SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transaction period from ___________ to ___________
Commission file number: 0-27378
NUCO2 INC.
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(Exact Name of Registrant as Specified in Its Charter)
Florida 65-0180800
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2800 S.E Market Place, Stuart, Florida 34997
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (561) 221-1754
Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
-----------------------------
(Title of Class)
Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. /X/
(continued next page)
<PAGE>
The aggregate market value at September 20, 1999 of shares of the
Registrant's common stock, $.001 par value per share (based upon the closing
price of $7.00 per share of such stock on the Nasdaq National Market on such
date), held by non-affiliates of the Registrant was approximately $38,870,000.
Solely for the purposes of this calculation, shares held by directors and
executive officers of the Registrant have been excluded. Such exclusion should
not be deemed a determination or an admission by the Registrant that such
individuals are, in fact, affiliates of the Registrant.
At September 20, 1999, there were outstanding 7,216,664 shares of
the Registrant's common stock, $.001 par value.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Items 10, 11, 12 and 13 of Part III is
incorporated by reference to the Registrant's definitive proxy statement to be
filed not later than October 28, 1999 pursuant to Regulation 14A.
<PAGE>
NUCO2 INC.
Index
Page
PART I.
Item 1. Business. 1
Item 2. Properties. 9
Item 3. Legal Proceedings. 9
Item 4. Submission of Matters to a Vote of Security Holders. 9
PART II.
Item 5. Market For Registrant's Common Equity and
Related Stockholder Matters. 9
Item 6. Selected Financial Data. 9
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 11
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 18
Item 8 Financial Statements and Supplementary Data. 18
Item 9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure. 18
PART III.
Item 10. Directors and Executive Officers of the Registrant. 18
Item 11. Executive Compensation. 18
Item 12. Security Ownership of Certain
Beneficial Owners and Management. 18
Item 13. Certain Relationships and Related Transactions. 18
PART IV.
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. 19
Signatures 22
Index to Financial Statements F-1
<PAGE>
1. Business.
General
NuCo2 Inc. is the largest supplier in the United States of bulk CO2
systems and bulk CO2 for carbonating and dispensing fountain beverages. In most
instances, CO2 is presently supplied to fountain beverage users in the form of
gas, which is transported and stored in high pressure cylinders. Bulk CO2 is a
relatively new technology that is replacing high pressure CO2 as the beverage
carbonation system of choice. We are the first and only company to operate a
national network of service locations with over 97% of fountain beverage users
in the Continental United States within our current service area.
Our customers are many of the major national and regional restaurant
and convenience store chains, movie theater operators, theme parks, resorts and
sports venues, including:
<TABLE>
<CAPTION>
QUICK SERVE RESTAURANTS CASUAL/DINNER HOUSES
<S> <C> <C> <C>
Burger King Captain D's Applebee's Landry's
Pizza Hut Sonic Drive-In Outback Steakhouse Red Lobster/Olive Garden
Taco Bell White Castle Chili's Shoney's
KFC Roy Rogers Ryan's Family Steak House Longhorn Steakhouse
McDonald's Dunkin' Donuts Pizzeria Uno Ponderosa Steak House
Wendy's Pizza Inn Hard Rock Cafe Friendly's Restaurant
Krystal Bumpers Drive-In Official All Star Cafe Ruby Tuesday
Hardee's Checker's Spaghetti Warehouse Roadhouse Grill
Churchs Chicken
CONTRACT FEEDERS WHOLESALE CLUBS CONVENIENCE/PETROLEUM
Sodexho Marriott BJ's Wholesale 7-Eleven Exxon
Host Marriott Costco Circle K Shell ETD
Daka International Sam's Club Coastal Mart E-Z Serve
ARAmark Total Petroleum Racetrac Petroleum
Fine Host Golden Pantry Spectrum Stores
Sport Services Handy Way Sunshine Jr.
Christy's Market Star Enterprises
SPORTS VENUES Phillips 66 BP/Amoco
Pro Player Stadium
Madison Square Garden MOVIE THEATRES
Georgia Dome Regal Cinemas General Cinema
Derby Lane American Multi Cinema Carmike Cinemas
AMF Bowling Centers Sony/Loew's Cinemas United Artists Cinemas
Litchfield Cinemas
</TABLE>
We are a Florida corporation, incorporated in 1990. Through a
combination of internal growth and over 30 acquisitions, we have expanded our
service area from one service location and 19 customers in Florida to 84 service
locations and approximately 65,000 bulk and high pressure CO2 customers in 44
states. Our customer base has increased by an average of 78% annually. Today,
the majority of our growth is driven by the conversion of high pressure CO2
users to bulk CO2 systems.
1
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[MAP WITH SERVICE AREA AND DEPOT LOCATIONS]
Customer Base
Fiscal Year Ended June 30
1995 1996 1997 1998 1999
10,467 16,184 28,719 55,095 65,000
55% 77% 92% 18%
Our bulk CO2 customer base is highest in Florida, Texas, Georgia
and New York. We expanded our service area by one state during fiscal 1999, 13
states during fiscal 1998 and 12 states during fiscal 1997.
States with Largest Bulk CO2 Customer Base
Florida Texas Georgia New York
11,804 6,081 5,004 2,754
2
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Substantially all of our revenues have been derived from the rental
of bulk CO2 systems installed at customers' sites, the sale of CO2 and high
pressure cylinder revenues. Revenues have grown from $812,000 in fiscal 1991 to
$47.1 million in fiscal 1999, an average increase of 68% annually. We believe
that earnings before interest, taxes, depreciation and amortization ("EBITDA")
is the principal financial measure by which we should be measured as we continue
to achieve national market share and build route density. EBITDA has grown from
$15,000 in fiscal 1991 to $11.3 million in fiscal 1999, an average increase of
72% annually from fiscal 1994 to fiscal 1999.
Net Sales
(in millions)
For Fiscal Year Ended June 30
1995 1996 1997 1998 1999
6.1 12.0 18.9 35.1 47.1
97% 58% 85% 34%
EBITDA
(in millions)
For Fiscal Year Ended June 30
1995 1996 1997 1998 1999
2.1 3.7 4.1 7.1 11.3
76% 10% 74% 59%
3
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Opportunity for Growth
CO2 is universally used for the carbonation and dispensing of
fountain beverages. Unlike high pressure cylinders, which are typically changed
out when empty and transported to the supplier's depot for refilling, bulk CO2
systems are permanently installed at the customer's site and are filled by the
supplier from a specialized bulk CO2 truck on a constant "stay fill" basis.
Advantages to users of bulk CO2 systems over high pressure cylinders include
enhanced safety, improved beverage quality and product yields, reduced employee
handling and cylinder storage requirements, and elimination of downtime and
product waste during high pressure cylinder changeovers. Consequently, we
believe that bulk CO2 systems will eventually displace most high pressure
cylinders in the fountain beverage market.
There are currently approximately 120,000 bulk CO2 beverage users in
the United States. Of these, approximately 59,000 are already our customers. We
also currently service approximately 6,000 high pressure CO2 customers and
estimate that there are approximately 800,000 fountain beverage users in the
Continental United States and therefore the bulk CO2 industry presents
substantial opportunity for growth.
Total Beverage CO2 Users (800,000)
Bulk CO2 High Pressure NUCO2 Inc. Market Share
Users CO2 Users of Bulk CO2 Users
(120,000) (680,000) (59,000)
15% 85% 49%
Products and Services
We offer our customers two principal services: (1) a stationary bulk
CO2 system installed on the customer's site and (2) routine filling of the bulk
CO2 system with bulk CO2 on a three to four week cycle. The bulk CO2 system
installed at a customer's site consists of a cryogenic vessel for the storage of
bulk CO2 and related valves, regulators and gas lines. The cryogenic vessel
preserves CO2 in its liquid form and then converts the liquid product to gaseous
CO2, the necessary ingredient for beverage carbonation. We offer bulk CO2
systems ranging from 50 to 600 lbs. of CO2 capacity. This range of bulk CO2
system sizes permits us to market our services to a broad range of potential
customers.
Presently, we typically enter into a six year bulk CO2 system lease
and CO2 supply agreement with our customers. Generally, these agreements are
classified as one of two types: (1) "budget plan" service contracts or (2)
"rental plus per pound charge" contracts. Under budget plan contracts, customers
pay a fixed monthly charge for the lease of a bulk CO2 system installed on the
customer's site and refills of bulk CO2. The bulk CO2 is included in the monthly
rental charge up to a predetermined maximum annual volume. This arrangement is
appealing to the customer since we bear the initial cost of the equipment and
installation, with the customer only facing a predictable
4
<PAGE>
and modest monthly usage fee. If the maximum annual volume of CO2 is exceeded,
the customer is charged on a per pound basis for additional bulk CO2 delivered.
Under rental plus per pound charge contracts, we also lease a bulk CO2 system to
the customer, but the customer is charged on a per pound basis for all bulk CO2
delivered. Although the bulk CO2 system is typically owned by us and leased to
the customer, some customers own their own bulk CO2 systems. Even with customers
that own their own their own bulk CO2 systems, we seek to arrange for long-term
bulk CO2 supply contracts.
We believe that the use of long-term contracts provides benefits to
both us and our customers. Customers are able to largely eliminate CO2 supply
interruptions and the need to operate CO2 equipment themselves, while the
contract adds stability to our revenue base. In each of fiscal 1997, 1998 and
1999, less than 5% of our bulk CO2 systems in service experienced service
terminatiion. Service termination is typically caused by restaurant closure.
After the expiration of the initial term of a contract, the contract generally
renews unless we or the customer notifies the other of intent to cancel. To
date, our experience has been that contracts generally "roll-over" without a
significant terminating in any one year. The largest number (approximately 40%)
of our current contracts expire in 2003.
We also supply high pressure gases in cylinder form, including CO2,
helium and nitrogen. We estimate that we currently service approximately 6,000
high pressure CO2 customers, most of whom are very low volume users. Helium and
nitrogen are supplied mostly to existing customers in connection with filling
balloons and dispensing beer, respectively.
We have an agreement with MiCell Technologies Inc. ("MiCell") to be
the exclusive supplier in the United States and Canada of bulk CO2 systems and
bulk CO2 to MiCell's customers in the dry cleaning industry that use the MICO2
garment cleaning fluid system technology developed and patented by MiCell. While
perchloroethylele ("perc") has been used effectively in the dry cleaning
industry for years, there are growing concerns that perc may be a health hazard
and tighter controls have been placed on its use. Dry cleaners and other
businesses that use perc must dispose of it as hazardous waste. The MICO2 system
is an alternative to perc and uses a combination of CO2 and specialty detergents
as a cleaning solvent. MiCell believes that the MICO2 system is environmentally
benign, non-carcinogenic, safe for garments and does a better job of cleaning
than any of the alternatives. MiCell completed field testing of the MICO2 system
and began its sale in November 1998. We currently service 5 MiCell customers and
expect that number to increase if MiCell is successful in commercializing the
MICO2 system. Consequently, we may eventually have significant revenues outside
of the fountain beverage industry. Tests of the MICO2 system have indicated that
the average dry cleaner customer will use approximately 10 times the volume of
bulk CO2 that an average fountain beverage customer uses.
We also have an agreement with Geotechnical Instruments, Inc. to be
the exclusive distributor in the United States of stationary carbon dioxide
detectors. Escaped CO2 in an enclosed area displaces oxygen and can lead to
asphyxiation. Our bulk CO2 systems are typically installed in store rooms or
basements at a customer's site. Municipalities have increasingly been requiring
the use of carbon dioxide detectors as a preventive measure.
Marketing and Customers
At June 30, 1999, we serviced approximately 65,000 bulk and high
pressure CO2 customers, none of which accounted for more than 5% of our fiscal
1999 net sales. We market our bulk CO2 products and services to large customers
such as restaurant and convenience store chains, movie theater operators, theme
parks, resorts and sports venues. Our customers include most of the major
national and regional chains throughout the United States. We approach large
chains on a corporate or regional level for approval to become the exclusive
supplier of bulk CO2 products and services on a national basis or within a
designated territory. We then direct our sales efforts to the managers or owners
of the individual or franchised operating units. Our relationships with chain
customers in one geographic market frequently help us to establish service with
these same chains when we expand into new markets. After accessing the chain
accounts in a new market, we attempt to rapidly build route density by leasing
bulk CO2 systems to independent restaurants, convenience stores and theaters.
While the large chains offer immediate penetration on a national or regional
basis, the small operators are important accounts because they provide
geographic density which optimizes delivery efficiency and reduces costs on a
per customer basis. The introduction of smaller bulk CO2 systems (50 and 100 lb.
capacity vessels), which we helped develop, allows us to penetrate the market
for lower volume users of CO2 such as mall-based food courts, small restaurants
and mass-market retailers. Our products and services are sold by a sales force
of 75 commission only independent sales representatives and 33 salaried sales
personnel.
5
<PAGE>
Competition
We are the largest as well as the sole national supplier of bulk CO2
systems and bulk CO2 for carbonating and dispensing fountain beverages. In many
of our markets, we are a leading or the dominant supplier of bulk CO2 services.
Major restaurant and convenience store chains continue to adopt bulk
CO2 technology and search for qualified suppliers to install and service bulk
CO2 systems. With the exception of us, we believe that qualified suppliers of
bulk CO2 services do not presently exist in many regions of the United States.
Unlike many of our competitors for whom bulk CO2 is a secondary service line, we
have no material lines of business at present other than the provision of bulk
CO2 services. All aspects of our operations are guided by our focus on the bulk
CO2 business, including our selection of operating equipment, design of delivery
routes, location of service locations, structure of customer contracts, content
of employee training programs and design of management information and
accounting systems. By restricting the scope of our activities to the bulk CO2
business, and largely avoiding the dilution of management time and resources
that would be required by other service lines, we believe that we are able to
maximize the level of service we provide to our bulk CO2 customers.
We offer a wide range of innovative sales, marketing and billing
programs. We believe that our ability to compete depends on a number of factors,
including price, product quality, availability and reliability, name
recognition, delivery time and post-sale service and support. Despite the
customer-level advantages of bulk CO2 systems over high pressure cylinders, we
generally price our services comparably to the price of high pressure cylinders.
This has proved an effective inducement to cause customers to convert from high
pressure cylinders to bulk CO2 systems. We believe that we enjoy cost advantages
over our competitors due to the density of our route structure, a lower average
time and distance traveled between stops and a lower average cost per delivery.
Each bulk CO2 system serviced by us has a label with a toll-free help line for
the customer's use. We respond to service calls on a 24-hour, 7-day-a-week
basis, and the experience level of our personnel aids in the resolution of
equipment failures or other service interruptions, whether or not caused by our
equipment. Recognizing the public visibility of our customers, we carefully
maintain the appearance of our vehicles and the professional image of our
employees.
Many types of businesses compete in the fountain beverage CO2
business and market share is fragmented. High pressure cylinders and bulk CO2
services are most frequently provided by distributors of industrial gases. These
companies generally provide a number of products and services in addition to CO2
and often view bulk CO2 systems as high-service adjuncts to their core business.
Industrial gas distributors generally have been reluctant to attempt to convert
their high pressure cylinder customers to bulk CO2 systems for several reasons
including the capital outlays required to purchase bulk CO2 systems and the
idling of existing high pressure cylinders and associated equipment. Other
competitors in the fountain beverage CO2 business include fountain supply
companies and distributors of restaurant supplies and groceries which vary
greatly in size. There are also a number of small companies that provide bulk
CO2 services that operate on a local or regional geographic scope. While many of
these suppliers lack the capital necessary to offer bulk CO2 systems to
customers on lease, or to purchase additional or replacement specialized bulk
CO2 trucks and equipment, suppliers vary widely in size and some of our
competitors have significantly greater financial, technical or marketing
resources than we do.
6
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Operations
At June 30, 1999, we operated 84 service locations (69 stationary
depots and 15 mobile depots) located throughout our 44 state service area and
operated 166 specialized bulk CO2 trucks, 86 installation vehicles and seven
high pressure cylinder delivery trucks. Each specialized bulk CO2 truck refills
bulk CO2 systems at customers' sites on a regular cycle and CO2 delivery
quantities are measured by flow meters installed on the bulk CO2 trucks. Each
stationary depot is equipped with a storage tank (up to 40 tons) which receives
bulk CO2 from large capacity tanker trucks and from which our specialized bulk
CO2 trucks are filled with bulk CO2 for delivery to customers. In most
instances, the bulk CO2 system at a customer's site is accessible from the
outside of the establishment and delivery of bulk CO2 does not cause any
interference with the operations of the customer. All dispatch and billing
functions are conducted from our corporate headquarters in Stuart, Florida, with
route drivers, installers and service personnel operating from our service
locations.
We have begun rolling out a new mobile information system for use in
our field operations. The system utilizes a hand held device to provide field
personnel with up to date delivery route and customer account information and
also serves as an input source to record all delivery transaction information.
At the end of the driver's shift, all delivery transaction information is
transmitted electronically to our headquarters in Stuart, Florida and downloaded
into our computer systems. We believe that this new system will revolutionize
our route management system and lead to improved efficiencies in virtually all
aspects of our operations. Anticipated benefits include improved route
efficiencies and monitoring of driver performance, a reduction in courier
charges for overnight shipment of delivery tickets and in employee hours to
manually input delivery tickets since delivery information will be transmitted
electronically, virtual elimination of illegible delivery tickets and
consequently a reduction in billing errors and customer disputes and a reduction
in paperwork as well as telephone calls to and from the field.
Bulk CO2 Supply
Bulk CO2 is currently a readily available commodity product which is
processed and sold by various sources. In May 1997, we entered into a ten year
bulk CO2 exclusive requirements contract with The BOC Group, Inc. that provides
high quality CO2 as well as relatively stable prices at competitive levels. In
addition, the agreement provides that if sufficient quantities of bulk CO2
become unavailable for any reason, we will receive treatment as a preferred
customer.
Bulk CO2 Systems
We purchase new bulk CO2 systems from their two major manufacturers
pursuant to purchase agreements and we believe that we are the largest purchaser
of bulk CO2 systems from these manufacturers combined. We purchase bulk CO2
systems in six sizes (50, 100, 250, 300, 400 or 600 lbs. bulk CO2 capacity)
depending on the needs of our customers. Bulk CO2 systems are vacuum insulated
containers with extremely high insulation characteristics allowing the storage
of CO2, in its liquid form, at very low temperatures. Bulk CO2 systems operate
under low pressure, are fully automatic, and require no electricity. Based upon
manufacturers' estimates, the service life of a bulk CO2 system is expected to
exceed 20 years with minimal maintenance. We generally maintain a 60 day
inventory of bulk CO2 systems to meet expected customer demand.
7
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Employees
At June 30, 1999, we employed 543 full-time employees, 178 of whom
were involved in an executive, marketing or administrative capacity, 264 of whom
were route drivers and 101 of whom were in installation functions. We consider
our relationship with our employees to be good.
Trademarks
We market our services using the NuCo2(R) trademark which has been
registered by us with the United States Patent and Trademark Office. The current
registration expires in 2007.
Seasonality
At June 30, 1999, approximately 6,000 of our bulk CO2 customers were
billed under rental plus per pound charge contracts and approximately 9,600 of
our bulk CO2 customers own their own bulk CO2 systems and are billed by the
pound for all bulk CO2 delivered. Customers who purchase bulk CO2 by the pound
tend to consume less CO2 in the winter months and our revenues to such customers
will be correspondingly lower in times of cold or inclement weather.
Regulatory Matters
Our business is subject to various federal, state and local laws and
regulations adopted for the protection of the environment, the health and safety
of employees and users of our products. For example, the transportation of bulk
CO2 is subject to regulation by various federal, state and local agencies,
including the U.S. Department of Transportation. Regulatory authorities have
broad powers and we are subject to regulatory and legislative changes that can
affect the economics of the industry by requiring changes in operating practices
or by influencing the demand for, and the costs of, providing services. We
believe that we are in compliance in all material respects with all such laws,
regulations and standards currently in effect and that the cost of compliance
with such laws, regulations and standards has not and is not anticipated to
materially adversely effect us.
8
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2. Properties.
Our corporate headquarters are located in a 32,400 square foot
rented facility in Stuart, Florida that accommodates corporate, administrative,
marketing, sales and warehouse space. At June 30, 1999, we also rented 69
stationary service locations throughout 44 states. These facilities are rented
on terms consistent with market conditions prevailing in the area. We believe
that our existing facilities are suitable for our current needs and that
additional or replacement facilities, if needed, are available to meet future
needs.
3. Legal Proceedings.
We are involved from time to time in litigation arising in the
ordinary course of business, none of which is expected to have a material
adverse effect on our financial condition or results of operations.
4. Submission of Matters to a Vote of Security Holders.
Not applicable.
5. Market For Registrant's Common Equity and Related Stockholder
Matters.
Our common stock trades on the Nasdaq National Market under the
symbol "NUCO".
The following table indicates the range of high and low bid
information for our common stock for each quarterly period during fiscal 1998
and 1999, as reported by Nasdaq. Such over-the-counter market quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not necessarily reflect actual transactions.
Calendar 1997 High Low
Third Quarter 18 1/4 14 3/8
Fourth Quarter 16 1/8 10 1/4
Calendar 1998
First Quarter 13 3/4 10 1/2
Second Quarter 13 1/4 9 7/8
Third Quarter 10 3/8 5 1/2
Fourth Quarter 8 1/2 5
Calendar 1999
First Quarter 9 7/8 6 1/8
Second Quarter 9 5/8 5 1/4
At June 30, 1999, there were approximately 219 holders of record of
our common stock. This number does not include an indeterminate number of
shareholders whose shares are held by brokers in "street name."
We have never paid cash dividends on our common stock and we do not
anticipate declaring any cash dividends on our common stock in the foreseeable
future. We intend to retain all future earnings for use in the development of
our business. In addition, the payment of cash dividends is restricted by
financial covenants in our loan agreements.
On May 4, 1999, in connection with and in consideration for the
purchase of $10.0 million of our 12% Senior Subordinated Promissory Notes due
2005 by an existing holder of our 12% Senior Subordinated Promissory Notes due
2004 and an affiliate of SunTrust Bank, South Florida, National Association, we
issued warrants to purchase 372,892 shares of our Common Stock at an exercise
price of $6.65 per share in reliance upon the exemption provided by Section 4(2)
of the Securities Act of 1933, as amended. No discounts or commissions were
paid.
6. Selected Financial Data.
The Selected Financial Data set forth below reflect our historical
results of operations, financial condition and operating data for the periods
indicated and should be read in conjunction with the consolidated financial
statements and notes thereto and Management's Discussion and Analysis of
Financial Condition and Results of Operations included elsewhere in this Form
10-K.
9
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<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(in thousands, except per share amounts and Operating Data)
Income Statement Data:
<S> <C> <C> <C> <C> <C>
Net Sales.......................................... $ 47,098 $ 35,077 $ 18,944 $ 11,966 $ 6,062
Cost of products sold.............................. 25,225 18,578 8,992 5,177 2,503
Selling, general and administrative expenses....... 10,554 9,396 5,859 3,066 1,448
Depreciation and amortization...................... 12,763 8,912 4,246 2,417 1,380
----------- ----------- --------- -------- -------
Operating income (loss)............................ (1,444) (1,809) (153) 1,305 731
Interest expense, net.............................. 7,489 3,639 (681) 1,258 1,264
----------- ----------- ---------- -------- -------
Income (loss) before extraordinary item............ (8,933) (5,448) 527 47 (533)
Extraordinary item................................. - 187 - 860 -
----------- ----------- --------- -------- -------
Net income (loss) (8,933) (5,635) 527 (813) (533)
Dividends on Preferred Stock....................... - - - (111) -
----------- ----------- --------- -------- -------
Net income (loss).................................. $ (8,933) $ (5,635) $ 527 $ (924) $ (533)
=========== ============ ========= ========= =======
Income (loss) per common share before
extraordinary item............................ $ (1.24) $ (0.75) $ .07 $ (.02) $ (.17)
Extraordinary item................................. - (0.03) - (.19) -
------------ ----------- --------- -------- -------
Net income (loss) per common share $ (1.24) $ (0.78) $ .07 $ (.21) $ (.17)
Weighted average shares outstanding................ 7,217 7,210 7,318 4,500 3,379
Other Data:
EBITDA (1)......................................... $ 11,319 $ 7,103 $ 4,093 $ 3,722 $2,111
Operating Data:
Company owned bulk CO2 systems serviced:
Beginning of period........................... 39,295 21,919 12,884 7,967 4,237
New installations, net........................ 11,100 9,446 5,817 3,337 1,703
Acquisitions - 7,930 3,218 1,580 2,027
----------- ----------- --------- -------- -------
Total Company owned bulk CO2 systems serviced: 50,395 39,295 21,919 12,884 7,967
Customer owned bulk CO2 systems serviced........... 8,605 6,800 4,800 2,900 2,300
----------- ----------- --------- -------- -------
Total bulk CO2 systems serviced.................... 59,000 46,095 26,719 15,784 10,267
Total high pressure CO2 customers.................. 6,000 9,000 2,000 400 200
----------- ----------- --------- -------- -------
Total customers.................................... 65,000 55,095 28,719 16,184 10,467
Stationary depots.................................. 69 63 38 24 15
Mobile depots...................................... 15 2 0 0 0
Bulk CO2 trucks.................................... 166 150 83 49 30
Installation vehicles.............................. 86 76 36 19 18
High pressure cylinder delivery trucks............. 7 17 1 1 1
Balance Sheet Data:
Cash and cash equivalents.......................... $ 1,579 $ 337 $ 11,673 $ 43,001 $ 562
Total assets....................................... 141,630 124,498 73,344 74,633 21,143
Total debt (including short-term debt)............. 82,460 59,328 9,546 10,844 17,391
Total shareholders' equity......................... $ 47,733 $ 55,643 $ 60,702 $ 60,684 $ 743
</TABLE>
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- --------------------
(1) EBITDA represents operating income plus depreciation and amortization.
Information regarding EBITDA is presented because of its use by certain
investors as one measure of an issuer's ability to generate cash flow.
EBITDA should not be considered an alternative to, or more meaningful
than, operating income or cash flows from operating activities as an
indicator of an issuer's operating performance.
7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED
IN THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH DIFFERENCES
INCLUDE, BUT ARE NOT LIMITED TO, OUR EXPANSION INTO NEW MARKETS, COMPETITION,
TECHNOLOGICAL ADVANCES, YEAR 2000 ISSUES AND AVAILABILITY OF MANAGERIAL
PERSONNEL.
Overview
We are the largest supplier in the United States of bulk CO2 systems
and bulk CO2 for carbonating and dispensing fountain beverages. We currently
operate a national network of 84 service locations in 44 states servicing
approximately 65,000 bulk and high pressure customers. Over 97% of fountain
beverage users in the Continental United States are within our current service
area.
Growth in our customer base has averaged 78% annually. Our rapid
growth has been due to a combination of internal growth and over 30
acquisitions. Today, the majority of our growth is driven by the conversion of
high pressure CO2 users to bulk CO2 systems. Our success in conversions is
demonstrated in the Florida market where we continue to rapidly add new bulk CO2
system installations, even after actively marketing in the state since 1990.
Substantially all of our revenues have been derived from the rental
of bulk CO2 systems installed at customers' sites, the sale of CO2 and high
pressure cylinder revenues. Revenues have grown from $812,000 in fiscal 1991 to
$47.1 million in fiscal 1999, an average increase of 68% annually. We believe
that our revenue base is stable due to the existence of long-term contracts with
our customers which generally roll-over without a significant portion expiring
without renewal in any one year. In each of fiscal 1997, 1998 and 1999, less
than 5% of our bulk CO2 systems in service experienced service termination.
Service termination is typically caused by restaurant closure. Affected bulk CO2
systems are either removed and reconditioned, or left in place when prospects
for a new restaurant at the same location appear likely. Revenue growth is
largely dependent on both (1) the rate of new bulk CO2 system installations and
(2) the growth in bulk CO2 sales at (i) customers on the rental plus per pound
charge contracts and (ii) customers that own their own bulk CO2 systems. During
fiscal 1999, we installed a net of 925 bulk CO2 systems monthly.
Cost of products sold is comprised of purchased CO2 and labor,
vehicle and service location costs associated with the storage and delivery of
CO2 to customers. Selling general and administrative expenses consist of
salaries, dispatch and communications costs, and expenses associated with
marketing, administration, accounting and employee training. Consistent with the
capital intensive nature of our business, we incur significant depreciation and
amortization expenses. These stem from the depreciation of our bulk CO2 systems;
depreciation and amortization of bulk CO2 system installation costs;
amortization of sales commissions; and amortization of goodwill, deferred
financing costs and other intangible assets.
With respect to bulk CO2 systems, we only capitalize costs that are
associated with specific successful placements of such systems with customers
under noncancelable contracts and which would not be incurred but for a
successful placement. All other service, marketing and administrative costs are
expended as incurred.
Since 1990, we have devoted significant resources to building a
sales and marketing organization, adding administrative personnel and developing
a national infrastructure to support the rapid growth in the number of our
installed base of bulk CO2 systems. The cost of this expansion and the
significant depreciation expense of our installed network have resulted in
significant operating losses to date and accumulated net losses of $17.1 million
at June 30, 1999.
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We believe that our future revenue growth, gains in gross margin and
profitability will be dependent upon increases in route density and the
expansion and penetration of bulk CO2 system installations in existing and new
market regions resulting from successful ongoing marketing.
Our experience has been that gross margins at service locations
have generally increased with the length of time that the service location is in
operation. Gross margins in our mature markets are generally in the 55% to 65%
range. For the quarter ended June 30, 1999, 36% of our stationary service
locations were open over three years and averaged a 58% gross margin, 19% of our
stationary service locations were open between two and three years and averaged
a 54% gross margin, 42% of our stationary service locations were open between
one and two years and averaged a 35% gross margin and 3% of our stationary
service locations were open under one year and averaged a 39% gross margin.
Additionally, we operate 15 mobile service locations with an average 43% gross
margin for the quarter ended June 30, 1999. New service locations typically
operate at low or negative gross margins in the early stages and detract from
our highly profitable service locations in mature markets. Increases in gross
margins at service locations are directly related to increases in the number of
customers serviced. New accounts are being added to newer depots for which there
is substantial excess capacity, and therefore, relatively little additional cost
is incurred to service new customers. New multi-unit placement agreements
combined with single-unit placements will help us in achieving route density.
During fiscal 1999, we reached multi-unit placement agreements with national and
regional chains aggregating approximately 7,000 locations. Our success in
reaching these multi-placement agreements is due in part to our national
delivery system. As our customer base increases, we anticipate that our
financial performance on a sequential basis will improve at an accelerated rate.
Our route density is highest in Florida and is less developed in the other areas
where we presently have operations.
We believe that optimal route density is achieved at over 400
accounts serviced per bulk CO2 truck and we typically employ targeted sales
efforts to build density within an existing delivery route. We maintain a "hub
and spoke" route structure and establish additional stationary bulk CO2 service
locations as a service area expands through geographic growth. Our entry into
many states was accomplished largely through business acquisitions with thinly
developed route networks. We expect to benefit from route efficiencies and other
economies of scale as we build our customer base in these states through
intensive marketing initiatives. Greater scale may also lead to better vehicle
and fixed asset utilization as well as the ability to spread fixed marketing and
administrative costs over a broader revenue base.
We believe that earnings before interest, taxes, depreciation and
amortization ("EBITDA") is the principal financial measure by which we should be
measured as we continue to achieve national market presence and to build route
density. Our revolving credit facility utilizes EBITDA for its calculation of
financial leverage, affecting the amount of funds available to us to borrow.
Information regarding EBITDA is presented because of its use by certain
investors as one measure of a corporation's ability to generate cash flow.
EBITDA should not be considered as an alternative to, or more meaningful than,
operating income or cash flows from operating activities as an indicator of a
corporation's operating performance. EBITDA excludes significant costs of doing
business and should not be considered in isolation from GAAP measures. EBITDA
has grown from $15,000 in fiscal 1991 to $11.3 million in fiscal 1999, an
average increase of 72% annually from fiscal 1994 to fiscal 1999.
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Results of Operations
The following table sets forth, for the periods indicated, the
percentage relationship which the various items bear to net sales:
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
1999 1998 1997
---- ---- ----
Income Statement Data:
<S> <C> <C> <C>
Net sales......................................... 100.0% 100.0% 100.0%
Cost of products sold............................. 53.6 53.0 47.5
Selling, general and administrative expenses...... 22.4 26.8 30.9
Depreciation and amortization..................... 27.1 25.4 22.4
------- --------- -------
Operating loss.................................... (3.1) (5.2) (.8)
Interest expense (income)......................... 15.9 10.4 (3.6)
------- ---------- --------
Income (loss) before extraordinary item........... (19.0) (15.6) 2.8
Extraordinary item................................ - .5 -
------- --------- ------
Net income (loss)................................. (19.0%) (16.1%) 2.8%
======== ========== ======
Other Data:
EBITDA......................................... 24.0% 20.3% 21.6%
======== =========== ======
</TABLE>
Fiscal Year Ended June 30, 1999 Compared to Fiscal Year Ended June 30, 1998
Net Sales
Net sales increased $12.0 million, or 34.3%, from $35.1 million in
fiscal 1998 to $47.1 million in fiscal 1999. Approximately $3.6 million, or
30.2%, of the increase represented net sales from fifteen acquisitions during
fiscal 1998 which are included for the full year in fiscal 1999 as compared to
from their dates of acquisition in fiscal 1998. The remainder of the increase in
net sales was primarily due to internal growth in the number of Company owned
and customer owned bulk CO2 systems serviced. At June 30, 1999, there were
approximately 50,400 Company owned and 8,600 customer owned bulk CO2 systems in
service, an increase of 12,900, or 28%, over the approximately 39,300 Company
owned and 6,800 customer owned bulk CO2 systems in service at the end of fiscal
1998. Increases in net sales due to price increase were insignificant.
Cost of Products Sold
Cost of products sold increased by $6.6 million, or 35.8%, from
$18.6 million in fiscal 1998 to $25.2 million in fiscal 1999, and increased as a
percentage of net sales from 53.0% in fiscal 1998 to 53.6% in fiscal 1999. The
dollar increase is attributable to our continued growth. The percentage increase
is largely attributable to an increase in bulk CO2 purchases as a percentage of
net sales. Bulk CO2 purchases increased by $2.1 million from $4.2 million in
fiscal 1998 to $6.3 million in fiscal 1999 and increased as a percentage of net
sales from 12.1% to 13.4%. Fully loaded route drivers increased by $2.0 million
from $6.2 million in fiscal 1998 to $8.2 million in fiscal 1999 and decreased as
a percentage of net sales from 17.7% to 17.5%. Auto and truck expense increased
by $1.0 million from $3.2 million in fiscal 1998 to $4.2 million in fiscal 1999
and decreased as a percentage of net sales from 9.2% to 9.0%. Depot expense
increased by $476,000 from $1.7 million in fiscal 1998 to $2.2 million in fiscal
1999 and decreased as a percentage of net sales from 4.9% to 4.7%.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $1.2
million, or 12.3%, from $9.4 million in fiscal 1998 to $10.6 million in fiscal
1999, and decreased as a percentage of net sales from 26.8% in fiscal 1998 to
22.4% in fiscal 1999. The dollar increase is primarily attributable to growth in
the number of marketing and administrative personnel and their associated
expenses. The percentage decrease is attributable to economies of scale. Fully
loaded marketing, administrative and executive personnel increased by $1.1
million from $5.6 million in fiscal 1998 to $6.7 million in fiscal 1999, and
decreased as a percentage of net sales from 16.1% in fiscal 1998 to 14.2% in
fiscal 1999. At June 30, 1999, we had operations in 44 states and employed 178
marketing, administrative and executive
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personnel, and at the end of fiscal 1998, we had operations in 43 states and
employed 146 marketing, administrative and executive personnel.
Depreciation and Amortization
Depreciation and amortization increased by $3.9 million from $8.9
million in fiscal 1998 to $12.8 million in fiscal 1999. As a percentage of net
sales, such expense increased from 25.4% in fiscal 1998 to 27.1% in fiscal 1999.
Depreciation expense increased by $2.7 million from $6.0 million in fiscal 1998
to $8.7 million in fiscal 1999 principally due to the increase in bulk CO2
systems leased to customers. As a percentage of net sales, depreciation expense
increased from 17.2% in fiscal 1998 to 18.6% in fiscal 1999. Amortization
expense increased by $1.2 million from $2.9 million in fiscal 1998 to $4.0
million in fiscal 1999 primarily due to the increase in amortization of deferred
lease acquisition costs, deferred charges and goodwill and customer lists
resulting from acquisitions. As a percentage of net sales, amortization expense
increased from 8.2% in fiscal 1998 to 8.5% in fiscal 1999.
Operating Loss
For the reasons described above, operating loss decreased by
$365,000, or 20.2%, from $1.8 million in fiscal 1998 to $1.4 million in fiscal
1999, and decreased as a percentage of net sales from 5.2% in fiscal 1998 to
3.1% in fiscal 1999.
Interest Expense
Net interest expense increased by $3.9 million from $3.6 million in
fiscal 1998 to $7.5 million in fiscal 1999, and increased as a percentage of net
sales from 10.4% in fiscal 1998 to 15.9% in fiscal 1999. This increase is
attributable to the increased level of long-term and subordinated debt in fiscal
1999 as compared to fiscal 1998.
During fiscal 1998, $187,000 of deferred financing costs relating to
our prior credit facility was written off.
Net Loss
For the reasons described above, net loss increased by $3.3 million,
or 58.5%, from $5.6 million in fiscal 1998 to $8.9 million in fiscal 1999. No
provision for income tax expense in either fiscal 1998 or fiscal 1999 has been
made due to historical net losses. At June 30, 1999, we had net operating loss
carryforwards for federal income tax purposes of $45.6 million, which are
available to offset future federal taxable income through 2014.
EBITDA
For the reasons described above, EBITDA increased from $7.1 million
in fiscal 1998 to $11.3 million in fiscal 1999, or 59.3%, and increased as a
percentage of net sales from 20.3% to 24.0%.
Fiscal Year Ended June 30, 1998 Compared to Fiscal Year Ended June 30, 1997
Net Sales
Net sales increased $16.1 million, or 85.2%, from $18.9 million in
fiscal 1997 to $35.1 million in fiscal 1998. Approximately $6.1 million of the
increase represented net sales resulting from 15 acquisitions during the fiscal
year ended June 30, 1998. In addition, approximately $2.9 million of the
increase represented net sales from nine acquisitions during fiscal 1997 which
are included for the full year in fiscal 1998 as compared to from their dates of
acquisition in fiscal 1997. At June 30, 1998, there were approximately 39,300
Company owned bulk systems in service, an increase of 17,400 over the
approximately 21,900 Company owned bulk systems in service at the end of fiscal
1997. Of such increase, approximately 7,900 resulted from acquisitions of
businesses completed during fiscal 1998 and the remaining 9,500 resulted from
internal marketing efforts. Increases in net sales due to price increases were
insignificant.
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Cost of Products Sold
Cost of products sold increased by $9.6 million, or 106.6%, from
$9.0 million in fiscal 1997 to $18.6 million in fiscal 1998, and increased as a
percentage of net sales from 47.5% in fiscal 1997 to 53.0% in fiscal 1998. This
increase was attributable to our expansion into new territories. Fully loaded
route drivers increased by $3.2 million from $3.0 million in fiscal 1997 to $6.2
million in fiscal 1998, and increased as a percentage of net sales from 16.0% to
17.7%. The number of depots we operated at June 30, 1998 increased to 65,
compared to 38 at June 30, 1997. Depot expense increased by $956,000 from
$775,000 in fiscal 1997 to $1.7 million in fiscal 1998, and increased as a
percentage of net sales from 4.1% to 4.9%. Auto and truck expense increased by
$1.7 million from $1.5 million in fiscal 1997 to $3.2 million in fiscal 1998 and
increased as a percentage of net sales from 8.2% to 9.2%. When we open new
depots and expand into new markets, higher costs expressed as a percentage of
net sales are incurred until route density is achieved. We typically service
approximately 350 customers per delivery vehicle in mature markets. In new
territories, a delivery vehicle can initially service as few as 100 customers.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $3.5
million, or 60.4%, from $5.9 million in fiscal 1997 to $9.4 million in fiscal
1998, and decreased as a percentage of net sales from 30.9% in fiscal 1997 to
26.8% in fiscal 1998. The dollar increase was primarily attributable to growth
in the number of marketing and administrative personnel and their associated
expenses, as well as the costs of expanding our geographic areas of service.
Fully loaded marketing, administrative and executive personnel increased by $2.4
million from $3.2 million in fiscal 1997 to $5.6 million in fiscal 1998, and
decreased as a percentage of net sales from 16.9% in fiscal 1997 to 16.1% in
fiscal 1998. The percentage decrease is attributable to economies of scale. At
June 30, 1997, we had operations in 30 states and at the end of fiscal 1998, we
had operations in 43 states.
Depreciation and Amortization
Depreciation and amortization increased by $4.7 million from $4.2
million in fiscal 1997 to $8.9 million in fiscal 1998. As a percentage of net
sales, such expense increased from 22.4% in fiscal 1997 to 25.4% in fiscal 1998.
Depreciation expense increased by $2.9 million from $3.1 million in fiscal 1997
to $6.0 million in fiscal 1998 principally due to the increase in bulk CO2
systems leased to customers. As a percentage of net sales, depreciation expense
increased from 16.5% in fiscal 1997 to 17.2% in fiscal 1998. Amortization
expense increased by $1.8 million from $1.1 million in fiscal 1997 to $2.9
million in fiscal 1998 primarily due to the increase in amortization of deferred
lease acquisition costs and goodwill and customer lists resulting from
acquisitions. As a percentage of net sales, amortization expense increased from
5.9% in fiscal 1997 to 8.2% in fiscal 1998.
Operating Loss
For the reasons described above, operating loss increased by $1.7
million, from $153,000 in fiscal 1997 to $1.8 million in fiscal 1998, and
increased as a percentage of net sales from 0.8% in fiscal 1997 to 5.2% in
fiscal 1999.
Interest Expense
Net interest income in fiscal 1997 was $681,000 compared to net
interest expense in fiscal 1998 of $3.6 million. This change is attributable to
the decreased level of cash and cash equivalents and the increased level of
long-term and subordinated debt in fiscal 1998 as compared to fiscal 1997.
During fiscal 1998, $187,000 of deferred financing costs relating to
our prior credit facility was written off.
Net Income/Loss
For the reasons described above, net income in fiscal 1997 was
$527,000 compared to a net loss of $5.6 million in fiscal 1998. No provision for
income tax expense in either fiscal 1997 or fiscal 1998 has been made due to
historical net losses. At June 30, 1998, we had net operating loss carryforwards
for federal income tax purposes of $26.2 million, which are available to offset
future federal taxable income through 2013.
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EBITDA
For the reasons described above, EBITDA increased from $4.1 million
in fiscal 1997 to $7.1 million in fiscal 1998, or 73.6%, but decreased as a
percentage of net sales from 21.6% to 20.3%.
Liquidity and Capital Resources
Our cash requirements consist principally of (1) capital
expenditures associated with purchasing and placing new bulk CO2 systems into
service at customers' sites; (2) payments of interest on outstanding
indebtedness; and (3) working capital. Whenever possible, we seek to obtain the
use of vehicles, land, buildings, and other office and service equipment under
operating leases as a means of conserving capital. As of June 30, 1999, we
anticipated making cash capital expenditures of at least $20.0 million to $40.0
million during each of fiscal 2000 and fiscal 2001, primarily for purchases of
bulk CO2 systems that we expect to place into service. Once bulk CO2 systems are
placed into service, we generally experience positive cash flows on a per-unit
basis, as there are minimal additional capital expenditures required for
ordinary operations. In addition to capital expenditures related to internal
growth, we review opportunities to acquire bulk CO2 service businesses, and may
require cash in an amount dictated by the scale and terms of any such
transactions successfully concluded.
During fiscal 1999, our capital resources included cash flows from
operations, available borrowing capacity under our credit facility and proceeds
from the sale of our 12% Senior Subordinated Promissory Notes due 2005 (the
"2005 Notes").
On May 4, 1999, we entered into a $75.0 million amended and
restated revolving credit facility with a syndicate of banks led by SunTrust
Bank, South Florida, National Association ("Amended SunTrust Facility"). The
Amended SunTrust Facility contains interest rates and an unused facility fee
based on a pricing grid calculated quarterly on senior funded debt to annualized
EBITDA. We are entitled to select the Base Rate or LIBOR, plus applicable
margin, for principal drawings under the Amended SunTrust Facility. The
applicable LIBOR margin pursuant to the pricing grid ranges from 1.75% to 3.5%,
the applicable unused facility fee pursuant to the pricing grid ranges from
.375% to .50% and the applicable Base Rate margin pursuant to the pricing grid
ranges from 0.25% to 2.00%. Interest only is payable periodically until the
expiration of the Amended SunTrust Facility. The Amended SunTrust Facility
expires May 4, 2002, however, it contains a two year renewal option subject to
approval. Additionally, it is collateralized by substantially all of our assets.
Drawings pursuant to the Amended SunTrust Facility are limited to availability
under a formula predicated upon multiples of EBITDA. We are precluded from
declaring or paying any cash dividends and are required to meet certain
affirmative and negative covenants, including but not limited to financial
covenants. At various dates in the past we have been unable to meet certain
covenants and have had to obtain waivers or modifications of terms from our
lenders. Although we believe that we will be able to comply with the current
provisions of our borrowing arrangements, circumstances may result in our having
to obtain waivers or further modifications in the future. We believe that we
have an excellent relationship with our lenders.
Simultaneously with the Amended SunTrust Facility, we sold $10.0
million of our 2005 Notes. Except for their October 31, 2005 maturity date, the
2005 Notes are substantially identical to our 12% Senior Subordinated Promissory
Notes due 2004 (the "2004 Notes"). The 2005 Notes were sold with detachable
6-1/2 year warrants to purchase an aggregate of 372,892 shares of our Common
Stock at an exercise price of $6.65 per stock unit. In connection with the sale
of the 2005 Notes, certain financial covenants governing the 2004 Notes and the
2005 Notes were adjusted as of March 31, 1999 and prospectively and the exercise
price for 612,023 warrants issued in connection with the sale of the 2004 Notes
was reduced from $12.40 per share to $6.65 per stock unit. Additionally,
effective May 4, 1999, the interest rate on the original $30.0 million of Notes
increased to 14% per annum and will continue at 14% per annum during any quarter
during which certain financial ratios are not met.
As of June 30, 1999, a total of $43.3 million was outstanding under
the Amended SunTrust Facility with interest at three hundred fifty basis points
above the 180-day London InterBank Offering Rate ("LIBOR") (8.88% at June 30,
1999).
Working Capital. At June 30, 1998, we had negative working capital
of $3.1 million. At June 30, 1999, we had negative working capital of $455,000.
16
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Cash Flows from Operating Activities. During fiscal 1998 and fiscal
1999, net cash provided by operating activities was $7.4 million and $4.2
million, respectively. Cash flows from operating activities decreased by $3.2
million during fiscal 1999 compared to fiscal 1998 primarily due to an increase
in net loss and a decrease in the change in accounts payable. Net loss increased
by $3.3 million from $5.6 million in fiscal 1998 to $8.9 million in fiscal 1999.
The increase in accounts payable in fiscal 1998 was $4.5 million and in fiscal
1999 was $105,000.
Cash Flows from Investing Activities. During fiscal 1999 and fiscal
1998, we made net capital expenditures of $24.0 million and $23.5 million,
respectively, primarily for purchases of new bulk CO2 systems and associated
installation and direct placement costs. In addition, during fiscal 1998, we
made 15 acquisitions and expended cash of $12.4 million.
Cash Flows from Financing Activities. During fiscal 1999 and fiscal
1998, net cash provided by financing activities was $22.7 million and $18.6
million, respectively. For fiscal 1999 and fiscal 1998, cash flows provided by
financing activities were primarily from the issuance of subordinated debt and
borrowings under our revolving credit facility.
We believe that cash from operating activities and available
borrowings under the Amended SunTrust Facility will be sufficient to fund
proposed operations for at least the next 12 months at our anticipated rate of
growth.
Year 2000
We have conducted a review to identify which of our computer and
other business operating systems will be affected by the "Year 2000" problem and
have developed a project plan and schedule to solve this issue. Among the
functions and systems impacted could be inventory and accounting systems,
dispatch and delivery systems, electronic data interchange, and mechanical
systems operating everything from office building environmental controls to
telephone switches and fax machines. We believe that the costs of modifications,
upgrades, or replacements of software, hardware, or capital equipment which
would not be incurred but for Year 2000 compatibility requirements have not and
will not have a material impact on our financial position or results of
operations.
We are also engaged in communications with our significant business
partners, suppliers and customers to determine the extent to which we are
vulnerable to such third parties' failure to address their own Year 2000 issues.
Our assessment of the impact of Year 2000 issues includes an assessment of our
vulnerability to such third parties. We are seeking assurances from our
significant business partners, suppliers and customers that their computer
applications will not fail due to Year 2000 problems. Nevertheless, we do not
control, and can give no assurances as to the substance or success of the Year
2000 compliance efforts of such independent third parties and we believe that
there is a risk that certain of these third parties on whom our finances and
operations depend will experience Year 2000 problems that could affect our
financial position or results of operations. These risks include, but are not
limited to, the potential inability of suppliers to correctly or timely provide
necessary services, materials and components for our operations; the inability
of our customers to timely or correctly process and pay our invoices; and the
inability of lenders, lessors or other sources of our necessary capital and
liquidity to make funds available to us when required.
Because we are unaware of any material Year 2000 compliance issues,
we lack a Year 2000-specific contingency plan. If Year 2000 compliance issues
are discovered, we will evaluate the need for one or more contingency plans
relating to such issues. If we are unable to develop and implement appropriate
contingency plans, as needed, in a timely manner, we may experience delays in,
or increased costs associated with, implementation of changes to address any
such issues, which could have material adverse effect on our business, operating
results or financial condition.
Inflation
The modest levels of inflation in the general economy have not
affected our results of operations. Additionally, our customer contracts
generally provide for annual increases in the monthly rental rate based on
increases in the consumer price index. We believe that inflation will not have a
material adverse effect on our future results of operations.
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Our bulk CO2 requirements contract with The BOC Group, Inc. provides
for annual adjustments in the purchase price for bulk CO2 based upon increases
or decreases in the Producer Price Index for Chemical and Allied Products or the
average percentage increase in the selling price of bulk merchant carbon dioxide
purchased by BOC's large, multi-location beverage customers in the United
States, however, such increases are limited to 3% annually until June 2002.
7A. Quantitative and Qualitative Disclosures About Market Risk.
As discussed under "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources"
above, as of June 30, 1999, a total of $43.3 million was outstanding under the
Amended SunTrust Facility with interest at three hundred fifty basis points
above the 180 day LIBOR rate (8.88% at June 30, 1999). Based upon $43.3 million
outstanding under the Amended SunTrust Facility at June 30, 1999, our annual
interest cost under the Amended SunTrust Facility would increase by $433,000 for
each one percent increase in LIBOR (i.e., from 8.0% to 9.0%).
In order to reduce our exposure to increases in LIBOR, and
consequently to increases in interest payments, on June 9, 1998 we entered into
an interest rate swap transaction (the "Swap") with SunTrust Bank, Atlanta, in
the amount of $10.0 million (the "Notional Amount"). The effective date of the
Swap is September 2, 1998 and it terminates on September 5, 2000. Pursuant to
the Swap, we pay a fixed interest rate of 6% per annum and receive a LIBOR-based
floating rate. The effect of the Swap is to neutralize any changes in LIBOR on
the Notional Amount. If LIBOR decreases below 6% during the period the Swap is
in effect, interest payments by us on the Notional Amount will be greater than
if we had not entered into the Swap, since by exchanging LIBOR for a fixed
interest rate, we would not benefit from falling interest rates on LIBOR, a
variable interest rate. We do not enter into speculative derivative transactions
or leveraged swap transactions.
8. Financial Statements and Supplementary Data.
See page F-1.
9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
Not applicable.
10. Directors and Executive Officers of the Registrant.
The information required by Item 10 is incorporated by reference to
our definitive proxy statement to be filed with the Securities and Exchange
Commission no later than October 28, 1999 pursuant to Regulation 14A.
11. Executive Compensation.
The information required by Item 11 is incorporated by reference to
our definitive proxy statement to be filed with the Securities and Exchange
Commission no later than October 28, 1999 pursuant to Regulation 14A.
12. Security Ownership of Certain Beneficial Owners and Management.
The information required by Item 12 is incorporated by reference to
our definitive proxy statement to be filed with the Securities and Exchange
Commission no later than October 28, 1999 pursuant to Regulation 14A.
13. Certain Relationships and Related Transactions.
The information required by Item 13 is incorporated by reference to
our definitive proxy statement to be filed with the Securities and Exchange
Commission no later than October 28, 1999 pursuant to Regulation 14A.
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Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as part of this
report:
(1) Financial statements.
See Index to Financial Statements which appears on page
F-1 herein.
(2) Financial Statement Schedules
II - Valuation and Qualifying Accounts.
(3) Exhibits:
19
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Exhibit No. Exhibit
----------- -------
**3.1 -- Amended and Restated Articles of Incorporation
of the Company.
*****3.2 -- Articles of Amendment to the Articles of
Incorporation of the Company, dated December 18,
1995.
*****3.3 -- Articles of Amendment to the Articles of
Incorporation of the Company, dated December 17,
1996.
**3.4 -- Bylaws of the Company.
*****10.1 -- 1995 Stock Option Plan.
**10.2 -- Directors' Stock Option Plan.
**10.3 -- Noncompetition Agreement between the Company and
Edward M. Sellian, dated November 30, 1995.
**10.4 -- Lease for 2528 North Tamiami Trail, Ft. Myers,
Florida, between the Company and Edward M.
Sellian.
***10.5 -- Lease for 2800 Southeast Market Place, Stuart,
Florida between the Company and Edward M.
Sellian.
*****10.6 -- Lease for 2820 Southeast Market Place, Stuart,
Florida between the Company and Edward M.
Sellian dated as of February 1, 1998.
****10.7 -- Employment agreement between the Company and
Joann Sabatino, dated October 16, 1996.
*10.8 -- Amended and Restated Revolving Credit Agreement,
dated as of May 4, 1999 by and among the
Company, SunTrust Bank, South Florida, National
Association, Bank Austria Creditanstalt
Corporate Finance, Inc., The Provident Bank and
Bank Leumi Le-Israel B.M. (the "Lenders") and
SunTrust Bank, South Florida, National
Association, as agent for the Lenders (the
"Agent").
*10.9 -- First Amendment to Amended and Restated Credit
Agreement dated as of June 16, 1999 by and among
the Company, the Lenders and the Agent.
*****10.10 -- Senior Subordinated Note Purchase Agreement,
dated as of October 31, 1997 between the
Company, the Subsidiary Guarantors and the
Investors.
*****10.11 -- Amendment No. 1 to Senior Subordinated Note
Purchase Agreement dated as of November 14, 1997
between the Company, the Subsidiary Guarantors
and the Investors.
*****10.12 -- Amendment No. 2 to Senior Subordinated Note
Purchase Agreement dated as of June 30, 1998
between the Company, the Subsidiary Guarantors
and the Investors.
*10.13 -- Amendment No. 3 to Senior Subordinated Note
Purchase Agreement dated as of May 4, 1999
between the Company, the Subsidiary Guarantors
and the Investors.
*****10.14 -- Warrant Agreement dated as of October 31, 1997
among the Company and the Initial Holders.
20
<PAGE>
*****10.15 -- Amendment No. 1 to Warrant Agreement dated as of
November 14, 1997, between the Company and the
Initial Holders.
*10.16 -- Amendment No. 2 to Warrant Agreement dated as of
May 4, 1999 between the Company and the Holders.
*****21 -- Subsidiaries
*23 -- Consent of Margolin, Winer & Evens LLP to the
incorporation by reference to the Company's
Registration Statement on Form S-8 (No.
333-06705) of the independent auditors' report
included herein.
*27 -- Financial Data Schedule.
(b) Reports on Form 8-K
The Company filed a Form 8-K dated May 4, 1999 reporting an Item 5
event.
- ---------------------------
* Included herein.
** Incorporated by reference to the Company's Registration Statement on
Form SB-2, filed with the Commission on November 7, 1995 (Commission
File No. 33-99078), as amended.
*** Incorporated by reference to the Company's Registration Statement on
Form SB-2, filed with the Commission on June 7, 1996 (Commission
File No. 333-3352).
**** Incorporated by reference to the Company's Form 10-KSB for the
fiscal year ended June 30, 1997.
***** Incorporated by reference to the Company's Form 10-K for the fiscal
year ended June 30, 1998.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
NUCO2 INC.
Dated: September 28, 1999 /s/ Edward M. Sellian
------------------------
Edward M. Sellian,
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Craig L. Burr Director September 28, 1999
------------------------
Craig L. Burr
/s/ Robert L. Frome Director September 28,1999
------------------------
Robert L. Frome
/s/ John A. Kerney Director September 28, 1999
------------------------
John A. Kerney
/s/ Robert Ranieri Director September 28, 1999
------------------------
Robert Ranieri
/s/ Daniel Raynor Director September 28, 1999
------------------------
Daniel Raynor
/s/ Edward M. Sellian Director September 28, 1999
------------------------
Edward M. Sellian
/s/ Joann Sabatino Chief Financial September 28, 1999
------------------------ Officer
Joann Sabatino
22
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page No.
NuCo2 Inc.
Report of Independent Auditors ...........................................F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of June 30, 1998 and 1999..........F-3
Consolidated Statements of Operations for the Fiscal
Years Ended June 30, 1997, 1998 and 1999......................F-4
Consolidated Statements of Shareholders' Equity for the
Fiscal Years Ended June 30, 1997, 1998 and 1999...............F-5
Consolidated Statements of Cash Flows for the Fiscal
Years Ended June 30, 1997, 1998 and 1999......................F-6
Notes to Consolidated Financial Statements................................F-8
Schedule II - Valuation and Qualifying Accounts for the Fiscal
Years Ended June 30, 1997, 1998 and 1999..........................F-19
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
NuCo2 Inc.
Stuart, Florida
We have audited the accompanying consolidated balance sheets of NuCo2 Inc. as of
June 30, 1998 and 1999, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the three years in the period
ended June 30, 1999. We have also audited the financial statement schedule
listed in the accompanying index. These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of NuCo2
Inc. as of June 30, 1998 and 1999, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
June 30, 1999 in conformity with generally accepted accounting principles. Also,
in our opinion, the related financial statement schedule when considered in
relation to the basic financial statement taken as a whole, presents fairly, in
all material respects, the information set forth herein.
MARGOLIN, WINER & EVENS LLP
Garden City, New York
August 20, 1999
F-2
<PAGE>
NuCo2 Inc.
CONSOLIDATED BALANCE SHEETS
ASSETS
(NOTE 5)
<TABLE>
<CAPTION>
June 30,
--------
1998* 1999
----------- ------------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 336,510 $ 1,579,191
Trade accounts receivable; net of allowance for doubtful
accounts of $395,491 and $557,592, respectively 4,285,158 6,767,716
Inventories 211,027 213,605
Prepaid expenses and other current assets 434,784 593,487
------------- -------------
Total current assets 5,267,479 9,153,999
------------- -------------
Property and equipment, net (Note 3) 85,435,933 99,664,890
------------- -------------
Other assets:
Goodwill, net 22,891,846 21,645,293
Deferred charges, net 2,004,259 2,915,167
Customer lists, net 3,963,588 2,897,638
Restrictive covenants, net 2,275,964 1,928,700
Deferred lease acquisition costs, net 2,475,139 3,236,919
Deposits 184,059 187,595
------------- -------------
33,794,855 32,811,312
------------- -------------
$ 124,498,267 $ 141,630,201
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt (Note 5) $ 139,251 $ 96,748
Accounts payable 6,596,722 6,701,695
Accrued expenses 323,254 747,631
Accrued interest 844,153 1,473,704
Accrued payroll 476,458 543,924
Other current liabilities 7,179 45,570
------------- -------------
Total current liabilities 8,387,017 9,609,272
Long-term debt, excluding current maturities (Note 5) 29,460,614 43,615,025
Subordinated debt (Note 6) 29,728,571 38,748,695
Customer deposits 1,279,178 1,924,528
------------- -------------
Total Liabilities 68,855,380 93,897,520
------------- -------------
Commitments and contingencies (Note 13)
Shareholders' equity (Note 7):
Preferred Stock; no par value; 5,000,000 shares authorized;
none issued -- --
Common Stock; par value $.001 per share; 30,000,000 shares authorized;
issued and outstanding 7,216,664 shares at June 30, 1998 and 1999 7,217 7,217
Additional paid-in capital 63,809,014 64,831,748
Accumulated deficit (8,173,344) (17,106,284)
------------- -------------
Total shareholders' equity 55,642,887 47,732,681
------------- -------------
$ 124,498,267 $ 141,630,201
============= =============
</TABLE>
*Restated to conform to current year's classifications
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
NuCo2 Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended June 30,
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Net sales $ 18,943,569 $ 35,077,361 $ 47,097,670
------------ ------------ ------------
Costs and expenses:
Cost of products sold 8,991,823 18,578,063 25,224,746
Selling, general and administrative expenses 5,858,934 9,396,003 10,554,146
Depreciation and amortization 4,246,035 8,912,124 12,762,707
------------ ------------ ------------
19,096,792 36,886,190 48,541,599
------------ ------------ ------------
Operating (loss) (153,223) (1,808,829) (1,443,929)
Other expenses (income):
Interest expense 884,627 3,809,138 7,524,966
Interest (income) (1,565,289) (170,160) (35,955)
------------ ------------ ------------
Income (loss) before extraordinary item 527,439 (5,447,807) (8,932,940)
------------ ------------ ------------
Extraordinary item - loss on extinguishment of debt (Note 5) -- 186,945 --
------------ ------------ ------------
Net income (loss) $ 527,439 $ (5,634,752) $ (8,932,940)
============ ============ ============
Basic and Diluted EPS
Income (loss) before extraordinary item $ 0.07 $ (0.75) $ (1.24)
Extraordinary item -- (0.03) --
------------ ------------ ------------
Net income (loss) $ 0.07 $ (0.78) $ (1.24)
============ ============ ============
Weighted average number of common and common
equivalent shares outstanding
Basic 7,164,924 7,210,350 7,216,664
============ ============ ============
Diluted 7,317,926 7,210,350 7,216,664
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
NuCo2 Inc.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Total
Common Stock Additional Accumulated Shareholders'
Shares Amount Paid-In Capital Deficit Equity
------ ------ --------------- ------- ------
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1996 7,129,467 $ 7,129 $ 63,743,312 $ (3,066,031) $ 60,684,410
Issuance of 34,289 share's of
common stock - exercise of options 34,289 34 152,319 -- 152,353
Redemption of warrant -- -- (1,143,450) -- (1,143,450)
Additional expense - secondary
offering -- -- (59,100) -- (59,100)
Issuance of 33,962 shares of common
stock - asset acquisition 33,962 35 539,962 -- 539,997
Net income -- -- -- 527,439 527,439
------------ ------------ ------------ ------------ ------------
Balance, June 30, 1997 7,197,718 7,198 63,233,043 (2,538,592) 60,701,649
Issuance of 18,835 shares of common
stock - asset acquisition 18,835 19 274,972 -- 274,991
Issuance of 111 shares of common
stock - exercise of options 111 -- 999 -- 999
Issuance of warrants -- -- 300,000 -- 300,000
Net (loss) -- -- -- (5,634,752) (5,634,752)
------------ ------------ ------------ ------------ ------------
Balance , June 30, 1998 7,216,664 7,217 63,809,014 (8,173,344) 55,642,887
Issuance and repricing of warrants -- -- 1,022,734 -- 1,022,734
Net (loss) -- -- -- (8,932,940) (8,932,940)
------------ ------------ ------------ ------------ ------------
Balance, June 30, 1999 7,216,664 $ 7,217 $ 64,831,748 $(17,106,284) $ 47,732,681
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
NuCo2 Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------
1997 1998* 1999
---- ----- ----
<S> <C> <C> <C>
Income (loss) before extraordinary item $ 527,439 $ (5,447,807) $ (8,932,940)
Extraordinary item - loss on extinguishment of debt -- (186,945) --
------------ ------------ ------------
Net income (loss) 527,439 (5,634,752) (8,932,940)
Cash flows from operating activities:
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization of property and equipment 3,130,022 6,045,652 8,743,134
Amortization of other assets 1,116,013 2,866,471 4,019,574
Loss on disposal of property and equipment 294,411 499,704 1,109,738
Write-off of deferred financing costs -- 186,945 --
Changes in operating assets and liabilities:
Decrease (increase) in:
Trade accounts receivable (735,238) (2,017,485) (2,482,558)
Inventories (33,176) (115,968) (2,578)
Prepaid expenses and other current assets 108,090 (157,926) (158,703)
Increase (decrease) in:
Accounts payable (712,747) 4,542,532 104,973
Accrued expenses 363,361 (395,794) 424,377
Accrued payroll (93,592) 243,989 67,466
Accrued interest 193,800 824,585 629,551
Other current liabilities (50,830) (41,061) 38,391
Customer deposits 236,392 591,296 645,350
------------ ------------ ------------
Net cash provided by operating activities 4,343,945 7,438,188 4,205,775
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from disposal of property and equipment 2,133,776 410,868 104,173
Purchase of property and equipment (16,945,522) (23,456,104) (24,048,318)
Acquisition of businesses (17,692,662) (12,406,907) 45,460
Increase in deferred lease acquisition costs (914,999) (1,805,874) (1,717,579)
(Increase) decrease in deposits 160,500 (79,661) (3,536)
------------ ------------ ------------
Net cash used in investing activities $(33,258,907) $(37,337,678) $(25,619,800)
------------ ------------ ------------
</TABLE>
* Restated to conform to current year's classifications.
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
NuCo2 Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------
1997 1998 1999
---- ---- ----
Cash flows from financing activities:
<S> <C> <C> <C>
Proceeds from issuance of Common Stock $ (59,100) $ -- $ --
Net proceeds from issuance of long-term debt
and subordinated debt -- 21,610,820 24,292,857
Repayment of long-term debt (1,309,704) (831,409) (138,092)
Increase in deferred charges (53,307) (2,216,916) (1,498,059)
Exercise of warrants and options 152,353 999 --
Redemption of warrant (1,143,450) -- --
------------ ------------ ------------
Net cash provided by (used in) financing activities (2,413,208) 18,563,494 22,656,706
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents (31,328,170) (11,335,996) 1,242,681
Cash and cash equivalents, beginning of year 43,000,676 11,672,506 336,510
------------ ------------ ------------
Cash and cash equivalents, end of year $ 11,672,506 $ 336,510 $ 1,579,191
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 903,729 $ 2,966,659 $ 6,870,822
============ ============ ============
Income taxes $ -- $ -- $ --
============ ============ ============
Supplemental schedule of noncash investing and
financing activities:
Acquisition of businesses:
Fair value of assets acquired $ 1,098,718 $ 26,426,234 $ --
Cost in excess of net assets of businesses acquired 244,000 16,256,879 --
Liabilities assumed or incurred (56,250) (30,001,215) --
Issuance of Common Stock (539,996) (274,991) --
------------ ------------ ------------
Cash paid $ 746,472 $ 12,406,907 $ --
============ ============ ============
</TABLE>
In 1997, the Company purchased equipment and incurred debt in the amount
of $11,604.
In 1998, the Company wrote-off a restrictive covenant and the related
liability in the amount of $19,231 due to the employee resigning.
In 1998, the Company repaid long-term debt in the amount of $20,782,995
with the proceeds of the issuance of subordinated debt. In connection therewith,
detachable warrants were issued and original issue discount in the amount of
$300,000 was recorded.
In 1999, the Company repaid long-term debt in the amount of $5,000,000
with the proceeds of the issuance of subordinated debt. In connection therewith,
detachable warrants were issued and original issue discount in the amount of
$549,032 was recorded. Additionally, in connection with the repricing of the
Company's 2004 warrants, original issue discount in the amount of $473,702 was
recorded.
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
NuCo2 Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Description of Business and Summary of Significant Accounting Policies
(a) Basis of Presentation
The consolidated financial statements include the accounts of NuCo2
Inc. and its wholly-owned subsidiary, NuCo2 Acquisition Corp. which was formed
during the year ended June 30, 1998 to acquire the stock of Koch Compressed
Gases, Inc. (see Note 2). All material intercompany accounts and transactions
have been eliminated.
(b) Description of Business
The Company is a supplier of bulk CO2 dispensing systems to customers
in the food, beverage, lodging and recreational industries in the United States.
(c) Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased
with an original maturity of three months or less to be cash equivalents.
(d) Inventories
Inventories, consisting primarily of carbon dioxide gas, are stated
at the lower of cost or market. Cost is determined by the first-in, first-out
method.
(e) Property and Equipment
Property and equipment are stated at cost. The Company does not
depreciate bulk systems held for installation until the systems are in service
and leased to customers. Upon installation, the systems, component parts and
direct costs associated with the installation are transferred to the leased
equipment account. These costs are associated with successful placements of such
systems with customers under noncancelable contracts and which would not be
incurred by the Company but for a successful placement. Upon early service
termination, the unamortized portion of direct costs associated with the
installation are charged to cost of products sold. Depreciation and amortization
is computed using the straight-line method over the estimated useful lives of
the respective assets or the lease terms for leasehold improvements, whichever
is shorter.
The depreciable lives of property and equipment are as follows:
Estimated Life
Leased equipment 5-20 years
Equipment and cylinders 3-20 years
Vehicles 3-5 years
Computer equipment 3-7 years
Office furniture and fixtures 5-7 years
Leasehold improvements lease term
F-8
<PAGE>
NuCo2 Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Description of Business and Summary of Significant Accounting
Policies - (continued)
(f) Other Assets
Goodwill, Net
Goodwill, net, represents costs in excess of net assets of
businesses acquired and is being amortized on a straight-line basis over twenty
years. Accumulated amortization of goodwill was $1,370,779 and $2,582,372 at
June 30, 1998 and 1999, respectively. The Company periodically assesses the
recoverability of the cost of its goodwill, as well as of its other intangible
assets, based on a review of projected undiscounted cash flows of the related
operating assets. These cash flows are prepared and reviewed by management in
connection with the Company's annual long range planning process.
Deferred Charges, Net
Deferred charges, net, consist of the unamortized portion of
financing costs which are being amortized over the term of the related
indebtedness, ranging from thirty-six to eighty-four months. Accumulated
amortization of deferred charges was $417,646 and $1,004,797 at June 30, 1998
and 1999, respectively. Included in the consolidated statements of operations
for the year ended June 30, 1998 are extraordinary write-offs of deferred
financing fees in connection with the reduction of certain indebtedness.
Customer Lists, Net
Customer lists, net, consist of the unamortized portion of
customer lists acquired in connection with asset acquisitions which are being
amortized over five years, the average life of customer leases. Accumulated
amortization of customer lists was $1,380,411 and $2,435,861 at June 30, 1998
and 1999, respectively. The Company's policy is to value customer lists based on
the estimated value of future cash flows over the life of the customer lease.
Restrictive Covenants, Net
Restrictive covenants, net, consist of covenants not to compete
arising in connection with asset acquisitions which are being amortized over
their contractual lives ranging from thirty to one hundred and twenty months.
Accumulated amortization of restrictive covenants was $353,993 and $701,257 at
June 30, 1998 and 1999, respectively. The Company's policy is to value
restrictive covenants based on the negotiated contractual value of the
restrictive covenant or a third party appraisal.
Deferred Lease Acquisition Costs, Net
Deferred lease acquisition costs, net, consist of commissions
associated with the acquisition of new leases and are being amortized over the
life of the related leases, generally five years. Accumulated amortization of
deferred lease acquisition costs was $1,197,756 and $1,932,060 at June 30, 1998
and 1999, respectively. Upon early service termination, the unamortized portion
of deferred lease acquisition costs are charged to selling, general and
administrative expenses.
(g) Revenue Recognition
The Company earns its revenues from the leasing of CO2 systems
and related gas sales. The Company, as lessor, recognizes revenue from leasing
of CO2 systems on a straight-line basis over the life of the related leases. The
majority of CO2 system leases generally include payments for leasing of
equipment and a continuous supply of CO2 until usage reaches a pre-determined
maximum annual level, beyond which the customer pays for CO2 on a per pound
basis. Other CO2 and gas sales are recorded upon delivery to the customer.
F-9
<PAGE>
NuCo2 Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Description of Business and Summary of Significant Accounting
Policies - (continued)
(h) Income Taxes
Income taxes are accounted for under Financial Accounting
Standards Board Statement No. 109, Accounting for Income Taxes. Statement No.
109 requires recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse. Under
Statement No. 109, the effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment
date.
(i) Net Income or Loss Per Common Share
Net income or loss per common share is presented in accordance
with SFAS No. 128, "Earnings per Share." Basic earnings per common share are
computed using the weighted average number of common shares outstanding during
the period. Diluted earnings per common share incorporate the incremental shares
issuable upon the assumed exercise of stock options and warrants to the extent
they are not anti-dilutive.
(j) Use Of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(k) Employee Benefit Plan
On June 1, 1996, the Company adopted a deferred compensation plan
under Section 401(K) of the Internal Revenue Code which covers all eligible
employees. Under the provisions of the plan, eligible employees may defer a
percentage of their compensation subject to the Internal Revenue Service limits.
Contributions to the plan are made only by employees.
Note 2 - Acquisitions
In August 1996, the Company acquired the bulk CO2 operations of
two affiliated companies operating in Ohio, Kentucky and Indiana for an
aggregate purchase of approximately $1,350,000. The Company paid cash for these
transactions.
In March 1997, the Company acquired certain assets of three
unrelated companies operating in Texas for an aggregate purchase price of
approximately $2,875,000. The Company paid cash for these transactions.
In April 1997, the Company acquired certain assets of Texas
Oxygen, Inc./Texas CO2, Inc. for an aggregate purchase price of approximately
$3,925,000. The Company paid cash for these transactions.
In May 1997, the Company acquired certain assets from two
companies, City Carbonic Company, Inc., and the BOC Group, Inc. City Carbonic
Company, Inc. operating in Oklahoma, Kansas, Texas and Arkansas, sold assets for
an aggregate purchase price of approximately $3,290,000. The BOC Group, Inc.
beverage bulk CO2 operations were located in Massachusetts, Pennsylvania and
Tennessee and were acquired for an aggregate purchase price of approximately
$5,233,000. The Company paid cash for these transactions.
In June 1997, the Company acquired certain assets of a business
operating in Georgia for a purchase price of $1,350,000. The Company paid
approximately $750,000 cash, incurred liabilities of $60,000 and issued 33,962
shares of Common Stock at market, for a value of $540,000.
F-10
<PAGE>
NuCo2 Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Acquisitions (continued)
Effective July 15, 1997, the Company purchased substantially all
of the assets of a bulk CO2 company operating in Colorado for a purchase price
of $675,000. The purchase price was funded through a borrowing under the
Company's credit facility.
Effective July 31, 1997, the Company purchased certain assets
from CC Acquisition Corp. (Carbo Co.) for an aggregate purchase price of
$11,000,000. Carbo Co. had operations in Nebraska, Kansas, Oklahoma, Iowa,
Missouri, Arkansas and South Dakota. The Company funded $5,000,000 through a
borrowing under its credit facility and paid cash for the balance.
In September 1997, the Company purchased certain assets of a bulk
CO2 company with operations in Arizona for an aggregate purchase price of
$1,084,250. The Company funded $1,075,000 through a borrowing under its credit
facility and paid cash for the balance.
Effective October 1, 1997, a newly formed wholly-owned subsidiary
of the Company purchased all of the issued and outstanding shares of Common
Stock of Koch Compressed Gases, Inc. ("Koch") for an aggregate purchase price of
approximately $5,000,000. Koch operated a bulk CO2 business as well as provided
carbon dioxide and other gases in high-pressure cylinders throughout the
tri-state New York metropolitan area. The purchase price was funded through a
borrowing under the Company's credit facility.
In November 1997, the Company purchased substantially all of the
assets of a bulk CO2 company operating in Texas for a purchase price of
$949,240. The Company paid $674,249 cash and issued 18,835 shares of Common
Stock at market, for a value of $274,991.
Effective December 2, 1997, the Company purchased certain assets
from four related carbonic gas distributors, Miller Carbonic Systems Co. Inc.,
Miller Carbonic, Inc., Carbonic National Systems, Inc., and Carbonic Gas
Service, Inc., operating primarily in Illinois, Indiana, Wisconsin and Michigan
for an aggregate purchase price of $11,150,000. The Company paid approximately
$4,650,000 cash and funded $6,500,000 through a borrowing under the Company's
SunTrust Facility (see Note 5).
Effective December 2, 1997, the Company purchased certain assets
of a bulk CO2 company with operations in Kansas for a purchase price of
approximately $990,000. The purchase price was funded through a borrowing under
the Company's SunTrust Facility (see Note 5).
Effective January 23, 1998, the Company purchased substantially
all of the assets of a bulk CO2 company operating in California for a purchase
price of $4,500,000. The purchase price was funded through a borrowing under the
Company's SunTrust Facility (see Note 5).
Effective March 2, 1998, the Company purchased certain assets
from Florida Carbonic Distributor, Inc., a carbonic gas distributor operating in
Florida for a purchase price of $6,300,000. The purchase price was funded
through a borrowing under the Company's SunTrust Facility (see Note 5).
In March, 1998, the Company purchased certain assets from three
unrelated carbonic gas distributors with operations in Texas, Maine and Alabama
for an aggregate purchase price of $406,000. The Company paid cash for these
transactions.
The Company did not consumate any acquisitions during the fiscal
year ended June 30, 1999.
These acquisitions were accounted for by the purchase method of
accounting and, accordingly, the purchase prices and direct costs of the
acquisitions have been allocated to the respective assets and liabilities of the
acquired companies based upon their estimated fair market values at the date of
acquisition. This resulted in goodwill of approximately $4,732,000 and
$16,257,000 in the two years ended June 30, 1998, respectively, which is being
amortized on a straight-line basis over twenty years. The results of operations
of the acquired companies are included in the Company's consolidated financial
statements since the effective date of the acquisitions.
F-11
<PAGE>
NuCo2 Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Acquisitions (continued)
The following summarized, unaudited, pro forma results of
operations assume that the acquisitions described above occurred as of the
beginning of the earliest year presented:
Year Ended June 30,
-------------------
1997 1998
---- ----
Net sales $ 33,104,161 $ 39,078,542
(Loss) before extraordinary item (1,751,557) (6,133,862)
Net (loss) (1,751,557) (6,320,807)
Net (loss) per common share (0.24) (0.88)
Note 3 - Property and Equipment, Net
Property and equipment, net consists of the following:
June 30,
--------
1998 1999
---- ----
Leased equipment $ 77,378,765 $ 95,925,286
Equipment and cylinders 12,126,813 13,939,944
Systems held for installation 3,925,539 5,150,513
Vehicles 622,092 448,363
Computer equipment 1,516,153 2,062,704
Office furniture and fixtures 997,142 1,216,246
Leasehold improvements 1,039,442 1,484,856
Construction in progress 221,999 --
------------ --------------
- - 97,827,945 120,227,912
Less accumulated depreciation
and amortization 12,392,012 20,563,022
------------ ---------------
$ 85,435,933 $ 99,664,890
============ ===============
Capitalized component parts and direct costs associated with
installation of equipment leased to others included in leased equipment was
$12,429,913 and $19,417,952 at June 30, 1998 and 1999, respectively. Accumulated
depreciation and amortization of these costs were $3,525,574 and $6,332,121 at
June 30, 1998 and 1999, respectively.
Depreciation and amortization of property and equipment was
$3,130,022, $6,045,652 and $8,743,134 for the years ended June 30, 1997, 1998,
and 1999, respectively.
Note 4 - Leases
The Company leases equipment to its customers generally pursuant
to five-year noncancelable operating leases which expire on varying dates
through June 2005. At June 30, 1999, future minimum rentals due from customers
which includes, where applicable, a continuous supply of CO2 (see Note 1(g)),
are approximately as follows:
Year Ending June 30,
2000 $ 31,935,000
2001 28,932,000
2002 24,973,000
2003 17,226,000
2004 9,064,000
Thereafter 5,295,000
--------------
$ 117,425,000
==============
F-12
<PAGE>
NuCo2 Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30,
1998 1999
<S> <C> <C>
Note payable to bank under credit facility. Drawings at June 30, 1999 are at
LIBOR rates plus 3.5% (8.8831%). Drawings at June 30, 1998 are at 6 month
LIBOR rates plus 2.25%. (7.875% to 8.00%) (a) $ 29,000,000 $ 43,250,000
Note payable assumed in connection with the acquisition of the stock of Koch
of $388,082, principal and interest (9%) payments of $4,413 through April
2003 and $5,405 from May 2003 through April 2008. 375,741 355,788
Various notes payable 224,124 105,985
------------ ------------
29,599,865 43,711,773
Less current maturities of long-term debt 139,251 96,748
------------ ------------
Long-term debt, excluding current maturities $ 29,460,614 $ 43,615,025
============ ============
</TABLE>
(a) On May 4, 1999, the Company entered into a $75.0 million
amended and restated revolving credit facility with a syndicate of banks led by
SunTrust Bank, South Florida, N.A. ("Amended SunTrust Facility"). The Amended
SunTrust Facility amended and restated the Company's existing $50.0 million
syndicated facility which had been entered into in October 1997. As of June 30,
1999, $31.75 million is available under the Amended SunTrust Facility. The
Amended SunTrust Facility contains interest rates and an unused facility fee
based on a pricing grid calculated quarterly on senior funded debt to annualized
EBITDA (as defined). The Company is entitled to select the Base Rate or LIBOR,
plus applicable margin, for principal drawings under the Amended SunTrust
Facility. The applicable LIBOR margin pursuant to the pricing grid ranges from
1.75% to 3.5%. The applicable unused facility fee pursuant to the pricing grid
ranges from .375% to .50%. Interest only is payable periodically until the
expiration of the Amended SunTrust Facility on May 4, 2002; there is, however, a
two year renewal option subject to approval. The Amended SunTrust Facility is
collateralized by substantially all of the assets of the Company. The Company is
precluded from declaring or paying any cash dividends and is required to meet
certain affirmative and negative covenants including, but not limited to,
financial covenants. Pursuant to the Amended SunTrust Facility, drawings are
limited to availability under a formula predicated upon multiples of EBITDA.
On June 9, 1998, the Company entered into an interest rate swap
transaction (the "Swap") with SunTrust Bank, Atlanta, in the amount of $10.0
million (the "Notional Amount"). The effective date of the Swap is September 2,
1998 and terminates on September 5, 2000. Pursuant to the Swap, the Company pays
a fixed interest rate of 6% per annum and receives a LIBOR-based floating rate.
The aggregate maturities of long-term debt for each of the five
years subsequent to June 30, 1999 are as follows:
Year Ending June 30,
2000 $ 96,748
2001 33,495
2002 43,286,638
2003 40,073
2004 43,826
Thereafter 210,993
----------------
$ 43,711,773
================
Extraordinary item - loss on extinguishment of debt
During the year ended June 30, 1998, the Company incurred an
extraordinary charge of $186,945, for the write-off of deferred financing costs
in connection with the early repayment of debt.
F-13
<PAGE>
NuCo2 Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Subordinated Debt
In October 1997, the Company issued $30.0 million of its 12%
Senior Subordinated Promissory Notes ("Notes") with interest only payable
semi-annually on April 30 and October 31, due October 31, 2004. The Notes were
sold with detachable seven year warrants to purchase an aggregate of 655,738
shares of the Company's Common Stock at an exercise price of $16.40 per share.
The effective rate of the Notes is 12.1% per annum after giving effect to the
amortization of the original issue discount. The Company is required to meet
certain affirmative and negative covenants. Additionally, NationsBanc Montgomery
Securities, Inc., the placement agent, received a warrant to purchase an
aggregate of 30,000 shares of the Company's Common Stock at an exercise price of
$14.64 per share which expires on October 31, 2004.
On May 4, 1999, the Company sold an additional $10.0 million of
its 12% Senior Subordinated Promissory Notes ("Additional Notes"). Except for
their October 31, 2005 maturity date, the Additional Notes are substantially
identical to the Notes described above. The Additional Notes were sold with
detachable 6-1/2 year warrants to purchase an aggregate of 372,892 shares of
Common Stock at an exercise price of $6.65 per share. In connection with the
sale of the Additional Notes, certain financial covenants governing the Notes
and the Additional Notes were adjusted as of March 31, 1999 and prospectively
and the exercise price of 612,023 of the warrants issued in connection with the
sale of the Notes was reduced to $6.65 per share. The effective rate of the
Additional Notes is 13.57% per annum after giving effect to the amortization of
the original issue discount. Additionally, effective May 4, 1999, the interest
rate on the original $30.0 million of Notes increased to 14% and will continue
at 14% during any quarter which certain financial ratios are not met.
Note 7 - Shareholders' Equity
(a) Non-Qualified Stock Options and Warrants
In June 1995, the Company granted a ten year warrant to purchase
84,917 shares of Common Stock at $5.00 per share to the Company's then current
lending institution in connection with a refinancing. As of June 30, 1999 the
warrant is outstanding.
In June 1995, the Company granted options to purchase 67,934
shares of Common Stock at $4.40 per share to certain officers and employees. In
June and July 1996, these options were exercised. Proceeds to the Company from
the exercise of these stock options in fiscal 1997 aggregated $149,455.
In connection with the Company's Initial Public Offering in
December 1995, representatives of the Underwriters received warrants to purchase
up to an aggregate of 110,000 shares of Common Stock. Such warrants are
exercisable for a period of five years, at an exercise price of $10.80 per
share. In July 1996, the Company redeemed and canceled a warrant issued to one
of the representatives of the underwriters to purchase 77,000 shares of Common
Stock for $1,143,450. This amount represented the approximate market value of
such warrant on the date of redemption.
In May 1997, the Company granted a warrant to purchase 1,000,000
shares of Common Stock to BOC pursuant to the supply agreement (see Note 13c).
The warrant is exercisable from May 1, 1999 to May 1, 2002 at an exercise price
of $17 per share and from May 1, 2002 until April 30, 2007 at an exercise price
of $20 per share.
(b) Stock Option Plans
The board of directors adopted the 1995 Option Plan (the "1995
Plan"). Under the 1995 Plan, the Company has reserved 850,000 shares of Common
Stock for employees of the Company. Under the terms of the 1995 Plan, options
granted may be either incentive stock options or non-qualified stock options, or
both. The exercise price of incentive options shall be at least equal to 100% of
the fair market value of the Company's Common Stock at the date of the grant,
and the exercise price of non-qualified stock options issued to employees may
not be less than 75% of the fair market value of the Company's Common Stock at
the date of the grant. The maximum term for all options is 10 years. Options
granted to date vest in three to five installments over periods of three to four
and one-half years. As of June 30, 1997, 1998 and 1999, options for 41,437
shares, 105,900 shares and 277,307 shares are exercisable, respectively. The
weighted-average fair value per share of options granted during the years ended
June 30, 1997, 1998 and 1999 were $2.93, $2.81 and $2.20, respectively. As of
June 30, 1999, the weighted-average remaining life of the options was 6.9 years.
F-14
<PAGE>
NuCo2 Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 - Shareholders' Equity (continued)
The following table summarizes the transactions pursuant to the 1995
Plan.
<TABLE>
<CAPTION>
Weighted-Average
Shares Exercise Price Exercise Price
------ -------------- --------------
<S> <C> <C> <C>
Outstanding at June 30, 1996 130,651 $9-$17.50 $13.88
Granted 222,500 $11.25 $11.25
Expired or canceled 6,225 $9-11.25 $9.31
Exercised 322 $9 $9
------- ------------- --------
Outstanding at June 30, 1997 346,604 $9-$17.50 $12.28
Granted 341,500 $10.25-$11.28 $10.43
Expired or canceled 77,067 $9-$17.50 $17.29
Exercised 111 $9 $9
------- ------------- --------
Outstanding at June 30, 1998 610,926 $9-$11.28 $10.61
Granted 214,500 $5.50-$7 $5.74
Expired or canceled 21,200 $9-$11.25 $10.40
------- ------------- --------
Outstanding at June 30, 1999 804,226 $5.50-$11.28 $9.32
======= ============= ========
</TABLE>
The board of directors of the Company adopted the Directors' Stock
Option Plan (the "Directors' Plan"). Under the Directors' Plan, each
non-employee director will receive options for 6,000 shares of Common Stock on
the date of his or her first election to the board of directors. In addition, on
the third anniversary of each director's first election to the Board, and on
each three year anniversary thereafter, each non-employee director will receive
an additional option to purchase 6,000 shares of Common Stock. The exercise
price per share for all options granted under the Directors' Plan will be equal
to the fair market value of the Common Stock as of the date of grant. All
options vest in three equal annual installments beginning on the first
anniversary of the date of grant. The maximum term for all options is ten years.
As of June 30, 1997, 1998 and 1999 options for 8,000 shares, 14,000 shares and
8,000 shares were currently exercisable and options for 24,000 shares, 22,000
shares and 30,000 shares were outstanding. No options have been exercised under
the Directors' Plan. The weighted-average fair value per share of options
granted during the years ended June 30, 1998 and 1999 were $4.11 and $2.58,
respectively. During the fiscal years ended June 30, 1998 and 1999, 6,000
options and 18,000 options were granted, respectively. No options were granted
during the year ended June 30, 1997. As of June 30, 1999, the weighted-average
remaining life of the options was 8.7 years.
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, defines a fair value based method of accounting for
stock options. The Statement allows an entity to continue to measure cost using
the accounting method prescribed by APB Opinion No. 25, Accounting for Stock
Issued to Employees, and to make pro forma disclosures of net income and
earnings per share as if the fair value based method of accounting had been
applied. The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in fiscal 1997, 1998 and 1999; expected volatility
of 39% to 40%, risk-free interest rate of 4.3% to 6.5%, expected dividend yield
of 0% and expected lives of one to five years. The Company adopted SFAS 123 in
fiscal year ended June 30, 1997 and presents the following pro forma disclosures
rather than change its present method of accounting for employee stock options:
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Net income (loss) available to common shareholders $ 27,439 $ (5,974,752) $ (9,462,940)
Net income (loss) per common share $ 0.01 $ (0.83) $ (1.31)
========= ============ ===============
Weighted average number of common and
common equivalent shares outstanding 7,302,662 7,210,350 7,216,664
========== ============ ==============
</TABLE>
The pro forma adjustment for stock based compensation costs
under SFAS 123 for the years ending 1997, 1998 and 1999 is approximately
$500,000, $340,000 and $530,000, respectively. No stock based compensation was
recognized in the financial statements pursuant to APB Opinion No. 25.
F-15
<PAGE>
NuCo2 Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Earnings per Share
In February 1997, the FASB issued Statement 128, "Earnings Per Share".
Statement 128 supersedes APB Opinion No. 15, "Earnings Per Share" and specifies
the computation, presentation and disclosure requirements for earnings per share
("EPS") for entities with publicly held Common Stock or potential Common Stock.
It replaces the presentation of primary EPS with the presentation of basic EPS
and replaces fully diluted EPS with diluted EPS. It also requires dual
presentation of basic and diluted EPS on the face of the statement of operations
for all entities with complex capital structures and requires a reconciliation
of the numerator and denominator of the basic EPS computation to the numerator
and denominator of the diluted EPS computation. Statement 128 is effective for
financial statements for periods ending after December 15, 1997.
Earnings per share of Common Stock for the year ended June 30, 1997 has
been restated to conform to the guidelines of Statement 128.
Following is a reconciliation of the numerator and denominator of the
basic and diluted per share computations for income from continuing operations
for the year ended June 30, 1997.
<TABLE>
<CAPTION>
Weighted Per-Share
Net Income Average Shares Amount
---------- -------------- ------
Basic EPS
<S> <C> <C> <C>
Income available to common shareholders $ 527,439 7,164,924 $ 0.07
Effect of dilutive options and warrants - 153,002 -
----------- --------- -------
Diluted EPS $ 527,439 7,317,926 $ 0.07
=========== ========= =======
</TABLE>
Incremental shares for stock options and warrants calculated
pursuant to the treasury stock method for the years ended June 30, 1998 and 1999
were 136,972 shares and 52,668 shares, respectively. These shares were not
included in diluted EPS because they would have been antidilutive. Additionally,
options and warrants to purchase 1,075,000 shares, 655,738 shares and 36,000
shares for $17.00-$17.50 per share, $16.40 per share and $12.50-$14.64 per
share, respectively, and options and warrants to purchase 1,043,715 shares,
321,810 shares and 350,416 shares for $16.40-$17.00 per share, $11.00-$14.64 per
share and $8.94-$10.80 per share, respectively, were outstanding during all or a
portion of the years ended June 30, 1998 and 1999, respectively, but were not
included in the computation of diluted EPS because the options and warrants
exercise price was greater than the average market price of the common shares.
Note 9 - Income Taxes
The tax effects of temporary differences that give rise to
significant portions of deferred tax assets and deferred tax liabilities are as
follows:
<TABLE>
<CAPTION>
June 30,
1998 1999
Deferred tax assets:
<S> <C> <C>
Allowance for doubtful accounts $ 111,000 $ 209,600
Amortization expense 269,900 512,500
Other 4,200 10,900
Net operating loss carryforwards 9,862,700 17,143,400
----------- ----------
Total gross deferred tax assets 10,247,800 17,876,400
Less valuation allowance (2,766,200) (6,236,400)
----------- -----------
Net deferred tax assets 7,481,600 11,640,000
----------- -----------
Deferred tax liabilities:
Depreciation expense (7,481,600) (11,640,000)
----------- -----------
Total gross deferred tax liabilities (7,481,600) (11,640,000)
----------- -----------
Net deferred taxes $ - $ -
=========== ===========
</TABLE>
F-16
<PAGE>
NuCo2 Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Income Taxes (continued)
At June 30, 1999, the Company had net operating loss carryforwards for
Federal income tax purposes of approximately $45,600,000 which are available to
offset future Federal taxable income, if any, in varying amounts through June
2014. The net change in the total valuation allowance for the years ended June
30, 1998 and 1999 was an increase of $2,129,800 and $3,470,200, respectively.
Note 10 - Related Party Transactions
The Company entered into leases with the chairman of the board
and chief executive officer for certain warehouse/depots and office facilities
with annual rentals of approximately:
Year Ending June 30,
2000 $ 276,000
2001 235,000
2002 109,000
2003 60,000
2004 -
--------------
$ 681,000
==============
Rental expense was $166,549, $246,551 and $274,711 in 1997, 1998
and 1999, respectively, under these leases.
Note 11 - Lease Commitments
The Company leases office equipment, trucks and warehouse/depot
and office facilities under operating leases (including related party leases,
see Note 10) that expire at various dates through June 2006. Primarily all of
the leases contain renewal options and escalations for real estate taxes, common
charges, etc. Future minimum lease payments under noncancelable operating leases
(that have initial noncancelable lease terms in excess of one year) are as
follows:
Year Ending June 30,
2000 $ 4,293,000
2001 3,954,000
2002 3,559,000
2003 2,412,000
2004 1,115,000
Thereafter 257,000
----------------
$ 15,590,000
================
Total rental expense under noncancelable operating leases was
approximately $1,413,000, $3,284,000 and $4,386,142 in 1997, 1998 and 1999,
respectively.
Note 12 - Concentration of Credit and Business Risks
The Company's business activity is with customers located within
the United States. For the years ended June 30, 1997, 1998 and 1999 the
Company's sales to customers in the food and beverage industry were
approximately 98%, 99% and 99%, respectively.
There were no customers that accounted for greater than 5% of
total sales for the three years ended June 30, 1999, nor were there any
customers that accounted for greater than 5% of total accounts receivable at
June 30, 1998 or 1999.
The Company purchases new bulk CO2 systems from the two major
manufacturers of such systems. The inability of both or either of these
manufacturers to deliver new systems to the Company could cause a delay in the
Company's ability to fulfill the demand for its services and a possible loss of
sales, which could affect operating results adversely.
F-17
<PAGE>
NuCo2 Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13 - Commitments and Contingencies
(a) Employment Agreement
The Company has an employment agreement with an officer of the
Company that currently provides minimum annual compensation of $150,000 per year
through October 1999. The contract provides for additional compensation in the
form of bonuses to be determined by the board of directors and incentive and
non-qualified stock options pursuant to the Company's 1995 Plan to purchase up
to 100,000 shares of the Company's Common Stock. The agreement also calls for a
covenant against competition which extends one year beyond termination for any
reason.
(b) Consulting Agreement
Effective April 13, 1998, the Company entered into a three year
consulting agreement with the former president of the Company. Pursuant to the
terms of the agreement, the former president shall receive $50,000 per annum and
shall not compete with the Company for a period of two years after the
expiration of the contract. Simultaneously, options to purchase 75,000 shares of
Common Stock were canceled.
(c) Supply Agreement
In May 1997, the Company entered into an exclusive ten-year
carbon dioxide supply agreement with The BOC Group, Inc. ("BOC"). The agreement
ensures readily available high quality CO2 as well as relatively stable liquid
carbon dioxide prices. Pursuant to the agreement, the Company must purchase all
of its liquid CO2 requirements from BOC. The agreement contains annual
adjustments over the prior contract year for an increase or decrease in the
Producer Price Index for Chemical and Allied Products ("PPI") or the average
percentage increase in the selling price of bulk merchant carbon dioxide
purchased by BOC's large, multi-location beverage customers in the United
States. However, such increases shall not exceed 3% per year in the first five
contract years.
The Company is a defendant in legal actions which arise in the
normal course of business. In the opinion of management, the outcome of these
matters will not have a material effect on the Company's financial position or
results of operations.
Note 14 - Disclosures about Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments.
(a) Cash and cash equivalents
The carrying amount approximates fair value due to the short
maturity of these instruments.
(b) Long-term debt
The fair value of the Company's long-term debt has been
estimated based on the current rates offered to the Company for debt of the same
remaining maturities.
The carrying amounts and fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
June 30,
--------
1998 1999
------- --------
Carrying Amount Carrying Amount
and Fair Value and Fair Value
-------------- --------------
<S> <C> <C>
Cash and cash equivalents $ 336,510 $ 1,579,191
Long-term debt, including current maturities 29,599,865 43,711,773
Subordinated debt 29,728,571 38,748,695
</TABLE>
As of June 30, 1998 and 1999, the fair value of the Company's
interest rate swap (see Note 5) was not material.
F-18
<PAGE>
NuCo2 Inc.
Schedule II
Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Column B Column C - Additions Column D Column E
-------- -------------------- -------- --------
Balance at Charge to
beginning of costs and Charged to Balance at
period expenses other accounts Deductions end of period
------ -------- -------------- ---------- -------------
Year ended June 30, 1997
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts $210,629 $143,210 $ -- $240,785 $113,054
Year ended June 30, 1998
Allowance for doubtful accounts $113,054 $450,871 $ 43,276(1) $211,710 $395,491
Year ended June 30, 1999
Allowance for doubtful accounts $395,491 $665,219 $ -- $503,118 $557,592
</TABLE>
(1) Initial reserve of acquired company
F-19
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
Dated as of May 4, 1999
By and Among
NUCO2 INC.,
SUNTRUST BANK, SOUTH FLORIDA, NATIONAL ASSOCIATTION
the banks or other lending institutions signatory hereto from time to time
and
SUNTRUST BANK, SOUTH FLORIDA, NATIONAL ASSOCIATION,
as Agent for the Lenders
and
SUNTRUST EQUITABLE SECURITIES CORPORATION,
as Arranger
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 .................................................. DEFINITIONS 1
Definitions .............................................................1
Calculations. Accounting Terms..........................................18
Other Definitional Provisions...........................................19
Captions................................................................19
ARTICLE II .....................................AMOUNT AND TERMS OF LOANS 19
Revolving Loan Commitments and Revolving Notes..........................19
Method of Borrowing Under the Commitments...............................21
Swing Line Subcommitment................................................22
Letter of Credit Subcommitment..........................................23
Notice of Issuance of Letter of Credit; Agreement to Issue..............23
Payment of Amounts drawn under Letter of Credit.........................24
Payment by Lenders......................................................25
Obligations Absolute....................................................25
Indemnification; Nature of Agent's Duties...............................26
Prepayment of Borrowings Under the Commitments..........................26
Mandatory Prepayments...................................................26
Voluntary Reduction of Commitments......................................27
Allocation of Payments..................................................28
Termination of Commitments..............................................28
Use of Proceeds.........................................................28
Fees....................................................................28
Interest................................................................29
Interest Periods........................................................29
Extension of Commitments................................................30
Increased Costs.........................................................31
Capital Adequacy........................................................32
Funding Losses..........................................................33
Making of Payments......................................................33
Default Rate of Interest................................................33
Proration of Payments...................................................34
Lenders' Obligations Several............................................34
Calculation of Interest.................................................34
Payments Free of Taxes..................................................34
Interest Rate Not Ascertainable, etc....................................35
Illegality..............................................................35
ARTICLE III.....................................CONDITIONS TO BORROWINGS 36
Conditions Precedent to Initial Advances................................36
Conditions Precedent to Each Advance and Letters of Credit..............39
ARTICLE IV.................................REPRESENTATIONS AND WARRANTIES 40
Corporate Status of Company; Status of Subsidiaries.....................40
Corporate Power and Authority...........................................41
ii
<PAGE>
Compliance with Other Instruments.......................................41
Enforceable Obligations.................................................41
Governmental Authorizations.............................................41
Intellectual Property...................................................42
Outstanding Indebtedness................................................42
Insurance Coverage......................................................42
Title to Properties.....................................................42
No Burdensome Restrictions..............................................43
No Material Violation of Law............................................43
No Default Under Other Agreements.......................................43
No Equity Investments...................................................43
Financial Statements....................................................43
Litigation..............................................................44
Taxes...................................................................44
Margin Regulations......................................................44
ERISA...................................................................44
Compliance With Environmental Laws......................................45
Possession of Material Patents, Trademarks, Etc. .......................45
Subsidiaries............................................................46
Disclosure..............................................................46
Year 2000 Compliance....................................................46
Projections.............................................................46
ARTICLE V ...................................AFFIRMATIVE COVENANTS 47
Use of Proceeds.........................................................47
Reporting Covenants.....................................................47
Maintenance of Properties...............................................48
Maintenance of Insurance................................................48
Maintenance of Books; Inspection of Property and Records................49
Existence and Status....................................................49
Taxes and Claims........................................................49
Compliance with Laws, Etc...............................................50
ERISA...................................................................50
Litigation..............................................................50
Notice of Events of Default.............................................51
Stockholder Reports, etc. ..............................................51
Future Guarantors.......................................................51
Ownership of Guarantors.................................................51
Interest Rate Protection................................................52
Cost of Products Sold...................................................52
ARTICLE VI....................................NEGATIVE COVENANTS 52
Limitation on Liens and Security Interests..............................52
Indebtedness............................................................53
Compliance with ERISA...................................................54
Sale and Leaseback......................................................54
iii
<PAGE>
Transactions with Affiliates............................................54
Guaranties..............................................................55
Limitations on Payment Restrictions.....................................55
Merger; Joint Ventures; Sale of Assets; Acquisitions....................55
Dividends; Loans, Advances..............................................56
Nature of Business......................................................57
Sale of Subsidiaries....................................................57
Negative Pledges........................................................57
Creation of Subsidiaries................................................57
Prepayments Under and Amendment of Other Agreements.....................57
Capital Expendires......................................................58
ARTICLE VII....................................FINANCIAL COVENANTS 58
Senior Debt Coverage Ratio..............................................58
Interest Coverage Ratio.................................................58
Senior Debt Leverage Ratio..............................................58
Minimum Net Worth.......................................................58
ARTICLE VIII.............................EVENTS OF DEFAULT AND REMEDIES 59
Events of Default.......................................................59
Remedies on Default.....................................................61
ARTICLE IX.............................................THE AGENT 61
Appointment and Authorization...........................................61
Nature of Duties of the Agent...........................................62
Lack of Reliance on the Agent...........................................62
Certain Rights of the Agent.............................................62
Liability of the Agent..................................................63
Indemnification.........................................................64
Agent and Affiliates....................................................65
Successor Agent.........................................................65
ARTICLE X............................................MISCELLANEOUS 65
Survival................................................................65
Amendments; Consents....................................................66
Notices.................................................................66
Severability; Time of Essence...........................................68
Governing Law; Submission to Jurisdiction...............................68
Payment of Costs........................................................69
Indemnity...............................................................69
Benefit of the Agreement................................................69
Subordination of Indebtedness...........................................70
Maximum Interest Rate...................................................71
Entire Agreement........................................................71
Set-Off.................................................................71
Counterparts............................................................72
Replacement Notes.......................................................72
Release.................................................................72
iv
<PAGE>
Annexes
Annex A - Projected Gross Margin
Annex B - Capital Expenditures
Exhibits
Exhibit A - Form of Revolving Note
Exhibit B - Form of Swing Line Note
Exhibit C - Form of Notice of Borrowing
Exhibit D - Form of Guaranty Agreement
Exhibit E - Form of Contribution Agreement
Exhibit F - Form of Closing Certificate
Exhibit G - Form of Opinion of Counsel of the Company and the
Guarantors
Exhibit H - Form of Florida Counsel Opinion
Exhibit I - Form of Compliance Certificate
Exhibit J - Form of Assignment Agreement
Exhibit K - Form of Borrowing Base Certificate
Exhibit L - Form of Depot Report
Exhibit M - Projections
Schedules
Schedule 1.01 - Calculation of Cost of Products Sold
Schedule 4.07 - Outstanding Indebtedness
Schedule 4.08 - Insurance Certificates
Schedule 4.15 - Litigation
Schedule 4.18 - ERISA
Schedule 4.19 - Environmental Liability
Schedule 4.21 - Subsidiaries
Schedule 6.01 - Liens
v
<PAGE>
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, dated as of May
4, 1999, by and among NUCO2 INC., a Florida corporation (the "Company"),
SUNTRUST BANK, SOUTH FLORIDA, NATIONAL ASSOCIATION, a national banking
association ("SunTrust"), BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC., a
Delaware corporation (the "Documentation Agent"), THE PROVIDENT BANK, an Ohio
banking corporation, BANK LEUMI LE-ISRAEL B.M., Miami Agency, and any other
banks or other lending institutions that are or will become parties to this
Agreement (collectively, the "Lenders" and each individually, a "Lender"), and
SUNTRUST BANK, SOUTH FLORIDA, NATIONAL ASSOCIATION, as agent for the Lenders.
W I T N E S S E T H :
WHEREAS, the Company, the Agent and the Lenders entered into that
certain Revolving Credit Agreement, dated as of October 31, 1997 (the "Existing
Credit Agreement");
WHEREAS, the Company has requested, and the Lenders have agreed to
amend and restate the Existing Credit Agreement to increase the revolving credit
facility available to the Company, to add a letter of credit facility and to
make certain other amendments on the terms and subject to the conditions set
forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. In addition to the other terms defined
herein, the following terms used herein shall have the meanings herein specified
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Additional Guarantor" shall have the meaning assigned to such term in
Section 5.13(a).
"Advance" shall mean any advance by a Lender under the Commitments.
<PAGE>
"Agent" shall mean SunTrust Bank, South Florida, National Association,
as agent for the Lenders hereunder and under the other Loan Documents, and each
successor agent.
"Agent Fee" shall mean the administrative fee described in the Fee
Letter, payable on the Closing Date and thereafter annually in advance to the
Agent during the period prior to the Commitment Termination Date.
"Affiliate" shall mean, with respect to any Person, any other Person
that, directly or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, such first Person. A Person
shall be deemed to control another Person if such first Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through the ownership of
voting securities, by contract or otherwise.
"Agreement" shall mean this Amended and Restated Revolving Credit
Agreement, either as originally executed or as hereafter amended, restated,
renewed, extended, supplemented or otherwise modified from time to time.
"Annualized EBITDA" shall mean EBITDA for the fiscal quarter ending on
the last day of such quarter, multiplied by four.
"Applicable Commitment Fee Percentage" shall mean the percentage
designated below based on the ratio of the Company's Senior Funded Debt to
Annualized EBITDA for each fiscal quarter-end, as indicated below, provided,
that, for purposes of this calculation, the term "Senior Funded Debt" shall
include the Letter of Credit Obligations and aggregate outstanding amount of all
Swing Line Loans:
Senior Funded Debt to Applicable Commitment
Annualized EBITDA Fee Percentage
----------------- --------------
Less than 1.50:1.0 0.375%
Greater than or equal to 1.50:1.0 0.375%
and less than 2.00:1.0
Greater than or equal to 2.00:1.0 0.375%
and less than 2.50:1.0
Greater than or equal to 2.50:1.0 and less than 3.00:1.00 0.50%
Greater than or equal to 3.00:1.00 and less than 3.25:1.0 0.50%
Greater than or equal to 3.25:1.0 0.50%
2
<PAGE>
From the Closing Date through and including September 30, 1999, the Applicable
Commitment Fee Percentage shall be 0.50%.
"Applicable Law" shall mean, anything in Section 10.05 notwithstanding,
(i) all applicable common law and principles of equity and (ii) all applicable
provisions of all (a) constitutions, statutes, rules, regulations and orders of
governmental bodies, (b) Governmental Approvals, and (c) orders, decisions,
judgments and decrees of all courts and arbitrators.
"Applicable Margin" shall mean the percentage designated below based on
the ratio of the Company's Senior Funded Debt to Annualized EBITDA for each
fiscal quarter-end, as indicated below:
Senior Funded Debt to Applicable Margin Applicable Margin
Annualized EBITDA (LIBOR Advance) (Base Rate Advance)
----------------- --------------- -------------------
Less than 1.50:1.0 1.75% 0.25%
Greater than or equal to 1.50:1.0 2.25% 0.75%
and less than 2.00:1.0
Greater than or equal to 2.00:1.0 2.75% 1.25%
and less than 2.50:1.0
Greater than or equal to 2.50:1.0
and less than 3.00:1.0 3.00% 1.50%
Greater than or equal to 3.00:1.0
and less than 3.25:1.0 3.25% 1.75%
Greater than or equal to 3.25:1.0 3.50% 2.00%
From the Closing Date through and including December 31, 1999, the Applicable
Margin on LIBOR Advances and Base Rate Advances shall be 3.50% and 2.00%
respectively.
"Asset Value" shall mean, with respect to any property or asset of the
Company or any of its Subsidiaries as of any particular date, an amount equal to
the greater of (i) the then book value of such property or asset as established
in accordance with GAAP, and (ii) the then fair market value of such property or
asset as determined in good faith by the board of directors of the Company or
such Subsidiary.
"Assignment Agreement" shall mean an agreement in the form of Exhibit
J.
3
<PAGE>
"Assignment of Leases" shall mean that certain Assignment of Leases
agreement, dated as of October 31, 1997, executed by the Company and each
Subsidiary in favor of the Agent, assigning the Company's and each Subsidiary's
lessee's interest in any leasehold (except those leaseholds whose terms prohibit
assignments), as the same may be hereafter amended, restated, renewed, extended,
supplemented or otherwise modified from time to time.
"Availability" shall mean, with respect to any Commitment, at any time,
the amount by which such Commitment exceeds all Advances outstanding under such
Commitment.
"Bankruptcy Law" shall mean laws governing bankruptcy, suspension of
payments, reorganization, arrangement, adjustment of debts, relief of debtors,
dissolution, or other similar laws relating to the enforcement of creditors'
rights generally.
"Base Rate" shall mean the higher of (i) the rate which SunTrust
designates from time to time as its prime lending rate, as in effect from time
to time, and (ii) the Federal Funds Rate, as in effect from time to time, plus
one-half of one percent (0.50%) per annum (any changes in such rates to be
effective as of the date of any change in such rate). The SunTrust prime lending
rate is a reference rate and does not necessarily represent the lowest or best
rate actually charged to any customer. SunTrust may make commercial loans or
other loans at rates of interest at, above, or below the SunTrust prime lending
rate.
"Base Rate Advance" shall mean any Advance made to the Company by the
Lenders at an interest rate equal to the Base Rate plus the Applicable Margin
for such Advance.
"Borrowing" shall mean a borrowing under the Commitments consisting of
simultaneous Advances by the Lenders, including Swing Line Borrowings.
"Borrowing Base" shall mean the product of (i) Gross Margin Factor
multiplied by the EBITDA Multiple, and (ii) the sum of EBITDA for the prior
three calendar months, multiplied by four.
"Borrowing Base Certificate" shall have the meaning set forth in
Section 5.02(a)(iv).
"Business Day" shall mean a day of the year other than Saturday, Sunday
or any other day on which the Agent is required to close.
"Capital Expenditures" shall mean, for any period, expenditures made by
the Company and its Subsidiaries to acquire or construct fixed assets, property,
plant
4
<PAGE>
and equipment (including renewals, improvements and replacements, but excluding
repairs) during such period computed in accordance with GAAP.
"CERCLA" shall mean the Comprehensive Environmental Response
Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act (42 U.S.C. ss. 9601 et seq.).
A "Change in Control" shall be deemed to have occurred if (a) any
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Exchange Act) shall become the "beneficial owner(s)" (as defined in said Rule
13d-3) of more than forty percent (40%) of the shares of the outstanding common
stock of the Company entitled to vote for members of the Company's board of
directors; (b) a majority of the seats (other than vacant seats) on the board of
directors of the Company shall at any time be occupied by persons who were
neither (i) nominated by the board of directors of the Company, nor (ii)
appointed by directors so nominated; (c) any event or condition shall occur or
exist which requires or permits the holder(s) of Indebtedness of the Company to
require that such Indebtedness be redeemed, repurchased, defeased, prepaid or
repaid, in whole or in part, or the maturity of such Indebtedness to be
accelerated in any respect as a result of a change in control provision of such
Indebtedness; or (d) any person or group (other than the group in control of the
Company on the date hereof) shall otherwise directly or indirectly control the
Company.
"Closing Date" shall mean May 4, 1999.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and the rulings issued thereunder.
"Collateral" shall mean all real and personal property and assets, now
or hereafter existing, of the Company and its Subsidiaries over which the
Company or such Subsidiary has granted a Lien to the Agent pursuant to the
Security Documents, and all proceeds and products thereof.
"Commitments" shall mean, collectively, the Revolving Loan Commitments,
the Letter of Credit Subcommitment and the Swing Line Subcommitment.
"Commitment Fee" shall have the meaning set forth in Section 2.16(c).
"Commitment Letter" means that certain letter agreement, dated as of
March 12, 1999, executed by SunTrust and SunTrust Equitable Securities
Corporation, and accepted and agreed to by the Company.
"Commitment Termination Date" shall have the meaning set forth in
Section 2.01.
5
<PAGE>
"Company" shall have the meaning set forth in the first paragraph of
this Agreement.
"Company Pledge Agreement" shall mean that certain Stock and Notes
Pledge Agreement (Company), dated as of October 31, 1997, executed by the
Company in favor of the Agent, as amended by the First Amendment to Stock and
Notes Pledge Agreement (Company), dated as of the date hereof, and as hereafter
amended, restated, supplemented or otherwise modified from time to time.
"Company Security Agreement" shall mean that certain Security Agreement
(Company), dated as of October 31, 1997, executed by the Company in favor of the
Agent, as amended by the First Amendment to Security Agreement (Company), dated
as of the date hereof, and as hereafter amended, restated, supplemented or
otherwise modified from time to time.
"Company Trademark Security Agreement" shall mean that certain
Trademark Security Agreement (Company), dated as of October 31, 1997, executed
by the Company in favor of the Agent, as amended by the First Amendment to
Trademark Security Agreement (Company), dated as of the date hereof, and as
hereafter amended, restated, supplemented or otherwise modified from time to
time.
"Compliance Certificate" shall have the meaning set forth in Section
5.02(a)(ii).
"Consolidated Companies" shall mean, collectively, the Company and all
of its Subsidiaries.
"Consolidated EBIT" shall mean, for any fiscal period of the Company,
an amount equal to the sum of (a) Consolidated Net Income (Loss), plus (b) to
the extent deducted in determining Consolidated Net Income (Loss), (i)
provisions for taxes based on income of the Company and its Subsidiaries
determined on a consolidated basis in accordance with GAAP, (ii) Interest
Expense, and (iii) extraordinary items determined according to GAAP.
"Consolidated Net Income (Loss)" shall mean, for any fiscal period of
the Company, the net income (or loss) of the Company and its Subsidiaries
determined on a consolidated basis for such period (taken as a single accounting
period), in accordance with GAAP.
"Consolidated Net Worth" shall mean, as of the date of determination,
the total shareholders' equity of the Company and its Subsidiaries, determined
in accordance with GAAP.
6
<PAGE>
"Contractual Obligations" of any Person shall mean any provision of any
security issued by such Person or of any agreement, instrument or undertaking
under which such Person is obligated or by which it or any of its property is
bound.
"Contribution Agreement" shall mean that certain Amended and Restated
Contribution Agreement, dated as of the date hereof, executed by the Company and
each of the Guarantors, a copy of which is attached hereto as Exhibit E attached
hereto, as hereafter amended, restated, supplemented or otherwise modified from
time to time.
"Cost of Products Sold" shall mean the Company's cost of products sold
determined on a consolidated basis in accordance with GAAP as reported from time
to time, and including all of the line items listed on Schedule 1.01.
"Default" shall mean any event that, with the giving of notice, or
lapse of time, or both, would constitute an Event of Default.
"Depot" shall mean a location leased or owned by the Company for the
storage of raw materials, supplies and motor vehicles used in the distribution
of the Company's products.
"Depot by Depot Report" shall have the meaning set forth in Section
5.02(a)(vii).
"EBITDA" shall mean, for any period of the Company, an amount equal to
the sum of Consolidated EBIT plus (i) depreciation and amortization expenses to
the extent deducted in determining such Consolidated EBIT as determined on a
consolidated basis in accordance with GAAP, and (ii) the historical Consolidated
EBITDA of any Person for such period which accrued prior to the date such Person
became a Subsidiary of the Company or was merged into or consolidated with the
Company or any of its Subsidiaries or such Person's assets were acquired by the
Company or any of its Subsidiaries (and the underlying records of such Person
shall be audited to the extent the Company is required pursuant to Regulation
S-X of the SEC to present audited financial information for such Person in
documents filed by it with the SEC). If audited financial records are not
available for acquired companies, pro forma financial statements (subject to
review and acceptance by the Required Lenders) will be substituted.
"EBITDA Multiple" shall mean (i) 3.65 for the period beginning on the
Closing Date through and including July 31, 1999; (ii) 3.55 for the period
beginning August 1,1999 through and including August 31, 1999; (iii) 3.45 for
the period beginning September 1,1999 through and including September 30, 1999;
(iv) 3.35 for the period beginning October 1,1999 through and including October
31, 1999; (v) 3.25 for the period beginning November 1,1999 through and
including November 30, 1999; (vi) 3.15 for the period beginning December 1, 1999
to December 31, 1999; (vii) 3.0 for the period beginning January 1, 2000 through
and including March 31, 2000; (viii) 2.75 for the period beginning April 1, 2000
through and including June 30, 2000; and (ix) 2.50 thereafter.
7
<PAGE>
"Environmental Laws" shall mean all federal, state, local and foreign
statutes and codes or regulations, rules or ordinances issued, promulgated, or
approved thereunder, now or hereafter in effect (including, without limitation,
those with respect to asbestos or asbestos containing material or exposure to
asbestos or asbestos containing material), relating to pollution or protection
of the environment and relating to public health and safety, relating to (i)
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial toxic or hazardous constituents,
substances or wastes, including without limitation, any Hazardous Substance (as
such term is defined under CERCLA), petroleum including crude oil or any
fraction thereof, any petroleum product or other waste, chemicals or substances
regulated by any Environmental Law into the environment (including without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata), or (ii) the manufacture, processing, distribution, use, generation,
treatment, storage, disposal, transport or handling of any Hazardous Substance
(as such term is defined under CERCLA), petroleum including crude oil or any
fraction thereof, any petroleum product or other waste, chemicals or substances
regulated by any Environmental Law, and (iii) underground storage tanks and
related piping, and emissions, discharges and releases or threatened releases
therefrom, such Environmental Laws to include, without limitation (i) the Clean
Air Act (42 U.S.C. ss. 7401 et seq.), (ii) the Clean Water Act (33 U.S.C. ss.
1251 et seq.), (iii) the Resource Conservation and Recovery Act (42 U.S.C. ss.
6901 et seq.), (iv) the Toxic Substances Control Act (15 U.S.C. ss. 2601 et
seq.) and (v) CERCLA.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
and all rules and regulations promulgated pursuant thereto, as the same may from
time to time be supplemented or amended.
"ERISA Affiliate" shall mean any trade or business (whether
incorporated or unincorporated) which together with the Company is treated as a
single employer under Section 414(b), (c), (m) or (o) of the Code.
"Event of Default" shall have the meaning set forth in Article VIII.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute thereto.
"Executive Officer" shall mean each of the executive officers of the
Company and any Person hereafter holding the following office or offices which,
individually or collectively, are assigned substantially similar duties:
Chairman, Chief Executive Officer, Chief Financial Officer, and Chief Operating
Officer.
"Existing Credit Agreement" shall have the meaning set forth in the
first recital.
"Facilities" shall mean, collectively, the Commitments described
hereunder.
8
<PAGE>
"Federal Funds Rate" shall mean, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of Atlanta, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Fee Letter" means that certain letter agreement, dated as of March 12,
1999, executed by SunTrust and SunTrust Equitable Securities Corporation, and
accepted and agreed to by the Company, setting forth certain nonrefundable fees
payable by the Company.
"Fees" shall mean, collectively, the Agent Fee, the Underwriting Fee,
the Commitment Fee and the Letter of Credit Fee.
"GAAP" shall mean generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession in the United States of America, which are applicable
to the circumstances as of the date of determination.
"Governmental Approval" shall mean any order, permission,
authorization, consent, approval, license, franchise, permit or validation of,
exemption by, registration or filing with, or report or notice to, any
governmental agency or unit, or any public commission, board or authority.
"Gross Margin" shall mean, with respect to the Company and its
Subsidiaries on a consolidated basis for any period, the ratio of (a) (i) Total
Revenues less (ii) Cost of Products Sold to (b) Total Revenues.
"Gross Margin Factor" shall mean, with respect to the Company and its
Subsidiaries on a consolidated basis for any period, the ratio of (i) the
average of the Gross Margin for each month of the most recently reported rolling
three-month period to (ii) the average of the Projected Gross Margin for each
month of such rolling three-month period.
"Guarantor Pledge Agreement" shall mean that certain Stock and Notes
Pledge Agreement (Guarantors), dated as of October 31, 1997, executed by each
Guarantor in favor of the Agent, as amended by the First Amendment to Stock and
Notes Pledge
9
<PAGE>
Agreement (Guarantors), dated as of the date hereof, and as hereafter amended,
restated, supplemented or otherwise modified from time to time.
"Guarantor Security Agreement" shall mean that certain Security
Agreement (Guarantors), dated as of October 31, 1997, executed by each Guarantor
in favor of the Agent, as amended by the First Amendment to Security Agreement
(Guarantors), dated as of the date hereof, and as hereafter amended, restated,
supplemented or otherwise modified from time to time.
"Guarantor Trademark Security Agreement" shall mean that certain
Trademark Security Agreement (Guarantors), dated as of October 31, 1997,
executed by each Guarantor in favor of the Agent, as amended by the First
Amendment to Trademark Security Agreement (Guarantors), dated as of the date
hereof, and as hereafter amended, restated, supplemented or otherwise modified
from time to time.
"Guarantors" shall mean, collectively, each Subsidiary of the Company
that has executed a Guaranty Agreement as of the Closing Date, together with all
other Subsidiaries that hereafter execute a Guaranty Agreement, and their
respective successors and permitted assigns. "Guarantor" shall mean any of the
Guarantors.
"Guaranty Agreement" shall mean that certain Amended and Restated
Guaranty Agreement, dated as of the date hereof, executed by each of the
Guarantors in favor of the Lenders and the Agent, a copy of which is attached
hereto as Exhibit D attached hereto, as hereafter amended, restated,
supplemented or otherwise modified from time to time.
"Guaranty Documents" shall mean, collectively, the Guaranty Agreement,
and each other guaranty agreement, mortgage, deed of trust, assignment of lease,
security agreement, pledge agreement, or other security or collateral document
guaranteeing or securing the Obligations, as the same may be amended, restated,
or supplemented from time to time, and the Contribution Agreement executed by
each of the Guarantors, as the same may be amended, restated or supplemented
from time to time.
"Guaranty Obligations" shall mean the obligation of the Guarantors to
the Lenders and the Agent, as set forth in the Guaranty Agreement.
"Hazardous Substance" shall have the meaning assigned to that term in
CERCLA.
"Indebtedness" shall mean (i) indebtedness for borrowed money or for
the deferred purchase price of property or services (other than trade accounts
payable on customary terms in the ordinary course of business), (ii) financial
obligations evidenced by bonds, debentures, notes or other similar instruments,
(iii) financial obligations as lessee under leases which shall have been or
should be, in accordance with GAAP, recorded as capital leases, (iv) financial
obligations as the issuer of capital stock
10
<PAGE>
redeemable in whole or in part at the option of any Person other than such
issuer, at a fixed and determinable date or upon the occurrence of an event or
condition not solely within the control of such issuer, (v) all obligations
(contingent or otherwise) with respect to interest rate and currency leasing
agreements, (vi) reimbursement obligations (contingent or otherwise) with
respect to amounts under letters of credit, bankers acceptances and similar
instruments, (vii) financial obligations under purchase money mortgages, (viii)
financial obligations under asset securitization vehicles, (ix) conditional sale
contracts and similar title retention instruments with respect to property
acquired, and (x) obligations under direct or indirect guaranties in respect of,
and obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
financial obligations of others of the kinds referred to in clauses (i) through
(ix) above, except to the extent such guaranties are limited to a lesser amount.
"Interest Coverage Ratio" shall mean, for any fiscal period of the
Company, the ratio of (a) (i) EBITDA for the fiscal period ending on the last
day of such period, minus (ii) Maintenance Capital Expenditures for the fiscal
period ending on the last day of such period, to (b) Interest Expense for the
fiscal period ending on the last day of such period.
"Interest Expense" shall mean, for any fiscal period of the Company,
total interest expense (including, without limitation, interest expense
attributable to capitalized leases in accordance with GAAP) of the Company and
its Subsidiaries, on a consolidated basis, for such period.
"Interest Period" shall mean (i) as to any LIBOR Advance, the interest
period selected by the Company pursuant to Section 2.18(a), and (ii) as to any
Base Rate Advance, the interest period requested by the Company and agreed to by
the participating Lenders pursuant to Section 2.18(b), and (iii) as to any Swing
Rate Advance, the interest period requested by the Company and agreed to by
SunTrust pursuant to Section 2.03.
"Investment" shall mean, when used with respect to any Person, any
direct or indirect advance, loan or other extension of credit (other than the
creation of receivables in the ordinary course of business) or capital
contribution by such Person (by means of transfers of property to others or
payments for property or services for the account or use of others, or
otherwise) to any Person, or any direct or indirect purchase or other
acquisition by such Person of, or of a beneficial interest in, capital stock,
partnership interests, bonds, notes, debentures or other securities issued by
any other Person.
"Lenders" shall have the meaning set forth in the first paragraph of
this Agreement.
"Lending Office" shall mean, for each Lender, the office such Lender
may designate in writing from time to time to the Company and the Agent with
respect to Base Rate Advances and LIBOR Advances.
11
<PAGE>
"Letter of Credit Fee" shall have the meaning set forth in Section
2.16(d).
"Letter of Credit Obligations" shall mean, with respect to Letters of
Credit, as at any date of determination, the sum of (a) the maximum aggregate
amount which at such date of determination is available to be drawn by the
beneficiaries thereof (assuming the conditions for drawing thereunder have been
met) under all Letters of Credit then outstanding, plus (b) the aggregate amount
of all drawings under Letters of Credit honored by the Agent not theretofore
reimbursed by the Company.
"Letter of Credit Subcommitment" shall mean $2,000,000.
"Letters of Credit" shall mean the letters of credit issued pursuant to
Section 2.04 hereof by the Agent for the account of the Company pursuant to the
Letter of Credit Subcommitment of the Revolving Loan Commitments.
"LIBOR" shall mean, for any Interest Period, the offered rates for
deposits in U.S. dollars for a period comparable to the Interest Period
appearing on the Telerate Screen Page 3750, as of 11:00 a.m., London time, on
the day that is two London banking days prior to the Interest Period. If at
least two such rates appear on the Telerate Screen Page 3750, the rate for that
Interest Period will be the arithmetic mean of such rates, and in either case as
such rates may be adjusted for any applicable reserve requirements.
"LIBOR Advance" shall mean any advance made to the Company by the
Lenders at an interest rate equal to LIBOR plus the Applicable Margin for such
advance.
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien, assignment or charge of any kind or description and shall include, without
limitation, any agreement to give any of the foregoing, any conditional sale or
other title retention agreement, any lease in the nature thereof including any
lease or similar arrangement with a public authority executed in connection with
the issuance of industrial development revenue bonds or pollution control
revenue bonds, and the filing of or agreement to give any financing statement
under the Uniform Commercial Code (or comparable law) of any jurisdiction naming
the owner of the asset to which such lien applies as a debtor (other than a
filing which does not evidence an outstanding secured obligation, or a
commitment to make advances or to incur any other obligation of any kind).
"Loan Documents" shall mean this Agreement, each Exhibit and Schedule
to this Agreement, the Notes, the Guaranty Documents, the Security Documents,
the Letters of Credit, and each other document, instrument, certificate and
opinion executed and delivered in connection with the foregoing, each as
amended, restated, supplemented or otherwise modified from time to time as
provided in Section 10.02.
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"Maintenance Capital Expenditures" shall mean Capital Expenditures
other than Capital Expenditures made (i) in connection with any business
expansion of the Company or any of its Subsidiaries, (ii) in connection with any
Investment made by the Company after the Closing Date, or (iii) in connection
with any other acquisition or business expansion by the Company or any of its
Subsidiaries.
"Margin Regulations" shall mean Regulation T, Regulation U and
Regulation X of the Board of Governors of the Federal Reserve System, as the
same may be in effect from time to time.
"Material Contract" shall mean any contract or other agreement, written
or oral, of the Company or its Subsidiaries the failure to comply with which
could reasonably be expected to have a Materially Adverse Effect.
"Materially Adverse Effect" shall mean a materially adverse change in
the operations, business, property or assets of, or in the condition (financial
or otherwise) of, the Company and its Subsidiaries, taken as a whole.
"Maximum Permissible Rate" shall mean, with respect to interest payable
on any amount, the rate of interest on such amount that, if exceeded, could,
under Applicable Law, result in (i) civil or criminal penalties being imposed on
any Lender or (ii) any Lender being unable to enforce payment of (or if
collected, to retain) all or part of such amount or the interest payable
thereon.
"Minimum Net Worth" shall have the meaning set forth in Section 7.04
hereof.
"Mortgaged Property" shall mean, collectively, all parcels of real
property owned or leased by the Company or any of its Subsidiaries which is
subject to a Mortgage or which is assigned under an Assignment of Leases.
"Mortgages" shall mean, collectively, all of the mortgages, deeds of
trust or deeds to secure debt hereafter executed in favor of the Agent by the
Company or any Subsidiary, as the same may be hereafter amended, restated,
renewed, extended, supplemented or otherwise modified from time to time.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA as to which the Company, any Subsidiary or any ERISA
Affiliate is obligated to make, has made, or will be obligated to make
contributions on behalf of participants who are or were employed by any of them.
"Net Worth" shall mean, at any date, the net worth of the Consolidated
Companies, determined in accordance with GAAP as determined on such date.
"Notes" shall mean, collectively, the Revolving Notes and the Swing
Line Note.
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"Notice of Borrowing" shall have the meaning set forth in Section
2.02(a) hereof.
"Notice of Interest Rate Conversion" shall have the meaning set forth
in Section 2.02(b) hereof.
"Obligations" shall mean all amounts owing to the Agent or any Lender
pursuant to the terms of this Agreement or any other Loan Document, including
without limitation, all Advances (including all principal and interest payments
due thereunder), Letter of Credit Obligations, Fees, expenses, indemnification
and reimbursement payments, indebtedness, liabilities, and obligations of the
Company and its Subsidiaries, covenants and duties of the Company to the Lenders
and the Agent of every kind, nature and description, direct or indirect,
absolute or contingent, due or not due, in contract or tort, liquidated or
unliquidated, arising under this Agreement or under the other Loan Documents, by
operation of law or otherwise, now existing or hereafter arising or whether or
not for the payment of money or the performance or the nonperformance of any
act, including, but not limited to, all debts, liabilities and obligations owing
by the Company to others which the Lenders may have obtained by assignment or
otherwise, and all damages which the Company may owe to the Lenders and the
Agent by reason of any breach by the Company of any representation, warranty,
covenant, agreement or other provision of this Agreement or of any other Loan
Document.
"Other Claims" shall have the meaning set forth in Section 5.07 hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto.
"Person" shall mean an individual, corporation, partnership, trust,
limited liability company or unincorporated organization, a government or any
agency or political subdivision thereof.
"Plan" shall mean any employee benefit plan, program, arrangement,
practice or contract, maintained by or on behalf of the Company or an ERISA
Affiliate, which provides benefits or compensation to or on behalf of employees
or former employees, whether formal or informal, whether or not written,
including but not limited to the following types of plans:
(i) Executive Arrangements - any bonus, incentive
compensation, stock option, deferred compensation, commission,
severance, "golden parachute", "rabbi trust", or other executive
compensation plan, program, contract, arrangement or practice;
(ii) ERISA Plans - any "employee benefit plan" as defined in
ERISA, including, but not limited to, any defined benefit pension plan,
profit sharing plan, money purchase pension plan, savings or thrift
plan, stock bonus plan, employee
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stock ownership plan, Multiemployer Plan, or any plan, fund, program,
arrangement or practice providing for medical (including
post-retirement medical), hospitalization, accident, sickness,
disability, or life insurance benefits;
(iii) Other Employee Fringe Benefits - any stock purchase,
vacation, scholarship, day care, prepaid legal services, severance pay
or other fringe benefit plan, program, arrangement, contract or
practice.
"Projected Gross Margin" shall mean Gross Margin calculated monthly,
projected by the Company and set forth on Annex A hereto.
"Pro Rata Share" shall mean, for any Lender, the proportion expressed
as a percentage equal to (1) the sum of such Lender's portion of the Total
Commitments (including, without duplication, any portion of the Total
Commitments in which such Lender has purchased a participation and excluding,
without duplication, any portion of the Total Commitments in which such Lender
has sold a participation), divided by (2) the sum of the Total Commitments.
"Regulation U" shall mean Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time, and any regulation
successor thereto.
"Required Lenders" shall mean Lenders whose combined Pro Rata Shares as
of the Closing Date of the Total Commitments are at least sixty-six and
two-thirds percent (66_%) of the Total Commitments.
"Revolving Loan Commitments" shall mean, for any Lender at any time,
the revolving credit facility severally established by such Lender in favor of
the Company pursuant to Section 2.01, as the same may be increased or decreased
from time to time as a result of any reduction thereof pursuant to Section 2.10,
any assignment thereof pursuant to Section 10.08, or any amendment thereof
pursuant to Section 10.02.
"Revolving Loans" shall mean, collectively, the loans made to the
Company by the Lenders pursuant to Section 2.01.
"Revolving Note" shall mean a promissory note of the Company payable to
the order of any Lender in substantially the form of Exhibit A hereto,
evidencing the maximum aggregate principal indebtedness of the Company to such
Lender under such Lender's Revolving Loan Commitment, either as originally
executed or as it may be from time to time supplemented, modified, amended,
renewed or extended.
"Security Documents" shall mean, collectively, the Mortgage, the
Assignment of Leases, the Company Pledge Agreement, the Company Security
Agreement, the Company Trademark Security Agreement, the Guarantor Pledge
Agreement, the
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Guarantor Security Agreement, the Guarantor Trademark Security Agreement, all
UCC financing statements and fixture filings naming the Company or any of its
Subsidiaries as debtor and the Agent as secured party, all stock certificates
evidencing shares of stock pledged to the Agent, together with undated stock
powers or other appropriate instruments of transfer executed in blank, and all
filings in the U.S. Patent and Trademark Office which are required to be made
under the Loan Documents.
"Senior Debt Coverage Ratio" shall mean, for any fiscal period of the
Company, the ratio of (a) Senior Funded Debt as of the last day of such fiscal
period to (b) Annualized EBITDA.
"Senior Debt Leverage Ratio" shall mean, for any fiscal period of the
Company, the ratio of (a) Senior Funded Debt as of the last day of such fiscal
period to (b) Total Capitalization as of the last day of such fiscal period.
"Senior Funded Debt" shall mean all indebtedness for money borrowed,
purchase money mortgages, capitalized leases, outstandings under asset
securitization vehicles, conditional sales contracts and similar title retention
debt instruments, including any current maturities of such indebtedness, which
by its terms matures more than one year from the date of any calculation thereof
and/or which is renewable or extendable at the option of the obligor to a date
beyond one year from such date.
"Senior Subordinated Debt" shall mean the senior Subordinated Debt in
respect of the 12% Senior Subordinated Notes issued pursuant to the Senior
Subordinated Note Purchase Agreement.
"Senior Subordinated Note Purchase Agreement" shall mean that certain
Senior Subordinated Note Purchase Agreement, dated as of October 31, 1997,
between the Company and the Guarantors and the Investors listed therein, as
amended by Amendment No. 1 to Senior Subordinated Note Purchase Agreement dated
as of November 14, 1997, as further amended by Amendment No. 2 to Senior
Subordinated Note Purchase Agreement, dated as of June 30, 1998, and as further
amended by the Third Amendment to Senior Subordinated Debt, and as hereafter
amended and in effect from time to time (subject, in the case of any amendment
or modification entered into after the date hereof, to the consent of the
Required Lenders to the extent required by Section 6.14).
"Subordinated Debt" shall mean all Indebtedness of the Company
subordinated to all obligations of the Company arising under this Agreement, the
Notes and the Letter of Credit Obligations, on terms and conditions satisfactory
in all material respects to the Agent and the Required Lenders, including
without limitation, with respect to interest rates, payment terms, maturities,
amortization schedules, covenants, defaults, remedies, and subordination
provisions, as evidenced by the written approval of the Agent and Required
Lenders.
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"Subsidiary" of any Person shall mean any corporation, partnership or
other Person of which a majority of all the outstanding capital stock (including
director's qualifying shares) or other securities or ownership interests having
ordinary voting power to elect a majority of the board of directors or other
persons performing similar functions is, at the time as of which any such
determination is being made, directly or indirectly owned by such Person, or by
one or more of the Subsidiaries of such Person, and which corporation,
partnership or other Person is consolidated with such Person for financial
reporting purposes. Unless otherwise specified, "Subsidiaries" and "Subsidiary"
shall mean the Subsidiaries and a Subsidiary, respectively, of the Company.
"Supplemental Documents" shall mean the supplements to the following
documents: the Guaranty Agreement, the Contribution Agreement, the Guarantor
Security Agreement, the Guarantor Pledge Agreement and the Guarantor Trademark
Security Agreement, as such supplements are more specifically described and
shown in each respective document.
"Swing Line" shall have the meaning assigned to such term in Section
2.03(a).
"Swing Line Advance" shall mean a Borrowing pursuant to Section 2.03
consisting of a Swing Line Loan made by SunTrust to the Company on the same date
and interest rate basis.
"Swing Line Borrowing" shall mean a Borrowing consisting or to consist
of a Swing Line Advance.
"Swing Line Borrowing Notice" shall mean the notice given by the
Company to SunTrust requesting a Swing Line Advance as provided in Section
2.03(b).
"Swing Line Loans" shall mean, collectively, the loans made to the
Company by SunTrust pursuant to Section 2.03.
"Swing Line Note" shall mean the promissory note evidencing the Swing
Line Loans substantially in the form of Exhibit B and duly completed in
accordance with the terms hereof.
"Swing Line Subcommitment" shall mean the commitment of SunTrust to
make Swing Line Loans in an aggregate principal amount at any time outstanding
not to exceed $2,000,000.
"Swing Rate" shall have the meaning set forth in Section 2.17(c).
"Swing Rate Advance" shall mean an Advance made or outstanding as a
Swing Line Loan bearing interest based on the Swing Rate as provided in Section
2.17(c).
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"Swing Rate Quote" shall mean an offer by SunTrust to make a Swing Line
Loan to the Company at the Swing Rate specified therein for the interest period
to be applicable to the Swing Line Loan as specified therein, pursuant to
Section 2.03(b).
"Tax" shall mean, with respect to any person or entity, any federal,
state or foreign tax, assessment, customs duties, or other governmental charge,
levy or assessment (including any withholding tax) upon such person or entity or
upon such person's or entity's assets, revenues, income or profits, other than
income and franchise taxes imposed upon any Lender by the jurisdictions (or any
political subdivision thereof) in which such Lender has its principal office or
office from which its Advances are made, or in which such Lender is
incorporated.
"Third Amendment to Senior Subordinated Debt" shall mean that certain
Amendment No. 3 to Senior Subordinated Note Purchase Agreement, dated as of May
4, 1999, among the Company, the Guarantors and the Investors listed therein.
"Total Capitalization" shall mean the sum of shareholders' equity plus
Subordinated Debt plus Senior Funded Debt.
"Total Commitments" shall mean, at any time, the sum of the Revolving
Loan Commitments, including the Letter of Credit Subcommitment of each of the
Lenders, and in the case of SunTrust, the Swing Line Subcommitment.
"Total Revenues" shall mean, for any fiscal period of the Company, the
total revenues of the Company as determined on a consolidated basis in
accordance with GAAP.
"Underwriting Fee" shall mean the underwriting fee described in the Fee
Letter, payable on the Closing Date to SunTrust Equitable Securities
Corporation.
"United States" or "U.S." means the United States of America, its fifty
(50) States and the District of Columbia.
"U.S. Dollar" "Dollar" and "$" shall mean lawful money of the United
States of America.
"Year 2000 Compliant" shall have the meaning set forth in Section 4.23.
SECTION 1.02 Calculations; Accounting Terms. Calculations of all
financial data herein shall be on a consolidated basis for the Company and all
Subsidiaries; and all accounting terms used herein shall, unless otherwise
expressly indicated, be in reference to the Company and its Subsidiaries, if
any, on a consolidated basis, which may be accounted for in accordance with the
equity investment method (to the extent such method is in accordance with GAAP),
and shall have the meanings ascribed thereto under and be interpreted in
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accordance with GAAP. All calculations and determinations under Article VII
shall be made in accordance with accounting principles consistent with those
followed in the preparation of the annual or interim financial statements, as
applicable, referred to in Section 5.02.
SECTION 1.03 Other Definitional Provisions.
(a) Except as otherwise specified herein, all references herein (A) to
any Person, other than the Company or any Subsidiary, shall be deemed to include
such Person's successors, transferees and assignees, (B) to the Company or any
Subsidiary, shall be deemed to include such Person's successors, (C) to any
Applicable Law specifically defined or referred to herein shall be deemed
references to such Applicable Law as the same may be amended or supplemented
from time to time, and (D) to any contract defined or referred to herein shall
be deemed references to such contract (and, in the case of any instrument, any
other instrument issued in substitution therefor) as the terms thereof may have
been or may be amended, supplemented, waived or otherwise modified from time to
time.
(b) When used in this Agreement, the words "herein", "hereof" and
"hereunder" and words of similar import shall refer to this Agreement as a whole
and not to any provision of this Agreement, and "Section", "Subsection",
"Schedule" and "Exhibit" shall refer to Sections and Subsections of, and
Schedules and Exhibits to, this Agreement unless otherwise specified.
(c) Whenever the context so requires, the neuter gender includes the
masculine or feminine, and the singular number includes the plural, and vice
versa.
(d) All terms defined in this Agreement shall have the defined meanings
when used in any Note or, except as otherwise expressly stated therein, any
certificate, opinion or other Loan Document.
SECTION 1.04 Captions. Article and Section captions in this Agreement
are included for convenience of reference only and shall not constitute a part
of this Agreement for any other purpose.
ARTICLE II
AMOUNT AND TERMS OF LOANS
SECTION 2.01 Revolving Loan Commitments and Revolving Notes. Subject to
and upon the terms and conditions set forth in this Agreement, (i) each of the
Lenders severally establishes until May 4, 2002, unless otherwise extended
pursuant to Section 2.19 below (May 4, 2002, or such later date as the
Commitments have been extended pursuant to Section 2.19, is hereinafter referred
to as the "Commitment Termination Date") a revolving credit facility in favor of
the Company in aggregate principal at any one time outstanding not to
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exceed the sum set forth opposite such Lender's name below, as the same may be
reduced from time to time pursuant to the terms hereof:
SunTrust Bank, South Florida, $42,500,000.00 56.67%
National Association
Bank Austria Creditanstalt $15,000,000.00 20.00%
Corporate Finance, Inc.
The Provident Bank $10,000,000.00 13.33%
Bank Leumi Le-Israel B.M. $7,500,000.00 10.00%
TOTAL: $75,000,000.00 100.00%
and (ii) each Lender agrees to purchase a participation interest in the Letters
of Credit in accordance with this Article II; provided, however, that in no
event may the aggregate principal amount of all outstanding Revolving Loans,
Swing Line Loans and Letter of Credit Obligations outstanding exceed at any time
the Total Commitments from time to time in effect. Within the limits of the
Revolving Loan Commitments, the Company may borrow, repay and reborrow under the
terms of this Agreement; provided, however, that (A) the aggregate principal
amount of each Borrowing shall not be less than $500,000 and shall be in
integral multiples of $100,000, (B) all of the Company's representations and
warranties are true and correct on and as of the date of each Borrowing, (C) the
Company may neither borrow nor reborrow should there exist a Default or an Event
of Default, or such would result from the Borrowing, (D) the aggregate
outstanding amount of Advances and Letter of Credit Obligations, after giving
effect to each Borrowing and issuance of Letters of Credit, shall not exceed the
Total Commitments, and (E) the aggregate outstanding amount of Advances and
Letter of Credit Obligations, after giving effect to each Borrowing and issuance
of Letters of Credit, shall not exceed the aggregate amount of the Borrowing
Base. At no time shall the number of Borrowings outstanding under this Article
II exceed six; provided that, for the purpose of determining the number of
Borrowings outstanding, all Borrowings consisting of Base Rate Advances shall be
considered as one Borrowing. Borrowings under the Commitments shall be made
through simultaneous Advances by the Lenders, and the amount of each such
Borrowing shall be prorated among such Lenders based on the percentages set
forth above. All Advances by each Lender shall be evidenced by a single
Revolving Note payable to such Lender in the form of Exhibit A attached hereto
with appropriate insertions. Each Revolving Note shall be dated the date hereof,
shall be payable to the order of the respective Lender in a principal amount
equal to the amount set forth opposite such Lender's name above, shall bear
interest as provided for in this Agreement and shall mature on the Commitment
Termination Date or sooner should the principal and accrued interest thereon be
declared immediately due and payable as provided for herein. No Lender shall
have any obligation to advance funds in excess of an amount equal to the
percentage set forth opposite such Lender's name above multiplied by the Total
Commitments.
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SECTION 2.02 Method of Borrowing Under the Commitments.
(a) The Company shall give the Agent written or telephonic notice
(promptly confirmed in writing) of any requested Borrowing under the
Commitments, substantially in the form of Exhibit C attached hereto (a "Notice
of Borrowing"), specifying (i) the amount of the Borrowing, and (ii) the date
the proposed Borrowing is to be made (which shall be a Business Day). Each
Notice of Borrowing shall be given to the Agent (x) in the case of Base Rate
Advances, not later than 11:00 a.m. (Ft. Lauderdale, Florida time) the same
Business Day of such requested Borrowing or (y) in the case of LIBOR Advances,
at least three Business Days before the date such requested Borrowing is to be
made (which shall be a Business Day). The Agent shall be entitled to rely on any
telephonic Notice of Borrowing which it believes in good faith to have been
given by an Executive Officer of the Company, and any Advances made by the
Lenders based on such telephonic notice shall, when deposited by the Agent to
the Company's Account No. 0128320009032 at SunTrust, be Advances for all
purposes hereunder.
(b) Whenever the Company desires to convert all or a portion of an
outstanding Borrowing consisting of Base Rate Advances into one or more
Borrowings consisting of LIBOR Advances, or to continue a Borrowing consisting
of LIBOR Advances for a new Interest Period, it shall give the Agent written
notice or telephonic notice (promptly confirmed in writing) at least three
Business Days before the date of such conversion, specifying each such Borrowing
to be converted into or continued as LIBOR Advances. Such notice (a "Notice of
Interest Rate Conversion") shall be given prior to 11:00 a.m. (Ft. Lauderdale,
Florida time) on the date specified. Each such Notice of Interest Rate
Conversion shall be irrevocable and shall specify the aggregate principal amount
of the Advances to be converted or continued, the date of such conversion or
continuation and the Interest Period applicable thereto. If, upon the expiration
of any Interest Period in respect of any Borrowing, the Company shall have
failed to deliver the Notice of Interest Rate Conversion, the Company shall be
deemed to have elected to convert or continue such Borrowing to a Borrowing
consisting of Base Rate Advances. So long as any Default or Event of Default
shall have occurred and be continuing, no Borrowing may be converted into or
continued as (upon expiration of the current Interest Period) LIBOR Advances
unless the Agent and each of the Lenders shall have otherwise consented in
writing. No conversion of any Borrowing of LIBOR Advances shall be permitted
except on the last day of the Interest Period in respect thereof.
(c) Upon receipt of a Notice of Borrowing or a Notice of Interest Rate
Conversion from the Company, the Agent shall notify the Lenders by telephone,
which notice shall be promptly confirmed in writing (including by telecopier) by
the Agent to such Lenders, of such Notice of Borrowing or Notice of Interest
Rate Conversion and of each such Lender's Pro Rata Share of the requested
Borrowing or Interest Rate Conversion. Not later than 1:00 p.m. (Ft. Lauderdale,
Florida time) on the date specified for the Borrowing or Interest Rate
Conversion in the Notice of Borrowing or Notice of Interest Rate Conversion and
in the notice to such Lender provided by the Agent, each Lender shall promptly
make its portion of the Borrowing available to the Agent in immediately
available funds, and the Agent shall make available to the Company the amount so
received by the Agent from the Lenders not later than 3:00 p.m. (Ft. Lauderdale,
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Florida time) on such date. In the event any Lender shall fail to make any
Advance available to the Agent in immediately available funds by 1:00 p.m. (Ft.
Lauderdale, Florida time) on the date specified, and provided no Default or
Event of Default shall have occurred and be continuing, the Agent may advance
such Lender's portion of the Borrowing on behalf of such Lender, in which event
such Lender shall promptly reimburse the Agent for the amount thereof plus (i)
if the amount of such Lender's Advance is reimbursed to the Agent on or prior to
the calendar day next succeeding the date of the Borrowing, interest on such
amount at the rate equal to the Federal Funds Rate, or (ii) if the amount of
such Lender's Advance is reimbursed to the Agent after the calendar day next
succeeding the day of the Borrowing, interest on such amount at the Base Rate;
provided, however, that any such reimbursement by the Company to the Agent shall
not relieve such Lender who fails to make any Advance as provided above from
liability to the Company for such failure. The amount of interest payable as a
result of any Lender's failure to make any Advance available shall be calculated
on the basis of a year of 360 days and paid for the actual number of days such
failure has continued (including the date of payment). If the Company fails to
reimburse the Agent as provided in this Section 2.02(c), then the Agent shall
have the right to deduct any amounts owed to it hereunder from Advances it makes
to the Company in subsequent Borrowings made by the Company.
SECTION 2.03 Swing Line Subcommitment.
(a) Notwithstanding anything contained herein to the contrary, SunTrust
hereby establishes a subcommitment within its Revolving Loan Commitment of up to
an aggregate of $2,000,000 (the "Swing Line") to accommodate the short term
borrowing needs of the Company. Sections 3.01 and 3.02 shall apply equally to
Borrowings made through the Swing Line and Borrowings or Interest Rate
Conversions requested or made through Section 2.02. The aggregate amount of all
Borrowings under the Swing Line shall not at any time exceed the Swing Line
Subcommitment, and to the extent any Borrowing under the Swing Line would cause
such a result after giving effect thereto, the Company shall be required to
request such Borrowing under Section 2.02(a) hereof. Any Borrowing made by the
Company under the Swing Line shall be for a period not to exceed 30 days.
(b) Whenever the Company desires to make a Borrowing under the Swing
Line, it shall give SunTrust prior written or telephonic notice (promptly
confirmed in writing) of any requested Borrowing under the Swing Line (each a
"Swing Line Borrowing Notice") prior to 11:00 a.m. (Ft. Lauderdale, Florida
time) on the date of such Borrowing. Each Swing Line Borrowing Notice shall
specify the aggregate principal amount of the Swing Line Borrowing, the date of
such Swing Line Borrowing (which shall be a Business Day) and the interest
period to be applicable thereto. SunTrust shall make available to the Company
the amount of the Borrowing requested in the Swing Line Borrowing Notice not
later than 3:00 p.m. (Ft. Lauderdale, Florida time) on such date, provided that
(i) no Default or Event of Default shall have occurred and be continuing and
(ii) the aggregated principle amount of the Swing Line Borrowings, including the
requested Borrowing under such Swing Line Borrowing Notice, shall be no greater
than the Swing Line Subcommitment.
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(c) The Company's obligation to pay the principal of, and interest on,
the Swing Line Loans shall be evidenced by the records of SunTrust and by the
Swing Line Note payable to SunTrust (or its assignee) completed in conformity
with this Agreement.
(d) The outstanding principal amount under each Swing Line Loan shall
be due and payable in full on the Commitment Termination Date.
(e) Each Borrowing under the Swing Line shall deemed to be made under
SunTrust's Commitment to the extent of any Availability thereunder on the date
such Borrowing is made.
SECTION 2.04 Letter of Credit Subcommitment. Subject to, and upon the
terms and conditions, hereof (including the limitations of Section 2.01) the
Company may request, in accordance with the provisions of this Section 2.04 and
Section 2.05, that on and after the Closing Date, the Agent issue a Letter or
Letters of Credit for the account of the Company; provided, that (i) no Letter
of Credit shall have an expiration date that is later than ten days prior to the
Commitment Termination Date; (ii) each Letter of Credit issued by the Agent
shall be in a stated amount of at least $250,000; (iii) the Agent shall have no
obligation to issue any Letter of Credit, if, after giving effect to such
issuance, the aggregate Letter of Credit Obligations would exceed the Letter of
Credit Subcommitment; and (iv) the Agent shall have no obligation to issue any
Letter of Credit, if, after giving effect to such issuance, the sum of the
outstanding Revolving Loans, Swing Line Loans and Letter of Credit Obligations
would exceed the Total Commitments or the Borrowing Base.
SECTION 2.05 Notice of Issuance of Letter of Credit; Agreement to Issue.
(a) Whenever the Company desires the issuance of a Letter of Credit, it
shall, in addition to any application and documentation procedures required by
the Agent for the issuance of such Letter of Credit, deliver to the Agent a
written notice no later than 11:00 A.M. (Atlanta, Georgia time) at least ten
(10) days in advance of the proposed date of issuance. Each such notice shall
specify (i) the proposed date of issuance (which shall be a Business Day); (ii)
the face amount of the Letter of Credit; (iii) the expiration date of the Letter
of Credit; and (iv) the name and address of the beneficiary with respect to such
Letter of Credit and shall attach a precise description of the documentation and
a verbatim text of any certificate to be presented by the beneficiary of such
Letter of Credit which would require the Agent to make payment under the Letter
of Credit, provided that the Agent may require changes in any such documents and
certificates in accordance with its customary letter of credit practices, and
provided further, that no Letter of Credit shall require payment against a
conforming draft to be made thereunder on the same Business Day that such draft
is presented if such presentation is made after 11:00 A.M. (Fort Lauderdale,
Florida time). In determining whether to pay under any Letter of Credit, the
Agent shall be responsible only to determine that the documents and certificate
required to be delivered under its Letter of Credit have been delivered, and
that they comply on their face with the requirements of the Letter of Credit.
Promptly after receiving the notice of issuance of a Letter of Credit, the Agent
shall notify each Lender of such Lender's respective participation therein,
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determined in accordance with its respective Pro Rata Share of the Revolving
Loan Commitments as determined on the date of the issuance of such Letter of
Credit.
(b) The Agent agrees, subject to the terms and conditions set forth in
this Agreement, to issue for the account of the Company, a Letter of Credit in a
face amount equal to the face amount requested under paragraph (a) above,
following its receipt of a notice and the application and other documents
required by Section 2.05(a). Immediately upon the issuance of each Letter of
Credit, each Lender shall be deemed to, and hereby agrees to, have irrevocably
purchased from the Agent a participation in such Letter of Credit and any
drawing thereunder in an amount equal to such Lender's Pro Rata Share multiplied
by the face amount of such Letter of Credit.
SECTION 2.06 Payment of Amounts drawn under Letter of Credit.
(a) In the event of any request for a drawing under any Letter of
Credit by the beneficiary thereof, the Agent shall notify the Company and the
Lenders on or before the date on which the Agent intends to honor such drawing,
and the Company shall reimburse the Agent on the day on which such drawing is
honored in an amount, in same day funds, equal to the amount of such drawing,
provided that anything contained in this Agreement to the contrary
notwithstanding, unless the Company shall have notified the Agent prior to 11:00
A.M. (Fort Lauderdale, Florida time) on the Business Day immediately prior to
the date on which such drawing is honored, that the Company intends to reimburse
the Agent for the amount of such drawing in funds other than the proceeds of
Revolving Loans, the Company shall be deemed to have timely given a Notice of
Borrowing to the Agent requesting Revolving Loans which are Base Rate Advances
on the date on which such drawing is honored in an amount equal to the amount of
such drawing, and the Lenders shall by 1:00 P.M. (Fort Lauderdale, Florida time)
on the date of such drawing, make Revolving Loans which are Base Rate Advances
in the amount of such drawing, the proceeds of which shall be applied directly
by the Agent to reimburse the Agent for the amount of such drawing, provided
that for the purposes solely of such Borrowing, the conditions and precedents
set forth in Sections 3.01 and 3.02 hereof shall not be applicable, and provided
further that if for any reason proceeds of the Revolving Loans are not received
by the Agent on such date in the amount equal to the amount of such drawing, the
Company shall reimburse the Agent on the Business Day immediately following the
date of such drawing in an amount, in dollars and immediately available funds,
equal to the excess of the amount of such drawing over the amount of such
Revolving Loans, if any, which are so received, plus accrued interest on the
amount at the applicable rate of interest for Base Rate Advances.
(b) Notwithstanding any provision of this Agreement to the contrary, to
the extent that any Letter of Credit or portion thereof remains outstanding on
the Commitment Termination Date, the parties hereby agree that the beneficiary
or beneficiaries thereof shall be deemed to have made a drawing of all available
amounts pursuant to such Letters of Credit on the Commitment Termination Date,
which amounts shall be reimbursed to the Agent as set forth above.
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SECTION 2.07 Payment by Lenders. In the event that the Company shall
fail to reimburse the Agent as provided in Section 2.06 by borrowing Revolving
Loans, or otherwise providing an amount equal to the amount of any drawing
honored by the Agent pursuant to any Letter of Credit issued by it, the Agent
shall promptly notify each Lender of the unreimbursed amount of such drawing and
of such Lender's respective participation therein. Each Lender shall make
available to the Agent an amount equal to its respective participation, in
dollars and in immediately available funds, at the office of the Agent specified
in such notice not later than 1:00 P.M. (Fort Lauderdale, Florida time) on the
Business Day after the date notified by the Agent. In the event that any such
Lender fails to make available to the Agent the amount of such Lender's
participation in such Letter of Credit, the Agent shall be entitled to recover
such amount on demand from such Lender together with interest on such amount at
the Base Rate. The Agent shall distribute to each other Lender which has paid
all amounts payable under this Section with respect to any Letter of Credit,
such Lender's Pro Rata Share of all payments received by the Agent from the
Company in reimbursement of drawings honored by the Agent under such Letter of
Credit when such payments are received.
SECTION 2.08 Obligations Absolute. The obligation of the Company to
reimburse the Agent for drawings made under Letters of Credit issued for the
account of the Company and the Lenders' obligation to honor their participations
purchased therein shall be unconditional and irrevocable and shall be paid
strictly in accordance with the terms of this Agreement under all circumstances,
including without limitation, the following circumstances:
(a) Any lack of validity or enforceability of any Letter of Credit;
(b) The existence of any claim, set-off, defense or other right which
the Company or any Subsidiary or Affiliate of the Company may have at any time
against a beneficiary or any transferee of any Letter of Credit (or any Persons
or entities for whom any such beneficiary or transferee may be acting), any
Lender or any other Person, whether in connection with this Agreement, the
transactions contemplated herein or any unrelated transaction (including without
limitation any underlying transaction between the Company or any of its
Subsidiaries and Affiliates and the beneficiary for which such Letter of Credit
was procured); provided that nothing in this Section shall affect the right of
the Company to seek relief against any beneficiary, transferee, Lender or any
other Person in any action or proceeding or to bring a counterclaim in any suit
involving such Persons;
(c) Any draft, demand, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent or invalid in any
respect or any statement therein being untrue or inaccurate in any respect;
(d) Payment by the Agent 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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(e) Any other circumstance or happening whatsoever which is similar to
any of the foregoing; or
(f) the fact that a Default or an Event of Default shall have occurred
and be continuing.
SECTION 2.09 Indemnification; Nature of Agent's Duties.
(a) In addition to amounts payable elsewhere provided in this
Agreement, without duplication, the Company hereby agrees to protect, indemnify,
pay and save the Agent and each Lender harmless from and against any and all
claims, demands, liabilities, damages, losses, costs, charges and reasonable
expenses (including reasonable attorney's fees and disbursements) which the
Agent or any Lender may incur or be subject to as a consequence, direct or
indirect, of (i) the issuance of any Letter of Credit for the account of the
Company, other than as a result of the gross negligence or willful misconduct of
the Agent; or (ii) the failure of the Agent to honor a drawing under any Letter
of Credit due to any act or omission (whether rightful or wrongful) of any
present or future de jure or de facto government or governmental authority.
(b) Notwithstanding any other provision contained in this Agreement,
the Agent shall not be obligated to issue any Letter of Credit, nor shall any
Lender be obligated to purchase its participation in any Letter of Credit to be
issued hereunder, if the issuance of such Letter of Credit or purchase of such
participation shall have become unlawful or prohibited by compliance by Agent or
such Lender in good faith with any law, governmental rule, guideline, request,
order, injunction, judgment or decree (whether or not having the force of law);
provided that in the case of the obligation of a Lender to purchase such
participation, such Lender shall have notified the Agent to such effect in
writing at least ten (10) Business Days' prior to the issuance thereof by the
Agent, which notice shall relieve the Agent of its obligation to issue such
Letter of Credit pursuant to Section 2.04 and Section 2.05 hereof.
SECTION 2.10 Prepayment of Borrowings Under the Commitments. The
Company shall have the right to prepay Borrowings under the Commitments, in
whole at any time or in part from time to time, without premium or penalty (but,
in the case of LIBOR Advances, subject to the funding indemnification provisions
of Section 2.22), provided that (i) the Company gives the Agent prior written
notice of such prepayment, specifying the date such prepayment will occur (which
shall be a Business Day), (x) in the case of any Base Rate Advance, at least one
Business Day in advance of such date or (y) in the case of any LIBOR Advance
during an Interest Period, at least three Business Days in advance of such date,
(ii) each partial prepayment shall be in an amount of at least $500,000 and
integral multiples of $100,000, (iii) prepayments shall be applied to repay
Borrowings under the Commitments in the order set forth in Section 2.13 hereof,
and (iv) such prepayments include interest accrued, on the principal amount
prepaid, to the prepayment date.
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SECTION 2.11 Mandatory Prepayments.
(a) If the sum of the (i) aggregate outstanding principal amount of the
Revolving Loans, (ii) aggregate outstanding principal amount of the Swing Line
Loans, and (iii) Letter of Credit Obligations exceed at any time the Total
Commitments, as reduced pursuant to Section 2.10 or otherwise, the Company shall
immediately repay the Revolving Loans, Swing Line Loans or Letter of Credit
Obligations by an amount equal to such excess. Each prepayment of Revolving
Loans shall be applied first to Base Rate Advances to the full extent thereof
before application to LIBOR Advances.
(b) The Company shall make a mandatory prepayment from 100 percent of
the after-tax net proceeds received by the Company from any sale or other
disposition by the Company of any of its assets, provided, however, that such
prepayment provision shall not apply to the sales of inventory by the Company in
the ordinary course of business or assets disposed of as part of the Company's
standard acquisition procedures (such assets to include high-pressure tanks,
motorized vehicles, including cars and trucks, and lines of business other than
carbon dioxide that may be obtained by the Company as part of the group of
assets of any corporation or other business entity the Company may acquire), and
certain other sales to be agreed upon in writing by the Company and the Required
Lenders.
(c) The Company shall make a mandatory prepayment from 100 percent of
net proceeds of any offering of debt; provided, however, that this provision
shall not include (i) fifty percent (50%) of the proceeds of the new
Subordinated Debt issued pursuant to the Third Amendment to Senior Subordinated
Debt, and (ii) any purchase money obligations paid to the Company.
(d) Notwithstanding anything in this Agreement to the contrary, no
reduction in the Commitments shall be required hereunder as a result of any
mandatory prepayment under this Section 2.11.
SECTION 2.12 Voluntary Reduction of Commitments. Upon at least five (5)
Business Days' prior written notice (or telephonic notice promptly confirmed in
writing) to the Agent, which notice shall specify (1) the amount by which such
Commitments are to be terminated and (2) the date such termination is to occur,
the Company shall have the right, without premium or penalty, to terminate the
Commitments, in whole or in part, provided that (a) any partial termination
pursuant to this Section 2.12 shall be in an amount of at least $5,000,000 and
integral multiples of $5,000,000 and (b) any such termination shall apply to
reduce proportionately and permanently the Commitments. If the aggregate
principal amount of Advances exceeds the amount of the Commitments as so
reduced, the Company shall immediately repay Borrowings under such Commitments
by an amount equal to such excess, together with accrued but unpaid interest on
such excess.
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SECTION 2.13 Allocation of Payments.
(a) All principal and interest payments and prepayments made with
respect to Advances and payments in respect of Commitment Fees shall be
allocated among all outstanding Commitments and Advances to which such payments
relate, proportionately based on the Lenders' Pro Rata Shares of the
Commitments.
(b) All payments made to the Agent by the Company shall be applied in
the following order: (a) first, to the reimbursement of any fees which are due
and payable, and expenses incurred by and then due and payable to, the Agent, in
accordance with the terms of this Agreement, in connection with the
administration of the Commitments and otherwise (to the extent any such fees are
payable by the Company pursuant to the terms of this Agreement); (b) second, to
the payment of any accrued and unpaid interest and Fees which are due and
payable, pro rata to the Lenders based upon their respective Pro Rata Shares of
the Commitments; and (c) finally, to the payment of outstanding Advances.
SECTION 2.14 Termination of Commitments. The unpaid principal balance
and all accrued and unpaid interest on the Notes will be due and payable upon
the first of the following dates or events to occur: (i) acceleration of the
maturity of any Note in accordance with the remedies contained in Section 8.02
of this Agreement; or (ii) upon the expiration of the Commitments on the
Commitment Termination Date.
SECTION 2.15 Use of Proceeds. The proceeds of each Borrowing under the
Commitments will be used by the Company solely to make Capital Expenditures and
to provide for the working capital and general corporate needs of the Company.
SECTION 2.16 Fees.
(a) On the Closing Date, the Company shall pay to SunTrust Equitable
Securities Corporation, the Underwriting Fee, which shall be fully earned and
nonrefundable when paid.
(b) On the Closing Date and on each anniversary thereof, if the
Commitments are extended pursuant to Section 2.19, the Company shall pay to the
Agent the Agent Fee, which fee shall be nonrefundable when paid.
(c) The Company shall pay to the Agent, for the account of and
distribution of the respective Pro Rata Share to each Lender (subject to the
last sentence hereof), a commitment fee (the "Commitment Fee") for the period
commencing on the Closing Date to and including the Commitment Termination Date,
computed at a rate equal to the Applicable Commitment Fee Percentage multiplied
by the average daily unused portion of the Commitments of the Lenders, such fee
being payable quarterly in arrears on the last day of each calendar quarter,
commencing on June 30, 1999, and on the Commitment Termination Date. The
Commitment Fee will be calculated on the basis of a 360-day year for the actual
number of days elapsed.
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(d) The Company shall pay, quarterly in arrears on the last day of each
calendar quarter, commencing on June 30, 1999, and on the Commitment Termination
Date, (i) to the Agent, for the account of and distribution of the respective
Pro Rata Share to each Lender, a letter of credit fee equal to the Applicable
Margin for LIBOR Advances multiplied by the average daily aggregate Letter of
Credit Obligations, and (ii) to the Agent, for its own account, a letter of
credit fronting fee equal to one-quarter of one percent (0.25%) multiplied by
the stated face amount of such Letter of Credit (collectively, the "Letter of
Credit Fee").
(e) The Company hereby authorizes the Agent to withdraw an amount equal
to the fees which are due and payable under clauses (a), (b) or (c) above from
any of its accounts with the Agent if not paid on the due date for such fees.
The Agent shall give the Company notice of any such withdrawals, provided,
however, that failure by the Agent to give the Company notice shall not prevent
the Agent from making any such withdrawals under this Section.
SECTION 2.17 Interest.
(a) For Borrowings other than those made under the Swing Line, the
Company shall be entitled to select between the following two options to
establish the rate of interest at which the unpaid principal amount of the
Revolving Notes shall accrue:
(i) Base Rate Advances - interest shall accrue at the Base Rate
plus the Applicable Margin; or
(ii) LIBOR Advances - interest shall accrue at LIBOR plus the
Applicable Margin.
(b) Interest on the Revolving Notes for Borrowings other than those
made under the Swing Line shall be calculated on the basis of a 360-day year and
shall be payable to the Lenders as follows:
(i) Base Rate Advances -- on the last day of every quarter in
arrears; and
(ii) LIBOR Advances -- at the expiration of each Interest Period
and, with respect to advances made for an Interest Period longer than
three months, also on the last day of each three-month period prior to
the expiration of the Interest Period.
(c) For Borrowings made under the Swing Line, the rate of interest at
which the unpaid principal shall accrue on the Swing Line Note shall be equal to
the Base Rate on the applicable day of the Swing Line Borrowing Notice (the
"Swing Rate").
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SECTION 2.18 Interest Periods.
(a) In connection with the making or continuation of, or conversion
into, each Borrowing of LIBOR Advances, the Company shall select an Interest
Period to be applicable to such LIBOR Advance, which Interest Period shall be
either a 1, 2, 3 or 6 month period.
(b) In connection with the making of each Base Rate Advance, the
Company and the Lenders shall agree on an Interest Period acceptable to both
sides.
(c) Notwithstanding paragraphs (a) or (b) above:
(i) The initial Interest Period for any Borrowing of LIBOR
Advances shall commence on the date of such Borrowing (including the
date of any conversion from a Borrowing consisting of Base Rate
Advances) and each Interest Period occurring thereafter in respect of a
continuation of such Borrowing shall commence on the day on which the
immediately preceding Interest Period expires;
(ii) If any Interest Period would otherwise expire on a day which
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided that if any Interest Period in
respect of LIBOR Advances would otherwise expire on a day that is not a
Business Day but is a day of the month after which no further Business
Day occurs in such month, such Interest Period shall expire on the next
preceding Business Day;
(iii) Any Interest Period in respect of LIBOR Advances which begins
on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period shall, subject to
part (iv) below, expire on the last Business Day of such calendar
month; and
(iv) No Interest Period with respect to the Advances shall extend
beyond the Commitment Termination Date.
SECTION 2.19 Extension of Commitments. No earlier than 120 days but no
later than 90 days prior to the then applicable Commitment Termination Date, the
Company may request that the Commitment Termination Date be extended by the
Lenders for an additional 364-day or longer period. The Lenders may agree or not
agree to such extension in the exercise of their sole discretion; provided,
however, that the Agent shall inform the Company no later than 60 days prior to
the then applicable Commitment Termination Date of the Lenders' decision as to
whether to extend the Commitment Termination Date. Notwithstanding anything
herein to the contrary, the Commitment Termination Date may only be extended, in
the aggregate, for up to an additional two-year period pursuant to this Section
2.19. If the Lenders agree, in their sole discretion, to extend the Commitment
Termination Date, then the applicable Commitment Termination Date shall
automatically be so extended upon written notice thereof being delivered by the
Lenders to the Company and completion by the Company and its Subsidiaries of any
conditions to such extension required by the Lenders.
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SECTION 2.20 Increased Costs.
(a) If, by reason of (x) after the date hereof, the introduction of or
any change (including, without limitation, any change by way of imposition or
increase of reserve requirements) in or in the interpretation of any law or
regulation, or (y) the compliance with any guideline or request from any central
bank or other governmental authority or quasi-governmental authority exercising
control over banks or financial institutions generally (whether or not having
the force of law):
(i) any Lender (or its applicable Lending Office) shall be subject
to any tax, duty or other charge with respect to its LIBOR Advances or
its obligation to make LIBOR Advances, or the basis of taxation of
payments to any Lender of the principal of or interest on its LIBOR
Advances or its obligation to make LIBOR Advances shall have changed
(except for changes in the tax on the overall net income of, or any
franchise tax on, such Lender or its applicable Lending Office imposed
by the jurisdiction in which such Lender's principal executive office
or applicable Lending Office is located); or
(ii) any reserve (including, without limitation, any imposed by the
Board of Governors of the Federal Reserve System), special deposit or
similar requirement against assets of, deposits with or for the account
of, or credit extended by, any Lender's applicable Lending Office shall
be imposed or deemed applicable or any other condition affecting its
LIBOR Advances or its obligation to make LIBOR Advances shall be
imposed on any Lender or its applicable Lending Office or the London
interbank market;
and as a result thereof there shall be any increase in the cost to such Lender
of agreeing to make or making, funding or maintaining LIBOR Advances (except to
the extent already included in the determination of LIBOR for LIBOR Advances),
or there shall be a reduction in the amount received or receivable by such
Lender or its applicable Lending Office, then the Company shall from time to
time, upon written notice from and demand by such Lender on the Company (with a
copy of such notice and demand to the Agent), pay to the Agent for the account
of such Lender within five Business Days after the date of such notice and
demand, additional amounts sufficient to indemnify such Lender against such
increased cost. A certificate as to the amount of such increased cost, submitted
to the Company and the Agent by such Lender in good faith and accompanied by a
statement prepared by such Lender describing in reasonable detail the basis for
and calculation of such increased cost, shall, except for manifest error, be
final, conclusive and binding for all purposes. In the event that the Company
shall pay the increased costs accrued through the date of payment as required
under this Section 2.20(a), plus any funding losses as described in Section
2.22, then the Company shall have the right to convert the relevant LIBOR
Advance to a Base Rate Advance, as provided in Section 2.02, and the Agent and
each of the Lenders shall be deemed to have given their consent thereto, as
required thereunder.
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(b) If any Lender shall advise the Agent that at any time, because of
the circumstances described in clauses (x) or (y) in Subsection 2.20(a) or any
other circumstances beyond such Lender's reasonable control arising after the
date of this Agreement affecting such Lender or the London interbank market or
the United States secondary certificate of deposit market or such Lender's
position in such markets, LIBOR, as determined by the Agent, will not adequately
and fairly reflect the cost to such Lender of funding its LIBOR Advances, then,
and in any such event:
(i) the Agent shall forthwith give notice (by telephone confirmed
in writing) to the Company and to the other Lenders of such advice;
(ii) the Company's right to request and such Lender's obligation to
make or permit portions of the Loans to remain outstanding past the
last day of the then current Interest Periods as LIBOR Advances shall
be immediately suspended; and
(iii) such Lender shall make a Loan as part of the requested
Borrowing of LIBOR Advances, as the case may be, as a Base Rate
Advance, which such Base Rate Advance shall, for all other purposes, be
considered part of such Borrowing.
SECTION 2.21 Capital Adequacy. If, after the date of this Agreement,
any Lender shall have determined that the adoption of any applicable law, rule
or regulation regarding capital adequacy, or any change therein, or any change
in the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Lender with any request or
directive regarding capital adequacy not currently in effect or fully applicable
as of the Closing Date (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on such Lender's capital as a consequence of its
obligations hereunder to a level below that which such Lender could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's policies with respect to capital adequacy) by an amount deemed by
such Lender to be material, then, from time to time, promptly upon demand by
such Lender (with a copy to the Agent), the Company shall pay such Lender such
additional amount or amounts as will compensate such Lender for such reduction.
A certificate of any Lender claiming compensation under this Section 2.21 and
setting forth the additional amount or amounts to be paid to it hereunder shall
be conclusive absent manifest error. In determining any such amount, such Lender
may use any reasonable averaging and attribution methods. Each Lender will
promptly notify the Company of any such adoption, change or compliance of which
it has knowledge which will entitle such Lender to compensation pursuant to this
Section, but the failure to give such notice shall not affect such Lender's
right to such compensation provided such Lender gives such notice within 90 days
after an officer of such Lender having responsibility for the administration of
this Agreement shall have received actual notice of such adoption, change or
compliance.
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SECTION 2.22 Funding Losses. The Company shall compensate each Lender,
upon its written request to the Company (which request shall set forth the basis
for requesting such amounts in reasonable detail and which request shall be made
in good faith and, absent manifest error, shall be final, conclusive and binding
upon all of the parties hereto), for all losses, expenses and liabilities
(including, without limitation, any interest paid by such Lender to lenders of
funds borrowed by it to make or carry its LIBOR Advances, in either case to the
extent not recoverable by such Lender in connection with a re-employment of such
funds and including loss of anticipated profits, which the Lender may sustain):
(i) if for any reason (other than a default by such Lender) a borrowing of, or
conversion to or continuation of, LIBOR Advances to the Company does not occur
on the date specified therefor in a Notice of Borrowing or Notice of Interest
Rate Conversion (whether or not withdrawn), (ii) if any repayment (including
mandatory prepayments and any conversions) of any LIBOR Advances by the Company
occurs on a date which is not the last day of an Interest Period applicable
thereto, or (iii) if, for any reason, the Company defaults in its obligation to
repay its LIBOR Advances when required by the terms of this Agreement.
SECTION 2.23 Making of Payments.
(a) The Fees and all payments of principal of, or interest on, the
Notes, and payments in respect of the Letters of Credit, shall be made in
immediately available funds free and clear of any defenses, set-offs,
counterclaims or withholdings or deductions for taxes to the Agent at its
principal office in Ft. Lauderdale, Florida, for the accounts of the respective
Lenders. All such payments shall be made not later than 1:00 p.m. (Ft.
Lauderdale, Florida time) and funds received after that hour shall be deemed to
have been received by the Agent on the next following Business Day. Payments to
the Agent shall, as to the Company, constitute payment to the applicable Lenders
hereunder, other than Swing Line Loans.
(b) Subject to Subsection 2.18(c)(ii), whenever any payment to be made
hereunder or under any Revolving Note or the Swing Line Note shall be stated to
be due on a day which is not a Business Day, the due date thereof shall be
extended to the next succeeding Business Day and, with respect to payments of
principal, interest thereon shall be payable at the applicable rate during such
extension.
(c) On the Business Day that a payment is received or deemed to have
been received hereunder, the Agent shall remit in immediately available funds to
each Lender its share, based on the percentages set forth in Section 2.01, of
all payments received by the Agent on the Revolving Notes.
SECTION 2.24 Default Rate of Interest. Upon the occurrence and during
the continuance of an Event of Default set forth in Section 8.01, to the extent
permitted by law, all unpaid amounts hereunder shall, on such date and
thereafter, accrue at the then applicable interest rate plus an additional two
percent (2.0%) per annum until payment in full, provided, that, for any LIBOR
Advance, at the end of the applicable Interest Period, interest shall accrue at
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the Base Rate plus two percent (2.0%) per annum. Interest accruing pursuant to
this Section 2.24 will be due and payable upon demand.
SECTION 2.25 Proration of Payments. If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, through exercise of
any right of set-off or otherwise) after the occurrence and during the
continuance of an Event of Default on account of the principal of or interest on
any Revolving Note or any fees in respect of this Agreement in excess of its Pro
Rata Share of payments and other recoveries obtained by all the Lenders on
account of the principal of and interest on the Revolving Notes then held by
them or any fees due to them in respect of this Agreement, such Lender shall
notify the Agent thereof and forthwith purchase from the other Lenders such
participation in the Revolving Notes held by them or in such fees owed to them
as shall be necessary to cause such purchasing Lender to share the excess
payment or other recovery ratably with each of them; provided, however, that if
all or any portion of the excess payment or other recovery is thereafter
recovered from such purchasing Lender, the purchase from such Lender shall be
rescinded and the purchase price restored by each selling Lender to the extent
of such recovery, but without interest, unless the purchasing Lender is required
to pay interest on the amount so recovered, in which case each selling Lender
shall pay its Pro Rata Share of such interest. After the occurrence and during
the continuance of an Event of Default, disproportionate payments of interest
shall be shared by the purchase of separate participations in unpaid interest
obligations, disproportionate payments of fees shall be shared by the purchase
of separate participations in unpaid fee obligations, and disproportionate
payments of principal shall be shared by the purchase of separate participations
in unpaid principal obligations. The Company agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section 2.25
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender were the direct creditor of the Company in the amount of such
participation. Each Lender shall give the Agent notice within five (5) days of
any payments or other recoveries described above which it obtains.
SECTION 2.26 Lenders' Obligations Several. The obligation of each
Lender to make any Advance is several, and not joint or joint and several, and
is not conditioned upon the performance by all other Lenders of their
obligations to make Advances.
SECTION 2.27 Calculation of Interest. Interest payable on the Notes,
including interest payable as provided in Section 2.24, shall be calculated on
the basis of a year of 360 days and paid for the actual number of days elapsed.
SECTION 2.28 Payments Free of Taxes.
(a) All payments made by the Company under this Agreement, the Notes
shall be made free and clear of, and without deduction for, any Tax. To the
extent that the Company is obligated by Applicable Law to make any deduction or
withholding on account of any Tax from any amount payable to any Lender under
this Agreement, the Notes, the Company shall (1) make such deduction or
withholding and pay the same to the relevant governmental authority and (2) pay
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such additional amount to such Lender as is necessary to result in that Lender's
receiving a net after-tax (or after-assessment or after-charge) amount equal to
the amount to which such Lender would have been entitled under this Agreement,
the Notes absent such deduction or withholding.
(b) Each Lender that is organized under the laws of any jurisdiction
other than the United States of America or any State thereof (including the
District of Columbia) agrees to furnish to the Company and the Agent, on the
Closing Date and otherwise prior to the time it becomes a Lender hereunder, two
copies of either U.S. Internal Revenue Service Form 4224 or U.S. Internal
Revenue Service Form 1001 or any successor forms thereto (wherein such Lender
claims entitlement to complete exemption from or reduced rate of U.S. Federal
withholding tax on interest paid by the Company hereunder) and to provide to the
Company and the Agent a new Form 4224 or Form 1001 or any successor forms
thereto if any previously delivered form is found to be incomplete or incorrect
in any material respect or upon the obsolescence of any previously delivered
form.
SECTION 2.29 Interest Rate Not Ascertainable, etc. In the event that
the Agent, in the case of LIBOR, shall have determined (which determination
shall be made in good faith and, absent manifest error, shall be final,
conclusive and binding upon all parties) that on any date for determining LIBOR
for any Interest Period, by reason of any changes arising after the date of this
Agreement affecting the London interbank market or the Agent's position in such
market, adequate and fair means do not exist for ascertaining the applicable
interest rate on the basis provided for in the definition of LIBOR then, and in
any such event, the Agent shall forthwith give notice (by telephone confirmed in
writing) to the Company and to the Lenders of such determination and a summary
of the basis for such determination. Until the Agent notifies the Company that
the circumstances giving rise to the suspension described herein no longer
exist, the obligations of the Lenders to make or permit portions of the Advances
to remain outstanding past the last day of the then current Interest Periods as
LIBOR Advances shall be suspended, and such affected Advances shall bear the
same interest as Base Rate Advances.
SECTION 2.30 Illegality.
(a) In the event that any Lender shall have determined (which
determination shall be made in good faith and, absent manifest error, shall be
final, conclusive and binding upon all parties) at any time that the making or
continuance of any LIBOR Advance has become unlawful by compliance by such
Lender in good faith with any applicable law, governmental rule, regulation,
guideline or order (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful), then, in any such event, the
Lender shall give prompt notice (by telephone confirmed in writing) to the
Company and to the Agent of such determination and a summary of the basis for
such determination (which notice the Agent shall promptly transmit to the other
Lenders).
(b) Upon the giving of the notice to the Company referred to in
subsection (a) above, (i) the Company's right to request and such Lender's
obligation to make LIBOR
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Advances shall be immediately suspended, and such Lender shall make an Advance
as part of the requested Borrowing of LIBOR Advances as a Base Rate Advance, and
(ii) if the affected LIBOR Advance or Advances are then outstanding, the Company
shall immediately, or if permitted by applicable law, no later than the date
permitted thereby, upon at least one Business Day's written notice to the Agent
and the affected Lender, convert each such Advance into an Advance or Advances
to a Base Rate Advance with an Interest Period ending on the date on which the
Interest Period applicable to the affected LIBOR Advances expires, provided that
if more than one Lender is affected at any time, then all affected Lenders must
be treated the same pursuant to this Subsection 2.30(b).
ARTICLE III
CONDITIONS TO BORROWINGS
The obligation of each Lender to make an Advance to the Company and the
obligation of the Agent to issue Letters of Credit hereunder is subject to the
satisfaction of the following conditions:
SECTION 3.01 Conditions Precedent to Initial Advances. At the time of
the making by each Lender of its initial Advance hereunder, unless otherwise
waived or consented to by the Required Lenders,
(a) all obligations of the Company to the Agent or any Lender incurred
prior thereto (including, without limitation, the Company's obligation to
reimburse the fees and disbursements of counsel to the Agent and the Lenders in
accordance with this Agreement), together with the Fees, shall have been paid in
full;
(b) the Agent shall have received the following, each dated as of the
Closing Date, if applicable, in form and substance satisfactory to the Lenders
and (except for the Notes) in sufficient copies for each Lender:
(i) A duly executed original of this Agreement.
(ii) A duly completed and executed original of a Revolving Note
payable to the order of each Lender in the principal amount of such
Lender's Commitment.
(iii) A duly completed and executed original of the Swing Line Note
payable to the order of SunTrust in the principal amount of $2,000,000.
(iv) A duly executed original of the Guaranty Agreement and the
Contribution Agreement.
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(v) A duly executed original of the amendments to the Company
Security Agreement and the Guarantor Security Agreement, together with
such UCC financing statements and UCC amendments recorded in such
jurisdictions as the Required Lenders deem necessary or desirable to
perfect the security interests granted thereunder and under the Company
Pledge Agreement, the Guarantor Pledge Agreement, the Company Trademark
Security Agreement, and the Guarantor Trademark Security Agreement.
(vi) Lien searches in all relevant jurisdictions listing all
effective financing statements which name the Company or any of its
Subsidiaries as debtor, together with copies of such other financing
statements (none of which shall cover the Collateral purported to be
covered by the Company Security Agreement, the Guarantor Security
Agreement, the Company Pledge Agreement, the Guarantor Pledge
Agreement, the Company Trademark Security Agreement or the Guarantor
Trademark Security Agreement), other than financing statements in favor
of the Agent.
(vii) A duly executed original of the amendment to Company Pledge
Agreement and the Guarantor Pledge Agreement, together with stock
certificates evidencing the shares of stock of all Subsidiaries of the
Company pledged to the Agent thereunder and an undated stock power for
each such stock certificate, executed in blank by the pledgor of such
stock.
(viii) A duly executed original of the amendments to Company
Trademark Security Agreement and the Guarantor Trademark Security
Agreement, together with such filings in the United States Patent and
Trademark Office as the Required Lenders deem necessary or desirable to
perfect the security interests granted under the Company Trademark
Security Agreement and the Guarantor Trademark Security Agreement.
(ix) Duly executed originals of any amendments to Mortgages and
Assignments of Leases to be recorded in the real estate records of the
jurisdiction in which the Mortgaged Property related thereto is
located, together with such fixture filings and amendments to existing
fixture filings recorded in such jurisdictions as the Required Lenders
deem necessary or desirable to perfect the security interests granted
thereunder, and endorsements to the existing title insurance policies
for such Mortgage or Assignment of Leases showing that the Agent has a
valid first priority Lien with respect to such Mortgaged Property
subject to no encumbrances other than such Mortgage or such Assignment
of Leases, and Liens permitted pursuant to Section 6.01 hereof.
(x) Evidence satisfactory to the Required Lenders that all other
actions necessary or desirable to perfect and protect the security
interests created by the Security Documents have been taken.
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(xi) Certificates of insurance issued by the Company's insurers,
describing in reasonable detail the insurance maintained by the
Company, together with appropriate evidence showing that the Agent has
been named as loss payee or additional insured, as its interest may
appear, on all insurance policies insuring property of the Company and
its Subsidiaries.
(xii) Certificates signed by the Chief Executive Officer or the
Chief Financial Officer of each of the Company and the Guarantors as to
the solvency of such Company or Guarantor.
(xiii) A duly executed original of the Closing Certificate, in the
form attached hereto as Exhibit F.
(xiv) Copies of the organizational papers of each of the Company
and the Subsidiaries, certified as true and correct by the Secretary of
State of the State in which the Company or such Subsidiary is
incorporated, and certificates from the Secretaries of State of the
States in which the Company or such Subsidiary is incorporated and of
each state in which the Company or such Subsidiary is legally required
to qualify to transact business as a foreign corporation, certifying
the Company's or Subsidiaries' good standing as a corporation in such
States.
(xv) Copies of the bylaws of each of the Company and the
Guarantors of resolutions of the Board of Directors of each of the
Company and the Guarantors approving this Agreement, the Notes, the
Borrowings hereunder, the Security Documents and all other Loan
Documents to which the Company or such Guarantor is a party and of all
documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Agreement, the Notes, the
Security Documents and all other Loan Documents to which the Company or
such Guarantor is a party, in each case certified as true and correct
by the Secretary or an Assistant Secretary of the Company or such
Guarantor.
(xvi) A favorable written opinion of Olshan Grundman Frome
Rosenzweig & Wolosky LLP, General Counsel for the Company and the
Guarantors, substantially in the form of Exhibit G attached hereto, and
covering such additional matters relating to the transactions
contemplated hereby as the Required Lenders may reasonably request,
addressed to the Agent and the Lenders.
(xvii) A favorable written opinion of Holland & Knight LLP, counsel
for the Company and the Guarantors, substantially in the form of
Exhibit H attached hereto, and covering such additional matters
relating to the transactions contemplated hereby as the Required
Lenders may reasonably request, addressed to the Agent and the Lenders.
(xviii) Certified copies of all consents, approvals, authorizations,
registrations or filings required to be made or obtained by the Company
or the Guarantors
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in connection with the transactions contemplated hereby and by the
other Loan Documents.
(c) Since December 31, 1998, there shall have been no change which has
had or could reasonably be expected to have a Materially Adverse Effect;
(d) Issuance and funding of at least $10,000,000 in additional
Subordinated Debt pursuant to the Third Amendment to Senior Subordinated Debt,
in form and substance satisfactory to the Lenders;
(e) Receipt by the Agent of the interest rate protection agreement
required by Section 5.15, in form and substance satisfactory to Agent; and
(f) All corporate and other proceedings taken or to be taken in
connection with the transactions contemplated hereby and all Loan Documents and
other documents incident thereto or delivered in connection therewith shall be
satisfactory in form and substance to each Lender.
SECTION 3.02 Conditions Precedent to Each Advance and Letters of
Credit. At the time of the making by the Lenders of each Advance hereunder
(including the initial Advances) and the issuance of all Letters of Credit
(before as well as after giving effect to such Advances and the proposed use of
the proceeds thereof and the issuance of Letters of Credit), the following
statements shall be true:
(a) The representations and warranties contained in Article IV hereof
are true and correct in all material respects on and as of the date of such
Borrowing or the issuance of such Letters of Credit as though made on and as of
such date, except insofar as such representations and warranties speak only as
of a prior date or reflect transactions and events after the Closing Date, as
permitted by the Loan Documents;
(b) No Default or Event of Default exists or would result from such
Borrowing or from the application of the proceeds therefrom;
(c) Since the date of the most recent consolidated financial statements
of the Company described in Section 4.14 or delivered to the Lenders pursuant to
Section 5.02, there shall have been no change which has had or could reasonably
be expected to have a Materially Adverse Effect;
(d) There shall be no action or proceeding instituted or pending before
any court or other governmental authority or, to the knowledge of the Company,
threatened (i) which reasonably could be expected to have a Materially Adverse
Effect, or (ii) seeking to prohibit or restrict the ownership or operation of
any portion of the business or assets of the Company or any of its Subsidiaries,
or to compel the Company or any of its Subsidiaries to dispose of or hold
separate all or any portion of its businesses or assets, where such portion or
portions of such
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business(es) or assets, as the case may be, constitute a material portion of the
total businesses or assets of the Company or its Subsidiaries; and
(e) The Advances to be made and the use of proceeds or the issuance of
such Letters of Credit thereof shall not contravene, violate or conflict with,
or involve the Agent or any Lender in a violation of, any Applicable Law.
(f) each Notice of Borrowing given by the Company in accordance with
Section 2.02(a) hereof or issuance of a Letter of Credit and the acceptance by
the Company of the proceeds of any Borrowing shall constitute a representation
and warranty by the Company, made as of the time of the making of such Borrowing
or the issuance of such Letter of Credit that the conditions specified in
Section 3.02(a) have been fulfilled as of such time unless a notice to the
contrary specifically captioned "Disclosure Statement" is received by each of
the Lenders from the Company prior to 5:00 p.m. (Ft. Lauderdale, Florida time)
on the Business Day immediately preceding the date of the making of such
Borrowing. To the extent that the Lenders agree to make such Borrowing after
receipt of a Disclosure Statement in accordance with the preceding sentence, the
representations and warranties pursuant to the preceding sentence will be deemed
made as modified by the contents of such Disclosure Statement and repeated, as
so modified, as at the time of the making of such Borrowing. Any such
modification shall be effective only for the occasion on which the Lenders elect
to make an Advance on such Borrowing, and unless expressly agreed by the
Required Lenders in writing to the contrary in accordance with Section 10.02,
shall not be deemed a waiver or modification of any condition to the making of
any future Borrowing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Company and the Subsidiaries represent and warrant as follows:
SECTION 4.01 Corporate Status of Company; Status of Subsidiaries. The
Company and each Subsidiary that is a corporation are duly organized, validly
existing and in good standing under the laws of the jurisdictions of their
respective incorporation and have the corporate power and authority to own their
respective property and assets and to transact the businesses in which they
respectively are engaged or presently propose to engage and are duly qualified
and in good standing as foreign corporations in all states where failure to be
so qualified and in good standing could have a Materially Adverse Effect. Each
Subsidiary that is a partnership is duly constituted, existing and in good
standing under the laws of the jurisdiction of its constitution and has all
requisite power, authority and legal right to own its property and assets and to
transact the businesses in which it is engaged or presently proposes to engage
and is duly qualified and in good standing as a foreign partnership wherever
failure to be so qualified and in good standing could have a Materially Adverse
Effect. The Company and each of its Subsidiaries have the power to own their
respective properties and to carry on their respective businesses as now being
conducted. The Company is adequately capitalized for the purpose of conducting
its business, was not formed solely for the purpose of acting as agent for, or
as an instrumentality of, any Subsidiary.
SECTION 4.02 Corporate Power and Authority. Each of the Company and the
Guarantors has the corporate power and has taken all necessary corporate action
(including, without limitation, any consent of stockholders required by law or
by its certificate of incorporation or bylaws) to authorize it, to execute,
deliver and carry out the terms and provisions of and to incur its obligations
under this Agreement, the Notes, the Security Documents and the other Loan
Documents to which it is a party. This Agreement, the Notes, the Security
Documents and the other Loan Documents have been duly authorized, executed and
delivered by the Company and the Guarantors party thereto.
SECTION 4.03 Compliance with Other Instruments. The execution, delivery
and performance by the Company and any Guarantors party thereto, as the case may
be, of this Agreement, the Notes, the Security Documents and the other Loan
Documents to which it is a party, (a) will not contravene any provision of
Applicable Law, rule, regulation, judgment, order or ruling, (b) will not
conflict with, be inconsistent with, or result in any breach of any of the
terms, covenants, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of any Lien upon any of the property or
assets of the Company or any of its Subsidiaries pursuant to the terms of any
indenture, mortgage, deed to secure debt, deed of trust, or any other material
agreement or instrument to which the Company or any of its Subsidiaries is a
signatory or by which it is bound or to which it may be subject, (c) will not
violate any provision of the certificate of incorporation (or equivalent
thereof) or bylaws (or equivalent thereof) of the Company or any corporate
Subsidiary of the Company or the certificate of partnership or other document
governing the constitution or conduct of affairs of any Subsidiary of the
Company that is not a corporation, (d) will not require any Governmental
Approval and (e) will not result in the creation of any Lien upon the assets or
properties of the Company and its Subsidiaries except as contemplated by the
Security Documents. Neither the Company nor any of its Subsidiaries is a party
to, or otherwise subject to any provision contained in, any instrument
evidencing Indebtedness of the Company or any of its Subsidiaries, any agreement
relating thereto or any other contract or agreement (including its charter)
which limits the amount of, or otherwise imposes restrictions on the incurring
of, Indebtedness of the type to be evidenced by the Notes, other than the Senior
Subordinated Debt.
SECTION 4.04 Enforceable Obligations. This Agreement, the Notes, the
Security Documents and the other Loan Documents constitute the legal, valid and
binding obligation of the Company and the Guarantors party thereto, enforceable
in accordance with their terms, except as the enforceability thereof may be
limited by Bankruptcy Law and by general principles of equity.
SECTION 4.05 Governmental Authorizations. The Company and its
Subsidiaries are in good standing with respect to all governmental
authorizations, consents,
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approvals, orders, licenses and other actions required by any governmental or
non-governmental authority or Person, except where the failure to maintain such
good standing will not have a Materially Adverse Effect on the Company and its
Subsidiaries.
SECTION 4.06 Intellectual Property. Each of the Company and its
Subsidiaries owns or has the right to use all patents, trademarks, service
marks, trade names, copyrights, licenses and other rights, free from burdensome
restrictions, which are material for the operation of its business as presently
conducted. Nothing has come to the attention of the Company, any of its
Subsidiaries or any of their respective directors and officers to the effect
that (i) any product, process, method, substance, part or other material
presently contemplated to be sold by or employed by Company or any of its
Subsidiaries in connection with its business may infringe any patent, trademark,
service mark, trade name, copyright, license or other right owned by any other
Person, (ii) there is pending or threatened any claim or litigation against or
affecting the Company or any of its Subsidiaries contesting its right to sell or
use any such product, process, method, substance, part or other material or
(iii) there is, or there is pending or proposed, any patent, invention, device,
application or principle or any statute, law, rule, regulation, standard or code
which would prevent, inhibit or render obsolete the production or sale of any
products of, or substantially reduce the projected revenues of, or otherwise
have a Materially Adverse Effect on the Company or any of its Subsidiaries.
SECTION 4.07 Outstanding Indebtedness. Neither the Company nor any of
its Subsidiaries, on a consolidated basis, has outstanding any Indebtedness,
except as described on Schedule 4.07 hereto. There exists no default under the
provisions of any instrument evidencing or securing any Indebtedness of the
Company or any of its Subsidiaries or of any agreement otherwise relating
thereto which has had or would reasonably be expected to have a Materially
Adverse Effect.
SECTION 4.08 Insurance Coverage. Each property of the Company or any of
its Subsidiaries is insured within terms reasonably acceptable to the Lenders
for the benefit of the Company or a Subsidiary of the Company in amounts deemed
adequate by the Company's management in its reasonable business judgment and not
materially less than those amounts customary in the industry in which the
Company and its Subsidiaries operate against risks usually insured against by
Persons operating businesses similar to those of the Company or its Subsidiaries
in the localities where such properties are located, and the Agent has been
named loss payee or additional insured, as its interest may appear, on all such
policies. Attached as Schedule 4.08 hereto are certificates evidencing such
insurance.
SECTION 4.09 Title to Properties. Each of the Company and its
Subsidiaries has (i) good and marketable fee simple title to its respective real
properties (other than real properties it leases from others), including such
real properties reflected in the financial statements referred to in Section
4.14, subject to no Lien of any kind except Liens permitted by Section 6.01, and
(ii) good title to all of its other respective properties and assets (other than
properties and assets which it leases from others), including the other
properties and assets reflected in the financial statements referred to in
Section 4.14, subject to no Lien of any kind
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except Liens permitted by Section 6.01. Each of the Company and its Subsidiaries
enjoys peaceful and undisturbed possession in all material leases necessary for
the operation of its respective properties and assets, none of which contains
any unusual or burdensome provisions that would adversely affect or impair the
operation of such properties and assets, and all such leases are valid and
subsisting and in full force and effect.
SECTION 4.10 No Burdensome Restrictions. Neither the Company nor any of
its Subsidiaries is a party to any contract or agreement that would result in
any burdensome restrictions that might reasonably be expected to have a
Materially Adverse Effect on the Company or any of its Subsidiaries, including,
but not limited to, any collective bargaining agreements.
SECTION 4.11 No Material Violation of Law. Neither the Company nor any
of its Subsidiaries has any notice of any violation of any law, statute, order,
regulation or judgment entered against it by any court that may reasonably be
expected to have a Materially Adverse Effect on the Company.
SECTION 4.12 No Default Under Other Agreements. Neither the Company nor
any of its Subsidiaries is in default under any material agreement to which it
is a party.
SECTION 4.13 No Equity Investments. Neither the Company nor any of its
Subsidiaries possesses investments in any equity or other long-term investments
in any person, except permitted investments, including any wholly-owned
Subsidiaries of the Company and the Subsidiaries.
SECTION 4.14 Financial Statements. The audited consolidated financial
statements of the Company dated June 30, 1998, and the related consolidated
statements of income (including supporting footnote disclosures), with opinion
of Margolin, Winer & Evens LLP, the unaudited consolidated quarterly financial
statements of the Company dated December 31, 1998, and the related consolidated
statements of income (including supporting footnote disclosures), and the
unaudited consolidated monthly financial statements of the Company dated
February 28, 1999, all heretofore furnished to the Lenders, are all true and
correct in all material respects and present fairly the consolidated financial
condition at the date of said financial statements and the results of operations
for the fiscal period then ending of the Company. The Company as of such date
did not have any significant liabilities, contingent or otherwise, including
liabilities for Taxes or any unusual forward or long-term commitments which were
not disclosed by or reserved against in the financial statements referred to
above or in the notes thereto, and at the present time there are no material
unrealized or anticipated losses from any unfavorable commitments of the Company
or any of its Subsidiaries. All such financial statements have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved. Since December 31, 1998, there has been no change which has had or
could reasonably be expected to have a Materially Adverse Effect.
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SECTION 4.15 Litigation. Except as disclosed on Schedule 4.15 attached
hereto, there are no actions, suits, investigations or proceedings pending or,
to the knowledge of the Company or any of its Subsidiaries, threatened against
or affecting the Company or any of its Subsidiaries or any of their properties
or rights by or before any court, arbitrator or administrative or governmental
body that would have a Materially Adverse Effect on the Company or any of its
Subsidiaries.
SECTION 4.16 Taxes. Each of the Company and its Subsidiaries has filed
or caused to be filed all declarations, reports and tax returns including, in
the case of the Company and each Subsidiary located in the United States, all
federal and state income tax returns which it is required by law to file, and
has paid all Taxes which are shown as being due and payable on such returns or
on any assessments made against it or any of its properties. The accruals and
reserves on the books of the Company and its Subsidiaries in respect of Taxes
are adequate in all material respects for all periods. Neither the Company nor
any of its Subsidiaries has any knowledge of any unpaid adjustment, assessment
or any penalties or interest of significance, or any basis therefor, by any
taxing authority for any period, except those being contested in good faith and
by appropriate proceedings which effectively stay the enforcement of any Lien
and the attachment of a penalty.
SECTION 4.17 Margin Regulations. No part of the proceeds of any of the
Advances will be used for any purpose which violates, or which would be
inconsistent or not in compliance with, the provisions of the applicable Margin
Regulations.
SECTION 4.18 ERISA. Except as disclosed on Schedule 4.18 attached
hereto:
(a) Identification of Plans. (i) Neither the Company nor any ERISA
Affiliate maintains or contributes to, or has maintained or contributed to, any
Plan that is an ERISA Plan, and (ii) neither the Company nor any of its
Subsidiaries maintains or contributes to, or has maintained or contributed to,
any Plan that is an Executive Arrangement;
(b) Compliance. Each Plan has at all times been maintained, by its
terms and in operation, in accordance with all Applicable Laws, except such
noncompliance (when taken as a whole) that will not have a Materially Adverse
Effect;
(c) Liabilities. Neither the Company nor any of its Subsidiaries is
currently nor has in the last 6 years been obligated to make contributions
(directly or indirectly) to a Multiemployer Plan, nor is it currently nor will
it become subject to any liability (including withdrawal liability), tax or
penalty whatsoever to any Person whomsoever with respect to any Plan including,
but not limited to, any tax, penalty or liability arising under Title I or Title
IV or ERISA or Chapter 43 of the Code, except such liabilities (when taken as a
whole) as will not have a Materially Adverse Effect; and
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(d) Funding. The Company and each ERISA Affiliate has made full and
timely payment of all amounts (i) required to be contributed under the terms of
each Plan and Applicable Law and (ii) required to be paid as expenses of each
Plan. No Plan has an "amount of unfunded benefit liabilities" (as defined in
Section 4001(a)(18) of ERISA).
SECTION 4.19 Compliance With Environmental Laws.
(a) The Company and its Subsidiaries are not in violation of, and do
not presently have outstanding any liability under, have not been notified that
they are or may be liable under and do not have knowledge of any liability or
potential liability (including any liability relating to matters set forth in
Part A. of Schedule 4.19) except as set forth in Part A. of Schedule 4.19, under
any applicable Environmental Laws which violation, liability or potential
liability could reasonably be expected to have a Materially Adverse Effect.
(b) Except as set forth in Part B. of Schedule 4.19, neither the
Company nor any of its Subsidiaries has received a written request for
information under any Environmental Laws stating or suggesting that the Company
or any of its Subsidiaries has or may have liability thereunder or written
notice that any such entity has been identified as a potentially responsible
party under any Environmental Laws, or any comparable state law, or any public
health or safety or welfare law, nor has any such entity received any written
notification that any Hazardous Substance that it or any of its respective
predecessors in interest has generated, stored, treated, handled, transported,
or disposed of, has been released or is threatened to be released at any site at
which any Person intends to conduct or is conducting a remedial investigation or
other action pursuant to any Environmental Laws.
(c) Except as set forth in Part C. of Schedule 4.19, each of the
Company and its Subsidiaries has obtained all material permits, licenses or
other authorizations required for the conduct of their respective operations
under all applicable Environmental and Asbestos Laws and each such authorization
is in full force and effect.
(d) Except as set forth in Part D. of Schedule 4.19, each of Company
and its Subsidiaries complies in all material respects with all laws and
regulations relating to equal employment opportunity and employee safety in all
jurisdictions in which it is presently doing business, and Company will use its
reasonable best efforts to comply, and to cause each of its Subsidiaries to
comply, with all such laws and regulations which may be legally imposed in the
future in jurisdictions in which Company or any of its Subsidiaries may then be
doing business.
SECTION 4.20 Possession of Material Patents, Trademarks, Etc. Each of
the Company and its Subsidiaries possesses all patents, trademarks, licenses,
and other intellectual property rights that are necessary in any material
respect for the ownership, maintenance and operation of its properties and
assets and they are possessed free from any burdensome restrictions. To the
Company's knowledge, there are no infringements of such patents, trademarks,
licenses, and other intellectual property rights that could have a Materially
Adverse Effect on the Company or any of its Subsidiaries.
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SECTION 4.21 Subsidiaries. Schedule 4.21 attached hereto correctly sets
forth the name of each Subsidiary of the Company, the jurisdiction of such
Subsidiary's incorporation or organization and the ownership of all issued and
outstanding capital stock of such Subsidiary. All the outstanding shares of the
capital stock of each such Subsidiary have been validly issued and are fully
paid and nonassessable and all such outstanding shares, except as noted on such
Schedule 4.21, are owned of record and beneficially by the Company or a
wholly-owned Subsidiary of the Company free of any Lien or claim, except for
Liens in favor of the Agent.
SECTION 4.22 Disclosure. Neither this Agreement, any Loan Document nor
any other document, certificate or statement furnished to the Lenders or the
Agent by or on behalf of the Company or any Guarantor in connection herewith
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein and therein not
misleading, if, in either case, such fact is material to an understanding of the
financial condition, business, prospects or property of the Company, or the
ability of the Company to fulfill its obligations under any Loan Documents to
which it is a party.
SECTION 4.23 Year 2000 Compliance. The Company has taken all action
reasonably determined to be necessary to ensure that the operating systems for
the Company's and its Subsidiaries' computers and all software applications that
run on such computers are Year 2000 Compliant or will be Year 2000 Compliant no
later than December 31, 1999, except where a failure to be Year 2000 Compliant
will not have a Materially Adverse Effect. "Year 2000 Compliant" means that
neither the performance nor functionality of the operating systems for the
Company's and its Subsidiaries' computers, embedded microchips and all software
applications that run on such computers is affected by dates prior to, during,
spanning or after January 1, 2000, and shall include, but not be limited to (a)
accurately processing (including, but not limited to calculating, comparing and
sequencing) date and time data from, into, and between the years 1999 and 2000
and leap year calculations, (b) functioning without error, interruption or
decreased performance relating to such date and time data, (c) accurately
processing such date and time data when used in combination with other
technology, if the other technology properly exchanges date and time data, (d)
accurate date and time data century recognition, (e) accurately calculating,
using same-century and multi-century formulas and date and time values, (f)
reflecting the correct century in date and time data interface values, and (g)
processing, storing, receiving and outputting all date and time data in a format
that accurately indicates the century of the date and time data.
SECTION 4.24 Projections. In the good faith judgment of the Chief
Financial Officer and Chief Executive Officer of the Company the projections, a
copy of which are attached hereto as Exhibit M, constitute the prospects of
financial performance of the Company for the periods indicated in such
projections, absent unanticipated changed circumstances or events, many of which
are beyond the Company's control.
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ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Note shall remain unpaid or any Lender shall have any
Commitment hereunder, unless the Required Lenders shall otherwise consent in
writing:
SECTION 5.01 Use of Proceeds. The proceeds of all Borrowings will be
used by the Company as provided in Section 2.15. None of the proceeds of any
Borrowing shall be used, directly or indirectly, to purchase or carry, or to
reduce or retire or refinance any credit incurred to purchase or carry, any
"margin security" or "margin stock" (within the meaning of the regulations of
the Board of Governors of the Federal Reserve System) or to extend credit to
others for the purpose of purchasing or carrying any such "margin security" or
"margin stock" or for any other purpose that might deem this transaction as a
"purpose credit" (within the meaning of the regulations of the Board of
Governors of the Federal Reserve System). If requested by any Lender, the
Company will furnish to such Lender statements in conformity with the
requirements of Federal Reserve Form U-1 referred to in Regulation U.
SECTION 5.02 Reporting Covenants.
(a) The Company will furnish to the Agent for distribution to each of
the Lenders:
(i) as soon as available and in any event no later than 90 days
after the end of each fiscal year of the Company, an audited
consolidated balance sheet of the Company and its Subsidiaries as of
the close of such fiscal year, and the related audited consolidated
statements of income and cash flow of the Company and its Subsidiaries
for such fiscal year, all in reasonable detail and with (1) an
unqualified opinion of Margolin, Winer & Evens LLP, or such other
independent certified public accountant of recognized standing selected
by the Company and satisfactory to the Required Lenders, and (2) a
certificate (with supporting details and calculations of financial
covenants) from the Chief Financial Officer of the Company stating
whether a Default or Event of Default exists;
(ii) as soon as available and in any event within 45 days after the
end of each fiscal quarter of the Company, its quarterly unaudited
financial statements, together with a certificate in the form of
Exhibit I hereto (the "Compliance Certificate") by the Chief Financial
Officer of the Company (with supporting details and calculations of
financial covenants) stating that (x) the financials were prepared in
accordance with GAAP (subject to customary year-end audit adjustments)
and that the covenants described in Article VII have been met and (y)
whether a Default or Event of Default exists;
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(iii) as soon as available and in any event within 30 days after the
end of each month, the monthly unaudited financial statements of the
Company;
(iv) as soon as available and in any event within 30 days after the
end of each month, a completed Borrowing Base Certificate in the form
of Exhibit K hereto (the "Borrowing Base Certificate");
(v) as soon as available and in any event not later than 30 days
after the end of each fiscal year of the Company, financial projections
for the following fiscal year, in a form satisfactory to Agent;
(vi) until the Company is Year 2000 Compliant, within 45 days after
the end of each fiscal quarter of the Company, a report evidencing and
outlining the Company's progress toward becoming Year 2000 Complaint;
and
(vii) as soon as available and in any event within 45 days after the
end of each month, a completed Depot by Depot Report in the form of
Exhibit L hereto (the "Depot by Depot Report"), including revenues and
gross profits for each Depot, calculated on a trailing three month
basis.
In each case, such financial statements shall include balance sheets,
income statements, and statements of cash flows for the Company, provided,
however, that the monthly financial statements provided by the Company to the
Lenders shall not include a statement of cash flows.
(b) The Company will furnish to each of the Lenders, with reasonable
promptness, notice of certain other events, including the occurrence or
existence of any Default or Event of Default, any citation for a material
violation of environmental laws or regulations, important matters relating to
funding of employee benefit plans, or such other information as any Lender or
the Agent may reasonably request.
SECTION 5.03 Maintenance of Properties. The Company shall, and shall
cause each of its Subsidiaries to, maintain, preserve, protect and keep, or
cause to be maintained, preserved, protected and kept, its properties and every
part thereof in good repair, working order and condition, and from time to time
will make or cause to be made all needful and proper repairs, renewals,
replacements, extensions, additions, betterments, and improvements thereto, so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times other than those which the failure to
maintain would in the aggregate, have no Materially Adverse Effect; provided,
however, that the Company and each Subsidiary shall not be under any obligation
to repair or replace any such properties which have become obsolete or have
become unsuitable or inadequate for the purpose for which they are used.
SECTION 5.04 Maintenance of Insurance. The Company shall, and shall
cause each of its Subsidiaries to, (i) maintain liability and worker's
compensation insurance with financially sound and reputable insurers (or
maintain a legally sufficient, fully funded, program
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of self insurance against worker's compensation liabilities), and also maintain
adequate insurance on its properties against such hazards and in at least such
amounts as is customary in the business, and (ii) name the Agent as loss payee
or additional insured, as its interest may appear, on each of such insurance
policies. At the request of any Lender, the Company will forthwith deliver an
officer's certificate specifying the material details of such insurance in
effect.
SECTION 5.05 Maintenance of Books; Inspection of Property and Records.
The Company shall, and shall cause each of its Subsidiaries to, keep proper
books of record and account containing complete and accurate entries in all
material respects of all of their respective financial and business transactions
and prepare or cause to be prepared its annual statements and reports in
accordance with GAAP. The Company shall, and shall cause each of its
Subsidiaries to, permit any person designated by any Lender to visit and inspect
any of its properties, corporate books and financial records, to make copies and
take extracts therefrom, and to discuss its accounts, affairs, and finances with
the principal officers of the Company and such Subsidiary during reasonable
business hours, all at such times as the Lenders may reasonably request;
provided, however, that any time following the occurrence and continuance of an
Event of Default, no prior notice to the Company and such Subsidiary shall be
required. The Company shall, and shall cause each of its Subsidiaries to,
prepare or cause to be prepared its interim statements and reports in accordance
with GAAP, subject to usual and customary year end audit and adjustments and
footnote disclosures.
SECTION 5.06 Existence and Status. The Company shall, and shall cause
each of its Subsidiaries that is a corporation to, maintain its corporate
existence, its material rights, franchises and licenses (for the scheduled
duration thereof), its patents, trademarks, trade names, service marks and other
intellectual property rights necessary or desirable in the normal conduct of its
business, its good standing in its state of incorporation and its qualification
and good standing as a foreign corporation in all jurisdictions where its
ownership of property or its business activities cause such qualification to be
required and the failure to do so could have a Materially Adverse Effect. The
Company shall cause each Subsidiary that is not a corporation to maintain its
present form of existence, its material rights, franchises and licenses (for the
scheduled duration thereof), its patents, trademarks, tradenames, service marks
and other intellectual property rights necessary or desirable in the normal
conduct of its business, its good standing in the jurisdiction of its
constitution and its qualification and good standing as a foreign entity in all
jurisdictions where its ownership of property or its business activities cause
such qualification to be required and the failure to do so could have a
Materially Adverse Effect.
SECTION 5.07 Taxes and Claims. The Company shall, and shall cause each
of its Subsidiaries to, pay and discharge (i) all Taxes prior to the date on
which penalties attach thereto, and (ii) all claims (including, without
limitation, claims for labor, materials, supplies or services) (collectively
"Other Claims") which, if unpaid, might become a Lien upon any of its property;
provided, however, that the Company and its Subsidiaries shall not be required
to pay and discharge any such Tax or Other Claim so long as the legality or
amount thereof shall be promptly contested in good faith and by appropriate
proceedings which
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effectively stay the enforcement of any Lien and the attachment of a penalty and
the Company or such Subsidiary, as the case may be, shall have set aside
appropriate reserves therefor in accordance with GAAP.
SECTION 5.08 Compliance with Laws, Etc. The Company shall, and shall
cause each of its Subsidiaries to, comply with all Applicable Law (including,
without limitation, the Environmental Laws and Employee Benefit Laws) and
Contractual Obligations applicable to or binding on any of them where the
failure to comply with such Applicable Law and Contractual Obligations would
reasonably be expected to have a Materially Adverse Effect.
SECTION 5.09 ERISA. The Company shall, and shall cause each of its
Subsidiaries to, deliver to each of the Lenders:
(a) Promptly after the discovery of the occurrence thereof with respect
to any Plan, or any trust established thereunder, notice of (A) a "reportable
event" described in Section 4043 of ERISA and the regulations issued from time
to time thereunder (other than a "reportable event" not subject to the
provisions for 30-day notice to the PBGC under such regulations), or (B) any
other event which could subject the Company or any ERISA Affiliate to any
material tax, penalty or liability under Title I or Title IV of ERISA or Chapter
43 of the Code;
(b) At the same time and in the same manner as such notice must be
provided to the PBGC, or to a Plan participant, beneficiary or alternative
payee, any notice required under Section 101(d), 302(f)(4), 303(e), 307(e),
4041(b)(1)(A) or 4041(c)(1)(A) of ERISA or Section 412(f) of the Code with
respect to any Plan; and
(c) Upon the request of any Lender, (A) true and complete copies of any
and all documents, government reports and determination or opinion letters (if
any) for any Plan, or (B) a current statement of withdrawal liability for each
Multiemployer Plan.
SECTION 5.10 Litigation. The Company shall give prompt written notice
to each of the Lenders of (a) any judgment entered by a court, tribunal,
administrative agency or arbitration panel in which the amount of liability is
$250,000 or more in excess of insurance coverage, or in which the aggregate
amount of liability is $500,000 or more in excess of insurance coverage, and (b)
any disputes which may exist between the Company or any of its Subsidiaries and
any governmental or regulatory body, in which the amount in controversy is
$250,000 or more and which may materially and adversely affect the normal
business operations of the Company or any of its Subsidiaries or any of their
respective properties and assets. The Company shall provide each of the Lenders,
on a quarterly basis, concurrently with the delivery of the Compliance
Certificate as provided under Section 5.02(a)(ii), a report which shall set
forth each action, proceeding or claim, of which the Company or any of its
Subsidiaries has notice, which is commenced or asserted against the Company, and
in which the amount claimed or the potential liability is $250,000 or more.
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SECTION 5.11 Notice of Events of Default. The Company shall deliver to
each of the Lenders within five (5) days after any Executive Officer obtains any
knowledge of any condition, event or act which creates or causes a Default or an
Event of Default, a certificate signed by an officer of the Company specifying
the nature thereof, the period of existence thereof and what action the Company
or such Subsidiary proposes to take with respect thereto.
SECTION 5.12 Stockholder Reports, etc. Contemporaneously with the
sending or filing thereof, the Company will provide to the Agent for
distribution to each of the Lenders copies of all proxy statements, financial
statements, and reports which the Company sends to its stockholders, and copies
of all regular, periodic, and special reports, and all statements which the
Company files with the Securities and Exchange Commission or any governmental
authority which may be substituted therefor, or with any national securities
exchange.
SECTION 5.13 Future Guarantors.
(a) Subject to any prohibitions or limitations as to power or authority
imposed by law applicable to any such Subsidiary, the Company shall cause (1)
each Person incorporated or otherwise organized in the United States that
hereafter becomes a Subsidiary (an "Additional Guarantor") to become a Guarantor
under the Guaranty Agreement and to create a security interest in favor of the
Lenders in all of its assets, including, to the extent owned by such Guarantor,
100% of the stock of other Subsidiaries, to the Agent upon the creation of such
Additional Guarantor by executing and delivering to the Agent the Supplemental
Documents; and (2) each Person that owns the stock of the Additional Guarantor
to pledge and deliver such stock to the Agent, together with a supplement to the
Company Pledge Agreement or Guarantor Pledge Agreement, as the case may be, and
with stock powers or other appropriate instruments of transfer executed by such
Person in blank.
(b) The Additional Guarantor shall also deliver to the Agent and the
Lenders, simultaneously with the Supplemental Documents, (1) Certified Requests
for Information or Copies (Form UCC-11) or equivalent reports, showing that
there are no effective financing statements which name the Additional Guarantor
as debtor and (2) an opinion rendered by legal counsel to such Additional
Guarantor and the Person required to pledge the shares of stock of the
Additional Guarantor under the Security Documents to the Agent, addressing the
types of matters set forth in Exhibit G and Exhibit H hereof and such other
matters as the Lenders may reasonably request, addressed to the Agent and the
Lenders.
SECTION 5.14 Ownership of Guarantors. The Company and its Subsidiaries
that own Guarantors shall maintain their percentage ownership of such Guarantors
existing as of the date hereof and shall not decrease its ownership percentage
in each Additional Guarantor pursuant to Section 5.13 after the date hereof, as
such ownership exists at the time such Additional Guarantor becomes a Guarantor
hereunder.
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SECTION 5.15 Interest Rate Protection. The Company shall enter into and
maintain until the Commitment Termination Date an agreement providing for
payments which are related to fluctuations of interest rates by which the
Company is protected against changes in the variable rates of interest payable
on its indebtedness as to a notional amount of approximately fifty percent (50%)
of Senior Funded Debt less the aggregate outstanding amount of Subordinated Debt
with one or more Lenders.
SECTION 5.16 Cost of Products Sold. The Company shall calculate Cost of
Products Sold in a manner consistent with its calculations prior to the Closing
Date and shall include in such calculation all of the line items set forth on
Schedule 1.01.
ARTICLE VI
NEGATIVE COVENANTS
So long as any Note shall remain unpaid or any Lender shall have any
Commitment hereunder, without the written consent of the Required Lenders
(unless otherwise provided herein):
SECTION 6.01 Limitation on Liens and Security Interests. The Company
shall not, and shall not permit any of its Subsidiaries to, create, incur,
assume or suffer to exist, any Lien or other encumbrance of any kind on any of
its properties or assets, real or personal, wherever located, including assets
hereafter acquired, except
(a) Liens existing on the date hereof and described on Schedule 6.01;
(b) Liens in favor of the Agent;
(c) Liens for Taxes not yet payable or being contested in good faith
and by appropriate proceedings;
(d) deposits or pledges to secure payments of workmen's compensation,
unemployment insurance, old age pension and other social security obligations;
(e) mechanics', carriers', workmen's, repairmen's, landlord's, or other
Liens arising in the ordinary course of business securing obligations which are
not overdue for a period longer than 60 days, or which are being contested in
good faith by appropriate proceedings;
(f) pledges or deposits to secure performance in connection with bids,
tenders, contracts (other than contracts for the payment of money) or leases
made in the ordinary course of the business of the Company or any of its
Subsidiaries;
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(g) deposits to secure, or in lieu of, surety and appeal bonds to which
the Company or a Subsidiary of the Company is a party;
(h) deposits in connection with the prosecution or defense of any claim
in any court or before any administrative commission or agency;
(i) Liens arising out of judgments or awards with respect to which the
Company or a Subsidiary of the Company at the time shall in good faith be
diligently prosecuting an appeal or proceedings for review and with respect to
which it shall have secured a stay of execution pending such appeal or
proceedings for review;
(j) purchase money security interests, and leases in the nature
thereof, for equipment and machinery or mortgages for real estate, in each case
purchased in the ordinary course of business and to be used in the conduct of
its business, provided that any such security interest or mortgage secures only
the repayment of the purchase price of such machinery, equipment or real estate
and any such lease obligations do not exceed the purchase price of such
machinery, equipment or real estate;
(k) Liens on fixtures in connection with existing mortgages on real
property or mortgages permitted hereunder;
(l) zoning restrictions, easements, licenses, reservations and
restrictions on the use of real property or minor irregularities thereto that do
not materially detract from the use thereof or the assets of the Company; and
(m) Liens incurred on pledges or deposits in connection with workers'
compensation, unemployment insurance, old age or Social Security benefits.
SECTION 6.02 Indebtedness. Create, incur, assume or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume or suffer to exist, any
Indebtedness, other than:
(a) Indebtedness evidenced by this Agreement and by the Notes;
(b) Indebtedness outstanding on the date hereof which is set forth
on Schedule 4.07 hereto and any refinancings thereof in a principal
amount equal to, and on terms and conditions substantially similar to,
such Indebtedness, as reasonably determined by the Agent and
Indebtedness to be issued after the Closing Date pursuant to the Third
Amendment to Senior Subordinated Debt in aggregate amount not to exceed
$5,000,000;
(c) secured Indebtedness to the extent permitted by clause (j) of
Section 6.01 above;
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(d) unsecured current liabilities (not resulting from any
borrowing) incurred in the ordinary course of business for current
purposes and not represented by a promissory note or other evidence of
indebtedness;
(e) Indebtedness related to interest rate swaps or hedges, or to
hedge the Company's variable interest rate exposure;
(f) Indebtedness incurred and consented to in writing by the
Lenders; or
(g) Indebtedness incurred by the Company to make acquisitions that
are permitted by Section 6.08(b), in the form of notes issued to the
seller of the stock or assets, which notes shall be subordinated to the
Obligations on terms and conditions satisfactory to the Lenders.
SECTION 6.03 Compliance with ERISA. The Company shall not take or fail
to take, or permit any of its Subsidiaries or ERISA Affiliates to take or fail
to take, any action with respect to a Plan including, but not limited to, (i)
establishing any Plan, (ii) amending any Plan, (iii) terminating or withdrawing
from any Plan, or (iv) incurring an "amount of unfunded benefit liabilities", as
defined in Section 4001(a)(18) of ERISA, or any withdrawal liability under Title
IV of ERISA, where such action or failure could have a Materially Adverse
Effect, result in a Lien on the property of the Company or any of its
Subsidiaries or require the Company or any of its Subsidiaries to provide any
security, except to the extent permitted pursuant to Section 6.01 hereof.
SECTION 6.04 Sale and Leaseback. The Company shall not, and shall not
permit any of its Subsidiaries to, enter into any transaction with any other
entity whereby such other entity leases assets sold or otherwise transferred to
it by the Company or such Subsidiary.
SECTION 6.05 Transactions with Affiliates. The Company shall not, and
shall not permit any of its Subsidiaries to:
(a) Enter into any material transaction or series of related
transactions which in the aggregate would be material, whether or not in the
ordinary course of business, with any affiliate of the Company or any of its
Subsidiaries (but excluding any affiliate which is the Company or any of its
Subsidiaries), other than on terms and conditions substantially as favorable to
the Company or such Subsidiary as would be obtained by the Company or such
Subsidiary at the time in a comparable arm's-length transaction with a Person
other than an affiliate.
(b) Convey or transfer to any other Person (including the Company or
any of its Subsidiaries) any real property, buildings, or fixtures used in the
manufacturing or production operations of the Company or any of its
Subsidiaries, or convey or transfer to the Company or any of its Subsidiaries
any other assets (excluding conveyances or transfers in the ordinary
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course of business) if at the time of such conveyance or transfer any Default or
Event of Default exists or would exist as a result of such conveyance or
transfer.
SECTION 6.06 Guaranties. The Company shall not, and shall not permit
any of its Subsidiaries to, create, incur, assume, guarantee, suffer to exist or
otherwise become liable on or with respect to, directly or indirectly, any
guaranties other than:
(a) endorsements of instruments for deposit or collection in the
ordinary course of business; or
(b) guarantees of Indebtedness owed by any Consolidated Company to
another Consolidated Company.
SECTION 6.07 Limitations on Payment Restrictions. Except as provided
under the Senior Subordinated Debt, the Company shall not, and shall not permit
any of its Subsidiaries to, create or otherwise cause or suffer to exist or
become effective, any consensual encumbrance or restriction on the ability of
the Company or any of its Subsidiaries to (i) pay dividends or make any other
distributions on stock of the Company or any of its Subsidiaries, (ii) pay any
indebtedness owed to the Company or any of its Subsidiaries, or (iii) transfer
any of its property or assets to the Company or any of its Subsidiaries except
any consensual encumbrance or restriction existing under the Loan Documents.
SECTION 6.08 Merger; Joint Ventures; Sale of Assets; Acquisitions. The
Company shall not, and shall not permit any of its Subsidiaries to:
(a) merge or consolidate with any other entity, except the foregoing
restrictions shall not be applicable to:
(i) mergers or consolidations of (x) any Subsidiary with any other
Subsidiary which is a Guarantor or (y) any Subsidiary with the Company;
or
(ii) mergers or consolidations in which any Person engaged in
business in which the Company is engaged as of the Closing Date or
substantially related thereto merges or consolidates with the Company
or any of its Subsidiaries where the surviving corporation is the
Company or such Subsidiary;
(b) purchase, lease or otherwise acquire for cash, stock or other
consideration, the stock of any Person or all or any substantial portion of the
assets of any Person, provided, that the Company may acquire stock or all or a
substantial portion of the assets of a Person if the purchase price for all such
acquisitions, whether in cash, stock or other consideration, does not exceed
$1,000,000 in the aggregate; or
(c) enter into a partnership or joint venture with any other entity;
provided, however, that so long as no Event of Default has occurred, the Company
or any of its
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Subsidiaries may request that the Required Lenders consent to its entering into
a partnership or joint venture for the purposes of carrying on its business; or
(d) sell, lease, transfer or otherwise dispose of any assets, except
that this Section 6.08 shall not prohibit any disposition of (i) any asset if on
the date such asset is sold, the Asset Value of all asset sales occurring after
the Closing Date, taking into account the Asset Value of the proposed asset
sale, would not exceed on an aggregate basis five percent (5%) of the
Consolidated Net Worth of the Company and its Subsidiaries on the Closing Date
and such sale is in the ordinary course of business, (ii) any obsolete or
retired property not used or useful in its business (such assets to include
high-pressure tanks, motorized vehicles, including cars and trucks, and lines of
business other than carbon dioxide that may be obtained by the Company as part
of the group of assets of any corporation or other business entity the Company
may acquire) or (iii) certain other sales to be agreed upon in writing by the
Company and the Required Lenders.
SECTION 6.09 Dividends; Loans, Advances.
(a) In any fiscal year of the Company, the Company shall not pay or
declare any cash dividends on any of its capital stock.
(b) The Company shall not, and shall not permit any of its Subsidiaries
to, make, permit or hold any loans or advances (not including accounts
receivable) to any Person, other than:
(i) Investments in Subsidiaries existing on the Closing Date;
(ii) direct obligations of the United States or any agency thereof,
or obligations guaranteed by the United States or any agency thereof,
in each case supported by the full faith and credit of the United
States and maturing within one year from the date of creation thereof;
(iii) commercial paper maturing within one year from the date of
creation thereof rated in the highest grade by a nationally recognized
credit rating agency;
(iv) time deposits maturing within one year from the date of
creation thereof with, including certificates of deposit issued by any
Lender and any office located in the United States of any bank or trust
company which is organized under the laws of the United States or any
state thereof and has total assets aggregating at least $500,000,000,
including without limitation, any such deposits in Eurodollars issued
by a foreign branch of any such bank or trust company;
(v) Investments made by Plans;
(vi) advances made by the Company or any of its Subsidiaries to its
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employees during the ordinary course of business, and loans made by the
Company to its employees to allow such employees to purchase stock of
the Company (such loans to be evidenced by a promissory note and
pledged to the Agent pursuant to the terms of the Security Documents);
provided that the aggregate total of such advances made by the Company
to its employees under this Subsection shall not exceed $1,000,000 at
any time; and
(vii) deposits made by the Company in connection with acquisitions
of other business entities.
SECTION 6.10 Nature of Business. The Company shall not, and shall not
permit any of its Subsidiaries to, engage in any business or businesses other
than those engaged in by the Company or such Subsidiary on the date hereof;
provided, however, that nothing herein contained shall prevent the Company or
any of its Subsidiaries (i) from expanding the location of its business or
businesses in the United States, (ii) from ceasing or omitting to exercise any
rights, licenses, permits, or franchises which in good faith in the judgment of
the Company or such Subsidiary can no longer be profitably exercised, or (iii)
from engaging in a business or businesses that are ancillary to those engaged in
by the Company or such Subsidiary on the date hereof.
SECTION 6.11 Sale of Subsidiaries. The Company shall not, and shall not
permit any of its Subsidiaries to, sell or otherwise dispose of any shares of
capital stock of or other ownership interest in any Subsidiary of the Company
(except in connection with any acquisition, merger or consolidation permitted by
Section 6.08), or permit any Subsidiary of the Company to issue any additional
shares of its capital stock or other incidents of ownership, except on a pro
rata basis to all its stockholders, partners or owners, as the case may be and
provided that any such additional shares of capital stock or other incidents of
ownership issued to the Company, any Guarantor or Additional Guarantor are
pledged to the Agent.
SECTION 6.12 Negative Pledges. The Company shall not, and shall not
permit any of its Subsidiaries to, agree or covenant with any Person to restrict
in any way its ability to grant any Lien on its assets in favor of the Lenders,
except that this Section 6.12 shall not apply to (i) any covenants contained in
this Agreement or the Security Documents, (ii) the covenants contained in
Section 8.02 of the Senior Subordinated Note Purchase Agreement, and (iii)
covenants and agreements made in connection with Liens described in Section
6.01(j) but only if such covenant or agreement applies solely to the specific
machinery, equipment or real estate to which such Lien relates.
SECTION 6.13 Creation of Subsidiaries. Neither the Company nor any of
its Subsidiaries shall create or acquire any other Subsidiary or any other
affiliate after the Closing Date.
SECTION 6.14 Prepayments Under and Amendment of Other Agreements. The
Company shall not, and shall not permit any of its Subsidiaries to, make any
prepayments
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under any Subordinated Debt document or amend or waive any material terms or
conditions under any Subordinated Debt document, or repurchase any notes issued
in connection with any Subordinated Debt without the written consent of the
Required Lenders, provided that no such consent shall be required with respect
to the cancellation or reduction by the Company of any Commitment of the
investors party to the Senior Subordinated Note Purchase Agreement to purchase
additional Senior Subordinated Debt in excess of the $10,000,000 pursuant to the
Third Amendment to Senior Subordinated Debt, after the date hereof.
SECTION 6.15 Capital Expenditures. The Company shall not, and shall not
permit any of its Subsidiaries to, make Capital Expenditures during any period
in excess of the amount listed for such period on Annex B attached hereto.
ARTICLE VII
FINANCIAL COVENANTS
So long as any Note shall remain unpaid or any Lender shall have any
Commitment hereunder, without the consent of the Required Lenders:
SECTION 7.01 Senior Debt Coverage Ratio. The Company shall not permit
the Senior Debt Coverage Ratio as of the last day of each fiscal quarter to be
greater than (i) 3.65 to 1.00 for the period beginning on the Closing Date
through and including June 30, 1999; (ii) 3.35 to 1.00 for the period beginning
July 1, 1999 through and including September 30, 1999; (iii) 3.00 to 1.00 for
the period beginning October 1, 1999 through and including March 31, 2000; (iv)
2.75 to 1.00 for the period beginning April 1, 2000 through and including June
30, 2000; and (v) 2.50 to 1.00 thereafter.
SECTION 7.02 Interest Coverage Ratio. The Company shall not permit the
Interest Coverage Ratio as of the last day of any fiscal quarter of the Company
to be less than (i) 1.30 to 1.00 for the period beginning on the Closing Date
through and including June 30, 1999; (ii) 1.50 to 1.00 for the period beginning
July 1, 1999 through and including September 30, 1999; (iii) 1.75 to 1.00, for
the period beginning October 1, 1999 through and including December 31, 1999;
(iv) 2.25 to 1.00 for the period beginning January 1, 2000 through and including
March 31, 2000; (v) 2.50 to 1.00 for the period beginning April 1, 2000 through
and including June 30, 2000; and (vi) 2.75 to 1.00 thereafter.
SECTION 7.03 Senior Debt Leverage Ratio. The Company shall not permit
the Senior Debt Leverage Ratio as of the last day of any fiscal quarter to be
greater than 0.50 to 1.00.
SECTION 7.04 Minimum Net Worth. The Company shall at all times maintain
its Net Worth greater than the Minimum Net Worth, equal to (i) $45,000,000, plus
(ii) fifty percent (50%) of the cumulative Consolidated Net Income for each
fiscal quarter beginning after the fiscal quarter
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ending on March 31, 1999 (specifically not including any Consolidated Net Loss
for any fiscal quarter), plus (iii) the cumulative net proceeds of all equity
offerings made by the Company after the Closing Date.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.01 Events of Default. Any one or more of the following shall
constitute an Event of Default hereunder:
(a) The Company shall fail to pay any principal amount owing when due
pursuant to this Agreement or the Notes; or
(b) The Company shall fail to pay any interest, fees, or any other
amounts owing pursuant to this Agreement or the Notes within three (3) Business
Days of the due date thereof; or
(c) The Company shall fail to perform or observe any covenant or
agreement contained in Section 5.02 , Section 5.04 or Section 6.03, if remaining
unremedied for a period of ten (10) days after (x) an Executive Officer becomes
aware of such failure or (y) the Agent or any Lender gives notice to the Company
as provided under Section 10.03; or
(d) The Company shall fail to perform or observe any covenant or
agreement contained in Section 5.11, Article VI (other than Section 6.03) and
Article VII; or
(e) The Company shall fail to perform or observe any other covenant or
agreement set forth in this Agreement, other than those referred to in clauses
(a), (b), (c) and (d) above, and (to the extent such failure can be remedied)
such failure of performance shall not be remedied within thirty (30) days after
the earlier of the date on which (1) the Company obtains knowledge thereof and
(2) written notice thereof has been given by the Agent to the Company; or
(f) Any representation, warranty or statement made by or on behalf of
the Company or any Guarantor to the Agent or any Lender in this Agreement, the
Company Security Agreement, the Company Pledge Agreement, the Company Trademark
Security Agreement, the Guarantor Security Agreement, the Guarantor Pledge
Agreement, the Guarantor Trademark Security Agreement, the Mortgage and the
Assignment of Leases shall be in any respect incorrect, false or misleading as
of the time at which such representation or warranty was given, or any
representation, warranty or statement made by or on behalf of the Company or any
Guarantor to the Agent or any Lender in any other Loan Documents or in any
financial statement, report or certificate furnished pursuant to this Agreement
shall be in any material
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respect incorrect, false or misleading as of the time at which such
representation, warranty or statement was made; or
(g) The Company or any of its Subsidiaries fails to make any payment as
and when such payment is due upon any Indebtedness having an aggregate unpaid
principal balance in excess of $250,000, other than Indebtedness owing or
arising pursuant to this Agreement and the Notes, or any other default, event or
condition shall have occurred or exist with respect to any such other
Indebtedness, or under any agreement or instrument evidencing, securing or
related to such other Indebtedness, the effect of which is to cause, or to
permit the holder or owner of such Indebtedness to cause, such Indebtedness or
any portion thereof, to become due prior to its stated maturity date or prior to
its regularly scheduled dates of payment; or
(h) The Company or any of its Subsidiaries defaults in the observance
or performance of any Material Contract; or
(i) The Company or any of its Subsidiaries makes an assignment for the
benefit of its creditors or files a voluntary petition seeking relief under any
provision of any bankruptcy, reorganization, arrangement, insolvency or
readjustment of debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect; or
(j) Any involuntary petition is filed against the Company or any of
its Subsidiaries under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect, and such petition shall remain undismissed
for a period of sixty (60) days or the Company approves, consents or acquiesces
thereto; or
(k) The Company incurs any liability or is exposed to any potential
liability under any employee benefit plan that has or would have a Materially
Adverse Effect; or
(l) Final judgment for the payment of money in excess of $250,000 (not
fully covered by insurance) or otherwise having a Materially Adverse Effect
shall have been rendered against the Company or any of its Subsidiaries and the
same shall have remained unpaid, unstayed on appeal, undischarged, or
undismissed for a period of sixty (60) days, or such longer period as may be
permitted by Applicable Law, during which execution may not be made, provided no
judgment Lien has attached or continues to attach to the assets of the Company
or such Subsidiary during such longer period; or
(m) Any Change in Control occurs; or
(n) Edward M. Sellian shall cease to function as the Company's chief
executive officer or chairman of the board or shall cease to devote his full
time and attention thereto (other than due to his death or disability); or
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(o) Any change occurs which has had or could reasonably be expected to
have a Materially Adverse Effect.
SECTION 8.02 Remedies on Default.
(a) Upon (i) the occurrence and during the continuation of an Event of
Default (other than an Event of Default described in Section 8.01(i) or (j)) and
(ii) the receipt of written instructions by the Agent from any Lender, the Agent
shall (x) terminate all obligations of the Lenders to the Company, including,
without limitation, the Commitments and all obligations to make Advances under
this Agreement, and (y) declare the Notes, including, without limitation,
principal, accrued interest and costs of collection (including, without
limitation, reasonable attorneys' fees if collected by or through an attorney at
law or in bankruptcy, receivership or other judicial proceedings) and all other
Obligations immediately due and payable, without presentment, demand, protest or
any other notice of any kind, all of which are expressly waived.
(b) Upon the occurrence of an Event of Default under Section 8.01(i) or
(j) all obligations of the Lenders to the Company, including, without
limitation, the Commitments, shall terminate automatically and the Notes,
including, without limitation, principal, accrued interest and costs of
collection (including, without limitation, reasonable attorneys' fees if
collected by or through an attorney at law or in bankruptcy, receivership or
other judicial proceedings) and all other Obligations shall be immediately due
and payable, without presentment, demand, protest, or any other notice of any
kind, all of which are expressly waived.
(c) Upon the occurrence of an Event of Default and acceleration of the
Notes as provided in (a) or (b) above, each of the Lenders and the Agent, or any
of them, may pursue any remedy available under this Agreement, the Notes, the
Security Documents or any other Loan Document, or available at law or in equity,
all of which shall be cumulative. The order and manner in which the rights and
remedies of the Lenders under the Loan Documents and otherwise may be exercised
shall be determined by the Required Lenders.
(d) Regardless of how each Lender may treat the payments for the
purpose of its own accounting, for the purpose of computing the Company's
obligations hereunder and under the Notes, no application of the payments will
cure any Event of Default or prevent acceleration, or continued acceleration, of
amounts payable under the Loan Documents or prevent the exercise, or continued
exercise, of rights or remedies of the Lenders hereunder or under applicable
law.
ARTICLE IX
THE AGENT
SECTION 9.01 Appointment and Authorization. Each Lender hereby
designates SunTrust as Agent to act as herein specified. Each Lender hereby
irrevocably
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authorizes, and each holder of any Revolving Note or by the acceptance of a
Revolving Note shall be deemed irrevocably to authorize, the Agent to take such
action on its behalf under the provisions of this Agreement and the Revolving
Notes and any other instruments and agreements referred to herein and to
exercise such powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of the Agent by the terms hereof and
thereof and such other powers as are reasonably incidental thereto. The Agent
may perform any of its duties hereunder by or through its agents or employees.
SECTION 9.02 Nature of Duties of the Agent. The Agent shall have no
duties or responsibilities to the other Lenders except those expressly set forth
in this Agreement. Neither the Agent nor any of its officers, directors,
employees or agents shall be liable for any action taken or omitted by it as
such hereunder or in connection herewith, unless caused by its or their gross
negligence or willful misconduct. The Agent shall not have by reason of this
Agreement a fiduciary relationship in respect of any Lender; and nothing in this
Agreement, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Agreement except as
expressly set forth herein. The Agent agrees to give each Lender prompt notice
of the Agent's receipt from the Company of any notice under this Agreement.
SECTION 9.03 Lack of Reliance on the Agent.
(a) Each Lender agrees that, independently and without reliance upon
the Agent, any other Lender, or the directors, officers, agents or employees of
the Agent or of any other Lender, each Lender, to the extent it deems
appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of the Company and its
Subsidiaries in connection with the taking or not taking of any action in
connection with this Agreement and the other Loan Documents, including the
decision to enter into this Agreement, and (ii) its own appraisal of the
creditworthiness of the Company and its Subsidiaries and, except as expressly
provided in this Agreement, the Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Lender with any credit
or other information with respect thereto, whether coming into its possession
before the making of any Advance or at any time or times thereafter.
(b) The Agent shall not be responsible to any Lender for any recitals,
statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith or for
the execution, effectiveness, genuineness, validity, enforceability,
collectibility, priority or sufficiency of this Agreement or any other Loan
Documents or the financial condition of the Company or its Subsidiaries or be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of this Agreement or any other Loan
Documents, or the financial condition of the Company or its Subsidiaries, or the
existence or possible existence of any Default or Event of Default.
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SECTION 9.04 Certain Rights of the Agent.
(a) If the Agent shall request instructions from the Required Lenders
with respect to any act or action (including the failure to act) in connection
with this Agreement or any other Loan Documents, the Agent shall be entitled to
refrain from such act or taking such action unless and until the Agent shall
have received instructions from the Required Lenders and the Agent shall not
incur liability to any Person by reason of so refraining. Without limiting the
foregoing, no Lender shall have any right of action whatsoever against the Agent
as a result of the Agent acting or refraining from acting hereunder in
accordance with the instructions of the Required Lenders; provided, however,
that the Agent shall not be required to act or not act in accordance with any
instructions of the Required Lenders if to do so would expose the Agent to
personal liability or would be contrary to any Loan Document or to Applicable
Law.
(b) The Agent may assume that no Event of Default has occurred and is
continuing, unless the Agent has received notice from the Company stating the
nature of the Event of Default, or has received notice from a Lender stating the
nature of the Event of Default and that such Lender considers the Event of
Default to have occurred and to be continuing.
(c) If the Agent has notice, or has received notice, that an Event of
Default has occurred and is continuing, the Agent shall give notice thereof to
the Lenders and shall act or not act upon the instructions of the Required
Lenders, provided that the Agent shall not be required to act or not act if to
do so would expose the Agent to personal liability or would be contrary to any
Loan Document or to Applicable Law, and provided further, that if the Required
Lenders fail, for five days after the receipt of notice from the Agent, to
instruct the Agent, then the Agent, in its discretion, may act or not act as it
deems advisable for the protection of the interests of the Lenders and shall be
fully protected in so acting.
SECTION 9.05 Liability of the Agent. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken or
not taken by them under or in connection with the Loan Documents, except for
their own gross negligence or willful misconduct. Without limitation on the
foregoing, the Agent and its directors, officers, agents, and employees:
(a) may treat the payee of any Revolving Note as the holder thereof
until the Agent receives notice of the assignment or transfer thereof in form
satisfactory to the Agent, signed by the payee, and may treat each Lender as the
owner of that Lender's interest in the obligations due to such Lender for all
purposes of this Agreement and the other Loan Documents until the Agent receives
notice of the assignment or transfer thereof, in form satisfactory to the Agent,
signed by such Lender;
(b) may consult with outside legal counsel (including King & Spalding),
in-house legal counsel, independent public accountants, in-house accountants and
other professionals, or other experts selected by it with reasonable care, or
with legal counsel, independent public accountants, or other experts for the
Company, and shall not be liable for any
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action taken or not taken by it or them in good faith in accordance with the
advice of such legal counsel, independent public accountants, or experts;
(c) will not be responsible to any Lender for any statement, warranty,
or representation made in any of the Loan Documents or in any notice,
certificate, report, request, or other statement (written or oral) in connection
with any of the Loan Documents;
(d) except to the extent expressly set forth in the Loan Documents,
will have no duty to ascertain or inquire as to the performance or observance by
the Company or any of its Subsidiaries or any other Person of any of the terms,
conditions, or covenants of any of the Loan Documents or to inspect the
property, books, or records of the Company or any of its Subsidiaries or other
Person;
(e) will not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, effectiveness, sufficiency, or
value of any Loan Document, any other instrument or writing furnished pursuant
thereto or in connection therewith;
(f) will not incur any liability by acting or not acting in reliance
upon any Loan Document, notice, consent, certificate, document, statement,
telex, telecopier message or other instrument or writing believed by it or them
to be genuine and to have been signed, sent or made by the proper Person; and
(g) will not incur any liability for any arithmetical error in
computing any amount payable to or receivable from any Lender hereunder,
including, without limitation, payment of principal and interest on the
Revolving Notes, Advances and other amounts; provided that promptly upon
discovery of such an error in computation, the Agent, the Lender and (to the
extent applicable) the Company shall make such adjustments as are necessary to
correct such error and to restore the parties to the position that they would
have occupied had the error not occurred.
SECTION 9.06 Indemnification. Each Lender shall, ratably in accordance
with the respective outstanding principal amount of its Advances, indemnify and
hold the Agent and its directors, officers, agents and employees harmless
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever (including, without limitation, attorneys' fees and
disbursements) that may be imposed on, incurred by, or asserted against it or
them in any way relating to or arising out of the Loan Documents (other than
losses incurred by reason of the failure by the Company to pay the obligations
due to the Lenders hereunder or under the Revolving Notes) or any action taken
or not taken by it as Agent thereunder, except for the gross negligence or
willful misconduct of the Agent. Without limitation of the foregoing, each
Lender shall reimburse the Agent upon demand for that Lender's ratable share of
any cost or expense incurred by the Agent in connection with the negotiation,
preparation, execution, delivery, administration, amendment, waiver,
refinancing, restructuring, reorganization (including a
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bankruptcy reorganization) or enforcement of the Loan Documents, to the extent
that the Company is required to pay that cost or expense but fails to do so upon
demand.
SECTION 9.07 Agent and Affiliates. SunTrust (and each successor Agent)
has the same rights and powers under the Loan Documents as any other Lender and
may exercise the same as though it were not the Agent; and the term "the
Lenders" or "Lender" includes SunTrust in its individual capacity. SunTrust (and
each successor Agent) and its Affiliates may accept deposits from, lend money
to, and generally engage in any kind of banking, trust or other business with
the Company and any Affiliate of the Company, as if it were not the Agent and
without any duty to account therefor to the Lenders. SunTrust (and each
successor Agent) need not account to any other Lender for any monies received by
it for reimbursement of its costs, expenses and fees as the Agent hereunder, or
for any monies received by it in its capacity as a Lender hereunder, except as
otherwise provided herein. This Agreement shall not be deemed to constitute a
joint venture or partnership among the Lenders.
SECTION 9.08 Successor Agent. The Agent may resign as such at any time
by written notice to the Company and the Lenders, to be effective upon a
successor's acceptance of appointment as Agent. In such event, the Required
Lenders shall appoint a successor Agent or Agents who must be from among the
Lenders; provided that the Agent shall be entitled to appoint a successor Agent
from among the Lenders, subject to acceptance of appointment by that successor
Agent if the Required Lenders have not appointed a successor Agent within thirty
(30) calendar days after the date the Agent gave notice of resignation or was
removed; and provided further that if no such successor Agent is appointed from
among the Lenders, an Agent who is not a Lender may be appointed, which shall be
a bank organized under the laws of the United States of America or any State
thereof, or any affiliate of such bank, having a combined capital and surplus of
at least $500,000,000. Upon a successor's acceptance of appointment as Agent the
successor will thereupon succeed to and become vested with all the rights,
powers, privileges, and duties of the Agent under the Loan Documents, and the
resigning Agent will thereupon be discharged from its duties and obligations
thereafter arising under the Loan Documents.
ARTICLE X
MISCELLANEOUS
SECTION 10.01 Survival. All covenants, agreements, warranties and
representations made herein, in the other Loan Documents, or in any certificates
or other documents delivered in connection with this Agreement by or on behalf
of the Company or any Guarantor shall survive the advances of money made by the
Lenders to the Company hereunder and the delivery of this Agreement and the
other Loan Documents, and all such covenants, agreements, warranties and
representations shall be binding upon and inure to the benefit of the Company,
the Guarantors, the Lenders, the Agent, and their respective successors and
assigns,
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whether or not so expressed, provided, however, that the Company may not assign
or transfer any of its rights under this Agreement without the prior written
consent of each of the Lenders.
SECTION 10.02 Amendments; Consents. No amendment, modification,
supplement, termination, or waiver of any provision of this Agreement or any
other Loan Document, and no consent to any departure by the Company, any
Guarantor or any Subsidiary of the Company therefrom, may in any event be
effective unless in writing signed by the Required Lenders, and then only in the
specific instance and for the specific purpose given; provided, however, that
without the approval in writing of all Lenders, no amendment, modification,
supplement, termination, waiver, or consent may be effective:
(a) to amend or modify the principal of, the rate of interest payable
on, or any fees with respect to, any Lender's Note, the Fees or the amount of
any Lender's Commitment;
(b) to postpone any date fixed for any payment of principal of, or any
installment of interest on, any Lender's Notes or the Fees, or to extend the
term "Commitments" of any Lender's Commitment;
(c) to amend or modify the definitions of "Borrowing Base", "Cost of
Products Sold", "EBITDA Multiple", "Gross Margin", "Gross Margin Factor",
"Revolving Loan Commitment" or "Required Lenders", to amend or modify Schedule
1.01, or the provisions of Section 10.07 or of this Section 10.02;
(d) to release any of the Collateral pledged to the Agent for the
benefit of, inter alia, the Agent or the Lenders pursuant to the Security
Documents to secure the Obligations, if any Obligations are outstanding or any
Commitment has not been terminated;
(e) to consent to the existence of any other lien, security interest or
encumbrance on the Collateral except as otherwise permitted herein;
(f) to subordinate any of the Obligations or the Commitments to any
other indebtedness of the Company or any of its Subsidiaries; and
(g) to release any Guarantor or to consent to the termination or
modification of any Guaranty Agreement.
Any amendment, modification, supplement, termination, waiver or consent effected
in accordance with this Section 10.02 shall apply equally to, and shall be
binding upon, all Lenders and the Agent.
SECTION 10.03 Notices. All notices, consents, demands and other
communications provided for hereunder, unless otherwise provided, shall be in
writing and mailed, sent by facsimile transmission or delivered to the parties
hereto addressed as follows or
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at such other address as shall be designated by any party in a written notice to
the other party hereto:
If to the Company:
NuCo2 Inc.
2800 SE Market Place
Stuart, Florida 34997
Attn: Ms. Joann Sabatino
Chief Financial Officer
Telecopier No.: (561) 221-1690
Confirmation No.: (561) 221-1754
with a copy to:
Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, New York 10022
Attn: Steven Wolosky, Esq.
Telecopier No.: (212) 755-1467
Confirmation No.: (212) 753-7200
If to the Agent:
SunTrust Bank, South Florida, National Association
501 E. Las Olas Blvd.
Ft. Lauderdale, Florida 33301
Attn: Corporate Banking Department
Telecopier No.: (954) 765-7301
Confirmation No.: (954) 765-7152
with a copy to:
King & Spalding
191 Peachtree St.
Atlanta, Georgia 30303
Attn: G. Lemuel Hewes, Esq.
Telecopier No.: 404-572-5149
Confirmation No.: 404-572-4862
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If to a Lender:
The address, telecopier and confirmation numbers set forth opposite its
name on the signature pages hereof.
All notices that are sent by facsimile transmission or are hand
delivered shall be deemed to be delivered upon receipt. All notices which are
mailed shall be mailed first class certified mail--return receipt requested,
postage prepaid, and shall be deemed delivered upon actual receipt or three days
after being deposited in the mail, whichever shall occur first.
The parties hereto agree that their signatures by facsimile shall be
effective and binding upon them as though executed in ink on paper, and that the
parties shall exchange original ink signatures promptly following any such
delivery by facsimile.
SECTION 10.04 Severability; Time of Essence. Every provision of this
Agreement and the other Loan Documents are intended to be severable. If any term
or provision of this Agreement or the Loan Documents, or any other document
delivered in connection herewith shall be unenforceable in any respect, the
enforceability of the remaining provisions shall not thereby be affected. Time
is of the essence of this Agreement and the other Loan Documents.
SECTION 10.05 Governing Law; Submission to Jurisdiction.
(a) THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ALL OTHER DOCUMENTS
CONTEMPLATED HEREBY, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND
UNDER THE OTHER LOAN DOCUMENTS SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH AND GOVERNED BY THE LAW OF THE STATE OF FLORIDA (WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAW PRINCIPLES THEREOF).
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF FLORIDA OR
OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF FLORIDA, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE COMPANY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY, AND
THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.
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(c) Nothing herein shall affect the right of the Lenders and the Agent
to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Company in any other jurisdiction.
SECTION 10.06 Payment of Costs. The Company shall pay all reasonable
costs, expenses, taxes and fees incurred by the Agent in connection with the
negotiation, preparation, execution and delivery of this Agreement, the term
sheet and the Commitment Letter relating to this Agreement, the Security
Documents and all other Loan Documents, including, without limitation, all of
the reasonable professional fees and expenses of King & Spalding, special
counsel to the Agent, as set forth in the Commitment Letter.
SECTION 10.07 Indemnity. The Company agrees to protect, indemnify and
save harmless the Agent and each Lender, and all directors, officers, employees
and agents of the Agent and each Lender, from and against any and all (i)
claims, demands and causes of action of any nature whatsoever brought by any
person or entity not a party to this Agreement and arising from or related or
incident to this Agreement or any other Loan Document, (ii) costs and expenses
incident to the defense of such claims, demands and causes of action, including,
without limitation, reasonable attorneys' fees, and (iii) liabilities,
judgments, settlements, penalties and assessments arising from such claims,
demands and causes of action, provided such claims, costs and liabilities are
not the result of the gross negligence or willful misconduct of such Agent or
such Lender. The indemnity contained in this Section shall survive the
termination of this Agreement.
SECTION 10.08 Benefit of the Agreement.
(a) This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective successors and assigns of the parties
hereto, provided that the Company may not assign or transfer any of its interest
hereunder without the prior written consent of the Lenders, and no such
assignment or transfer of any such obligations shall relieve the Company of its
obligations hereunder unless each Lender shall have consented to such release in
a writing specifically referring to the obligation from which the Company is to
be released.
(b) Any Lender may make, carry or transfer Advances at, to or for the
account of, any of its branch offices or the office of an Affiliate of such
Lender. Any Lender may at any time assign all or any portion of its rights in
this Agreement and the Revolving Notes issued to it to a Federal Reserve Bank;
provided that no such assignment shall release the Lender from any of its
obligations hereunder.
(c) Each Lender may assign or delegate all or a portion of its
interests, rights and obligations under this Agreement and the other Loan
Documents (including all or a portion of any of its Commitments and the Advances
at the time owing to it and the Revolving Notes held by it) to another financial
or lending institution or entity; provided, however, that (i) the Agent and the
Company must give their prior written consent to such assignment (which
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consent, in the case of the Company, shall not be unreasonably withheld) unless
such assignment is to an Affiliate of the assigning Lender or, in the case of
the Company, unless an Event of Default has occurred and is continuing, (ii)
such assignment or delegation is complete or is in minimum increments of
$5,000,000, and (iii) the parties to each such assignment shall execute and
deliver to the Agent an Assignment Agreement, and, together with a Revolving
Note or Revolving Notes subject to such assignment and, unless such assignment
is to an Affiliate of such Lender, a processing and recordation fee of $3,000.
The Company shall not be responsible for such processing and recordation fee or
any costs or expenses incurred by any Lender (other than the Agent) in
connection with such assignment. From and after the effective date specified in
each Assignment Agreement, which effective date shall be at least five (5)
Business Days after the execution thereof, the assignee thereunder shall be a
party hereto and to the extent of the interest assigned by such Assignment
Agreement, have the rights and obligations of a Lender under this Agreement.
Within five (5) Business Days after receipt of the notice and the Assignment
Agreement, the Company, at its own expense, shall execute and deliver to the
Agent, in exchange for the surrendered Revolving Note or Revolving Notes, a new
Revolving Note or Revolving Notes to the order of such assignee in a principal
amount equal to the applicable Commitments assumed by it pursuant to such
Assignment and Acceptance and new Revolving Note or Revolving Notes to the
assigning Lender in the amount of its retained Commitment or Commitments. Such
new Revolving Note or Revolving Notes shall be in an aggregate principal amount
equal to the aggregate principal amount of such surrendered Revolving Note or
Revolving Notes, shall be dated the date of the surrendered Revolving Note or
Revolving Notes which they replace, and shall otherwise be in substantially the
form attached hereto.
(d) Each Lender may from time to time sell or otherwise grant
participations in all or a portion of its rights and obligations under this
Agreement and the other Loan Documents (including all or a portion of its
Commitments and the Advances owing to it and the Revolving Notes held by it) to
another financial or lending institution or entity, whereupon the holder of any
such participation, if the participation agreement so provides, shall be
entitled to all of the rights of a Lender hereunder; provided, however, that (i)
the Agent must give its prior written consent to such participation unless such
participation is to an Affiliate of such Lender, (ii) such selling Lender's
obligations under this Agreement shall remain unchanged, (iii) such selling
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, and (iv) the Company, the Agent and other
Lenders shall continue to deal solely and directly with each Lender in
connection with such Lender's rights and obligations under this Agreement and
the other Loan Documents, and such Lender shall retain the sole right to enforce
the obligations of the Company relating to the Advances and to approve any
amendment, modification or waiver of any provisions of this Agreement or the
other Loan Documents. Any Lender selling a participation hereunder shall provide
prompt written notice to the Company of the name of such participant.
SECTION 10.09 Subordination of Indebtedness. Any Indebtedness of any
Guarantor now or hereafter owed to the Company is hereby subordinated in right
of payment to the payment by such Guarantor of its Guaranty Obligations such
that if a default in the payment
70
<PAGE>
of the Obligations shall have occurred and be continuing, any such Indebtedness
of such Guarantor owed to the Company, if collected or received by the Company,
shall be held in trust by the Company for the holders of the Obligations and be
paid over to the Lenders and the Agent for application of such Guarantor's
Guaranty Obligations.
SECTION 10.10 Maximum Interest Rate. Nothing contained in this
Agreement or any Note shall require the Company to pay interest at a rate
exceeding the Maximum Permissible Rate. If interest payable to any Lender for
any period would exceed the Maximum Permissible Rate, such interest shall be
reduced automatically to the maximum amount that will not exceed the Maximum
Permissible Rate, and interest payable to any Lender for any subsequent period,
to the extent less than the Maximum Permissible Rate, shall, to that extent, be
increased by the aggregate amount of all such reductions.
SECTION 10.11 Entire Agreement. This Agreement and the other Loan
Documents executed and delivered contemporaneously herewith, together with the
exhibits and schedules attached hereto and thereto, constitute the entire
understanding of the parties with respect to the subject matter hereof, and any
other prior or contemporaneous agreements, whether written or oral, with respect
thereto, including, without limitation, the Commitment Letter, which is
expressly superseded hereby; provided, however, that the indemnities of the
Company in favor of the Lenders and SunTrust Equitable Securities Corporation
contained in the Commitment Letter shall survive the execution and delivery of
this Agreement. The execution of this Agreement and the other Loan Documents by
the Company was not based upon any facts or materials provided by the Agent or
any Lender, nor was the Company or any Guarantor induced to execute this
Agreement or any other Loan Document by any representation, statement or
analysis made by the Agent or any Lender.
SECTION 10.12 Set-Off. Upon the occurrence and during the continuance
of any Event of Default, each Lender, and each of its branches and offices, is
hereby authorized by the Company, at any time and from time to time, without
notice to the Company (i) to set off against, and to appropriate and apply to
the payment of the Obligations (in each case whether matured or unmatured) any
and all amounts owing by such Lender, or any such office or branch, to the
Company (whether payable in Dollars or any other currency, whether matured or
unmatured, and, in the case of deposits, whether general or special, time or
demand and however evidenced) and (ii) pending any such action, to the extent
necessary, to hold such amounts as collateral to secure such Obligations and
Guaranty Obligations and to return as unpaid for insufficient funds any and all
checks and other items drawn against any deposits so held as such Lender in its
sole discretion may elect. Each Lender shall give the Company notice of its
intention to exercise its rights under this Section 10.12; provided, however,
that failure by such Lender to give the Company notice shall not prevent such
Lender from exercising its rights as provided in this Section. The Company, to
the fullest extent it may effectively do so under Applicable Law, agrees that
any holder of a participation in any Advance may exercise rights of set-off and
counterclaim and other rights with respect to such participation as fully as if
such holder of a participation were a direct creditor of the Company in the
amount of such participation.
71
<PAGE>
SECTION 10.13 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which, taken together, shall constitute one and the same instrument.
SECTION 10.14 Replacement Notes. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Note, and in the case of any such loss, theft or destruction, upon delivery of
any indemnity agreement reasonably satisfactory to the Company or, in the case
of any such mutilation, upon surrender and cancellation of such Note, the
Company shall execute and deliver, in lieu thereof, a replacement note identical
in form and substance to such Note and dated as of the date of such Note, and
upon such execution and delivery of the replacement note all references in this
Agreement and in all other Loan Documents to the Note shall be deemed to refer
to such replacement note.
SECTION 10.15 Release. In consideration of the Agent's and the Lenders'
agreement to enter into this Agreement and to establish the Commitments
hereunder, the Company hereby (a) releases, acquits and forever discharges the
Agent and the Lenders, their respective agents, employees, officers, directors,
servants, representatives, attorneys, affiliates, successors and assigns
(collectively, the "Released Parties") from any and all liabilities, claims,
suits, debts, liens, losses, causes of action, demands, rights, damages, costs
and expenses of any kind, character or nature whatsoever, known or unknown,
fixed or contingent, that the Company may have or claim to have against the
Agent and the Lenders which might arise out of or be connected with any act of
commission or omission of the Agent or the Lenders existing or occurring on or
prior to the date of this Agreement, including, without limitation, any claims,
liabilities or obligations relating to or arising out of or in connection with
the Loan Documents (including, without limitation, arising out of or in
connection with the initiation, negotiation, closing or administration of the
transactions contemplated thereby or related thereto), from the beginning of
time until the execution and delivery of this Agreement (the "Released Claims")
and (b) agrees forever to refrain from commencing, instituting or prosecuting
any lawsuit, action or other proceeding against the Released Parties with
respect to any and all Released Claims.
72
<PAGE>
WITNESS the hand and seal of the parties hereto through their duly
authorized officers, as of the date first above written.
NUCO2 INC.,
a Florida corporation
Address: By: /s/ Joann Sabatino
c/o NuCo2 Inc. -----------------------------
2800 S.E. Market Place Joann Sabatino
Stuart, Florida 34997 Chief Financial Officer
and Treasurer
Attest: /s/ Eric M. Wechsler
--------------------
Eric M. Wechsler
General Counsel and
Secretary
[SIGNATURE PAGE TO THE REVOLVING CREDIT AGREEMENT]
<PAGE>
SUNTRUST BANK, SOUTH FLORIDA,
NATIONAL ASSOCIATION,
By: /s/ Russell E. Burnette
----------------------------------
Russell E. Burnette
Vice President
[SIGNATURE PAGE TO THE REVOLVING CREDIT AGREEMENT]
<PAGE>
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.,
individually and as Documentation Agent
By: /s/ Scott Kray
------------------------------------
Name: Scott Kray
Title: Vice President
By: /s/ Gary W. Andresen
------------------------------------
Name: Gary W. Andresen
Title: Associate
[SIGNATURE PAGE TO THE REVOLVING CREDIT AGREEMENT]
<PAGE>
BANK-LEUMI LE-ISRAEL B.M.,
MIAMI AGENCY
By: /s/ Stephen Hanas
-----------------------------------
Name: Steven Hanas
Title: Vice President
[SIGNATURE PAGE TO THE REVOLVING CREDIT AGREEMENT]
<PAGE>
THE PROVIDENT BANK
By: /s/ Nick Jeviz
-----------------------------------
Name: Nick Jeviz
Title: Vice President
[SIGNATURE PAGE TO THE REVOLVING CREDIT AGREEMENT]
EXHIBIT 10.9
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT, dated
as of June 16, 1999 (this "Amendment"), by and among NUCO2 INC., a Florida
corporation (the "Company"), SUNTRUST BANK, SOUTH FLORIDA, NATIONAL ASSOCIATION,
a national banking association ("SunTrust"), BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC., a Delaware corporation (the "Documentation Agent"), THE
PROVIDENT BANK, an Ohio banking corporation, BANK LEUMI LE-ISRAEL B.M., Miami
Agency, IBJ WHITEHALL BUSINESS CREDIT CORPORATION, a New York corporation, and
any other banks or other lending institutions that are or will become parties to
this Amendment (collectively, the "Lenders" and each individually, a "Lender"),
and SUNTRUST BANK, SOUTH FLORIDA, NATIONAL ASSOCIATION, as agent for the
Lenders.
PRELIMINARY STATEMENTS
The Company, Agent and the Lenders are parties to that certain
Amended and Restated Credit Agreement, dated as of May 4, 1999 (the "Credit
Agreement"; capitalized terms used herein and not defined herein shall have the
meanings assigned to them in the Credit Agreement), pursuant to which the
Lenders made and continue to make certain financial accommodations to the
Company; and
The Company, Agent and the Lenders desire to amend the Credit
Agreement on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. Amendments to Credit Agreement.
a. Section 10.02 of the Credit Agreement is hereby amended by
replacing subsection (c) in its entirety with the following subsection (c):
(c) to amend or modify the definitions of "Borrowing
Base", "Cost of Products Sold", "EBITDA Multiple", "Gross Margin",
"Gross Margin Factor", "Revolving Loan Commitment" or "Required
Lenders", to amend or modify Schedule 1.01, or the provisions of
Section 2.01 (ii)(E), Section 10.07 or of this Section 10.02;
b. Exhibit K to the Credit Agreement is hereby amended by replacing
such Exhibit K in its entirety with Annex A attached to this Amendment.
<PAGE>
2. Other Agreements.
a. Company hereby affirms that each of the representations and
warranties of the Company contained in the Credit Agreement and in any of the
other Loan Documents (except to the extent that any such representation or
warranty expressly relates solely to an earlier date and for changes therein
permitted or contemplated by the Credit Agreement) is correct in all material
respects on and as of the date hereof and after giving effect to this Amendment.
In addition, with respect to this Amendment, the Company warrants and represents
that the execution, delivery and performance by the Company of this Amendment
(i) are within the Company's corporate or similar power; (ii) have been duly
authorized by all necessary or proper corporate or similar action, and
shareholder or similar action; (iii) are not in contravention of any provision
of the Company's certificate of incorporation or bylaws; (iv) will not violate
any law or regulation, or any order or decree of any Governmental Authority; (v)
will not conflict with or result in the breach or termination of, constitute a
default under or accelerate any performance required by, any indenture,
mortgage, deed of trust, lease, agreement or other instrument to which the
Company is a party or by which the Company or any of its property is bound; (vi)
will not result in the creation or imposition of any Lien upon any of the
property of the Company other than those in favor of the Agent and the Lenders,
all pursuant to the Loan Documents; and (vii) do not require the consent or
approval of any Governmental Authority. Company further represents and warrants
that this Amendment has been duly executed and delivered for the benefit of or
on behalf of the Company and constitutes a legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms.
b. As amended hereby, all terms of the Credit Agreement and the
other Loan Documents shall be and remain in full force and effect and shall
constitute the legal, valid, binding and enforceable obligations of the Company
to the Agent and the Lenders. To the extent any terms and conditions in any of
the other Loan Documents shall contradict or be in conflict with any terms or
conditions of the Credit Agreement, after giving effect to this Amendment, such
terms and conditions are hereby deemed modified and amended accordingly to
reflect the terms and conditions of the Credit Agreement as modified and amended
hereby.
c. Company hereby restates, ratifies and reaffirms each and every
term and condition set forth in the Credit Agreement and the other Loan
Documents, effective as of the date hereof, and represents that, after giving
effect to this Amendment, no Default or Event of Default has occurred and is
continuing as of the date hereof.
d. Company agrees to pay on demand all costs and expenses of the
Agent and the Lenders in connection with the preparation, execution, delivery
and enforcement of this Amendment, the closing hereof, and any other
transactions contemplated hereby, including the fees and out-of-pocket expenses
of the Agent's counsel.
e. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS (AND NOT THE LAWS OF CONFLICTS), OF THE STATE OF FLORIDA
AND ALL APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
A-2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
NUCO2 INC.,
a Florida corporation
By: /s/ Joann Sabatino
-------------------------------------
Joann Sabatino
Chief Financial Officer and Treasurer
Attest: /s/ Eric M. Wechsler
---------------------------------
Eric M. Wechsler
General Counsel and Secretary
SUNTRUST BANK, SOUTH FLORIDA,
NATIONAL ASSOCIATION,
individually and as Agent
By: /s/ Russell E. Burnette
-------------------------------------
Russell E. Burnette
Vice President
A-3
<PAGE>
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.,
Individually and as Documentation Agent
By: /s/ Scott Kray
-------------------------------------
Name: Scott Kray
Title: Vice President
By: Gary W. Andresen
------------------------------------
Name: Gary W. Andresen
Title: Associate
A-4
<PAGE>
BANK-LEUMI LE-ISRAEL B.M.,
MIAMI AGENCY
By: /s/ Stephen Hanas
-----------------------------------
Name: Steven Hanas
Title: Vice President
A-5
<PAGE>
THE PROVIDENT BANK
By: /s/ Nick Jeviz
-----------------------------------
Name: Nick Jeviz
Title: Vice President
A-6
<PAGE>
IBJ WHITEHALL BUSINESS CREDIT
CORPORATION
By: /s/ Bruce Kasper
-----------------------------------
Name: Bruce Kasper
Title: Vice President
A-7
<PAGE>
ACKNOWLEDGMENT OF GUARANTORS
Each of the Guarantors acknowledges and agrees to the terms of the
foregoing First Amendment to Amended and Restated Credit Agreement, and further
acknowledges and agrees that (i) all of the obligations of the Company shall
continue to constitute "Guaranteed Obligations" covered by the Amended and
Restated Guaranty Agreement dated as of May 4, 1999 executed by the undersigned,
and (ii) the Amended and Restated Guaranty Agreement is and shall remain in full
force and effect on and after the date hereof, and (iii) the foregoing agreement
shall in no way release, discharge, or otherwise limit the obligations of such
Guarantor under the Amended and Restated Guaranty Agreement.
This Acknowledgment of Guarantors made and delivered as of June 16,
1999.
GUARANTORS:
NUCO2 ACQUISITION CORP.,
a Florida corporation
By: /s/ Eric M. Wechsler
-----------------------------------
Name: Eric M. Wechsler
Title: Vice President
[CORPORATE SEAL]
KOCH COMPRESSED GASES, INC.,
a New Jersey corporation
By: /s/ Eric M. Wechsler
-----------------------------------
Name: Eric M. Wechsler
Title: Vice President
[CORPORATE SEAL]
A-8
EXECUTION COPY
AMENDMENT NO. 3
AMENDMENT NO. 3 dated as of May 4, 1999 to the Note Purchase
Agreement referred to below, between:
NUCO2 INC., a corporation duly organized and validly existing
under the laws of the State of Florida (the "Company");
each of the Subsidiaries of the Company appearing under the
caption "SUBSIDIARY GUARANTORS" on the signature pages hereto (each a
"Subsidiary Guarantor" and, collectively, the "Subsidiary Guarantors";
and, together with the Company, the "Obligors"); and
each of the Investors, including the Additional Investors (as
defined below), appearing under the caption "INVESTORS" on the
signature pages hereto (each, an "Investor", and collectively, the
"Investors").
WHEREAS, the Obligors and the Investors (other than SunTrust Banks,
Inc. ("SunTrust")) are party to a Senior Subordinated Note Purchase Agreement
dated as of October 31, 1997 (as heretofore modified and supplemented and in
effect on the date hereof, the "Note Purchase Agreement"), pursuant to which the
Company issued its 12% Senior Subordinated Notes due 2004 in an aggregate
principal amount of $30,000,000 (the "Existing Notes") to such Investors (other
than SunTrust). Chase Equity Associates L.P. ("Chase Capital") and SunTrust
desire to purchase from the Company, and the Company desires to issue to each of
Chase Capital and SunTrust, its 12% Senior Subordinated Note due 2005 (each such
Note, a "2005 Note") in the aggregate principal amount of $13,000,000 and
$2,000,000, respectively, under the Note Purchase Agreement, having the same
terms as the Existing Notes heretofore issued by the Company thereunder (except
as otherwise provided herein) and the parties to the Note Purchase Agreement
wish to amend the Note Purchase Agreement to provide for such issuance and to
make certain other modifications thereto;
Accordingly, the parties hereto hereby agree as follows:
Section 1. Definitions. Except as otherwise defined in this
Amendment No. 3, terms defined in the Note Purchase Agreement are used herein as
defined therein.
Section 2. Amendments to Note Purchase Agreement. Subject to the
satisfaction of the conditions precedent specified in Section 4 below, but
effective as of the date hereof, the Note Purchase Agreement shall be amended as
follows:
A. References in the Note Purchase Agreement to "this Agreement"
(and indirect references such as "hereunder", "hereby", "herein" and "hereof")
shall be deemed to be references to the Note Purchase Agreement as amended
hereby.
<PAGE>
B. Section 1.01 of the Note Purchase Agreement shall be amended by
adding the following new definitions (to the extent not already included in said
Section 1.01) and inserting the same in the appropriate alphabetical locations
and amending the following definitions (to the extent already included in said
Section 1.01) to read in their entirety as follows:
"Amendment No. 3" means Amendment No. 3 dated as of May 4, 1999 to
this Agreement.
"First 2005 Note Closing Date" has the meaning assigned to such term
in Section 2.07(a).
"New Investor" has the meaning assigned to such term in Section
2.07(a).
"Required Investors" means, at any time after the First 2005 Note
Closing Date, Investors holding more than 60% in aggregate principal
amount of the Notes at the time outstanding, and at any time after the
Second 2005 Note Closing Date, Investors holding more than 63% in
aggregate principal amount of the Notes at the time outstanding (in each
case exclusive of Notes then owned by the Company or any of its
Affiliates); provided that, in each case, "Required Investors" shall
include at least two Investors.
"Second 2005 Note Closing Date" has the meaning assigned to such
term in Section 2.07(b).
"Senior Credit Agreement" means the Amended and Restated Revolving
Credit Agreement dated as of May 4, 1999 between the Company, the lenders
party thereto from time to time and SunTrust Bank, South Florida, National
Association, agent for such lenders, as executed and delivered on May 4,
1999, and any refinancing, refunding, extension or renewal thereof
(whether or not with any of the lenders or the agent for such lenders then
party to the Senior Credit Agreement), in each case, at any time amended
or modified in accordance with Section 8.10(a).
"Senior Debt" means the following obligations of the Company and its
Subsidiaries:
(i) with respect to the Company, all principal of the
loans outstanding under the Senior Credit Agreement, all
interest thereon (including any interest accruing after the
date of any filing by the Company of any petition in
bankruptcy or the commencing of any bankruptcy, insolvency or
similar proceedings with respect to the Company whether or not
the same is allowed as a claim in any such
<PAGE>
proceeding) and all other amounts outstanding thereunder,
including all expenses (including, without limitation,
attorneys' fees), indemnities and penalties and all
commitment, facility and administrative, agency or other
similar fees payable by the Company from time to time under
the Senior Credit Documents, and including any obligations of
the Company in respect of Hedging Agreements owing to one or
more of the lenders under Senior Credit Agreement that are
required by the terms of the Senior Credit Agreement;
(ii) with respect to the Company, additional
Indebtedness in an aggregate principal amount up to but not
exceeding $15,000,000 under or in respect of (x) the Senior
Credit Agreement and (y)any other instrument evidencing such
Indebtedness; provided that, in the case of clause (y) only,
such Indebtedness is specifically designated in such other
instrument as "Senior Debt" for purposes of this Agreement;
(iii) with respect to the Company, additional
Indebtedness under or respect of (x) the Senior Credit
Agreement and (y) any other instrument evidencing such
Indebtedness; provided that (i) in the case of clause (y)
only, such Indebtedness is specifically designated in such
other instrument as "Senior Debt" for purposes of this
Agreement and (ii) after giving effect to the incurrence of
such Indebtedness (and the application of the proceeds
thereof), the Senior Debt Incurrence Ratio is less than or
equal to 3.50 to 1.00;
(iv) with respect to any Subsidiary Guarantor, the
Guarantee of such Subsidiary Guarantor in respect of any
Senior Debt of the Company; and
(v) with respect to the Company, any and all
refinancings, replacements or refundings of any of the amounts
referred to in clauses (i), (ii) and (iii) above; provided
that the refinancing, replacement or refunding of Senior Debt
incurred under said clause (iii) shall constitute Senior Debt
only to the extent that, after giving effect to such
refinancing, replacement or refunding (and the application of
the proceeds hereof), the Senior Debt Incurrence Ratio is less
than or equal to 3.50 to 1.00;
provided that the aggregate principal amount of Senior Debt
permitted under clauses (i) and (ii) above (together with the
amount of obligations in respect of Hedging Agreements
referred to in said clause (i)), and any refinancing,
replacement or refunding thereof permitted under clause (v)
above (including the maximum amount of the aggregate
commitments of the lenders to extend any revolving credit
facility thereunder) shall not exceed at any time $90,000,000
minus the aggregate amount of (x) permanent reductions in
revolving credit commitments thereunder and (y) prepayments of
any term loans made from time to time in respect of the Senior
Debt.
<PAGE>
"SunTrust" means SunTrust Banks, Inc.
"2005 Note" has the meaning assigned to such term in Section
2.07(a).
C. Section 2.03(a) of the Note Purchase Agreement shall be
amended in its entirety to read as follows:
"(a) The Company's obligation to pay the principal of
and interest on all the Notes issued by it shall be evidenced by a
Note, substantially in the form of Exhibit A (except, in the case of
the 2005 Notes, as modified by Section 2.07(a)), duly executed and
delivered by the Company with blanks appropriately completed in
conformity herewith."
D. A new Section 2.04(e) is added to the Note Purchase
Agreement to read as follows:
"(e) Notwithstanding anything in this Agreement or
the Notes to the contrary, the unpaid principal amount of each Note
(other than the 2005 Notes) shall bear interest at the rate of 14% Mar
annum during each fiscal quarter (commencing with the fiscal quarter
beginning on April 1, 1999) of the Company in which the Total Net
Funded Debt Coverage Ratio exceeds 5.50 to 1.00 as at the end of the
immediately preceding fiscal quarter (that portion of the interest
accruing on the Notes in excess of 12% being herein referred to as
"Additional Interest"); provided, however, that no Additional Interest
shall accrue prior to May 4, 1999. Interest accruing pursuant to the
immediately preceding sentence will be payable as provided in Section
2.04(c); provided, however, that any Additional Interest accruing with
respect to any fiscal quarter ending on (i) March 31 will be payable on
May 31 of such year and (ii) September 30 will be payable on November
30 of such year.
E. A new Section 2.07 is added to the Note Purchase Agreement
to read as follows:
"SECTION 2.07 Issuance of 2005 Notes.
(a) Subject to and upon the terms and conditions set
forth in the immediately succeeding sentence, each of Chase Capital and
SunTrust (each, a "New Investor") agrees to purchase from the Company,
and the Company agrees to issue to each New Investor, its 12% Senior
Subordinated Notes due 2005 (the "2005 Notes"), which Notes (i) shall
be issued on May 4, 1999 (or such later date as the Company and the New
Investors shall mutually agree, but not later than May [4], 1999) (the
"First 2005 Note Closing Date"), (ii) shall be in a principal amount of
$8,666,667, in the case of Chase Capital, and $1,333,333, in the case
of SunTrust, and purchased at par by such New Investor and (iii) shall
otherwise be in the form of Exhibit A (except that the maturity date
thereof shall be October 31, 2005). Each 2005 Note shall constitute a
Note,
<PAGE>
and each New Investor shall be an Investor, for all purposes of this
Agreement. The issuance of the 2005 Notes to the New Investors is
subject, at the time of purchase, to the satisfaction of the following
conditions: (i) receipt by the New Investors of a certificate of a
senior officer of the Company, dated the date of such purchase, to the
effect, both immediately prior to the purchase of such 2005 Notes and
also after giving effect thereto and the intended use thereof, set
forth in clauses (a) and (b) of Section 5.02; (ii) receipt by each New
Investor of the 2005 Note of such New Investor, duly executed and
completed for such New Investor; and (iii) the execution and delivery
of an amendment to the Warrant Agreement satisfactory to the New
Investors providing for the issuance of Warrants to the New Investors
(or any Affiliate thereof) for the purchase of 323,173 Stock Units (as
defined in the Warrant Agreement), in the case of Chase Capital, and
49,719 Stock Units (as defined in the Warrant Agreement), in the case
of SunTrust, and making certain other modifications thereto as mutually
agreed by the Company and the Investors (including the New Investors).
Notwithstanding anything to the contrary herein or in the 2005 Notes,
interest on the 2005 Notes issued on the First 2005 Note Closing Date
under this Section 2.07(a) shall accrue from and including the First
2005 Note Closing Date and the initial payment of interest on the 2005
Notes issued under this Section 2.07(a) shall be made on October 31,
1999.
(b) Subject to and upon the terms and conditions set
forth in the immediately succeeding sentence and upon ten Business
Days' prior written notice from the Company to the New Investors, each
New Investor agrees to purchase from the Company, and the Company
agrees to issue to each New Investor, an additional 2005 Note, which
Notes (i) shall be issued on any Business Day (such day, the "Second
2005 Note Closing Date") during the period from the First 2005 Note
Closing Date to and including March 31, 2000, (ii) shall be in a
principal amount of $4,333,333, in the case of Chase Capital, and
$666,667, in the case of SunTrust, and purchased at par by such New
Investor and (iii) shall otherwise be in the form of the 2005 Notes
issued under Section 2.07(a). Each such 2005 Note shall constitute a
Note, and each such New Investor shall be an Investor, for all purposes
of this Agreement. The issuance of such 2005 Notes to such New
Investors is subject, at the time of purchase, to the satisfaction of
the following conditions: (i) receipt by the New Investors of a
certificate of a senior officer of the Company, dated the date of such
purchase, to the effect, both immediately prior to the purchase of such
2005 Notes and also after giving effect thereto and the intended use
thereof, set forth in clauses (a) and (b) of Section 5.02; (ii) receipt
by each New Investor of the 2005 Note of such New Investor, duly
executed and completed for such New Investor; (iii) receipt by the
Investors of the most recent financial statements required to be
delivered pursuant to Section 7.01(a) or 7.01(b), as applicable; and
(iv) the Total Net Funded Debt Coverage Ratio as of the end of and for
the most recent fiscal quarter for which financial statements have been
delivered pursuant to clause (iii) above would not exceed 6.0 to 1.0
after giving effect to the issuance of such 2005 Notes, and receipt by
the New Investors of a certificate of a senior officer of the Company,
dated the date of such purchase, demonstrating in reasonable detail to
that effect. Notwithstanding anything to
<PAGE>
the contrary herein or in the 2005 Notes, interest on the 2005 Notes
issued on the Second 2005 Note Closing Date under this Section 2.07(b)
shall accrue from and including the Second 2005 Note Closing Date and
the initial payment of interest on the 2005 Notes issued under this
Section 2.07(b) shall be made on the first 30~ day of April or the
first 31~ day of October, whichever is earlier, to occur following the
Second 2005 Note Closing Date.
The Company shall pay to each New Investor a
commitment fee on the principal amount of the 2005 Notes to be issued
to such New Investor on the Second 2005 Note Closing Date for the
period from and including the First 2005 Note Closing Date to but not
including the earlier of the Second 2005 Note Closing Date and March
31, 2000 (or such earlier date on which the Company shall terminate in
writing to each of the New Investors the obligations of the New
Investors to purchase the 2005 Notes pursuant to this Section 2.07(b))
at a rate per annum equal to 1/2 of 1%. The accrued commitment fee
(which shall be computed on the basis of a year of 360 days and shall
be payable for the actual number of days elapsed (including the first
but excluding the last day)) shall be payable in arrears on April 30
and October 31 of each year (or if any date is not a Business Day, on
the immediately succeeding Business Day), commencing on October 31,
1999, and on the date on which the obligations of the New Investors to
purchase the 2005 Notes pursuant to this Section 2.07(b) shall
terminate. "
F. Section 3.01(a) of the Note Purchase Agreement shall be
amended in its entirety to read as follows:
"(a) The Company may, at its option, upon notice as
provided below, prepay all or, from time to time, part of the Notes
(other than the 2005 Notes) at any time at the following prices
(expressed in percentages of principal amount) in each of the years
listed below, in each case, together with interest accrued and unpaid
on the Notes (other than the 2005 Notes) (or part thereof, as the case
may be) to the prepayment date:
Year Price
From the Closing Date
through October 31, 1998 106%
From November 1, 1998
through October 31, 1999 104%
From November 1, 1999
through October 31, 2000 102%
From November 1, 2000
and thereafter 100%
<PAGE>
The Company may, at its option, upon notice as provided below, prepay
all or, from time to time, part of the 2005 Notes at any time at the
following prices (expressed in percentages of principal amount) in each
of the years listed below, in each case, together with interest accrued
and unpaid on the 2005 Notes (or part thereof, as the case may be) to
the prepayment date:
Year Price
From the Closing Date
through April 30, 2000 106%
From May 1, 2000
through April 30, 2001 104%
From May 1, 2001
through April 30, 2002 102%
From May 1, 2002
and thereafter 100%"
G. The first sentence of Section 3.01(d) of the Note Purchase
Agreement shall be amended in its entirety to read as follows:
"(d) In the event of a Change in Control, any
Investor shall have the option to require the Company to repurchase (i)
the Notes (other than the 2005 Notes) held by such Investor at a price
equal to 101% of the principal amount of such Notes if such Change in
Control occurs prior to the third anniversary of the date hereof and
thereafter at a price equal to 100% of the principal amount of such
Notes, in each case, together with interest accrued and unpaid on the
Notes (or part thereof, as the case may be) to the payment date and/or
(ii) the 2005 Notes held by such Investor at a price equal to 101% of
the principal amount of such Notes if such Change in Control occurs
prior to the third anniversary of the First 2005 Note Closing Date and
thereafter at a price equal to 100% of the principal amount of such
Notes, in each case, together with interest accrued and unpaid on the
Notes (or part thereof, as the case may be) to the payment date. "
H. The last sentence of Section 3.02 of the Note Purchase
Agreement shall be amended in its entirety to read as follows:
"Anything in this Agreement or the Notes to the
contrary notwithstanding, any payment of principal of, or premium or
interest on any Note, or any other payment hereunder or under the
Notes, that is due on a date other than a Business Day shall be
<PAGE>
made on the next succeeding Business Day without including the
additional days elapsed in the computation of the interest payable on
such next succeeding Business Day. "
I. Section 5.02 of the Note Purchase Agreement shall be
amended in its entirety to read as follows:
"SECTION 5.02. Other Conditions Precedent. The
obligation of any Investor to purchase its Note(s) (including its 2005
Note(s)) hereunder is subject to the further conditions precedent that,
both immediately prior to the purchase of such Note(s) and also after
giving effect thereto and to the intended use thereof:
(a) no Default shall have occurred and be continuing;
and
(b) the representations and warranties made by the
Company in Article VI shall be true and correct on and as of the
Closing Date (or the First 2005 Closing Date or the Second 2005 Closing
Date, as applicable, in the case of the 2005 Notes) with the same force
and effect as if made on and as of such date (or, if any such
representation or warranty is expressly stated to have been made as of
a specific date, as of such specific date)."
J. A new Section 5.03 is added to the Note Purchase Agreement
to read as follows:
"SECTION 5.03 Conditions Precedent to Second 2005
Notes. The obligation of each New Investor to purchase its 2005 Note on
the Second 2005 Note Closing Date is subject to the further condition
precedent that the Company shall have issued and delivered to such
Investors the Warrants required to be issued under Section 2.08(b) of
the Warrant Agreement in the amounts therein specified and shall have
executed and delivered each of the other agreements and instruments
contemplated to be executed and/or delivered under said Section 2.08(b)
with respect to such Warrants."
K. Section 8.09 of the Note Purchase Agreement shall be
amended in its entirety to read as follows:
"SECTION 8.09 Financial Covenants.
(a) Interest Coverage Ratio. The Company will not
permit the Interest Coverage Ratio to be less than the following
respective ratios as at the last day of each fiscal quarter during the
following respective periods:
<PAGE>
Period Ratio
From April 1, 1999
through December 31, 1999 1.25 to 1.00
From January 1, 2000
through March 31, 2000 1.50 to 1.00
From April 1, 2000
through June 30, 2000 1.75 to 1.00
From July 1, 2000
through September 30, 2000 2.00 to 1.00
From October 1, 2000
and at all times thereafter 2.50 to 1.00
(b) Total Net Funded Debt Coverage Ratio. The Company
will not permit the Total Net Funded Debt Coverage Ratio to exceed the
following respective ratios at any time during the following respective
periods:
Period Ratio
From January 1, 1999
through June 30, 1999 6.75 to 1.00
From July 1, 1999
through September 30, 1999 6.00 to 1.00
From October 1, 1999
through December 31, 1999 5.50 to 1.00
From January 1, 2000
through March 31, 2000 5.00 to 1.00
From April 1, 2000
and at all times thereafter 4.50 to 1.00
(c) Minimum Net Worth. The Company shall at all times
maintain Consolidated Net Worth of not less than the sum of (a)
$40,000,000, (b) ~ 50% of the cumulative Consolidated Net Income for
each fiscal quarter ending on or after December 31, 1997 (but
specifically not including any Consolidated Net Loss for any such
fiscal quarter) plus (c) the cumulative net proceeds of all equity
offerings (if any) made by the Company for each fiscal quarter ending
on or after September 30, 1997."
L. Section 8.10(a) of the Note Purchase Agreement shall be
amended in its entirety to read as follows:
"(a) The Company will not, and will not permit any of
its Subsidiaries to, change, amend, supplement or otherwise modify the
terms of the Senior Credit Documents, or refund or refinance the same,
without the prior consent of the Required Investors, if the effect of
such amendment or such refunding or refinancing is to:
(i) impose upon the Company, directly or indirectly,
any prohibition or limitation on its ability to make regularly
scheduled payments of principal of or interest on the Notes,
or any other amounts owing to the Investors under this
Agreement, except as provided in the subordination provisions
set forth in Article XI;
<PAGE>
(ii) extend or shorten the scheduled maturity of any
payment of any principal amount of the loans under the Senior
Credit Agreement, except (x) altering or modifying the payment
schedule of such loans so as to cause the average life to
maturity of such loans to be not more than three years longer
than the average life to maturity of such loans as of the date
hereof or (y) extending the final maturity date of such loans
by more than three years; and
(iii) change, amend, supplement or otherwise modify
Section 2.1 l(d) of the Senior Credit Agreement or change,
amend, supplement or otherwise modify the terms of the Senior
Credit Agreement to require a reduction in the Commitments (as
defined in the Senior Credit Agreement) as a result of a
mandatory prepayment under Section 2.11 of the Senior Credit
Agreement."
M. Schedules 6.06(a), 6.10, 6.12, 6.13, 8.01 and 8.02 to the
Note Purchase Agreement are hereby amended to read as set forth in Schedules
6.06(a), 6.10, 6.12, 6.13, 8.01 and 8.02, respectively, to this Amendment No. 3.
Section 3. Representations and Warranties.
(a) The Company represents and warrants to the Investors that
(i) the representations and warranties set forth in Article VI of the Note
Purchase Agreement (as amended hereby) are true and complete on the date hereof
as if made on and as of the date hereof and as if each reference in said Article
VI to "this Agreement" (or words of similar import) referred to the Note
Purchase Agreement as amended by this Amendment No. 3 and (ii) no Default has
occurred and is continuing.
(b)Each New Investor represents to the Company that the
representations set forth in Article IV of the Note Purchase Agreement are true
and complete with respect to such New Investor on the date of each purchase of
its 2005 Note pursuant to Section 2.07 of the Note
<PAGE>
Purchase Agreement, as amended hereby, as if made on and as of such date and as
if each reference in said Article IV to "this Agreement" (or words of similar
import) referred to the Note Purchase Agreement as amended by this Amendment No.
3.
Section 4. Conditions Precedent. As provided in Section 2
above, the amendments to the Note Purchase Agreement set forth in said Section 2
shall become effective, as of the date hereof, upon the satisfaction of the
following conditions:
(a) Amendment No. 3. The execution and delivery of one or more
counterparts of this Amendment No. 3 by each of the parties hereto and
receipt by the Investors of evidence that the lenders party to the
Senior Credit Agreement shall have approved this Amendment No. 3.
(b) Corporate Documents. Receipt by the Investors of certified
copies of the charter and by-laws (or equivalent documents) of each
Obligor and of all corporate authority for each Obligor (including,
without limitation, board of director resolutions and evidence of the
incumbency, including specimen signatures, of officers) with respect to
the execution, delivery and performance of this Amendment No. 3 and
each other document to be delivered by such Obligor from time to time
in connection herewith and the 2005 Notes hereunder (each Investor may
conclusively rely on such certificate until it receives notice in
writing from such Obligor to the contrary).
(c) Officer's Certificate. Receipt by the Investors of a
certificate of a senior officer of the Company, dated the First 2005
Note Closing Date, to the effect set forth in clauses (a) and (b) of
Section 5.02.
(d) Opinion of Counsel to the Obligors. Receipt by the
Investors of an opinion, dated the First 2005 Note Closing Date, of
Olshan Grundman Frome Rosenzweig & Wolosky LLP, counsel to the
Obligors, in form and substance reasonably satisfactory to the Required
Investors (and each Obligor hereby instructs such counsel to deliver
such opinion to the Investors).
(e) Opinion of Special New York Counsel to the Investors.
Receipt by the Investors of an opinion, dated the First 2005 Note
Closing Date, of Milbank, Tweed, Hadley & McCloy LLP, special New York
counsel to Chase Capital, in form and substance reasonably satisfactory
to the Required Investors.
(f) 2005 Notes. Receipt by the Additional Investors of the
2005 Notes to be purchased on the First 2005 Note Closing Date, duly
completed and executed for each New Investor.
(g) Warrants. Receipt by the New Investors of the Warrants
required to be issued under Section 2.08(a) of the Warrant Agreement,
as amended, in the amounts therein
<PAGE>
specified and each of the other agreements and instruments contemplated
to be executed and/or delivered under said Section 2.08(a) with respect
to such Warrants
(h) Other Documents. Receipt by the New Investors of such
other documents as any Additional Investor or special New York counsel
to the Investors may reasonably request.
Section 5. Miscellaneous. Except as herein provided, the Note
Purchase Agreement shall remain unchanged and in full force and effect. This
Amendment No. 3 may be executed in any number of counterparts, all of which
taken together shall constitute one and the same amendatory instrument and any
of the parties hereto may execute this Amendment No. 3 by signing any such
counterpart. This Amendment No. 3 shall be governed by, and construed in
accordance with, the law of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 3 to be duly executed and delivered as of the day and year first
above written.
NUCO2 INC.
By /s/ Joann Sabatino
--------------------------------------
Name: Joann Sabatino
Title: Chief Financial Officer and
Treasurer
SUBSIDIARY GUARANTORS
NUCO2 ACQUISITION CORP.
By /s/ Joann Sabatino
--------------------------------------
Name: Joann Sabatino
Title: Chief Financial Officer and
Treasurer
KOCH COMPRESSED GASES, INC.
By /s/ Joann Sabatino
--------------------------------------
Name: Joann Sabatino
Title: Chief Financial Officer and
Treasurer
<PAGE>
INVESTORS
CHASE EQUITY ASSOCIATES L.P.
By Chase Capital Partners,
its general partner
By____________________________________
Title:
DK ACQUISITION PARTNERS, L.P.
By M.H. Davidson & Co.,
its general partner
By____________________________________
Title:
EMPIRE INSURANCE COMPANY,
as executed on their behalf by
their Investment Manager,
Cohanzick Management, L.L C.
By____________________________________
Title:
ORIX USA CORPORATION
By____________________________________
Title:
PAINEWEBBER HIGH INCOME FUND,
a series of PaineWebber Managed
Investments Trust
By____________________________________
Title:
<PAGE>
SUNTRUST BANKS, INC.
By____________________________________
Title:
EXECUTION COPY
AMENDMENT NO. 2
AMENDMENT NO. 2 dated as of May 4, 1999 to the Warrant
Agreement referred to below, between:
NUCO2 INC., a corporation duly organized and validly existing
under the laws of the State of Florida (the "Company"); and
each of the Initial Holders, including the Additional Initial
Holders (as defined below), appearing under the caption "INITIAL
HOLDERS" on the signature pages hereto (each, an "Initial Holder", and
collectively, the "Initial Holders").
WHEREAS, the Company and the Initial Holders (other than
SunTrust Banks, Inc. ("SunTrust")) are party to a Warrant Agreement dated as of
October 31, 1997 (as heretofore modified and supplemented and in effect on the
date hereof, the "Warrant Agreement");
WHEREAS, pursuant to the Warrant Agreement, in connection with
the issuance by the Company of $30,000,000 aggregate principal amount of Senior
Subordinated Notes (the "2004 Notes") and as an inducement for the purchase by
the Initial Holders (other than SunTrust and Nationsbanc Montgomery Securities,
Inc.) of such $30,000,000 aggregate principal amount of the Notes, the Company
issued Warrants to such Initial Holders providing for the purchase of shares of
Common Stock of the Company;
WHEREAS, in connection with the issuance by the Company of up
to an additional $15,000,000 aggregate principal amount of Senior Subordinated
Notes due 2005 (the "2005 Notes", and together with the 2004 Notes, the "Notes")
to each of Chase Equity Associates L.P. ("Chase Capital") and SunTrust (each, a
"2005 Note Initial Holder") and as an inducement for the purchase by the 2005
Note Initial Holders of up to such $ 15,00O,000 aggregate principal amount of
the 2005 Notes, the Company has agreed to issue Warrants to the 2005 Note
Initial Holders providing for the purchase of shares of Common Stock of the
Company;
WHEREAS, SunTrust desires to become an Initial Holder party to
the Warrant Agreement and each 2005 Note Initial Holder desires to purchase the
2005 Notes from the Company, and the Company desires to issue to the 2005 Note
Initial Holders, a Warrant having the same terms as the Warrants heretofore
issued by the Company and as amended (including the amendments thereto effected
by this Amendment No. 2) under the Warrant Agreement (as amended hereby). The
Company and the Initial Holders (including the 2005 Note Initial Holders) wish
to amend the Warrant Agreement to add SunTrust as an Initial Holder thereunder
and to provide for the issuance of such additional Warrants and to make other
modifications to the Warrant Agreement and the Warrants heretofore issued and
outstanding thereunder.
<PAGE>
Accordingly, the parties hereto hereby agree as follows:
Section 1. Definitions. Except as otherwise defined in this
Amendment No. 2, terms defined in the Warrant Agreement are used herein as
defined therein.
Section 2. Amendments to Warrant Agreement. Subject to the
satisfaction of the conditions precedent specified in Section 5 below, but
effective as of the date hereof, the parties to the Warrant Agreement agree that
the Warrant Agreement shall be amended as follows:
A. References in the Warrant Agreement to "this Agreement"
(and indirect references such as "hereunder", "hereby", "herein" and "hereof")
shall be deemed to be references to the Warrant Agreement as amended hereby.
B. Section 1.01 of the Warrant Agreement shall be amended by
adding the following new definitions (to the extent not already included in said
Section 1.01) and inserting the same in the appropriate alphabetical locations
and amending the following definitions (to the extent already included in said
Section 1.01) to read in their entirety as follows:
"Amendment No. 2" shall mean Amendment No. 2 dated as
of May 4, 1999 to this Agreement.
"First 2005 Note Closing Date" shall have the meaning
assigned to such term in the Senior Subordinated Note Purchase
Agreement.
"Second 2005 Note Closing Date" shall have the
meaning assigned to such term in the Senior Subordinated Note Purchase
Agreement.
"Senior Subordinated Note Purchase Agreement" shall
mean the Senior Subordinated Note Purchase Agreement dated as of
October 31, 1997 between the Company, the subsidiary guarantors party
thereto and the investors party thereto, as amended and in effect from
time to time.
"2005 Note Initial Holder" shall have the meaning
assigned to such term in Section 2.07 and Section 2.08 hereof.
C. A new Section 2.08 is added to the Warrant Agreement to
read as follows:
"SECTION 2.08 Issuance of Additional Warrants. (a) Subject to
and upon the conditions set forth in this Agreement, the Company shall
issue to each of Chase Equity Associates L.P. ("Chase Capital") and
SunTrust Banks, Inc. ("SunTrust" and, together with Chase Capital, the
"2005 Note Initial Holders"), on the First 2005 Note Closing Date and
for no cash consideration, a Warrant (the "2005 Note Warrants") in the
form of Annex 1 to this Agreement covering such number of Stock Units
as is equal to the
<PAGE>
percentage of the issued and outstanding shares of Common Stock on a
fully diluted basis on the date of issuance of such 2005 Note Warrant
as is specified opposite the name of such 2005 Note Initial Holder in
Part A of Schedule 1 to Amendment No. 2. The number of shares of Common
Stock comprising each Stock Unit covered by the 2005 Note Warrants
issued under this Agreement shall be subject to adjustment as provided
in Sections 6 and 7 hereof. Each 2005 Note Warrant shall constitute a
Warrant, and each 2005 Note Initial Holder shall be an Initial Holder,
for all purposes of this Agreement. On the First 2005 Note Closing
Date, the Company shall deliver to each 2005 Note initial Holder a
single certificate for the Warrant to be acquired by such Initial
Holder hereunder, registered in the name of such Initial Holder.
(b) Subject to and upon the terms and conditions set
forth in the this Agreement, on the Second 2005 Note Closing Date, the
Company shall (i) issue to each 2005 Note Initial Holder (or its
transferees, as the case may be) Warrants in the form of Annex 1 to
this Agreement covering such number of Stock Units as is equal to the
percentage of the issued and outstanding shares of the Common Stock on
a fully diluted basis on the date of issuance of such Warrants as is
specified opposite the name of such 2005 Note Initial Holder in Part B
of Schedule I to Amendment No. 2, (ii) deliver to each 2005 Note
Initial Holder a single certificate for the Warrants to be acquired by
such 2005 Note Initial Holder hereunder on such date, registered in the
name of such 2005 Note Initial Holder, except that, if such 2005 Note
Initial Holder shall notify the Company in writing prior to such
issuance that it desires certificates for Warrants to be issued in
other denominations or registered in the name or names of any Person or
Persons referred to in Section 5.01 (a)(i) or (ii) hereof or any
nominee or nominees for its or their benefit, then the certificates for
Warrants shall be issued to such 2005 Note Initial Holder in the
denominations and registered in the name or names specified in such
notice, and (iii) deliver to each 2005 Note Initial Holder a legal
opinion from counsel to the Company in form and substance reasonably
satisfactory to each 2005 Note Initial Holder. Each 2005 Note Warrant
shall constitute a Warrant, and each 2005 Note Initial Holder shall be
an Initial Holder, for all purposes of this Agreement."
D. Schedules 1 and 2 to the Warrant Agreement are hereby
amended to read as set forth in Schedules 1 and 2, respectively, to this
Amendment No. 2.
E. The form of Warrant attached as Annex 1 to the Warrant
Agreement shall be amended by deleting the amount "$16.40" in the first
paragraph of such form and adding in lieu thereof the amount "$6.65."
Section 3. Amendments to Warrants. Subject to the satisfaction
of the conditions precedent specified in Section 5 below, but effective as of
the date hereof, the Company agrees for the benefit of each of holders of the
Warrants heretofore issued by the Company under the Warrant Agreement, as
amended and outstanding thereunder on the date hereof (the "Existing Warrants"),
that each of the Existing Warrants (other than Warrant No. 5 to purchase 30,000
<PAGE>
Stock Units held by NationsBanc Montgomery Securities, Inc. and Warrant No. 7 to
purchase 43,715 Stock Units held by DK Acquisition Partners, L.P.) shall be
amended by deleting the amount "$ 12.40" in the first paragraph thereof and
adding in lieu thereof the amount $6.65. "
Section 4. Representations and Warranties.
(a) The Company represents and warrants to the Initial Holders
that (i) the representations and warranties set forth in Section 3 of the
Warrant Agreement as amended hereby are true and complete on the date hereof as
if made on and as of the date hereof and as if each reference in said Section 3
to "this Agreement" (or words of similar import) referred to the Warrant
Agreement as amended by this Amendment No. 2 and (ii) no default has occurred
and is continuing.
(b) Each 2005 Note Initial Holder represents to the Company
that the representations set forth in Section 2.03 of the Warrant Agreement are
true and complete with respect to such 2005 Note Initial Holder on the date of
each issuance of the 2005 Note Warrants as if made on and as of such date and as
if each reference in said Section 2.03 to "this Agreement" (or words of similar
import) referred to the Warrant Agreement as amended by this Amendment No. 2.
Section 5. Conditions Precedent. As provided in Section 2
above, the amendments to the Warrant Agreement set forth in said Section 2 shall
become effective, as of the date hereof, upon the execution and delivery of one
or more counterparts of this Amendment No. 2 by the Company and Holders of at
least 66-2/3% of the Restricted Warrants.
Section 6. Miscellaneous. Except as herein provided, the
Warrant Agreement shall remain unchanged and in full force and effect. This
Amendment No. 2 may be executed in any number of counterparts, all of which
taken together shall constitute one and the same amendatory instrument and any
of the parties hereto may execute this Amendment No. 2 by signing any such
counterpart. This Amendment No. 2 shall be governed by, and construed in
accordance with, the law of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 2 to be duly executed and delivered as of the day and year first
above written.
NUCO2 INC.
By: /s/ Joann Sabatino
-----------------------------------
Name: Joann Sabatino
Title: Chief Financial Officer/
Treasurer
<PAGE>
INITIAL HOLDERS
CHASE EQUITY ASSOCIATES L.P.
By Chase Capital Partners,
its general partner
By_____________________________________
Title:
ORIX USA CORPORATION
By_____________________________________
Title:
EMPIRE INSURANCE COMPANY,
as executed on their behalf by
their Investment Manager,
Cohanzick Management, L.L.C.
By_____________________________________
Title:
DK ACQUISITION PARTNERS, L.P.
By M.H. Davidson & Co.,
its general partner
By_____________________________________
Title:
NATIONSBANC MONTGOMERY SECURITIES,
INC.
By_____________________________________
Title:
<PAGE>
PAINEWEBBER HIGH INCOME FOND,
a series of PaineWebber Managed
Investments Trust
By_____________________________________
Title:
SUNTRUST BANKS, INC.
By_____________________________________
Title:
<PAGE>
Schedule 1
PART A: First 2005 Note Closing Date Percentage
CHASE EQUITY ASSOCIATES L.P. 3.90%
SUNTRUST BANKS, INC. 0.60%
-----
Total 4.50%
=====
PART B: Second 2005 Note Closing Date
CHASE EQUITY ASSOCIATES L.P. 1.95%
SUNTRUST BANKS, INC. 0.30%
-----
Total 2.25%
=====
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statement (No. 333-06705) on Form S-8 of our report dated August 20, 1999 for
the years ended June 30, 1997, 1998 and 1999, and to the addition of our firm
under the caption "Experts" in the Prospectus, insofar as it relates to our
report on the financial statements for the three years ended June 30, 1999.
/s/ Margolin, Winer & Evens LLP
-------------------------------
Margolin, Winer & Evens LLP
Garden City, New York
September 28, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NUCO2 INC.
FINANCIAL STATEMENTS AS OF JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,579,191
<SECURITIES> 0
<RECEIVABLES> 7,325,308
<ALLOWANCES> 557,592
<INVENTORY> 213,605
<CURRENT-ASSETS> 9,153,999
<PP&E> 120,227,912
<DEPRECIATION> 20,563,022
<TOTAL-ASSETS> 141,630,201
<CURRENT-LIABILITIES> 9,609,272
<BONDS> 0
0
0
<COMMON> 7,217
<OTHER-SE> 47,725,464
<TOTAL-LIABILITY-AND-EQUITY> 141,630,201
<SALES> 47,097,670
<TOTAL-REVENUES> 47,097,670
<CGS> 25,224,746
<TOTAL-COSTS> 48,541,599
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,524,966
<INCOME-PRETAX> (8,932,940)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,932,940)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,932,940)
<EPS-BASIC> (1.24)
<EPS-DILUTED> (1.24)
</TABLE>
