<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
</TABLE>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
VALLEY NATIONAL GASES INCORPORATED
--------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (check the appropriate box):
<TABLE>
<S> <C> <C>
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction
applies:
------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------
</TABLE>
<PAGE> 2
LOGO
VALLEY NATIONAL GASES INCORPORATED
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF
VALLEY NATIONAL GASES INCORPORATED
The Annual Meeting of the Shareholders of Valley National Gases
Incorporated, a Pennsylvania corporation (the "Company"), will be held at the
McLure House, 1200 Market Street, Wheeling, West Virginia 26003, on Tuesday,
October 26, 1999, commencing at 9:00 a.m., Wheeling time, for the following
purposes:
1. To elect three directors to hold office until the 2002 Annual
Meeting of Shareholders; and
2. To transact such other business, if any, as properly may be brought
before the meeting.
The close of business on October 6, 1999 has been designated as the record
date for the determination of Shareholders entitled to notice of and to vote at
the Annual Meeting or any adjournments or postponements thereof.
By order of the Board of Directors,
/s/ John R. Bushwack
John R. Bushwack, Secretary
Wheeling, West Virginia
October 8, 1999
A proxy for the annual meeting is enclosed herewith. Even though you may
plan to attend the meeting in person, please mark, date and execute the enclosed
proxy and mail it promptly. A postage-paid return envelope is enclosed for your
convenience.
<PAGE> 3
VALLEY NATIONAL GASES INCORPORATED
67 43RD STREET
WHEELING, WEST VIRGINIA 26003
------------------------
PROXY STATEMENT
OCTOBER 8, 1999
------------------------
This proxy statement is furnished to the holders of Common Stock of Valley
National Gases Incorporated (the "Company") in connection with the solicitation
of proxies for use in connection with the Annual Meeting of the Shareholders
(the "Annual Meeting") to be held at the McLure House, 1200 Market Street,
Wheeling, West Virginia 26003, on October 26, 1999 at 9:00 a.m., Wheeling time,
and all adjournments or postponements thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of the Shareholders. Only holders of
record of the Company's Common Stock at the close of business on October 6, 1998
will be entitled to vote at the Annual Meeting. Such holders are hereinafter
referred to as the "Shareholders." The Company is first mailing this proxy
statement and the enclosed form of proxy to Shareholders on or about October 8,
1999.
Whether or not you expect to be present in person at the meeting, you are
requested to complete, sign, date and return the enclosed form of proxy, and the
shares represented thereby will be voted in accordance with your instructions.
If you attend the meeting, you may vote by ballot. If you do not attend the
meeting, your shares of Common Stock can be voted only when represented by a
properly executed proxy.
Any person giving such a proxy has the right to revoke it at any time
before it is voted by giving written notice of revocation to the Secretary of
the Company, by duly executing and delivering a proxy bearing a later date, or
by attending the Annual Meeting and voting in person.
The close of business on October 6, 1999 has been fixed as the record date
for the determination of the Shareholders entitled to vote at the Annual
Meeting. As of the record date, 9,347,584 shares of Common Stock were
outstanding and entitled to be voted at the Annual Meeting, with 109 holders of
record. Shareholders will be entitled to cast one vote on all matters for each
share of Common Stock held of record on the record date.
A copy of the Company's Annual Report to Shareholders for the fiscal year
ended June 30, 1999 accompanies this proxy statement.
The Company's Audit and Finance Committee is recommending the selection of
Arthur Anderson, LLP as its principal accountant for the fiscal year ending June
30, 2000. The Company's Board of Directors will consider this recommendation at
its next regularly scheduled meeting on October 26, 1999. Arthur Anderson, LLP
has audited the Company's financial statements since 1994. Its representatives
are expected to be present at the Annual Meeting with the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions.
The solicitation of this proxy is made by the Board of Directors of the
Company. The solicitation will be by mail and the expense thereof will be paid
by the Company. In addition, proxies may be solicited by telephone, telefax or
other means, or personal interview, by directors, officers or regular employees
of the Company.
1
<PAGE> 4
ELECTION OF DIRECTORS
(ITEM 1 ON FORM OF PROXY)
NOMINEES AND CONTINUING DIRECTORS
The Board of Directors is divided into three classes, with the terms of
office of each class ending in successive years. At the Annual Meeting, three
directors of the Company are to be elected for a term expiring at the Annual
Meeting in 2002, or until their successors have been elected and have qualified.
Certain information with respect to the nominees for election as directors
proposed by the Company and the other directors whose terms of office as
directors will continue after the Annual Meeting is set forth below. Each of the
nominees and the directors has served in his principal occupation for the last
five fiscal years, unless otherwise indicated. Should a nominee be unable or
unwilling to serve (which is not expected), the proxies (except proxies marked
to the contrary) will be voted for such other person as the Board of Directors
of the Company may recommend.
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
NAME, AGE, PRINCIPAL OCCUPATION OR POSITION, OTHER DIRECTORSHIPS SINCE
- ---------------------------------------------------------------- -----
<S> <C>
TO BE ELECTED FOR TERM ENDING IN 2002:
Gary E. West, 62.............................................. 1997
Mr. West has served as Chairman of the Board of Directors of
the Company or Valley National Gases, Inc. since 1984. From
1970, when he purchased the Company, to March 1995 Mr. West
served as President of the Company. Mr. West is primarily
responsible for the growth and success of the Company. Mr.
West has also served as President of West Rentals, Inc. and
Equip Lease Corp. and Vice President of Acetylene Products
Corp. since 1992, 1988 and 1985, respectively. See "Certain
Relationships and Related Transactions." Since June 1993, he
has served as a director of WesBanco Wheeling, and since June
1990 he has served as a director of H.E. Newmann Co., a
plumbing, heating and mechanical contracting company. Mr. West
received his Bachelor of Science degree in Business
Administration from West Liberty State College.
John R. Bushwack, 48.......................................... 1997
Mr. Bushwack has served as the Executive Vice President, the
Chief Operating Officer and a Director of the Company since
January 1997. From 1991 to 1996, Mr. Bushwack served in
various positions with the Company, including Executive Vice
President of Sales and Acquisitions, Vice President of Sales
and Acquisitions, Vice President of Sales and General Manager.
From 1987 to 1990, Mr. Bushwack served as President of the
Harvey Company, a gas distributor, and from 1990 to 1991 he
served as Vice President and Director of Linde Gases of the
Great Lakes, also a gas distributor. In addition, Mr. Bushwack
has been a Director of Convenient Care Products Group, Ltd., a
division of Westmoreland Health System, since 1991 and
Westmoreland Holding Company, Inc., since 1999.
James P. Hart, 45............................................. 1997
Mr. Hart was elected a Director of the Company in January
1997. He has been Vice President and Chief Financial Officer
of Industrial Scientific Corporation ("ISC"), a manufacturer
of portable instruments used for detecting and monitoring a
variety of gases, since August 1994. From March 1984 to August
1994, Mr. Hart was Treasurer and Controller of ISC. Mr. Hart
holds a Bachelor of Science degree in Accounting from the
University of Scranton.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR
OF EACH NAMED NOMINEE.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
NAME, AGE, PRINCIPAL OCCUPATION OR POSITION, OTHER DIRECTORSHIPS SINCE
- ---------------------------------------------------------------- -----
<S> <C>
TO CONTINUE IN OFFICE UNTIL 2000:
Ben Exley, IV, 52............................................. 1997
Mr. Exley was elected a Director of the Company in January
1997. Since April 1998, he has served as a Marketing
Specialist for the Ohio Valley Industrial and Business
Development Corporation and currently serves as its Interim
Executive Director. He served as the President of Ohio Valley
Clarksburg, Inc. since 1987 and Bailey Drug Company from 1993
through 1997, both of which are pharmaceutical distributors
and wholly-owned subsidiaries of Cardinal Health Inc. Mr.
Exley has also served on the board of directors of several
companies, including BankOne West Virginia N.A. since 1994,
BankOne Wheeling-Steubenville N.A. since 1991 and Stone &
Thomas, a chain of clothing department stores, from 1991
through 1997. Mr. Exley is a graduate of West Virginia
Wesleyan College with a Bachelor of Science degree in Business
Administration. He also holds a Masters in Business
Administration degree from Northern Illinois University.
William A. Indelicato, 60..................................... 1997
Mr. Indelicato was elected a Director of the Company in
January 1997. Mr. Indelicato has been President of ADE
Vantage, Inc., a business consulting firm which provides
certain services to the Company, since July 1992. From 1988 to
1991, Mr. Indelicato served as General Business Director of
Union Carbide Industrial Gases Inc. Mr. Indelicato is also an
associate professor of strategic management at Pace University
in New York. Mr. Indelicato received his Bachelor of Science
degree in Electrical Engineering from the University of Notre
Dame and his Masters in Business Administration degree from
Pace University.
August Maier, 70.............................................. 1997
Mr. Maier was elected a Director of the Company in January
1997. In September 1997, Mr. Maier became an employee of the
Company and he served as Corporate Director of Field
Operations until his retirement in July 1999. He served as
Chief Executive Officer of Houston Fearless 79, a manufacturer
of film processing equipment, from May 1995 until August 1997.
From October 1987 to May 1995, Mr. Maier was Chief Executive
officer of Holox, Inc., a manufacturer and distributor of
industrial gases and welding equipment, which is wholly owned
by Hoeklos Ltd. of Holland. Mr. Maier received his Bachelor of
Science degree in Mechanical Engineering from the Indiana
Institute of Technology and his Masters in Business
Administration degree from the Harvard Business School.
TO CONTINUE IN OFFICE UNTIL 2001:
Lawrence E. Bandi, 45......................................... 1997
Mr. Bandi has served as President and Chief Executive Officer
of the Company since March 1995 and April 1991, respectively,
and as a director of the Company or Valley National Gases,
Inc. since March 1984. Mr. Bandi has held various other
positions with the Company since joining it in 1974. Mr. Bandi
is a Director of the Ohio Valley Industrial and Business
Development Corporation, a private corporation established for
the purpose of attracting various business entities to West
Virginia. Mr. Bandi received his Bachelor of Science degree in
Accounting from Wheeling College and his Masters in Business
Administration degree from Wheeling Jesuit College.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
NAME, AGE, PRINCIPAL OCCUPATION OR POSITION, OTHER DIRECTORSHIPS SINCE
- ---------------------------------------------------------------- -----
<S> <C>
F. Walter Riebenack, 60....................................... 1999
Mr. Riebenack was elected a Director of the Company in January
1999. He has served as the Chief Financial Officer, General
Counsel and as a member of the Board of Site-Blauvalt,
Engineers, Inc. since 1993, a multi-disciplinary consulting
engineering firm offering transportation design, geotechnical
engineering, subsurface exploration, construction inspection
and materials testing services to a wide range of clients in
both the public and private sectors of the marketplace, with
Offices in New Jersey, Pennsylvania, New York, Delaware,
Virginia, South Carolina and West Virginia. Mr. Riebenack
received his law degree along with his Bachelor of Business
Administration degree in Finance and Accounting from the
University of Notre Dame. Mr. Riebenack has served as an
instructor of Business Law at Indiana University and St.
Francis College in Fort Wayne, Indiana.
</TABLE>
COMMON STOCK OWNERSHIP OF DIRECTORS, NOMINEES AND OFFICERS
The following table sets forth information regarding the amount of the
outstanding Common Stock as of September 1, 1999 beneficially owned by each
director and nominee, the Chief Executive Officer and the two other most highly
compensated executive officers of the Company (each a "Named Executive Officer")
and all of the directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF SHARES COMMON STOCK
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING(1)
------------------------ ------------------ --------------
<S> <C> <C>
Gary E. West................................................ 7,095,000(2) 75.9
Lawrence E. Bandi (3)....................................... 107,446 1.1
John R. Bushwack (3)........................................ 47,329 *
William A. Indelicato....................................... 78,866 *
Ben Exley, IV............................................... 1,600 *
James P. Hart............................................... 1,000 *
August E. Maier............................................. 2,000 *
F. Walter Riebenack......................................... 4,000 *
All directors and executive officers as a group (9 persons)
(4)....................................................... 7,342,040 78.3
</TABLE>
- ---------------
* Represents beneficial ownership of less than one percent.
(1) Percentages are determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
(2) Gary E. West beneficially owns and controls a portion of the shares
indicated through six grantor retained annuity trusts.
(3) Includes options to purchase 12,500 shares of Common Stock exercisable
within sixty days of September 1, 1999.
(4) Includes 25,000 options exercisable within sixty days of September 1, 1999.
4
<PAGE> 7
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to each
person known to the Company to be the beneficial owner of more than 5% of the
Company's outstanding Common Stock as of September 1, 1999:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS(1)
------------------------------------ -------------------- -----------
<S> <C> <C>
Gary E. West (2)............................................ 7,095,000 75.9
Entities affiliated with T. Rowe Price Associates, Inc.
(3)....................................................... 766,100 8.2
</TABLE>
- ---------------
(1) Percentages are determined in accordance with Rule 13d-3 under the Exchange
Act.
(2) Mr. West's address is c/o Valley National Gases Incorporated, 67 43rd
Street, Wheeling, West Virginia 26003. A portion of his shares are
beneficially owned and controlled through six grantor retained annuity
trusts.
(3) As provided in a Form 13G filed with the SEC on February 11, 1999. T. Rowe
Price Associates, Inc., a registered investment advisor, holds sole voting
power as to 57,000 shares and sole dispositive power as to 766,100 shares.
T. Rowe Price Small-Cap Value Fund, Inc., holds sole voting power as to
682,200 shares. Their address is 100 E. Pratt Street, Baltimore, Maryland,
21202.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors met four times during fiscal 1999. Each incumbent
director attended at least 75% of the meetings of the Board and committees on
which he served during 1998.
The Board of Directors has an Executive Committee, an Audit and Finance
Committee, and a Nominating and Compensation Committee, all of which were formed
in January 1997. The Executive Committee, of which Messrs. West, Bandi and
Indelicato are members, met nine times in the past fiscal year. The Audit and
Finance Committee, of which Messrs. Hart, Bushwack and Riebenack are members,
met two times in the past fiscal year. This committee is responsible for
recommending a public accounting firm to be retained for the coming year and
reviews the work to be done by such firm and the adequacy of the Company's
internal controls. The Nominating and Compensation Committee, consisting of
Messrs. West, Indelicato and Exley, establishes and oversees the compensation
policies of the Company and determines executive compensation. This committee
held three meetings in the past fiscal year. See "Compensation Committee Report
on Executive Compensation."
DIRECTOR COMPENSATION
The Company pays each non-employee director a $1,000 fee for each Board
meeting attended and a $500 fee for each Committee meeting attended. Directors
are also reimbursed for certain reasonable expenses incurred in attending
meetings. Officers of the Company do not receive any additional compensation for
serving the Company as members of the Board of Directors or any of its
Committees.
On January 4, 1999, the Company granted to each of the three independent
directors options to purchase 1,000 shares of the Common Stock. The options vest
three years after the date of the grant and have a term of ten years. The
options are exercisable at a price equal to the fair market value of the shares
of Common Stock on the date of the grant.
William A. Indelicato, a director of the Company, provides consulting
services to the Company concerning all aspects of the Company's acquisition
program. The agreement with Mr. Indelicato provides for a monthly retainer fee
of $4,000, reimbursement of out-of-pocket expenses related to the performance of
services, and a variable payment for each acquisition completed in an amount
based primarily upon the purchase price and the annual sales of the business
acquired. In addition, the Company retains ADE Vantage, Inc. ("ADE") to provide
consulting services. Mr. Indelicato is President of ADE. This agreement has a
one year term, is renewable each year for one year and can be terminated by
either party giving ninety day notice. Payments to Mr. Indelicato and ADE for
fiscal 1999 totaled $239,984.
5
<PAGE> 8
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gary E. West.............................. 62 Chairman of the Board of Directors
Lawrence E. Bandi......................... 45 President and Chief Executive Officer
John R. Bushwack.......................... 48 Executive Vice President, Chief Operating Officer
and Secretary
Robert D. Scherich........................ 39 Chief Financial Officer
</TABLE>
For more information about Messrs. West, Bandi and Bushwack, please see the
appropriate description under the above caption "Nominees and Continuing
Directors."
Robert D. Scherich, Chief Financial Officer. Mr. Scherich has served as the
Company's Chief Financial Officer since May 1996. From January 1993 to April
1996, he served as Controller and General Manager of Wheeling Pittsburgh Steel
Corporation, a subsidiary of WHX Corporation, and from January 1988 to December
1993 he served as Division Controller of such corporation. Mr. Scherich was an
accountant with Ernst & Whinney from 1981 to 1984. Mr. Scherich received a
Bachelor of Science degree in Accounting from The Pennsylvania State University
and is a Certified Public Accountant.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who beneficially own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission (the "SEC"). Directors, executive officers and greater than
ten percent beneficial shareholders are required by SEC regulation to furnish
the Company with copies of all Forms 3, 4 and 5 they file.
To the Company's knowledge, based solely on the Company's review of the
copies of such forms it has received and written representations that no other
reports were required, the Company believes that all its directors, executive
officers and greater than ten percent beneficial owners complied with all filing
requirements applicable to them with respect to transactions during its fiscal
year ended June 30, 1999.
6
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain summary information for the fiscal
years ended June 30, 1997, 1998 and 1999 concerning the compensation awarded or
paid to, or earned by each of the Named Executive Officers during such fiscal
year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND COMPENSATION UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) ($)(2) OPTIONS(#) ($)(3)
------------------ ---- --------- ----------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Gary E. West................ 1999 76,332 61,320 -- -- 5,662
Chairman 1998 79,978 117,875 -- -- 8,107
1997 64,366 143,750 -- -- 10,067
Lawrence E. Bandi........... 1999 178,000 35,000 -- 12,600 8,806
President and 1998 161,718 67,280 -- -- 8,177
Chief Executive Officer 1997 96,238 151,500 -- 42,000 10,864
John R. Bushwack............ 1999 135,539 26,200 -- 7,400 8,541
Executive Vice President 1998 124,656 48,720 -- -- 7,825
and Chief Operating Officer 1997 127,572 52,530 -- 25,000 12,656
</TABLE>
- ---------------
(1) Includes bonuses earned in the reported year. The payment of bonuses is at
the discretion of the Nominating and Compensation Committee of the Board of
Directors.
(2) The Company has not included in the Summary Compensation Table the value of
incidental personal perquisites furnished by the Company to the Named
Executive Officers since such value did not exceed the lesser of $50,000 or
10% of the total of annual salary and bonus reported for any of such Named
Executive Officers.
(3) Represents contributions made by the Company on behalf of the Named
Executive Officers under the Company's 401(k) Plan during fiscal 1999.
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under its 1997 Stock
Option Plan (the "Plan"). The Company adopted the Plan in February 1997. The
Plan provides for the issuance of options to purchase up to 650,000 shares of
Common Stock to key employees, officers and directors of the Company and is
administered by the Nominating and Compensation Committee of the Board of
Directors. As of September 16, 1999, options to purchase a total of 232,400
shares were outstanding under the Plan and options to purchase 417,600 shares
remained available to grant thereunder.
7
<PAGE> 10
The following tables show for the fiscal year ended June 30, 1999, certain
information regarding options granted to, exercised by, and held at year end by,
the Named Executive Officers:
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
OPTION/SAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM
OPTIONS/SARS EMPLOYEES IN EXERCISE OR BASE ---------------------
NAME GRANTED(#) FISCAL YEAR PRICE($/SH) EXPIRATION DATE 5%($) 10%($)
---- ---------- ----------- ----------- --------------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Lawrence E. Bandi.... 12,600 19 5.625 1/4/09 44,600 113,000
John R. Bushwack..... 7,400 11 5.625 1/4/09 26,200 66,300
</TABLE>
STOCK OPTION EXERCISES AND HOLDINGS
The following table presents information with respect to stock options
exercised during the last fiscal year by the Named Executive Officers, as well
as the status and current value of unexercised stock options held as of June 30,
1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT JUNE 30, 1999 IN-THE-MONEY OPTIONS
ACQUIRED (# SHARES) AT JUNE 30, 1999
ON EXERCISE VALUE --------------------------- ---------------------------
NAME (# SHARES) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gary E. West................. 0 0 0 0 $0 $0
Lawrence E. Bandi............ 0 0 12,500 42,100 $0 $0
John R. Bushwack............. 0 0 12,500 19,900 $0 $0
</TABLE>
BENEFIT PLANS
401(k) Plan. The Company has a qualified 401(k) savings and retirement plan
(the "401(k) Plan"). Eligibility to participate in the 401(k) Plan requires an
employee to have been employed with the Company for twelve months ("Eligible
Employees"). The 401(k) Plan allows Eligible Employees to defer into their plan
account a certain dollar amount or stated percentage of their salary, not to
exceed statutorily mandated annual limits (the "Employee Contributions").
Eligible Employees are 100% vested in their Employee Contributions. The Company
makes an annual contribution (the "Company Contribution") to all Eligible
Employees' plan account in an amount equal to 5% of their salary or wages.
Company Contributions vest over a term of seven years. The Company also makes a
determination each year based upon performance as to the amount, if any, of
additional contributions to be made to Eligible Employees' plan accounts. If a
determination is made to make additional contributions in any year, such amounts
are contributed on a pro rata basis to the plan accounts of Eligible Employees
who made voluntary contributions during such year. Distributions under the
401(k) Plan may be made at retirement, death, permanent disability or other
termination of employment, in a lump sum.
- ---------------
1 The options were granted on January 4, 1999. The options vest three years
after the date of the grant and have a term of ten years. The options are
exercisable at a price equal to the fair market value of the shares of Common
Stock on the date of the grant. In the case of key employees and officers,
unexercised options granted under the Plan are subject to forfeiture upon
termination of employment for any reason other than death, disability or
normal retirement.
8
<PAGE> 11
CERTAIN AGREEMENTS WITH EXECUTIVE OFFICERS
Lawrence E. Bandi and John R. Bushwack have entered into agreements with
the Company whereby the Company has agreed to pay each of them, or their
respective beneficiaries, certain death, disability and/or retirement benefits
provided that they are employed with the Company until their respective
retirements or death, and that with respect to retirement benefits, they do not
thereafter compete with the Company. In the event of the death or retirement of
Mr. Bandi or Mr. Bushwack, the Company is obligated to make payments of $2,000
and $1,000 per month, respectively, for eighty-four months. In the event of
disability, the Company is obligated to make payments of $2,000 and $1,000 per
month, respectively, for the duration of the disability, but not after 65 years
of age.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the Company's Nominating and Compensation Committee
consists of Messrs. West, Indelicato and Exley. Mr. West is the Chairman of the
Board of Directors of the Company. During the year ended June 30, 1999, no other
interlocking relationship existed between any member of the Company's
Compensation Committee and any other member of the Company's Board of Directors.
The Company leases certain buildings and equipment from West Rentals, Inc., a
Company owned by Mr. West. West Rentals, Inc. employees also supply certain
services for the Company. The Company rents an airplane from EquipLease Corp., a
corporation owned by Mr. West. Mr. West is also a Director and shareholder of
Acetylene Products Corp., a company that leases space to the Company. Mr.
Indelicato and ADE provide consulting services to the Company. See "Certain
Relationships Related Transactions."
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION(2)
The Company's executive compensation program is administered by the
Nominating and Compensation Committee of the Board of Directors, which is
comprised of two non-employee directors and one employee director. The
Nominating and Compensation Committee works with management to develop
compensation plans for the Company and is responsible for determining the
compensation of each executive officer and recommending such compensation to the
Board of Directors.
The Company's executive compensation program is designed to align executive
compensation with the Company's business objectives and the executive's
individual performance and to enable the Company to attract, retain and reward
executive officers who contribute, and are expected to continue to contribute,
to the Company's long-term success. In establishing executive compensation, the
Committee is guided by the following principles: (i) the total compensation
payable to executive officers should be sufficiently competitive with the
compensation paid by competitive companies for officers in comparable positions
so that the Company can attract and retain qualified executives and (ii)
individual compensation should include components which reflect both the
financial performance of the Company and the performance of the individual.
The compensation of the Company's executive officers consists of a
combination of base salary, bonuses and equity-based compensation. In general,
the Company's compensation program attempts to limit increases in salaries and
favors bonuses based on revenues, operating profit and individual merit. The
Nominating and Compensation Committee believes that executive compensation
should be designed to motivate executives to increase shareholder value and
further believes that executive officers can best increase shareholder value by
managing the revenues and operating profit of the Company and by conceiving,
developing and positioning the leading products and services in the Company's
chosen markets.
Compensation payments in excess of $1 million to the Chief Executive
Officer or other executive officers are subject to a limitation of deductibility
for the Company under Section 162(m) of the Internal Revenue Code of 1986, as
amended. Certain performance-based compensation is not subject to the limitation
on deductibility. The
- ---------------
2 The material in this report is not "soliciting material," is not deemed
"filed" with the SEC, and is not to be incorporated by reference into any
filing of the Company under the 1933 Act or 1934 Act, whether made before or
after the date hereof and irrespective of any general incorporation language
contained in such filing.
9
<PAGE> 12
Committee does not expect cash compensation to its Chief Executive Officer or
any other executive officer in the foreseeable future to be in excess of $1
million.
BASE SALARY
The Nominating and Compensation Committee sets the base salary for
executives at the beginning of each fiscal year, based upon a review of the
salaries for comparable positions in companies in the Company's industry and
other related industries, the historical compensation levels of the Company's
executives and the individual performance of the executives in the preceding
year.
MERIT BONUS PROGRAM
Each year the Nominating and Compensation Committee intends to adopt
management incentive plans for the executive officers, which reflect the
Committee's belief that a portion of each executive officer's compensation
should be tied to the achievement by the Company of its revenue and profit goals
and balance sheet performance objectives, and by each executive officer of his
individual objectives as determined by the Nominating and Compensation
Committee. Merit bonus goals based on the fiscal 1999 operating plan were
determined by the Nominating and Compensation Committee and approved by the
Board of Directors at the beginning of the fiscal year based upon these
criteria. In addition, the plans for fiscal 1999 prescribed adjustments in the
merit bonus goals based upon the Company's actual operating profit. At the end
of the fiscal year, the Board of Directors allocated merit bonuses to individual
executives based on the executive's performance relative to his or her
performance objectives.
STOCK-BASED COMPENSATION
Awards of stock options under the Company's stock option plan are designed
to closely tie the long-term interests of the Company's executives and its
shareholders and to assist in the retention of executives. The Nominating and
Compensation Committee selects the executive officers, if any, to receive stock
options and determines the number of shares subject to each option. However, all
grants of stock options are ultimately authorized by the Company's Board of
Directors. The Nominating and Compensation Committee's determination of the size
of option grants is generally intended to reflect an executive's position with
the Company and his or her contributions to the Company. Options generally have
a three-year vesting period to encourage key employees to continue in the employ
of the Company. The Compensation Committee reviews the outstanding unvested
options of the key executives from time to time and may grant additional options
to encourage the retention of key executives. Options for 20,000 shares were
granted to executive officers in fiscal 1999 to reward the executive officers
for their performance in fiscal 1998 and to establish appropriate incentives for
these key executives.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Chief Executive Officer's compensation generally is based on the same
policies and criteria as the other executive officers. However, the bonus
portion of the compensation package represents a larger portion of total
compensation than other executive officers.
******
The foregoing report is provided by the following directors, who were
members of the Nominating and Compensation Committee on June 30, 1999:
William A. Indelicato, Chairman
Gary E. West
Ben Exley, IV
10
<PAGE> 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
WEST RENTALS, INC.
The Company leases 46 buildings from West Rentals, Inc., a West Virginia
corporation ("West Rentals"), 41 of which are leased pursuant to a Master Lease
Agreement (the "Master Lease") and five of which are leased pursuant to
pass-through subleases. Gary E. West, the Company's Chairman of the Board, is
the sole shareholder of West Rentals. The Master Lease terminates on July 31,
2007 and may be renewed for an additional five-year term. Currently, the Company
pays an aggregate of $170,200 a month to West Rentals as rent for all real
property leased. In addition, the Company pays all utility bills and fees as
well as all property and local taxes on the real property leased from West
Rentals. The Company also rents cylinders and trailers from West Rentals and
currently pays approximately $6,529 a month to West Rentals for such rentals.
Employees of the Company provide occasional construction, maintenance and
clerical related services to West Rentals. The Company bills West Rentals for
such services on an hourly basis. Aggregate expenditures by the Company under
the Master Lease and for rental of cylinders and trailers was approximately
$2,212,887 for the fiscal year ended June 30, 1999. The Company believes that
the amounts it has paid for rental of real property, cylinders and trailers have
not been less favorable than could have been obtained in arms-length
transactions with unaffiliated third parties.
ACETYLENE PRODUCTS CORP.
The Company leases two buildings from Acetylene Products Corp. ("APC")
under ten-year leases expiring in March, 2008 for an aggregate amount of $11,575
per month. The Company also leases approximately 1,400 square feet of space
located in Wheeling, West Virginia from APC for use as an employee training
center at a cost of $50 per day. The Company believes that the current
arrangements with APC are not less favorable than could be obtained in
arms-length transactions with unaffiliated third parties. During fiscal 1999,
the Company paid APC $143,022.
INDELICATO CONSULTING ARRANGEMENT
William A. Indelicato, a director of the Company, provides consulting
services to the Company concerning all aspects of the Company's acquisition
program. The agreement with Mr. Indelicato provides for a monthly retainer fee
of $4,000, reimbursement of out-of-pocket expenses related to the performance of
services, and a variable payment for each acquisition completed in an amount
based primarily upon the purchase price and the annual sales of the business
acquired. In addition, the Company retains ADE to provide consulting services.
Mr. Indelicato is President of ADE. This agreement has a one year term, is
renewable each year for one year and can be terminated by either party giving
ninety day notice. Payments to Mr. Indelicato and ADE for fiscal 1999 totaled
$239,984.
EQUIPLEASE, CORP.
EquipLease Corp. ("EquipLease"), a corporation wholly-owned by Gary E.
West, rents an airplane to the Company at an monthly rate of $7,157. The Company
paid a total of $87,432 to EquipLease for rental of the airplane during fiscal
1999. The Company believes that the arrangements with EquipLease have not been
less favorable than could have been obtained in arms-length transactions with
unaffiliated third parties.
11
<PAGE> 14
PERFORMANCE GRAPH(3)
The following graph sets forth a comparison for the period beginning April
10, 1997 (the date the Company first became subject to the reporting
requirements of the Exchange Act) and ending June 30, 1999, of the cumulative
total return on a $100.00 investment in the Company's Common Stock, based on the
market price of the Common Stock, with the cumulative total return, assuming
reinvestment of dividends, on an investment of $100.00 for the same period in
companies on the Nasdaq Stock Market (U.S.) and on the S&P 500 Index. The
indices are included for comparative purposes only. They do not necessarily
reflect management's opinion that such indices are an appropriate measure of the
relative performance of the Company's Common Stock and are not intended to
forecast or be indicative of future performance of the Common Stock.
TOTAL SHAREHOLDER RETURNS
(DIVIDENDS REINVESTED)
<TABLE>
<CAPTION>
MONTH ENDING VALLEY NATIONAL GASES INC. S&P 500 INDEX S&P CHEMICALS COMPOSITE
- ------------ -------------------------- ------------- -----------------------
<S> <C> <C> <C>
'10 April 97' 100.00 100.00 100.00
'June 97' 131.25 117.13 117.37
'June 98' 137.50 152.46 136.22
'June 99' 53.13 187.15 134.38
</TABLE>
VOTING
A plurality of the votes cast are required to elect the directors. The
Company's Articles of Incorporation do not provide for cumulative voting. The
affirmative vote of the holders of a majority of the shares of the Company's
Common Stock entitled to vote which are present in person or represented by
proxy at the 1999 Annual Meeting is required to act on any other matters
properly brought before the meeting. Shares represented by proxies which are
marked "withhold authority" with respect to the election of the nominees for
election as directors and proxies which are marked to deny discretionary
authority on other matters will be counted for the purpose of determining the
number of shares represented by proxy at the meeting. Such proxies will thus
have the same effect as if the shares represented thereby were voted against
such other matters. Votes withheld for director nominees will not be counted. If
a broker indicates on the proxy that it does not have discretionary authority as
to certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter. If no
specification is made on a duly executed proxy, the proxy will be voted FOR the
election of the directors nominated by the Board of Directors and in the
discretion of the persons named as proxies on such other business as may
properly come before the meeting or any adjournment or postponement thereof.
- ---------------
3 This Section is not "soliciting material," is not deemed "filed" with the SEC
and is not to be incorporated by reference in any filing of the Company under
the 1993 Act or the 1934 Act whether made before or after the date hereof and
irrespective of any general incorporation language in any such filing.
12
<PAGE> 15
OTHER MATTERS
The Company knows of no other matters to come before the meeting. However,
if any other matters properly come before the meeting or any postponement or
adjournment thereof, the proxies solicited hereby will be voted on such matters
in accordance with the judgment of the persons voting such proxies.
SHAREHOLDER PROPOSALS
Proposals of Shareholders intended to be presented at the 2000 Annual
Meeting must be received by the Company by June 10, 2000 for inclusion in the
Company's proxy statement and proxy relating to that meeting. Upon receipt of
any such proposal, the Company will determine whether or not to include such
proposal in the proxy statement and proxy in accordance with regulations
governing the solicitation of proxies.
In order for a Shareholder to nominate a candidate for director, under the
Company's Bylaws, timely notice of the nomination must be given to the Company
in advance of the meeting. Ordinarily, such notice must be given not less than
60 nor more than 90 days prior to the date of any meeting of the shareholders at
which directors are to be elected. The Shareholder filing the notice of
nomination must describe various matters related to the nominee and the
shareholder filing the notice, as specified in the Company's Bylaws, including
such information as name, address, occupation, and number of shares held.
In order for a Shareholder to bring other business before a Shareholder
meeting, timely notice must be given to the Company. To be timely, such notice
must be delivered to or mailed and received at the Company's principal executive
offices not less than 60 days before nor more than 90 days prior to the meeting.
However, if the meeting is not held on the first Tuesday in August, and less
than 60 days' notice or prior public disclosure of the meeting date is given or
made to shareholders, then the notice from the shareholder must be received by
the close of business on the 15th day following the day on which such notice of
the meeting date was mailed or such public disclosure was made, whichever occurs
first. Such notice must include a description of the proposed business, the
reasons therefor and other matters specified in the Company's Bylaws. The Board
or the presiding officer at the Annual Meeting may reject any such proposals
that are not made in accordance with these procedures or that are not a proper
subject for Shareholder action in accordance with applicable law. These
requirements are separate from and in addition to the requirements a Shareholder
must meet to have a proposal included in the Company's proxy statement.
In each case the notice must be given to the Secretary of the Company,
whose address is 67 43rd Street, Wheeling, West Virginia 26003. Any Shareholder
desiring a copy of the Company's Restated Articles of Incorporation, as amended,
or Bylaws will be furnished a copy without charge upon written request to the
Secretary.
MISCELLANEOUS
Even if you plan to attend the meeting in person, please complete, sign,
date and return the enclosed proxy promptly. Should you attend the meeting, you
may revoke the proxy and vote in person. A postage-paid, return-addressed
envelope is enclosed for your convenience. No postage need be affixed if mailed
in the United States. Your cooperation in giving this your immediate attention
will be appreciated.
By Order of the Board of Directors
/s/ John R. Bushwack
John R. Bushwack, Secretary
Wheeling, West Virginia
October 8, 1999
13
<PAGE> 16
ANNEX A
FORM OF PROXY
[BACK]
MARK CHOICE AS INDICATED IN THIS EXAMPLE [X]
MANAGEMENT RECOMMENDS A VOTE FOR THE FOLLOWING:
1. Election of Three Directors
FOR NOMINEES LISTED (EXCEPT AS MARKED TO THE CONTRARY) [ ]
WITHHOLD AUTHORITY TO VOTE FOR NOMINEES LISTED [ ]
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR A NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME ON THE LIST BELOW.)
Nominees: For term expiring in 2002:
Gary E. West
John R. Bushwack
James P. Hart
The undersigned hereby acknowledges receipt of the 1999 Annual Report to
Shareholders and the Notice of said Annual Meeting and accompanying Proxy
Statement.
Please sign as registered and return promptly in the enclosed envelope to:
Valley National Gases Incorporated, c/o American Stock Transfer Company, 40 Wall
Street, 46th Floor, New York, New York 100005.
Dated this day of ,1999
(If Stock is owned in
joint names, both owners
must sign, or if owned
by a corporation,
partnership or trust,
this Proxy must be
signed by an authorized
officer, partner or
trustee.) If the address
at left is incorrect,
please write in the
correct information.
FOLD AND DETACH HERE
<PAGE> 17
ANNEX A
FORM OF PROXY
[FRONT]
VALLEY NATIONAL GASES INCORPORATED
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Robert D. Scherich and Lawrence E. Bandi, or
either of them, the true and lawful attorneys in fact, agents and proxies of the
undersigned to represent the undersigned at the Annual Meeting of the
Shareholders of VALLEY NATIONAL GASES INCORPORATED (the "Company") to be held on
Tuesday, October 26, 1999, commencing at 9:00 a.m., Pittsburgh time, at the
McLure House, 1200 Market Street, Wheeling, West Virginia 26003, and at any
postponement or adjournment of said meeting, and to vote all the shares of
Common Stock of the Company standing on the books of the Company in the name of
the undersigned as specified below and in the discretion of any such person on
such other business as may properly come before the meeting and any postponement
or adjournment thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF SAID NOMINEES AS DIRECTORS AND IN THE
DISCRETION OF THE PROXIES ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING AND ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
(continued and to be signed on reverse side)
FOLD AND DETACH HERE
