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Exhibit 10(a)
[PRUDENTIAL LOGO] P. Scott von Fischer, CFA
Senior Vice President
Corporate Finance
Prudential Capital Group
Two Prudential Plaza, Suite 5600, Chicago IL 60601-6716
Tel 312 540-4225 Fax 312 540-4222
philip.vonfischer@prudential.com
November 11, 1998
The Lincoln Electric Company
22801 St. Clair Avenue
Cleveland, Ohio 44117
Attention: Chief Financial Officer
Re: Amendment to Note Agreement
Ladies and Gentlemen:
Reference is made to that certain Note Agreement dated November 20,
1991 (as amended from time to time, the "Note Agreement") between The Lincoln
Electric Company, an Ohio corporation (the "Company"), and The Prudential
Insurance Company of America ("Prudential"), pursuant to which the Company
issued and sold and Prudential purchased the Company's 8.73% senior note in the
original principal amount of $75,000,000, due November 26, 2003 (the "Note").
Unless otherwise defined herein, capitalized terms used herein shall have the
meanings assigned to such terms in the Note Agreement.
The Company has advised Prudential that the Company and the Company's
sole shareholder, Lincoln Electric Holdings, Inc. ("Holdings"), intend to
consummate a reorganization of the corporate structure of the Company and its
Subsidiaries (the "Reorganization") substantially on the terms described in the
Proxy Statement/Prospectus of the Company dated April 20, 1998, as in effect on
such date, and in the supplemental materials provided by the Company to
Prudential prior to the Amendment Effective Date (as defined in Section 4
hereof) related thereto (collectively, the "Reorganization Documents").
Pursuant to the Reorganization, the Company may transfer to Holdings
and/or certain subsidiaries of Holdings (other than Subsidiaries) all of the
capital stock of the subsidiaries listed on Schedule I attached hereto (the
"Disposed Subsidiaries") and all of the assets held by the Disposed
Subsidiaries, whether by asset transfer, merger, consolidation or otherwise,
substantially on the terms set forth in the Reorganization Documents.
Pursuant to the Company's request, the banks party to the Credit
Agreement are willing to permit the Reorganization upon the terms set forth in
Amendment No. 3 to Credit Agreement attached hereto as Schedule II.
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The Lincoln Electric Company
November 11, 1998
Page 2
In order to effect the Reorganization, the Company has requested that
Prudential enter into this agreement. Consequently, pursuant to the request of
the Company and in accordance with the provisions of paragraph 11C of the Note
Agreement, Prudential and the Company agree as follows:
SECTION 1. Amendment. On the Amendment Effective Date, the Note
Agreement is hereby amended as follows:
1.1 References to Bank Agreement and Credit Agreement. Paragraph 10B of
the Note Agreement is amended to delete the defined term "Bank Agreement" and
"Credit Agreement" appearing therein and to substitute therefor the following
definition:
"Bank Agreement" and "Credit Agreement" shall mean and refer
to that certain Credit Agreement dated as of December 20, 1995 among
the Company, the banks listed therein and KeyBank National Association
(f/k/a Society National Bank), as agent, as amended by Amendments No.1,
2 and 3 thereto as in effect on the date of the effectiveness of the
amendment to this Agreement dated November 11, 1998.
1.2 Consent to Amendment. Prudential hereby expressly consents to the
Amendment No. 3 to Credit Agreement in the form attached as Schedule II hereto.
1.3 Addendum to Exhibit E. The Note Agreement is hereby amended to add
to Exhibit E attached thereto Amendment No. 3 to the Credit Agreement attached
hereto as Schedule II.
SECTION 2. Effect of Changes to Credit Agreement. All references herein
to the Credit Agreement and the Company's compliance with the terms thereof as
required under the Note Agreement shall be based upon the Credit Agreement as in
effect on the Amendment Effective Date without giving effect to any other
amendment, waiver or other modification of the Credit Agreement unless the
Company shall have obtained the written consent of the Required Holder(s) to any
such amendment, waiver or modification. No termination of the Credit Agreement
in whole or in part shall affect the continued applicability of the sections of
the Credit Agreement referred to herein.
SECTION 3. Representations and Warranties. The Company hereby
represents and warrants that this letter is a legally valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to creditors' rights generally or general principles of equity. The Company
represents and warrants that the Reorganization Documents do not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein not misleading (any interim
financial information is subject to changes resulting from audits and year-end
adjustments).
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The Lincoln Electric Company
November 11, 1998
Page 3
SECTION 4. Conditions Precedent. This letter shall become effective
only on the first date on which all of the following conditions precedent shall
have been satisfied (the "Amendment Effective Date"):
(i) Prudential shall have received a duly executed counterpart of
this letter signed by the Company and Prudential; and
(ii) Prudential shall have received a copy of the duly executed
Amendment No. 3 to Credit Agreement which shall be in full
force and effect.
SECTION 5. Governing Law. This letter shall be governed by the internal
laws and decisions of the State of Ohio.
SECTION 6. Miscellaneous. Except as specifically set forth in this
letter, the Company's obligations under the Note Agreement and the Note are
neither altered nor amended, and all terms and conditions of the Note Agreement
and the Note remain in full force and effect. Upon the effectiveness of this
letter, each reference to the Note Agreement and the Note shall mean and be a
reference to the Note Agreement and the Note as amended by this letter. This
letter may be executed in any number of counterparts and by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
deemed to be an original, but all of which taken together shall constitute one
and the same agreement.
Sincerely,
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By /s/ P. Scott von Fischer
--------------------------------
Vice President
Acknowledged and Agreed:
THE LINCOLN ELECTRIC COMPANY
By: A.A. Massaro
-------------------------
Its Chairman and CEO
By: H. Jay Elliot
-------------------------
Its: Senior Vice President,
Chief Financial Officer
and Treasurer
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SCHEDULE I
DISPOSED SUBSIDIARIES
Lincoln Electric International Holding Co.
ASIA
Nippon Lincoln Electric K.K.
Lincoln Electric Asia Pacific Pte. Ltd.
PT L.E. Dharma Indonesia
Lincoln Electric Shanghai Holdings Pte. Ltd.
PT L.E. Austenite Indonesia
LE (Shanghai) Welding Co. Ltd.
Lincoln Electric Philippines Inc.
AUSTRALIA
The Lincoln Electric Company (Australia) Pty. Ltd.
The Lincoln Electric Company (New Zealand) Limited
Liquidarc Pty. Limited
EUROPE
Harris Calorific GmbH
Harris Calorific Limited
Harris Calorific SRL
Lincoln Electric Europe, Ltd (to be liquidated)
Lincoln Electric France SA
Lincoln Electric Italia SRL
Lincoln Electric (U.K.) Ltd
Lincoln KD S.A.
Lincoln Electric Norge AS
Lincoln Electric Europe BV
Lincoln Smitweld Belgium SA
Lincoln Smitweld BV
Lincoln Smitweld GmbH
Lincoln Electric Sverige AB
Sacit SRL
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Lincoln Electric Company BV (to be liquidated)
Lincoln Electric Company GmbH (to be liquidated)
Askaynek (Turkey)
LATIN AMERICA
Champion Internacional S.A. de C.V.
Hirax Participacoes Ltda (to be liquidated)
Lincoln Electric do Brasil Ltda.
Lincoln do Brasil Industries E Comercio Ltda (to be liquidated)
Lincoln Electric Mexicana, S.A. de C.V.
Gardell Corporation (to be liquidated)
NORTH AMERICA
Harris Calorific Division ("Harris")
Lincoln Electric Company of Canada Limited ("Lincoln Canada")
Seal-Seat Division Assets ("Seal Seat")
Lincoln Venezuela Inc. (to be liquidated)
Lincoln Electric GmbH Inc. (to be liquidated)
Indalco Alloy
OTHERS
Any Subsidiaries (other than any Subsidiaries listed above (the "Listed
Subsidiaries")) existing on the date (the "Amendment Date") of effectiveness of
Amendment No. 3 to the Credit Agreement dated as of October 23, 1998 among the
Company, the Banks and the Agent which, in the aggregate, do not, and would not,
constitute a "Significant Subsidiary" and (ii) any Subsidiary created after the
Amendment Date to facilitate the consummation of the Reorganization (but only so
long as the Company and its Subsidiaries transfer no assets (other than the
assets held by any Listed Subsidiary) to any such Subsidiary), including any
such Subsidiary to which all the welding technology held by the Company, Harris
and Seal Seat, along with the names "Lincoln", "Harris" and "Seal Seat", may
be transferred.
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SCHEDULE II
[EXECUTION COPY]
AMENDMENT NO. 3 TO CREDIT AGREEMENT
AMENDMENT dated as of October 23, 1998 (this "Amendment") among THE
LINCOLN ELECTRIC COMPANY (the "Company"), the BANKS listed on the signature
pages hereof (the "Banks") and KEYBANK NATIONAL ASSOCIATION, as Agent (the
"Agent").
WITNESSETH:
WHEREAS, the parties hereto have heretofore entered into a Credit
Agreement dated as of December 20, 1995 (as amended from time to time, the
"Credit Agreement"); and
WHEREAS, Lincoln Electric Holdings, Inc. ("Holdings") and the Company
intend to consummate a reorganization of the corporate structure of the Company
and its Subsidiaries (the "Reorganization") substantially on the terms described
in the Proxy Statement/Prospectus of the Company dated April 20, 1998, as in
effect on such date, and in the supplemental materials provided by the Company
to the Banks prior to the Amendment Effective Date (as defined in Section 8
hereof) related thereto (collectively, the "Reorganization Documents"); and
WHEREAS, pursuant to the Reorganization, the Company may transfer to
Holdings and/or to certain subsidiaries of Holdings (other than Subsidiaries)
all of the capital stock of the Subsidiaries listed on Schedule I hereto (the
"Disposed Subsidiaries") and all of the assets held by the Disposed
Subsidiaries, whether by asset transfer, merger, consolidation or otherwise,
substantially on the terms set forth in the Reorganization Documents; and
WHEREAS, the parties hereto desire to amend the Credit Agreement as set
forth below to permit such transfers;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise specifically
defined herein, each term used herein which is defined in the Credit Agreement
shall have the meaning assigned to such term in the Credit Agreement. Each
reference to "hereof", "hereunder", "herein" and "hereby" and each other similar
reference and each reference to "this Credit Agreement" and each other similar
reference
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contained in the Credit Agreement shall from and after the Amendment Effective
Date refer to the Credit Agreement as amended hereby.
SECTION 2. Additional Definitions. New definitions of "Disposed
Subsidiaries", "Reorganization" and "Reorganization Documents" are added in
alphabetical order in Section 1.01 of the Credit Agreement, to read in their
entirety as follows:
"Disposed Subsidiaries" means the Subsidiaries listed on Schedule I to
this Agreement.
"Reorganization" means the reorganization of the corporate structure of
the Company and its Subsidiaries substantially on the terms set forth in the
Reorganization Documents.
"Reorganization Documents" means the Proxy Statement/Prospectus of the
Company dated April 20, 1998, as in effect on such date, and the supplemental
materials provided by the Company to the Banks prior to the date of
effectiveness of Amendment No.3 to this Agreement dated as of October 23,1998
among the Company, the Banks and the Agent.
SECTION 3. Amendment to the Conduct of Business and Maintenance of
Existence Covenant. The proviso set forth in Section 5.04 of the Credit
Agreement is hereby amended to read in its entirety as follows: "provided that
nothing in this Section 5.04 shall prohibit (i) the merger or consolidation of
any Disposed Subsidiary with or into Holdings or any of its subsidiaries (other
than the Company and its Subsidiaries) in order to consummate the
Reorganization, (ii) the merger of a Subsidiary into the Company or the merger
or consolidation of a Subsidiary with or into another Person (other than any
such merger or consolidation described in clause (i) of this proviso) if the
corporation surviving such consolidation or merger is a Subsidiary and if, in
each case, after giving effect thereto, no Default shall have occurred and be
continuing, (iii) the termination of the corporate existence of any Disposed
Subsidiary in connection with the Reorganization or (iv) the termination of the
corporate existence of any Subsidiary (other than as permitted by clause (iii)),
so long as such Subsidiary is not a Significant Subsidiary and so long as the
Company in good faith determines that such termination is in the best interest
of the Company and is not otherwise materially disadvantageous to the interests
of the Banks hereunder."
Section 4. Amendment to the Merger Covenant. Section 5.10(b) of the
Credit Agreement is hereby amended by adding the following proviso at the end of
the first sentence thereof: "provided that any Borrower may transfer any
capital stock of any Disposed Subsidiary or any assets held by any Disposed
Subsidiary to Holdings or any of its subsidiaries (other than the Company or
any of its Subsidiaries) in order to consummate the Reorganization."
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SECTION 5. Addition of a Schedule. A Schedule I is hereby added to the
Credit Agreement, to read in its entirety as set forth on Schedule I hereto.
SECTION 6. Licensing Agreements; No Defaults. (a) Prior to or
simultaneously with the transfer of capital stock of a Disposed Subsidiary or
the transfer of all or substantially all of the assets of a Disposed Subsidiary
to Holdings or any of its subsidiaries (other than Subsidiaries), the Company
shall have entered into such licensing agreements and other agreements relating
to the use of the assets held by such Disposed Subsidiary as may be necessary
or desirable to ensure that the consummation of the Reorganization substantially
on the terms set forth in the Reorganization Documents will not have a material
adverse effect on the business, financial position, results of operations or
prospects of the Company and its Subsidiaries (other than Disposed
Subsidiaries), considered as a whole; provided that, in any event, prior to or
simultaneously with the transfer of ownership of the name "Lincoln" to Holdings
or any of its subsidiaries (other than Subsidiaries), the Company shall have
entered into a licensing agreement or other similar agreement granting the
Company and its Subsidiaries the use of the name "Lincoln"
(b) As of the Amendment Effective Date, no Default has occurred and is
continuing.
SECTION 7. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 8. Counterparts; Effectiveness. This Amendment may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Amendment shall become effective on the date (the "Amendment Effective
Date") on which each of the following conditions shall be satisfied;
(i) the Agent shall have received duly executed counterparts hereof
signed by the Company and the Required Banks (or, in the case of any party as to
which an executed counterpart shall not have been received, the Agent shall
have received telegraphic, telex or other written confirmation from such party
of execution of a counterpart hereof by such party);
(ii) the Banks shall have received the pro forma consolidated statement
of financial condition of the Company and its Consolidated Subsidiaries at
December 31, 1997 and the pro forma consolidated statement of income of the
Company and its Consolidated Subsidiaries for the fiscal year then ended, in
each case adjusted to give effect to the Reorganization as if the Reorganization
had been consummated substantially on the terms set forth in the Reorganization
Documents on December 31, 1997, in the case of such pro forma statement of
financial condition and on January 1, 1997, in the case of such pro forma
consolidated statement of income;
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(iii) the fact that (x) on the basis of the pro forma consolidated
statement of financial condition described in clause (ii) above, the Company is
in compliance with the financial covenant set forth in Section 5.08 of the
Credit Agreement at June 30, 1998, after giving effect to any Debt outstanding
on the Amendment Effective Date and not reflected in such statement of financial
condition and (y) on the basis of the pro forma consolidated statement of income
described in clause (ii) above, the Company is in compliance with the financial
covenant set forth in Section 5.07 of the Credit Agreement for the period of
four consecutive fiscal quarters ended June 30, 1998;
(iv) receipt by the Agent of evidence reasonably satisfactory to it
that the Company and the Prudential Insurance Company of America shall have
entered into an amendment to the Note Agreement dated as of November 1, 1991
with respect to the $75,000,000 8.73% Senior Notes Due 2003 of the Company in
form and substance reasonably satisfactory to the Agent;
(v) receipt by the Agent of a duly executed Election to Terminate with
respect to each Disposed Subsidiary that is a Borrower immediately prior to the
effectiveness of this Amendment (each, a "Disposed Borrower"); and
(vi) the fact that all Loans of each Disposed Borrower outstanding
immediately prior to the effectiveness of this Amendment shall have been repaid
in full, together with all accrued and unpaid interest thereon and all amounts
payable to any Bank with respect thereto pursuant to Section 2.12 of the Credit
Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed.
THE LINCOLN ELECTRIC COMPANY
By _________________________________
Name:
Title:
By _________________________________
Name:
Title:
KEYBANK NATIONAL ASSOCIATION
By _________________________________
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By _________________________________
Title:
BANK ONE (formerly known as NBD
Bank)
By ________________________________
Title:
11
NATIONAL CITY BANK
By ________________________________
Title:
ABN AMRO BANK N.V.
By _______________________________
Title:
By _______________________________
Title:
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION, successor by merger to
BANK OF AMERICA ILLINOIS
By _______________________________
Title:
CIBC INC.
By ________________________________
Title:
12
CREDIT LYONNAIS CAYMAN
ISLAND BRANCH
By ________________________________
Title:
CREDIT LYONNAIS CHICAGO
BRANCH
By _______________________________
Title:
PNC BANK, NATIONAL ASSOCIATION
By _______________________________
Title:
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SCHEDULE I
DISPOSED SUBSIDIARIES
Lincoln Electric International Holding Co.
ASIA
Nippon Lincoln Electric K.K.
Lincoln Electric Asia Pacific Pte. Ltd.
PT L.E. Dharma Indonesia
Lincoln Electric Shanghai Holdings Pte. Ltd.
PT L.E. Austenite Indonesia
LE (Shanghai) Welding Co. Ltd.
Union Electric Philippines Inc.
AUSTRALIA
The Lincoln Electric Company (Australia) Pty. Ltd.
The Lincoln Electric Company (New Zealand) Limited
Liquidarc Pty. Limited
EUROPE
Harris Calorific GmbH
Harris Calorific Limited
Harris Calorific SRL
Lincoln Electric Europe, Ltd (to be liquidated)
Lincoln Electric France SA
Lincoln Electric Italia SPL
Lincoln Electric (U.K.) Lid
Lincoln KD S.A.
Lincoln Electric Norge AS
Lincoln Electric Europe BV
Lincoln Smitweld Belgium SA
Lincoln Smitweld BV
Lincoln Smitweld GmbH
Lincoln Electric Sverige AB
Sacit SRL
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Lincoln Electric Company BV (to be liquidated)
Lincoln Electric Company GmbH (to be liquidated)
Askaynek (Turkey)
LATIN AMERICA
Champion Internacional S.A. de C.V.
Hirax Participacoes Lida (to be liquidated)
Lincoln Electric do Brasil Ltda.
Lincoln do Brasil Industries E Comercio Ltda (to be liquidated)
Lincoln Electric Mexicana, S.A. de C.V.
Gardell Corporation (to be liquidated)
NORTH AMERICA
Harris Calorific Division ("Harris")
Lincoln Electric Company of Canada Limited ("Lincoln Canada")
Seal-Seat Division Assets ("Seal Seat")
Lincoln Venezuela Inc. (to be liquidated)
Lincoln Electric GmbH Inc. (to be liquidated)
Indalco Allop
OTHERS
Any Subsidiaries (other than any Subsidiaries listed above (the "Listed
Subsidiaries")) existing on the date (the "Amendment Date") of effectiveness of
Amendment No.3 to the Credit Agreement dated as of October 23, 1998 among the
Company, the Banks and the Agent which, in the aggregate, do not, and would not,
constitute a "Significant Subsidiary" and (ii) any Subsidiary created after the
Amendment Date to facilitate the consummation of the Reorganization (but only so
long as the Company and its Subsidiaries transfer no assets (other than the
assets held by any Listed Subsidiary) to any such Subsidiary), including any
such Subsidiary to which all the welding technology held by Lincoln, Canada,
Harris and Seal Seat, along with the names "Lincoln", "Harris" and "Seal Seat",
may be transferred.
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ANNEX A
The Reorganization
I. The Reorganization will consist of a series of corporate transactions,
occurring over time, involving:
A. transfers, by The Lincoln Electric Company (the "Company") to its
sole shareholder, Lincoln Electric Holdings, Inc. ("Holdings"),
or to one or more subsidiaries of the Company, which, as part of
the Reorganization, will become subsidiaries of Holdings, of
assets that may include:
1. all of the Company's current foreign operations, whether
operated as divisions or subsidiaries, including one or more
subsidiaries that may be a Significant Subsidiary as defined
in the Credit Agreement;
2. all of the Company's operations relating to its Harris
business;
3. all of the Company's existing welding technology and the
name "Lincoln," other than rights granted to the Company
through an exclusive, perpetual and royalty-bearing license
of such technology and name in connection with the
Company's domestic welding business;
4. all of the Company's rights to future welding technology
research and developments, which will be licensed to the
Company on a royalty-bearing basis; and
5. all existing license arrangements with international
subsidiaries involving foreign technology or trademarks.
B. reorganizations of the Company's international holding company
subsidiaries and other subsidiaries that may include mergers or
dissolutions of subsidiaries, possibly including Significant
Subsidiaries, that may occur prior to or concurrent with the
transfers described in I.A.