adequate
reserves have been established, or deposits made to obtain the release
of such liens;
(4) easements, licenses, minor irregularities in
title or minor encumbrances on or over any real property which do not,
in the judgment of the Required Banks, materially detract from the
value of such property or its marketability or its usefulness in its
business;
(5) liens for taxes and governmental charges which
are not yet due or which are being contested in good faith and by
appropriate proceedings and for which appropriate reserves have been
established;
(6) liens created by or resulting from any litigation
or legal proceeding which is being contested in good faith and by
appropriate proceedings and for which appropriate reserves have been
established;
(7) those liens in favor of Acquisition Sellers which
secure Acquisition Seller Debt, including those liens in favor of
Existing Acquisition Sellers which secure Acquisition Seller Debt as
described on EXHIBIT O attached hereto; provided that (i) the maximum
aggregate amount of Acquisition Seller Debt secured by such liens shall
be $6,500,000 and (ii) the Acquisition Seller holding any such lien
(other than any identified on Exhibit O as exempt from the
subordination requirement) is a party to (a) the Intercreditor
Agreements, or (b) other intercreditor and subordination agreement with
the Agent and the Banks and the Company in substance and form the same
as the Intercreditor Agreements and in all events satisfactory to the
Agent and the Required Banks in all respects; and
(8) liens on property that secure only Debt incurred
for the purchase price of such property, but only to the extent such
Debt is permitted under Section 5.02(m)(iii) of this Agreement and to
the extent such Debt is not greater than the fair market value of such
property.
(c) Guaranties. Neither the Credit Parties nor any of their
respective Subsidiaries nor any Guarantor shall be a guarantor or surety of, or
otherwise be responsible in any manner with respect to any undertaking of any
other person or entity, whether by guaranty agreement or by agreement to
purchase any obligations, stock, assets, goods or services, or to supply or
advance any funds, assets, goods or services, or otherwise, except for:
(1) guaranties in favor of the Agent, for the
benefit of the Banks and the Agent;
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(2) guaranties by endorsement of instruments for
deposit made in the ordinary course of business; and
(3) those specific existing guaranties listed on
EXHIBIT P attached hereto.
(d) Loans or Advances. Neither the Credit Parties nor any of
their respective Subsidiaries nor any Guarantor shall make or permit to exist
any loans or advances to any other Person, except for:
(1) extensions of credit or credit accommodations to
customers or vendors made by it in the ordinary course of its business
as now conducted;
(2) reasonable salary advances to non-executive
employees, and other advances to agents and employees for anticipated
expenses to be incurred on its behalf of the course of discharging
their assigned duties;
(3) loans made to its employees in accordance with
its customary employee loan program, provided that, the amount of each
loan made to any such employee shall not exceed a principal amount in
excess of such employee's salary for two (2) pay periods for a term not
to exceed twelve (12) pay periods for such employee;
(4) loans or advances made between the Credit Parties
and their respective Subsidiaries, provided that (i) no Event of
Default or Unmatured Event of Default exists and remains uncured or
would be caused by the making of such loan or advance, (ii) such loans
and advances shall not be evidenced by any promissory note or be
secured by any collateral, and (iii) loans and advances by VNGI and
VNGDI to the Company shall be junior and subordinate to the Obligations
pursuant to a subordination agreement executed by VNGI and VNGDI in
form and substance the same as attached hereto as EXHIBIT Q (as the
same may be amended, modified, supplemented and/or restated from time
to time and at any time, the "Subordination Agreement").
(5) the specific items listed on EXHIBIT R attached
hereto.
(e) Mergers, Consolidations, Sales, Acquisition or Formation
of Subsidiaries. Neither the Credit Parties nor any of their respective
Subsidiaries nor any Guarantor shall (i) be a party to any consolidation or to
any merger or purchase the capital stock of or otherwise acquire any equity
interest in any other business entity other than New Acquisitions (with respect
to the Company), (ii) acquire any material part of the assets of any other
business entity other than New Acquisitions (with respect to the Company),
except in the ordinary course of business, or (iii) sell, transfer, convey or
lease all or any material part of its assets, except in the ordinary course of
business, or sell or assign with or without recourse any receivables. VNGI shall
not cause to be created or otherwise acquire any Subsidiary other than VNGDI
without the prior written consent of the Agent and the Required Banks. VNGDI
shall not cause to be created or otherwise acquire any Subsidiary other than the
Company without the prior written consent of the Agent and the Required Banks.
The Company shall not cause to be created or otherwise acquire any Subsidiary
without the prior written consent of the Agent and the Required Banks, which
consent shall not be unreasonably withheld. Without limiting the generality of
the foregoing sentence, the Company shall not consummate any New Acquisition
which would cause a new Subsidiary of the Company to exist without the prior
written consent of the Agent and the Required Banks, and the Agent and the Banks
reserve the right to require as condition of such consent that concurrently with
or within thirty (30) days following consummation of such New Acquisition: (i)
that the Company amend the Company Pledge Agreement to include a pledge of and
security interest and lien in and to all of the capital stock of each such
Subsidiary as provided in Section 4.01(f) of this Agreement, and deliver to the
Agent, for the benefit of the Banks and the Agent, all of the original stock
certificates of such Subsidiary, together with executed blank stock powers
therefor; and (ii) that any such Subsidiaries become Guarantors and execute and
deliver in favor of the Agent, for the benefit of the Banks and the Agent,
Subsidiary Guaranties and Subsidiary Security Agreements as provided in Section
4.01(f) of this Agreement. No Subsidiary of the Company shall cause to be
created or otherwise acquire any Subsidiary without the prior written consent of
the Agent and the Required Banks.
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(f) Margin Stock. The Company shall not use or cause or permit
the proceeds of the Loans to be used, either directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of purchasing or carrying
any margin stock within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System, as amended from time to time.
(g) Other Agreements. Neither the Credit Parties nor any of
their respective Subsidiaries nor any Guarantor shall enter into any agreement
containing any provision which would be violated or breached in material respect
by the performance of its obligations under this Agreement or under any other
Loan Document to which it is a party.
(h) Judgments. Neither the Credit Parties nor any of their
respective Subsidiaries nor any Guarantor shall permit any uninsured judgment or
monetary penalty rendered against it in any judicial or administrative
proceeding to remain unsatisfied for a period in excess of forty-five (45) days
unless such judgment or penalty is being contested in good faith by appropriate
proceedings and execution upon such judgment has been stayed, and unless an
appropriate reserve has been established with respect thereto.
(i) Principal Office. Neither the Credit Parties nor any of
their respective Subsidiaries nor any Guarantor shall change the location of its
principal office unless it gives not less than ten (10) days prior written
notice of such change to the Agent and the Required Banks.
(j) Hazardous Substances. Neither the Credit Parties nor any
of their respective Subsidiaries nor any Guarantor shall allow or permit to
continue the release or threatened release of any Hazardous Substance on any
premises owned or occupied by or under lease to Credit Parties nor any of their
respective Subsidiaries nor any Guarantor, except as permitted by and in
accordance with that certain permit No. 25656 issued by the Allegheny Health
Department, State of Pennsylvania, a copy of which is attached hereto as EXHIBIT
S.
(k) Lease Obligations. Neither Credit Parties nor any of their
respective Subsidiaries nor any Guarantor shall incur obligations under any
Capital Leases.
(l) Additional Debt. Neither Credit Parties nor any of their
respective Subsidiaries nor any Guarantor shall create, incur, assume or suffer
to exist any Debt or liability on account of deposits or advances or for
borrowed money or for the deferred purchase price of any property or services or
for Capital Lease obligations, except (i) Acquisition Seller Debt, (ii) the
Obligations, (iii) Debt incurred to finance the acquisition of property and
secured only by a security interest in the property so acquired, provided that,
the amount of all such Debt outstanding shall not exceed $1,000,000 in the
aggregate at any time, and (iv) the existing Debt for borrowed money disclosed
on EXHIBIT T attached hereto.
(m) Restrictions Parent Assets. Neither VNGI nor VNGDI shall
own any assets other than cash, intercompany receivables, and Common Stock of
their respective Subsidiaries, without the prior written consent of the Agent
and the Required Banks.
ARTICLE VI
Lending Conditions
Section 6.01. CONDITIONS OF LENDING. Unless the Agent and the
Required Banks otherwise consent in writing, the obligation of the Banks to make
any Advance and to make the Term Loan and of Bank One to issue any Letters of
Credit shall be subject to fulfillment of each of the following conditions
precedent:
(a) No Default. No Event of Default or Unmatured Event of
Default shall have occurred and be continuing, and the representations and
warranties of the Credit Parties contained in Section 3.01 of this Agreement
shall be true and correct as of the date of this Agreement and as of the date of
each Advance, except that after the date of this
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Agreement: (i) the representations contained in subsection 3.01(d)(ii) of this
Agreement will be construed so as to refer to the latest Financial Statements
furnished to the Agent by the Credit Parties pursuant to the requirements of
this Agreement, (ii) the representations contained in subsection 3.01(k) (with
respect to Hazardous Substances) will be construed so as to apply not only to
the Credit Parties, but also to their respective Subsidiaries, (iii) the
representation contained in subsection 3.01(l) of this Agreement will be
construed so as to except any Subsidiary which may hereafter be formed or
acquired by any of the Credit Parties with the consent of the Required Banks and
the Agent, and (iv) all other representations will be construed to have been
amended to conform with any changes of which the Agent and the Required Banks
shall previously have been given notice in writing by the Credit Parties.
(b) Documents and other Items to be Furnished at Closing. The
Agent shall have received contemporaneously with the execution of this Agreement
(or such later date as indicated below), the following, each duly executed,
currently dated (as applicable) and in form and substance satisfactory to the
Agent and the Initial Banks:
(1) The Term Notes, the Revolving Notes, the Company
Pledge Agreement, and the Company Security Agreement,
each duly executed and delivered by the Company to
each of the Initial Banks, together with the original
stock certificates of each of Doansco and Toledo
Oxygen and blank stock powers therefor duly executed
and delivered by the Company to the Agent.
(2) The Parent Guaranties, the Parent Security Agreements
and the Parent Pledge Agreements, each duly executed
and delivered by VNGI and VNGDI, respectively, to the
Agent, together with the original stock certificates
of each of VNGDI and the Company and blank stock
powers therefor duly executed and delivered by VNGI
and VNGDI to the Agent.
(3) The Subsidiary Guaranties and the Subsidiary Security
Agreements, each duly executed and delivered by
Doansco and Toledo Oxygen, respectively, to the
Agent.
(4) The Subordination Agreement, duly executed and
delivered to the Agent by the Credit Parties.
(5) A certificate of the Secretaries of each of the
Credit Parties, Doansco and Toledo Oxygen:
(i) certifying the adoption at a duly called
meeting of its Board of Directors of the
resolutions authorizing the execution,
delivery and performance, respectively, of
this Agreement and the other Loan Documents
provided for in this Agreement to which it
is a party;
(ii) certifying the names of the officer or
officers authorized to sign this Agreement
and the other Loan Documents provided for in
this Agreement to which it is a party,
together with a sample of the true signature
of each such officer; and
(iii) certifying as complete and correct its
Articles of Incorporation and By-laws as
then in effect (or in the case of the
Company certifying as complete and correct
all amendments to its Articles of
Incorporation and By-laws since October 4,
1996 or a certification that no amendments
have been adopted and its Articles of
Incorporation and By-laws as in effect on
October 4, 1996 remain in full force and
effect without change).
(6) A Copy of the file-marked Articles of Incorporation
of each of Credit Parties, Doansco and Toledo Oxygen
certified as complete and correct by the Secretary of
State of the state of its incorporation.
(7) A currently dated certificate of existence for each
of the Credit Parties, Doansco, and Toledo Oxygen
issued by the Secretary of State of the state of its
incorporation and certificates of
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good standing from the respective Secretaries of
State for each other state in which any of them
engages in business.
(8) Certificates evidencing the existence of all
insurance required under the terms of this Agreement
or any other of the Loan Documents.
(9) Payment to the Agent of all legal fees and expenses
of Baker & Daniels, special counsel to the Agent, in
connection with the negotiation, preparation and
closing of this Agreement, the other Loan Documents,
the Transfer Agreement, other closing documents and
UCC-1 assignments and filings.
(10) Payment to each Initial Bank, other than Bank One, of
a Commitment Fee equal to one-eighth percent (1/8%)
of such the amount of each Initial Bank's Commitment
(as set forth in EXHIBIT B) and payment to Bank One
of a commitment fee as set forth in the Agent Fee
Agreement.
(11) Such other UCC Financing Statements, Perfection
Certificates and other documents as the Agent or the
Initial Banks may reasonably require.
(12) Pay current to the Closing Date all accrued interest
on the "Revolving Loan" and "Term Loan" (as those
terms are defined in the Original Agreement).
(13) The opinion of counsel for the Credit Parties
addressed to the Agent and the Banks in such form and
substance as may be reasonably acceptable to the
Agent and the Banks.
(c) Documents to be Furnished at Time of Each Advance. The
Agent shall have received the following prior to making any Advance, each duly
executed and currently dated, unless waived at the Agent's discretion as
provided in subsection 2.02(b) of this Agreement:
(1) An Application for a Revolving Loans Advance.
(2) An Officer's Certificate.
(3) Such other documents as the Agent or the Required
Banks may reasonably require.
ARTICLE VII
Events of Default--Acceleration
Section 7.01. EVENTS OF DEFAULT. Each of the following shall
constitute an Event of Default under this Agreement:
(a) Nonpayment of the Loans. Default in the payment when due
of any amount payable under the terms of either of the Notes, or otherwise
payable to the Agent or any of the Banks or any other holder of the Notes under
the terms of this Agreement.
(b) Nonpayment of Other Debt. Default by any Credit Party or
any Guarantor in the payment when due, whether by acceleration or otherwise, of
any other material Debt for borrowed money, or default in the performance or
observance of any obligation or condition with respect to any such other Debt if
the effect of such default is to accelerate the maturity of such other Debt or
to permit the holder or holders thereof, or any trustee or agent for such
holders, to cause such Debt to become due and payable prior to its scheduled
maturity, unless the Credit Party or the Guarantor is contesting the existence
of such default in good faith and by appropriate proceedings.
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(c) Other Material Obligations. Subject to the expiration of
any applicable grace period, default by any Credit Party or any Guarantor in the
payment when due, or in the performance or observance of any material obligation
of, or condition agreed to by any Credit Party or any Guarantor with respect to
any material purchase or lease of goods, securities or services except only to
the extent that the existence of any such default is being contested in good
faith and by appropriate proceedings and that appropriate reserves have been
established with respect thereto.
(d) Bankruptcy, Insolvency, etc. Any Credit Party or any
Guarantor admitting in writing its inability to pay its debts as they mature or
an administrative or judicial order of dissolution or determination of
insolvency being entered against any Credit Party or any Guarantor; or any
Credit Party or any Guarantor applying for, consenting to, or acquiescing in the
appointment of a trustee or receiver for it or any of its property, or any
Credit Party or any Guarantor making a general assignment for the benefit of
creditors; or, in the absence of such application, consent or acquiescence, a
trustee or receiver being appointed for any Credit Party or any Guarantor or for
a substantial part of its property and not being discharged within sixty (60)
days; or any bankruptcy, reorganization, debt arrangement, or other proceeding
under any bankruptcy or insolvency law, or any dissolution or liquidation
proceeding being instituted by or against any Credit Party or any Guarantor,
and, if involuntary, being consented to or acquiesced in by any Credit Party or
any Guarantor or remaining for sixty (60) days undismissed.
(e) Warranties and Representations. Any warranty or
representation made by any Credit Party or any Guarantor in this Agreement or
any other Loan Document to which it is a party proving to have been false or
misleading in any material respect when made, or any schedule, certificate,
financial statement, report, notice, or other writing furnished by any Credit
Party or any Guarantor to the Bank proving to have been false or misleading in
any material respect when made or delivered, provided that the foregoing shall
not be deemed to be an Event of Default until the Agent gives such Credit Party
or such Guarantor ten (10) days' prior written notice of same.
(f) Violations of Negative and Financial Covenants. Failure by
the Credit Parties and their respective Subsidiaries or any of them to comply
with or perform any covenant stated in subsection 5.01(g) or Section 5.02 of
this Agreement.
(g) Noncompliance With Other Provisions of this Agreement.
Failure of any Credit Party or any Guarantor to comply with or perform any
covenant or other provision of this Agreement or any other Loan Document to
which it is a party or to perform any other Obligation (which failure does not
constitute an Event of Default under any of the preceding provisions of this
Section 7.01) and continuance of such failure for thirty (30) days after notice
thereof to such Credit Party or such Guarantor from the Agent.
(h) Guaranty Defaults. Any Guarantor shall default in the due
observance or performance of any covenant, condition or agreement on its part to
be observed or performed under the terms of its Guaranty and continuance of such
default for ten (10) days after written notice thereof to the Guarantor by the
Agent.
(i) Termination of Guaranties. The termination or purported
termination of any of the Guaranties.
(j) Default under Other Loan Documents. The occurrence of any
"Default" or "Event of Default" as such terms are defined in any of the Loan
Documents other than this Agreement.
Section 7.02. EFFECT OF EVENT OF DEFAULT. If any Event of
Default described in Section 7.01(d) of this Agreement shall occur, maturity of
the Loans shall immediately be accelerated and the Notes and the Loans evidenced
thereby, and all other indebtedness and any other payment Obligations of the
Company to the Banks shall become immediately due and payable, and the
obligation of the Banks to make any Advance and the obligation of Bank One to
issue any Letter of Credit shall immediately terminate, all without notice of
any kind. When any other Event of Default has occurred and is continuing, the
Required Banks may accelerate payment of the Loans and declare the Notes and all
other payment Obligations due and payable, whereupon maturity of the Loans shall
be accelerated and the Notes and the Loans evidenced thereby, and all other
payment Obligations shall become immediately due and payable and the obligation
of the Banks to make any Advance and the obligation of Bank One to issue any
Letter of Credit shall
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<PAGE> 40
immediately terminate, all without notice of any kind. The Agent shall promptly
advise the Company of any such declaration, but failure to do so shall not
impair the effect of such declaration. The remedies of the Agent and the Banks
specified in this Agreement or in any other Loan Document shall not be
exclusive, and the Agent and the Banks each may avail itself of any other
remedies provided by law as well as any equitable remedies available to the
Banks.
ARTICLE VIII
Agent
Section 8.01. Agent. This Article specifies rights and
obligations among and between the Banks and the Agent. The Credit Parties
acknowledge the existence of limitations in Agent's authority but shall be
entitled to rely upon the authority of the Agent as conferred by this Article
and otherwise specified in this Agreement or any other Loan Document.
Section 8.02. Appointment of Agent. Each Bank hereby appoints
and authorizes the Agent to act as its agent under this Agreement and the other
Loan Documents to receive payments made in respect of the Revolving Notes and
the Term Notes and in respect to Letter of Credit Loans and to have such powers
as are specifically delegated to the Agent by the terms of this Agreement and
the other Loan Documents, together with such other powers as are reasonably
incidental thereto.
Section 8.03. Powers and Immunities of Agent.
(a) Powers. The Agent shall have no rights or duties or
responsibilities except those expressly set forth in this Agreement and the
other Loan Documents, and the Agent shall not by reason of this Agreement or any
of the other Loan Documents be a trustee or fiduciary for any Bank. Neither the
Agent nor any of its directors, officers, agents, attorneys or employees shall
be responsible for any recitals, statements, representations or warranties
contained in this Agreement or any other Loan Documents, or received by any of
them under this Agreement or any other Loan Documents, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Documents or for any failure by the Credit Parties
to perform any of their obligations hereunder or thereunder. The Agent may
employ agents and attorneys and shall not be responsible, except as to money or
securities received by it or its authorized agents, for the negligence or
misconduct of any such agents or attorneys selected by it with reasonable care.
Neither the Agent nor any of its directors, officers, employees or agents shall
be liable or responsible for any action taken or omitted to be taken by it to
any Bank, Credit Party or any other Person under this Agreement or any other
Loan Documents or in connection herewith, except for its or their own gross
negligence or willful misconduct.
(b) Reliance by Agent. The Agent shall be entitled to rely
upon any certification, notice or other communication (including any thereof by
telephone, telex, telegram, cable or telecopy) received by it in connection with
this Agreement or the other Loan Documents believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by Agent. As to any matters not expressly
provided for by this Agreement or the other Loan Documents, the Agent shall in
all cases be fully protected in acting, or in refraining from acting, hereunder
in accordance with instructions signed by the Required Banks, and such
instructions and any action taken or failure to act pursuant thereto shall be
binding on all of the Banks.
(c) Defaults. The Agent shall not be deemed to have knowledge
of the occurrence of an Event of Default or Unmatured Event of Default (other
than (i) the non-payment of principal of or interest on the Notes or any other
amounts payable under this Agreement or (ii) the failure of the Credit Parties
to provide timely the statements and certification required by Section
5.01(b)(1) through (4) hereof) or to comply with a request or demand by the
Agent unless the Agent has received written notice or other written
documentation from a Bank or from a Credit Party indicating that an Event of
Default or Unmatured Event of Default has occurred. In the event that the Agent
receives such a notice of the occurrence of an Event of Default or Unmatured
Event of Default, the Agent shall give prompt notice thereof to the Banks (and
shall give each Bank prompt notice of each such non-payment). The Agent shall
(subject to Section
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<PAGE> 41
8.03(g) of this Agreement) take such action with respect to such Event of
Default or Unmatured Event of Default as shall be directed by the Required
Banks.
(d) Rights as a Bank. With respect to the Loan Documents, Bank
One, in its capacity as a Bank hereunder, shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it were not
acting as the Agent. The affiliates of any Bank (including Bank One) may
(without having to account therefor to any other Bank) accept deposits from,
lend money to and generally engage in any kind of banking, trust or other
business with a Credit Party. Bank One may accept fees and other consideration
from a Credit Party for services in connection with this Agreement or otherwise
without having to account for the same to the other Banks except as specified
herein. In so doing, no Bank shall violate the provisions of this Agreement or
the other Loan Documents.
(e) Indemnification. Each of the Banks agrees to indemnify the
Agent (to the extent not reimbursed by a Credit Party) ratably in proportion to
its Commitment Percentage for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever which may be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out of this
Agreement or any other Loan Documents or the enforcement of any of the terms
hereof or of any such other documents, provided that no Bank shall be liable for
any of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the Agent.
(f) Non-Reliance on Agent and other Banks. Each Bank agrees
that it has, independently and without reliance on the Agent or any other Bank,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis of the Credit Parties and its decision to enter into
this Agreement and that it will, independently and without reliance upon the
Agent or any other Bank, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement and the other Loan Documents.
The Agent shall not be required to keep itself informed as to the performance or
observance by the Credit Parties of this Agreement or any other Loan Documents
or to inspect the properties or books of the Credit Parties unless an inspection
of the properties or books is requested in writing by the Required Banks.
(g) Failure to Act. Except for action expressly required of
the Agent hereunder, the Agent shall in all cases be fully justified in failing
or refusing to act under this Agreement and the other Loan Documents unless it
shall be indemnified to its satisfaction by the Banks against any and all
liability and expenses which may be incurred by it by reason of taking or
continuing to take any such action.
(h) Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided below, the Agent may
resign at any time by giving notice thereof to the Banks and the Company, and
the Agent may be removed at any time with or without cause by the Required
Banks. Upon such resignation or removal, the Required Banks shall have the right
to appoint a successor Agent. If no successor Agent shall have been so appointed
by the Required Banks or such successor shall not have accepted such appointment
within thirty (30) days after the retiring Agent's giving of notice of
resignation or after the removal of the Agent, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent, which shall be a bank which has
an office in the United States and having a combined capital and surplus of at
least Five Hundred Million Dollars ($500,000,000.00). Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations as Agent under this Agreement and the other Loan
Documents. After any retiring Agent's resignation or removal hereunder as Agent,
the provisions of this Section 8.03 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
Agent.
(i) Collateral. Any Collateral in the possession of the Agent
(as agent for the Banks) shall be held for the ratable benefit of the Banks and
the Agent, subject to any prior lien therein held by the Agent in its individual
capacity and not as agent for the Banks. As to Collateral in its possession, the
Agent shall exercise only such degree of care as it would exercise for its own
account.
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ARTICLE IX
Miscellaneous
Section 9.01. WAIVER -- AMENDMENTS. No delay on the part of
the Agent or the Banks, or any holder of the Notes in the exercise of any right,
power or remedy shall operate as a waiver thereof, nor shall any single or
partial exercise by any of them of any right, power or remedy preclude any other
or further exercise thereof, or the exercise of any other right, power or
remedy. No amendment, modification or waiver of, or consent with respect to any
of the provisions of this Agreement or the other Loan Documents or otherwise of
the Obligations shall be effective unless such amendment, modification, waiver
or consent is in writing and signed by the Required Banks.
Section 9.02. NOTICES. Any notice given under or with respect
to this Agreement to any Credit Party, the Agent or the Banks shall be in
writing and, if delivered by hand or sent by overnight courier service, shall be
deemed to have been given when delivered and, if mailed, shall be deemed to have
been given five (5) days after the date when sent by registered or certified
mail, postage prepaid, and addressed to such Credit Party, the Agent or the
Banks (or other holder of the Notes) at its address shown below, or at such
other address as any such party may, by written notice to the other party to
this Agreement, have designated as its address for such purpose. The addresses
referred to are as follows:
The Company: Valley National Gases, Inc.
67 43rd Street
Wheeling, West Virginia 26003-7601
Attention: President
VNGI: Valley National Gases Incorporated
1640 Jefferson Avenue
Washington, Pennsylvania 15301
Attention: President
VNGDI: Valley National Gases Delaware, Inc.
300 Delaware Avenue, Suite 1704
Wilmington, Delaware 19801
Attention: President
Agent and Bank One: Bank One, Indiana, National Association
Bank One Center/Tower - Suite 1911
111 Monument Circle
P.O. Box 7700
Indianapolis, Indiana 46277
Attention: Manager, Regional Department A
LaSalle: LaSalle National Bank
One Metropolitan Sq.
211 North Broadway, Suite 2140
St. Louis, Missouri 63102
Attn: David Carney
Star: Star Bank, National Association
425 Walnut St., ML 8160
Cincinnati, Ohio 45201-1038
Attn: Mark Whitson
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<PAGE> 43
PNC: PNC Bank, National Association
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222
Attn: Mark Stasenko
NationsBank: NationsBank, N.A.
NationsBank Plaza, NC1-002-03-10
101 South Tryon Street
Charlotte, North Carolina 28255
Attn: Charles Dickerson
National City: National City Bank
30 South 4th Street
Martins Ferry, OH 43935
Attn: Reese Slater
Huntington: The Huntington National Bank
One Huntington Square
Charleston, West Virginia 25322
Attn: Kenneth H. Berberich
Section 9.03. COSTS, EXPENSES AND TAXES. The Company agrees to
pay (without duplication), all of the following fees, costs and expenses
incurred by the Agent: (i) all reasonable costs and expenses in connection with
the negotiation, preparation, printing, typing, reproduction, execution and
delivery of the Loan Documents and any and all other documents furnished
pursuant hereto or in connection herewith, and all investigation of and due
diligence regarding the Company and the security for the Obligations undertaken
and performed with respect thereto, including without limitation the reasonable
fees and out-of-pocket expenses of Baker & Daniels, special counsel to the Agent
(or, but not as well as, the reasonable allocated costs of staff counsel) as
well as the fees and out-of-pocket expenses of counsel, independent public
accountants and other outside experts retained by the Agent in connection with
the foregoing and the administration of this Agreement, (ii) all reasonable
costs and expenses in connection with the negotiation, preparation, printing,
typing, reproduction, execution and delivery of any amendments or modifications
of (or supplements to) any of the foregoing and any and all other documents
furnished pursuant thereto or in connection therewith, and all investigation of
and due diligence regarding the Company and the security for the Obligations
undertaken and performed with respect thereto, including without limitation the
reasonable fees and out-of-pocket expenses of counsel retained by the Agent
relative thereto (or, but not as well as the reasonable allocated costs of staff
counsel) as well as the fees and out-of-pocket expenses of counsel, independent
public accountants and other outside experts retained by the Agent in connection
with the foregoing and the administration of this Agreement, and (iii) all
search fees, appraisal fees and expenses, title insurance policy fees, costs and
expenses and filing and recording fees and taxes. In addition, the Company
agrees to pay (without duplication) all costs and expenses of the Agent and the
Banks (including, without limitation, reasonable attorneys' fees and expenses of
the Agent, the Banks or any of them), if any, in connection with the enforcement
of this Agreement, any Note and/or any other Loan Documents or other agreement
furnished pursuant hereto or thereto or in connection herewith or therewith. In
addition, the Company shall pay any and all stamp, transfer and other similar
taxes payable or determined to be payable in connection with the execution and
delivery of this Agreement, or any of the other Loan Documents or the issuance
of any Note or the making of any of the Loans, and agrees to save and hold the
Agent and the Banks harmless from and against any and all liabilities with
respect to or resulting from any delay in paying, or omission to pay, such
taxes. Any portion of the foregoing fees, costs and expenses which remains
unpaid following the statement and request for payment thereof shall bear
interest from the date of such statement and request to the date of payment at a
per annum rate equal to the Prime Rate plus Two Percent (2%).
Section 9.04. SEVERABILITY. If any provision of this Agreement
or any other Loan Document is determined to be illegal or unenforceable, such
provision shall be deemed to be severable from the balance of the
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provisions of this Agreement or such Document and the remaining provisions shall
be enforceable in accordance with their terms.
Section 9.05. CAPTIONS. Section captions used in this
Agreement are for convenience only and shall not affect the construction of this
Agreement.
Section 9.06. GOVERNING LAW/PROCESS. Except as may otherwise
be expressly provided in any other Loan Document, this Agreement and all other
Loan Documents are made under and will be governed in all cases by the
substantive laws of the State of Indiana, notwithstanding the fact that Indiana
conflicts of law rules might otherwise require the substantive rules of law of
another jurisdiction to apply. EACH CREDIT PARTY WAIVES PERSONAL SERVICE OF ANY
AND ALL PROCESS UPON THE COMPANY AND AGREES THAT ALL SERVICE OF PROCESS MAY BE
MADE BY MESSENGER, BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY REGISTERED
MAIL DIRECTED TO SUCH CREDIT PARTY AT THE ADDRESS STATED IN SECTION 9.02 OF THIS
AGREEMENT. NOTHING CONTAINED IN THIS SECTION SHALL AFFECT THE RIGHT OF THE BANK
TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
Section 9.07. PRIOR AGREEMENTS, ETC. This Agreement supersedes
all previous agreements and commitments made by the Agent or the Banks and the
Credit Parties with respect to the Loans and all other subjects of this
Agreement, including, without limitation, any oral or written proposals or
commitments made or issued by the Agent or the Banks.
Section 9.08. SUCCESSORS AND ASSIGNS.
(a) This Agreement and the other Loan Documents shall be
binding upon and shall inure to the benefit of the Credit Parties, the Agent and
the Banks and their respective successors and assigns, provided that the Credit
Parties' rights under this Agreement shall not be assignable without the prior
written consent of the Banks.
(b) Any Bank may, in the ordinary course of its business and
in accordance with applicable law, at any time assign to one or more banks or
other entities (a "Purchaser") all or any part of its Revolving Loans, Term
Loan, Letter of Credit Exposure, Commitment and its rights and obligations under
its Notes and under this Agreement, pursuant to a form of assignment acceptable
to such Bank and such Purchaser, provided that (i) the Bank shall have given the
Agent and the Company not less than seven (7) Banking Days prior written notice
of such assignment, (ii) each individual assignment shall be in an amount of not
less than $10,000,000, (iii) the prior written consent of the Agent shall be
required prior to an assignment becoming effective with respect to a Purchaser
which is not then a Bank or an affiliate thereof, which consent shall not be
unreasonably withheld, (iv) unless (1) an Event of Default or Unmatured Event of
Default has occurred and is continuing, or (2) such assignment would result from
the sale or acquisition by or of any Bank, the prior written consent of the
Company shall be required prior to an assignment becoming effective with respect
to a Purchaser which is not then a Bank or an affiliate thereof, which consent
shall not be unreasonably withheld, (v) the senior unsecured debt of such
Purchaser must be rated by Moody's Investors Service, Inc. as Baa1 or higher;
and (vi) the Purchaser shall have paid an assignment fee to the Agent, for its
account, in the amount of $3,500. Notwithstanding the foregoing provisions of
this Section 9.08(b), any Bank may at any time assign all or any portions of its
Revolving Loans, Term Loan, Revolving Note, Term Note and its risk participation
in the Letter of Credit Exposure to a Federal Reserve Bank (but no such
assignment shall release such Bank from any of its obligations hereunder).
(c) Upon delivery to the Agent and the Company of a notice of
assignment, together with any consent required by this Section 9.08, such
assignment shall become effective on the effective date specified in such
notice, and Exhibit B shall be deemed to have been amended to reflect such
Purchaser as a Bank, and the appropriate adjustments of the Commitments and
Commitment Percentages of the Banks. On and after the effective date of such
assignment, such Purchaser shall for all purposes be a Bank party to this
Agreement and shall have all the rights and obligations of a Bank under this
Agreement, to the same extent as if it were an original party hereto, and no
further consent or action by the Company, the Agent or any other Bank shall be
required to release the transferor Bank with respect to the percentage of the
Revolving Loans, Term Loan, Letter of Credit Exposure and Commitment assigned to
such Purchaser. Upon the consummation of any assignment to a Purchaser pursuant
to this Section 9.08, the transferor
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<PAGE> 45
Bank and the Company shall make appropriate arrangements so that replacement
Notes are issued to such transferor Bank in principal amounts reflecting its pro
rata share of the Aggregate Commitment.
(d) The Company authorizes each Bank to disclose to any
Purchaser or prospective Purchaser or any other entity acquiring an interest in
this Agreement or its Notes by operation of law (each a "Transferee") and any
prospective Transferee any and all information in such Bank's possession
concerning the creditworthiness of the Company, the other Credit Parties and
their respective Subsidiaries.
(e) This Agreement and all covenants, representations and
warranties made herein and in any of the other Loan Documents shall survive the
making of the Loans, the execution and delivery of the Loan Documents and shall
continue in effect so long as any Obligations remain unpaid or any Commitment
remains outstanding.
Section 9.09. WAIVER OF JURY TRIAL. EACH OF THE CREDIT
PARTIES, THE AGENT AND EACH OF THE BANKS HEREBY VOLUNTARILY, KNOWINGLY,
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN
OR AMONG THE CREDIT PARTIES, THE AGENT AND THE BANKS ARISING OUT OF OR IN ANY
WAY RELATED TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. THIS PROVISION IS A
MATERIAL INDUCEMENT TO THE AGENT AND THE BANKS TO PROVIDE THE FINANCING
DESCRIBED HEREIN OR IN THE OTHER LOAN DOCUMENTS. NEITHER THE COMPANY OR ANY
GUARANTORS NOR THE BANKS WILL SEEK TO CONSOLIDATE ANY SUCH ACTION IN WHICH A
JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL HAS NOT
BEEN OR CANNOT BE WAIVED.
Section 9.10. ARBITRATION. The Agent, the Banks and the Credit
Parties agree that upon the written demand of any party, whether made before or
after the institution of any legal proceedings, but prior to the rendering of
any judgment in that proceeding, all disputes, claims and controversies between
them, whether individual, joint, or class in nature, arising from this
Agreement, any other Loan Document or otherwise, including without limitation
contract disputes and tort claims, shall be resolved by binding arbitration
pursuant to the Commercial Rules of the American Arbitration Association. Any
arbitration proceeding held pursuant to this arbitration provision shall be
conducted in the city nearest the Company's address having an AAA regional
office, or at any other place selected by mutual agreement of the parties. No
act to take or dispose of any Collateral shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration agreement. This
arbitration provision shall not limit the right of any party during any dispute,
claim or controversy to seek, use, and employ ancillary, or preliminary rights
and/or remedies, judicial or otherwise, for the purposes of realizing upon,
preserving, protecting, foreclosing upon or proceeding under forcible entry and
detainer for possession of, any real or personal property, and any such action
shall not be deemed an election of remedies. Such remedies include, without
limitation, obtaining injunctive relief or a temporary restraining order,
invoking a power of sale under any deed of trust or mortgage, obtaining a writ
of attachment or imposition of a receivership, bankruptcy or exercising any
rights relating to personal property, including taking or disposing of such
property with or without judicial process pursuant to Article 9 of the Uniform
Commercial Code or when applicable, a judgment by confession of judgment. Any
disputes, claims or controversies concerning the lawfulness or reasonableness of
an act, or exercise of any right or remedy concerning any Collateral, including
any claim to rescind, reform, or otherwise modify any agreement relating to the
Collateral, shall also be arbitrated; provided, however that no arbitrator shall
have the right or the power to enjoin or restrain any act of any party. Judgment
upon any award rendered by any arbitrator may be entered in any court having
jurisdiction. Nothing in this arbitration provision shall preclude any party
from seeking equitable relief from a court of competent jurisdiction. The
statute of limitations, estoppel, waiver, laches and similar doctrines which
would otherwise be applicable in an action brought by a party shall be
applicable in any arbitration proceeding, and the commencement of an arbitration
proceeding shall be deemed the commencement of any action for these purposes.
The Federal Arbitration Act (Title 9 of the United States Code) shall apply to
the construction, interpretation, and enforcement of this arbitration provision.
Section 9.11. Amendments. Subject to the provisions of this
Section, the Required Banks (or the Agent with the consent in writing of the
Required Banks) and the Credit Parties may enter into agreements supplemental
hereto for the purpose or adding or modifying any provisions of the Loan
Documents or changing in any manner the
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<PAGE> 46
rights of the Banks, the Agent or the Credit Parties hereunder or waiving any
Event of Default; provided, however, that no such supplemental agreement shall,
without the consent of each Bank:
(a) Extend the maturity of any Revolving Note or Term Note or
reduce the principal amount thereof, or reduce the rate, extend or change the
time of payment of principal, interest or fees hereunder or thereunder, or amend
the terms of Section 2.03(a)(3)(i) so as to lengthen the maximum permitted
expiration date of a Letter of Credit.
(b) Reduce the percentages specified in the definition of
Required Banks.
(c) Extend the Scheduled Revolving Loans Maturity Date or the
Scheduled Term Loan Maturity Date or increase the amount of the Commitment of
any Bank, or permit the Company to assign its rights under this Agreement.
(d) Amend this section.
(e) Waive any Event of Default arising from a failure to pay
principal of or interest on a
Loan.
(f) Affect the rights, duties or obligations of the Agent.
(g) Release any Guaranty or asset having a value in excess of
$1,000,000.00 at the time of release from any lien or security interest held by
the Agent as security for all or any part of the Obligations; provided that the
Agent may release Collateral sold in a transaction that has been approved by the
Required Banks if the proceeds of such sale (net of reasonable expenses of sale)
are paid to the Agent, for the ratable benefit of the Banks, in exchange for
such release.
Section 9.12. Entire Agreement. This Credit Agreement, the
other Loan Documents and the other documents identified herein or therein
contain the entire agreement between the parties concerning the subject matter
hereof as of the date hereof and supersedes all prior dealings between them with
respect to such subject matter.
Section 9.13. Waiver and Release. As a material inducement to
each of the Initial Banks to execute the Transfer Agreement and this Agreement,
the Credit Parties hereby acknowledge that none of them have any unsatisfied
claims or causes of action as of the Closing Date against Bank One under,
pursuant to or by virtue of the Original Agreement, including all prior versions
thereof, and waive and release any and all such claims, rights, causes of action
or demands against Bank One.
Section 9.14. Indemnification. The Credit Parties, jointly and
severally, agree to indemnify and hold harmless each of the Banks and the Agent
from and against all liabilities, obligations, losses, damages, penalties,
action, judgments, suits, costs (including attorneys' fees), expenses or
disbursements of any kind whatever which may be imposed upon or asserted against
the Agent or any of the Banks in any way relating to the business operations of
the Credit Parties, their execution of this Credit Agreement or any other of the
Loan Documents or the performance of their obligations thereunder. It is
expressly agreed that neither the Agent nor the Banks shall control the business
activities of the Credit Parties as a result of this Credit Agreement or the
other Loan Documents or the performance thereof.
Section 9.15. Interest Rate Hedging Agreement. Each of the
Banks, other than Bank One, may enter into interest rate hedging agreements with
the Company not to exceed the amount of such Bank's Commitment. Bank One may
enter into interest rate hedging agreements, including the Master Agreement with
the Company in excess of its Commitment. Each Bank entering into such an
agreement shall provide notice of such agreement and the amount thereof to the
other Banks within ten (10) days of the execution thereof, provided, however,
that the failure to give such notice timely shall not affect any of the
obligations and liabilities of the Company, then existing or thereafter arising,
under or with respect to the agreement by which the notice was to have been
given, nor preclude such obligations and liabilities from being part of the
Obligations.
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Section 9.16. Execution. This Agreement may be executed, by
original or facsimile signatures, in two or more counterparts, each of which
shall constitute an original, but all of which when taken together shall
constitute but one agreement.
IN WITNESS WHEREOF, the Agent, the Banks and the Credit
Parties have by their duly authorized officers executed this Agreement as of the
date first set forth above.
VALLEY NATIONAL GASES, INC.,
a West Virginia corporation
By:___________________________________
Lawrence E. Bandi, President
(the "Company")
VALLEY NATIONAL GASES INCORPORATED
a Pennsylvania corporation
By:___________________________________
Lawrence E. Bandi, President
("VNGI")
VALLEY NATIONAL GASES DELAWARE, INC.
a Delaware corporation
By:___________________________________
Lawrence E. Bandi, President
("VNGDI")
BANK ONE, INDIANA, NATIONAL ASSOCIATION
By:_____________________________________
Stacey Roberts, Assistant Vice President
(the "Agent")
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LASALLE NATIONAL BANK
By: ______________________________________
Printed: _________________________________
Title: ___________________________________
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STAR BANK, NATIONAL ASSOCIATION
By: ______________________________________
Printed: _________________________________
Title: ___________________________________
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PNC BANK, NATIONAL ASSOCIATION
By: ______________________________________
Printed: _________________________________
Title: ___________________________________
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NATIONSBANK, N.A.
By: ______________________________________
Printed: _________________________________
Title: ___________________________________
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NATIONAL CITY BANK
By: ______________________________________
Printed: _________________________________
Title: ___________________________________
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THE HUNTINGTON NATIONAL BANK
By: ______________________________________
Printed: _________________________________
Title: ___________________________________
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<PAGE> 1
Exhibit 11.1
CALCULATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
1996 1997 1996 1997
----------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Net earnings before income taxes $1,200,878 $1,749,654 $1,928,745 $3,123,572
Provision for income taxes 731,098 1,280,665
------------------ ------------------
Net earnings $1,018,556 $1,842,907
================== ==================
Pro forma income taxes 480,351 771,498
----------------- ------------------
Pro forma net earnings $720,527 $1,157,247
================= ==================
Weighted average shares
outstanding during the period 7,000,000 9,620,084 7,000,000 9,620,084
Shares issuable under
consulting agreement 96,366 96,366
Shares issuable under
compensation agreement 170,708 170,708
----------------- ------------------ ------------------ ------------------
Weighted average common
and common equivalent
shares outstanding during the 7,267,074 9,620,084 7,267,074 9,620,084
period
================= ================== ================== ==================
Pro forma or basic earnings per $0.10 $0.11 $0.16 $0.19
share
================= ================== ================== ==================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR VALLEY NATIONAL GASES INCORPORATED AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001030715
<NAME> VALLEY NATIONAL GASES INCORPORATED
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1998
<PERIOD-START> OCT-01-1997 JUL-01-1997
<PERIOD-END> DEC-31-1997 DEC-31-1997
<CASH> 594,101 594,101
<SECURITIES> 0 0
<RECEIVABLES> 12,319,852 12,319,852
<ALLOWANCES> 200,750 200,750
<INVENTORY> 8,764,300 8,764,300
<CURRENT-ASSETS> 23,147,255 23,147,255
<PP&E> 62,368,839 62,368,839
<DEPRECIATION> 24,870,397 24,870,397
<TOTAL-ASSETS> 93,714,503 93,714,503
<CURRENT-LIABILITIES> 16,556,934 16,556,934
<BONDS> 47,107,596 47,107,596
0 0
0 0
<COMMON> 9,385 9,385
<OTHER-SE> 23,063,117 23,063,117
<TOTAL-LIABILITY-AND-EQUITY> 93,714,503 93,714,503
<SALES> 23,890,001 44,511,152
<TOTAL-REVENUES> 23,890,001 44,511,152
<CGS> 10,988,568 20,463,037
<TOTAL-COSTS> 10,988,568 20,463,037
<OTHER-EXPENSES> 10,527,076 19,790,047
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 684,045 1,255,212
<INCOME-PRETAX> 1,749,654 3,123,572
<INCOME-TAX> 731,098 1,280,665
<INCOME-CONTINUING> 1,018,556 1,842,907
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,018,556 1,842,907
<EPS-PRIMARY> 0.11 0.19
<EPS-DILUTED> 0.11 0.19
</TABLE>
