<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 MARCH 31, 2000
[ ] 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 May 12, 2000
----- ---------------------------
Common stock, $0.001 par value 9,347,584
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Valley National Gases Incorporated
TABLE OF CONTENTS
Page
PART I FINANCIAL INFORMATION
Item 1 Condensed Consolidated Balance Sheets as of June 30, 1999
and March 31, 2000 3
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 1999 and 2000 5
Condensed Consolidated Statements of Operations for the
Nine Months Ended March 31, 1999 and 2000 6
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended March 31, 1999 and 2000 7
Notes to Condensed Consolidated Financial Statements 8
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3 Quantitative and Qualitative Disclosures About Market Risk 16
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 16
Signatures 17
Exhibit Index 18
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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, March 31,
1999 2000
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 224,708 $ 1,510,659
Accounts receivable, net of allowance for
doubtful accounts of $454,981 and
$589,423, respectively 11,960,059 16,658,645
Inventory 11,173,995 13,234,819
Prepaids and other 1,965,966 845,579
------------ ------------
Total current assets 25,324,728 32,249,702
------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Land 49,786 33,000
Buildings and improvements 4,413,900 4,662,356
Equipment 56,906,554 65,783,124
Transportation equipment 10,172,945 11,647,442
Furniture and fixtures 4,102,422 4,510,071
------------ ------------
Total property, plant and equipment 75,645,607 86,635,993
Accumulated depreciation (29,857,130) (33,288,273)
------------ ------------
Net property, plant and equipment 45,788,477 53,347,720
------------ ------------
OTHER ASSETS:
Intangibles, net of amortization of $10,268,270
and $13,566,909, respectively 35,773,717 44,741,976
Deposits and other assets 1,638,801 1,545,052
------------ ------------
Total other assets 37,412,518 46,287,028
------------ ------------
TOTAL ASSETS $108,525,723 $131,884,450
============ ============
</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, March 31,
------------------------------------ 1999 2000
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 6,294,130 $ 7,265,111
Bank overdraft -- 1,114,624
Accounts payable, trade 4,418,974 3,688,786
Accrued compensation and employee benefits 3,198,918 3,190,653
Other current liabilities 1,799,297 3,304,389
------------ ------------
Total current liabilities 15,711,319 18,563,563
LONG-TERM DEBT, less current maturities 56,242,003 72,297,347
DEFERRED TAX LIABILITY 7,864,661 9,240,899
OTHER LONG-TERM LIABILITIES 1,663,096 1,876,933
------------ ------------
Total liabilities 81,481,079 101,978,742
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock, par value, $.001 per share-
Authorized, 30,000,000 shares
Issued, 9,620,084 shares 9,620 9,620
Paid-in-capital 19,269,338 19,269,338
Retained earnings 10,029,114 12,890,178
Treasury stock at cost, 272,500 shares (2,263,428) (2,263,428)
------------ ------------
Total stockholders' equity 27,044,644 29,905,708
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $108,525,723 $131,884,450
============ ============
</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
March 31,
----------------------------------
1999 2000
----------- ------------
<S> <C> <C>
NET SALES $28,027,430 $36,822,963
COST OF PRODUCTS SOLD, excluding depreciation
and amortization 12,711,518 18,654,262
----------- -----------
Gross profit 15,315,912 18,168,701
----------- -----------
EXPENSES:
Operating and administrative 10,247,292 11,959,542
Depreciation and amortization 2,102,076 2,542,403
----------- -----------
Total expenses 12,349,368 14,501,945
----------- -----------
Income from operations 2,966,544 3,666,756
INTEREST EXPENSE 1,002,027 1,476,451
OTHER INCOME (EXPENSE) NET 62,958 80,032
----------- -----------
EARNINGS BEFORE INCOME TAXES 2,027,475 2,270,337
PROVISION FOR INCOME TAXES 831,264 998,948
----------- -----------
NET EARNINGS 1,196,211 1,271,389
=========== ===========
ACCRETION OF REDEEMABLE COMMON STOCK 131,353 --
----------- -----------
NET EARNINGS AVAILABLE FOR COMMON STOCK $ 1,064,858 $ 1,271,389
=========== ===========
BASIC EARNINGS PER SHARE $ 0.11 $ 0.14
DILUTED EARNINGS PER SHARE 0.11 0.14
WEIGHTED AVERAGE SHARES:
Basic 9,535,278 9,347,584
Diluted 9,535,278 9,354,439
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 6
VALLEY NATIONAL GASES INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
-----------------------------------
1999 2000
------------ -----------
<S> <C> <C>
NET SALES $75,853,143 $93,651,031
COST OF PRODUCTS SOLD, excluding depreciation
and amortization 34,185,287 46,150,301
------------ -----------
Gross profit 41,667,856 47,500,730
------------ -----------
EXPENSES:
Operating and administrative 27,985,380 31,924,054
Depreciation and amortization 6,079,907 6,955,264
------------ -----------
Total expenses 34,065,287 38,879,318
------------ -----------
Income from operations 7,602,569 8,621,412
INTEREST EXPENSE 2,940,057 3,772,360
OTHER INCOME (EXPENSE) NET 193,974 259,990
------------ -----------
EARNINGS BEFORE INCOME TAXES 4,856,486 5,109,042
PROVISION FOR INCOME TAXES 1,991,159 2,247,978
------------ -----------
NET EARNINGS 2,865,327 2,861,064
============ ===========
ACCRETION OF REDEEMABLE COMMON STOCK 227,178 --
------------ -----------
NET EARNINGS AVAILABLE FOR COMMON STOCK $ 2,638,149 $ 2,861,064
============ ===========
BASIC EARNINGS PER SHARE $ 0.28 $ 0.31
DILUTED EARNINGS PER SHARE 0.27 0.31
WEIGHTED AVERAGE SHARES 9,591,646 9,347,584
DILUTED AVERAGE SHARES 9,603,731 9,350,348
</TABLE>
The accompanying notes are an integral part of these financial statements.
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VALLEY NATIONAL GASES INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
------------------------------------
1999 2000
------------ ------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 6,591,520 $ 5,889,437
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of assets 8,922 231,545
Purchases of property and equipment (5,261,115) (4,619,393)
Business acquisitions, net of cash acquired (7,496,390) (9,752,174)
------------ ------------
Net cash used by investing activities (12,748,583) (14,140,022)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 17,824,049 21,453,074
Principal payments on loans (9,500,939) (11,916,538)
Purchase of treasury shares (2,263,428) --
------------ ------------
Net cash provided by
financing activities 6,059,682 9,536,536
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (97,381) 1,285,951
CASH AND CASH EQUIVALENTS, beginning of period 589,170 224,708
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 491,789 $ 1,510,659
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for interest $ 2,944,963 $ 3,327,904
============ ============
Cash payments for income taxes $ 1,316,284 $ 901,280
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 8
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, 1999.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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, March 31,
1999 2000
----------- -----------
(Unaudited)
<S> <C> <C>
Hardgoods $ 9,753,794 $12,237,335
Gases 1,420,201 997,484
----------- -----------
$11,173,995 $13,234,819
=========== ===========
</TABLE>
PLANT AND EQUIPMENT
Plant and equipment are stated at cost. Depreciation is provided on the
straight-line basis over the estimated useful lives of the related assets.
Effective July 1, 1998, the Company changed its estimate of the useful
lives of its cylinders and tanks from 12 to 30 years. This change was made to
better reflect the estimated periods during which these assets will remain in
service.
The Company changed the estimated useful life of cylinders as a result of
thorough studies and analyses. The studies considered technological advances in
cylinders, empirical data obtained from cylinder manufacturers and other
industry experts and experience gained from the Company's maintenance of a
cylinder population of approximately 400,000 cylinders.
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.
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<PAGE> 9
During the nine months ended March 31, 2000, the Company purchased five
businesses. The largest of these acquisitions and the effective date was Lee's
Gas Supply, Inc. (December 1999).
In connection with these acquisitions, the total purchase price, fair value
of assets acquired, cash paid and liabilities assumed were as follows:
<TABLE>
<CAPTION>
Nine Months
Ended
March 31,
2000
-----------
(Unaudited)
<S> <C>
Cash paid $ 9,856,996
Notes issued to sellers 2,000,000
Notes payable and capital leases assumed
2,239,789
Other liabilities assumed and acquisition costs 3,150,000
-----------
Total purchase price allocated to assets acquired $17,246,785
===========
</TABLE>
4. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30, March 31,
1999 2000
----------- -----------
(Unaudited)
<S> <C> <C>
Revolving note, interest at LIBOR plus 1.875%
payable monthly through January 2001. Secured
by the assets of the Company. $36,756,726 $53,881,202
Term note, interest at LIBOR plus 1.875% payable
monthly through October 2003. Secured by the
assets of the Company. 10,872,905 8,954,150
Note payable, interest at 6.6% payable annually
through October 2003. Secured by certain
assets of the Company. 3,415,372 2,732,298
Individuals and corporations, mortgages and
notes, interest at 3.7% to 10.00%, payable at
various dates through 2010. 11,648,116 14,134,917
----------- -----------
62,693,119 79,702,567
Original issue discount (156,986) (140,109)
Current maturities (6,294,130) (7,265,111)
----------- -----------
Total long-term debt $56,242,003 $72,297,347
=========== ===========
</TABLE>
Prime rate was 9.0% and LIBOR was 6.0% at March 31, 2000.
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, including a letter of credit
sublimit of $25.0 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 pays a fee for the unused portion of the revolving loan. The
revolving loan is used primarily to fund acquisitions. The Company is not
required to make principal
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<PAGE> 10
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 8.1%
as of March 31, 2000. As of March 31, 2000, availability under the revolving
loan was approximately $13.6 million, with outstanding borrowings of
approximately $53.9 million and outstanding letters of credit of approximately
$7.8 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.
On May 1, 2000, the Company amended its credit facility with its banks. See
Note 6 for further discussion.
5. EARNINGS PER SHARE
Basic earnings per share were computed based on the weighted average number
of common shares issued and outstanding during the relevant periods. Diluted
earnings per common share were computed based on the weighted average number of
common shares issued and outstanding plus additional shares assumed to be
outstanding to reflect the dilutive effect of common stock equivalents using the
treasury stock method.
Options to purchase 232,400 shares of common stock were outstanding during
the nine months and quarter ended March 31, 2000, but were not included in the
computation of diluted earnings per common share as the options' exercise price
was greater than the average market price of the common stock for the period.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------------- --------------------------------
1999 2000 1999 2000
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Net earnings available for common
stock $1,064,858 $1,271,389 $2,638,149 $ 2,861,064
========== ========== ========== ===========
Basic earnings per common share:
Weighted average common shares 9,535,278 9,347,584 9,591,656 9,347,584
========== ========== ========== ===========
Basic earnings per common share $ 0.11 $ 0.14 $ 0.28 $ 0.31
========== ========== ========== ===========
Diluted earnings per common share:
Weighted average common shares 9,535,278 9,347,584 9,591,656 9,347,584
Shares issuable from assumed
conversion of common stock
equivalents -- 6,855 12,075 2,764
---------- ---------- ---------- -----------
Weighted average common and common
equivalent shares 9,535,278 9,354,439 9,603,731 9,350,348
========== ========== ========== ===========
Diluted earnings per common share $ 0.11 $ 0.14 $ 0.27 $ 0.31
========== ========== ========== ===========
</TABLE>
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<PAGE> 11
6. SUBSEQUENT EVENTS
On May 1, 2000, the Company entered into a second amended and restated
credit agreement with Bank One, as agent. This agreement increased the maximum
revolving note borrowings to $100 million, from the previous maximum borrowings
level of $75.3 million, and extended the maturity of the revolving note to May
1, 2003. The agreement permits the Company, on an annual basis, to request that
the maturity be extended one year. No significant changes were made to pricing
and the covenant requirements when compared to the original agreement.
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 eleven
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 $120.1 million for
the last twelve months. In fiscal 1999, gases accounted for approximately 40% of
net sales, welding equipment and supplies accounted for approximately 45% of net
sales, and cylinder and tank rental accounted for approximately 15% of net
sales.
The Company believes it has been successful in executing its strategy of
growth through acquisitions, having completed 46 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. Seasonality of total
sales has increased as propane sales as a percentage of total sales have
increased.
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 seasonality of sales mentioned above and the
generally fixed nature of these expenses.
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<PAGE> 12
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, in some cases, has decreased in comparison to
prior years. Future acquisitions may affect this pattern depending upon the
product mix of the acquired businesses.
RESULTS OF OPERATIONS
Comparison of Three Months Ended March 31, 2000 and 1999
Net sales increased 31.4%, or $8.8 million, to $36.8 million from $28.0
million for the three months ended March 31, 2000 and 1999, respectively.
Acquisitions made during the preceeding twelve months contributed $4.4 million
of the increase in net sales, while same store sales increased $4.4 million.
Same store sales increased 15.6% versus the same quarter last year. Gases and
cylinder revenue represented 57.5% of net sales for the three months ended March
31, 2000, with hard goods representing 42.5%. In comparison, net sales for the
three months ended March 31, 1999 reflected gases and cylinder revenue as 57.4%
and hard goods as 42.6%.
Gross profit, which excludes depreciation and amortization, increased
18.6%, or $2.9 million, to $18.2 million from $15.3 million for the three months
ended March 31, 2000 and 1999, respectively. Of this increase, $2.2 million was
attributable to acquisitions made during the last twelve months. Same stores
contributed an increase of $0.7 million versus the same quarter last year. Gross
profit as a percentage of net sales was 49.3% for the three months ended March
31, 2000, compared to 54.6% for the three months ended March 31, 1999. Reduced
gross profit as a percentage of sales for propane products reduced the total
company average 4.4%. The balance of the change was primarily the result of
changes in the mix of products sold. Propane costs averaged 100% higher for the
quarter compared to the same quarter last year as sales per gallon increased
37%. The increase in propane cost for the quarter was consistent with industry
changes in heating fuel costs. Gross profit as a percentage of sales, for
propane products decreased 19% compared to the prior year quarter with gross
profit decreasing $.04 per gallon.
Operating and administrative expenses increased 16.7%, or $1.7 million, to
$12.0 million from $10.3 million for the three months ended March 31, 2000 and
1999, respectively. Of this increase, $1.5 million was related to acquired
businesses while base business increased $0.2 million. Operating and
administrative expenses as a percentage of sales was 32.5% for the three months
ended March 31, 2000, as compared to 36.6% for the same quarter in 1999. This
reflects the effect of leveraging acquisitions made during the last twelve
months, the before mentioned increase in same store sales and the Company's cost
containment efforts.
Depreciation and amortization expense increased $0.4 million for the three
months ended March 31, 2000 compared to the same period in 1999, reflecting the
increase from acquisitions made during the last twelve months.
Interest expense increased $0.5 million for the quarter, reflecting the
financing of acquisitions made during the last twelve months and increases in
bank interest rates.
Net earnings increased 19.4% to $1.3 million for the three months ended
March 31, 2000 compared to $1.1 million after accretion of redeemable common
stock for the prior year quarter.
Comparison of Nine Months Ended March 31, 2000 and 1999
Net sales increased 23.5%, or $17.8 million, to $93.7 million from $75.9
million for the nine months ended March 31, 2000 and 1999, respectively.
Acquisitions made
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<PAGE> 13
during the preceding twelve months contributed $9.7 million of the increase in
net sales, while same store sales increased $8.1 million. Same store sales
increased 10.7% versus the same period last year reflecting increased propane
sales, a partial recovery in steel related markets and the Company's efforts to
improve service to its customers. Gases and cylinder revenue represented 55.8%
of net sales for the nine months ended March 31, 2000, with hard goods
representing 44.2%. In comparison, net sales for the nine months ended March 31,
1999 reflected gases and cylinder revenue as 56.3% and hard goods as 43.7%. This
change in sales mix reflects the effect of acquisitions made during the
preceding twelve months and the before mentioned factors that affected same
store sales.
Gross profit, which excludes depreciation and amortization, increased
14.0%, or $5.8 million, to $47.5 million from $41.7 million for the nine months
ended March 31, 2000 and 1999, respectively. Acquisitions made during the
preceeding twelve months contributed $4.9 million of the increase in gross
profit, while the gross profit in the base business increased $0.9 million.
Gross profit as a percentage of net sales was 50.7% for the nine months ended
March 31, 2000, compared to 54.9% for the nine months ended March 31, 1999. This
change reflects, primarily, the effect of decreased gross profit, as a
percentage of sales, for propane products.
Operating and administrative expenses increased 14.1%, or $3.9 million, to
$31.9 million from $28.0 million for the nine months ended March 31, 2000 and
1999, respectively. Of this increase, $3.3 million was related to acquired
businesses and the remaining $0.6 million reflected increases on a same store
basis. Operating and administrative expenses as a percentage of sales was 34.1%
for the nine months ended March 31, 2000, as compared to 36.9% for the same
period in 1999, reflecting the addition of operating expenses related to
acquired businesses as a percentage of sales and the effect of the increase in
same store sales.
Depreciation and amortization expense increased $0.9 million for the nine
months ended March 31, 2000 compared to the same period in 1999, reflecting the
increase from acquisitions made during the last twelve months.
Interest expense increased $0.8 million for the nine months, reflecting the
financing of acquisitions made during the last twelve months along with the
increase in bank interest rates.
Net earnings increased to $2.9 million for the nine months ended March 31,
2000 compared to $2.6 million, after accretion of redeemable common stock, for
the same period last year.
YEAR 2000 COMPLIANCE
Our Year 2000 compliance efforts were completed and we have experienced no
problems to date with our internal automated systems as a result of Year 2000.
In or before 1999, many of our critical suppliers and vendors indicated that
they were, or would be, Year 2000 compliant during 1999. We have not
experienced, and are not aware of, any Year 2000 problems affecting our critical
suppliers and vendors. We cannot guarantee that our efforts will prevent a
material adverse impact on our results of operations, financial condition or
cash flow that might result from the failure of any key third party systems to
accommodate the Year 2000 problem. We believe our efforts to address the Year
2000 issue will minimize possible negative consequences to Valley National
Gases, Inc.
LIQUIDITY AND CAPITAL RESOURCES
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.
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<PAGE> 14
At March 31, 2000, the Company had working capital of approximately $13.7
million. Funds provided by operations for the nine months ended March 31, 2000
were approximately $5.9 million. Funds used for investing activities were
approximately $14.1 million for the nine months ended March 31, 2000, consisting
primarily of capital spending and financing for acquisitions. Sources of funds
from financing activities for the nine months ended March 31, 2000 were
approximately $9.5 million from net borrowings. The Company's cash balance
increased $1.3 million during the nine months to $1.5 million.
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, including a letter of credit
sublimit of $25.0 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 pays a fee for the unused portion of the revolving loan. 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 8.1% as of March 31, 2000. As of March 31, 2000,
availability under the revolving loan was approximately $13.6 million, with
outstanding borrowings of approximately $53.9 million and outstanding letters of
credit of approximately $7.8 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.
On May 1, 2000, the Company entered into a second amended and restated
credit agreement with Bank One, as agent. This agreement increased the maximum
revolving note borrowings to $100 million, from the previous maximum borrowings
level of $75.3 million, and extended the maturity of the revolving note to May
1, 2003. The agreement permits the Company, on an annual basis, to request that
the maturity be extended one year. No significant changes were made to pricing
and the covenant requirements when compared to the original agreement.
The Company is obligated under various promissory notes related to the
financing of acquisitions that have various rates of interest, ranging from 3.7%
to 10.0% per annum, and maturities through 2010. The outstanding balance of
these notes as of March 31, 2000 was $16.9 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 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.
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
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<PAGE> 15
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. On August 28, 1998, the Company entered into an interest
rate swap agreement with Bank One to reduce the impact of changes in interest
rates. This 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 5.40% 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.
The Company has entered into a put/call option agreement with an independent
distributor for the purchase of its business. This option becomes exercisable
beginning in the year 2002 and ending in the year 2008. The Company believes
that it will have adequate capital resources available to fund this acquisition
at such time that the option is exercised.
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 are higher for the second and third
quarters than for the first and fourth quarters of the fiscal year.
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 May 1, 2000, the Company entered into a second amended and restated
credit agreement with Bank One, as agent. This agreement increased the maximum
revolving note borrowings to $100 million, from the previous maximum borrowings
level of $75.3 million, and extended the maturity of the revolving note to May
1, 2003. The agreement permits the Company, on an annual basis, to request that
the maturity be extended one year. No significant changes were made to pricing
and the covenant requirements when compared to the original agreement.
RECENT ACCOUNTING PRONOUNCEMENTS
On June 15, 1998, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". The Statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met.
In June 1999, the FASB issued Financial Accounting Standards No. 137,
Accounting
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<PAGE> 16
for Derivative Instruments and Hedging Activities - Deferral of the effective
date of SFAS No 133." Both statements are effective for years beginning after
June 15, 2000.
The Company has not yet quantified the impact of adopting Statement 133 on
our financial statements. However, the Statement could increase volatility in
earnings.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No change has occurred since the filing by the Registrant on Form 10-K for
the year ended June 30, 1999. Reference is made to Part II, Item 7A,
Quantitative and Qualitative Disclosures About Market Risk, in the Registrant's
Annual Report on Form 10-K for the year ended June 30, 1999.
There was no change to the composition of the Company's fixed and variable
rate long term debt or interest rate swaps during the nine months ended March
31, 2000. As of March 31, 2000 the Company's average pay rate for these swaps
was 5.51% compared to its average receive rate of 6.01%.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
See the Exhibit Index on page 18.
(b) Reports on Form 8-K:
No reports on Form 8-K were made during the quarter.
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<PAGE> 17
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
May 15, 2000 /s/ Robert D. Scherich
-----------------------------------------
Robert D. Scherich
Chief Financial Officer
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<PAGE> 18
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)
10.18 Second Amended and Restated Credit Agreement dated May 1, 2000,
between the Company and Bank One, Indiana NA, as agent
27.1 Financial Data Schedule (provided for the information of the
U.S. Securities and Exchange Commission only)
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<PAGE> 1
Exhibit 10.18
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT is executed
as of the 1st day of May, 2000 ("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 ("Bank One"), LASALLE BANK NATIONAL ASSOCIATION, a
national banking association ("LaSalle"), FIRSTAR, N.A. (formerly, Star Bank,
National Association), a national banking association with its principal office
in Cincinnati, Ohio ("Firstar"), BANK OF AMERICA, N.A. (successor to
NationsBank, N.A.), a national banking association ("B of A"), NATIONAL CITY
BANK, a national banking association,("National City"), THE HUNTINGTON NATIONAL
BANK, a national banking association ("Huntington"), WESBANCO BANK, INC.
"WesBanco"), and SKY BANK ("Sky Bank") (collectively, the "Signatory Lenders"),
National City, as syndication agent ("Syndication Agent"), Huntington, as
documentation agent for the Lenders ("Documentation Agent"), and Bank One, as
administrative and collateral agent for the Lenders (in such capacity, the
"Agent"; Syndication Agent, Documentation Agent and Agent being collectively
referred to as the "Agents").
RECITALS
1. The Company, VNGDI, VNGI, the Initial Lenders, PNC Bank,
National Association ("PNC") and the Agent, are parties to an Amended and
Restated Credit Agreement, dated January 23, 1998 (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"), PNC has sold, transferred and assigned to Bank One,
WesBanco and Sky Bank and/or the Agent specified interests in and obligations
under 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, such interests aggregating all of
PNC's rights, title and interests therein and obligations and lending
commitments thereunder.
<PAGE> 2
4. The Company, VNGDI and VNGI (referred to herein
collectively, as the "Credit Parties", and individually as a "Credit Party")
have requested the Signatory Lenders 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 Signatory Lenders, the Agent and the Credit Parties agree to
amend, and as so amended, restate, the Original Agreement as follows:
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 the
Agent 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)
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<PAGE> 3
calendar month period preceding such New Acquisition Closing Date as
may be agreed and approved by the Agent, 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 the Agent) of such Related Business Entity by virtue of
the acquisition.
"Adjusted LIBOR Rate" means, with respect to any LIBOR Advance and the
related Interest Period, the per annum rate obtained by dividing (i)
the LIBOR Rate for such LIBOR Advance and related Interest Period, by
(ii) an amount equal to one minus the stated maximum rate (expressed as
a decimal) of all reserve requirements (including, without limitation,
any marginal, emergency, supplemental, special or other reserves) that
is specified on the first day of such Interest Period by the Board of
Governors of the Federal Reserve System (or any successor agency
thereto) for determining the maximum reserve requirement with respect
to eurocurrency funding (currently referred to as "Eurocurrency
liabilities" in Regulation D of such Board) maintained by a member bank
of such System.
"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.
"Agents" has the meaning ascribed to such term in the preamble to this
Agreement.
"Aggregate Commitment" means the aggregate of the Commitments of all of
the Lenders, as reduced from time to time pursuant to the terms of this
Agreement.
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<PAGE> 4
"Agreement" means this Second 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:
Ratio of
Total Funded Debt to EBITDA Applicable LOC Fee Percentage
--------------------------- -----------------------------
3.75 or above 1.50%
3.50 to 3.74 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%
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 Lenders agree for purposes of the Applicable LOC Fee Percentage, the
Applicable Spread and the Applicable Unused Commitment Fee Percentage shall be
between 3.50 and 3.74 as of the Closing Date) and shall be redetermined, based
on the Ratio of Total Funded Debt to EBITDA as of the close of each fiscal
quarter of the Company thereafter, concurrently with each 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 as and for the period provided in
the definition of "Ratio of Total Funded Debt to EBITDA."
Notwithstanding the foregoing, the Applicable LOC Fee Percentage shall
be as follows if, and during any period the Letter of Credit Exposure (including
any Letter of Credit requested to be issued) exceeds that amount equal to twenty
percent (20%) of the sum of the then-outstanding principal balance of the
Obligations (inclusive of the then-outstanding Letter of Credit Exposure):
Ratio
Total Funded Debt to EBITDA Applicable LOC Fee Percentage
--------------------------- -----------------------------
3.75 or above 2.250%
3.50 to 3.74 2.125%
3.00 to 3.49 1.875%
2.50 to 2.99 1.625%
2.00 to 2.49 1.250%
Below 2.00 1.000%
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<PAGE> 5
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:
Ratio of
Total Funded Debt to EBITDA Applicable LOC Fee Percentage
--------------------------- -----------------------------
3.75 or above 0.75%
3.50 to 3.74 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%
"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:
Ratio of
Total Funded If Determining a If Determining a
Debt to EBITDA Prime-based Rate LIBOR-based Rate
-------------- ---------------- ----------------
3.75 or above 0.50% 2.25%
3.50 to 3.74 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%
5
<PAGE> 6
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 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:
Ratio of Total Funded Applicable Unused Commitment
Debt to EBITDA Fee Percentage
--------------------- ----------------------------
3.75 or above 0.50%
3.50 to 3.74 0.50%
3.00 to 3.49 0.375%
2.50 to 2.99 0.375%
2.00 to 2.49 0.25%
less than 2.00 0.25%
6
<PAGE> 7
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.
"Arranger" means Banc One Capital Markets, Inc., its successors and
assigns.
"Asset Sale Payment" has the meaning ascribed to such term in Section
2.06 of this Agreement.
"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.
"Bank One Prime Rate" means a variable per annum interest rate at all
times equal to the per annum interest rate established by Bank One from
time to time as its "prime rate," such rate to change contemporaneously
with each change in such established per annum rate (it being
acknowledged that such announced or established
7
<PAGE> 8
rate may not necessarily be the lowest rate charged by Bank One to any
of its customers and shall not necessarily be representative of the
rate of interest actually charged by Bank One on any loan or class of
loans).
"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 Lender's business activities.
"Budgeted Acquisition Capital Expenditures" means, Capital Expenditures
made by the Company for or in connection with a New Acquisition and
which are actually incurred at or within twelve (12) months after the
New Acquisition Closing Date and do not exceed in the aggregate the
budgeted total of Capital Expenditures for such New Acquisition, as set
forth in a Capital Expenditure Budget for the New Acquisition provided
to the Agent by the Company within thirty (30) days after the New
Acquisition Closing Date.
"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.
"Cash Collateral" means any and all cash (or qualified investment
property as may be acceptable to the Required Lenders in their sole
discretion) required or permitted to be pledged by any Person to the
Agent for the pro rata benefit of the Lenders 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 Lenders 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 Lenders 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
8
<PAGE> 9
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 and collateral assignment
documents as may be required by the Required Lenders to attach and
perfect and maintain perfection of such security interests and liens in
the Collateral Account Property, all in form and substance satisfactory
in all respects to the Required Lenders.
"Change of Control" means: VNGDI shall cease to own Voting Stock of the
Company in an aggregate representing 100% of the total aggregate voting
power of all classes of the Voting Stock of the Company, calculated on
a fully diluted basis, including Convertible Securities convertible
into or exchangeable for Voting Stock of the Company; or VNGI shall
cease to own Voting Stock of VNGDI in an aggregate representing 100% of
the total aggregate voting power of all classes of the Voting Stock of
VNGDI, calculated on a fully diluted basis, including Convertible
Securities convertible into or exchangeable for Voting Stock of VNGDI.
"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 Lender, 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 amounts of the initial Commitment of each Lender with
respect to the Revolving Loans, the Letters of Credit and the Term Loan
are 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
Lender 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
under the heading and caption "Commitment Percentage", as amended from
time to time and at any time in accordance with the terms of this
9
<PAGE> 10
Agreement, or as the context requires, shall mean, when used with
reference to any Lender, the percentage set opposite its designation on
EXHIBIT B under the heading "Commitment Percentage", 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.
"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(f) 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 Lenders and the Agent, in
form and substance the same as EXHIBIT D to this Agreement, 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
10
<PAGE> 11
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.
"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 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
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<PAGE> 12
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.
"EBITDAR" means, with respect to the Credit Parties and their
respective Subsidiaries for any period, the EBITDA for such period,
plus the Rent Expense for such period.
"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.
"Federal Funds Rate" means, for any day, the average of the rates on
overnight federal funds transactions with members of the Federal
Reserve System arranged by
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<PAGE> 13
federal funds brokers, as published by the Federal Reserve Bank of New
York for such day, or, if such rate is not so published for any day,
the average of the quotations for such rates received by the Bank from
three federal funds brokers of recognized standing selected by the Bank
in its discretion from time to time as the opening federal funds rate
paid or payable by the Bank in its regional federal funds market for
overnight borrowings from other banks.
"Financial Statements" includes, but is not limited to, balance sheets,
profit and loss statements, and cash flow statements, prepared in
accordance with GAAP.
"Fixed Charge Coverage Ratio" means, with respect to the Credit Parties
and their respective Subsidiaries for any period, a ratio of EBITDAR 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 depreciation expense deducted in determining the amount of
Consolidated Net Income for 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; plus (vi)
Rent Expense deducted in determining the amount of Consolidated Net
Income for such period; plus (vii) Stock Redemption Expense paid or
payable 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.
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<PAGE> 14
"Guarantors" means, collectively, VNGDI, VNGI and any Subsidiary of the
Company which hereafter unconditionally guaranties the Obligations
pursuant to a Guaranty executed and delivered by such Subsidiary in
favor of the Lenders, 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.
"Highest Lawful Rate" means the maximum rate of interest which may be
charged the Company by the Lenders under applicable state or federal
usury law or regulation or any other law or regulation, however
characterized, limiting the rate of interest which may be charged to
corporations.
"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
previous version thereof which remain outstanding on the Closing Date.
"Intercreditor Agreements" means, collectively, Intercreditor and
Subordination Agreements among the Agent, the Company and certain of
the Existing Acquisition Sellers and which are outstanding on the
Closing Date, as the same may be amended, modified, extended, renewed,
supplemented, replaced and/or restated from time to time and at any
time.
"Initial Lenders" means, collectively, Bank One, LaSalle, Firstar, B of
A, National City and Huntington.
"Interest Period" means, with respect to any LIBOR Advance, the one (1)
month, two (2) month, three (3) month or six (6) month period selected
by the Company as provided in this Agreement and commencing on that day
designated by the Company in its written notice to the Bank making such
selection (so long as such day is not less than two (2) London Business
Days after the date of such notice). Each Interest Period for a LIBOR
Advance that begins on the last day of a calendar month (or on a day
for which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last London Business Day of
the appropriate sequent calendar month.
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Each Interest Period for a LIBOR Advance which would otherwise end on a
day which is not a London Business Day shall end on the immediately
succeeding London Business Day (unless such immediately succeeding
London Business Day is in another calendar month, in which case such
Interest Period shall end on the immediately preceding London Business
Day).
"Interest Rate Agreement" means any interest rate hedging agreement,
interest rate swap agreement, interest rate cap agreement, foreign
currency hedging agreement or other interest rate or foreign currency
protection agreement or arrangement designed to protect the Company
against fluctuations in interest rates or foreign currency values. (The
amount of the obligation under any Interest Rate Agreement shall be the
amount determined in respect thereof as of the end of the most recently
ended fiscal quarter of such Person, based on the assumption that such
Interest Rate Agreement had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to
such Interest Rate Agreement provides for the netting of amounts
payable by and to such Person thereunder or if any such agreement
provides for the simultaneous payment of amounts by and to such Person,
then in each such case, the amount of such obligation shall be the net
amount so determined.)
"Lenders" means, collectively, the Signatory Lenders and any Purchaser
that becomes a Lender party to this Agreement pursuant to the terms of
Section 9.08 of this Agreement, together with their respective
successors and assigns, and "Lender" means any one of the Lenders.
"Letters of Credit" means all standby letters of credit issued by Bank
One pursuant to Section 2.03 of this Agreement, but also 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
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<PAGE> 16
(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 Advance" means any Advance or portion of the Revolving Loans
(or, if the case, the entire outstanding principal balance of the
Revolving Loans) or any portion of the Term Loan (or, if the case, the
entire outstanding principal balance of the Term Loan) as to which a
LIBOR-based Rate is elected by the Company pursuant to this Agreement.
"LIBOR-based Rate" means a per annum rate at which interest accrues on
a LIBOR Advance equal to the sum of the applicable Adjusted LIBOR Rate,
plus the Applicable Spread.
"LIBOR Rate" means, with respect to a LIBOR Advance for the applicable
Interest Period, an interest rate per annum equal to the applicable
British Bankers' Association Interest Settlement Rate for deposits in
U.S. dollars appearing on Reuters Screen FRBD as of 11:00 a.m. (London
time) two London Banking Days prior to the first day of such Interest
Period, and having a maturity equal to such Interest Period, provided
that, (i) if Reuters Screen FRBD is not available to the Agent for any
reason, the applicable LIBOR Rate for the relevant Interest Period
shall instead be the applicable British Bankers' Association Interest
Settlement Rate for deposits in U.S. dollars as reported by any other
generally recognized financial information service as of 11:00 a.m.
(London time) two London Banking Days prior to the first day of such
Interest Period, and having a maturity equal to such Interest Period,
and (ii) if no such British Bankers' Association Interest Settlement
Rate is available to the Agent, the applicable LIBOR Rate for the
relevant Interest Period shall instead be the rate determined by the
Agent to be the rate at which Bank One or one of its Affiliate banks
offers to place deposits in U.S. dollars with first-class banks in the
London interbank market at approximately 11:00 a.m. (London time) two
London Banking Days prior to the first day of such Interest Period, in
the
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<PAGE> 17
approximate amount of Bank One's relevant LIBOR Advance and having a
maturity equal to such Interest Period. Each determination of a LIBOR
Rate made by the Agent in accordance with the foregoing shall be
conclusive except in the case of demonstrative or manifest error.
"Lien" means any mortgage, security interest, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or
otherwise) or other security interest or preferential arrangement of
any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any financing or
similar statement or notice filed under the Uniform Commercial Code as
in effect in any jurisdiction, or any other similar recording or notice
statute, and any lease having substantially the same effect as the
foregoing, but excluding any equipment operating leases and any
precautionary filings related thereto).
"Loans" means, collectively, the Revolving Loans, the Term Loan and
Letter of Credit 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, the Master
Agreement and any and all Interest Rate Agreements which at any time
from and after the Closing Date may be made between the Company and any
of the Lenders, 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 of the foregoing may be amended,
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 Business Day" means, with respect to any LIBOR Advance, a day
which is both a Banking Day and a day on which dealings in Dollar
deposits are carried out in the London interbank market.
"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.
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<PAGE> 18
"Maximum Availability" means $100,000,000.00 or such greater amount as
may be established pursuant to Section 2.02(g) of this Agreement. 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
election of the Required Lenders to take any action specified in
Section 7.02 of this Agreement, the Maximum Availability shall be
automatically reduced to zero (0) dollars without any action on the
part of or the giving of any additional notice to the Company by the
Lenders or the Agent.
"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 Lenders (collectively, the "Qualification Conditions"). An
acquisition which would otherwise qualify as a "New Acquisition" shall
not so qualify unless the Company shall have obtained from the Agent
its confirmation that the written submissions made to the Agent by the
Company demonstrate that the Qualifying Conditions are fully met with
respect to the proposed acquisition. To obtain such confirmation from
the Agent the Company shall submit to the Agent such historical
financial statements and pro forma calculations of the Additional
EBITDA Amount which will be applicable to the proposed acquisition as
the Agent may require.
"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 Lenders or any of them
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<PAGE> 19
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
Lenders 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 Lender owed to some other Person.
"Officer's Certificate" means a certificate in the form included as a
part of EXHIBIT G 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 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 Lenders 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 Lenders, 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 Lenders' 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) 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) of this
Agreement.
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<PAGE> 20
"Period Ending Date" has the meaning ascribed to such term in the text
of the definition of EBITDA in this Section 1.01.
"Permitted Asset Sales" means all sales and other dispositions by the
Company and its Subsidiaries of tangible assets (other than the sale of
inventory, cylinders and other equipment in the ordinary course of
business and other than Short-Term Real Estate Sales) permitted by the
terms of the Loan Documents.
"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.
"Prime-based Rate" means a variable rate per annum at which interest
accrues on all or a portion of a Loan under the terms of this
Agreement, equal at all times to the Prime Rate, as in effect from time
to time, plus the Applicable Spread.
"Prime Rate" means, for any date of determination, a rate of interest
per annum equal to the higher of (i) the Bank One Prime Rate for such
date, and (ii) the Federal Funds Rate for such date, plus One-Half
Percent (.50%) per annum. The Prime Rate shall change each day with any
change in the Bank One Prime Rate or Federal Funds Rate, if applicable.
"Prime Rate Advance" means any Advance or portion of the Revolving
Loans (or, if the case, the entire outstanding principal balance of the
Revolving Loans) or any portion of the Term Loan (or, if the case, the
entire outstanding principal balance of the Term Loan) which bears
interest at the Prime-based Rate.
"Purchaser" shall have the meaning ascribed to such term in
Section 9.08(b) of this Agreement.
"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. 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
20
<PAGE> 21
pursuant to Section 5.01(g) of this Agreement, the Ratio of Total
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 Lenders prior to the
Closing Date for the preceding twelve (12) calendar month period ending
December 31, 1999, 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 Lender 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
Lenders 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 Lenders 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 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 and their
respective Subsidiaries for the most recent twelve (12)
calendar month period that precedes the New Acquisition
Closing Date provided to the Lenders 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.
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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 Lenders 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 Lenders 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 Lenders 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.
"Real Estate Leases" shall mean all non-cancellable leases of real
property or improvements or fixtures thereon, which leases, in
conformity with GAAP, are not required to be capitalized.
"Regulatory Change" means at any time after the Closing Date (a) any
change in existing, or any introduction or adoption of new, United
States federal, state or foreign laws, regulations, treaties or
directives (including Regulation D of the Board of Governors of the
Federal Reserve System), (b) any change in the interpretation of the
foregoing by any Governmental Authority charged with the administration
or interpretation thereof, or (c) any change in the manner in which
existing guidelines of any federal or state governmental authority are
enforced.
"Reimbursement Agreement" has the meaning ascribed to such term in
subsection 2.03(a) of this Agreement.
"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,
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<PAGE> 23
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.
"Rent Expense" means for any fiscal period, the total amount of rents
and other charges payable during such period by the Credit Parties and
their respective Subsidiaries under all Real Estate Leases to which
they are a lessee, all as determined on a consolidated basis in
accordance with GAAP.
"Required Lenders" means Lenders in the aggregate having at least
66.67% of the Aggregate Commitment or, if the Aggregate Commitment has
been terminated, Lenders in the aggregate holding at least 66.67% of
the aggregate unpaid principal of the Obligations.
"Required Term Lenders" means Term Lenders in the aggregate holding at
least 66.67% of the aggregate unpaid principal of the Term Loan.
"Reserve Requirement" means, with respect to an Interest Period for a
LIBOR Advance, the maximum aggregate reserve requirement (including all
basic, supplemental, marginal, emergency and other reserves),
assessments or similar requirements under any regulations of the Board
of Governors of the Federal Reserve System (or any successor thereto)
or other Governmental Authority having jurisdiction with respect
thereto dealing with reserve requirements prescribed for eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D).
"Revolver Lenders" means, collectively, all of the Signatory Lenders
and any Purchaser that becomes a Revolver Lender party to this
Agreement pursuant to the terms of Section 9.08 of this Agreement,
together with their respective successors and assigns, and "Revolver
Lender" means any one of the Revolver Lenders.
"Revolving Loans" has the meaning ascribed to such term in
subsection 2.02(a) of this Agreement.
"Revolving Loans Commitment Percentage" shall mean, when used with
reference to any Revolver Lender and any described aggregate or total
amount, an amount equal to the
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result obtained by multiplying such described aggregate or total amount
by the percentage set opposite its designation on EXHIBIT B under the
heading "Revolving Loans Commitment Percentage", 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
Revolver Lender, the percentage set opposite its designation on EXHIBIT
B under the heading "Revolving Loans Commitment Percentage", as amended
from time to time and at any time in accordance with the terms 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
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.
"Sale Value" means, with respect to any asset sold or otherwise
disposed of as a Permitted Asset Sale, the higher of: (i) the book
value of the asset on the books of the Company or its Subsidiary
immediately prior to such sale or other disposition, and (ii) the Asset
Sale Payment received with respect to such sale or other disposition.
"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 April 30, 2003, or such
later date as may be established pursuant to the terms of Section
2.02(f) of this Agreement.
"Scheduled Term Loan Maturity Date" means October 4, 2003.
"Short-Term Real Estate Sale" means any arms-length sale made by the
Company while there is no Event of Default or Unmatured Event of
Default (including any sale which is part of a sale-leaseback
transaction) to a Person who is not an Affiliate of the Company or any
of the Guarantors, of real estate (including improvements thereon)
which has been owned by the Company for less than one year, and the
term "Short-Term Real Estate Sales" means all of such sales,
collectively.
"Stock Redemption Expense" means, with respect to any period, the total
cost incurred by VNGI in the purchase and redemption of any of its
capital stock at any time during such period, as such cost is
determined in accordance with GAAP.
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"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 guaranties executed
and delivered to the Lenders by any 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 any 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 Lenders" means all of the Signatory Lenders, other than WesBanco,
and any Purchaser that becomes a Term Lender party to this Agreement
pursuant to the terms of Section 9.08 of this Agreement, together with
their respective successors and assigns.
"Term Loan" has the meaning ascribed to such term in subsection 2.04 of
this Agreement.
"Term Loan Commitment Percentage" shall mean, when used with reference
to any Term Lender 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 under the heading "Term Loan Commitment
Percentage", 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 Term Lender, the percentage set
opposite its designation on EXHIBIT B under the heading "Term Loan
Commitment Percentage", as amended from time to time and at any time in
accordance with the terms of this Agreement.
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"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.
"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.
"Transfer Agreement" has the meaning ascribed to such term in the
Recitals to this Agreement.
"Type" means, with respect to any Advance, its nature as a LIBOR
Advance or a Prime Rate Advance.
"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.
"Voting Stock" means, in reference to the Company, all classes of
capital stock of the Company then outstanding and normally entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors of the Company, and means, in reference to VNGDI,
all classes of capital stock of VNGDI then outstanding and normally
entitled (without regard to the occurrence of any contingency) to vote
in the election of directors of VNGDI.
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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 Lender 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 Revolver
Lenders 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 Revolver Lender not to exceed at any time such Lender's Revolving Loans
Commitment Percentage of the Maximum Revolver Availability. Advances may be used
by the Company only to fund working capital requirements 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 the
Signatory Lenders and PNC under the Original Agreement (the "Prior Revolving
Loans") and the Company affirms, acknowledges and agrees that the aggregate
outstanding principal balance of the Prior Revolving Loans as of the Closing
Date is $__________________, being the unpaid principal amount of the Prior
Revolving Loans 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 Revolver Lenders 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 Revolver Lenders 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;
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(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
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 Revolver
Lender 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 Two Hundred
Fifty Thousand Dollars ($250,000), 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 Revolver Lenders 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 Revolver
Lender and payments by the Company shall be recorded by each Revolver Lender 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 Revolver Lender. The Revolver Lenders' 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 Revolver Lender will make available to the Agent its Revolving Loan
Commitment Percentage of the Advance requested to be made on such date in U.S.
Dollars and in immediately available
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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 Revolver Lenders, 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 Revolver Lender prior to the date of an Advance that such
Revolver Lender does not intend to make available to the Agent such Revolver
Lender's Commitment Percentage of the Advance to be made on such date, the Agent
may assume that such Revolver Lender 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 Revolver Lender's Revolving Loan Commitment
Percentage thereof. If such Revolver Lender 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 Revolver Lender. If a Revolver Lender
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 Revolver Lender from its obligation to fund its
Revolving Loan Commitment Percentage of each requested Advance, or to prejudice
any rights which the Company may have against a Revolver Lender as a result of
any failure by such Revolver Lender to fund its Revolving Loans Commitment
Percentage of any requested Advance.
The Company agrees that upon demand by any Revolver Lender
(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
Revolver Lender against any net loss or expense which such Revolver Lender
sustains or incurs, as reasonably determined by such Revolver Lender, 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 each day from and after the Closing Date shall
bear interest until the Revolving Loans Maturity Date at a rate per annum equal
to the Prime-based Rate for such day, and shall be treated as a Prime Rate
Advance, except that at the option of the Company, exercised from time to time
as provided herein, interest may accrue prior to maturity on any portion or on
the entire outstanding principal balance of the Revolving Loans as to which no
LIBOR-based Rate elected remains in effect, at a LIBOR-based Rate, provided that
an election of a LIBOR-based Rate for a period extending beyond the Scheduled
Revolving Loans Maturity
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Date shall be permitted only at the discretion of Required Lenders. 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 each day
at a per annum rate equal to the Prime-based Rate for such day plus two percent
(2.0%) per annum, except that as to any LIBOR Advances for which the Company may
have elected a LIBOR-based Rate for an Interest Period that has not expired at
the Revolving Loans Maturity Date, such LIBOR Advances shall, during the
remainder of such period, bear interest at the greater of the Prime-based Rate
(for each day during the remainder of such period) plus two percent (2.0%) per
annum, or the LIBOR-based Rate then in effect with respect thereto plus two
percent (2.0%) per annum. Each change in the rate of interest to be charged on
Prime Rate Advances shall become effective on the date of each change in the
Prime Rate. Each change in the rate of interest to be charged on any LIBOR
Advance shall become effective without notice on the commencement of the
Interest Period for that LIBOR Advance based on the LIBOR-based Rate for that
Interest Period then in effect. With respect to that principal portion of the
Revolving Loans, if any, which bears interest at the Prime-based Rate, accrued
interest shall be due and payable quarterly on the last Banking Day of each
calendar quarter until the Revolving Loans Maturity Date. With respect to each
LIBOR Advance, accrued interest thereon shall be due and payable on the last day
of each applicable Interest Period until the Revolving Loans Maturity Date;
except in the case of LIBOR Advances with an Interest Period exceeding three
months, accrued interest shall be due and payable at intervals of three months
after the first day of such Interest Period until the Revolving Loans Maturity
Date. On the Revolving Loans Maturity Date, the entire unpaid principal balance
of the Revolving Loans and Revolving Notes 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 Revolver Lenders, 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.
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(f) Extension of Scheduled Revolving Loans Maturity Date. Upon
the written request of the Company made not earlier than ninety (90) days nor
later than sixty (60) days prior to each anniversary of the Closing Date, and
the unanimous agreement of the Revolver Lenders (which approval and agreement by
each Revolver Lender is at the sole discretion of each such Revolver Lender)
extend the Scheduled Revolving Loans Maturity Date for a period of one
additional year, and upon the unanimous agreement in writing of the Revolver
Lenders to any such one-year extension, the date to which the Scheduled
Revolving Loans Maturity Date is then extended will become the "Scheduled
Revolving Loans Maturity Date" for purposes of this Agreement.
(g) Increase of Revolving Loans Commitment and Maximum
Availability. The Company may, at any time, request the Revolver Lenders in
writing to increase the total Commitments of the Revolver Lenders with respect
to the Revolving Loans, provided that (i) such increase shall not cause the
aggregate total Revolving Loans Commitments to exceed One Hundred Twenty Million
Dollars ($120,000,000.00), and (ii) no Event of Default shall have occurred or
be continuing. Any or all of the Revolver Lenders may, but shall not be
obligated to, increase its Revolving Loan Commitment by all or any portion of
the additional amount requested. Immediately upon the effectiveness of any such
increase in the total Revolving Loan Commitments, each Revolver Lender's
Revolving Loan Commitment Percentage of the total Commitments for Revolving
Loans shall be automatically adjusted to reflect the same. In the event the
Revolver Lenders agree to increase the Revolving Loans Commitments by less than
all of the amount requested, the Company may seek additional commitments in the
amount of the difference between the requested increase and the amount of
increase in Revolving Loans Commitments agreed to by the Revolver Lenders from a
third party financial institution provided that such third party financial
institution is selected upon prior written notice to Agent and would meet all
qualifications of a Purchaser, were it at that time to be a Purchaser, and such
third party financial institution shall become a party to this Credit Agreement
by an amendment in form and substance as required by Required Lenders.
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:
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(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.
(b) Risk Participation. Each Revolver Lender (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 Revolver
Lender 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
Revolver Lender 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 Lender's Revolving Loan Commitment Percentage.
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(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 Lenders 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 Lenders 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
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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.
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;
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(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 Revolver Lenders for funding
pursuant to this section. Each Revolver Lender (other than Bank
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One) shall forthwith (and in any event, not later than 1:00 p.m., Indianapolis
time, on the day the Agent has indicated to the Revolver Lenders 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 Revolving Loans 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 Revolver Lender for, and each Revolver Lender shall pay to the Agent (for
the account of Bank One if the recovery is obtained from it) an amount equal to
such Revolver Lender's Revolving Loans 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 Revolver
Lender 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 Revolver Lender 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 Revolver Lender's
Revolving Loans Commitment Percentage thereof.
(g) Indemnity. The Company agrees to protect, indemnify and
save Bank One and the Revolver Lenders 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 Revolver Lenders 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").
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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.
(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 the Applicable LOC Fee
Percentage then in effect (determined as of immediately after issuance of such
Letter of Credit). Each L/C Commission shall be deemed fully earned and
nonrefundable when due. The Company also shall pay to Bank One a fronting fee
equal to 0.125% of the amount of the Letter of Credit for which such fee is
charged and all standard Bank One transaction fees
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with respect to any transactions occurring on account of any Letter of Credit,
including all standard fees for issuance, amendment, cancellation, negotiation
or transfer of each Letter of Credit and with respect to each Draft thereon.
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 disburse
the L/C Commission to each Revolver Lender, including Bank One, pro rata in
accordance with each Revolver Lender's Revolving Loans Commitment Percentage.
All transaction fees and the fronting fee 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.
(j) Cash Collateral. The Company shall on the Revolving Loans
Maturity Date provide the Agent with Cash Collateral in a deposit or an
investment in United States government securities with the Agent which is
acceptable to the Agent and which is in the name of the Company but under the
sole and exclusive dominion and control of the Agent with respect to which the
Company has no authority to withdraw from, to draw upon, or otherwise exercise
any authority of any kind, in an amount equal to the then-outstanding Letter of
Credit Exposure. The Company hereby grants a security interest in all of such
Cash Collateral to the Agent, for the benefit of itself and the Lenders, to
secure the Obligations. If there is any Draft, or other liability of the Agent
or Bank One under any Letter of Credit, the Agent shall apply the Cash
Collateral in reimbursement of any such Draft or other liability. The Cash
Collateral provided to the Agent pursuant to this Section 2.03(j) shall be
released to the Company only upon full payment or satisfaction of all
Obligations, including any Letter of Credit Exposure. The Company agrees to
execute all agreements, documents and instruments requested by the Agent to
further evidence the security interest granted in the Cash Collateral pursuant
to this Section 2.03(j).
Section 2.04 The Term Loan.
(a) The Term Loan -- General. Each Term Lender severally
agrees, subject to the terms and conditions of this Agreement, to loan to the
Company the principal amount equal to its Term Loan Commitment Percentage of
Eight Million Nine Hundred Fifty Four Thousand One Hundred Fifty Dollars
($8,954,150.00) 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 the "Signatory
Lenders" (as such term is defined in the
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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 $8,954,150.00, 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 Term Lenders 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
June, 2000, 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 amounts which may be due the Term Lenders pursuant to Section
2.05(b) of this Agreement, the principal of the Term Loan, upon not less than
two (2) Banking Days' prior written notice to the Agent from the Company, may be
prepaid at any time in whole or in part, provided that any partial prepayment
shall be in an amount which is a minimum of $1,000,000 and an integral multiple
of One Hundred Thousand Dollars ($100,000), 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 principal amount of the
Term Loan and the Term Notes outstanding each day from and after the Closing
Date shall bear interest until the Term Loan Maturity Date at a rate per annum
equal to the Prime-based Rate for such day and shall be treated as a Prime Rate
Advance, except that at the option of the Company, exercised from time to time
as provided herein, interest may accrue prior to maturity on any specified
amount of the principal balance or on the entire outstanding principal balance
of the Term Loan as to which no LIBOR-based Rate elected remains in effect, at a
LIBOR-based Rate, provided that an election of a LIBOR-based Rate for a period
extending beyond the Scheduled Term Loan Maturity Date shall be permitted only
at the discretion of the Required Term Lenders. After the Term Loan Maturity
Date and until paid in full, the principal amount of the Term Loan and Term
Notes outstanding from time to time shall bear interest at a per annum rate
equal to the Prime-based Rate plus two percent (2.0%) per annum, except that as
to any LIBOR Advance which is a part of the Term Loan for which the Company may
have elected a LIBOR-based Rate for an Interest Period that has not expired at
the Term Loan Maturity Date, such LIBOR Advance shall, during the remainder of
such period, bear interest at the greater of the Prime-based Rate plus two
percent (2.0%) per annum, or the LIBOR-based Rate then in effect with respect
thereto plus two percent (2.0%) per annum. Each change in the rate of interest
to be charged on any principal of Term Loan that bears interest at the
Prime-based Rate shall become effective on the date of each change in the Prime
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Rate. Each change in the rate of interest to be charged on any LIBOR Advance
which is part of the Term Loan shall become effective without notice on the
commencement of the Interest Period for that LIBOR Advance based on the
LIBOR-based Rate for that Interest Period. With respect to that principal of the
Term Loan and the Term Notes , if any, which bears interest at the Prime-based
Rate, accrued interest shall be due and payable quarterly on the last Banking
Day of each calendar month until the Term Loan Maturity Date. With respect to
each LIBOR Advance which is a part of the Term Loan, accrued interest thereon
shall be due and payable on the last day of each applicable Interest Period
until the Term Loan Maturity Date; except in the case of each such LIBOR Advance
with an Interest Period exceeding three months, accrued interest shall be due
and payable at intervals of three months after the first day of such Interest
Period until the Term Loan Maturity Date. On the Term Loan Maturity Date, the
entire unpaid principal balance of the Term Loan and the Term Notes, and all
unpaid, accrued interest thereon, shall be due and payable in full without
demand. 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 and Terms for Electing LIBOR Advances. LIBOR
Advances may be elected only in accordance with the following procedures and
subject to the following conditions, and the election of a LIBOR Advance shall
have the following consequences, in addition to other consequences stated in
this Agreement:
(1) A LIBOR Advance may be elected only in a minimum
amount of $1,000,000.00 and additional integral
multiples of $100,000.00.
(2) No LIBOR Advance may be elected at any time that
an Event of Default or Unmatured Event of Default has
occurred and is continuing.
(3) The Company has notified the Agent of its election
to obtain a LIBOR Advance and of the Interest Period
selected therefor and such notice is given as herein
provided. On any Banking Day, the Company may request
a quotation of the Adjusted LIBOR 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 Adjusted LIBOR
Rates and 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 London Banking Day following
the day on which the
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quotation is given. Such election and the LIBOR-based
Rate for such LIBOR Advance shall be effective,
provided there is then no Event of Default or
Unmatured Event of Default and the notification
required under the preceding sentence has been given,
on the first day of such specified Interest Period. 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 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.
(4) No more than ten (10) Interest Periods in total
may be in effect on the Revolving Loans and the Term
Loan at any one time.
(b) Breakage. The Company may pay all or any portion of the
outstanding principal balance of the Loans and Notes, provided that if the
Company makes any such payment (whether voluntary, mandatory, or as a result of
acceleration after default) of a LIBOR Advance other than on the last day of the
relevant Interest Period, the Company shall pay all accrued interest on the
principal amount paid with such principal payment and, on demand, shall
reimburse each of the Lenders and hold each of the Lenders harmless from all
losses incurred by each of the Lenders as a result of such principal payment
having been made on other than the last day of the relevant Interest Period then
in effect, including without limitation, any losses incurred by reason of the
liquidation or reemployment of deposits or other funds acquired to fund or
maintain the principal amount paid. If with respect to a prepaid LIBOR Advance,
such reimbursement shall be calculated as though the Lenders each funded its
portion of the principal amount paid through the purchase of U.S. Dollar
deposits in the London, England interbank market having a maturity corresponding
to the Interest Period for such LIBOR Advance and bearing an interest rate equal
to the LIBOR-based Rate for such Interest Period, whether in fact that is the
case or not. A Lender's determination of the amount of such reimbursement shall
be conclusive in the absence of manifest error. If at the time of any payment of
any portion of the principal of any Loan, there are outstanding both LIBOR
Advances and Prime Rate Advances, then any payment of principal of that Loan
will be applied first to the portion of that Loan on which interest accrues at
the Prime-based Rate and next to the portion or portions which bear interest at
a LIBOR-based Rate or Rates, and if interest accrues on the LIBOR Advances at
more than one LIBOR-based Rate, first to the LIBOR Advance or LIBOR Advances on
which interest accrues at a rate or rates which results in least reimbursement
amount.
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(c) Increased Costs. If, as the result of any Regulatory
Change, the basis of taxation of payments to any Lender of the principal of or
any interest on any LIBOR Advance or any other amounts payable hereunder in
respect thereof, other than taxes charged on the gross or net income of the
Lender, 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 the Lender are imposed, modified, or deemed applicable, and
the Lender reasonably determines that, by reason thereof, the cost to it of
making, issuing, or maintaining any LIBOR Advance at a LIBOR-based Rate is
increased by an amount deemed by it to be material, then the Company with
respect to such LIBOR Advance shall pay promptly upon demand by the Lender such
additional amounts as the Lender reasonably determines will compensate for such
increased costs; provided, however, that the Company shall not be the only
borrower of the Lender that is singled out from a group of similarly situated
borrowers of the Lender subject to this type of provision that is requested to
remit increased costs. Any determination by a Lender of increased costs made
pursuant to the provisions of this subsection shall be final, absent manifest
error.
(d) Limitation on Types of Advances. If, on or prior to the
determination of the interest rate for any LIBOR Advance, the Agent reasonably
and in good faith determines that deposits in U.S. Dollars comparable to the
amount and for the Interest Period of that LIBOR Advance are not available in
the London interbank eurodollar market, or that, by reason of circumstances
affecting the London interbank eurodollar market, adequate and reasonable means
do not exist for ascertaining the interest rate applicable to that Interest
Period, or that the making or funding of LIBOR Advances has become
impracticable, the Agent shall give the Company prompt notice thereof, and so
long as that condition remains in effect, the Lenders shall be under no
obligation to make, or to convert other principal amounts of any of the Loans
into, LIBOR Advances of the type affected, and the Company shall, on the later
of (a) the last day of the then current Interest Period for the affected LIBOR
Advance, or (b) seven (7) Banking Days after receipt of the Bank's notice,
either notify the Agent and thereafter prepay the LIBOR Advance, or notify the
Agent and thereafter convert the LIBOR Advance into a Prime Rate Advance
(subject to all other provisions of this Agreement).
(e) Illegality. In the event that it becomes unlawful for any
Lender to (a) honor its obligations to make any principal amount of a Loan a
LIBOR Advance, or (b) maintain any LIBOR Advance, the Lender shall promptly
notify the Company and the Agent thereof and the Lender's obligation to make
principal amounts into LIBOR Advances shall be suspended until such time as the
Lender may again legally make and maintain the affected type of LIBOR Advance,
and the Company shall, effective on the last day of the then current for that
LIBOR Advance (or on such earlier date as the Lender may specify to the
Company), either notify the Lender and the Agent and thereafter prepay the LIBOR
Advance or notify the Lender and the
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Agent and thereafter convert the LIBOR Advance into a Prime Rate Advance
(subject to all other provisions of this Agreement).
(f) Funding Losses. The Company hereby agrees that upon demand
by any Lender (which demand shall be accompanied by a statement setting forth
the basis for the calculations of the amount being claimed), the Company will
indemnify the Lender against any losses or expense which the Lender may sustain
or incur (including, without limitation, any net loss or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
the Lender to fund or maintain any portion of a LIBOR Advance) as reasonably
determined by the Lender, as a result of any failure of the Company to borrow or
convert into a LIBOR Advance any principal amount on a date specified therefor
in an informal request or Application for Revolving Loans Advance or in a notice
of conversion pursuant to this Agreement (other than as a result of a default by
the Lender.). For this purpose, all notices to any Lender or the Agent pursuant
to this Agreement shall be deemed to be irrevocable.
(g) Additional Amounts Payable. If any Regulatory Change
either shall (a) subject any Lender to any additional tax, duty, charge,
deduction or withholding with respect to any of the Loans or Letters of Credit
(other than a tax measure by the net or gross income of the Lender), or (b)
impose or increase any reserve, special deposit or similar requirement on
account of any of the Loans or Letters of Credit not otherwise provided in this
Agreement or (c) impose increased minimum capital requirements on the Lender on
account of its issuing or maintaining any of the Loans or Letters of Credit; and
if any of the foregoing (i) results in any increase to the Lender in the cost of
issuing or maintaining any of the Loans or Letters of Credit, or making any
payment on account of any of the Loans or Letters of Credit, (ii) reduces the
amount of any payment receivable by the Lender under this Agreement with respect
to any of the Loans or Letters of Credit, (iii) requires the Lender to make any
payment calculated by reference to the gross amount of any sum received or paid
by the Lender pursuant to any of the Loans or Letters of Credit, or (iv) reduces
the rate of return on the Lender's capital to a level below that which the
Lender could otherwise have achieved (taking into consideration the Lender's
policies with respect to capital adequacy), then the Company shall pay to the
Lender, as additional compensation for the Loans or Letters of Credit, such
amounts as will compensate the Lender for such increased costs, payments or
reductions. Within twenty (20) days after (A) the initial demand therefor and
(b) presentation by the Lender of a certificate to the Company containing a
statement of the cause of such increased costs, payments or reductions and a
calculation of the amounts thereof (which statement and calculation shall be
presumed prima facie to be correct), the Company shall pay the additional amount
payable measured from the date such change, enactment, adoption or
interpretation first affects the Lender.
(h) Conversion and Continuation. Prime Rate Advances shall
continue as Prime Rate Advances unless and until such Prime Rate Advances are
converted into LIBOR Advances.
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Each LIBOR Advance shall continue as a LIBOR Advance until the end of the
applicable Interest Period therefor, at which time such LIBOR Advance shall
automatically be converted into a Prime Rate Advance, unless the Company shall
have given the Agent a Conversion/Continuation Notice (as defined below)
requesting that, at the end of such Interest Period, such LIBOR Advance continue
as a LIBOR Advance for the same or another specified Interest Period. Subject to
the terms hereof, the Company may elect from time to time to convert all or any
part of a Prime Rate Advance into a LIBOR Advance or to continue a LIBOR Advance
as a LIBOR Advance at the end of its applicable Interest Period, but only so
long as no Event of Default or Unmatured Event of Default has occurred and is
continuing and further provided that conversion of any LIBOR Advance shall be
made on, and only on, the last day of the Interest Period applicable thereto.
The Company shall give the Agent irrevocable notice (a "Conversion/Continuation
Notice") of each conversion of a Prime Rate Advance or a LIBOR Advance or
continuation of a LIBOR Advance not later than 10:00 A.M. (Indianapolis, Indiana
time) at least one (1) Banking Day, in the case of a conversion of a LIBOR
Advance into a Prime Rate Advance, or at least three (3) Banking Days, in case
of a conversion into or continuation of a LIBOR Advance, prior to the date of
the requested conversion or continuation, specifying: (i) the requested date,
which shall be a Banking Day, of such continuation or conversion; (ii) the
aggregate amount and Type of the Prime Rate Advance or LIBOR Advance to be
converted or continued; and (iii) the amounts and Type into which such Prime
Rate Advance or LIBOR Advance is to be converted or continued, and in the case
of a continuation of or a conversion into a LIBOR Advance, the duration of the
Interest Period applicable thereto. Any conversion shall be subject to all other
terms and provisions of this Agreement.
(i) Calculation of Interest. Interest on all of the
Obligations shall be calculated on the basis that an entire year's interest is
earned in 360 days.
(j) Manner of Payment - Application. All payments of principal
and interest on the Loans and the Obligations 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.
Obligor No: 2310116845
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
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costs, late charges and other fees and charges and reimbursement obligations,
provided, however, upon delinquency or other default, the Lenders reserve the
right to apply payments among principal, interest, late charges, collection
costs and other fees and charges and reimbursement obligations, at their
discretion, as determined by the Required Lenders. Except as provided in Section
2.06(b) of this Agreement, all prepayments for which the payment application has
not been specifically directed by the Company at the time of such prepayment
shall be applied first to the Term Loan and, upon the Term Loan being fully paid
to the remaining Obligations in such order and manner as the Required Lenders
may from time to time determine in their sole discretion. Following the Term
Loan Maturity Date, all payments and other recoveries shall be applied first to
the Term Notes until all of the Obligations evidenced by the Term Notes have
been paid in full.
(k) Automatic Debit. The Agent, on behalf of the Lenders, 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.
(l) Unconditional Obligations and No Deductions. The Company's
obligation to make all payments provided for in this Agreement and the Notes
shall be unconditional. Each such payment shall be made without relief from
valuation and appraisement laws and without deduction for any claim, defense or
offset of any type, including without limitation any withholdings and other
deductions on account of income or other taxes and regardless of whether any
claims, defenses or offsets of any type exist.
(m) Payment on Non-Banking Days. Whenever any payment to be
made under this Agreement or under any of the Notes shall be stated to be due on
a day other than a Banking Day, such payment may be made on the next succeeding
Banking Day, and such extension of time shall in such case be included in the
computation of payment of fees, if any, and interest under this Agreement and
under such Note.
Section 2.06. Mandatory Prepayment/Reduction of Maximum
Availability. (a) If at any time a determination thereof is to be made, the sum
of (i) the aggregate principal balance of the Revolving Loans outstanding at
such time, plus (ii) 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 Lenders' 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 Lenders.
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(b) Sale of Assets. The Company or any Subsidiary of the
Company making a Permitted Asset Sale in any fiscal year of the Company shall
pay to the Agent, concurrently with the consummation of such Permitted Asset
Sale, a payment ("Asset Sale Payment") in an amount equal to the following: One
hundred percent (100%) of the gross amount realized upon such Permitted Asset
Sale and all other Permitted Asset Sales previously consummated by the Company
or any Subsidiary of the Company during such fiscal year (in each case net only
of reasonable and customary selling costs and expenses actually incurred by the
seller) minus the sum of (i) $2,000,000; and (ii) the amount of all Asset Sale
Payments previously made to the Agent with respect to Permitted Asset Sales
consummated during such fiscal year. Each Asset Sale Payment shall first be
applied to the Term Loan as a prepayment, and to the extent any balance remains
after payment of the Term Loan in full, shall be applied pro rata against the
outstanding principal balance of the Revolving Loans, with the Maximum Revolver
Availability to be automatically and concurrently reduced permanently by the
amount so applied against the Revolving Loans. To the extent that any balance of
the Asset Sale Payment remains unapplied after application against the Term Loan
and the Revolving Loans, it shall be held by the Agent as Cash Collateral to
secure payment of any Letter of Credit Exposure then existing.
Section 2.07. Pro Rata Treatment. All borrowings, conversions
and payments of the Revolving Loans shall be effected so that after giving
effect thereto the Obligations of the Company to each Revolver Lender with
respect to the Revolving Loans (which shall be deemed to include, with respect
to each Lender, its Revolving Loans Commitment Percentage of the Letter of
Credit Exposure) shall be equal to such Revolver Lender's Revolving Loans
Commitment Percentage of the Obligations of the Company to all Revolver Lenders
with respect to all of the Revolving Loans. All borrowings, conversions and
payments of the Term Loan shall be effected so that after giving effort thereto
the Obligations of the Company to each Term Loan Lender shall be equal to such
Term Lender's Term Loan Commitment Percentage of the Obligations of that Company
to all Term Lenders with respect to the Term Loan. The Agent shall distribute
all payments to the Lenders 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 Lender, 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 Lender, such Lender agrees, promptly upon
demand, to purchase such participation in the Revolving Notes and Term Notes
held by the other Lenders so that after such purchase the purchasing Lender
shall share such excess payment ratably with each of them. If any Lender,
whether in connection with setoff or amounts which might be subject to setoff or
otherwise, receives Collateral or other protection for the Obligations to such
Lender hereunder, such Lender agrees, promptly upon demand, to take such action
necessary such that all Lenders share in the benefits of such Collateral ratably
in proportion to their Commitment
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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 amounts and payment terms of which are set forth in a
separate agreement between the Agent and the Company (the "Agent Fee
Agreement").
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 Lenders 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 Lenders 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 Lender 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 Lender 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 Lender under this Section 2.09 are in addition to all other rights and
remedies (including, without limitation, other rights of setoff) which such
Lender may have.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. REPRESENTATIONS AND WARRANTIES. To induce the Lenders to
make the Loans, each of the Credit Parties represents and warrants to each of
the Lenders 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. 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
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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. 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 Lenders their audited, consolidated Financial Statements as
of June 30, 1999, and for the fiscal year of the Company then ended and their
unaudited consolidated interim Financial Statements as of December 31, 1999, 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 Lender there has been no
material adverse change
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in the financial position of the Credit Parties or their respective Subsidiaries
or in the results of its and their operations.
(e) Litigation and Contingent Liabilities. Except as set forth
on Exhibit 3.01(e) to this Agreement, 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 or which any of the Credit Parties is required by applicable
law to disclose in any filing of a Form 10-K or Form 10-Q with the United States
Securities and Exchange Commission. 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 H 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
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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 I
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. 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.
(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.
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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 Lenders deem is or may not be covered as collateral
by the Company Security Agreement or the Company Pledge Agreement or in which
the Required Lenders 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 Lenders 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 Lenders in all respects.
(b) Real Estate. Upon request by the Required Lenders 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 Lenders 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
Lenders in all respects duly executed, acknowledged and delivered to the Agent
in recordable form. Upon request by the Required Lenders, the Company covenants
and agrees, within ten (10) days after receiving such request, to grant to the
Agent, for the ratable benefit of the Lenders 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 Lenders 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
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the Company's expense: (i) evidence satisfactory to the Required Lenders
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 Lenders, 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 Lenders 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 Lenders
confirming there are no material environmental problems associated with such
Real Estate.
(c) 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 Lenders and the Agent, each in the form attached
hereto and made a part hereof for all purposes as EXHIBIT J-1 and J-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.
(d) 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 Lenders and the Agent, each in the form attached
hereto and made a part hereof for all purposes as EXHIBIT K-1 and K-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 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.
(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
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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"), 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. 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 Subsidiary owned by
the Company (which in each case shall be all of the issued and outstanding
capital stock of each such Subsidiary), 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 a 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,
"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. Within sixty (60) calendar days of the acquisition by the
Company of any Subsidiary of the Company, (i) the Company shall execute and
deliver to the Agent for the benefit of the Lenders and the Agent a Company
Pledge Agreement (or at the Agent's option, an amendment to any existing Company
Pledge Agreement) to a pledge to, and grant to the Agent, for the benefit of the
Lenders and the Agent, a security interest and lien in and to all of the capital
stock of such Subsidiary, and shall deliver to the Agent all of such capital
stock and appropriate stock powers, and (ii) any such Subsidiary shall become a
Guarantor and to execute and deliver in favor of the Agent, for the benefit of
the Lenders and the Agent, a Subsidiary Guaranty and Subsidiary Security
Agreement in form and substance the same as attached hereto as EXHIBITS J-4 and
J-4, together with such financing statements and other perfection documents as
the Agent may require or as are required by the terms of such Security
Agreement.
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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 (100) 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 income statements
for the Credit Parties and their respective Subsidiaries showing its and
their results of operations as at, and for such calendar month and
year-to-date, all in reasonable detail, and certified to the Lender by
the respective President, Chief Financial Officer, or Treasurer of each
of the Credit Parties, together with comparable prior year-to-date
income statements as at the end of same calendar month of the prior
year.
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(3) Interim Quarterly Statements. As soon as available and in
any event within fifty (50) 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 Lender 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 Lender 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 fifty (50) 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
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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 Lenders 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 Lenders 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 Lenders may from time to
time request, including, without limitation, consolidating Financial
Statements of the Credit Parties and their respective Subsidiaries.
(11) Additional EBITDA Amount Confirmations. Within fourteen
(14) calendar days of the consummation by the Company of a New
Acquisition, the Company shall deliver to the Agent a final written
calculation of the Additional EBITDA Amount applicable to such New
Acquisition (as such calculation has been approved by the Agent in its
discretion), together with a written statement of the President or Chief
Financial Officer of the Company confirming pro forma compliance with
the financial covenants set forth in Section 5.01 (g) of this Agreement
as at immediately following the consummation of such New Acquisition,
determined with the inclusion of the Additional EBITDA Amount.
(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 the
Lenders for purposes of inspection, copying and audit, and the Credit Parties
and each of their respective Subsidiaries and each Guarantor shall permit the
Lender 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 Lenders, 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
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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)
$25,300,000.00, 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 the Agent 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 Ratio. 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 of not less than: (i) 1.10:1 through June 29,
2002, and (ii) 1.15:1 on June 30, 2002, and thereafter.
(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) 4.00:1
through June 29, 2002, (ii) 3.75:1 from June 30, 2002, through September
29, 2002, and (iii) 3.50:1 on September 30, 2002, and thereafter.
(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
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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 Lenders 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 Lenders
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 Lenders 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 Lenders, which
approval shall not be unreasonably withheld.
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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 or purchase,
as applicable, and if no Event of Default or Unmatured Event of Default would
result from such payment or purchase, as applicable: (1) 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 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; and (2) from and after the Closing
Date VNGI may purchase and redeem up to an aggregate of 180,000 shares of its
Common Stock at a purchase price not to exceed $7.50 per share.
(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
Lenders 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;
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(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 Lenders, 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 Existing 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
Lenders and the Company in substance and form the same as the
Intercreditor Agreements and in all events satisfactory to the Agent and
the Required Lenders 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(l)(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
Lenders 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
an amended and restated 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 only), (ii) acquire any material part of the assets of any other
business entity other than New Acquisitions (with respect to the Company only),
except in the ordinary course of business
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and excepting Short-Term Real Estate Sales, 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 Lenders. 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 Lenders.
The Company shall not cause to be created or otherwise acquire any Subsidiary
without the prior written consent of the Agent and the Required Lenders, 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 Lenders, and if such consent is
given, concurrently with or within sixty (60) days following consummation of
such New Acquisition: (i) the Company shall amend the Company Pledge Agreement
to include a pledge of and security interest and Lien in and to all of the
capital stock of such Subsidiary as provided in Section 4.01(f) of this
Agreement, and deliver to the Agent, for the benefit of the Lenders and the
Agent, all of the original stock certificates of such Subsidiary, together with
executed blank stock powers therefor; and (ii) such Subsidiary shall become a
Guarantor and shall execute and deliver in favor of the Agent, for the benefit
of the Lenders and the Agent, a Subsidiary Guaranty and Subsidiary Security
Agreement 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 Lenders.
(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.
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(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 Lenders.
(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.
(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 S 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 Lenders.
(n) Negative Pledge Limitation. Neither the Company nor any
Guarantor shall enter into any agreement with any Person, other than the
Lenders, which prohibits or limits its ability to create, incur, assume, or
suffer to exist in favor of the Lenders or the Agent any Lien upon any of its
assets, rights, revenues, or property, real, personal, or mixed, tangible or
intangible, whether now owned or hereafter acquired.
(o) Accounting Policies/Change of Business. Neither the
Company nor any of the Guarantors shall: (1) change its fiscal year or any of
its significant accounting policies except to the extent necessary to comply
with GAAP; or (2) make any material change in the nature of its business as
carried on the Closing Date.
(p) Capital Expenditures. The Credit Parties and their
respective Subsidiaries on a consolidated basis shall not make Capital
Expenditures (excluding Budgeted Acquisition Capital Expenditures): (i) during
the first year following the Closing Date (with such year
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beginning on the first day of the month in which the Closing Date occurs) which
in the aggregate on a consolidated basis exceed $6,500,000; and (ii) during the
second year following the Closing Date which in the aggregate on a consolidated
basis exceed $7,000,000; and (iii) during the third year following the Closing
Date which in the aggregate on a consolidated basis exceed $7,500,000.
ARTICLE VI
Lending Conditions
Section 6.01. CONDITIONS OF LENDING. Unless the Agent and the
Required Lenders otherwise consent in writing, the obligation of the Lenders 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 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 Lenders 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 Lenders shall previously have been
given notice in writing by the Credit Parties.
(b) Documents and other Items to be Furnished at Closing. To
the extent not previously delivered to the Agent pursuant to the Original
Agreement, 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 Signatory Lenders:
(1) The Term Notes, the Revolving Notes and the Company
Security Agreement, each duly executed and delivered by
the Company to each of the Signatory Lenders.
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(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 Subordination Agreement, duly executed and
delivered to the Agent by the Credit Parties.
(4) A certificate of the Secretaries of each of the Credit
Parties:
(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.
(5) On or before June 1, 2000, a copy of the file-marked
Articles of Incorporation of each of Credit Parties
certified as complete and correct by the Secretary of
State of the state of its incorporation.
(6) On or before June 1, 2000, a currently dated
certificate of existence for each of the Credit
Parties issued by the Secretary of State of the state
of its incorporation and certificates of good standing
from the respective Secretaries of State for each
other state in which any of them engages in business.
(7) Certificates evidencing the existence of all insurance
required under the terms of this Agreement or any
other of the Loan Documents.
(8) 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. By
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its execution of this Agreement, the Company
authorizes the Agent to debit any of the deposit
accounts of the Company carried with the Agent for
such attorneys' fees and any other amounts owed under
Section 9.03 of this Agreement.
(9) Payment to Bank One and the Arranger of all amounts
due them under the Agent Fee Agreement and payment to
each Signatory Lender of a Commitment Fee in the
amounts shown on the Schedule of Commitment Fee
Amounts which accompanies this Agreement.
(10) Such other UCC Financing Statements, Perfection
Certificates and other documents as the Agent or the
Signatory Lenders may reasonably require.
(11) Pay current to the Closing Date all accrued interest
on the Prior Revolving Loans and the Term Loan.
(12) The opinion of counsel for the Credit Parties
addressed to the Agent and the Lenders in such form
and substance as may be reasonably acceptable to the
Agent and the Lenders.
(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
Lenders 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:
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(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 Lenders 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.
(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 Lender 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
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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 Section 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.
(k) Change of Control. The occurrence of any Change of Control
without the consent of the Required Lenders.
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 Lenders shall become immediately due and payable, and the
obligation of the Lenders 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 Lenders 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 Lenders to make any Advance and the obligation of Bank One to
issue any Letter
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of Credit shall 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 Lenders specified in this Agreement or in any other Loan Document shall not
be exclusive, and the Agent and the Lenders each may avail itself of any other
remedies provided by law as well as any equitable remedies available to the
Lenders.
ARTICLE VIII
Agent
Section 8.01. Agent. This Article specifies rights and
obligations among and between the Lenders and the Agent, Syndication Agent and
Documentation 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 Lender 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.
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Section 8.03. Powers and Immunities of Agent.
(a) Powers. The Agents shall have no rights or duties or
responsibilities except those expressly set forth in this Agreement and the
other Loan Documents, and the Agents shall not by reason of this Agreement or
any of the other Loan Documents be a trustee or fiduciary for any Lender. None
of the Agents nor any of their respective 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.
None of the Agents nor any of their respective directors, officers, employees or
agents, shall be liable or responsible for any action taken or omitted to be
taken by it to any Lender, 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. Each of the Agents 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 it. As to any matters not
expressly provided for by this Agreement or the other Loan Documents, each of
the Agents shall in all cases be fully protected in acting, or in refraining
from acting, hereunder in accordance with instructions signed by the Required
Lenders, and such instructions and any action taken or failure to act pursuant
thereto shall be binding on all of the Lenders.
(c) Defaults. None of the Agents shall 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 Lender 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 Lenders (and
shall give each Lender prompt notice of each such non-payment). The Agent shall
(subject to Section 8.03(g)
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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 Lenders.
(d) Rights as a Lender. With respect to the Loan Documents,
Bank One, Huntington and National City, each in its capacity as a Lender
hereunder, shall have the same rights and powers hereunder as any other Lender
and may exercise the same as though it were not acting as the Agent,
Documentation Agent or Syndication Agent, respectively. The affiliates of any
Lender (including Bank One) may (without having to account therefor to any other
Lender) 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
Lenders except as specified herein. In so doing, no Lender shall violate the
provisions of this Agreement or the other Loan Documents.
(e) Indemnification. Each of the Lenders 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 its capacity as one of the Agents, 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 Lender 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 Agents and other Lenders. Each Lender
agrees that it has, independently and without reliance on any of the Agents or
any other Lender, 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 any of the Agents or any other Lender, 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. None of the Agents shall 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 Lenders.
(g) Failure to Act. Except for action expressly required of
one of the Agents hereunder, each of the Agents 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 Lenders
against any and all liability and expenses which may be incurred by it by reason
of taking or continuing to take any such action.
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<PAGE> 72
(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 Lenders and the Company, and
the Agent may be removed at any time with or without cause by the Required
Lenders. Upon such resignation or removal, the Required Lenders shall have the
right to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Required Lenders 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 Lenders, 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 Lenders) shall be held for the ratable benefit of the Lenders
and the Agent, subject to any prior lien therein held by the Agent in its
individual capacity and not as agent for the Lenders. As to Collateral in its
possession, the Agent shall exercise only such degree of care as it would
exercise for its own account.
ARTICLE IX
Miscellaneous
Section 9.01. Waiver -- Amendments. No delay on the part of
the Agent or the Lenders, 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 Lenders.
Section 9.02. Notices. Any notice given under or with respect
to this Agreement to any Credit Party, the Agent or the Lenders shall be in
writing and, if delivered by hand or sent by
72
<PAGE> 73
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 Lenders (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
111 Monument Circle
Mail Code IN1-0046
P.O. Box 7700
Indianapolis, Indiana 46277
Attention: Division Manager,
Commercial Lending Dept.
LaSalle: LaSalle Bank National Association
One Metropolitan Sq.
211 North Broadway, Suite 4050
St. Louis, Missouri 63102
Attention: David J. Carney,
Asst. Vice President
Firstar: Firstar, N.A.
425 Walnut St., ML 8160
Cincinnati, Ohio 45201-1038
Attention: Mark Whitson, Vice President
73
<PAGE> 74
B of A: Bank of America, N.A.
Bank of America Plaza, NC1-002-03-10
101 South Tryon Street
Charlotte, North Carolina 28255
Attention: Randy Dickerson,
Sr. Vice President
National City: National City Bank
30 South 4th Street
Martins Ferry, OH 43935
Attention: Reese Slater, Vice President
74
<PAGE> 75
Huntington: The Huntington National Bank
One Huntington Square
Charleston, West Virginia 25322
Attention: Kenneth H. Berberich
WesBanco: WesBanco Bank
1 Bank Wheeling
Wheeling, West Virginia 26003-3565
Attention: David Pell, Sr. Vice President
Sky Bank: Sky Bank
10 East Main Street
Salineville, Ohio 43945
Attention: Gregory J. Agresta,
Sr. Vice President
-------------------------------
-------------------------------
-------------------------------
75
<PAGE> 76
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 and the Arranger: (i) all reasonable costs and expenses in
connection with (1) syndication of the Loans, (2) 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,
(3) 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, 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 the other Loan Documents, (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 Lenders (including, without limitation,
reasonable attorneys' fees and expenses of the Agent, the Lenders or any of
them), if any, in connection with the enforcement and collection 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 Lenders 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%) per annum.
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 provisions of
this Agreement or such Document and the remaining provisions shall be
enforceable in accordance with their terms.
76
<PAGE> 77
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
LENDER 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 Lenders 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 Lenders.
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 Lenders 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 Lenders.
(b) Any Lender 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 Lender and such Purchaser, provided that (i) the Lender 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 the lesser of: (1) $5,000,000; and (2) the then outstanding
amount of the transferor Lender's Commitment, (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 Lender 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 Lender, the
prior written consent of the Company shall be required prior to an assignment
77
<PAGE> 78
becoming effective with respect to a Purchaser which is not then a Lender 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 $5,000.
Notwithstanding the foregoing provisions of this Section 9.08(b), any Lender 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
Lender 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 Lender, and the appropriate adjustments of the Commitments, the
Commitment Percentages of the Lenders, the Revolving Loans Commitment
Percentages of the Revolver Lenders and the Term Loan Commitment Percentages of
the Term Lenders, as applicable. On and after the effective date of such
assignment, such Purchaser shall for all purposes be a Lender party to this
Agreement and shall have all the rights and obligations of a Lender 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 Lender shall be
required to release the transferor Lender 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 Lender and the Company shall make
appropriate arrangements so that replacement Notes are issued to such transferor
Lender in principal amounts reflecting its pro rata share of the Aggregate
Commitment.
(d) The Company authorizes each Lender 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 Lender'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 LENDERS HEREBY VOLUNTARILY, KNOWINGLY,
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT,
78
<PAGE> 79
TORT OR OTHERWISE) BETWEEN OR AMONG THE CREDIT PARTIES, THE AGENT AND THE
LENDERS 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 LENDERS
TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE OTHER LOAN DOCUMENTS.
NEITHER THE COMPANY OR ANY GUARANTORS NOR THE LENDERS 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. Amendments. Subject to the provisions of this
Section, the Required Lenders (or the Agent with the consent in writing of the
Required Lenders) 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 rights of the Lenders, 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 Lender:
(a) Reduce the principal amount of any Revolving Note or Term
Note, 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 Lenders or Required Term Lenders.
(c) Extend the Scheduled Revolving Loans Maturity Date or the
Scheduled Term Loan Maturity Date or increase the amount of the Commitment of
any Lender, 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 Agents
(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 Lenders if the proceeds of such sale (net of reasonable
79
<PAGE> 80
expenses of sale) are paid to the Agent, for the ratable benefit of the Lenders,
in exchange for such release.
(h) Amend or otherwise override the Asset Sale Payment
application provisions of Section 2.06(b) of this Agreement.
Section 9.11. 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 9.12. Waiver and Release. As a material inducement to
each of the Signatory Lenders 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 PNC 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 PNC.
Section 9.13. Indemnification. The Credit Parties, jointly and
severally, agree to indemnify and hold harmless each of the Lenders and the
Agents 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 any of the Agents or any of the Lenders 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 none of the Agents or the
Lenders 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 9.14. Interest Rate Hedging Agreement. Each of the
Lenders may enter into Interest Rate Hedging Agreements with the Company. Each
Lender entering into such an agreement shall provide notice of such agreement
and the amount thereof to the Agent 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.
Section 9.15. 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.
80
<PAGE> 81
Section 9.16. Highest Lawful Rate. Notwithstanding any
provision to the contrary contained in this Agreement or in any of the other
Loan Documents, it is expressly provided that in no case or event shall the
aggregate of (a) all interest on the unpaid balance of any Note, accrued or paid
from the date hereof, and (b) the aggregate of any other amounts accrued or paid
pursuant to such Note, or any of the other Loan Documents, which under
applicable laws are or may be deemed to constitute interest upon such Debt from
the date hereof, ever exceed the maximum rate of interest which could lawfully
be contracted for, charged or received on the unpaid principal balance of such
Debt. In this connection, it is expressly stipulated and agreed that it is the
intent of the Company and the Lenders to contract in strict compliance with
Indiana usury laws and with any other applicable state usury laws and with
federal usury laws (whichever permit the higher rate of interest) from time to
time in effect. In furtherance thereof, none of the terms of this Agreement or
any of the other Loan Documents shall ever be construed to create a contract to
pay, as consideration for the use, forbearance or detention of money, interest
at a rate in excess of the Highest Lawful Rate. Neither the Company nor any
other Person now or hereafter becoming liable for payment of indebtedness
pursuant to the Loan Documents (the "Lender Debt") shall ever be liable for
interest in excess of the Highest Lawful Rate. If under any circumstances the
aggregate amounts paid on the Lender Debt include amounts which by law are
deemed interest which would exceed the Highest Lawful Rate, the Company
stipulates that such amounts will be deemed to have been paid as a result of an
error on the part of the Company and the Lenders, and the Person receiving such
excess payment shall promptly, upon discovery of such error or upon notice
thereof from the Person making such payment, refund the amount of such excess.
The parties further stipulate that such refund shall be a sufficient and sole
remedy for such error and that no party shall be entitled to any damages or
penalties, whether statutory or otherwise, as a result of such error. In
addition, all sums paid or agreed to be paid to the holder or holders of the
Lender Debt for the use, forbearance or detention of the Lender Debt shall, to
the extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of the Lender Debt. The provisions of this
Section 9.17 shall control all agreements, whether now or hereafter existing and
whether written or oral, among the Company and the Lenders.
IN WITNESS WHEREOF, the Agent, the Signatory Lenders 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
And
By:
-------------------------------------------
Robert D. Scherich, Chief Financial Officer
and Assistant Secretary
(the "Company")
81
<PAGE> 82
VALLEY NATIONAL GASES INCORPORATED
a Pennsylvania corporation
By:
-------------------------------------------
Lawrence E. Bandi, President
And
By:
-------------------------------------------
Robert D. Scherich, Chief Financial Officer
and Assistant Secretary
("VNGI")
82
<PAGE> 83
VALLEY NATIONAL GASES DELAWARE, INC.
a Delaware corporation
By:
-------------------------------------------
Lawrence E. Bandi, President
And
By:
-------------------------------------------
Robert D. Scherich, Chief Financial Officer
and Assistant Secretary
("VNGDI")
83
<PAGE> 84
BANK ONE, INDIANA,
NATIONAL ASSOCIATION
By:
----------------------------------------
----------------------------------------
("Bank One" and the "Agent")
84
<PAGE> 85
LASALLE BANK NATIONAL ASSOCIATION
By:
-----------------------------------------
Printed:
------------------------------------
Title:
--------------------------------------
85
<PAGE> 86
FIRSTAR, N.A.
By:
-----------------------------------------
Printed:
------------------------------------
Title:
--------------------------------------
86
<PAGE> 87
BANK OF AMERICA, N.A.
By:
-----------------------------------------
Printed:
------------------------------------
Title:
--------------------------------------
87
<PAGE> 88
NATIONAL CITY BANK
By:
-----------------------------------------
Printed:
------------------------------------
Title:
--------------------------------------
88
<PAGE> 89
THE HUNTINGTON NATIONAL BANK
By:
-----------------------------------------
Printed:
------------------------------------
Title:
--------------------------------------
89
<PAGE> 90
WESBANCO BANK, INC.
By:
-----------------------------------------
-----------------------------------------
90
<PAGE> 91
SKY BANK
By:
-----------------------------------------
-----------------------------------------
91
<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 9-MOS
<FISCAL-YEAR-END> JUN-30-2000 JUN-30-2000
<PERIOD-START> JAN-01-2000 JUL-01-1999
<PERIOD-END> MAR-31-2000 MAR-31-2000
<CASH> 1,510,659 1,510,659
<SECURITIES> 0 0
<RECEIVABLES> 17,248,068 17,248,068
<ALLOWANCES> 589,423 589,423
<INVENTORY> 13,234,819 13,234,819
<CURRENT-ASSETS> 32,249,702 32,249,702
<PP&E> 86,635,993 86,635,993
<DEPRECIATION> 33,288,273 33,288,273
<TOTAL-ASSETS> 131,884,450 131,884,450
<CURRENT-LIABILITIES> 18,563,563 18,563,563
<BONDS> 72,297,347 72,297,347
0 0
0 0
<COMMON> 9,620 9,620
<OTHER-SE> 29,896,088 29,896,088
<TOTAL-LIABILITY-AND-EQUITY> 131,884,450 131,884,450
<SALES> 36,822,963 93,651,030
<TOTAL-REVENUES> 36,822,963 93,651,030
<CGS> 18,654,262 46,150,300
<TOTAL-COSTS> 18,654,262 46,150,300
<OTHER-EXPENSES> 14,501,946 38,877,719
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,476,451 3,772,359
<INCOME-PRETAX> 2,270,336 5,109,041
<INCOME-TAX> 998,948 2,247,978
<INCOME-CONTINUING> 1,271,388 2,861,063
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,271,388 2,861,063
<EPS-BASIC> 0.14 0.31
<EPS-DILUTED> 0.14 0.31
</TABLE>
