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Exhibit 10.16
AGREEMENT
This Agreement, made as of the 1st day of July, 1998 between Valley
National Gases, Inc., a Corporation, ("VALLEY") and Xxxxxxx X. Xxxxxxxxxx
("XXXXXXXXXX").
WHEREAS, Xxxxxxxxxx, individually and by and through his consulting
corporation ADE Vantage, Inc. ("CORPORATION") have an arrangement with Valley
National Gases, Inc., which expires June 30, 1998, for the expansion of Valley's
industrial gas and welding supply business, through acquisition and expansion of
industrial gas and welding supply distributors ("ACQUISITION PROGRAM"); and,
WHEREAS, Valley and Xxxxxxxxxx desire to enter into this Agreement
setting forth Xxxxxxxxxx'x continuing relationship with Valley in the execution
of the Acquisition Program including compensation therefore.
WITNESSETH in consideration the mutual promises hereinafter contained
Valley and Xxxxxxxxxx agree as follows:
1. Duties. Xxxxxxxxxx will identify, investigate and develop industrial gas and
welding supply business distributors as prospective acquisition candidates.
Xxxxxxxxxx together with Valley will qualify all potential distributors for
acquisition and jointly target distributors for acquisition solicitation
("TARGET DISTRIBUTORS"). Xxxxxxxxxx will assist Valley in the solicitation,
preparation of offering memoranda, contract negotiation, due diligence and/or
any other matters necessary to assist Valley to consummate Target Distributor
acquisitions in accordance with the Acquisition Program.
2. Term. The term of this Agreement shall be one (1) year from the execution and
delivery of this Agreement.
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3. Independent Contractor Status. It is understood that Xxxxxxxxxx is an
independent contractor, representing Valley pursuant to this Agreement, and he
shall not otherwise hold himself out to the public as employee, or partner of
Valley. As such Xxxxxxxxxx is responsible, where necessary, to secure at his
sole cost, worker's compensation, insurance, disability, benefits and any other
insurance as may be requires by law. Valley will not provide, nor will it be
responsible to pay for benefits for Xxxxxxxxxx. Any benefits, if provided by
Indelicato for himself and/or his staff, including by not limited to, health
insurance, paid vacation, paid holidays, sick leave or disability insurance
coverage of whatever nature, shall be secured and paid for by Xxxxxxxxxx.
4. Tax Duties and Responsibilities. Xxxxxxxxxx is responsible for the payment of
all required payroll taxes, whether federal, state or local in nature,
including, but not limited to, income taxes, social security taxes, federal
unemployment compensation taxes, and any other fees, charges, licenses or other
payments required by law.
5. Employee's of Independent Contractor. Xxxxxxxxxx may employ as many employees
as he requires, such matter resting entirely with his own discretion. Valley
need not be advised to the employment of such individuals. Such persons are
employed of Xxxxxxxxxx, and he shall be deemed employer of such persons. As
such, Xxxxxxxxxx shall be responsible for compensation as well as all necessary
insurance and payroll deductions for such persons, including but not limited to,
federal, state and local income taxes, social security taxes, unemployment
compensation taxes, workers compensation coverage, etc.
6. ADE Vantage, Inc. Xxxxxxxxxx may at his sole cost and expense (except for
reimbursement support service costs as provided in Paragraph 11 hereinafter), in
his
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execution of the Acquisition Program engage Corporation, ADE Vantage, Inc., his
consulting firm, as his agent and contractor to provide support services and any
other services executed pursuant to the Acquisition Program or otherwise
required of Xxxxxxxxxx hereunder. At all times, Corporation shall solely be the
contractual agent of Xxxxxxxxxx and not Valley.
7. Indemnification. Xxxxxxxxxx shall not be liable for the acts, negligence or
defaults of any employee, agent or representative of Valley, nor shall he be
liable for anything done or not done in good faith, including errors of
judgment, acts done or committed on the advise of counsel, or mistakes of fact
or law. Xxxxxxxxxx shall, without prejudice to any other rights which he may
have, be indemnified by Valley against all liability and expense reasonably
incurred by him in connection with any claim, action, suit or proceeding of
whatever nature in which he may be involved as a party or otherwise by reason of
having entered into this Agreement and the execution of the duties assumed
hereunder relative to his execution of the Acquisition Program. Indemnification
hereunder, shall not, however, extend to any liability, loss, damage claim or
expense to the extent occasioned by or arising out of Xxxxxxxxxx'x default
hereunder or any willful misconduct or grossly negligent act by Xxxxxxxxxx, his
agents and employees in his capacity as an Independent Contractor in the
execution of his duties hereunder. Further, Valley agrees that ADE Vantage, Inc.
shall not be liable and shall be held harmless for any damage or injury caused
by its negligent mistakes, errors and omissions in and about providing financial
services under this Agreement.
8. Business of Independent Contractor. During the term of this Agreement,
Xxxxxxxxxx may engage in any other business which does not conflict with his
duties
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hereunder, conflict with Valley's business, or otherwise impair the successful
execution and implementation of the Acquisition Program. Notwithstanding, Valley
and Xxxxxxxxxx agree that approximately sixty seven percent (67%) of
Xxxxxxxxxx'x time will be spent on the Acquisition Program.
9. Supervision. Xxxxxxxxxx shall not be subject to the provisions of any
personnel handbook or the rules and regulations of applicable employees to
Valley since Xxxxxxxxxx shall fulfill his responsibilities independent of any
without supervision or control by Valley.
10. Compensation. Xxxxxxxxxx'x compensation hereunder shall be set forth as
follows:
x. Xxxxxxxxxx will be paid a management service fee of $4,100 per month
by cash payment to be paid, (1) for the first six months $1,500 per
month and a lump sum payment of $15,600 paid between January 1, 1999
and January 7, 1999 and (2) for the last six months $4,100 per month.
If however, Xxxxxxxxxx'x time in any single calendar month exceeds 75%,
then the $4,100 per month management service fee will be prorated
upward based upon the actual time spent on behalf of Valley but in no
case exceed $6,000 per month. Also, if Xxxxxxxxxx'x time in any single
calendar month is less than 60%, then the $4,100 per month management
service fee will be prorated downward based upon the actual time spent
on behalf of Valley, but in no case will be less than $3,500 per month.
Adjustments to the monthly management service fee will be made
quarterly in arrears and invoiced or credit to Valley.
b. For each acquisition which closes during the term of this Agreement,
* with the exception of Redball, Valley will provide Xxxxxxxxxx with a
bonus payment
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based upon the following calculation:
Payment = 80(3000(S) + 5100)/V
Where P = Payment in Dollars for each closed transaction
S = Size of transaction (annual sales) in $ millions
V = Percent of Strategic Value, where if V is between values
of 75 and 85 then for the purpose of this calculation V
will be set at 80. If V is at a value above or below the
range of 75 to 85, then the actual value of V will be
used.
Strategic Value will be determined by the method consistent with
past practices used by Xxxxxxxxxx and the Company as presented to
Valley. The methodology involves ten year financial projections and
a terminal value using agreed upon assumptions and cost savings
recognized by Valley management as being achievable over a
reasonable period of time. Calculations will be on a debt free
basis and will be adjusted for assets held outside by related
parties and will be further adjusted for all non recurring costs or
income items which would not exist under Valley ownership.
Strategic Value will be based upon information available
immediately after completion of due diligence as documented by
letter to X.X. Xxxxx, President, which is also used to communicate
transaction specific information to Bank One (the "Letter").
Percent of Strategic Value is determined as follows:
(Actual Payment/Strategic Value) 100
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The Actual Payment made for the business is on a net present value
basis including all interest bearing debt, as historically documented
in the Letter.
Valley and Xxxxxxxxxx will negotiate in good faith to arrive at a
mutually acceptable bonus compensation for Redball, based upon previous
payments to Xxxxxxxxxx and the value of the acquisition to Valley
shareholders if an acquisition of, or joint venture with, Redball
finally materializes.
* If a letter of intent has been executed prior to the expiration of
this Agreement, and the transaction ultimately closes, the transaction
will be treated as if it had closed prior to the expiration of this
agreement and a bonus payment will be paid to Xxxxxxxxxx after closing
and after the appropriate documentation has been provided by Xxxxxxxxxx
to Valley.
c. Valley shall reimburse Xxxxxxxxxx by cash payment for all out of
pocket expenses reasonably incurred by him, while rendering services in
support of the Acquisition Program, excluding office rent but including
cellular phone monthly charges and charges for phone service which is
exclusively for Valley's benefit.
11. Reimbursable Support Service.
a. Financial. Xxxxxxxxxx shall be entitled for financial support
services for financial projections, evaluations as well as other
necessary and required analyses prepared for Xxxxxxxxxx by Corporation
or by independent professional agents obtained for this specific
purpose, at the rate of seventy seven ($79.00) per hour as such support
service costs are incurred during the term of this Agreement. Valley
and Xxxxxxxxxx agree that they intend to use ADE Vantage, Inc. for
financial services.
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b. Approval of Valley. All such financial support services shall be
incurred on a case by case basis, only upon the notice to and agreement
of Valley as to the proposed nature and extent thereof.
12. Assignment. Xxxxxxxxxx shall not sell, assign or transfer this Agreement,
however, he shall have the limited right to assign the Agreement to the
Corporation.
13. Governing Law. This Agreement shall be subject to and governed by the laws
of the State of West Virginia.
14. Renewal. This Agreement may be renewed for one year periods upon written
acknowledgment by both parties 30 days prior to expiration.
15. Termination of Agreement. This Agreement may be terminated at will by either
party, at any time, by at least ninety (90) days prior notice to the other party
as provided hereinunder in Paragraph "15. Notices." In the event Xxxxxxxxxx
dies, then in such event his estate would be entitled to all payments due under
this Agreement for acquisitions not yet closed, and the same if Valley
terminated the Agreement other than for just cause. Termination of this
Agreement will in no event cause forfeiture of Xxxxxxxxxx'x right to payment
hereunder, which shall survive any and all such termination.
16. Notices. All notices required to be given hereunder shall be in writing and
shall be sent by certified mail, postage prepaid, to Valley and/or to Xxxxxxxxxx
at the addresses indicated below, unless written notice of change of address is
provided to other party as the address indicated.
To Valley: Valley National Gases, Inc., 00-00xx Xxxxxx, Xxxxxxxx, XX
00000; Attention: Xxxxxxxx X. Xxxxx
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To Xxxxxxxxxx: Xxxxxxx X. Xxxxxxxxxx, 00 Xxxx Xxxxxx, Xxxxx 000, Xxx
Xxxxxx, Xxxxxxxxxxx 00000
17. Waiver. The waiver by either party of a breach of any provision in the
Agreement shall not operate or be construed to operate as a waiver of any
subsequent breach.
18. Modification. No change, modification or waiver of any term of this
Agreement shall be valid unless it is in writing and signed by both parties.
19. Entire Agreement. This Agreement constitutes the entire Agreement between
the parties and supersedes all prior Agreements or understandings between Valley
and Xxxxxxxxxx, with the exception of the letter agreements pertaining to
deferred compensation on future acquisitions.
20. Captions. The captions are inserted for convenience only and shall not be
considered when interpreting any provision or terms hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of this 16th day
of June, 1998.
VALLEY NATIONAL GASES, INC.
By /s/ XXXXXXXX X. XXXXX
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Its President
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/s/ XXXXXXX X. XXXXXXXXXX
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XXXXXXX X. XXXXXXXXXX
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